The Daily Magic Formula Stock for 08/27/2008 is Oshkosh Corp. According to the Magic Formula Investing Web Site, the ebit yield is 15% and the EBIT ROIC is 50-75 %.
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The Company is a leading designer, manufacturer and marketer of a broad range of specialty vehicles and vehicle bodies. The Company operates in four segments: access equipment, defense, fire & emergency and commercial. Oshkosh began business in 1917 and was among the early pioneers of four-wheel drive technology. In 1981, Oshkosh was awarded the first Heavy Expanded Mobility Tactical Truck (â€śHEMTTâ€ť) contract for the U.S. Department of Defense (â€śDoDâ€ť), and quickly its defense segment developed into the DoDâ€™s leading supplier of severe-duty, heavy-payload tactical trucks. As the leading manufacturer of severe-duty, heavy- and medium-payload tactical trucks for the DoD, the Company manufactures vehicles that perform a variety of demanding tasks such as hauling tanks, missile systems, ammunition, fuel and cargo for combat units. In 1996, the Company began a strategic initiative to diversify its business by making selective acquisitions in attractive segments of the specialty vehicle and vehicle body markets to complement its defense truck business.
In September 1996, the Company entered the firefighting apparatus market through the acquisition of Pierce, a domestic market leader in manufacturing and marketing of firefighting vehicles. The Company subsequently expanded into additional emergency response and geographic markets to form its fire & emergency segment. This segment manufactures commercial and custom firefighting vehicles and equipment, aircraft rescue and firefighting (â€śARFFâ€ť) vehicles, snow removal vehicles, ambulances, wreckers, carriers and other emergency vehicles primarily sold to fire departments, airports, other governmental units and towing companies in the U.S. and abroad; mobile medical trailers sold to hospitals and third party medical service providers in the U.S. and Europe; and broadcast vehicles sold to broadcasters and TV stations in North America and abroad.
In February 1998, the Company entered the concrete mixer and refuse collection vehicle markets through the acquisition of McNeilus to form its commercial segment. Since that time, the Company has acquired additional businesses serving these markets and other adjacent markets. This segment manufactures rear- and front-discharge concrete mixers, refuse collection vehicles, mobile and stationary compactors and waste transfer units, portable and stationary concrete batch plants and vehicle components sold to ready-mix companies and commercial and municipal waste haulers in North America, Europe and other international markets and field service vehicles and truck-mounted cranes sold to mining, construction and other companies in the U.S. and abroad.
In December 2006, the Company entered the access equipment market (defined as aerial work platforms and telehandlers) through the acquisition of JLG, the Companyâ€™s largest and most recent acquisition, to form its access equipment segment. Founded in 1969, JLG is a leading global producer of access equipment based on gross revenues. The access equipment segment manufactures aerial work platforms and telehandlers used in a wide variety of construction, industrial, institutional and general maintenance applications to position workers and materials at elevated heights. Access equipment customers include equipment rental companies, construction contractors, manufacturing companies, home improvement centers and the U.S. military.
The result of this diversification and acquisition initiative to date has been an increase in sales from $413 million in fiscal 1996 to $6.3 billion in fiscal 2007, with earnings from continuing operations increasing from a loss of $.01 per share for fiscal 1996 to earnings of $3.58 per share for fiscal 2007.
The Company believes it has developed a reputation for excellent product quality, performance and reliability at low total product life cycle costs in each of the specialty markets in which it participates. The Company has strong brand recognition in its markets and has demonstrated design and engineering capabilities through the introduction of several highly engineered proprietary components that increase the operating performance of the Companyâ€™s products. The Company has developed comprehensive product and service portfolios for many of its markets in an effort to become a single-source supplier for its customers, including third-party customer lease financing programs for its fire & emergency products and certain commercial products through its wholly-owned subsidiary, Oshkosh Equipment Finance, L.L.C., doing business as Oshkosh Capital (â€śOshkosh Capitalâ€ť); for its access equipment products through its wholly-owned subsidiary, Access Financial Solutions, Inc.; and for certain of its commercial products through the Companyâ€™s interest in Oshkosh/McNeilus Financial Services Partnership (â€śOMFSPâ€ť).
See Note 20 to the Consolidated Financial Statements for financial information related to the Companyâ€™s business segments.
The following competitive strengths support the Companyâ€™s business strategy:
Strong Market Positions. The Company has developed strong market positions and brand recognition in its core businesses, which the Company attributes to its reputation for quality products, advanced engineering, innovation, vehicle performance, reliability, customer service and low total product life cycle costs.
Extensive Distribution Capabilities. The Company has established an extensive domestic and international distribution system for specialty vehicles and vehicle bodies tailored to each market. The Company utilizes networks of dealers and distributors in markets characterized by a large, fragmented customer base. The Company employs direct in-house sales and service representatives in markets characterized by a concentrated customer base. In addition, the Companyâ€™s access equipment segment sells to independent rental companies to reach its various markets.
Flexible and Efficient Manufacturing. Over the past 11 years, the Company has significantly increased manufacturing efficiencies. The Company believes it has competitive advantages over larger vehicle manufacturers in its specialty vehicle markets due to its manufacturing flexibility and custom fabrication capabilities. In addition, the Company believes it has competitive advantages over smaller vehicle and vehicle body manufacturers due to the Companyâ€™s relatively higher volumes of similar products that permit the use of moving assembly lines and allow the Company to leverage purchasing power opportunities across product lines.
Diversified Product Offering and Customer Base. The Companyâ€™s broad product offerings and target markets serve to diversify its sources of revenues, mitigate the impact of economic cycles and provide multiple platforms for potential internal growth and acquisitions. For each of the Companyâ€™s target markets, the Company has developed or acquired a broad product line to become a single-source provider of specialty vehicles, vehicle bodies, parts and service and related products to the Companyâ€™s customers.
Strong Management Team. The present management team has successfully executed a strategic repositioning of the Companyâ€™s business while significantly improving its financial and operating performance. With each acquisition since 1996, the Company assimilated the management and culture of the acquired company and has introduced, and continues to introduce, new strategies intended to increase sales and use the Companyâ€™s expertise in purchasing, engineering and manufacturing to reduce costs.
Quality Products and Customer Service. The Companyâ€™s products have developed strong brand recognition based on the Companyâ€™s commitment to meet the stringent product quality and reliability requirements of its customers and the specialty vehicle and vehicle body markets it serves. The Companyâ€™s commitment to product quality is exemplified by the ISO 9001 certification. Most of the Companyâ€™s facilities are ISO 9001 certified. The Company also achieves high quality customer service through its extensive service and parts support program, which is available to domestic customers 365 days a year in all product lines throughout the Companyâ€™s distribution systems.
Proprietary Components. The Companyâ€™s advanced design and engineering capabilities have contributed to the development of proprietary, severe-duty components that enhance vehicle performance, reduce manufacturing costs and strengthen customer relationships. These proprietary components include front drive and steer axles, transfer cases, cabs, TAK-4 independent suspension, the Pierce Ultimate Configuration (â€śPUCâ€ť) vehicle configuration, the Hercules and Husky foam systems, the Command Zone embedded diagnostics multiplexing technology, the McNeilus Auto Reach Arm for automated side-loading refuse collection vehicles, the Geesink Norba Groupâ€™s SmartPak compaction system, JerrDanâ€™s vehicle recovery system, JLGâ€™s electronic control system, the Pro-Pulse hybrid electric drive technology and the TerraMax autonomous vehicle navigation system. The Company also has an exclusive license to manufacture and market the Revolution composite concrete mixer drum in North, Central and South America and the Caribbean (the â€śAmericasâ€ť) and Europe and a 20-year license to use certain Caterpillar Inc. (â€śCaterpillarâ€ť) intellectual property in connection with the design and manufacture of Caterpillar-branded telehandler products. The Company believes these proprietary components provide the Company a competitive advantage by increasing its productsâ€™ durability, operating efficiency and performance. The integration of many of these components across various product lines also reduces the Companyâ€™s costs to manufacture its products compared to manufacturers who simply assemble purchased components.
The Company is focused on increasing its net sales, profitability and cash flow by capitalizing on its competitive strengths and pursuing a comprehensive, integrated business strategy. Key elements of the Companyâ€™s business strategy include:
Focusing on Specialty Vehicle and Vehicle Body Markets. The Company plans to continue its focus on those specialty vehicle and vehicle body markets where it has or can acquire strong market positions and where the Company believes it can leverage synergies in purchasing, manufacturing, technology and distribution to increase sales and profitability. The Company believes the higher sales volumes associated with strong market positions will allow the Company to continue to enhance productivity in manufacturing operations, capitalize on extensive distribution capabilities, fund innovative product development and invest in further expansion. In addition to the Companyâ€™s plans to increase its market share and profitability, the Company believes each of the Companyâ€™s specialty vehicle and vehicle body markets, both domestically and internationally, exhibit opportunities for further market growth.
Introducing New Products. The Company has maintained a strong emphasis on new product development, as it seeks to expand sales by leading its core markets in the introduction of new or improved products and new technologies, through internal development, strategic acquisitions or licensing of technology. In fiscal 2007, the Company invested $75.8 million in development activities for new products and product enhancements. The Company believes it is at the forefront of commercializing emerging technologies that are capable of important changes in customer uses of its products, such as the TerraMax autonomously operated vehicle, ProPulse hybrid-electric drive, Revolution composite concrete mixer drum, Side Loading Vehicle Retriever, PUC vehicle configuration and Velocity and Impel custom fire chassis.
Providing Superior Quality and Service to Each Market. The Company generally markets a premium product line in each of its markets and seeks to provide superior quality and service in each market to sustain its premium product positioning. Each of its businesses maintains active programs involving customer outreach, design and manufacturing quality and supplier certification to assure superior product quality. Quality metrics are maintained at each business to drive continuous improvement.
