Download - Q4 2015 earnings slides final
MOVING THE WORLD AT WORK
Oshkosh Corporation Classification: Highly Restricted
Fourth Quarter Fiscal 2015October 29, 2015
Charles L. SzewsChief Executive Officer
Wilson R. JonesPresident and Chief Operating Officer
David M. SagehornExecutive Vice President and Chief Financial Officer
Patrick N. DavidsonVice President, Investor Relations
Oshkosh Corporation (NYSE:OSK)
MOVING THE WORLD AT WORK
Oshkosh Corporation Classification: Highly Restricted
Forward-Looking StatementsThis presentation contains statements that the Company believes to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including, without limitation, statements regarding the Company’s future financial position, business strategy, targets, projected sales, costs, earnings, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations, are forward-looking statements. When used in this presentation, words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “project” or “plan” or the negative thereof or variations thereon or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond the Company’s control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include the cyclical nature of the Company’s access equipment, commercial and fire & emergency markets, which are particularly impacted by the strength of U.S. and European economies; the Company’s estimates of access equipment demand; the strength of the U.S. dollar and its impact onCompany exports, translation of foreign sales and purchased materials; the expected level and timing of U.S. Department of Defense (“DoD”) and international defense customer procurement of products and services and funding thereof; risks related to reductions in government expenditures in light of U.S. defense budget pressures, sequestration and an uncertain DoD tactical wheeled vehicle strategy; risks related to the Company’s future defense segment sales as a result of the outcome of a competitor’s protest of the JLTV production contract award to the Company; the Company’s ability to finalize an international contract for a significant quantity of M-ATVs, with the majority of the units sold in fiscal 2016; the Company’s ability to increase prices to raise margins or offset higher input costs; increasing commodity and other raw material costs, particularly in a sustained economic recovery; risks related to facilities expansion, consolidation and alignment, including the amounts of related costs and charges and that anticipated cost savings may not be achieved; global economic uncertainty, which could lead to additional impairment charges related to many of the Company’s intangible assets and/or a slower recovery in the Company’s cyclical businesses than Company or equity market expectations; projected adoption rates of work at height machinery in emerging markets; the impact of severe weather or natural disasters that may affect the Company, its suppliers or its customers; risks related to the collectability of receivables, particularly for those businesses with exposure to construction markets; the cost of any warranty campaigns related to the Company’s products;risks related to production or shipment delays arising from quality or production issues; risks associated with international operations and sales, including compliance with the Foreign Corrupt Practices Act; the Company’s ability to comply with complex laws andregulations applicable to U.S. government contractors; cybersecurity risks and costs of defending against, mitigating and responding to a data security breach; and risks related to the Company’s ability to successfully execute on its strategic road map and meet its long-term financial goals. Additional information concerning these and other factors is contained in the Company’s filings with the Securities and Exchange Commission, including the Form 8-K filed today. All forward-looking statements speak only as of the dateof this presentation. The Company assumes no obligation, and disclaims any obligation, to update information contained in this presentation. Investors should be aware that the Company may not update such information until the Company’s next quarterly earnings conference call, if at all.
October 29, 2015OSK Fourth Quarter 2015 Earnings Call 2
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Oshkosh Corporation Classification: Highly Restricted
Q4 FY15 Results Q4 adjusted EPS* of $0.67
- In line with revised expectations Taking actions to reduce costs
and inventory in Access Equipment
Defense recovery underway− Restarted FHTV sales− Awarded international contract for
273 M-ATVs JLTV win provides long-term
stability to Defense outlook− Expect award to Oshkosh to be
upheld Repurchased 2.9 million shares
for $112 million
Net Sales(billions)
AdjustedEPS*
3
$1.6 $1.7
$0.67
$0.96
$0.00
$0.25
$0.50
$0.75
$1.00
$1.25
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
FY15 FY14Net Sales Adjusted EPS*
* Non-GAAP results. See Appendix for reconciliation to GAAP results.
OSK Fiscal Q4 Performance
October 29, 2015OSK Fourth Quarter 2015 Earnings Call
MOVING THE WORLD AT WORK
Oshkosh Corporation Classification: Highly Restricted
Full Year Results
Full year results negatively impacted by:– Trough in Defense earnings– Mid-cycle dip in Access
Equipment demand Set foundation for strong
Defense earnings growth Sustained margin enhancement
at Fire & Emergency and Commercial
Repurchased 4.9 million shares or 6.1% of outstanding shares
Announced 12% dividend increase effective November
FY16 EPS estimate range of $3.00 to $3.40
Net
Sal
es(b
illio
ns)
Adjusted EPS*
OSK Full Year Performance
* Non-GAAP results. See Appendix for reconciliation to GAAP results.
