oshkosh corporation (nyse:osk) · 16 source: rouse asset services, april 2014 note: rouse rebased...
TRANSCRIPT
MOVING THE WORLD AT WORK
Oshkosh Corporation (NYSE:OSK)KeyBanc Capital Markets Industrial, Automotive &
Transportation ConferenceMay 29, 2014
MOVING THE WORLD AT WORK
Forward-Looking Statements
2Oshkosh Corporation Investor Handout May 29, 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 either the Company, the Company’s 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 April 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 such information 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: $7.1 billion (1)
Market Capitalization (2): $4.4 billion
Responsible capital allocation
(1) As of March 31, 2014(2) As of May 20, 2014
Defense
Commercial
3Oshkosh Corporation Investor Handout May 29, 2014
Access Equipment
Fire & Emergency
Defense
Commercial
MOVING THE WORLD AT WORK
Oshkosh Corporation Sales Mix
Source: Oshkosh Corporation 10-Q Filing dated April 30, 2014
4Oshkosh Corporation Investor Handout May 29, 2014
48%
30%
10%
12%
Revenue by SegmentFirst Six Months FY14
Access Equipment Defense Fire & Emergency Commercial
76%
5%10%
9%
Revenue by GeographyFirst Six Months FY14
United States Other NA EAME Rest of World
MOVING THE WORLD AT WORK
Strong Free Cash Flow(1)
5Oshkosh Corporation Investor Handout May 29, 2014
Targeting free cash flow to approximate net income or higher over time
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 – March 31, 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 May 29, 2014
MOVING THE WORLD AT WORK
Strong Performance in FY13…
(1) Non-GAAP results. See Appendix: Non-GAAP to GAAP Reconciliation(2) Variance calculated from high end of range.
Analyst Day FY13 Measure FY13 Estimates Actual %Variance(2)
Revenue $7.5 - $7.8B $7.7B (1.7%) Solid non-defense growth largely offset anticipated defense decline
Adjusted Operating Income(1) $380 - $420M $535M 27.4% MOVE initiatives provide strong foundationfor growth to FY15 objectives
Adjusted EPS(1) $2.35 - $2.60 $3.74 43.8% Strong growth despite lower defense revenue
Free Cash Flow(1) $75 - $100M $386M 286.0%Consistent generator of strong FCF
7Oshkosh Corporation Investor Handout May 29, 2014
…Driving Toward FY15 Targets
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
9Oshkosh Corporation Investor Handout May 29, 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
10Oshkosh Corporation Investor Handout May 29, 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
11Oshkosh Corporation Investor Handout May 29, 2014
MOVING THE WORLD AT WORK
Customer Supporting Systems
12
Leaders Cascade Training
Driving Our Customer-Centric Culture -OOS Foundational Training
Customer Satisfaction
Launched September 2013
Launched December 2013
Customer First
Launched November 2012
Oshkosh Corporation Investor Handout May 29, 2014
MOVING THE WORLD AT WORK
Transforming Operations –Continuous Improvement Events
13Oshkosh Corporation Investor Handout May 29, 2014
Using Problem Solving Tools to Improve Paint Quality
Developing Customer-Centric Key Performance Indicators
Using Process Mapping to Reduce Lead Time
Improving Station Layout to Reduce Non-Value Added Motion
MOVING THE WORLD AT WORK
Oshkosh Segment Overview
MOVING THE WORLD AT WORK
Access Equipment
May 29, 2014Oshkosh Corporation Investor Handout 15
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, March 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 March
(Age
in M
onth
s)
16
Source: Rouse Asset Services, April 2014Note: Rouse rebased the Rouse Value IndexTM in January 2014
May 29, 2014Oshkosh Corporation Investor Handout
50
55
60
65
70
75
1Q'10
2Q'10
3Q'10
4Q'10
1Q'11
2Q'11
3Q'11
4Q'11
1Q'12
2Q'12
3Q'12
4Q'12
1Q'13
2Q'13
3Q'13
4Q'13
Ind. Avg.
40
45
50
55
60
2008 2009 2010 2011 2012 2013 2014YTD
‐40%
‐30%
‐20%
‐10%
0%
10%
20%
30%
2008 2009 2010 2011 2012 2013 2014E 2015EResidential Non‐Residential
25.0
30.0
35.0
40.0
45.0
Jul 12
Aug 12
Sep 12
Oct 12
Nov
12
Dec 12
Jan 13
Feb 13
Mar 13
Apr 1
3
May 13
Jun 13
Jul 13
Aug 13
Sep 13
Oct 13
Nov
13
Dec 13
Jan 14
Feb 14
Mar 14
AWP ‐ Articulating Boom AWP ‐ Scissor Lifts
AWP ‐ Telescopic Boom Forklifts Hi‐Reach
MOVING THE WORLD AT WORK
May 29, 2014Oshkosh Corporation Investor Handout 17
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%
4.5% -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/fall 2015
May 29, 2014Oshkosh Corporation Investor Handout 18
MOVING THE WORLD AT WORK
Fire & Emergency
May 29, 2014Oshkosh Corporation Investor Handout 19
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 2H 2014
and throughout 2015
MOVING THE WORLD AT WORK
Domestic Fire Market Drivers Recovering • Municipal fire truck orders improving with tax receipts
HOUSING PRICES & LOCAL PROPERTY TAXES
20May 29, 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
May 29, 2014Oshkosh Corporation Investor Handout 21
Leading brands for concrete mixers and RCVs 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
2H 2014 and into 2015
MOVING THE WORLD AT WORK
Construction: Substantial MixerOpportunities with Modest Recovery
Housing Starts and Mixer Shipments (1959-2013)
22
Sources: Housing Starts - U.S. Census Bureau. Mixer Shipments - Truck Mixer Manufacturers Bureau; U.S. and Canada.
