Oshkosh Corporation (OSK) Q3 2012 Earnings Report, Transcript and Summary

Greetings and welcome to the Oshkosh Corporation Fiscal 2012 Third Quarter Results Conference Call. At this time, all participants are in a listen-only mode. A 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, Patrick Davidson, Vice President of Investor Relations for Oshkosh Corporation. Thank you. Mr. Davidson, you may begin. Patrick Davidson – Vice President, Investor Relations: Thanks, (Claudia). Good morning everybody and thanks for joining us. Earlier today, we published our third quarter results for fiscal 2012. A copy of that 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, and please refer now to Slide 2 of that 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 from those expressed or implied by such forward-looking statements. 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 Charlie Szews, President and Chief Executive 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, Charlie. Charlie Szews – President and Chief Executive Officer: Thank you, Patrick. Good morning. Today, with our third fiscal quarter results, we are beginning to realize the benefits of Oshkosh’s MOVE strategy. Since implementing our MOVE strategy a little over a year ago, we have been focused on the disciplined execution of the initiatives developed to support this strategy with the expectation that we would begin to enhance value for our shareholders in fiscal 2012 of more meaningful benefits beginning in fiscal 2013. We believe our third quarter results demonstrate that we are on track to deliver on our objective. We are pleased with these results which exceeded our expectations and reflect the opportunities for strong earnings growth and increased shareholder value that we believe lie ahead. For the third quarter of fiscal 2012, total company sales increased 7.6% to $2.18 billion compared to the third quarter of fiscal 2011. Earnings per share was $0.82 versus $0.75 in the prior year quarter. Our results were driven by improved operating performance and operating income margins across all our non-defense segments offset by lower defense earnings. Results for the current year quarter also include $0.07 per share of discrete tax benefits. Broadly, we saw continued progress in our non-defense businesses this quarter. Strong replacement driven demand for our access equipment products led to 40.4% year-over-year sales growth. Along with significantly higher operating income and improved margins into this segment, we are also pleased with our continued progress in raising margins in the commercial segment in the face of very challenging market conditions and returning the Fire and Emergency segment to profitability this quarter. As you may have seen today, we also announced plans they have the two small underperforming business that have been negatively impacting results in our Fire and Emergency segment. These actions will help improve our profitability in fiscal 2013 and allow us to focus our resources on profitably growing our larger fire apparatus and airport products businesses in this segment. To move initiatives underway at Oshkosh and the continued focus on improving the performance of our business are beginning to positively impact our cost structure, our ability to innovate an international revenue expansion. We are building momentum and maintain our view that our non-defense businesses will drive our success within the next several years. We also recently announced some changes to executive operating teams that are important for our long-term performance. Wilson Jones will not serve as our President and Chief Operating Officer effective next week. Wilson has led two of our segments, building strong teams in delivering customer focused results. His multi-industry experience, ability to manage all aspects of the business and leadership qualities to motivate our teams to execute at the highest levels will benefit our entire organization. Wilson will join us on these calls beginning next quarter. Frank Nerenhausen will assume Wilson's former role as President of the Access Equipment segment. Frank and his team have performed extremely well over the past couple of years in our Commercial segment, taking an operation that has been especially hard hit by the recession and returning it to profitability with an operating income margin nearly 7% in the quarter just ended when the industry volumes remained down on 40% and 90%. Like Wilson, Frank brings excellent leadership qualities and a drive to perform every day. Todd Fierro will follow Frank to lead our Commercial segment. He has been one of the driving forces for change and improvement in the Commercial segment as the Vice President of Operations. Todd has a lean transformation in this segment. It is important to these highly competitive businesses. I am confident that each of these leaders will be successful in their new roles and as a team we expect to drive MOVE initiatives faster to deliver tangible results for shareholders. Let’s talk about our current market condition. I’ll turn to slide four. Led by our performance in North America, Access Equipment segment delivered double digit sales growth this quarter in all major regions. We continued to benefit from replacement demand in North America equipment utilization, rental rates and used equipment values remain attractive and we believe that replacement demand in this region will remain solid. Looking at access equipment performance across the globe we remain encouraged by the underlying drivers of long-term demand for access equipment. Specifically increased product adoption and infrastructure build out in the less developed markets. Europe remains the mixed bag as it has been for sometime given the economic uncertainty in that region and growth rates have slowed in some other markets. We’re watching to see how these events play out so that we can take advantage of opportunities and be responsive to challenges. In our Defense segment we recently announced an order in the United Arab Emirates which is our first large international order for M-ATV. We’ve talked for the last several quarters about the potential for international orders for this product. And we’re