Oshkosh Corporation. Investor Presentation

Transcription

1 Oshkosh Corporation Investor Presentation MARCH 2018

2 Forward-Looking Statements This presentation contains statements that the Company believes to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 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 and construction seasons; the Company s estimates of access equipment demand which, among other factors, is influenced by customer historical buying patterns and rental company fleet replacement strategies; the strength of the U.S. dollar and its impact on Company 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 acceptance of and funding or payments for such products and services; risks related to reductions in government expenditures in light of U.S. defense budget pressures, sequestration and an uncertain DoD tactical wheeled vehicle strategy; the impact of any DoD solicitation for competition for future contracts to produce military vehicles, including a future Family of Medium Tactical Vehicles production contract; 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; 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 associated with international operations and sales, including compliance with the Foreign Corrupt Practices Act; the Company s ability to comply with complex laws and regulations applicable to U.S. government contractors; cybersecurity risks and costs of defending against, mitigating and responding to data security threats and breaches; 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 January 25, All forward-looking statements speak only as of January 25, 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. Investor Presentation 2

3 Oshkosh Corporation Key Messages A different integrated global industrial MOVE Evolving to deliver more value Positioned for long-term success Investor Presentation 3

4 Build. Serve. Defend. Protect. ACCESS EQUIPMENT DEFENSE FIRE & EMERGENCY COMMERCIAL Leading provider of specialty vehicles Celebrated 100 years strong in 2017 A different integrated global industrial Focused on delivering value to customers and shareholders Serial innovator of gamechanging new products Investor Presentation 4

5 Oshkosh Corporation Profile - FY17 Revenue by Segment Revenue by Geography 44% Access Equipment 74% United States 14% Commercial 15% Fire & Emergency 27% Defense 6% Rest of World 17% EMEA 3% Other NA FY17 global revenue of $6.8 billion across four segments Integrated approach drives opportunity/efficiency across enterprise Investor Presentation 5

6 Broad Industry Leadership GLOBAL RANK (1) Aerial Work Platforms/Telehandlers Military Tactical Wheeled Vehicles #1 #1 NORTH AMERICA RANK (1) Fire Apparatus Airport Products (ARFF/Snow Removal) Refuse Collection Vehicles Concrete Mixers/Batch Plants Wreckers & Carriers #1 #1 #1 #1 #2 Strong Brands Value Creation (1) Company estimates Investor Presentation 6

7 A Different Global Industrial Defense Shared technology Access Equipment Fire & Emergency Diverse End Markets Integrated Operations Shared procurement Shared production processes Commercial Shared talent Take Advantage of Opportunities Unavailable to Many Companies Investor Presentation 7

8 Evolving to Deliver More Value Grow profitably by maintaining intense focus on customer experience Optimize our costs and capital structure to provide value for customers and shareholders - Simplify Lead in innovation over the product life cycle Drive international growth in targeted geographies Investor Presentation 8

9 People First Culture Maturing the concept Driving better results Engage. Develop. Connect. Investor Presentation 9

10 Strong Performance During 100 th Year Access equipment, defense and fire & emergency segments all achieved full year adjusted operating income* margin 10% People First culture maturing Focus on simplifying our businesses 4 th consecutive year of increasing dividends; goal of raising annually $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 OSK Full Year Performance Net Sales (billions) $6.3 FY16 $6.8 FY17 $5.00 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 Adjusted EPS* $3.14 FY16 $4.25 FY17 * Non-GAAP results. See Appendix for reconciliation to GAAP results. Investor Presentation 10

11 Solid Start to FY18 Q1 adjusted EPS* of $0.84, exceeded expectations Double digit percentage sales growth in defense, access and commercial segments Generally solid performance across the enterprise Strong backlogs across all four segments Raising full year FY18 adjusted EPS* range to $ $5.45 $2.4 $2.2 $2.0 $1.8 $1.6 $1.4 $1.2 $1.0 $0.8 $0.6 $0.4 $0.2 $0.0 OSK Fiscal Q1 Performance Net Sales (billions) $1.21 FY17 $1.59 FY18 $0.90 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 Adjusted EPS $0.26 FY17 $0.84* FY18 * Non-GAAP results. See Appendix for reconciliation to GAAP results. Investor Presentation 11

12 Access Equipment Recent Highlights National rental company negotiations largely complete Consistent positive customer outlook Q1 orders up 94% vs. prior year Customers placed orders earlier Ending backlog more than 2.5x prior year level Continued solid international demand (Latin America remains weak) Incurred additional costs and inefficiencies implementing previously announced restructuring plan Investor Presentation 12