May 29, 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 – Mar. ’14Global Insight – Mar. ’14PCA – Nov. ’13
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 2H FY14
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
24May 29, 2014Oshkosh Corporation Investor Handout
MOVING THE WORLD AT WORK
Q2 Performance Highlights
Solid performance despite significant defense sales decline- Market conditions improved for most
non-defense businesses
Strong international order trend in access equipment continued
Important new product launches at trade shows
Refinanced debt
Reiterated FY14 adjusted EPS* expectations of $3.40 to $3.65
Net
Sal
es(b
illio
ns)
Adjusted EPS*
OSK Fiscal Q2 Performance
* Non-GAAP results. See Appendix for reconciliation to GAAP results.
May 29, 2014Oshkosh Corporation Investor Handout 25
$1.68
$1.98
$0.80
$0.96
$0.00
$0.25
$0.50
$0.75
$1.00
$1.25
$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% CapEx of ~$80 million Free cash flow* ~$200 million Share count of ~86.0 million
Segment information
Measure Access Equipment Defense Fire &
Emergency Commercial
Sales(billions) $3.40 - $3.45 $1.725 - $1.75 ~$0.80 $0.85 - $0.875
Operating Income Margin 14.5% - 14.75% 4.5% - 4.75%* 3.5% - 3.75% 6.0% - 6.25%
Revenues of $6.7 billion to $6.8 billion Adjusted operating income* of $490 million to $520 million Adjusted EPS* of $3.40 to $3.65
Comments on FY14 Second Half Expect Q3 to be strongest earnings quarter
of the year Expect reduction in defense segment sales
and operating income from Q3 to Q4
* Non-GAAP results. See Appendix for reconciliation to GAAP results.** Information current as of April 29, 2014.
May 29, 2014Oshkosh Corporation Investor Handout 26
MOVING THE WORLD AT WORK
Our Commitment to Shareholders Continue executing MOVE to drive shareholder value- Strong start to FY14 - Benefiting from 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 developing processes and talent
27
Transforming to Sustain Long-Term Value Creation for Shareholders
Oshkosh Corporation Investor Handout May 29, 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
29
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
May 29, 2014Oshkosh Corporation Investor Handout
MOVING THE WORLD AT WORK
30
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):
Fiscal Year EndedSeptember 30,
2013
Operating income (non-GAAP) 534.8$ Tender offer and proxy contest costs (16.3) Impairment charge (9.0) Union contract ratification costs (3.8) Operating income (GAAP) 505.7$
Earnings per share from continuing operations-diluted (non-GAAP) 3.74$ Tender offer and proxy contest costs, net of tax (0.12) Impairment charge, net of tax (0.06) Union contract ratification costs, net of tax (0.03) Earnings per share from continuing operations-diluted (GAAP) 3.53$
Net cash flows provided by operating activities 438.0$ Additions to property, plant and equipment (46.0) Additions to equipment held for rental (13.9) Proceeds from sale of property, plant and equipment 0.1 Proceeds from sale of equipment held for rental 7.5 Free cash flow 385.7$
Operating expenses-Corporate (non-GAAP) (147.6)$ Tender offer and proxy contest costs (16.3) Operating expenses-Corporate (GAAP) (163.9)$
May 29, 2014Oshkosh Corporation Investor Handout
Appendix: Non-GAAP to GAAP Reconciliation
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:
May 29, 2014Oshkosh Corporation Investor Handout 31
2014 2013
Adjusted earnings per share from continuingoperations-diluted (non-GAAP) 0.80$ 0.96$
Reduction of valuation allowance on net operatingloss carryforward 0.14 -
Pension curtailment, net of tax (0.03) - Debt extinguishment costs, net of tax (0.08) -
Earnings per share from continuingoperations-diluted (GAAP) 0.83$ 0.96$
Three Months EndedMarch 31,
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):
May 29, 2014Oshkosh Corporation Investor Handout 32
Low High
Adjusted operating income (non-GAAP) 490.0$ 520.0$ Pension curtailment (4.1) (4.1) Operating income (GAAP) 485.9$ 515.9$
Adjusted earnings per share from continuing operations-diluted (non-GAAP) 3.40$ 3.65$ Reduction of valuation allowance on net operating loss carryforward 0.14 0.14 Pension curtailment, 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) 3.43$ 3.68$
Defense adjusted operating income margin (non-GAAP) 4.50% 4.75%Pension curtailment (0.25)% (0.25)%Defense operating income margin (GAAP) 4.25% 4.50%
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, except per share amounts):
May 29, 2014Oshkosh Corporation Investor Handout 33
Fiscal 2014Expectations
Net cash flows provided by operating activities 290.0$ Additions to property, plant and equipment (80.0) Additions to equipment held for rental (13.0) Proceeds from sale of equipment held for rental 3.0
Free cash flow 200.0$
Effective tax rate (non-GAAP) 32.0%Reduction of valuation allowance on net operating loss carryforward (3.0)%Effective tax rate (GAAP) 29.0%