excited to expand the relationship with the UAE and move forward with this initial order for 750 units, which includes an option for close to 200 additional units. We expect to deliver all 750 M-ATVs in fiscal 2013 pending standard U.S. regulatory approval. This order is important for our defense business and further reinforces our belief that there are opportunities to continue selling M-ATV. We’ve been for – deploying business development teams in hypertension markets around the globe and believe there will be additional opportunities for global defense vehicle and aftermarket parts and service sales over the coming years. In fact John Urias and his team, his defense team participated in are very well attended and encouraging international trade show and demonstration in Paris last month. Eurosatory is an annual military trade show that focuses on defense land forces every other year. Highlights of our participation this year included an opportunity to showcase our M-ATV in a live demonstration as well as the opportunity to meet with key international military delegation have shown interest in Oshkosh defense vehicle. The U.S. fire truck market remains down and we expect this trend to continue for some period of time. Our focused efforts abroad continued to deliver results as we secured additional international orders for Pierce fire trucks as well as Oshkosh ARF and snow unit that support emergency response organizations in major airports around the world. Specifically we won some important competitions during the quarter in China, England and India. In our Commercial segment we’re seeing slow but positive improvement in residential construction trend which we believe bodes well for the concrete mixer market outlook. We also experienced another quarter of relatively strong parts sales in this segment which we view as a positive sign for future new vehicle demand. And we continue shipping a richer mix of CNG-powered units in our Commercial segment a trend which we also experienced through the first six months of our fiscal year. Let’s turn to slide five and talk about some operational initiatives. The Oshkosh operating system is gaining momentum since we reinvigorated it with strong new leadership and a sharper focus. The Oshkosh operating system is a customer-centric application of a lean operating system. Our plants are operating with (indiscernible) metrics. Integrated project teams have been formed to streamline key business processes and resolve operational challenges. And training is commencing across the company. The Oshkosh operating system will be a key contributor to delivering the optimizing cost initiative of our MOVE strategy. We will have more to report in the Oshkosh operating system and its impacts on our organization during our Analyst Day in September. JLG continued the trend of improved operating margins that we have been taking about for the last several quarters. We capture some additional pricing as expected from our price increase implemented in our second fiscal quarter. Capturing these price increases is important as we continue working to recover material cost increases that we absorbed over the past 12 to 18 month. We have communicated to customers that we expected increased prices again January 2013 as it is important to fully recover our cost increases in this business and deliver acceptable margins over the economic cycle. We also benefited this quarter from higher volumes and operational efficiencies in this segment. In Defense, the team delivered another quarter of improved performance on the FMTV program. During the quarter, we worked with our U.S. Army customer to adjust FMTV delivery schedules for fiscal 2013 and 2014 to better match our customer needs, at the same time, better utilize our production capacity. Basically, we’ll be building a same quantity of vehicles over the two-year period with some of the production volume shifting to fiscal 2014. In the Fire and Emergency segment, we have made progress in the quarter of improving the operational efficiency of our fire apparatus manufacturing. This is key to driving margins to acceptable levels in this low volume environment. As I mentioned earlier, to allow us to better focus on improving the performance of our major product lines in this segment, we announced today that we’ll be exiting the ambulance business and the European mobile medical business. We had expected that the move of ambulance production to Florida would result in significantly improved performance for the Med Tech Ambulance product line. Our current view is that despite the effort of numerous dedicated individuals and teams, we would not be able to achieve profitability for Med Tech Ambulances in a reasonable timeframe, if at all and as a result, we will turn our focus to other initiatives. We expect to incur pre-tax charges of approximately $15 million to $20 million related to these actions with approximately $14 million to $18 million of that number expected in the fourth quarter of fiscal 2012 and the remainder largely in the first quarter of fiscal 2013 as we build out our backlog of ambulance orders. Our Commercial segment delivered another solid quarter driven by stronger volumes and focused execution utilizing their principles of the Oshkosh operating system. We expect to continue driving improved results at the Commercial segment and throughout all of Oshkosh Corporation as the Oshkosh operating system becomes more engrained in our everyday activity. Now, please turn to slide six and Dave will take us through a brief discussion of our financial performance for the quarter and our updated expectations for fiscal 2012. Dave Sagehorn – Executive Vice President and Chief Financial Officer: Thanks, Charlie and good morning everyone. Consolidated net sales for our third fiscal quarter were $2.18 billion, an increase of 7.6% from the prior year quarter. Each of our non-defense segments experienced higher sales compared to the prior year quarter led by a 40.4% increase in the Access Equipment segment. These higher sales helped offset a 13.4% decrease in defense segment sales compared to the prior year quarter. Consolidated operating income for the quarter was $124.5 million or 5.7% of