Q4 2017 earnings slides final
- 1. MOVING THE WORLD AT WORK Fourth Quarter Fiscal 2017 October 31, 2017 Wilson R. Jones President and Chief Executive Officer David M. Sagehorn Executive Vice President and Chief Financial Officer Patrick N. Davidson Senior Vice President, Investor Relations Oshkosh Corporation (NYSE:OSK)
- 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 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 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 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. October 31, 2017OSK Fourth Quarter 2017 Earnings Call 2
- 3. Q4 Drove Strong Finish to FY17 Q4 adjusted EPS* of $1.38 Q4 results exceeded expectations Sales growth in all four segments Higher backlogs in all non-defense segments Announced 14% dividend increase effective November 16 Net Sales (billions) Adjusted EPS* 3 OSK Fiscal Q4 Performance October 31, 2017OSK Fourth Quarter 2017 Earnings Call $1.05 $1.38 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 FY16 FY17 $1.76 $1.96 $0.0 $0.2 $0.4 $0.6 $0.8 $1.0 $1.2 $1.4 $1.6 $1.8 $2.0 $2.2 $2.4 FY16 FY17 * Non-GAAP results. See appendix for reconciliation to GAAP results.
- 4. OSK Full Year Performance Impressive Performance During 100th 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 Announcing full year FY18 adjusted EPS* estimate range of $4.25 to $4.65 * Non-GAAP results. See Appendix for reconciliation to GAAP results. 4October 31, 2017OSK Fourth Quarter 2017 Earnings Call Net Sales (billions) Adjusted EPS* $3.14 $4.25 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 FY16 FY17 $6.3 $6.8 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 FY16 FY17
- 5. Access Equipment Strong close to FY17 – full year results higher than expected Customer sentiment and demand remain solid in North America − Metrics support positive outlook Generally positive U.S. construction trends Positive outlook for international markets in FY18 Restructuring activities on track to achieve targeted improvements Expecting to grow in FY18 October 31, 2017OSK Fourth Quarter 2017 Earnings Call 5
- 6. Defense Strong results driven by JLTV ramp and international shipments JLTV program on track ‒ Pleased with results during government testing and evaluation activities − International interest is growing Strong backlog supports FY18 outlook FMTV recompete winner expected to be announced in Q2 FY18 U.S. operating under Continuing Resolution − Not expected to impact segment in FY18, but FY19 could be impacted if budget delays persist October 31, 2017OSK Fourth Quarter 2017 Earnings Call 6
- 7. Fire & Emergency Achieved >10% full year operating income margin − Earlier than anticipated − Disciplined commitment to simplification U.S. fire apparatus market stable in FY17 compared to FY16 − Aging fleets and solid municipal tax receipts support positive outlook Solid Q4 international contribution and positive outlook − China 5-yr Plan targets 260 international airports by 2020 October 31, 2017OSK Fourth Quarter 2017 Earnings Call 7
- 8. Commercial Q4 results in line with expectations Committed to improved performance − Driving lasting change through simplification activities − Time needed to translate into meaningfully better financial results U.S. RCV market grew in FY17 − Now above pre-recession levels U.S. concrete mixer market remains well below pre-recession levels − Fleets continue to age Positive longer-term market outlook October 31, 2017OSK Fourth Quarter 2017 Earnings Call 8
- 9. Consolidated Results Sales impacted by: + Higher sales in all segments, led by defense Adjusted EPS* impacted by: + Higher defense and fire & emergency segment operating income + Lower tax rate − Higher incentive compensation (Dollars in millions, except per share amounts) Fourth Quarter Net Sales $1,963.0 $1,755.4 % Change 11.8% 11.2% Adjusted Operating Income* $150.0 $123.3 % Change 21.7% 37.7% % Margin 7.6% 7.0% Adjusted EPS* $1.38 $1.05 % Change 31.4% 56.7% 2017 2016 October 31, 2017OSK Fourth Quarter 2017 Earnings Call 9 Q4 Comments * Non-GAAP results. See appendix for reconciliation to GAAP results.
- 10. FY18 Expectations 10 Revenues of $6.9 to $7.1 billion Adjusted operating income* of $515 million to $565 million Adjusted EPS* of $4.25 to $4.65 Additional expectations Corporate expenses of ~$150 million Adjusted tax rate* of ~30.5% CapEx of ~$100 million Free Cash Flow* of ~$350 million Assumes share count of ~76.0 million Segment information Measure Access Equipment Defense Fire & Emergency Commercial Sales (billions) $3.1 - $3.2 ~ $1.8 – $1.85 ~ $1.1 $0.95 - $0.975 Adj. Operating Income Margin 10.5% - 11.0%* 9.5% - 9.75% 10.5% - 11.0% 5.75% - 6.25% OSK Fourth Quarter 2017 Earnings Call October 31, 2017 * Non-GAAP results. See appendix for reconciliation to GAAP results. Q1 Commentary Expect higher yr/yr sales and adjusted earnings driven by defense segment Higher access equipment segment sales; incremental margins adversely impacted by higher material costs
- 11. For information contact: Patrick N. Davidson Senior Vice President, Investor Relations (920) 966-5939 [email protected] Jeffrey D. Watt Director, Investor Relations (920) 233-9406 [email protected] October 31, 2017OSK Fourth Quarter 2017 Earnings Call 11
- 12. Appendix: Access Equipment October 31, 2017OSK Fourth Quarter 2017 Earnings Call 12 Net Sales $833.8 $775.8 % Change 7.5% 0.8% Adjusted Operating Income* $77.9 $73.0 % Change 6.7% 23.7% % Margin 9.3% 9.4% Fourth Quarter 2017 2016 (Dollars in millions) Sales impacted by: + Higher aerial work platform and telehandler sales Adjusted operating income* impacted by: + Higher sales volume + Favorable mix − Higher material costs − Higher incentive compensation Backlog up 152.2% vs. prior year to $452 million Q4 Comments * Non-GAAP results. See appendix for reconciliation to GAAP results.