13 Defense Recent Highlights Strong results driven by JLTV ramp up and international M-ATV shipments JLTV continues to track positively to the program schedule Strong reliability test results Received $100 million order in Q1 Constructive dialogue with international customers Progress in pursuit of additional international orders Awarded FMTV A2 production contract in February, 2018 Solid funding for Oshkosh programs in FY19 President s Budget Request Investor Presentation 13

14 Joint Light Tactical Vehicle (JLTV) 2 Door 4 Door Utility General Purpose Heavy Guns Carrier Close Combat Weapons Carrier Future Variants U.S. JLTV Production Contract Overview ~$6.7 billion initial announced value Base award plus 8 order years Program scope includes: 4 Mission Package Configurations Mission Kits Interim Contractor Support (ICS) Total Package Fielding (TPF) System Technical Support (STS) Technical Data Package Quantity: 18,000+ vehicles (1) Vehicle deliveries expected through 2024 (1) Source: FY17 U.S. President s Budget Investor Presentation 14

15 U.S. JLTV Program Schedule FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Deliveries & Testing Armor Coupon Testing Ballistic Testing Full Rate Production Milestone Marine Corps Fielding Decision Army First Unit Equipped Performance, Reliability & Live Fire Testing LRIP (1) YR 1 LRIP YR 2 LRIP YR 3 FRP (2) YR 1 FRP YR 2 FY18 President s Budget Funding Request Order Quantity Expected Sales Quantity FY FY17 (3) 1,803 ~600 to 650 FY18 (4) 2,637 ~1,500 to 2,000 FY19 (4) 5,032 ~3,000 FY20 (4) 5,029 ~4,500 FY21 (4) 3,865 ~5,000 Delivering unprecedented performance. On-time. On-budget. (1) Low Rate Initial Production (2) Full Rate Production (3) Actual (4) FY18-FY21 Order Quantity values based on FY18 and FY19 President's Budget Requests for U.S. Army and U. S. Marine Corps. Investor Presentation 15

16 Global Light TWV Market Potential Significant international interest / opportunity Today s HMMWV Installed Base (1) 240,000 HMMWVs 60 countries 30+ configurations JLTV is Next-Generation Protected Mobility for the Modern Battlefield 47% 53% Armor Capable HMMWV Unarmored HMMWV Jeep HMMWV JLTV The Oshkosh JLTV Will Shape the History of Light Military Vehicles (1) Source: Government publications, IHS Jane s, SIPRI, AM General Website Investor Presentation 16

17 Fire & Emergency Recent Highlights Strong performance in FY17 continued in Q1 FY18 Lower international ARFF deliveries largely offset by higher fire apparatus sales North American fire truck market grew 4% in FY17 Expect flat to slightly positive market in FY18, supported by continued growing municipal tax receipts and aging fleets Meaningful opportunities in international markets Led by China and the Middle East Investor Presentation 17

18 Domestic Fire Truck Market Drivers Gaining Momentum Increasing Home Prices and Property Taxes $ Billions Data through Sept 2017 Housing prices and local property taxes have continued to recover Aging fleets coupled with improving state and local tax receipts have led to steady growth in municipal demand Investor Presentation 18

19 Commercial Recent Highlights Q1 results in line with expectations Implemented new organizational structure Supports greater accountability and long-term strategy Committed to improved performance Driving lasting change through simplification activities Positive longer-term outlook for RCV and concrete mixer markets Investor Presentation 19

20 FY18 Expectations (as of January 25, 2018) Revenues of $7.1 to $7.3 billion Adjusted operating income* of $550 million to $600 million Adjusted EPS* of $5.00 to $5.45 Segment information Measure Access Equipment Defense Fire & Emergency Commercial Sales (billions) Adj. Operating Income Margin $3.3 - $3.4 ~ $1.8 $1.85 ~ $1.1 ~ $ % %* 9.75% % 10.75% % 5.75% %* Additional expectations Corporate expenses of ~$155 million Adjusted tax rate* of ~23% CapEx of ~$100 million Free Cash Flow* of ~$400 million Assumes share count of ~76.0 million Q2 Expectations Higher adjusted earnings compared to Q2 FY17 Higher sales and adjusted operating income in all non-defense segments Lower defense segment sales and operating income as higher JLTV sales only partially offset lower international M-ATV sales Lower tax rate * Non-GAAP results. See appendix for reconciliation to GAAP results. Investor Presentation 20