sales. This compares to operating income of $126 million or 6.2% of sales in the third quarter of fiscal 2011. Improved performance in our non-defense segment largely offset the continued shift from higher margin FHTV vehicle and after-market parts sales to lower margin FMTV vehicle sales in the Defense segment. Both the Access Equipment and Commercial segments realized strong incremental margins in the quarter. And as expected, the Fire and Emergency segment was profitable in the quarter. More information on our third quarter segment performance can be found in the appendix section of this morning’s slide deck. As Charlie mentioned, earnings per share for the quarter was $0.82, which included a $0.07 per share of discrete tax benefit. This compares to $0.75 earnings per share in the third quarter of fiscal 2011. Overall, we are pleased with the third quarter performance and believe that these results are evidenced of the efforts and focus of the entire Oshkosh team on successfully managing the business in the face of continued challenging end markets. Subsequent to the end of the quarter, we successfully refinanced our credit agreement, which included among other things lowering the interest rates spread by 100 basis points adjusting the leverage ratios, at which the interest rate spreads change and increasing the restricted payments basket to match those in our senior notes. These changes apply only to our credit agreement, which is comprised of the term loan A with $455 million outstanding as of June 30, 2012 and following the amendment of $525 million revolver, which was undrawn on as of June 30, 2012. Please turn to slide seven for a review of our current outlook for the remainder of our fiscal 2012. We are again increasing our outlook for fiscal 2012 compared to what we provided on our last earnings call, largely as a result of our third quarter performance. We now believe that Access Equipment segment sales will be approximately 40% higher than fiscal 2011 compared to our previous estimate of 35% to 40% higher. We expected operating income margins in this segment will be in the 7.5% to 8% range consistent with our previous estimate. We expect fourth quarter sales and operating income margins in the segment will be lower than in the third quarter, reflecting the seasonal pattern that this segment traditionally experiences. In our Defense segment, we believe sales for the year will be approximately 10% lower than the prior year versus our previous estimate that it would decrease by 10% to 15%. With the continued improvement in FMTV margins, we now believe that operating income margin in this segment will be between 5% and 5.5% for the full year. We continue to believe that Fire and Emergency segment sales will be up slightly compared to fiscal 2011. We now believe that this segment will report a small full year operating loss compared to our previous estimate of breakeven. We do expect the segment to report sequentially improved profitability from the third and fourth fiscal quarters however. These estimates do not include any of the expected costs associated with exiting our ambulance and European mobile medical businesses. We lowered our full year earnings estimates largely due to costs incurred during the third quarter associated with the integration of Med Tech into our Florida operations. We now believe that full year sales in our Commercial segment will be up approximately 20% compared to fiscal 2011. Our previous estimate was an increase of 15%. We believe that operating income margins in this segment will be in the 3.5% to 4% range, reflecting the continued progress being made by the commercial team. We expect our operating income margin to decline from the third to fourth fiscal quarter due largely to investments in our MOVE strategy. We now believe that corporate expenses will be approximately flat with fiscal 2011 and net interest expense will be lower than in fiscal 2011 due to the expiration of our interest rate swap and the full year impact of fiscal 2011 debt reduction. We now estimate that our full year tax rate will be 29% to 30% down from our previous estimate as a result of discrete items recorded in our third quarter. Finally, we are updating our estimated full year capital expenditures to be between $50 million and $60 million. Summing it up, we expect fourth quarter fiscal 2012 earnings per share to be slightly higher than either our first or second quarter earnings per share. We plan on providing an initial view of our outlook for fiscal 2013 at our upcoming Analyst Day. I would also like to note that with our debt level now within our targeted range, we believe there will be opportunities to increase shareholder value through selective repurchases of our common stock. Our Board of Directors has approved a 4 million share increase in the amount of common stock that management is authorized to repurchase. Combined with the approximately 3.2 million shares currently authorized, management now has the authority to repurchase up to approximately 7.2 million shares. We do expect that we will begin to selectively repurchase some of our shares. I’ll turn it back over to Charlie for some closing comments. Charlie Szews – President and Chief Executive Officer: It seems that for every positive data point in the news, there is another data point that leads to some doubt in the recovery. Regardless of the daily headlines, we are all reading, we believe we are at the front end of a slow economic recovery and that our businesses are moving in the right direction and with significant upside ahead for Oshkosh. We believe we have the right team and the right roadmap to guide us and drive shareholder value with our MOVE strategy as we transitioned for global industrial company. That concludes our formal comments here to answer your questions. So, I will turn it back over to Pat to get the Q&A started. Patrick Davidson – Vice President, Investor Relations: Thanks, Charlie, and I’d like to remind everyone, please limit your questions to one, plus a follow-up, and then after the follow-up, now we ask that you get back in queue if you’d like to ask additional questions. Claudia, let’s begin the question-and-answer period of the call, please.

