Q4 2016 earnings slides v8
- 1. MOVING THE WORLD AT WORK Fourth Quarter Fiscal 2016 November 1, 2016 Wilson R. Jones President and Chief Executive Officer David M. Sagehorn Executive Vice President and Chief Financial Officer Patrick N. Davidson Vice President, Investor Relations Oshkosh Corporation (NYSE:OSK)
- 2. MOVING THE WORLD AT WORK 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; the outcome of a competitor’s protest of orders we received from the DoD; higher material costs resulting from production variability due to uncertainty of timing of funding or payments from international defense customers; 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 Vehicle 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; 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 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. November 1, 2016OSK Fourth Quarter 2016Earnings Call 2
- 3. MOVING THE WORLD AT WORK Q4 FY16 Results Q4 FY16 adjusted EPS* of $1.05 Higher defense segment sales − 325 international M-ATVs Higher adjusted operating income margin vs. prior year in defense and access equipment segments Strong free cash flow Maintaining full year FY17 EPS outlook range of $3.00 to $3.40 Net Sales (billions) Adjusted EPS* 3 OSK Fiscal Q4 Performance November 1, 2016OSK Fourth Quarter 2016 Earnings Call * Non-GAAP results. See Appendix for reconciliation to GAAP results. $1.05 $0.67 $0.00 $0.25 $0.50 $0.75 $1.00 $1.25 FY16 FY15 $1.8 $1.6 $0.0 $0.2 $0.4 $0.6 $0.8 $1.0 $1.2 $1.4 $1.6 $1.8 $2.0 FY16 FY15
- 4. MOVING THE WORLD AT WORK OSK Full Year Performance Full Year FY16 Results Revenue and adjusted EPS growth driven by: – Strong defense shipments – Improved fire & emergency results Improving operations − Focus on operational efficiencies and simplifying our businesses Repurchased 2.5 million shares or ~3% of outstanding shares Announced 11% dividend increase effective November 17 Generated $490 million free cash flow* * Non-GAAP results. See Appendix for reconciliation to GAAP results. 4November 1, 2016OSK Fourth Quarter 2016 Earnings Call Net Sales (billions) Adjusted EPS* $3.14 $3.02 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 FY16 FY15 $6.3 $6.1 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 FY16 FY15
- 5. MOVING THE WORLD AT WORK Access Equipment Maintaining previous outlook for FY17 North America market remains cautious − Rental companies selective with new equipment purchases − Lower replacement demand Growth in Europe − Signs of recovery in southern Europe − Continued recovery in Benelux and Nordics − Brexit driven pause in UK Achieved inventory reduction goal Plan to outsource aftermarket parts distribution Long-term outlook remains positive November 1, 2016OSK Fourth Quarter 2016 Earnings Call 5
- 6. MOVING THE WORLD AT WORK Defense Strong finish to strong year Initial deliveries of JLTV started in Q4 − Supports government testing during LRIP − Eight years of U.S. DoD demand with initial contract − Solid long-term international opportunity FMTV update − Additional orders received in September as expected − Competitor filed protest with GAO; resolution expected in January 2017 Continuing to work towards additional opportunities for international sales − Positive impact on FY16 performance with growth in FY17 November 1, 2016OSK Fourth Quarter 2016 Earnings Call 6
- 7. MOVING THE WORLD AT WORK Fire & Emergency Strong performance driven by streamlined operations and improved North American market − 160 bps increase in operating income margin in FY16 − Q4 operating income margin supports full year FY17 margin target Building on strengths in traditional fire truck market − New products/technology − Improved municipal tax receipts − Dealer network investing for growth Airport products revenue lower − Large international sales in Q4 FY15 − Strong U.S. dollar Aging fleets support longer term outlook November 1, 2016OSK Fourth Quarter 2016 Earnings Call 7
- 8. MOVING THE WORLD AT WORK Commercial Slightly higher full year results and operating income margin compared to prior year on flat sales RCV business remains solid despite expected moderation in near term − Strong municipal tax receipts and construction support continuing demand Concrete mixer customers remain cautious − Waiting for positive construction trends to be more pronounced − Fleet age expected to become positive driver Committed to deliver margin improvement November 1, 2016OSK Fourth Quarter 2016 Earnings Call 8
- 9. MOVING THE WORLD AT WORK Consolidated Results Sales impacted by: Higher sales in each segment, led by defense EPS impacted by: Higher defense and access equipment segment operating income Lower average share count − Higher corporate expenses Q4 Comments (Dollars in millions, except per share amounts) Fourth Quarter Net Sales $1,755.4 $1,578.3 % Change 11.2% (5.4)% Adjusted Operating Income* $123.3 $89.5 % Change 37.7% (23.4)% % Margin 7.0% 5.7% Adjusted EPS* $1.05 $0.67 % Change 56.7% (30.2)% 2016 2015 November 1, 2016OSK Fourth Quarter 2016 Earnings Call 9 * Non-GAAP results. See appendix for reconciliation to GAAP results.
