jefferies 2014 global industrials conference slides
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Jefferies 2014 Global Industrials Conference slidesTRANSCRIPT
MOVING THE WORLD AT WORK
Oshkosh Corporation (NYSE:OSK)Jefferies 2014 Global Industrials Conference
Investor HandoutAugust 2014
MOVING THE WORLD AT WORK
Forward-Looking Statements
2Oshkosh Corporation Investor Handout August 2014
This 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 pace of U.S. and European economic recoveries; the strength of emerging market growth and projected adoption rate of work at height machinery; the expected level and timing of 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 uncertainDoD tactical wheeled vehicle strategy, including the Company’s ability to successfully manage the cost reductions required as a result of lower customer orders in the defense segment; the Company’s ability to win a U.S. JLTV production contract award; 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 consolidation and alignment, including the amounts of related costs and charges and that anticipated cost savings may not be achieved; the duration of the ongoing global economic uncertainty, which could lead to additional impairment charges related to many of the Company’s intangible assets and/or a slower recovery inthe Company’s cyclical businesses than Company or equity market expectations; 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 foreign currency fluctuations and compliance with the Foreign Corrupt Practices Act; the Company’s ability to comply with complex laws and regulations applicable to U.S. government contractors; the impact of severeweather or natural disasters that may affect the Company, its suppliers or its customers; the impact of cyber security risk 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 July 29, 2014. All forward-looking statements speak only as of the date of 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 suchinformation until the Company’s next quarterly earnings conference call, if at all.
MOVING THE WORLD AT WORK
Oshkosh Corporation
Leading global provider of specialty vehicles
- Moving the World at Work
Nearly 100 years in business; incorporated in 1917
Four business segments
TTM Revenue: $6.9 billion (1)
Market Capitalization (2): $3.9 billion
Responsible capital allocation
(1) As of June 30, 2014(2) As of July 31, 2014
Defense
Commercial
3Oshkosh Corporation Investor Handout August 2014
Access Equipment
Fire & Emergency
Defense
Commercial
MOVING THE WORLD AT WORK
Oshkosh Corporation Profile – FY14
Source: Oshkosh Corporation 10-Q Filing dated July 29, 2014
4Oshkosh Corporation Investor Handout August 2014
50%
28%
10%
12%
Revenue by SegmentFirst Nine Months FY14
Access Equipment Defense Fire & Emergency Commercial
77%
5%10%
8%
Revenue by GeographyFirst Nine Months FY14
United States Other NA EAME Rest of World
Compared with FY13 through Nine Months: Non-Defense Segment Revenues Increased 8.8%
Non-Defense Segment Operating Income Increased 25.0%
MOVING THE WORLD AT WORK
Strong Free Cash Flow(1)
5Oshkosh Corporation Investor Handout August 2014
Targeting free cash flow to approximate net income or higher over the course of a cycle
Historically relatively low annual capital spending requirements:$50 - $100 million
Significant cash flow available to execute capital allocation strategy
(1) Free cash flow is cash from operations less net capital expenditures
Fiscal Year
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2006 2007 2008 2009 2010 2011 2012 2013
Cum
ulat
ive
Free
Cas
h Fl
ow (m
illio
ns)
MOVING THE WORLD AT WORK
Responsible Capital Allocation Strategy
Reinstated $0.15 quarterly cash dividend Repurchased 9.8M OSK shares for $368M; July 2012 – June 30, 2014 Refinanced $250M in Sr. Notes, now due March 2022
─ Interest rate reduced from 8.25% to 5.375%
6
Return capital to shareholders
Re-invest in core business
Invest in external growth
opportunities
Hold cash
Reduce debt
Long-term targeted capital
structure
Oshkosh Corporation Investor Handout August 2014
MOVING THE WORLD AT WORK
Transforming Oshkosh with MOVE
MOVING THE WORLD AT WORK
Transforming – More Diverse, Global Industrial Company
FY15E Sales (1)
FY11 Sales
Defense Non-Defense
Non-Defense Sales Become Majority of Revenue by FY15
FY13 Sales
(1) Based on Company estimates as of September 2012 Analyst Day
8Oshkosh Corporation Investor Handout August 2014
MOVING THE WORLD AT WORK
MOVE – The Right Strategy
