Baird’s 2019 Global Industrial Conference · 2019-11-05 · Forward-looking statements Baird's 2019 Global Industrial Conference November 5, 2019 2 This presentation contains statements

Oshkosh CorporationBaird’s 2019 Global Industrial ConferenceNovember 5, 2019

DAVID SAGEHORN – EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICERJOHN PFEIFER – EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICERPATRICK DAVIDSON – SENIOR VICE PRESIDENT, INVESTOR RELATIONS

Forward-looking statements

2Baird's 2019 Global Industrial Conference November 5, 2019

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 the cost of 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 Company's ability to predict the level and timing of orders for indefinite delivery/indefinite quantity contracts with the U.S. federal government; 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; 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; performance issues with key suppliers or subcontractors; 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; risks that an escalating trade war and related tariffs could reduce the competitiveness of the Company's products; 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; the Company's ability to successfully identify, complete and integrate acquisitions and to realize the anticipated benefits associated with the same; 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 October 30, 2019. 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.

Oshkosh Corporation key messages

• A different integrated global industrial

• Committed to disciplined capital allocation

• Positioned for long-term success



A Different Integrated Global IndustrialMarket leader

Technology & operational synergies

Diverse end markets

ScaleStrong financial performance

Integrated approach reinforces Oshkosh value proposition

Disciplined Capital Allocation

FY20 capital allocation priorities • Invest to innovate and grow

• Target returning ~50% of FCF* to shareholders

• Grow dividend

• Opportunistically evaluate potential acquisitions


Target > 50% free cash flow* returned to shareholders over the cycle

Maintain strong and flexible balance sheet

($00

0s)

*Non-GAAP results. See appendix for reconciliation to GAAP results

0%

20%

40%

60%

80%

0

500

1000

1500

FY16 FY17 FY18 FY19

4 Year Cumulative Free Cash Flow Returned to Shareholders

% FCF* Returned to SH's Dividends Repurchases

Baird's 2019 Global Industrial Conference November 5, 2019

Strong Brands Value Creation

(1) Company estimates

6

Broad industry leadership North America Rank (1)

Fire apparatus #1

Wreckers & carriers

Airport products (ARFF/Snow removal) #1

#1Refuse collection vehicles

#1

#2

Concrete mixers & batch plants

Global Rank (1)

Aerial work platforms & telehandlers #1

Military tactical wheel vehicles #1

Strong and improving cultureDriving team member engagement

People First at Oshkosh• Engage. Develop. Connect.

• Maturing the concept

• Driving better results


Industry data says

Recognized leader in making a difference

Customers• Innovation and quality drive market leadership• Received Magnus Hendrickson award for innovative achievement in vehicle dynamics

Shareholders• Long-term focus on generating attractive returns• Three-year Adj. Operating Income* CAGR of +27% and +38% Adj. EPS* CAGR

Ethics and Compliance• Ethisphere Institute’s 2019 World’s Most Ethical Companies list

(4th consecutive year)

Sustainability• Named as a member the Dow Jones Sustainability™ World Index in 2019• #17 in Barron’s “Top 100 Most Sustainable Companies”

(2nd consecutive year in top 20)


* FY16 – FY19; Non-GAAP results. See appendix for reconciliation to GAAP results.

Oshkosh Corporation profile – FY19

Broad end market exposure provides solid foundation

Access Equipment

Defense

Fire & Emergency

Commercial

Revenue by segment

49%15%

24%

12%North America

EMEA

Rest of world

Revenue by geography

86%

6%8%


Strong FY19 Performance

Strong execution and results in an uncertain environment

Double-digit sales growth in fire & emergency and defense segments

FY19 operating income margin >10% in 3 segments

Generated >$400M FCF

Strong capital allocation

Returned ~$425 million to shareholders through share buybacks and dividends

Increasing quarterly cash dividend by 11%

Net Sales(billions) Adjusted EPS*

+8.8% +30.7%


$8.38

$7.71

$8.31

$6.36

FY18 FY19 FY18* FY19*

OSK FY19 Performance


Access Equipment – FY19 Highlights


Strong finish to FY19 - full year record revenues exceeding $4B Higher North America and Asia Pacific sales Product adoption in Asia Pacific remains a strong

market driver

Expanding manufacturing footprint in China in response to expected continued strong growth in the region