The Company sustains its quality reputation with a strong aftermarket focus. The Company actively tailors distribution and service to each of its domestic and international markets. The Company utilizes dealers and distributors in markets characterized by a large, fragmented customer base. The Company uses its owned or leased facilities and in-house sales representatives in markets characterized by a concentrated customer base, supplemented by a network of nationwide service representatives. In addition, the Companyâ€™s access equipment segment sells to independent rental companies to reach its various markets. The Company believes that this distribution and service model provides frequent contact with customers and timely service at a reasonable cost. Because the Companyâ€™s vehicles must be ready to go to war, fight a fire, rescue, clean up, tow, broadcast, build and perform other critical missions, the Company has actively been expanding Company-owned service locations, opening remanufacturing facilities, encouraging dealers to expand service locations and adding roving service vans to maintain high readiness levels of its installed fleets.
Focusing on Lean Operations. The Company seeks to deliver high performance products to customers at both low total product life cycle costs and low acquisition prices. Historically, the Company has actively benchmarked competitor costs and best industry practices and utilized teams of industrial engineers and procurement specialists to re-engineer manufacturing processes and leverage purchasing volumes to meet these objectives. Since 1996, the Companyâ€™s corporate strategic purchasing group has procured approximately two-thirds of all materials and components Company-wide to leverage the Companyâ€™s full purchasing power. Beginning in fiscal 2004, the Company adopted a more comprehensive, lean enterprise focus to continue its drive to be a low cost producer in all of its product lines and to deliver low product life cycle costs for its customers. Lean is a methodology to eliminate non-value added work from a process stream. In fiscal 2006, the Company expanded its lean initiative with the creation of chartered cost reduction teams at all businesses and the introduction of broad-based training programs. By utilizing teams comprised of individuals with significant lean experience to train the Companyâ€™s business units in lean skills, the Company has been able to introduce lean concepts to a number of its businesses. As a result of this lean focus, the Company expects to reduce product costs, manufacturing lead times and new product development cycle times over the next several years.
Pursuing Strategic Acquisitions. The Companyâ€™s present management team has successfully negotiated and integrated fifteen acquisitions since 1996 that, taken as a whole, have significantly increased the Companyâ€™s sales and earnings. Following the completion of additional integration tasks for the JLG acquisition and planned de-leveraging, in late fiscal 2008 or fiscal 2009, the Company intends to resume its pursuit of strategic acquisitions, both domestically and internationally, to enhance its product offerings and expand its international presence in specialty vehicle and vehicle body markets. The Companyâ€™s acquisition strategy is focused on opportunities that provide or enhance the Companyâ€™s ability to provide a full range of products to customers in growing specialty vehicle and vehicle body markets where the Company can improve its strong market positions and achieve significant acquisition synergies.
The Company is focused on the following core segments of the specialty vehicle and vehicle body markets:
Access Equipment Segment. In December 2006, through its JLG acquisition, the Company became a leading worldwide manufacturer of a wide range of aerial work platforms, telehandlers, scissor lifts and vertical masts used in a variety of construction, industrial, institutional and general maintenance applications to safely and efficiently position workers and materials at elevated heights that might otherwise have to be reached by scaffolding, ladders, cranes or other means.
In October 2005, JLG entered into a 20-year strategic alliance (the â€śAllianceâ€ť) with Caterpillar related to the design, manufacture and global sale of Caterpillar-branded telehandlers. JLGâ€™s manufacture and sale of Caterpillar-branded telehandlers commenced in July 2006.
JLG, through its wholly-owned subsidiary Access Financial Solutions, Inc., also arranges equipment financing and leasing solutions for its customers, primarily through private-label arrangements with independent third party financial companies, and provides credit support in connection with these financing and leasing arrangements. Financing arrangements that JLG offers or arranges through this segment include installment sale contracts, capital leases, operating leases and rental purchase guarantees. Terms of these arrangements vary depending on the type of transaction, but typically range between 36 and 72 months and generally require the customer to be responsible for insurance, taxes and maintenance of the equipment, and to bear the risk of damage to or loss of the equipment.
Defense Segment. The Company has sold products to the DoD for over 80 years. The Companyâ€™s proprietary military all-wheel drive product line of heavy-payload tactical trucks includes the HEMTT, the Heavy Equipment Transporter (â€śHETâ€ť), the Palletized Load System (â€śPLSâ€ť), the Common Bridge Transporter (â€śCBTâ€ť) and the Logistic Vehicle System (â€śLVSâ€ť). Beginning with the award of the Medium Tactical Vehicle Replacement (â€śMTVRâ€ť) base contract in fiscal 1998, the Company became a major manufacturer of severe-duty, medium-payload trucks for the U.S. Marine Corps. In fiscal 2005, the Company launched the Medium Tactical Truck (â€śMTTâ€ť) to offer a line of lower-cost severe-duty, medium-payload trucks suitable for less demanding requirements than the MTVR. The Company also exports severe-duty heavy- and medium-payload tactical trucks to approved foreign customers.
The Company has developed and maintained a strong relationship with the DoD over the years and has established itself as a proven supplier. The Company operates under a one-year, renewable Family of Heavy Tactical Vehicles (â€śFHTVâ€ť) requirements contract with the DoD. The current contract expires in February 2008. The contract includes the following heavy-payload products: HEMTT, HEMTT-ESP (â€śExtended Service Programâ€ť), PLS and PLS Trailer and associated logistics and configuration management support. As of November 19, 2007, the Company was in negotiations to renew this contract for a one-year period. As a result of significant usage of the Companyâ€™s heavy-payload trucks in Operation Iraqi Freedom and the Companyâ€™s performance under the initial contract, the Company was awarded a five-year follow-on, fixed-price indefinite delivery, indefinite quantity (â€śID/IQâ€ť) contract in September 2004 to rebuild Oshkosh heavy-payload defense trucks and trailers deployed in Iraq. As funds become available to the DoD, the ID/IQ allows the DoD to contract with Oshkosh to rebuild Oshkosh defense trucks and trailers at fixed prices over a five-year period ending in September 2009.
In June 2006, the DoD awarded Oshkosh a production contract for the Logistics Vehicle System Replacement (â€śLVSRâ€ť) vehicle and associated manuals, vehicle kits, test support and training for the U.S. Marine Corps. The Company estimates that this fixed-price, ID/IQ contract has a value of $740.2 million based on a production quantity of 1,592 units over a six-year period. The contract allows for the purchase of up to 1,900 cargo, wrecker and fifth-wheel LVSR variants. The Company delivered the first units under the contract in fiscal 2007 and expects that full scale production will begin in the second half of fiscal 2009.
In February 2006, the Company entered into a licensing agreement with ADI Limited of Australia (â€śADIâ€ť), a wholly-owned subsidiary of Thales Group, to allow the Company to manufacture, market and support the Bushmaster armored vehicle for North American customers as well as countries eligible for Foreign Military Sales. The Bushmaster, originally developed by ADI in conjunction with the Australian Defence Force, is a mine-blast resistant vehicle due to its v-shaped hull, and its armor provides improvised explosive device and ballistic protection to its occupants. The vehicleâ€™s mission profile requires it to travel long distances over rough terrain and deliver its occupants to their destination as safely and comfortably as possible, making it more effective in a tactical environment. To date, the Company has been unsuccessful in securing contracts for this vehicle from the DoD, but it continues to market this vehicle to friendly foreign militaries.
In July 2007, the Company announced a teaming agreement with Ceradyne, Inc. (â€śCeradyneâ€ť) and Ideal Innovations, Inc. (â€śI-3â€ť) to further develop, produce and market the Bull armored vehicle. The Bull is intended to address the increasing need for protection from improvised explosive devices (â€śIEDâ€ť), mine blasts and lethal, explosively formed projectiles (â€śEFPâ€ť) and would be built on a combat-proven Oshkosh chassis. The Bull advanced technology armored solution, conceived by I-3 in 2005 and developed with Ceradyne in 2006, has been tested by the Army Test Center, Aberdeen, Md., and was demonstrated to be capable of protecting vehicle occupants against IED, EFP, mine blast and ballistic threats.
The Companyâ€™s objective is to continue to diversify into other areas of the U.S. and international defense truck markets by expanding applications, uses and vehicle body styles of its current heavy- and medium-payload tactical truck lines. As the Company enters tactical truck competitions in the defense market segment, the Company believes it has multiple competitive advantages, including:
â€˘ Truck engineering and testing. DoD and international truck contract competitions require significant defense truck engineering expertise to ensure that a companyâ€™s truck excels under demanding test conditions. The Company has a team of engineers and draftsmen and engages contract engineers to support current business and truck contract competitions. These personnel have significant expertise designing new trucks, using sophisticated computer-aided tools, supporting grueling testing programs at test sites and submitting detailed, comprehensive, successful contract proposals.
â€˘ Proprietary components. The Companyâ€™s patented TAK-4 independent suspension and proprietary transfer case enhance its trucksâ€™ off-road performance. In addition, because these are two of the highest cost components in a truck, the Company has a competitive cost-advantage based on the in-house manufacturing of these two truck components. The Companyâ€™s Command Zone tool also simplifies maintenance troubleshooting.
â€˘ Past performance. The Company has been building trucks for the DoD for over 80 years. The Company believes that its past success in delivering reliable, high quality trucks on time, within budget and meeting specifications is a competitive advantage in future defense truck procurement programs. The Company understands the special contract procedures in use by the DoD and other foreign armies and has developed substantial expertise in contract management and accounting.
â€˘ Flexible manufacturing. The Companyâ€™s ability to produce a variety of truck models on the same moving assembly line permits it to avoid facilitation costs on most new contracts and maintain competitive manufacturing efficiencies.
â€˘ Logistics. The Company has gained significant experience in the development of operatorsâ€™ manuals and training and in the delivery of parts and services worldwide in accordance with the DoDâ€™s expectations, which differ materially from commercial practices. The Company has logistics capabilities to permit the DoD to order parts, receive invoices and remit payments electronically.
Fire & Emergency Segment. Through Pierce, the Company is a leading domestic manufacturer of fire apparatus assembled on custom chassis, designed and manufactured by Pierce to meet the special needs of firefighters. Pierce also manufactures fire apparatus assembled on commercially available chassis, which are produced for multiple end-customer applications. Pierceâ€™s engineering expertise allows it to design its vehicles to meet stringent industry guidelines and government regulations for safety and effectiveness. Pierce primarily serves domestic municipal customers, but also sells fire apparatus to airports, universities and large industrial companies, and in international markets. Pierceâ€™s history of innovation and research and development in consultation with firefighters has resulted in a broad product line that features a wide range of innovative, high-quality custom and commercial firefighting equipment with advanced fire suppression capabilities. In an effort to be a single-source supplier for its customers, Pierce offers a full line of custom and commercial fire apparatus and emergency vehicles, including pumpers, aerial and ladder trucks, tankers, light-, medium- and heavy-duty rescue vehicles, wildland rough terrain response vehicles, mobile command and control centers, bomb squad vehicles, hazardous materials control vehicles and other emergency response vehicles.