Focuses on drivers that create highest shareholder value Expected to drive higher incremental margins across non-Defense
businesses over cycle
FY15 EPS Target$4.00 to $4.50
9Oshkosh Corporation Investor Handout August 2014
MOVING THE WORLD AT WORK
Powering Our Transformation –The Oshkosh Operating System Customer-centric application
of lean principles─ Develops talent to deliver value
for customers
Improves processes needed todeliver key elements of MOVE
Supports drive to improve cash flow
Implementation gaining momentum
Company-wide foundation for building shareholder value
10Oshkosh Corporation Investor Handout August 2014
MOVING THE WORLD AT WORK
Oshkosh Segment Overview
MOVING THE WORLD AT WORK
Access Equipment
August 2014Oshkosh Corporation Investor Handout 12
Market leader with innovative product offerings- Aerial work platforms- Telehandlers
Innovation focus evident at ConExpo trade show, March 2014 185’ Ultra Boom AWP Refreshed North America’s top telehandler
brand, SkyTrak®
Industry’s first hybrid diesel-electric boom lift Introduced global telehandler - RS series
Strong execution driven by MOVE strategy
Positive global trends
MOVING THE WORLD AT WORK
North American Metrics Remain SolidRefreshing Fleets, Increasing Penetration
Residential and Non-Residential Spending(Y-O-Y % Change)
N.A. Rental Equipment Access - Fleet Age(AWP & TMH)
N.A. Rental Equipment Company Fleet Utilization
Recent Used Equipment Value Trends(OLV)
Source: Global Insight Estimates, June 2014
Based on International Rental News/Dan Kaplan sample of medium to large NA rental equipment companies (United Rentals, RSC, H&E, HERC).
(% C
hang
e)(%
Tim
e U
tiliz
atio
n)
OLV
(% o
f Cos
t)
Source: Rouse Rental Report. Calendar year-end data for 2008-13, 2014YTD through June
(Age
in M
onth
s)
13
Source: Rouse Asset Services, July 2014Note: Rouse rebased the Rouse Value IndexTM in January 2014
August 2014Oshkosh Corporation Investor Handout
‐40%
‐30%
‐20%
‐10%
0%
10%
20%
2008 2009 2010 2011 2012 2013 2014E 2015EResidential Non‐Residential
25.0
30.0
35.0
40.0
45.0
AWP - Articulating Boom AWP - Scissor LiftsAWP - Telescopic Boom Forklifts Hi-Reach
40
45
50
55
60
2008 2009 2010 2011 2012 2013 2014YTD
MOVING THE WORLD AT WORK
August 2014Oshkosh Corporation Investor Handout 14
Leading supplier to U.S. DoD for medium and heavy payload TWVs Managing programs with lower expected funding Working on multiple international opportunities- Middle East: M-ATV, Medium & Heavy
TWV platforms- Canada: MSVS SMP
Defense Team Driving Hard Through Downturn
(1) FY15 estimates as of September 2012 Analyst Day(*) Non-GAAP results. See Appendix: Non-GAAP to GAAP Reconciliation
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
FY12 FY13 FY14E FY15E
Sale
s in
Bill
ions
$4.0
$3.0
$1.725-$1.75 $1.5 Target (1)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
FY12 FY13 FY14E FY15E
6.0%
7.4%
~4.75%*
Baseline~2.0% (1)
Ope
ratin
g In
com
e M
argi
n
DoD Funding Drives Lower Defense Outlook Through FY15
$0.8 Baseline (1)
MOVING THE WORLD AT WORK
Competing in Light TWV MarketJoint Light Tactical Vehicle Program
JLTV represents opportunity to recreate the business- One of three EMD phase suppliers - Strong congressional and pentagon
program support- Large unit potentialo Initial contract ~17,000o Total U.S. requirements of ~55,000o Attractive global customer prospects
- Leverages Oshkosh strengths- Contract award scheduled for
summer 2015
August 2014Oshkosh Corporation Investor Handout 15
MOVING THE WORLD AT WORK
Fire & Emergency
August 2014Oshkosh Corporation Investor Handout 16
Industry-leading brands- Pierce firetrucks- Oshkosh ARFF and snow removal
vehicles- Frontline broadcast vehicles
Extensive new product launches at FDIC show in April 2014
Slowly recovering U.S. municipal demand
Lower funding limiting federal demand
Investing in operations to achieve MOVE targets Expect greater benefit in 4Q FY14
and throughout FY15
MOVING THE WORLD AT WORK
Domestic Fire Market Drivers Recovering • Municipal fire truck orders improving with tax receipts
HOUSING PRICES & LOCAL PROPERTY TAXES
17August 2014Oshkosh Corporation Investor Handout
‐8%
‐6%
‐4%
‐2%
0%
2%
4%
6%
8%
10%
12%
14%
Year‐Over‐Year Percent Change In Housing Prices vs. Local Property Taxes (4‐quarter moving average)
RecessionHousing Price IndexLocal Property Taxes
Source: Rockefeller Institute analysis of U.S. Census Bureau Quarterly Summary of State and Local Government Tax Revenue and Federal Housing Finance Agency, House Price Indexes data (All Transactions).