- 10. MOVING THE WORLD AT WORK FY17 Estimates 10 Revenues of $6.5 to $6.7 billion Operating income of $390 million to $430 million EPS of $3.00 to $3.40 Assumptions – No recession – Sale of ~1,000 International M-ATVs – Continued caution by construction equipment customers – Slow recovery of N.A. fire apparatus market continues – Moderating refuse collection vehicle market growth – Working capital build to support international defense sales Additional estimates – Corporate expenses of $140 - $145 million – Tax rate of ~33% – CapEx of ~$100 million – Free Cash Flow* of $0 to $50 million – Assumes share count of ~74.5 million Segment information Measure Access Equipment Defense Fire & Emergency Commercial Sales (billions) $2.7 to $2.8 ~$1.85 ~$1.0 ~$1.0 Operating Income Margin 7.75% - 8.5% ~9.5% ~8.5% ~6.75% OSK Fourth Quarter 2016 Earnings Call November 1, 2016 * Non-GAAP results. See appendix for reconciliation to GAAP results.
- 11. MOVING THE WORLD AT WORK Positive Long-Term Outlook for Oshkosh A Different Integrated Global Industrial Favorable end market drivers Shared operations People First culture MOVE – Evolving to deliver more value Well positioned for long-term success November 1, 2016OSK Fourth Quarter 2016 Earnings Call 11
- 12. MOVING THE WORLD AT WORK For information contact: Patrick N. Davidson Vice President, Investor Relations (920) 966-5939 pdavidson@oshkoshcorp.com Jeffrey D. Watt Director, Investor Relations (920) 233-9406 jwatt@oshkoshcorp.com November 1, 2016OSK Fourth Quarter 2016 Earnings Call 12
- 13. MOVING THE WORLD AT WORK Net Sales $775.8 $769.5 % Change 0.8% (17.5)% Adjusted Operating Income* $73.0 $59.0 % Change 23.7% (53.7)% % Margin 9.4% 7.7% Fourth Quarter (Dollars in millions) 2016 2015 Appendix: Access Equipment Sales impacted by: Higher volume in EMEA and Pacific Rim − Competitive pricing Operating income impacted by: Lower spending on engine emissions standards changes Lower material costs Lower provisions for valuation reserves on used equipment − Competitive pricing Backlog down 14% vs. prior year to $179 million Q4 Comments November 1, 2016OSK Fourth Quarter 2016 Earnings Call 13 * Non-GAAP results. See appendix for reconciliation to GAAP results.
- 14. MOVING THE WORLD AT WORK Appendix: Defense Sales impacted by: Higher international M-ATV and FHTV volume Operating income impacted by: Higher sales volume Prior year provisions for contract audits Backlog up 65% vs. prior year to $2.3 billion* Q4 Comments Net Sales $471.8 $317.6 % Change 48.5% 10.3% Operating Income $52.4 $18.5 % Change 183.4% 989.8% % Margin 11.1% 5.8% Fourth Quarter (Dollars in millions) 2016 2015 November 1, 2016OSK Fourth Quarter 2016 Earnings Call 14 * Includes $380 million of FMTV orders under protest.