21 Responsible Capital Allocation Strategy Long-term targeted capital structure Reinvest in core business Debt to EBITDA target ~2.0X Drives sales and EPS growth Opportunistic levers to drive additional shareholder value Invest in external growth (M&A) Return cash to shareholders Reduce debt Hold cash Investor Presentation 21

22 Strong Balance Sheet and Liquidity Strong balance sheet (1) Debt/Capital ~27% Total debt: $831 million Debt Maturities ($ in millions) Responsible leverage profile Target: Debt/EBITDA ~2x Strong interest coverage Consistently > 7x Manageable debt maturities Bank facility maturing in 2019 to be addressed in FY18 Potential refinance of note maturing in 2022 $850 $315 $20 $250 $ (2) (3) (4) Term Loan Revolver 2022 Notes 2025 Notes (1) As of September 30, (2) Revolver undrawn as of December 31, (3) First callable in March (4) First callable in March Investor Presentation 22

23 Positive Long-term Outlook Convergence of favorable market dynamics and benefits of MOVE position OSK to deliver strong results Favorable market dynamics JLTV provides multi-year visibility for Defense Access Equipment replacement demand opportunities Fleet ages help to drive Fire & Emergency and Commercial Segment demand MOVE strategy drives results Expected strong free cash flow over the cycle will ensure strong balance sheet Expect revenue and operating income margin growth to continue A Different Integrated Global Industrial Company Investor Presentation 23

24 For information contact: Patrick N. Davidson Sr. Vice President, Investor Relations (920) Jeffrey D. Watt Director, Investor Relations (920)

25 Consolidated Results (Dollars in millions, except per share amounts) First Quarter Net Sales $1,586.3 $1,211.4 % Change 30.9% (3.2)% Adjusted Operating Income $92.4* $36.2 % Change 155.2% 19.4% % Margin 5.8% 3.0% Adjusted EPS $0.84* $0.26 Q1 Comments Sales impacted by: + Higher sales in defense, access equipment and commercial segments Adjusted EPS* impacted by: + Higher adjusted operating income in all segments + Lower tax rate due to tax reform Higher corporate expenses % Change 223.1% 36.8% * Non-GAAP results. See appendix for reconciliation to GAAP results. Investor Presentation 25

26 Appendix: Access Equipment (Dollars in millions) First Quarter Net Sales $628.2 $489.2 % Change 28.4% (7.7)% Adjusted Operating Income $29.9* $24.4 % Change 22.5% 19.2% % Margin 4.8% 5.0% Q1 Comments Sales impacted by: + Higher aerial work platform and telehandler sales Adjusted operating income* impacted by: + Higher sales volume Higher material costs Unfavorable miscellaneous reserve adjustments and customer mix Adverse FX Backlog up 165% vs. prior year to $1.58 billion * Non-GAAP results. See appendix for reconciliation to GAAP results. Investor Presentation 26

27 Appendix: Defense (Dollars in millions) First Quarter Net Sales $493.5 $294.5 % Change 67.6% (7.4)% Operating Income $65.2 $23.8 % Change 173.9% 2.6% % Margin 13.2% 8.1% Q1 Comments Sales impacted by: + Ramp up of JLTV program + M-ATV international sales Operating income impacted by: + Higher sales volume + Improved manufacturing performance Adverse product mix Backlog down 17% vs. prior year to $1.85 billion Investor Presentation 27

28 Appendix: Fire & Emergency (Dollars in millions) First Quarter Net Sales $229.1 $232.5 % Change (1.5)% 12.0% Operating Income $25.1 $17.0 % Change 47.6% 68.1% % Margin 11.0% 7.3% Q1 Comments Sales impacted by: Lower international ARFF deliveries + Higher fire truck sales Operating income impacted by: + Improved pricing + Improved operational execution Higher SG&A expenses Backlog up 9% vs. prior year to $985 million Investor Presentation 28

29 Appendix: Commercial (Dollars in millions) First Quarter Net Sales $241.4 $199.2 % Change 21.2% (0.6)% Adjusted Operating Income $10.8* $4.6 % Change 134.8% (47.9)% % Margin 4.5% 2.3% Q1 Comments Sales impacted by: + Higher concrete mixer and RCV unit volume Adjusted operating income* impacted by: + Higher sales volume Backlog up 58% vs. prior year to $374 million * Non-GAAP results. See appendix for reconciliation to GAAP results. Investor Presentation 29