MOVING THE WORLD AT WORK
Commercial
August 2014Oshkosh Corporation Investor Handout 18
Strong concrete mixer and RCV brands Positive outlook for U.S.
concrete mixer market Housing trend generally
positive Strong ConExpo trade show
Expect flat U.S. RCV market in 2014 Remain focused on driving
improved segment results Expect greater benefit in
Q4 FY14 and into FY15
MOVING THE WORLD AT WORK
Construction: Substantial MixerOpportunities with Modest Recovery
Housing Starts and Mixer Shipments (1959-2013)
19
Sources: Housing Starts - U.S. Census Bureau. Mixer Shipments - Truck Mixer Manufacturers Bureau; U.S. and Canada.
August 2014Oshkosh Corporation Investor Handout
0
2,000
4,000
6,000
8,000
10,000
12,000
0.0
0.5
1.0
1.5
2.0
2.5
Mixer units
Hou
sing
Sta
rts
(Uni
ts in
Mill
ions
)
Housing Starts Mixer Units Shipped
Moody’s – June ’14Global Insight – June ’14PCA – April ’14
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2012 2013 2014E 2015E
Hou
sing
Starts (un
its in
millions)
U.S. Housing Starts Forecast
Moodys Portland Cement AssociationGlobal Insight Average Analyst Estimate
MOVING THE WORLD AT WORK
Moving Forward in FY14
MOVING THE WORLD AT WORK
Q3 Performance Highlights
Adjusted EPS* of $1.23 Improved access equipment
and commercial performance offset by expected lower defense results Access equipment posted all
time records for revenue and operating income Strong investments in NPD Announced quarterly dividend
of $0.15 per share
Net
Sal
es(b
illio
ns)
Adjusted EPS*
OSK Fiscal Q3 Performance
* Non-GAAP results. See Appendix for reconciliation to GAAP results.
August 2014Oshkosh Corporation Investor Handout 21
$1.9
$2.2
$1.23
$1.67
$0.00
$0.25
$0.50
$0.75
$1.00
$1.25
$1.50
$1.75
$2.00
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
FY14 FY13Net Sales Adjusted EPS*
MOVING THE WORLD AT WORK
Expectations for FY14
Additional expectations Corporate expenses ~$10 million higher than
adjusted FY13* Tax rate* of ~32.0% CapEx of ~$100 million Free cash flow* ~$100 million Assumes share count of ~86.0 million
Segment information
Measure Access Equipment Defense Fire &
Emergency Commercial
Sales(billions) $3.40 - $3.425 $1.725 - $1.75 ~$0.775 ~$0.85
Operating Income Margin ~14.6% ~4.75%* ~3.5% ~6.0%
• Revenues of $6.7 billion to $6.75 billion• Adjusted operating income* of $490 million to $505 million• Adjusted EPS* of $3.40 to $3.55
* Non-GAAP results. See Appendix for reconciliation to GAAP results.