Through JerrDan, the Company is a leader in the manufacturing and marketing of towing and recovery equipment in the U.S. The Company believes JerrDan is recognized as an industry leader in quality and innovation. JerrDan offers a complete line of both roll-back carriers (â€ścarriersâ€ť) and traditional tow trucks (â€śwreckersâ€ť). In addition to manufacturing equipment, JerrDan provides its customers with one-stop service for carriers and wreckers and generates revenue from the installation of equipment, as well as the sale of chassis and service parts.
The Company, through its Oshkosh and BAI brands, is among the leaders in sales of ARFF vehicles to domestic and international airports. These highly specialized vehicles are required to be in service at most airports worldwide to support commercial airlines in the event of an emergency. Many of the worldâ€™s largest airports, including LaGuardia International Airport, Oâ€™Hare International Airport, Hartsfield-Jackson International Airport and Dallas/Fort Worth International Airport in the United States and airports located in Montreal and Toronto, Canada; Rome and Milan, Italy and Shanghai and Hangzhou, China, are served by the Companyâ€™s ARFF vehicles. The Company believes that the performance and reliability of its ARFF vehicles contribute to the Companyâ€™s strong position in this market.
The Company is a leader in airport snow removal vehicles in the U.S. The Companyâ€™s specially designed airport snow removal vehicles can cast up to 5,000 tons of snow per hour and are used by some of the largest airports in the United States, including Denver International Airport, LaGuardia International Airport, Minneapolis-St. Paul International Airport and Oâ€™Hare International Airport. The Company believes that the reliability of its high performance snow removal vehicles and the speed with which they clear airport runways contribute to its strong position in this market.
Through Medtec, the Company is one of the leading U.S. manufacturers of custom ambulances for private and public transporters and fire departments. Medtec markets a broad line of ambulances for private patient transporters, fire departments and public transporters, but specializes in Type I and Type III ambulances. Type I and Type III ambulances are popular among public patient transporters and fire departments. Type I ambulances feature a conventional style, light- or medium-duty chassis with a modular patient transport body mounted separately behind the vehicle cab. Type III ambulances are built on light-duty van chassis with a walk-through opening into the patient transport body which is mounted behind the vehicle cab.
Through OSV, the Company is one of the leaders in the manufacturing of mobile medical vehicles for North American and European medical centers and service providers. OSV is the only mobile medical vehicle manufacturer certified by all major original equipment manufacturers of mobile medical imaging equipment â€” General Electric Company, Royal Philips Electronics and Siemens AG. OSV is also a leading manufacturer and integrator of custom vehicles for the broadcast and communications industry, where the Company, under its Frontline brand, markets a full line of television broadcast, satellite news gathering and microwave transmission electronic news gathering vehicles to broadcasters, TV stations, radio stations and NASA.
Through BAI, the Company is one of the leaders in manufacturing and marketing fire apparatus and equipment to municipalities and airports throughout Europe, the Middle East and Africa. BAI produces a wide range of firefighting vehicles, ARFF units, industrial firefighting vehicles and forest firefighting vehicles.
The Company offers three- to fifteen-year municipal lease financing programs to its fire & emergency segment customers in the United States through Oshkosh Capital. Programs include competitive lease financing rates, creative and flexible finance arrangements and the ease of one-stop shopping for customersâ€™ equipment and financing. The lease financing transactions are executed through a private label arrangement with an independent third party finance company.
Commercial Segment. Through McNeilus and the Geesink Norba Group, the Company is a leading North American and European manufacturer of refuse collection vehicles for the waste services industry. Through Oshkosh, McNeilus, London and CON-E-CO, the Company is a leading manufacturer of front- and rear-discharge concrete mixers and portable and stationary concrete batch plants for the concrete ready-mix industry throughout the Americas. Through IMT, the Company is a leading North American manufacturer of field service vehicles and truck-mounted cranes for the construction, equipment dealer, building supply, utility, tire service and mining industries. The Company believes its commercial segment vehicles and equipment have a reputation for efficient, cost-effective, dependable and low maintenance operation.
In March 2002, the Company introduced the rear-discharge Revolution concrete mixer drum, which is constructed of lightweight composite materials. In fiscal 2006, the Company launched the sale of front-discharge Revolution drums. Since the introduction of the first concrete mixer drum about 90 years ago, the Company believes all commercially successful drums worldwide had been produced utilizing steel until the launch of the Revolution. The Company believes the Revolution is the first composite concrete mixer drum ever produced. The Revolution drum offers improved concrete payload on a vehicle and longer drum life, which lowers the cost per yard of concrete delivered. The Companyâ€™s strategy has been to sell the Revolution drum as a premium-priced product as the Company believes the Revolution drum yields a quick payback to customers through lower operating costs. The Company is required to pay to its Australian partner royalty fees for each drum sold. The Company has sold over 2,000 Revolution drums in the U.S. since the launch of the Revolution. The ramp-up of the production and sale of Revolution drums has proceeded at a much slower pace than the Companyâ€™s initial expectations, as the Company has addressed various technical design and production process control issues, which the Company believes have now been addressed.
The Company, through OMFSP, an affiliated financial services partnership, offers three- to seven-year tax advantaged lease financing to concrete mixer customers, concrete batch plant customers and commercial waste haulers in the United States. Offerings include competitive lease financing rates and the ease of one-stop shopping for customersâ€™ equipment and financing.
Marketing, Sales, Distribution and Service
The Company believes it differentiates itself from many of its larger competitors by tailoring its distribution to the needs of its specialty vehicle and vehicle body markets and from its smaller competitors with its national and global sales and service capabilities. Distribution personnel use demonstration vehicles to show customers how to use the Companyâ€™s vehicles and vehicle bodies properly. In addition, the Companyâ€™s flexible distribution is focused on meeting customers on their terms, whether on a jobsite, in an evening public meeting or at a municipalityâ€™s offices, compared to the showroom sales approach of the typical dealers of large vehicle manufacturers. The Company backs all products by same-day parts shipment, and its service technicians are available in person or by telephone to domestic customers 365 days a year. The Company believes its dedication to keeping its products in-service in demanding conditions worldwide has contributed to customer loyalty.
The Company provides its salespeople, representatives and distributors with product and sales training on the operation and specifications of its products. The Companyâ€™s engineers, along with its product managers, develop operating manuals and provide field support at vehicle delivery for some markets.
U.S. dealers and representatives, where used, enter into agreements with the Company that allow for termination by either party generally upon 90 days notice. Dealers and representatives, except for those utilized by JLG, JerrDan, Medtec and IMT, are generally not permitted to market and sell competitive products.
Access Equipment Segment. JLGâ€™s products are marketed in over 3,500 locations worldwide through independent rental companies and distributors that purchase JLG products and then rent and sell them and provide service support, as well as through other sales and service branches or organizations in which the Company holds equity positions. North American customers are located in all 50 states in the U.S., as well as in Canada and Mexico. International customers are located in Europe, the Asia/Pacific region, Australia, Africa, the Middle East and Latin America. JLGâ€™s sales force is comprised of approximately 180 employees worldwide. In North America, teams of sales employees are dedicated to specific major customers, channels or geographic regions. JLGâ€™s sales employees in Europe and the rest of the world are spread among JLGâ€™s approximately 20 international sales and service offices.
Defense Segment. The Company sells substantially all of its domestic defense products directly to principal branches of the DoD. The Company maintains a liaison office in Washington, D.C. to represent its interests with the Pentagon, Congress and the offices of the Executive Branch of the U.S. government. The Company also sells and services defense products to approved foreign governments directly through a limited number of international sales offices, through dealers, consultants and representatives and through the U.S. Foreign Military Sales (â€śFMSâ€ť) program.
The Company maintains a marketing staff and engages consultants to regularly meet with all branches of the Armed Services, Reserves and National Guard and with representatives of key military bases to determine their vehicle requirements and identify specialty truck variants and apparatus required to fulfill their missions.
In addition to marketing its current truck offerings and competing for new contracts in the heavy- and medium-payload segment, the Company actively works with the Armed Services to develop new applications for its vehicles and expand its services.
Logistics services are increasingly important to the DoD, especially following the commencement of Operation Iraqi Freedom. The Company believes that its proven worldwide logistics capabilities and internet-based ordering, invoicing and electronic payment systems have significantly contributed to the expansion of its defense parts and service business since fiscal 2002, following the commencement of Operation Iraqi Freedom. The Company maintains a large parts distribution warehouse in Milwaukee, Wisconsin to fulfill stringent parts delivery schedule requirements, as well as satellite facilities near DoD bases in the U.S., Europe, Asia and the Middle East. The Company has been particularly active in recent years performing maintenance and armoring services at areas near, or in, military conflicts including in the Middle East to support Operation Iraqi Freedom.
Fire & Emergency Segment. The Company believes the geographic breadth, size and quality of its Pierce fire apparatus sales and service organization are competitive advantages in a market characterized by a few large manufacturers and numerous small, regional competitors. Pierceâ€™s fire apparatus are sold through over 30 sales and service organizations with more than 250 sales representatives nationwide, which combine broad geographical reach with frequency of contact with fire departments and municipal government officials. These sales and service organizations are supported by approximately 70 product and marketing support professionals and contract administrators at Pierce. The Company believes frequency of contact and local presence are important to cultivate major, and typically infrequent, purchases involving the city or town council, fire department, purchasing, finance and mayoral offices, among others, that may participate in a fire apparatus bid and selection. After the sale, Pierceâ€™s nationwide local parts and service capability is available to help municipalities maintain peak readiness for this vital municipal service.