Thank you. (Operator Instructions) Our first question is coming from the line of Ann Duignan with JPMorgan. Please state your question. Ingrid Aja – JPMorgan: Good morning. It’s Ingrid Aja standing in for Ann.

Good morning Ingrid.

Good morning. Ingrid Aja – JPMorgan: Good morning. I wonder if you could just go back to the AWPs and give us a little more color on what you’re seeing there. How long can replacement demand in North America continue and are you now seeing at all any fleet expansion and then maybe a little more color on what you’re seeing in Europe?

Okay. First of all we do believe that the replacement cycle for AWPs can extend some period of time. Average fleet ages are still very high and that with the continuing recovery we think that replacement cycle will go on for two years. With respect to fleet expansion we have seen some pockets of fleet expansion around the country, we don’t think it’s been significant but there has been some. And turning to Europe I don’t think much has really change the news has been pretty volatile about Europe the last few months, but fundamentally the news in AWP market is pretty consistent. And that is if the region of two halves, right Northern Europe is reasonably in good shape and Southern Europe is pretty dead, right. So, Northern Europe we’re seeing reasonable activity, it’s not going to be high growth activity, but we do think it will improve in 2013 and Southern Europe probably going to be a couple of years out before we see any. Ingrid Aja – JPMorgan: Okay great. Thanks. That’ helpful and then if we could switch to defense, you mentioned that you are moving around some of the FMTV sales. I was trying to better understand that how much volume is moving from FY ‘13 into FY ‘14 and maybe just talk about your outlook in general for defense?

Well, the moves do a few things it accommodates the build for the M-ATV and it also really helps to spill out of our shift production in a more rational manner. So, these are moves that we start with our customer and at the same time really helped our customer out with some of their initiatives. So, that’s really why we did it. Ingrid Aja – JPMorgan: Okay. So, it’s more just trying to more manage it more efficiently?

Absolutely, what it’s all about? Ingrid Aja – JPMorgan: Okay. That’s helpful. Thank you.

Thank you.

Our next question comes is from the line of Charlie Brady with BMO Capital Markets. Please state your question. Charlie Brady – BMO Capital Markets: Thanks. Good morning guys.

Good morning.

Good morning. Charlie Brady – BMO Capital Markets: Hi. With respect to the guidance on access 40% up for the year, it looks like that implies flat fourth quarter revenues which seems a bit conservative and I’m just trying to square that with kind of the activity in your commentary and along with that can you speak to what you’re seeing from the smaller independent rental companies as far as what their participation in the purchasing has been like?