August 2014Oshkosh Corporation Investor Handout 22
MOVING THE WORLD AT WORK
MOVE Investments Providing Returns Recovering demand for
non-defense businesses in North America- Europe looking stronger Additional cost take-out- Focus on product, process
and overhead costs- Dedicated teams leveraging
the Oshkosh Operating System
Innovations improving customers’ performance at work Driving to grow
international sales
23August 2014Oshkosh Corporation Investor Handout
MOVING THE WORLD AT WORK
Our Commitment to Shareholders Continue executing MOVE to drive shareholder value- Finish FY14 with strength - Impacted by housing starts; expect follow on growth in non-
residential construction and municipal recovery- MOVE initiatives driving margin expansion- Targeting FY15 EPS of $4.00 to $4.50
Oshkosh Operating System developingprocesses and talent
24
Transforming to Sustain Long-Term Value Creation for Shareholders
Oshkosh Corporation Investor Handout August 2014
MOVING THE WORLD AT WORK
For informationcontact:
Patrick N. DavidsonVice President, Investor Relations(920) [email protected]
Jeffrey D. WattDirector, Investor Relations(920) [email protected]
MOVING THE WORLD AT WORK
Appendix: Commonly Used Acronyms
26
ARFF Aircraft Rescue and Firefighting M-ATV MRAP All-Terrain VehicleAWP Aerial Work Platform MECV Modernized Expanded Capability VehicleCapEx Capital Expenditures MRAP Mine Resistant Ambush ProtectedCNG Compressed Natural Gas MSVS Medium Support Vehicle System (Canada)DGE Diesel Gallon Equivalent NOL Net Operating LossDoD Department of Defense NPD New Product DevelopmentEAME Europe, Africa & Middle East NRC National Rental CompanyEMD Engineering & Manufacturing Development OI Operating IncomeEPS Diluted Earnings Per Share OOS Oshkosh Operating SystemFHTV Family of Heavy Tactical Vehicles PLS Palletized Load SystemFMS Foreign Military Sales PUC Pierce Ultimate ConfigurationFMTV Family of Medium Tactical Vehicles 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
August 2014Oshkosh Corporation Investor Handout
MOVING THE WORLD AT WORK
Appendix: Non-GAAP to GAAP Reconciliation
• The tables below present a reconciliation of the Company’s presented non-GAAP measures to the most directly comparable GAAP measures:
August 2014Oshkosh Corporation Investor Handout 27
2014 2013
Adjusted earnings per share from continuing operations-diluted (non-GAAP) 1.23$ 1.67$ Contract pricing adjustment for OPEB costs, net of tax (0.08) - OPEB curtailment gain, net of tax 0.07 - Earnings per share from continuing operations-diluted (non-GAAP) 1.22$ 1.67$
Three Months EndedJune 30,
MOVING THE WORLD AT WORK
Appendix: Non-GAAP to GAAP Reconciliation
• The tables below present a reconciliation of the Company’s presented non-GAAP measures to the most directly comparable GAAP measures (in millions, except per share amounts):
August 2014Oshkosh Corporation Investor Handout 28
Low High
Adjusted operating income (non-GAAP) 490.0$ 505.0$ Contract pricing adjustment for OPEB costs (10.7) (10.7) OPEB curtailment gain 9.7 9.7 Pension curtailment loss (4.1) (4.1) Operating income (GAAP) 484.9$ 499.9$
Adjusted earnings per share from continuing operations-diluted (non-GAAP) 3.40$ 3.55$ Reduction of valuation allowance on net operating loss carryforward 0.14 0.14Contract pricing adjustment for OPEB costs, net of tax (0.08) (0.08)OPEB curtailment gain, net of tax 0.07 0.07Pension curtailment loss, net of tax (0.03) (0.03)Debt extinguishment costs, net of tax (0.08) (0.08)Earnings per share from continuing operations-diluted (GAAP) 3.42$ 3.57$
Adjusted operating expenses-Corporate (non-GAAP) (147.6)$ Tender offer and proxy contest costs (16.3) Operating expenses-Corporate (GAAP) (163.9)$
Fiscal Year EndedSeptember 30, 2013
Fiscal 2014 Expectations
MOVING THE WORLD AT WORK
Appendix: Non-GAAP to GAAP Reconciliation
• The tables below present a reconciliation of the Company’s presented non-GAAP measures to the most directly comparable GAAP measures (in millions):
August 2014Oshkosh Corporation Investor Handout 29
Fiscal 2014Expectations
Net cash flows provided by operating activities 213.0$ Additions to property, plant and equipment (100.0) Additions to equipment held for rental (19.0) Proceeds from sale of equipment held for rental 6.0 Free cash flow 100.0$
Effective tax rate (non-GAAP) 32.0%Reduction of valuation allowance on net operating loss carryforward (3.0)%Effective tax rate (GAAP) 29.0%
Defense adjusted operating income margin (non-GAAP) 4.75%Contract pricing adjustment for OPEB costs (0.62)%OPEB curtailment gain 0.56%Pension curtailment loss (0.24)%Defense operating income margin (GAAP) 4.45%