Oshkosh Corporation Classification: Highly Restricted
MOVING THE WORLD AT WORK
Charles L. Szews Chief Executive Officer
Oshkosh Corporation Wilson R. Jones (NYSE:OSK) President and Chief Operating Officer
David M. Sagehorn Fourth Quarter Fiscal 2015 Executive Vice President October 29, 2015 and Chief Financial Officer Patrick N. Davidson Vice President, Investor Relations Oshkosh Corporation Classification: Highly Restricted 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 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 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 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 and regulations 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 meetits 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 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.
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OSK Fourth Quarter 2015 Earnings Call October 29, 2015 2 Oshkosh Corporation Classification: Highly Restricted Q4 FY15 Results
. Q4 adjusted EPS* of $0.67 OSK Fiscal Q4 Performance - In line with revised expectations . Taking actions to reduce costs Net Sales Adjusted and inventory in Access (billions) EPS* Equipment $1.8 $1.7 $1.25 $1.6 $1.6 . Defense recovery underway $0.96 $1.4 $1.00 − Restarted FHTV sales $1.2 $0.67 $0.75 − Awarded international contract for $1.0 273 M-ATVs $0.8 $0.50 $0.6 . JLTV win provides long-term $0.4 $0.25 stability to Defense outlook $0.2 − Expect award to Oshkosh to be $0.0 $0.00 FY15 FY14 upheld Net Sales Adjusted EPS* . Repurchased 2.9 million shares for $112 million
MOVING THE WORLD AT WORK * Non-GAAP results. See Appendix for reconciliation to GAAP results.
OSK Fourth Quarter 2015 Earnings Call October 29, 2015 3 Oshkosh Corporation Classification: Highly Restricted Full Year Results
. Full year results negatively impacted by: OSK Full Year Performance – Trough in Defense earnings
– Mid-cycle dip in Access $10.0 $5.00 Equipment demand
$8.0 $3.62 $4.00 Adjusted EPS* . Set foundation for strong $6.8 $6.1 $3.02 Defense earnings growth $6.0 $3.00 . Sustained margin enhancement
(billions) $4.0 $2.00
at Fire & Emergency and Net Sales Commercial $2.0 $1.00
. Repurchased 4.9 million shares $0.0 $0.00 or 6.1% of outstanding shares FY15 FY14 Net Sales Adjusted EPS* . Announced 12% dividend increase effective November . FY16 EPS estimate range of $3.00 to $3.40
MOVING THE WORLD AT WORK * Non-GAAP results. See Appendix for reconciliation to GAAP results.
OSK Fourth Quarter 2015 Earnings Call October 29, 2015 4 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
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OSK Fourth Quarter 2015 Earnings Call October 29, 2015 5 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 JLTV 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
M-ATV 6x6
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OSK Fourth Quarter 2015 Earnings Call October 29, 2015 6 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 MOVING THE WORLD AT WORK
OSK Fourth Quarter 2015 Earnings Call October 29, 2015 7 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
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OSK Fourth Quarter 2015 Earnings Call October 29, 2015 8 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 in third quarter Positive view on longer-term . North American construction growth . Aged fleets
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OSK Fourth Quarter 2015 Earnings Call October 29, 2015 9 Oshkosh Corporation Classification: Highly Restricted Consolidated Results
(Dollars in millions, except per share amounts)
Fourth Quarter Q4 Comments 2015 2014 . Sales impacted by: Net Sales $1,578.3 $1,667.7 Lower Access Equipment % Change (5.4)% (3.4)% segment sales Higher Defense, Fire & Emergency and Commercial Adjusted Operating segment sales Income* $89.5 $116.9 . EPS impacted by: % Change (23.4)% 49.7% Lower Access Equipment % Margin 5.7% 7.0% segment results Higher tax rate Higher Defense, Fire & Adjusted EPS* $0.67 $0.96 Emergency and Commercial segment results % Change (30.2)% 95.9% Lower Corporate expenses Lower share count MOVING THE WORLD AT WORK * Non-GAAP results. See Appendix for reconciliation to GAAP results.
OSK Fourth Quarter 2015 Earnings Call October 29, 2015 10 Oshkosh Corporation Classification: Highly Restricted Expectations for FY16 . Revenues of ~ $6.2 - $6.5 billion . Operating income of $400 million to $440 million . EPS of $3.00 to $3.40 Segment information Access Fire & Measure Equipment Defense Emergency Commercial Sales $2.9 to $3.05 ~ $1.55 ~ $0.9 ~ $1.0 (billions) Operating ~ 10.5% ~ 8.75% ~ 6.0% ~ 7.0% Income Margin
Additional expectations Quarterly commentary . Corporate expenses of $145 - $150 million . Earnings weighted to second half . Tax rate of ~ 34% Increased international M-ATV sales . CapEx of ~ $100 million Seasonality . Free Cash Flow* ~ $350 million Cautious construction equipment customers . Assumes share count of ~ 75 million . First quarter slightly profitable
MOVING THE WORLD AT WORK * Non-GAAP results. See Appendix for reconciliation to GAAP results.
