Key banc conference investor presentation
- 1. MOVING THE WORLD AT WORK Oshkosh Corporation (NYSE:OSK) KeyBanc Capital Markets Industrial, Automotive & Transportation Conference May 28, 2015
- 2. MOVING THE WORLD AT WORK Forward-Looking Statements 2May 28, 2015Oshkosh Corporation Investor Presentation 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 press release, 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 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 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, 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. Joint Light Tactical Vehicle production contract award and international defense contract awards; 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; 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; the impact of severe weather or natural disasters that may affect the Company, its suppliers or its customers; cyber security 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 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 28, 2015. All forward-looking statements speak only as of April 28, 2015. 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.
- 3. MOVING THE WORLD AT WORK Oshkosh Corporation Leading provider of specialty vehicles – Moving the World at Work Nearly 100 years in business; incorporated in 1917 Serial innovator of game changing new products Market Capitalization(1): $4.2 billion FY14 Revenue: $6.8 billion Focused on delivering value to customers and shareholders 3 (1) As of May 26, 2015 Access Equipment Defense Fire & Emergency Commercial May 28, 2015Oshkosh Corporation Investor Presentation
- 4. MOVING THE WORLD AT WORK Oshkosh Corporation Profile – FY14 Source: Oshkosh Corporation 2014 Annual Report 4Oshkosh Corporation Investor Presentation May 28, 2015 51% 25% 11% 13% Revenue by Segment Access Equipment Defense Fire & Emergency Commercial 77% 5% 10% 8% Revenue by Geography United States Other NA EAME Rest of World Non-Defense Segment Revenues and Operating Income Both Grew in FY14 ─ Expected to Repeat Again in FY15
- 5. MOVING THE WORLD AT WORK Confidence in FY15 – Targeting to nearly double EPS from FY12 to FY15 – Strong customer sentiment Positive Outlook Beyond FY15 – Additional market recovery opportunities in non-defense segments – Significant upside opportunities in defense – MOVE to deliver margin expansion and growth 5 A Positive Outlook for OSK May 28, 2015Oshkosh Corporation Investor Presentation
- 6. MOVING THE WORLD AT WORK Basis for Positive Outlook 6May 28, 2015Oshkosh Corporation Investor Presentation
- 7. MOVING THE WORLD AT WORK FY15 MOVE Scorecard FY15 Adjusted EPS Target Range 7 FY15 TargetInitiative EPS ~ Double EPS by FY15 (1) EPS of $4.00 - $4.50 …Bottom Line Results for Shareholders FY15 Estimate $4.00 - $4.25* (1) Compared with FY12 expectations as of September 2012 Analyst Day. (2) Net of investment costs and compared with consolidated FY11 operating income margins. * Non-GAAP results. See Appendix for reconciliation to GAAP results. May 28, 2015Oshkosh Corporation Investor Presentation
- 8. MOVING THE WORLD AT WORK Solid Q2 FY15 Results Q2 adjusted EPS* of $0.81 - In line with expectations - Significant defense sales decline - Foreign exchange and weather headwinds - Double digit sales and operating income growth in all non-defense segments Positive rental company sentiment - Little oil & gas slowdown impact Refinanced $250 million senior notes due 2020 Reduced interest rate by > 300 bps Targeting FY15 adjusted EPS* estimate range of $4.00 to $4.25 Net Sales (billions) Adjusted EPS* 8 $1.6 $1.7 $0.81 $0.80 $0.00 $0.25 $0.50 $0.75 $1.00 $0.0 $0.2 $0.4 $0.6 $0.8 $1.0 $1.2 $1.4 $1.6 $1.8 FY15 FY14 Net Sales Adjusted EPS* * Non-GAAP results. See Appendix for reconciliation to GAAP results. OSK Fiscal Q2 Performance May 28, 2015Oshkosh Corporation Investor Presentation
- 9. MOVING THE WORLD AT WORK Access Equipment – The Market Leader MOVE delivered in FY14 – Exciting new products – Strong incremental margins – Record revenues, operating income and operating income margin Expect continued growth in FY15 – Moderate growth in North America and Europe – Mixed outlook in other regions Strong new product launches during the year 9 Reaching Out – Rising to Every Challenge May 28, 2015Oshkosh Corporation Investor Presentation