Market outlook Lower Q4 orders and backlog due to more cautious

capex approach by customers

Expect lower segment sales in FY20

Fleet demographics support expectation of increased replacement demand in North America in FY21

North America Fleet Replacement Demand


0.0%

5.0%

10.0%

15.0%

20.0%

201820172016201520142013201220112010

Model Year of Fleet

Composition of Rental Fleet in 2019 as Percent of Total Units(1)

(1) Rouse Services: Age composition of Access Equipment of “Rouse 8” fleets in North America as of 07/31/2019

Fleet growth of 2012 – 2015 expected to drive demand in future years

Defense – FY19 Highlights


TWV supplier of record, with deliveries expected through:

FHTV 2022JLTV 2024FMTV 2026 JLTV program continues to mature following Full

Rate Production milestone earlier in 2019 Incorporating configuration changes into production Program timing and budget on track

Significant interest in Oshkosh products at recent DSEI and AUSA tradeshows Showcasing Oshkosh’s tactical wheeled vehicle

leadership Expect to book international JLTV orders in FY20

Well positioned for FY20 sales despite U.S. government budget delay and continuing resolution

JLTV is next-generation protected mobility for the modern battlefield


Global Light TWV Market PotentialSignificant international interest / opportunity

Today’s HMMWV Installed Base*

• 240,000+ HMMWVs

• 60 countries

• 30+ configurations 53%47%Armor CapableHMMWV

* Source: Government publications, IHS Jane’s, SIPRI, AM General Website

Jeep HMMWV

JLTV

The Oshkosh JLTV is shaping the future of light military vehicles

Fire & Emergency – FY19 Highlights


FY19 performance set new segment records for sales and operating income > 1,100 basis point operating margin improvement

since FY13

Domestic municipal demand, increased U.S. Air Force volume and timing of international sales drove FY19 sales

Orders up 10% for full year Highest order rate at Pierce since FY09

Uncertain trade policy negatively impacted international orders

Expect flat to slight growth in North America fire truck market in FY20

Commercial – FY19 Highlights


Strong finish to FY19 Increased RCV sales Operations back to normal

Simplification focus regaining momentum after recovery from partial roof collapse

Expect stable RCV and concrete mixer markets in FY20 to be similar to FY19 RCV at or slightly above long term average Concrete mixer remains below long term

average Expect choppiness as customers assess macro

outlook

Well positioned for successFavorable market dynamics and benefits of MOVE position OSK to deliver solid results

• Attractive End Markets • Defense• Fire trucks• Refuse collection

• Secular Tailwinds• Population growth• Urbanization• Household formation

• Strong free cash flow over the cycle• Growth optionality• Ensures strong balance sheet

• Integrated approach to cost containment• MOVE Strategy• Simplification


Positive long-term outlook

Contacts:

Patrick N. DavidsonSenior Vice President, Investor Relations

[email protected]

920-966-5939

Jeffrey D. WattDirector, Investor Relations

[email protected]

920-233-9406


mailto:[email protected]

mailto:[email protected]

Appendix: Oshkosh FY20 expectations

• Revenues of $7.9 - $8.2 billion• Operating income of $690 to $765 million• EPS of $7.30 to $8.10