$6.1$6.8
$3.02
$3.62
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
FY15 FY14Net Sales Adjusted EPS*
4October 29, 2015OSK Fourth Quarter 2015 Earnings Call
MOVING THE WORLD AT WORK
Oshkosh Corporation Classification: Highly Restricted
Positive Long-Term Outlook for Oshkosh Leading brands with excellent long-term
prospects Growing Defense portfolio with increasing
global demand Continued global penetration of Access
Equipment and sustained North American construction growth
Commitment to smart capital allocation Disciples of “The Outsiders” Expected strong free cash flow provides
opportunity to enhance shareholder returns
Strong, experienced leaders to execute roadmap to deliver strong shareholder returns
October 29, 2015OSK Fourth Quarter 2015 Earnings Call 5
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Oshkosh Corporation Classification: Highly Restricted
Defense Won DoD’s JLTV competition in August− Contract for 17,000 vehicles over 8 years− Program expected to yield 55,000 vehicles
domestically over 20+ years− Expect strong interest from
international allies− GAO decision on competitor protest in
December
M-ATV continues to gain interest globally Introduced new 6x6 M-ATV Technology
Demonstrator Total of nine M-ATV variants to conduct a
wide variety of missions
October 29, 2015OSK Fourth Quarter 2015 Earnings Call 6
JLTV
M-ATV 6x6
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Oshkosh Corporation Classification: Highly Restricted
Access Equipment Mid-cycle dip accelerated into 2015 − Driven by weather and oil & gas impact− Light replacement demand after low
purchases in 2009 - 2010 Improving residential and non-residential
construction driving equipment usage and long-term confidence
Expect mid-cycle sales decline of approximately 10% - 15% in FY16
International markets 2016 outlook mixed Europe down (due to currency) Latin America expected to remain weak Asia and Australia steady
Reducing production rate and workforce− Will drive inventory reduction− Margin pressure due to under-absorption
October 29, 2015OSK Fourth Quarter 2015 Earnings Call 7
MOVING THE WORLD AT WORK
Oshkosh Corporation Classification: Highly Restricted
Fire & Emergency
Strong quarter to finish the year− Higher revenues, operating income &
margins− Elevated backlog
Pierce share gains at a time when the market is still below historical norms Driven by strong new product launches
Improved results from operational changes− Still more work to do, but business
improvement roadmap is delivering higher margins
October 29, 2015OSK Fourth Quarter 2015 Earnings Call 8
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Oshkosh Corporation Classification: Highly Restricted
Commercial
RCV sales grew double digits again in the quarter Replacement demand
recovering Share growing due to success of
new product launches Concrete mixer sales down
in the quarter Continuation of market
slowdown that began inthird quarter
Positive view on longer-term North American
construction growth Aged fleets
October 29, 2015OSK Fourth Quarter 2015 Earnings Call 9
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Oshkosh Corporation Classification: Highly Restricted
Consolidated Results
Sales impacted by: Lower Access Equipment
segment sales Higher Defense, Fire &
Emergency and Commercial segment sales
EPS impacted by: Lower Access Equipment
segment results Higher tax rate Higher Defense, Fire &
Emergency and Commercial segment results
Lower Corporate expenses Lower share count
Q4 Comments
(Dollars in millions, except per share amounts)
Fourth Quarter
Net Sales $1,578.3 $1,667.7% Change (5.4)% (3.4)%
Adjusted Operating Income* $89.5 $116.9
% Change (23.4)% 49.7%% Margin 5.7% 7.0%
Adjusted EPS* $0.67 $0.96% Change (30.2)% 95.9%
2015 2014
* Non-GAAP results. See Appendix for reconciliation to GAAP results.
October 29, 2015OSK Fourth Quarter 2015 Earnings Call 10
MOVING THE WORLD AT WORK
Oshkosh Corporation Classification: Highly Restricted
Expectations for FY16
Additional expectations Corporate expenses of $145 - $150 million Tax rate of ~ 34% CapEx of ~ $100 million Free Cash Flow* ~ $350 million Assumes share count of ~ 75 million
Segment information
Revenues of ~ $6.2 - $6.5 billion Operating income of $400 million to $440 million EPS of $3.00 to $3.40
* Non-GAAP results. See Appendix for reconciliation to GAAP results.