No. Our fourth quarter, at least in our numbers is still up and I think you’re wrong the growth rate does declined some because I think last year in our fourth quarter we started to see really the ramp up in this segment. So, our growth rate is lower, but it still is strong growth rate in the quarter. The independents are still not a big factor in the market, we think its going to improve into 2013. We see some it still continues to be largely a financing issue as the bank markets a little bit choppy themselves and I think that affects the independents’ ability to get financing it is improving. And we do expect them to play a bigger role in the market next year. Charlie Brady – BMO Capital Markets: Okay. And with respect to M-ATV orders to the UAE that you are going to ship in fiscal ‘13 is will all that be – is that going to be any inter-segment similar to what we did on the original U.S. contract or is that all going to coming out of the Defense segment?

We’re building all of the units in defense 100% in defense. Charlie Brady – BMO Capital Markets: Okay. Thanks very much.

Thank you.

Thank you. Our next question is coming from the line of Walt Liptak with Barrington Research. Please state your question. Walt Liptak – Barrington Research: Hi good morning guys and thanks for the nice quarter. I want to ask about the defense business and the FMTV margins which you said are improving. I wonder if you can give us some color about what you are doing operationally to get those margins up if there is engineering changes going on maybe give us an idea of what those margins might be looking like at this point?

Largely the improvement is coming from efficiencies in the point we’ve hired some very strong talent in our defense operation and they are doing a terrific job of partnering with our production employees and getting us profitability in this contract to really where it needed to be. And that virtually where it’s all coming from, yes we are always looking at tinkering with the truck a little bit as you maybe aware any configuration changes of vehicle has to be approved by the customer and they generally mean if the win-win where we’re giving some of the savings back to our customers. So, largely right now it’s from efficiencies as we move forward we do a scheduled price increases that also impacted. Walt Liptak – Barrington Research: Okay good and on the UAE contract M-ATV contract from the U.S. government were pretty good in the double-digit, I wonder if you could comment on where you see the margins on this contract?

Really we can’t comment on that. Walt Liptak – Barrington Research: Okay.

Walt just in terms of I mean our customers asked us to not say a lot about the pricing on the contract, but obviously we know how to build the trucks. We think we will be efficient at it and we think we’ll do okay. Walt Liptak – Barrington Research: Okay, we’ve seen your margins in defense move around quite a bit obviously the FMTV margins were a lot lower than anything that’s happened to the company historically on the heavies we’ve seen those margins obviously move around over the last couple of years mostly to the down side. I wonder if you can maybe not say anything specific, but may be some color on how you are feeling about the profitability low margins similar to FMTV or is this closer to something traditional?

On the M-ATV specifically that’ what you are asking? Walt Liptak – Barrington Research: Yeah right.

I think historically you’ve seen our non-FMTV programs have higher margins and this is going to be more reflective of that. Walt Liptak – Barrington Research: Okay.

Go ahead Walt Liptak – Barrington Research: Okay, good. Thanks that’s what I was looking for.

Thank you. Our next question is coming from the line Rob McCarthy with Robert W. Baird. Please state your question Nick Dobre – Robert W. Baird: Yes, this is Nick Dobre again for Rob McCarthy. Good morning gentlemen.

Good morning.

Good morning. Nick Dobre – Robert W. Baird: Going back to the defense segment, can you give us a sense for the FMTV program and what percentage of the quarter’s revenue has been in FMTVs?

In the third quarter it was almost 50% of the revenue was FMTV related. Nick Dobre – Robert W. Baird: Okay and how about the margin on this business you commented on over the last couple of quarters so I am wondering how that progressed?

We’ve talked about that we had continuing improvement in the last several quarters, but it really – it still remains in the low single digits. Nick Dobre – Robert W. Baird: I see and if I understand your earlier comment you were saying that basically this should be considered a run rate for the FMTV program going forward into the first part of fiscal ’14, have I understood your comments correctly or not?

I don’t think so, in terms of run rate we are certainly picking with respect to daily production. And there are some scheduled decrease in daily production over the next two years there are very rational they’ve come down in steps?