- 13. Appendix: Defense Net Sales $596.8 $471.8 % Change 26.5% 48.5% Operating Income $73.0 $52.4 % Change 39.3% 183.4% % Margin 12.2% 11.1% Fourth Quarter (Dollars in millions) 2017 2016 October 31, 2017OSK Fourth Quarter 2017 Earnings Call 13 Sales impacted by: + Ramp-up of JLTV program + M-ATV international sales Operating income impacted by: + Higher sales volume Backlog down 10.6% vs. prior year to $2.1 billion Q4 Comments
- 14. Appendix: Fire & Emergency Sales impacted by: + Improved pricing + Higher content units Operating income impacted by: + Improved pricing + Improved labor performance − Higher incentive compensation Backlog up 9.2% vs. prior year to $932 million October 31, 2017OSK Fourth Quarter 2017 Earnings Call 14 Net Sales $278.0 $256.9 % Change 8.2% 4.7% Operating Income $34.6 $22.3 % Change 55.2% (5.8)% % Margin 12.4% 8.7% Fourth Quarter 2017 2016 (Dollars in millions) Q4 Comments
- 15. Appendix: Commercial October 31, 2017OSK Fourth Quarter 2017 Earnings Call 15 Net Sales $259.9 $254.3 % Change 2.2% 0.6% Operating Income $11.6 $17.7 % Change (34.5)% (15.9)% % Margin 4.5% 7.0% Fourth Quarter 2017 2016 (Dollars in millions) Sales impacted by: + Higher concrete mixer volume − Lower package (third party chassis) sales Operating income impacted by: − Adverse product mix − Warranty campaign Backlog up 85.2% vs. prior year to $321 million Q4 Comments
- 16. October 31, 2017OSK Fourth Quarter 2017 Earnings Call 16 Appendix: Non-GAAP to GAAP Reconciliation • The table below presents a reconciliation of the Company’s presented non-GAAP measures to the most directly comparable GAAP measures (in millions, except per share amounts): 2017 2016 2017 2016 Adjusted earnings per share-diluted (non-GAAP) 1.38$ 1.05$ 4.25$ 3.14$ Long-lived asset impairment charge, net of tax - (0.22) - (0.22) Restructuring-related costs, net of tax (0.15) (0.01) (0.48) (0.01) Earnings per share-diluted (GAAP) 1.23$ 0.82$ 3.77$ 2.91$ Adjusted consolidated operating income (non-GAAP) 150.0$ 123.3$ 506.3$ 391.8$ Long-lived asset impairment charge - (26.9) - (26.9) Restructuring-related costs (15.5) (0.9) (43.3) (0.9) Consolidated operating income (GAAP) 134.5$ 95.5$ 463.0$ 364.0$ Adjusted access equipment segment operating income (non-GAAP) 77.9$ 73.0$ 302.4$ 291.2$ Long-lived asset impairment charge - (26.9) - (26.9) Restructuring-related costs (15.5) (0.9) (43.3) (0.9) Access equipment segment operating income (GAAP) 62.4$ 45.2$ 259.1$ 263.4$ Three Months Ended September 30, Fiscal Year Ended September 30,
- 17. October 31, 2017OSK Fourth Quarter 2017 Earnings Call 17 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): Fiscal Year Ended September 30, 2017 Net cash flows provided by operating activities 246.5$ Additions to property, plant and equipment (85.8) Proceeds from sale of equipment held for rental, net of additions 22.1 Free cash flow 182.8$
- 18. October 31, 2017OSK Fourth Quarter 2017 Earnings Call 18 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 earnings per share-diluted (non-GAAP) 4.25$ 4.65$ Restructuring-related costs, net of tax (0.05) (0.05) Earnings per share-diluted (GAAP) 4.20$ 4.60$ Adjusted consolidated operating income (non-GAAP) 515.0$ 565.0$ Restructuring-related costs (5.0) (5.0) Consolidated operating income (GAAP) 510.0$ 560.0$ Adjusted access equipment operating income margin (Non-GAAP) 10.5% 11.0% Restructuring-related costs (0.2%) (0.2%) Access equipment operating income margin (GAAP) 10.3% 10.8% September 30, 2018 Expectations Fiscal Year Ended
- 19. October 31, 2017OSK Fourth Quarter 2017 Earnings Call 19 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: Fiscal 2018 Expectations Net cash flows provided by operating activities 450.0$ Additions to property, plant and equipment (100.0) Free cash flow 350.0$ Adjusted effective income tax rate (Non-GAAP) 30.5% Impact of restructuring-related costs on effective income tax rate (0.2%) Effective income tax rate (GAAP) 30.3%
- 20. Appendix: Commonly Used Acronyms October 31, 2017OSK Fourth Quarter 2017 Earnings Call 20 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