11
Quarterly commentary Earnings weighted to second half
Increased international M-ATV sales Seasonality Cautious construction equipment customers
First quarter slightly profitable
Measure Access Equipment Defense Fire &
Emergency Commercial
Sales(billions) $2.9 to $3.05 ~ $1.55 ~ $0.9 ~ $1.0
Operating Income Margin ~ 10.5% ~ 8.75% ~ 6.0% ~ 7.0%
October 29, 2015OSK Fourth Quarter 2015 Earnings Call
MOVING THE WORLD AT WORK
Oshkosh Corporation Classification: Highly Restricted
For informationcontact:
Patrick N. DavidsonVice President, Investor Relations(920) [email protected]
Jeffrey D. WattDirector, Investor Relations(920) [email protected]
October 29, 2015OSK Fourth Quarter 2015 Earnings Call 12
MOVING THE WORLD AT WORK
Oshkosh Corporation Classification: Highly Restricted
Net Sales $769.5 $932.7% Change (17.5)% 19.5%
Adjusted OperatingIncome $59.0* $127.4
% Change (53.7)% 41.3%% Margin 7.7% 13.7%
Fourth Quarter
(Dollars in millions)
2015 2014
Appendix: Access Equipment
Sales impacted by: Lower North America demand Unfavorable foreign currency Higher European demand
Operating income impacted by: Lower sales volume Unfavorable product mix Unfavorable absorption Used equipment valuation
reserves Lower incentive compensation
expense Backlog down 45% vs. prior
year to $210 million
Q4 Comments
October 29, 2015OSK Fourth Quarter 2015 Earnings Call 13
* Non-GAAP results. See Appendix for reconciliation to GAAP results.
MOVING THE WORLD AT WORK
Oshkosh Corporation Classification: Highly Restricted
Appendix: Defense
Sales impacted by: M-ATV reset volume International M-ATV sales Lower FHTV and FMTV sales
Operating income impacted by: Higher sales volume Favorable absorption Lower SG&A
Backlog up 81% vs. prior year to $1.4 billion, including $0.1 billion related to JLTV contract award
Q4 Comments
Net Sales $317.6 $288.1% Change 10.3% (43.9)%
Adjusted Operating Income $18.5 $1.8*
% Change 935.7% (88.1)%% Margin 5.8% 0.6%
Fourth Quarter
(Dollars in millions)
2015 2014
October 29, 2015OSK Fourth Quarter 2015 Earnings Call 14
* Non-GAAP results. See Appendix for reconciliation to GAAP results.
MOVING THE WORLD AT WORK
Oshkosh Corporation Classification: Highly Restricted
Net Sales $245.4 $214.9% Change 14.2% (7.4)%
Operating Income $23.7 $12.5% Change 89.2% 35.3%% Margin 9.6% 5.8%
Fourth Quarter
(Dollars in millions)
2015 2014
Appendix: Fire & Emergency
Sales impacted by: Higher fire apparatus volume
Operating income impacted by: Higher sales volume Favorable absorption
Backlog up 39% vs. prior year to $790.7 million
Q4 Comments
October 29, 2015OSK Fourth Quarter 2015 Earnings Call 15
MOVING THE WORLD AT WORK
Oshkosh Corporation Classification: Highly Restricted
Appendix: Commercial
Sales impacted by: Higher RCV volume Lower concrete mixer volume
Operating income impacted by: Stronger mix of RCV sales Higher sales volume MOVE investments
Backlog up 20.7% vs. prior year to $193 million
Q4 Comments
Net Sales $252.9 $243.7% Change 3.8% 16.4%
Operating Income $21.1 $18.4% Change 14.6% 17.3%% Margin 8.4% 7.6%
Fourth Quarter
(Dollars in millions)
2015 2014
October 29, 2015OSK Fourth Quarter 2015 Earnings Call 16
MOVING THE WORLD AT WORK
Oshkosh Corporation Classification: Highly Restricted
Appendix: Commonly Used Acronyms
17October 29, 2015OSK Fourth Quarter 2015 Earnings Call