30 Appendix: Consolidated Results (Dollars in millions, except per share amounts) Full Year Net Sales $6,829.6 $6,279.2 % Change 8.8% 3.0% Adjusted Operating Income* $506.3 $391.8 % Change 29.2% (1.6)% % Margin 7.4% 6.2% Adjusted EPS* $4.25 $3.14 % Change 35.4% 4.0% Comments Sales impacted by: + Higher sales in defense and fire & emergency Adjusted EPS* impacted by: + Higher defense, fire & emergency and access equipment segment operating income + Lower tax rate Lower commercial segment operating income * Non-GAAP results. See appendix for reconciliation to GAAP results. Investor Presentation 30

31 Appendix: Access Equipment (Dollars in millions) Full Year Net Sales $3,026.4 $3,012.4 % Change 0.5% (11.4)% Adjusted Operating Income* $302.4 $291.2 % Change 3.8% (28.9)% % Margin 10.0% 9.7% Comments Sales impacted by: + Higher AWP volume Lower telehandler volume Adjusted operating income* impacted by: + Improved absorption + Favorable mix Higher incentive compensation Backlog up 152.2% vs. prior year to $452 million * Non-GAAP results. See appendix for reconciliation to GAAP results. Investor Presentation 31

32 Appendix: Defense (Dollars in millions) Full Year Net Sales $1,820.1 $1,351.1 % Change 34.7% 43.8% Operating Income $207.9 $122.5 % Change 69.7% 1,983.1% % Margin 11.4% 9.1% Comments Sales impacted by: + Ramp-up of JLTV program + M-ATV international sales + FHTV sales Operating income impacted by: + Higher sales volume Higher SG&A Backlog down 10.6% vs. prior year to $2.1 billion Investor Presentation 32

33 Appendix: Fire & Emergency (Dollars in millions) Full Year Net Sales $1,030.9 $953.3 % Change 8.1% 16.9% Operating Income $104.2 $67.0 % Change 55.5% 53.1% % Margin 10.1% 7.0% Comments Sales impacted by: + Improved pricing + Higher content units + Increased volume Operating income impacted by: + Improved pricing Backlog up 9.2% vs. prior year to $932 million Investor Presentation 33

34 Appendix: Commercial (Dollars in millions) Full Year Net Sales $970.3 $979.2 % Change (0.9)% 0.1% Operating Income $43.8 $67.6 % Change (35.2)% 4.8% % Margin 4.5% 6.9% Comments Sales impacted by: Lower RCV volume + Higher package sales + Higher concrete mixer volume Operating income impacted by: Lower sales volume Operational inefficiencies Backlog up 85.2% vs. prior year to $321 million Investor Presentation 34

35 Appendix: GAAP to Non-GAAP Reconciliation The table below presents a reconciliation of the Company s presented GAAP measures to the most directly comparable non-gaap measures (in millions, except per share amounts): Fiscal Year Ended September 30, Earnings per share-diluted (GAAP) $ 3.77 $ 2.91 Long-lived asset impairment charge, net of tax Restructuring-related costs, net of tax Adjusted earnings per share-diluted (non-gaap) $ 4.25 $ 3.14 Consolidated operating income (GAAP) $ $ Long-lived asset impairment charge Restructuring-related costs Adjusted consolidated operating income (non-gaap) $ $ Access equipment segment operating income (GAAP) $ $ Long-lived asset impairment charge Restructuring-related costs Adjusted access equipment segment operating income (non-gaap) $ $ Net income (GAAP) $ $ Long-lived asset impairment charge Restructuring-related costs, net of tax Adjusted net income (non-gaap) $ $ Investor Presentation 35

36 Appendix: GAAP to Non-GAAP Reconciliation The table below presents a reconciliation of the Company s presented GAAP measures to the most directly comparable non-gaap measures (in millions, except per share amounts): Three Months Ended December 31, Access equipment segment operating income (GAAP) $ 13.8 $ 24.4 Costs and inefficiencies related to restructuring actions Adjusted access equipment segment operating income (non-gaap) $ 29.9 $ 24.4 Commercial segment operating income (GAAP) $ 8.3 $ 4.6 Restructuring-related costs Adjusted commercial segment operating income (non-gaap) $ 10.8 $ 4.6 Consolidated operating income (GAAP) $ 73.8 $ 36.2 Costs and ineffciencies related to restructuring actions Adjusted consolidated operating income (non-gaap) $ 92.4 $ 36.2 Provision for income taxes (GAAP) $ 4.7 $ 5.2 Income tax benefit of costs and inefficiencies related to restructuring actions Revaluation of net deferred tax liabilities Repatriation tax (17.4) - Adjusted provision for income taxes (non-gaap) $ 15.7 $ 5.2 Earnings per share-diluted (GAAP) $ 0.74 $ 0.26 Costs and inefficiencies related to restructuring actions, net of tax Revaluation of net deferred tax liabilities (0.31) - Repatriation tax Adjusted earnings per share-diluted (non-gaap) $ 0.84 $ 0.26 Investor Presentation 36