The Company markets its Oshkosh-branded ARFF vehicles through a combination of three direct sales representatives domestically and 41 representatives and distributors in international markets. Certain of these international representatives and distributors also handle Pierce products. In addition, the Company has 25 full-time sales and service representatives and distributor locations with over 48 sales people focused on the sale of snow removal vehicles, principally to airports, but also to municipalities, counties and other governmental entities in the U.S. and Canada. In addition, the Company has opened an office in Beijing, China to support ARFF sales in China and Southeast Asia.
Medtec sells ambulances through over 20 distributor organizations with more than 70 representatives focused on sales to the ambulance market. Eighteen of these distributor organizations are common to Pierce. JerrDan markets its carriers and wreckers through its worldwide network of 93 independent distributors, supported by JerrDanâ€™s direct sales force. OSV markets its mobile medical trailers and broadcast vehicles through 28 in-house sales and service representatives in the U.S. and three in-house sales and service representatives in Europe. BAI sells firefighting vehicles and equipment direct in the Italian market. Internationally, BAI has agreements with a limited number of distributors and uses sales agents for â€śone-offâ€ť sales in countries that do not buy in large quantities on a regular basis. Most of BAIâ€™s international distribution is focused in the Middle East, Europe and Africa.
Commercial Segment. The Company operates 20 distribution centers with over 200 in-house sales and service representatives in the U.S. to sell and service refuse collection vehicles, rear- and front-discharge concrete mixers and concrete batch plants. These centers are in addition to sales and service activities at the Companyâ€™s manufacturing facilities, and they provide sales, service and parts distribution to customers in their geographic regions. Four of the distribution centers also have paint facilities and provide significant additional paint and mounting services during peak demand periods. Two of the centers also manufacture concrete mixer replacement drums. The Company also uses 18 independent sales and service organizations to market its CON-E-CO branded concrete batch plants. The Company believes this network represents one of the largest concrete mixer, concrete batch plant and refuse collection vehicle distribution networks in the United States.
In Canada, the Company operates two distribution centers with 11 outside and in-house sales and service representatives to sell and service its rear-discharge concrete mixers, refuse collection vehicles and concrete batch plants.
In Europe, through the Geesink Norba Group, the Company operates 19 distribution centers with 130 in-house sales and service representatives in nine countries to sell and service its refuse collection vehicles and stationary compactors. Two of the centers have paint facilities, and five of the centers provide mounting services. The Company also operates 100 roving service vans throughout Europe. The Company believes this network represents one of the largest refuse collection vehicle distribution networks in Europe. The Geesink Norba Group also has sales and service agents in Europe and the Middle East.
The Company believes its direct distribution to customers is a competitive advantage in concrete and refuse collection vehicle markets, particularly in the U.S. waste services industry where principal competitors distribute through dealers, and to a lesser extent in the ready mix concrete industry, where several competitors and the Company in part use dealers. The Company believes direct distribution permits a more focused sales force in the U.S. refuse collection vehicle market, whereas dealers frequently offer a very broad and mixed product line, and accordingly, the time dealers tend to devote to refuse collection vehicle sales activities is limited.
With respect to distribution, the Company has been applying Oshkoshâ€™s and Pierceâ€™s sales and marketing expertise in municipal markets to increase sales of McNeilus refuse collection vehicles to municipal customers. While the Company believes commercial customers represent a majority of the refuse collection vehicle market, many municipalities purchase their own refuse collection vehicles. The Company believes it is positioned to create an effective municipal distribution system in the refuse collection vehicle market by leveraging its existing commercial distribution capabilities and by opening service centers in major metropolitan markets.
The Company also has established an extensive network of representatives and dealers throughout the Americas for the sale of Oshkosh, McNeilus, CON-E-CO and London concrete mixers, concrete batch plants and refuse collection vehicles. The Company coordinates among its various businesses to respond to large international tenders with its most appropriate product offering for the tender.
IMT distributes its products through approximately 85 dealers with a total of 115 locations worldwide, including approximately 15 international dealers. International dealers are primarily located in Central and South America, Australia and Asia and are primarily focused on mining and construction markets. The Company believes this network represents one of the most extensive networks in its market.
J. WILLIAM ANDERSEN â€“ Mr. Andersen has served as a director of our company since 1976 and had been the Executive Director of Development, University of Wisconsin-Oshkosh from 1980 through his retirement in 1994.
ROBERT G. BOHN â€“ Mr. Bohn joined our company in 1992 as Vice President-Operations. He was appointed President and Chief Operating Officer in 1994. He was appointed our President and Chief Executive Officer in 1997, and Chairman of the Board of Directors in 2000. On October 1, 2007 Mr. Bohn's title was changed to Chief Executive Officer. Prior to joining our company, Mr. Bohn held various executive positions with Johnson Controls, Inc. from 1984 until 1992. He has served as a director of our company since 1995 and is also a director of Graco, Inc. and Menasha Corporation.
ROBERT A. CORNOG â€“ Mr. Cornog was elected as a director of our company in 2005. Mr. Cornog served as the Chairman of Snap-on Incorporated, a manufacturer of hand tool, diagnostic and equipment solutions for professional tool and equipment users, from 1991 until his retirement in 2002 and President and Chief Executive Officer of Snap-on Incorporated from 1991 to 2001. Mr. Cornog is also a director of Johnson Controls, Inc. and Wisconsin Energy Corporation.
RICHARD M. DONNELLY â€“ Mr. Donnelly has served as a director of our company since 2001. From 1961 until his retirement in 1999, he held various positions with General Motors Corporation, a manufacturer of motor vehicles, including most recently as President and Group Executive of General Motors, Europe, a division of General Motors Corporation. Mr. Donnelly is an Industrial Partner in Ripplewood Holdings LLC, a private equity investment firm located in New York, New York, where he is responsible for its global automotive supply business. He is also Chairman of Niles Co., Ltd. and Honsel International Technologies S.A., a director of Asahi Tec Corporation, and a Trustee of Colonial Williamsburg Foundation.
FREDERICK M. FRANKS, JR. â€“ Gen. (Ret.) Franks has served as a director of our company since 1997. He was the Commander of the U.S. Army Training and Doctrine Command from 1991 to 1994 and commanded the U.S. Army VII Corps during Operation Desert Storm. He retired from the Army in 1994. Gen. (Ret.) Franks is self-employed and co-author of Into the Storm, A Study in Command with Tom Clancy. Gen. (Ret.) Franks is also the Chairman of the American Battle Monuments Commission, is President of the Amputee Board of Advisors of the Defense Health Board, and teaches a Battle Command course at West Point.
MICHAEL W. GREBE â€“ Mr. Grebe has served as a director of our company since 1990. He was a partner in the law firm of Foley & Lardner LLP in Milwaukee from 1977 until his retirement in 2002. Mr. Grebe has served since 2002 as President and Chief Executive Officer of the Lynde and Harry Bradley Foundation, a private foundation based in Milwaukee. Mr. Grebe is also a director of the Lynde and Harry Bradley Foundation and Church Mutual Insurance Company. In addition, Mr. Grebe is a director of the Philanthropy Roundtable, a non-profit organization.
KATHLEEN J. HEMPEL â€“ Ms. Hempel has served as a director of our company since 1997. She was Vice Chairman and Chief Financial Officer of Fort Howard Corporation, a manufacturer of paper and paper products, from 1992 until its merger into Fort James Corporation in 1997. She is a director of Actuant Corporation and Whirlpool Corporation.
HARVEY N. MEDVIN â€“ Mr. Medvin has served as a director of our company since 2004. Mr. Medvin was Executive Vice President and Chief Financial Officer of Aon Corporation (and its corporate predecessor), a provider of risk management services and insurance brokerage, from 1982 until his retirement in 2003. He is a director of The Warranty Group, Inc., a subsidiary of ONEX
Corporation. Mr. Medvin is also a director of two non-profit organizations: Evanston Northwestern Health Care and Ravinia Festival.
J. PETER MOSLING, JR. â€“ Mr. Mosling has served as a director of our company since 1976, having joined our company in 1969. He served in various senior executive capacities during his employment with our company through his retirement in 1994.
TIMOTHY J. ROEMER â€“ The Board of Directors elected Mr. Roemer as a director of our company in May 2007. Since 2003, Mr. Roemer has served as President of the Center for National Policy, a non-profit, non-partisan public policy organization dedicated to engaging the nation's leaders with practical policy solutions on global security. In addition, Mr. Roemer currently serves as a distinguished fellow at the Mercatus Center at George Mason University, a non-profit research and educational institution dedicated to improving public policy outcomes. He also served as a Trustee of the National Trust for Historic Preservation. In addition, he served the country as a member of the 9/11 Commission. Mr. Roemer was a representative from the State of Indiana in the United States House of Representatives from 1991 until 2003. Mr. Roemer's nomination to the Board was recommended by the Governance Committee based upon a search performed by a third-party search firm at the direction of the Governance Committee.
RICHARD G. SIM â€“ Mr. Sim has served as a director of our company since 1997. From 1998 until 2003, he was Chairman, President and Chief Executive Officer of APW, Ltd., an electronic contract manufacturer. During 2002, APW, Ltd. completed a recapitalization of its balance sheet by filing in May 2002 a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code. Mr. Sim served as Chairman and a member of the board of directors of Actuant Corporation, a manufacturer of hydraulic equipment, from 1987 until 2002.
CHARLES L. SZEWS â€“ The Board of Directors elected Mr. Szews as a director of our company in May 2007. Mr. Szews joined our company in 1996 as Vice President and Chief Financial Officer. He was appointed Executive Vice President in 1997. On October 1, 2007, Mr. Szews assumed the responsibility of President and Chief Operating Officer of our company. Prior to joining our company, Mr. Szews spent eight years at Fort Howard Corporation holding a series of executive positions. Prior to Fort Howard Corporation, Mr. Szews was an auditor with Ernst & Young serving in various offices and capacities over a ten-year period. Mr. Szews is on the board of directors of Gardner Denver, Inc., a manufacturer of compressed air and gas, vacuum and fluid transfer technologies.