But I think in terms of margin, as Charlie alluded to earlier, we’re going to continue to work on driving efficiencies in the program, and ideally, we would like to see those margins continue to improve. Nick Dobre – Robert W. Baird: Great. And last one on Defense is can you give us sense for how you are thinking about the long-term revenue opportunity for this segment. And for M-ATV specifically how should we think about the global demand for this kind of a vehicle, when you are looking at your total market opportunity out there, outside of just the UAE?

Well, in terms of the segment overall we’re going have an Analyst Day on September 14, and we’re going to talk about the outlook for Defense at that point in time. We have a great platform of our vehicles now and – we’ll talk and give really shareholders I think what they have been looking for from us in this regard. The M-ATV we’ve said for some time that we have opportunities of about 3,000 M-ATV, but thereby no means is their prediction that we’re going to win those, but rather that, that’s sort of the population of opportunities that we are chasing and that they tend to take a long time to develop.

I would say that our success in the UAE with the order there is I think positive example of the opportunities that we do believe are out there. Nick Dobre – Robert W. Baird: Well, and thank you. And last question for me is really around potential of share buybacks, I’m wondering do you have a particular debt-to-total capital target that we should be thinking about or how should we think about progression in that regard?

Well, we’ve talked that our debt is within our target – what we consider within our target range. So, I would look at it from a standpoint of our debt will kind of hang around where it is. We’ll take care of the required amortizations, quarterly amortizations as they come due, but we kind of like where our debt is right now. Nick Dobre – Robert W. Baird: Very well. Thank you.

Thank you.

Our next is coming from the line of Jamie Cook with Credit Suisse. Please state your question. Linda Yuan – Credit Suisse: Hi guys, this is Linda Yuan in for Jamie Cook.

Good morning. Linda Yuan – Credit Suisse: Good morning. Could you go into how we should think about R&D and defense going forward, I’m assuming that it’s going to decrease given that the number of contracts is going to go down, so but this potentially help margins?

Not exactly sure of your question, certainly the M-ATV program win will help us here, but as I just said short-term ago, we’re going to give everyone a real good look at our Defense business here in September and provide you with our outlook. Linda Yuan – Credit Suisse: Okay. And then could you go a little bit more in depth on the type of revenues that we should be looking at for Defense segment, would that be something similar to what we had pre-Middle East for us?

We’re going to give you our views on all of that here in September. We are preparing our comments as we speak I suppose for that meeting, but as we have said in our prepared remarks as well, we have four deployed business development people around the world, where we are pursuing additional M-ATV sales, sales of our other vehicles around the world. We are pursuing competitions like the JLTV, which is hopefully will be announced here by the end of August. And we think we have long-term viable defense business. Linda Yuan – Credit Suisse: Okay, alright. Thank you.

Thanks Linda.

Our next question is coming from the line of Jerry Revich with Goldman Sachs. Please state your question. Jerry Revich – Goldman Sachs: Good morning.

Good morning, Jerry. Jerry Revich – Goldman Sachs: Charlie, can you talk about which of the platforms drove the outside surprise in defense into the back half of this year and so that’s something you are willing to comment. How we should be think about operationally what you are looking at in your defense business over the next couple of years. From a plant size and capacity standpoint, you were one of the first folks to outline what post Middle East demand means for military businesses? And I’m just wondering if you can give us some more context on, what we should expect on your cost structure over the next couple of years to the extent that you can comment head of your Analyst Day?

Jerry, good morning, it’s Dave. Just in terms of the quarter performance, really it was largely focused around the FMTV that – again that Charlie talked about the continued progress on that program. I think, we are pleased of what we are seeing and the team is really coming together and helping their improve the performance on that program. And then…

With respect to long-term business, we think that this business is going to be profitable for long-term. We will do it, but we need to do – to sustain profitability in the business. I’m now here to talk about what facilities will remain open, what could potentially close at some point in time, because we are in a volatile world, right and there are lot of events going on in the Middle East that could sustain our long-term defense business. So, what we’ll talk about in September is a several range of possibilities for this business, but again, we are going to manage it to be profitable. We think we’ve got our MOVE initiatives are gaining traction and we are going to be able to sustain and drive good shareholder value over the next few years. Jerry Revich – Goldman Sachs: Okay. And I’m wondering if we could talk a little bit more about the aerials business that we have seen out of your rental companies, utilizations come down a bit off of high levels, in your mind, is it a situation of the added capacity too quickly, too fast in the first half of the year. So, now we are – as we saw in your orders and Terex orders, we are going to have a couple of quarter of adjustment process to get the utilizations backup or how do you see the cycle playing out, because clearly the weakness is showing up in your orders in their utilization rates?