37 Appendix: GAAP to Non-GAAP Reconciliation The table below presents a reconciliation of the Company s presented GAAP measures to the most directly comparable non-gaap measures (in millions, except per share amounts): Fiscal Year Ended September 30, 2018 Expectations Low High Consolidated operating income (GAAP) $ $ Costs and inefficiencies related to restructuring actions Adjusted consolidated operating income (non-gaap) $ $ Earnings per share-diluted (GAAP) $ 4.75 $ 5.20 Costs and inefficiencies related to restructuring actions, net of tax Revaluation of net deferred tax liabilities (0.31) (0.31) Repatriation tax Adjusted earnings per share-diluted (non-gaap) $ 5.00 $ 5.45 Access equipment segment operating income margin (GAAP) 9.95% 10.5% Costs and inefficiencies related to restructuring actions 0.80% 0.75% Adjusted access equipment segment operating income margin (non-gaap) 10.75% 11.25% Commercial segment operating income margin (GAAP) 5.35% 5.85% Restructuring related costs 0.40% 0.40% Adjusted commercial segment operating income margin (non-gaap) 5.75% 6.25% Investor Presentation 37

38 Appendix: GAAP to Non-GAAP Reconciliation The table below presents a reconciliation of the Company s presented GAAP measures to the most directly comparable non-gaap measures (in millions): Fiscal 2018 Expectations Net cash flows provided by operating activities $ Additions to property, plant and equipment (100.0) Free cash flow $ Fiscal Year Ended September 30, 2018 Expectations Low High Effective income tax rate (GAAP) 21.8% 21.8% Impact of costs and inefficiencies related to restructuring actions (0.1%) (0.1%) Revaluation of net deferred tax liabilities 5.1% 4.7% Repatriation tax (3.8%) (3.4%) Adjusted effective income tax rate (non-gaap) 23.0% 23.0% Investor Presentation 38

39 Appendix: Commonly Used Acronyms ARFF Aircraft Rescue and Firefighting LVSR Logistic Vehicle System Replacement AWP Aerial Work Platform M-ATV MRAP All-Terrain Vehicle AMPS Aftermarket Parts & Service MRAP Mine Resistant Ambush Protected CapEx Capital Expenditures MSVS Medium Support Vehicle System (Canada) CNG Compressed Natural Gas NOL Net Operating Loss DGE Diesel Gallon Equivalent NPD New Product Development DoD Department of Defense NRC National Rental Company EMD Engineering & Manufacturing Development OCO Overseas Contingency Operations EMEA Europe, Middle East & Africa OH Overhead EPS Diluted Earnings Per Share OI Operating Income FAST Act Fixing America s Surface Transportation Act OOS Oshkosh Operating System FDIC Fire Department Instructors Conference OPEB Other Post-Employment Benefits FHTV Family of Heavy Tactical Vehicles PLS Palletized Load System FMS Foreign Military Sales PUC Pierce Ultimate Configuration FMTV Family of Medium Tactical Vehicles R&D Research & Development GAAP U.S. Generally Accepted Accounting Principles RCV Refuse Collection Vehicle GAO Government Accountability Office RFP Request for Proposal HEMTT Heavy Expanded Mobility Tactical Truck ROW Rest of World HET Heavy Equipment Transporter SMP Standard Military Pattern (Canadian MSVS) HMMWV High Mobility Multi-Purpose Wheeled Vehicle TACOM Tank-automotive and Armaments Command IRC Independent Rental Company TDP Technical Data Package IT Information Technology TPV Tactical Protector Vehicle JLTV Joint Light Tactical Vehicle TWV Tactical Wheeled Vehicle JPO Joint Program Office UCA Undefinitized Contract Action JROC Joint Requirements Oversight Council UIK Underbody Improvement Kit (for M-ATV) JUONS Joint Urgent Operational Needs Statement UK United Kingdom L-ATV Light Combat Tactical All-Terrain Vehicle ZR Zero Radius LRIP Low Rate Initial Production Investor Presentation 39