OSK Fourth Quarter 2015 Earnings Call October 29, 2015 11 Oshkosh Corporation Classification: Highly Restricted
For information Patrick N. Davidson Jeffrey D. Watt Vice President, Investor Relations Director, Investor Relations contact: (920) 966-5939 (920) 233-9406 [email protected] [email protected]
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OSK Fourth Quarter 2015 Earnings Call October 29, 2015 12 Oshkosh Corporation Classification: Highly Restricted Appendix: Access Equipment
(Dollars in millions)
Fourth Quarter Q4 Comments 2015 2014 . Sales impacted by: Net Sales $769.5 $932.7 Lower North America demand Unfavorable foreign currency % Change (17.5)% 19.5% Higher European demand . Operating income impacted by: Lower sales volume Adjusted Operating Unfavorable product mix Income $59.0* $127.4 Unfavorable absorption % Change (53.7)% 41.3% Used equipment valuation % Margin 7.7% 13.7% reserves Lower incentive compensation expense . Backlog down 45% vs. prior year to $210 million
MOVING THE WORLD AT WORK * Non-GAAP results. See Appendix for reconciliation to GAAP results.
OSK Fourth Quarter 2015 Earnings Call October 29, 2015 13 Oshkosh Corporation Classification: Highly Restricted Appendix: Defense
(Dollars in millions)
Fourth Quarter Q4 Comments 2015 2014 . Sales impacted by: M-ATV reset volume Net Sales $317.6 $288.1 International M-ATV sales % Change 10.3% (43.9)% Lower FHTV and FMTV sales . Operating income impacted by: Adjusted Operating Income $18.5 $1.8* Higher sales volume Favorable absorption % Change 935.7% (88.1)% Lower SG&A % Margin 5.8% 0.6% . Backlog up 81% vs. prior year to $1.4 billion, including $0.1 billion related to JLTV contract award
MOVING THE WORLD AT WORK * Non-GAAP results. See Appendix for reconciliation to GAAP results.
OSK Fourth Quarter 2015 Earnings Call October 29, 2015 14 Oshkosh Corporation Classification: Highly Restricted Appendix: Fire & Emergency
(Dollars in millions)
Fourth Quarter Q4 Comments 2015 2014 . Sales impacted by: Higher fire apparatus volume Net Sales $245.4 $214.9 . Operating income impacted by: % Change 14.2% (7.4)% Higher sales volume Favorable absorption Operating Income $23.7 $12.5 . Backlog up 39% vs. prior year % Change 89.2% 35.3% to $790.7 million % Margin 9.6% 5.8%
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OSK Fourth Quarter 2015 Earnings Call October 29, 2015 15 Oshkosh Corporation Classification: Highly Restricted Appendix: Commercial
(Dollars in millions)
Fourth Quarter Q4 Comments
2015 2014 . Sales impacted by: Higher RCV volume Net Sales $252.9 $243.7 % Change 3.8% 16.4% Lower concrete mixer volume . Operating income impacted by: Operating Income $21.1 $18.4 Stronger mix of RCV sales % Change 14.6% 17.3% Higher sales volume % Margin 8.4% 7.6% MOVE investments . Backlog up 20.7% vs. prior year to $193 million
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OSK Fourth Quarter 2015 Earnings Call October 29, 2015 16 Oshkosh Corporation Classification: Highly Restricted Appendix: Commonly Used Acronyms
ARFF Aircraft Rescue and Firefighting MECV Modernized Expanded Capability Vehicle AWP Aerial Work Platform 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 EAME Europe, Africa & Middle East OCO Overseas Contingency Operations EMD Engineering & Manufacturing Development OH Overhead EPS Diluted Earnings Per Share OI Operating Income FHTV Family of Heavy Tactical Vehicles OOS Oshkosh Operating System FMS Foreign Military Sales OPEB Other Post-Employment Benefits FMTV Family of Medium Tactical Vehicles PLS Palletized Load System GAAP U.S. Generally Accepted Accounting Principles PUC Pierce Ultimate Configuration GAO Government Accountability Office R&D Research & Development HEMTT Heavy Expanded Mobility Tactical Truck RCV Refuse Collection Vehicle HET Heavy Equipment Transporter RFP Request for Proposal HMMWV High Mobility Multi-Purpose Wheeled Vehicle ROW Rest of World IRC Independent Rental Company SMP Standard Military Pattern (Canadian MSVS) IT Information Technology TACOM Tank-automotive and Armaments Command JLTV Joint Light Tactical Vehicle TDP Technical Data Package JPO Joint Program Office TPV Tactical Protector Vehicle JROC Joint Requirements Oversight Council TWV Tactical Wheeled Vehicle JUONS Joint Urgent Operational Needs Statement UCA Undefinitized Contract Action L-ATV Light Combat Tactical All-Terrain Vehicle UIK Underbody Improvement Kit (for M-ATV) LVSR Logistic Vehicle System Replacement UK United Kingdom M-ATV MRAP All-Terrain Vehicle ZR Zero Radius
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OSK Fourth Quarter 2015 Earnings Call October 29, 2015 17 Oshkosh Corporation Classification: Highly Restricted 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):
Three Months Ended Three Months Ended September 30, September 30, 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%
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OSK Fourth Quarter 2015 Earnings Call October 29, 2015 18 Oshkosh Corporation Classification: Highly Restricted 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):
Three Months Ended Fiscal Year Ended, September 30, September 30, 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 2016 Actual 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) Fre e ca sh flow (usa ge )$ (48.7) $ 350.0
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OSK Fourth Quarter 2015 Earnings Call October 29, 2015 19