Really, there are no weakness in the orders, what you are seeing is a normal seasonal pattern, Jerry. And we would expect that discussion to the national rental companies will pickup here in right around winter time and you will see orders in late in the first quarter and in the second quarter that will drive next year’s business. So, it would be very consistent for what we are seeing right now.

Jerry, just to add on that a little bit, one of the things in terms from an order pattern, I mean, five out of the last six years, our orders in the June quarter were down sequentially from March. So, this is what we would consider normal. Jerry Revich – Goldman Sachs: Alright, thank you.

Thank you.

(Operator Instructions) Our next question is coming from the line of Charlie Brady with BMO Capital Markets. Please state your question. Charlie Brady – BMO Capital Markets: Thanks. Just want to clarify your guidance on the Commercial segment, in the Q1, there were some restructuring charges embedded in that. Is your guidance include the Q1 restructuring, and I guess, similar question on the Fire and Emergency segment?

Charlie, I think it does include the restructuring and commercial in Q1 as well as what we incurred earlier in the fiscal year in the Fire and Emergency. Charlie Brady – BMO Capital Markets: Okay, thanks very much.

Thank you.

Thank you. Our next question is coming from the line of Rob McCarthy with Robert W. Baird. Please state your question. Rob McCarthy – Robert W. Baird: Yes, thank you for the follow-up. Just wanted to ask a quick question about Wilson Jones’s new role, I am wondering if you can provide any insight as to how his role would develop and what will be maybe a little bit different than what you’ve currently done?

Okay, as has been evident, we’ve really been preparing Wilson for this move for some period of time. We’ve been promoting and moving into different segments, so that he has broader and broader responsibilities. He is a real talent and I view him as a partner in helping me execute the MOVE initiatives much faster, to be frank, a great additional urgency and deliver for shareholders. So, he is going to be managing the Access Equipment, Commercial, Fire and Emergency in our Asian operation. Obviously, I’m still going to be involved in all of that, but he is going to be able to develop more day-to-day attention to execute as the recovery unfolds. Rob McCarthy – Robert W. Baird: Thank you.

Our next question is coming from the line of Basili Alukos with Morningstar. Please state your question. Basili Alukos – Morningstar: Hey guys, good morning.

Good morning.

Good morning. Basili Alukos – Morningstar: Two questions related to the share buyback, first, I think in the past you guys have talked about bolt-on acquisitions and that potentially being part of the strategy and I’m not sure if it’s part of the move as you think differently, but has your view on acquisitions changed?

No, it really hasn’t I mean – I think we would like to be opportunistic. And as we look at opportunities, and sometimes we want – we just want to maintain that flexibility. I think will be disciplined as we look at potential share buybacks here and the amount of shares that are currently authorized, while we think it’s a good amount, it’s not something that will totally limit our flexibility for other opportunities if they present themselves. Basili Alukos – Morningstar: Okay. And then a just housekeeping you mentioned $7.2 million was the total authorization?

That’s what’s currently authorized, yes. Basili Alukos – Morningstar: And now have any shares already been repurchased?

No. Basili Alukos – Morningstar: Okay, great. Those are my questions. Thanks.

Thank you.

As we reached the end of our Q&A session, I would like to turn the floor back over to management for closing remarks. Charlie Szews – President and Chief Executive Officer: Okay, thank you very much. We plan to continue working diligently to execute our MOVE strategy to drive shareholder value. We have a strong team that will be even stronger as we go forward with the recently announced promotions of Wilson Jones, the President and Chief Operating Officer as well as Frank Nerenhausen taking the helm at Access Equipment and Todd Fierro assuming the lead role in Commercial. For institutional investors and analysts on the call, you’ll have an opportunity to meet many key members of our leadership team on September 14th at our Analyst Day. Please contact Pat Davidson or Tina Schmiedel, if you’ve not already been contacted or if you’d like to hear more about the event. Thank you and have a great day.

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. And we thank you for your participation.