ARFF Aircraft Rescue and Firefighting MECV Modernized Expanded Capability VehicleAWP Aerial Work Platform MRAP Mine Resistant Ambush ProtectedCapEx Capital Expenditures MSVS Medium Support Vehicle System (Canada)CNG Compressed Natural Gas NOL Net Operating LossDGE Diesel Gallon Equivalent NPD New Product DevelopmentDoD Department of Defense NRC National Rental CompanyEAME Europe, Africa & Middle East OCO Overseas Contingency OperationsEMD Engineering & Manufacturing Development OH OverheadEPS Diluted Earnings Per Share OI Operating IncomeFHTV Family of Heavy Tactical Vehicles OOS Oshkosh Operating SystemFMS Foreign Military Sales OPEB Other Post-Employment BenefitsFMTV Family of Medium Tactical Vehicles PLS Palletized Load SystemGAAP U.S. Generally Accepted Accounting Principles PUC Pierce Ultimate ConfigurationGAO Government Accountability Office R&D Research & DevelopmentHEMTT Heavy Expanded Mobility Tactical Truck RCV Refuse Collection VehicleHET Heavy Equipment Transporter RFP Request for ProposalHMMWV High Mobility Multi-Purpose Wheeled Vehicle ROW Rest of WorldIRC Independent Rental Company SMP Standard Military Pattern (Canadian MSVS)IT Information Technology TACOM Tank-automotive and Armaments CommandJLTV Joint Light Tactical Vehicle TDP Technical Data PackageJPO Joint Program Office TPV Tactical Protector VehicleJROC Joint Requirements Oversight Council TWV Tactical Wheeled VehicleJUONS Joint Urgent Operational Needs Statement UCA Undefinitized Contract ActionL-ATV Light Combat Tactical All-Terrain Vehicle UIK Underbody Improvement Kit (for M-ATV)LVSR Logistic Vehicle System Replacement UK United KingdomM-ATV MRAP All-Terrain Vehicle ZR Zero Radius
MOVING THE WORLD AT WORK
Oshkosh Corporation Classification: Highly Restricted
October 29, 2015OSK Fourth Quarter 2015 Earnings Call 18
Appendix: Non-GAAP to GAAP Reconciliation
• The table below presents a reconciliation of the Company’s presented non-GAAP measures to the most directly comparable GAAP measures (in millions):
2015 2014 2015 2014
Adjusted Access Equipment segment operating income (non-GAAP) 59.0$ 127.4$ 7.7% 13.7%Workforce reduction charges (2.5) - -0.4% - Access Equipment segment operating income (GAAP) 56.5$ 127.4$ 7.3% 13.7%
Adjusted Defense segment operating income (non-GAAP) 18.5$ 1.8$ 5.8% 0.6%Pension and OPEB curtailment/settlement - (3.8) - -1.3%Defense segment operating income (loss) (GAAP) 18.5$ (2.0)$ 5.8% -0.7%
Adjusted consolidated operating income (non-GAAP) 89.5$ 116.9$ 5.7% 7.0%Pension and OPEB curtailment/settlement - (3.8) - -0.2%Workforce reduction charges (2.9) - -0.2% - Consolidated operating income (GAAP) 86.6$ 113.1$ 5.5% 6.8%
Three Months EndedSeptember 30,
Three Months EndedSeptember 30,
MOVING THE WORLD AT WORK
Oshkosh Corporation Classification: Highly Restricted
October 29, 2015OSK Fourth Quarter 2015 Earnings Call 19
Appendix: Non-GAAP to GAAP Reconciliation
• The table below presents a reconciliation of the Company’s presented non-GAAP measures to the most directly comparable GAAP measures (in millions, except per share amounts):
2015 2014 2015 2014
Adjusted earnings per share - diluted (non-GAAP) 0.67$ 0.96$ 3.02$ 3.62$ Reduction of valuation allowance on net operating loss carryforward - - - 0.14 Pension and OPEB curtailment/settlement, net of tax - (0.03) 0.03 0.01 Contract pricing adjustment for OPEB costs, net of tax - - - (0.08) Debt extinguishment costs, net of tax - - (0.12) (0.08) Workforce reduction charges, net of tax (0.03) - (0.03) - Earnings per share - diluted (GAAP) 0.64$ 0.93$ 2.90$ 3.61$
Fiscal 2015 Fiscal 2016Actual Expectations
Net cash flows provided by operating activities 82.5$ 475.0$ Additions to property, plant and equipment (131.7) (100.0) Net additions to equipment held for rental 0.5 (25.0) Free cash flow (usage) (48.7)$ 350.0$
Three Months Ended Fiscal Year Ended,September 30, September 30,