Oshkosh Corporation 2008 Annual Report
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Oshkosh Corporation 2008 Annual Report Built strong. Building for the future. 76636 08AR_COV.indd 1 12/1/08 11:35:25 AM Revenues for fi scal 2008 were up 13.2% to $7.1 billion, powered by the ownership of JLG Industries, Inc. Here’s how: (“JLG”) for a full year, higher defense volumes and market share gains in fi re trucks and domestic refuse Dear fellow shareholders: We faced a number of collection vehicles which offset lower sales due to challenges in fi scal 2008: a U.S. economic downturn weak markets in several other businesses. International that spread globally causing demand to decline by sales grew to $2.14 billion or 30% of total sales. 10% to 70% in many of our businesses; declining Operating income fell to $406.3 million due in large construction spending; record high steel and fuel part to $175.2 million of non-cash charges ($2.31 per prices; and tight credit affecting customers’ expansion share, net of taxes) for the impairment of Geesink plans. The Oshkosh team took quick and decisive Norba Group goodwill. Our facility rationalization actions to raise product selling prices, reduce the plan is improving their results, but was not suffi cient Company’s cost structure and drive debt reduction to avoid the impairment charges especially in light of in an effort to mitigate these challenges. The strength the other macroeconomic challenges faced by this of the Oshkosh brands was clearly evident as we European refuse collection vehicle business. Going gained share in a number of important markets. With global helped us to deliver sharply higher operating the power of the Oshkosh brands and continued income in access equipment in fi scal 2008, while our tenacious management through the market turmoil we defense segment continued to report positive results. expect to face again in fi scal 2009, we believe we can Our fi re & emergency segment results were down emerge a year from now as a stronger company, more modestly due to market weakness in our towing and prepared to capitalize on the next economic upturn. recovery and mobile medical trailer businesses while most of our operating income shortfall compared to fi scal 2007 was concentrated in our more cyclical commercial segment. Largely as a result of the impairment charges, net income and earnings per share fell to $79.3 million and $1.06, respectively. Built strong The strength of a brand is evident during times of economic uncertainty like fi scal 2008. JLG, the global leader in access equipment, increased sales in the second and third quarters of fi scal 2008 in Europe by approximately 100% and 30%, respectively, Superior products. Oshkosh when other companies were reporting modest growth is a leading global manufacturer of specialty or declining sales. Pierce, America’s leading brand vehicles and vehicle bodies. By understanding the demanding requirements of our customers’ of fi re trucks, and McNeilus, America’s leading brand jobs, we consistently deliver vehicles that of refuse collection vehicles, delivered 20% and 40% outperform anything else on the market. Today, Oshkosh is at the forefront of vehicle safety increases in orders in fi scal 2008, respectively, at a features, CNG technology for vocational vehicles, time when we expect fi nal industry order statistics to independent suspension systems and robotic vehicle development. be fl at to down 10%. These are just three examples of the strength of the Oshkosh brand portfolio. 2 Oshkosh Corporation 76636 08AR_COV.indd 2 12/1/08 11:36:18 AM We believe that in diffi cult times like these, you inventories and debt by $241 million and $202 million, should expect the brand leaders to outperform respectively, in the fourth quarter of fi scal 2008. We market trends and we at Oshkosh are striving to expect to take additional actions in fi scal 2009 as do that in fi scal 2009. necessary to respond to uncertain, and sometimes volatile, market conditions. Oshkosh leadership is also built strong. When steel, fuel and other costs were escalating in our third Built to perform Oshkosh brands are built strong fi scal quarter, we increased prices for virtually all because our products are built to perform. There’s no our businesses — for some, multiple times. Across better evidence of this than the recently announced our non-defense businesses, we increased product Family of Heavy Tactical Vehicles (“FHTV”) contract selling prices by a range of 6% to 11%, risking short awarded to Oshkosh to provide next-generation term volume loss but believing that Oshkosh would Heavy Expanded Mobility Tactical Trucks (“HEMTT”), emerge stronger from these actions. We decisively Palletized Load Systems and Heavy Equipment responded to a sharp and sudden downturn in access Transporters. The initial delivery order under the equipment market conditions in Europe in June contract is valued at $1.2 billion. The contract will 2008 with cost and debt reduction initiatives. While be awarded in increments during the next several diffi cult, we reduced our global workforce by 10%, years, initially calling for more than 