MANAGEMENT DISCUSSION FROM LATEST 10K
The Company is a leading designer, manufacturer and marketer of a wide range of specialty vehicles and vehicle bodies, including access equipment, defense trucks, fire & emergency vehicles and concrete mixers and refuse collection vehicles. The Company is a leading global manufacturer of aerial work platforms under the â€śJLGâ€ť brand name. The Company is among the worldwide leaders in the manufacturing of telehandlers under the â€śJLG,â€ť â€śSkyTrak,â€ť â€śLullâ€ť and â€śGradallâ€™ brand names. The Company manufactures defense trucks under the â€śOshkoshâ€ť brand name and is the leading manufacturer of severe-duty heavy-payload tactical trucks for the DoD. Under the â€śPierceâ€ť brand name, the Company is among the leading domestic manufacturers of fire apparatus assembled on both custom and commercial chassis. Under the â€śJerr-Danâ€ť brand name, the Company is a leading domestic manufacturer and marketer of towing and recovery equipment. Under the â€śBAIâ€ť brand name, the Company is a manufacturer and marketer of fire apparatus, aircraft rescue and firefighting vehicles and equipment to municipalities and airports in Italy and exports into Europe, the Middle East and Africa. The Company manufactures aircraft rescue and firefighting and airport snow removal vehicles under the â€śOshkoshâ€ť brand name and ambulances under the â€śMedtecâ€ť brand name. The Company manufactures mobile medical trailers under the â€śOshkosh Specialty Vehiclesâ€ť and â€śSMITâ€ť brand names. Under the â€śFrontlineâ€ť brand name, the Company is a leading domestic manufacturer and marketer of broadcast vehicles. Under the â€śMcNeilus,â€ť â€śOshkosh,â€ť â€śLondonâ€ť and â€śCON-E-COâ€ť brand names, the Company manufactures rear- and front-discharge concrete mixers and portable and stationary concrete batch plants. Under the â€śMcNeilus,â€ť â€śGeesink,â€ť â€śNorbaâ€ť and â€śKiggenâ€ť brand names, the Company manufactures a wide range of automated, rear, front, side and top loading refuse collection vehicles and mobile and stationary refuse compactors and transfer systems. Under the â€śIMTâ€ť brand name, the Company is a leading domestic manufacturer of field service vehicles and truck-mounted cranes.
Major products manufactured and marketed by each of the Companyâ€™s business segments are as follows:
Access equipment â€“ aerial work platforms and telehandlers used in a wide variety of construction, industrial, institutional and general maintenance applications to position workers and materials at elevated heights. Access equipment customers include equipment rental companies, construction contractors, manufacturing companies, home improvement centers and the U.S. military.
Defense â€“ heavy- and medium-payload tactical trucks and supply parts and services sold to the U.S. military and to other militaries around the world.
Fire & emergency â€“ custom and commercial firefighting vehicles and equipment, aircraft rescue and firefighting vehicles, snow removal vehicles, ambulances, wreckers, carriers and other emergency vehicles primarily sold to fire departments, airports, other governmental units and towing companies in the U.S. and abroad, mobile medical trailers sold to hospitals and third party medical service providers in the U.S. and Europe and broadcast vehicles sold to broadcasters and TV stations in North America and abroad.
Commercial â€“ concrete mixers, refuse collection vehicles, mobile and stationary compactors and waste transfer units, portable and stationary concrete batch plants and vehicle components sold to ready-mix companies and commercial and municipal waste haulers in North America, Europe and other international markets and field service vehicles and truck-mounted cranes sold to mining, construction and other companies in the U.S. and abroad.
All estimates referred to in this â€śManagementâ€™s Discussion and Analysis of Financial Condition and Results of Operationsâ€ť refer to the Companyâ€™s estimates as of November 1, 2007 when the Company conducted a conference call in connection with its announcement of its earnings for the fourth quarter and fiscal year ended September 30, 2007 and its revised outlook for fiscal 2008.
Since 1996, the Company has selectively pursued strategic acquisitions to enhance its product offerings and diversify its business. The Company has focused its acquisition strategy on providing a full range of products to customers in specialty vehicle and vehicle body markets that are growing and where it can develop strong market positions and achieve acquisition synergies. Acquisitions completed during the past three fiscal years include:
On December 6, 2006, the Company acquired JLG for $3.1 billion, including transaction costs and the assumption of debt and net of cash acquired. JLG is a leading global manufacturer of access equipment based on gross revenues. The results of JLGâ€™s operations are included in the consolidated results of the Company from the date of acquisition.
During fiscal 2006, the Company completed two acquisitions: IMT and OSV. In August 2006, the Company acquired IMT for $133.0 million. IMT is a leading North American manufacturer of field service vehicles and truck-mounted cranes for niche markets. In July 2006, the Company completed the acquisition of OSV for $142.0 million. OSV is a leading manufacturer of mobile medical, homeland security command and communications, and broadcast vehicles with sales throughout the Americas and Europe.
During fiscal 2005, the Company completed two acquisitions: London and CON-E-CO. In March 2005, the Company acquired London for $11.2 million. London is a manufacturer and marketer of rear-discharge concrete mixers for the concrete placement market with sales throughout the Americas. In November 2004, the Company acquired CON-E-CO for $19.9 million. CON-E-CO is a leading manufacturer and marketer of portable and stationary concrete batch plants for the Americas.
Fiscal 2007 was a record year for the Company in terms of sales, net income and earnings per share. Net sales were $6.3 billion, an 84.0% increase over fiscal 2006, net income was $268.1 million, a 30.5% increase over the prior year and earnings per share was $3.58, a 29.7% increase over fiscal 2006. These increases were primarily driven by exceptional performance in the newly acquired access equipment segment. The Companyâ€™s focus in fiscal 2008 is to complete the integration of JLG, achieve the synergy opportunities identified as part of that acquisition, successfully execute the turnaround actions at the Geesink Norba Group and reduce the Companyâ€™s debt to provide flexibility to make strategic acquisitions in late fiscal 2008 or fiscal 2009.
The Companyâ€™s results in fiscal 2007 were driven by the strong performance of JLG post-acquisition, improved fire & emergency segment results and improvements in the effective tax rate. These effects were partially offset by lower earnings in the commercial segment and higher corporate expenses related to higher personnel costs, higher professional services fees and increased travel expenses and an increase in interest expense.
Since 1996, the Company has selectively pursued strategic acquisitions to enhance its product offerings and diversify its business. The Company has focused its acquisition strategy on providing a full range of products to customers in specialty vehicle and vehicle body markets that are growing and where it can develop strong market positions and achieve significant synergies to help drive superior returns for shareholders. On December 6, 2006, the Company completed its fifteenth acquisition since 1996 and formed its access equipment segment with the purchase of JLG for $3.1 billion, including transaction costs and the assumption of debt and net of cash acquired. The results of JLGâ€™s operations are included in the consolidated results of the Company from the date of acquisition. In fiscal 2007, JLG contributed sales of $2.5 billion and operating income of $268.4 million to the consolidated results. After consideration of interest costs on acquisition-related debt, JLG was accretive to earnings per share by approximately $0.75 in fiscal 2007.
Since the onset of Operation Iraqi Freedom in 2003, the Companyâ€™s defense segment has benefited substantially from increasing DoD requirements for new trucks, parts, service, armoring and remanufacturing of the Companyâ€™s defense vehicles operated in Iraq. During fiscal 2007, the Companyâ€™s defense segment increased production of new and remanufactured trucks to meet the requirements of its largest customer, the DoD, in its mission to successfully complete Operation Iraqi Freedom. As a result, sales of new and remanufactured trucks increased 25.7% in fiscal 2007 as compared to the prior year. Due to lower armor sales, inefficiencies on the start-up of a contract and lower negotiated margins on the FHTV program, operating margin declined from 18.4% of sales in the prior year to 17.3% of sales in fiscal 2007. As a result, operating income for the defense segment only increased 1.1% for fiscal 2007 compared to the prior year.
The Companyâ€™s fire & emergency segment experienced solid sales growth of 18.8% in fiscal 2007 and an increase in operating income of 19.4%. The acquisition of OSV added sales of $101.7 million and operating income of $8.1 million to fiscal 2007 results. Higher organic sales levels in fiscal 2007 reflected strong order flow and market share gains for domestic fire apparatus and homeland security products as well as stronger towing product sales. The Company believes that the fire apparatus and towing markets benefited during fiscal 2007 from the pre-buy of units before new diesel engine emissions standards that took effect on January 1, 2007. The increase in operating income in fiscal 2007 for the businesses in the segment other than OSV reflected strong sales and improved margins at the Companyâ€™s domestic fire apparatus business as a result of ongoing cost reduction initiatives and lower losses at the Companyâ€™s domestic ambulance business.
Sales in the Companyâ€™s commercial segment increased 4.9% in fiscal 2007. Excluding the impact of the IMT acquisition, sales were down 2.4% in fiscal 2007 as compared to the prior year. The decrease in sales was largely attributable to weak demand at the Companyâ€™s North American businesses during the last half of fiscal 2007 as a result of a sharp decrease in demand subsequent to the January 1, 2007 diesel engine emissions standards changes in the U.S. and lower residential construction. Sales at the Companyâ€™s European refuse collection vehicle business were down 9.2% in fiscal 2007 as compared to the prior year due to soft demand for the Companyâ€™s products in the United Kingdom, the lack of available chassis in France for the first six months of the fiscal year and some market share losses.
Operating income in the Companyâ€™s commercial segment decreased 12.9% in fiscal 2007. Excluding the impact of the IMT acquisition, operating income was down 30.6% in fiscal 2007 as compared to the prior year. The decrease in operating income was largely due to the performance of the Companyâ€™s European refuse collection vehicle business. The Companyâ€™s European refuse collection vehicle operations had an operating loss of $19.3 million in fiscal 2007 compared with operating income of $2.9 million in fiscal 2006. In fiscal 2007, the Company incurred charges totaling $9.7 million in connection with a reduction in its European refuse collection vehicle business salaried and hourly workforce, the closure of an underutilized facility and other adjustments related to the plan to turn around this business. The Company expects to incur additional charges at this business in fiscal 2008 related to further planned turn around activities.