- 10. MOVING THE WORLD AT WORK Slow U.S. Construction Recovery is Continuing 10 Source: U.S. Census Bureau, May 19, 2015 Source: U.S. Census Bureau, May 1, 2015 U.S. Housing Starts - Current Annual Forecasts (millions) Date 2014 2015 2016 Global Insight Feb-15 1.00 1.18 1.33 Moody's - Slower Recovery Apr-15 1.00 1.20 1.58 Portland Cement Association Apr-15 1.00 1.18 1.34 Average Analyst Estimate 1.00 1.19 1.42 U.S. Nonresidential Construction (yr/yr Growth) - Current Analyst Estimates Date 2014 2015 2016 Portland Cement Association Apr-15 8.2% 8.8% 8.3% FMI Source Mar-15 6.0% 8.0% 7.0% Global Insight Mar-15 2.8% 2.2% 3.6% Moody's – Slower Recovery Apr-15 6.9% 7.7% 4.6% Construction Market Data Mar-15 3.9% 8.2% 8.6% McGraw-Hill Mar-15 13.5% 10.9% 13.0% Average Analyst Estimate 6.9% 7.6% 7.5% Thousands $ Millions U.S. Non-Residential SpendingHousing Starts May 28, 2015Oshkosh Corporation Investor Presentation 450,000 500,000 550,000 600,000 650,000 Jan‐2010 Jul‐2010 Jan‐2011 Jul‐2011 Jan‐2012 Jul‐2012 Jan‐2013 Jul‐2013 Jan‐2014 Jul‐2014 Jan‐2015 400 500 600 700 800 900 1,000 1,100 1,200 Jan‐2010 Jul‐2010 Jan‐2011 Jul‐2011 Jan‐2012 Jul‐2012 Jan‐2013 Jul‐2013 Jan‐2014 Jul‐2014 Jan‐2015
- 11. MOVING THE WORLD AT WORK Operating Income Margin Expansion Remains a Priority Expect biggest impact from optimize cost and value innovation initiatives still to come 11 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% FY14 FY15E Target (OperatingIncomeMargin%) 16% 17% ~ 15% 14.3% ACCESS EQUIPMENT May 28, 2015Oshkosh Corporation Investor Presentation
- 12. MOVING THE WORLD AT WORK Defense – Reduced Cost Structure with Upside Opportunities Believe FY15 will be trough year for both revenues and operating income Submitted proposal for JLTV program in February – Expect decision on winning bidder between July and September 2015 Canada MSVS program award decision expected by June 2015 Continuing pursuit of sales of thousands of M-ATVs – International – Reset opportunities in U.S. Generally favorable FY16 budget funding requests for our programs 12 Mission Proven – World-Class Performance May 28, 2015Oshkosh Corporation Investor Presentation
- 13. MOVING THE WORLD AT WORK Fire & Emergency – Operational Improvements Leading to Bright Future Continuing to execute operational efficiency roadmap − More work to be done Positive response to recent new product launches – Enforcer and Saber chassis – Revolutionary Ascendant™ two axle aerial ladder vehicle Modest market growth expected in North America in FY15 – Recently announced 3% price increase Additional international success − ARFF orders in Asia, Australia and Latin America 13 Recently Launched New Products Driving Customer Interest May 28, 2015Oshkosh Corporation Investor Presentation
- 14. MOVING THE WORLD AT WORK Operating Income Margin Expansion Remains a Priority Margin expansion behind schedule, but improvement roadmap is solid 14 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% FY14 FY15E Target (OperatingIncomeMargin%) 10%+ ~ 4.25% 3.5% FIRE & EMERGENCY May 28, 2015Oshkosh Corporation Investor Presentation
- 15. MOVING THE WORLD AT WORK Commercial – Progress Continues Solid North American concrete mixer market recovery over last several years − Driven by slowly improving housing market − Strong U.S. dollar creating some drag for multinational concrete mixer customers RCV market expected to grow in FY15 – Grew modestly in FY14 Split-bin and automated RCV models generating incremental demand MOVE investments continue 15 North American Market Leader Split Body Rear Loaders May 28, 2015Oshkosh Corporation Investor Presentation
- 16. MOVING THE WORLD AT WORK Operating Income Margin Expansion Remains a Priority Optimize cost initiatives continue Absorption benefits accelerate in market recovery 16 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% FY14 FY15E Target (OperatingIncomeMargin%) 10%+ ~ 6.5%6.2% COMMERCIAL May 28, 2015Oshkosh Corporation Investor Presentation
- 17. MOVING THE WORLD AT WORK Driving to FY15 MOVE Targets and Beyond 17May 28, 2015Oshkosh Corporation Investor Presentation
- 18. MOVING THE WORLD AT WORK What to Expect from Oshkosh in FY15? Deliver MOVE strategy – FY15 adjusted EPS* estimate range of $4.00 - $4.25 – Margin improvement in all non- defense segments – Launch game changing new products – Compete vigorously for business around the world Target defense contract awards Maintain strong customer focus Increase industry leading quality to higher level Drive shareholder value 18 * Non-GAAP results. See Appendix for reconciliation to GAAP results. May 28, 2015Oshkosh Corporation Investor Presentation