6,000 vehicles slashed discretionary spending, and closed under- and accompanying trailers covering the entire FHTV utilized facilities resulting in a planned reduction fl eet currently manufactured by Oshkosh. All of of our cost structure of approximately $100 million. these vehicles will feature increased horsepower We rapidly adjusted production schedules to reduce and performance due to upgrades to the powertrain and suspension. Globally, customers are continuing to recognize the outstanding performance of Oshkosh products. The Beijing Capital International Airport recently took delivery of six Striker® airport rescue and fi refi ghting vehicles to help serve higher traffi c for the Beijing Olympics and purchased 26 Oshkosh® snow removal units to address their harsh winter storms. Oshkosh’s high capacity snow blowers can move 5,000 tons of snow per hour and are also now serving airports in Russia. One of our high tech, high defi nition broad- Best people. Oshkosh employees casting vehicles was performing for China Central are remarkable. Our skilled workforce designs and builds the world’s toughest equipment to the Television for the broadcast of the 2008 Olympics highest standards of excellence, often working basketball games and our mobile medical and dental shoulder-to-shoulder with the people who use our products. They work safely and effi ciently — facilities are now performing in the deserts of Saudi and always put the customer fi rst. Arabia. When customers seek the best performing products, they seek Oshkosh brands. Oshkosh customers know that our products have been 2008 Annual Report 3 76636 08AR_lettergates.indd 1 12/1/08 4:08:03 PM “ We believe we can emerge from this economic downturn as a stronger, leaner company, better prepared to capitalize on improved global markets.” Robert Bohn, Chairman and Chief Executive Offi cer performing for decades and that they will always ■ SandCat™ — a light armored, highly protected receive the very best aftermarket support. multi-role tactical vehicle ™ Building new products Customers expect that ■ Extension of Pierce’s Ultimate Confi guration each year Oshkosh will launch industry-leading across multiple fi re product lines products that will enhance their ability to perform ■ Element™ by Jerr-Dan — an uncomplicated work, and fi scal 2008 was another headline year. self-loading wrecker that provides performance New product launches included: at a value price ■ ™ Liftpod — the most portable aerial work platform ■ CNG powered refuse collection vehicles that ever designed burn 90% cleaner than standard diesel fuel ■ ClearSky™ Connected Asset technology for JLG Building for the future There is no doubt about aerial work platforms remotely connects an entire it; we will face challenges in fi scal 2009. We expect rental fl eet, providing information on location, that the weak U.S. economy, slowing economies operating status and equipment health 24/7 across the globe, and persistently high commodity ■ Super Compact telehandler for the construction, costs will continue to impact demand and our landscape and agricultural markets production costs into fi scal 2009. But we are pre- pared to meet the challenges, thanks to our leading ■ Updated HEMTT A4 with signifi cant improvements brands, exceptional aftermarket support, and timely and advancements in power, armor integration, actions to increase selling prices, reduce costs and maintenance capability and soldier comfort drive debt reduction. At the same time, we see opportunity ahead for our segments in fi scal 2009, driven by our growing stature as a world leader in specialty vehicles. While we anticipate lower revenues in our access equipment business, we see opportunity for the segment in emerging markets where we believe infrastructure, power generation and other expendi- tures will remain strong. We expect solid top-line growth in our defense business, driven by the military’s continuing need for tactical wheeled Outstanding service. When vehicles and the passage of a 2008 supplemental Oshkosh vehicles leave the production line, funding bill for the U.S. Department of Defense. they’re backed by our 24/7 global service network. Through 24-hour Internet access to With a solid backlog of orders, including strong parts and service, extensive operational and activity in the international airport arena, our fi re maintenance training with customers, and an unrivaled fi eld service organization, we help & emergency segment is positioned for steady customers optimize uptime, reduce operating performance. Finally, we expect our recent restruc- costs and extend equipment lifespans. turing actions in the commercial segment to help drive improved performance in this segment. 4 Oshkosh Corporation 76636 08AR_lettergates.indd 1 12/1/08 4:08:03 PM From left, Bob Bohn, Bryan Blankfi eld, Matt Zolnowski, Tom Fenner, Jay Kimmitt, Charlie Szews, Mark Radue, Don Verhoff, and Dave Sagehorn We will continue to launch new high-performance continually improve customer responsiveness, we products in fi scal 2009 to enhance the safety and promoted Tom Fenner to the newly-created position productivity of our customers.