The Company has a positive outlook for fiscal 2008 in spite of a slowing U.S. economy as the Company seeks to achieve the full synergy potential from the JLG acquisition. The Company estimates that its sales will increase to $7.1 â€” $7.3 billion and that its earnings per share will increase to $4.15 â€” $4.35. The Company expects sales in its access equipment segment to grow by a double digit percentage in fiscal 2008, in part as a result of the ownership of JLG for a full year in fiscal 2008, but also due to a strong backlog in this segment and strong markets outside North America, offset by expected weakness in U.S. access equipment sales. The Company also expects its defense segment sales to rise at a double digit percentage in fiscal 2008 due to strong DoD funding for its truck programs. The Company expects such sales increases and cost reduction plans across all segments largely tied to synergies from the JLG acquisition to be the primary drivers of its estimated earnings per share growth in fiscal 2008. See â€śFiscal 2008 Outlookâ€ť for further details regarding the Companyâ€™s fiscal 2008 estimates.
Results of Operations
Consolidated Net Sales â€“ Three Years Ended September 30, 2007
Fiscal 2007 Compared to Fiscal 2006
Consolidated net sales increased $2.9 billion, or 84.0%, to $6.3 billion in fiscal 2007 compared to fiscal 2006. Net sales increased in all segments. The acquisitions of OSV, IMT and JLG contributed $2.7 billion of the sales increase in fiscal 2007.
Access equipment net sales were $2,539.5 million in fiscal 2007. Access equipment sales represent sales of JLG from December 6, 2006, the date of its acquisition, through the end of the fiscal year. Since the date of acquisition, JLG has experienced strong demand in Europe and Asia for all products and in North America for aerial work platforms. The segment has also benefited from the start-up of production of Caterpillar-branded telehandlers. The segment experienced softer demand for its traditional telehandlers in North America as a result of a slowdown in residential construction.
Defense segment net sales increased 7.5% to $1,416.5 million in fiscal 2007 compared to fiscal 2006. The increase compared to the prior year was attributable to an increase in sales of new and remanufactured trucks, offset by sharply lower parts and service sales. Sales of medium-payload tactical vehicles to the DoD in fiscal 2007 more than offset a decrease in international truck sales due to the completion of the U.K. Wheeled Tanker contract in the first quarter of fiscal 2007. The sharp decrease in parts and service sales resulted from the completion of several nonrecurring, large armor and armor installation projects in fiscal 2006.
Fire & emergency segment net sales increased 18.8% to $1,142.2 million in fiscal 2007 compared to fiscal 2006. The acquisition of OSV added sales of $101.7 million in fiscal 2007. Sales rose 8.4% for other businesses in the segment, reflecting higher sales for all domestic business units, most notably fire apparatus and towing products. The increase in domestic fire apparatus sales reflected higher demand for chassis with engines purchased in advance of diesel engine emissions standards changes effective January 1, 2007, increased pricing and some market share gains. The increase in towing product sales reflected a higher mix of package sales, which include both a wrecker unit and a purchased chassis.
Commercial segment net sales increased 4.9% to $1,248.3 million in fiscal 2007 compared to fiscal 2006 due to the addition of IMT for the full year and higher domestic refuse collection vehicle sales. The acquisition of IMT added net sales of $85.8 million in fiscal 2007. Domestic refuse collection vehicle sales were 23.9% higher in fiscal 2007 due to an increase in shipments to large U.S. commercial waste haulers and municipalities. A 10.2% decrease of concrete placement product sales in fiscal 2007 as compared to fiscal 2006, largely due to lower domestic concrete mixer volume subsequent to the January 1, 2007 changes to diesel engine emissions standards and a slowdown in residential construction, partially offset the increase in sales of refuse collection vehicles. European refuse collection vehicle sales were also down 9.2% in fiscal 2007 as compared to fiscal 2006 due to soft demand for the Companyâ€™s products in the United Kingdom, the lack of available chassis for mounting refuse collection vehicles in France during the first half of the fiscal year and some market share losses.
Fiscal 2006 Compared to Fiscal 2005
Consolidated net sales increased 15.8% to $3.4 billion in fiscal 2006 compared to fiscal 2005. Net sales were up in all segments. The acquisitions of OSV and IMT contributed $32.4 million of the sales increase in fiscal 2006.
Defense segment net sales increased 24.1% to $1,317.2 million in fiscal 2006 compared to fiscal 2005. The sales increase arose from increased sales of new and remanufactured heavy-payload trucks to the DoD to support Operation Iraqi Freedom and higher shipments of wheeled tankers under the U.K. Ministry of Defence (â€śMoDâ€ť) contract. Parts and service sales in fiscal 2006 were up slightly as armor sales offset a decrease in other parts and service sales.
Fire & emergency segment net sales increased 14.3% to $961.5 million in fiscal 2006 compared to fiscal 2005. The acquisition of OSV contributed $16.5 million to the increase in fiscal 2006 net sales. Sales in the remaining businesses in the segment rose 12.3%, reflecting strong order rates for fire apparatus, ambulances and airport products.
Commercial segment net sales increased 9.6% to $1,190.3 million in fiscal 2006 compared to fiscal 2005. The acquisition of IMT contributed $15.9 million to the increase in fiscal 2006 net sales. Concrete placement sales were up 11.8% primarily due to strong demand in advance of diesel engine emissions standards changes effective January 1, 2007 offset by a lower mix of package sales involving a truck chassis and vehicle body. Domestic refuse collection vehicle sales were 0.8% higher due to an increase in shipments to large U.S. commercial waste haulers offset by a decrease in package sales. European refuse collection vehicle sales increased 8.4% in U.S. dollars due to higher unit volumes and higher pricing offset in part by unfavorable currency translation adjustments as a result of the increased strength of the U.S. dollar compared to the Euro.
MANAGEMENT DISCUSSION FOR LATEST QUARTER
Results of Operations
Analysis of Consolidated Net Sales
Third Quarter Fiscal 2008 Compared to 2007
Consolidated net sales increased 6.6% to $2.0 billion for the third quarter of fiscal 2008 compared to the third quarter of fiscal 2007. This increase was largely driven by higher defense and, to a lesser extent, access equipment sales, partially offset by lower sales in the Companyâ€™s fire & emergency and commercial segments.
Access equipment segment net sales increased 5.3% to $920.2 million for the third quarter of fiscal 2008 compared to the third quarter of fiscal 2007. The increase in sales was attributable to strong demand for aerial work platforms in Europe, a nearly 16% increase in the strength of the Euro as compared to the U.S. Dollar between the third quarter of fiscal 2007 and the third quarter of fiscal 2008 and increased demand for aftermarket parts and service. These increases were offset in part by lower demand for telehandlers due to the weak construction market in the U.S. and lower orders for telehandlers in Europe prior to the launch of a redesigned product. Although the access equipment market in certain countries of Western Europe started to experience signs of weakness in the third quarter of fiscal 2008, sales in Europe overall increased nearly 30% versus the comparable prior year quarter.
Defense segment net sales increased 30.1% to $489.5 million for the third quarter of fiscal 2008 compared to the third quarter of fiscal 2007. The increase was attributable to an increase in sales of heavy-payload tactical vehicles and substantially higher parts and service sales. Sales of new and remanufactured trucks were up 18.7% versus the comparable prior year quarter as an increase in sales of new heavy-payload trucks more than offset a decrease in medium-payload truck and international truck sales. Parts and service sales more than doubled in the third quarter due to higher armor kit sales and international service work.
Fire & emergency segment net sales decreased 3.1% to $281.3 million for the third quarter of fiscal 2008 compared to the third quarter of fiscal 2007. The decrease in sales reflected weaker demand for mobile medical trailers and towing equipment as well as a shift in the timing of international fire apparatus sales to the fourth quarter of fiscal 2008, offset in part by higher volume in the domestic fire apparatus business. A reduction in medical reimbursement rates by the U.S. government to providers of mobile medical imaging services continued to have a negative effect on sales of mobile medical trailers. The towing equipment vehicle market was negatively impacted by lower demand as a result of rising fuel prices and uncertainty in the U.S. economy.
Commercial segment net sales decreased 7.3% to $294.5 million for the third quarter of fiscal 2008 compared to the third quarter of fiscal 2007. The decrease was the result of a 20% decline in sales of concrete placement products, offset in part by increased refuse collection vehicle sales in both North America and Europe. Since the third quarter of fiscal 2007, the Company has experienced sharply lower demand in the United States as a result of lower residential construction activity and the impact of customer pre-buy of units in advance of the 2007 diesel engine emissions standards change. European refuse collection vehicle sales were up nearly 20% in the third quarter of fiscal 2008 compared to the third quarter of fiscal 2007 due to higher demand in The Netherlands as well as favorable foreign exchange rates.
Patrick Davidson - Vice President, Investor Relations
Thanks, Doug. Good morning, and thanks for joining us everybody.
Earlier today, we published our third quarter results for fiscal 2008. A copy of the release is available on our website at www.oshkoshcorporation.com. Today's call is being webcast and is accompanied by a slide presentation also available on our website. The audio replay and slide presentation will be available on the web for approximately 12 months.
Please refer now to the 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. Those 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. Except as described in the form 8-K, 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.
Occasionally today, we will refer to previous estimates. We made or updated such estimates during our fiscal 2008 second quarter earnings conference call on May 1, 2008 and updated certain figures on June 26, 2008. On June 26, we announced that we would be recording asset impairment charges of approximately $175 million at our European refused collection vehicle business. The actual amount of the impairment is $175.2 million pre tax and $173.1 million net of tax.
Unless stated otherwise all figures and data that we discuss today, will relate to our performance excluding the non-cash asset impairment charges. For the purposes of our discussion today, we believe that excluding impairment charges is the best way for you to participants on this call to better understand our operating performance. A reconciliation of these non-GAAP measures to the most comparable GAAP measures can be found in the last slide of our presentation as well as in our earnings release; both are which available on our website.
Presenting today Oshkosh Corporation will 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 Bob.
Robert G. Bohn - Chairman and Chief Executive Officer
Thank you, Pat. Good morning and thank you all for joining us today.
We are during the EAA program here in town. So if you hear your jet circling, we are in good shape with that's what's going on here today.
On June 26, we pre-announced much of what we will discuss today. We know that some investors were disappointed with our preannouncement, but order activity in our European access equipment business didn't reach our expectations in June. And that was compounded by late multiple order cancellations in the region. Despite that situation in the third quarter, we delivered nearly 30% sales growth in our European access equipment business and 27% operating income growth in the segment. This drove consolidated sales by nearly $2 billion and operating income of just over $180 million.