- 15. MOVING THE WORLD AT WORK Net Sales $256.9 $245.4 % Change 4.7% 14.2% Operating Income $22.3 $23.7 % Change (5.8)% 89.2% % Margin 8.7% 9.6% Fourth Quarter (Dollars in millions) 2016 2015 Appendix: Fire & Emergency Sales impacted by: Higher Pierce fire truck volume − Lower airport products volume Operating income impacted by: − Unfavorable airport products and broadcast vehicle mix Higher sales volume Backlog up 8% vs. prior year to $853 million Q4 Comments November 1, 2016OSK Fourth Quarter 2016 Earnings Call 15
- 16. MOVING THE WORLD AT WORK Appendix: Commercial Sales impacted by: Higher concrete mixer volume − Lower service truck volume Operating income impacted by: − Production inefficiencies associated with new product launches − Investments in MOVE initiatives Backlog down 10% vs. prior year to $173 million Q4 Comments Net Sales $254.3 $252.9 % Change 0.6% 3.8% Operating Income $17.7 $21.1 % Change (15.9)% 14.6% % Margin 7.0% 8.4% Fourth Quarter (Dollars in millions) 2016 2015 November 1, 2016OSK Fourth Quarter 2016 Earnings Call 16
- 17. MOVING THE WORLD AT WORK November 1, 2016OSK Fourth Quarter 2016 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 2016 Net cash flows provided by operating activities $ 577.7 Additions to property, plant and equipment (92.5) Additions to equipment held for rental (34.8) Proceeds from sale of equipment held for rental 40.2 Free cash flow $ 490.6 Fiscal 2017 Fiscal 2017 Low High Expectations Expectations Net cash flows provided by operating activities $ 100.0 $ 150.0 Additions to property, plant and equipment (100.0) (100.0) Free cash flow $ - $ 50.0
- 18. MOVING THE WORLD AT WORK November 1, 2016OSK Fourth Quarter 2016 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): 2016 2015 2016 2015 Adjusted access equipment segment operating income (non-GAAP) 73.0$ 59.0$ 291.2$ 409.5$ Long-lived asset impairment charge (26.9) - (26.9) - Workforce reduction charges (0.9) (2.5) (0.9) (2.5) Access equipment segment operating income (GAAP) 45.2$ 56.5$ 263.4$ 407.0$ Adjusted operating income (non-GAAP) 123.3$ 89.5$ 391.8$ 398.1$ Long-lived asset impairment charge (26.9) - (26.9) - OPEB curtailment / settlement - - - 3.4 Workforce reduction charges (0.9) (2.9) (0.9) (2.9) Operating income (GAAP) 95.5$ 86.6$ 364.0$ 398.6$ Adjusted earnings per share-diluted (non-GAAP) 1.05$ 0.67$ 3.14$ 3.02$ Long-lived asset impairment charge, net of tax (0.22) - (0.22) - OPEB curtailment / settlement, net of tax - - - 0.03 Workforce reduction charges, net of tax (0.01) (0.03) (0.01) (0.03) Debt extinguishment costs, net of tax - - - (0.12) Earnings per share-diluted (GAAP) 0.82$ 0.64$ 2.91$ 2.90$ Three Months Ended Fiscal Year Ended September 30, September 30,
- 19. MOVING THE WORLD AT WORK Appendix: Commonly Used Acronyms 19November 1, 2016OSK Fourth Quarter 2016 Earnings Call 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 EAME Europe, Africa & Middle East OCO Overseas Contingency Operations EMD Engineering & Manufacturing Development OH Overhead EPS Diluted Earnings Per Share OI Operating Income FAST Act Fixing America’s Surface Transportation Act 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 GAO Government Accountability Office RCV Refuse Collection Vehicle HEMTT Heavy Expanded Mobility Tactical Truck RFP Request for Proposal HET Heavy Equipment Transporter ROW Rest of World HMMWV High Mobility Multi-Purpose Wheeled Vehicle SMP Standard Military Pattern (Canadian MSVS) IRC Independent Rental Company TACOM Tank-automotive and Armaments Command IT Information Technology TDP Technical Data Package JLTV Joint Light Tactical Vehicle TPV Tactical Protector Vehicle JPO Joint Program Office TWV Tactical Wheeled Vehicle JROC Joint Requirements Oversight Council UCA Undefinitized Contract Action JUONS Joint Urgent Operational Needs Statement UIK Underbody Improvement Kit (for M-ATV) L-ATV Light Combat Tactical All-Terrain Vehicle UK United Kingdom LRIP Low Rate Initial Production ZR Zero Radius