- 19. MOVING THE WORLD AT WORK Expectations for FY15* Additional expectations Corporate expenses of $140 - $145 million Tax rate of ~32% CapEx of ~$150 million Free cash flow** ~$200 million Assumes share count of ~79.5 million Segment information Revenues of $6.5 billion to $6.6 billion Adjusted operating income** of $510 million to $540 million Adjusted EPS** of $4.00 to $4.25 * As of April 28, 2015 ** Non-GAAP results. See Appendix for reconciliation to GAAP results. 19 Q3 Commentary Expect seasonally highest EPS; above prior year Defense segment results similar to Q2 Higher non-defense segment sales and operating income compared to prior year Q3 Measure Access Equipment Defense Fire & Emergency Commercial Sales (billions) $3.7 - $3.8 ~$1.0 ~$0.80 ~$1.0 Operating Income Margin ~15.0% Slightly above break even ~4.25% ~6.5% May 28, 2015Oshkosh Corporation Investor Presentation
- 20. MOVING THE WORLD AT WORK And Beyond FY15? Continued improvement Execute effectively to deliver positive near-term outlook Continue operating income margin expansion – Target 16 – 17% at Access Equipment – Initially target 10% at other segments Prudent capital allocation – Target annual dividend increases – Begin building cash; deploy with crocodile patience Sustain talent and process improvement to outperform with Oshkosh Operating System 20 7.0% 7.5% ~ 8.0% 10.0%+ 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 2013 2014 2015E Target OSK Consolidated Adjusted Operating Income Margin * * Non-GAAP results. See Appendix for reconciliation to GAAP results. May 28, 2015Oshkosh Corporation Investor Presentation
- 21. MOVING THE WORLD AT WORK For information contact: Patrick N. Davidson Vice President, Investor Relations (920) 966-5939 [email protected] 21 Jeffrey D. Watt Director, Investor Relations (920) 233-9406 [email protected] May 28, 2015Oshkosh Corporation Investor Presentation 21
- 22. MOVING THE WORLD AT WORK 22 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 OH Overhead EMD Engineering & Manufacturing Development OI Operating Income EPS Diluted Earnings Per Share OOS Oshkosh Operating System FHTV Family of Heavy Tactical Vehicles OPEB Other Post-Employment Benefits FMS Foreign Military Sales PLS Palletized Load System FMTV Family of Medium Tactical Vehicles PUC Pierce Ultimate Configuration GAAP U.S. Generally Accepted Accounting Principles 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 May 28, 2015Oshkosh Corporation Investor Presentation
- 23. MOVING THE WORLD AT WORK May 28, 2015Oshkosh Corporation Investor Presentation 23 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: 2015 2014 Adjusted earnings per share - diluted (non-GAAP) 0.81$ 0.80$ Reduction of valuation allowance on net operating loss carryforward - 0.14 Pension and OPEB curtailment, net of tax - (0.03) Debt extinguishment costs, net of tax (0.12) (0.08) Earnings per share - diluted (GAAP) 0.69$ 0.83$ Three Months Ended March 31,
- 24. MOVING THE WORLD AT WORK May 28, 2015Oshkosh Corporation Investor Presentation 24 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: 2013 2014 2015E Consolidated operating income margins (non-GAAP) 7.0% 7.5% 8.0% Union contract ratification costs -0.1% - - Pension curtailment and settlement loss - -0.1% - OPEB curtailment gain - 0.2% - Tender offer and proxy contest costs -0.2% - - Impairment charge -0.1% - - Contract pricing adjustment for OPEB costs - -0.2% - Consolidated operating income margins (GAAP) 6.6% 7.4% 8.0% Fiscal Year Ended September 30,
- 25. MOVING THE WORLD AT WORK May 28, 2015Oshkosh Corporation Investor Presentation 25 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): Low High Adjusted operating income (non-GAAP) 510.0$ 540.0$ OPEB curtailment gain 3.4 3.4 Operating income (GAAP) 513.4$ 543.4$ Adjusted earnings per share - diluted (non-GAAP) 4.00$ 4.25$ OPEB curtailment gain, net of tax 0.03 0.03 Debt extinguishment costs, net of tax (0.12) (0.12) Earnings per share - diluted (GAAP) 3.91$ 4.16$ Fiscal 2015 Expectations Net cash flows provided by operating activities 359.0$ Additions to property, plant and equipment (150.0) Net additions to equipment held for rental (9.0) Free cash flow 200.0$ Fiscal 2015 Expectations