While operating income was down about 6% from the prior year, our domestic non-defense markets were generally estimated to be down anywhere from 10% to 70% through the first nine months of our fiscal year compared to the same period last year. So in that environment, our teams delivered a solid performance in the third quarter and probably gained market share in a few product lines.
As we said on June 26, we expect our fourth fiscal quarter earnings per share to fall below our previous estimates from May 1st, 2008 and from prior year performance. Essentially, we expect modestly improved performance in all segments, except access equipment in the fourth quarter. We expect fourth quarter access equipment sales volumes to decline in several Western European countries as those economies start to slowdown.
Coupled with the North American access equipment downturn that we believe to face... that we faced earlier in the year and still another cost increases baring down on us. We now expect much lower access equipment operating income in the fourth quarter. This drives our earnings per share estimate range of $0.50 to $0.65 for the fourth fiscal quarter and $3.15 to $3.30 for fiscal 2008.
Despite the signs about these market weaknesses in access equipments, we have been realizing strong independent rental company orders in North America and pockets of order strength globally that should help us manage through the current downturn. And we will continue to challenge our team to deliver market leading performance. Because sales curtailed late in the third quarter, we had a little bit more inventory than planned at June 30th. But we were still able to pay down nearly $80 million of debt in the third quarter. We've adjusted our production rates to match current demand levels, which should permit us to generate additional free cash flow over the next six months.
Please turn with me to slide 4. During these challenging times, we are managing the business primarily to mitigate difficult market conditions to aggressively drive cash flow for debt reduction and to invest in the limited number of initiatives that will strengthen the business for the next up cycle. We are actively engaged in a comprehensive set of activities designed to improve our cost structure across the entire company.
Teams throughout the company are working to make significant reduction to our operating and overhead expenses. We expect these actions to be completed by mid September, so that when we enter fiscal 2009, we'll have a much more competitive cost structure.
In November, when we provide fiscal 2009 estimates, we will quantify these reductions for you. We are also aggressively pursuing lower cost sourcing initiatives to offset some of the cost pressures we are seeing today in our business. While it is still relatively early, we are pleased by the results of our recently inactive prices increases in our foreign emergency and commercial segments and expect these increases to greatly reduce the impact of rising material costs.
In the access equipment segment, it's too soon to assess the impact of price increases that will take effect on October 1st. But we do know that other competitors have also announced price increases. As we mentioned on our call in late June, we are implementing an aggressive plan to reduce debt and primarily focused on driving down excess inventory and reducing working capital.
We believe debt reduction is our best use of cash at this time and we will continue to look for opportunities to reduce our debt. While we are focusing on cost reductions and cash flow generation. We remain committed to prudent investments and growth initiatives. Many of those initiatives are expanding our business globally, and you are seeing the results in our international sales growth over the last 18 months. We expect to share more with you as these initiatives gain more attraction.
Oshkosh Corporation is a strong and resilient and company. We have leading brands and leading market positions in almost all of the markets, in which we compete. And while we face weaknesses in several of our markets, we remain focused to more execute on our business plans to mitigate the near-term set of challengers and build the strong foundation for when this economy recovers.
At this time, I'll turn it over to you President, Charlie Szews to discuss details on each our segments and review several of our operating highlights and challenges. Charlie?
Charles L. Szews - President and Chief Operating Officer
Thanks Bob. The operating teams are after the challenges and we will do our best to deliver market leading performance in this environment.
Let's talk about some of those highlights in most recent quarter. Please turn with me to slide 5, and we will get started. LJG continue to perform very well on most international markets in third quarter. The strong performance across most of the Europe, this segment led the way in the quarter by increasing sale, operating income and operating income margin compared to prior year.
Sales in Europe were up nearly 30% in the third quarter, despite weakness is related in the quarter. While we expect demand in Spain, U.K. and France to remain soft in 2009, we believe that our European business will be supported into 2009 as pocket for strength in Western Europe and continued demand across Eastern Europe.
On June 26th, we described how the large rental companies in North America has informed us of their intentions to further decreased purchases for the remainder of calendar 2008. Our sales efforts with the independent rental channel are helping offset softness with the large national customers. In the near term, we expect weak residential and non-residential construction spending to limit our sales in North America. Although, we continue to experience strong demand for certain products such as larger ultra booms.
We are also driving growth with our ground support aftermarket initiative. JLG products are designed to be remanufactured, and more customers are recognizing the benefits from remanufacturing, especially as steel prices escalated. Emerging market for access equipment like Russia, the Middle East, Latin America and Asia remain solid due to strength in commodity pricing in infrastructure projects and are becoming a larger part of JLG's overall business.
As Bob mentioned, we are focused on improving our cost structure and are aggressively implementing plans addressed that we believe will be softer market conditions for the segment in the near term. We announced plans to reduce our hourly and salary workforce a JLG by approximately 600 positions; most of those reductions have already occurred. We have also adjusted our production schedules to track more directly with demand as we work to reduce inventories and convert working capital into cash.
Our new pricing at JLG takes effect worldwide for orders received beginning October 1, 2008. We expect this action this will begin to mitigate the impact of the cost increases we are experiencing. We believe we will receive limited benefit from the price increase in our first quarter of fiscal 2009. But we expect to substantially cover our cost increases with these higher selling prices by early calendar 2009.
Please move with me to slide 6, and let's a take a look defense. The defense segment posted a very strong quarter as both parts and service revenues, and truck production increased. We are experiencing lower margins in this segment as negotiated margins have been lower under recent contract renewals. But this is not a change from our outlook over the last year or so.
The segment's solid backlog in recently approved federal funding request give us confidence and visibility through fiscal 2009 and provide a solid foundation for fiscal 2010. The approved supplemental budget includes more than $2 billion for Oshkosh products and is focused mainly on our family of heavy tactical vehicle, for FHTV products.
I should remind you though that this one is very fluid and subject to reprogramming and sales put under contract. We moved some vehicle production from our south plant location to our Harrison Street, our locations during the last six months. Both of these facilities are located in Oshkosh. This capacity expansion was executed great skill as our operations team; we can figure the insight of the 300,000 square foot Harrison Street facility to support the increased demand for military vehicles into fiscal 2009.
Finally, we talked with you with you at length in the last quarterly earnings call about the joint light tactical vehicle or JLTV competition. The timing of the down flick of this program is moved back to sometime in late summer or possibly into the fall. I should remind you that production plans are not likely until to 2012 or 2013 that could commence as early as 2010 or 2011 that bought urgent requirement in the technical capabilities of technology development vehicles warrant the modification to that timeline.
Please turn with me to slide 7. Soft markets continue to impact most of our fire and emergency businesses. We are pleased that our fire... our Pierce fire apparatus business continues to outperform in a tough market. The strength of our new product launches over the last year and a half is really beginning to payoff as we have had significant orders for velocity and Impel chassis, as well as for the Pierce Ultimate Configuration or PUC.
We do have some start up production inefficiencies for these models that we are working through, but that's expected. Overall, this business is performing well in a down market, and gaining several share points in the most recently announced quarterly market share data.
The airport products business was once again led by a strong aircraft rescue and fire fighting, where our vehicles shipment, and vigorous order activity in the international markets to support global airport expansion. Higher fuel prices and economic weakness have negatively impacted our towing and recovery business. But changes in Medicare reimbursement rates continued to address the impact sales of our mobile medical trailer units. There is several cost reduction initiatives underway to improve the profitability for both of these business.
Please turn the slide 8. Despite the asset impairment charges that we announced last month, we are making progress at Geesink. We have worked to aggressively reduce our fixed cost structure in this business. And while we continue to experience inefficiencies in the third quarter related to the start up of production of our Norba branded units in our Netherlands facility. We believe this business will have significantly improved results in fiscal 2009 as the new leadership team makes progress.
As we previously described, the U.S. country mixer market is anemic with industry volumes down roughly 70%. Our team has increased international concrete mixer sales by over 40%, to partially offset of the domestic downturn, the debt not enough to avoid losses in the business. Hence, we do not expect significant revenue growth in this business and for the broader U.S. economy in construction markets improving mid 2009 or later.
We continue to work on lowering the cost structure in this business, so we can remain profitable with weak markets. We've been pleased with the performance of our domestic refuse collection vehicle business in a weak economy. We expect sales in this business to be up in the fourth fiscal quarter as we realize the benefits of several quarters to strong orders. We are particularly excited about the potential for growth in compressed natural gas powered refuse vehicle. We've recently won a competitive bid for 58 of these units for Brook units [ph] in New York.
At this time, we do not expect a significant pre buy for either the concrete mixer or refuse collection vehicle product line to ahead of the 2010 engine emissions centers changes. But we do believe that these powers will order higher levels in 2009 as they work to reduce speed age.
And before I turn it back over to Dave to discuss our financial results, I'd like to reinforce Bob's comments earlier about our commitment to cost reduction and cash flow generation across the company. We are proactively reducing our cost structure, our inventory levels and our working capital at corporate in all of our segments. We've already begun these actions, and we expect to update you on our progress during our next quarterly call.
Dave, you can take us from here.
David M. Sagehorn - Executive Vice President, Chief Financial Officer
Thanks Charlie, and good morning everyone.
Please turn to slide 9; consolidated net sales of $1.97 billion for the third quarter of fiscal 2008 were up 6.6%, compared to the third quarter of last year, led by defense and access equipment sales. Operating income decreased by 5.9% to $181.2 million, with our operating income margin lower this year at 9.2% compared with the last year. Margins were lower in all segments, except access equipment.
Earnings per share decreased 1.7% to $1.19 per share. Earnings per share exceeded our June 26 revised estimate range, largely as result of the timing of deliveries between the third and fourth fiscal quarters, particularly in international markets. Although we began to experience some impact from rising steel costs during the quarter, we expect that the impact will be much more pronounced beginning in the fourth quarter. Finally, we were able to pay down $78.6 million of debt in the quarter. This is a greater reduction than we had previously expected on June 26, due to strong cash receipts in the last few days of quarter.
Now let's take a look at the each of the segments in detail; please turn to slide 10. Access equipment sales were $920.2 million in the third quarter, up 5.3%, compared to the same period last year, driven mainly by strength in our international markets. Higher area work platform sales in the Europe, foreign currency movement, and higher aftermarket sales around the globe provided much of the revenue growth in the quarter while telehandler sales declined in all markets.
Segment revenues in Europe were up almost 30% with approximately half of the increase due to favorable foreign currency exchange rates, but down in North America about 5%. The segment recorded operating income of $125.2 million, up 27.3% from the prior year quarter, and an operating income margin of 13.6%. Operating income benefited primarily from favorable foreign currency exchange rates, higher parts and service sales, as well as favorable product and customers mix.
Backlog for access equipment was $574.5 million at June 30, 2008, which was down 51.7% compared to June 30, 2007. And down slightly from March 31, 2008. The decrease in backlog is largely the result of large block orders placed in the prior year, the weaker economy in the U.S., and weakening markets in certain parts of Europe.
Please turn to slide 11; defense segment sales in the quarter were $489.5 million, up 30.1%, compared to last year's third quarter, on continuing strong demand for new trucks and significantly higher aftermarket parts and service sales, as a result of higher armor kit sales.
Operating income grew slightly from $65.3 million to $66.5 million. Operating income margin for the quarter in this segment was lower as we expected at 13.6%. As a greater percentage of this segment sales this quarter came from truck shipments, under the FHTV contract that was renegotiated last year. Higher product development costs also contributed to lower margin this quarter compared to the comparable quarter in fiscal 2007.
Backlog in this segment was $1.36 billion at June 30, 2008, down 21.9%, compared to the end of last year's third quarter. While the President signed the 2008 supplemental into loss several weeks ago, orders for many of these requirements will not be in backlog until late fiscal 2008 or early fiscal 2009.
Please turn to slide 12; turning to a fire and emergency, sales decreased by 3.1% to $281.3 million, compared to prior year's third quarter in a challenging environment. While sales for Pierce and import products were up modestly, we experience softer sales at JerrDan and Oshkosh specialty vehicles for the reasons Charlie noted.
We also experienced the shift in timing of deliveries at our European fire apparatus subsidiary from the third quarter to the fourth quarter. Operating income in this segment declined 38.2% to $17.9 million or 6.4% of sales compared to prior year quarter, due mostly to lower volumes at certain businesses in this segment, product mix and a work stoppage at our fabrication facility, that has since been resolved. Compared to prior year, the fire and emergency backlog was up 10.3% to $669.1 million on June, 30 2008, due largely to higher fire apparatus backlogs.
Please turn to slide 13; commercial sales declined 7.3% to $294.5 million, compared to last years third quarter due to ongoing weakness in the U.S. residential construction market, as well as the overall weak domestic economy. Revenue was up for both our U.S. and European refuse collection vehicle businesses, but the increase did not offset the declining concrete placement. We recorded an operating loss in this segment of $6.2 million in the third quarter. The loss included an operating loss of $12.5 million at Geesink during the quarter.
We continue to experience inefficiencies at Geesink related to the relocation of Norba branded production from Sweden to the Netherlands. We're making progress addressing the through put rate, and we expect that efficiencies will improve significantly as we head into fiscal 2009. Unfavorable foreign currency movements along with higher material and warranty costs also affected Geesink's performance this quarter. Backlog for the commercial segment was up 11.6% at June 30, 2008, compared to June 30, 2007, due to strength in domestic refuse collection vehicle orders.
Please turn to slide 14, for a review of our guidance for the full year fiscal 2008. All comparisons are to our fiscal 2007 actual results. On a consolidated basis, we are estimating total sales of $7.03 billion to $7.1 billion, an increase of 11.4% to 12.6% over 2007. For access equipment, we are adjusting our revenue expectations to a growth of approximately 20% for the full year. This equates to a sales decline in the fourth quarter of approximately 20%, compared with the fourth quarter of 2007.
Reduction in our outlook compared to our May 1, estimates is based primarily on recent slowdown in Western Europe, and some ongoing weakness in North America. We expect that North American sales in the fourth quarter will be down more than 30% compared with last year's fourth quarter, with European sales expected to be down slightly.
We are increasing our expected full year sales growth rate for defense to approximately 35%, driven by both our vehicle and parts and service businesses. For fire and emergency, we expect full year revenues to be up slightly, compared with 2007 results. This reflects strength in our Pierce fire apparatus and airport products businesses, offset by weakness in our towing and recovery, and mobile medical product lines.
Finally, we expect that commercial sales will be down approximately 15% for the year. This decrease is driven by a weak concrete placement market, which is being impacted by the previously discussed U.S. residential construction market conditions, as well as the remaining impact on current year demand of the pre-buy ahead of the 2007 engine emission standards changes.
Turning to slide 15, let's review our operating income assumptions. We are reducing our expectations for full year operating income to a range of approximately $560 million to $575 million. This implies the consolidated operating income margin of 7.9% to 8.2%. We now believe the Access Equipment margins will improve by 80 basis points to 100 basis points over last year. This implies a lower than previously estimated fourth quarter operating income margin, which is driven by expected lower sales volume, and the impact of raw material cost increases before recently announced price increases in the segment take effect on October 1.
We estimate the defense margins will decline by a range of 330 basis points to 350 basis points, reflecting a higher percentage of sales under certain of our lower margin programs. As we said previously, if we receive a JLTV technology development contract in fiscal 2008, we would expect to incur additional expenses related to program development that are not included in this operating income margin estimate.
We are modestly reducing our estimate for fire and emergency margins, and now expect them to decline by 150 basis points to 170 basis points in fiscal 2008, due largely to weakness in several of our businesses in this segment. We expect our commercial segment to incur an operating loss for the fiscal year of 2.5% to 3% of segment sales. The decrease in margins from our previous estimates is mostly due to expected lower results at Geesink. We now expect corporate and inter segment elimination expenses to increase by approximately $20 million in fiscal 2008, down $5 million to $10 million from prior estimates due to lower estimated incentive compensation, and an increased focus on cost containment.
Turning slide 16, let's take care of few more P&L items. We estimate our interest expense will be approximately $215 million. We estimate our full year tax rate will be 34%, expectations for equity and earnings have increased to a range of $8 million to $8.5 million of income.
Finally, our estimate for average shares outstanding is $75 million for earnings per share calculations. Finishing up with slide 17, as we mentioned in our press release and earlier during the call today, we have reduced our full year fiscal 2008 outlook, to an EPS range of $3.15 to $3.30, including a range of $0.50 to $0.65 earnings per share for the fourth fiscal quarter.
Our current capital expenditure estimate for the year is $85 million, and our debt estimate for the end of fiscal 2008, is between $2.85 billion and $2.9 billion. This is higher than our previous estimated debt balance at September 30, due to lower earnings and higher working capital levels. We've received enquiries regarding our debt levels and our ability to comply with the financial covenants contained in our credit agreement. The financial covenants contained in the credit agreements, specifically exclude the impact of write-downs of intangible assets such as write-down of Geesink. And as of June 30, 2008, we are in compliance with all of our financial covenants.
If we determine that our estimated earnings and debt levels will be such that it is likely that would violate the financial covenant, we would seek a waver amendment to our credit agreement, in advance to avoid any violations. Amending our credit agreement would likely result in the payment of significant upfront fees as well as higher interest rates.
I'll turn it back over to Bob for a wrap up before the Q&A. Please turn to slide 18.
Robert G. Bohn - Chairman and Chief Executive Officer
Thanks a lot Dave, and Charlie and Pat.
While we're not able to provide details and comprehensive estimates for 2009 at this time, I would like to make a few high level comments about our next fiscal year, which should help you understand our company and our outlook a little better.
Let's take a look at each of our segments please. Our defense business is solid, and we expect to grow the top line in 2009. We expect this business, because we have contracts a healthy backlog, and a recently signed supplemental spending deal that funds this business into our fiscal 2010. We also know that we have a strong and capable group that services our defense customer, and they quite frankly are the best around.
Quite simply, our Oshkosh builds the best medium and heavy payload tactical military vehicles in the entire world. We believe there will be continued need for replacement and remanufacture of our vehicles, due to the conflicts in Iraq and Afghanistan, as well as general wear and tear.
We will do everything in our power to continue to be as responsive as we can for our customer. We expect the operating income margins of this segment to remain under pressure in fiscal 2009 as we continue to negotiate new contracts with the U.S. government. Our fire and emergency businesses are already facing weak end markets, caused mainly by low municipal tax receipts that are driving weak municipal spending.
We have the leading brands in our markets, and we are the new product innovators. Even if municipal spending weakness persists, we believe that the segment can weather the storm. At this time, we expect flat to slightly lower sales and operating income in this segment next year. It is generally the nature of these businesses that they don't grow too rapidly in strong markets, and they don't decline too rapidly in weak markets either.
Our commercial segment should benefit in fiscal 2009 from strong domestic refuse collection vehicle orders. When you add this to our expectation that our European refuse collection vehicle business will deliver significantly improved results in 2009, the other potential for solid turnaround of profitability in the segment. We expect our North American access equipment sales to remain under pressure in fiscal 2009 as most forecasters are expecting soft construction markets into calendar '09.
In Europe, we expect growth in Eastern Europe while certain western European countries will likely be weak. Additionally, we expect our sales to grow in Latin America, the Middle East, and Asia in fiscal 2009. Overall we anticipate that segment sales will likely decline, but we are the industry leader and customers tend to consolidate their purchases with the industry leaders in times of uncertainty. So, we expect to deliver market leading performance in 2009.
It's too early to estimate the full impact of cost increases and product line selling price increases on the segment's performance. To that end, we will be in better position to provide more definitive commentary in several months when we announce our fourth quarter and full year results.
Many, many businesses are facing economic headwinds like here at Oshkosh. I have absolute faith and our people remain strong and that we'll emerge from these challenges as a stronger and more robust company. We are taking these actions necessary to optimize our performance. Oshkosh has a long proud history of creating shareholder value, and we will work hard to disown the future.
With that, I'll turn it over to Pat, and open it up for questions. Thank you.
Patrick Davidson - Vice President, Investor Relations
I'd like to remind everyone to limit their questions to one plus a follow up. And please avoid the questions with multiple sub parts as it makes it very difficult to ensure that everybody participates. After the follow up, we ask that each participant get back in queue to ask additional questions. And with that, I will turn it over to Hugh Dough [ph]. Please begin the question-and-answer period of this call.