Additional expectations Corporate expenses of $150 - $155 million

Tax rate of ~21.25% - 21.5%

CapEx of ~$150 million

Free Cash Flow* of ~$450 million

Share count of ~69 million**

Q1 expectations Lower sales

− All segments lower except defense EPS percentage down more than sales

− Prior year large defense positive cumulative catch-up adjustment

Segment information

Measure Access Equipment Defense Fire &

Emergency Commercial

Sales (billions) $3.5 – $3.8 ~$2.2 ~$1.2 ~$1.05

Operating Income Margin

11.25% – 12.25% ~9.0% 14.5% – 15.0% ~7.0%

* Non-GAAP results. See appendix for reconciliation to GAAP results

** Assumes 50% of free cash flow returned to shareholders throughshare repurchases and dividends


Consolidated FY19 results

FY19 comments

Sales impacted by:+ Higher sales in access equipment,

defense and fire & emergency segments

Adjusted EPS* impacted by:+ Higher sales volumes+ Share repurchases

Fiscal Year 2019 2018

Net Sales $ 8,382.0 $ 7,705.5

% Change 8.8% 12.8%

Adjusted Operating Income $ 797.0 $ 667.2*

% Change 19.5% 29.9%

% Margin 9.5% 8.7%

Adjusted EPS* $ 8.31 $ 6.36

% Change 30.7% 49.6%


Dollars in millions, except per share amounts


Appendix: Access Equipment FY19 Results

FY19 comments

Sales impacted by:+ Higher volume in all regions,

except EMEA+ Improved pricing

Adjusted operating income* impacted by:+ Higher sales volume+ Improved price/cost+ Lower freight costs

Backlog down 59% vs. prior year to $390 million at year end


Dollars in millions



Net Sales $ 4,079.7 $ 3,776.8

% Change 8.0% 24.8%


% Change 20.5% 37.7%

% Margin 12.3% 11.0%

Appendix: Defense FY19 Results

FY19 comments

Sales impacted by:+ Ramp up of JLTV program− Absence of int’l M-ATVs

Adjusted operating income impacted by:‒ Adverse product mix‒ Facility startup costs+ Higher sales volume

Backlog up 34% vs. prior year to $2.49 billion at year end

Dollars in millions



Net Sales $ 2,032.1 $ 1,828.9

% Change 11.1% 0.5%


% Change (1.5)% (2.4)%

% Margin 10.0% 11.3%

Appendix: Fire & Emergency FY19 Results

FY19 comments

Sales impacted by:+ Higher fire truck deliveries+ Impact of ASC 606+ Improved pricing

Operating income impacted by:+ Higher sales volume+ Improved price/cost- Adverse product mix


Dollars in millions



Net Sales $ 1,266.1 $ 1,069.7

% Change 18.4% 3.8%

Operating Income $ 176.5 $ 137.6

% Change 28.3% 28.4%

% Margin 13.9% 12.9%

Appendix: Commercial FY19 Results

FY19 comments Sales impacted by:

‒ Lower deliveries in part due to partialroof collapse in Q2

Adjusted operating income impacted by:‒ Impact of partial roof collapse+ Favorable product mix+ Improved price/cost


Dollars in millions



Net Sales $ 1,022.2 $ 1,054.7

% Change (3.1)% 8.7%


% Change (2.1)% 55.7%

% Margin 6.5% 6.5%


Appendix: Commonly used acronymsARFF Aircraft Rescue and FirefightingAWP Aerial Work PlatformAMPS Aftermarket Parts & ServiceASC Accounting Standards CodificationCapEx Capital ExpendituresCNG Compressed Natural GasDGE Diesel Gallon EquivalentDoD Department of DefenseEMD Engineering & Manufacturing DevelopmentEMEA Europe, Middle East & AfricaEPS Diluted Earnings Per ShareFAST Act Fixing America’s Surface Transportation ActFDIC Fire Department Instructors ConferenceFHTV Family of Heavy Tactical VehiclesFMS Foreign Military SalesFMTV Family of Medium Tactical VehiclesFRP Full Rate ProductionFYDP Future Years Defense ProgramGAAP U.S. Generally Accepted Accounting PrinciplesGAO Government Accountability OfficeHEMTT Heavy Expanded Mobility Tactical TruckHET Heavy Equipment TransporterHMMWV High Mobility Multi-Purpose Wheeled VehicleIRC Independent Rental CompanyIT Information TechnologyJLTV Joint Light Tactical VehicleJPO Joint Program OfficeJROC Joint Requirements Oversight CouncilJUONS Joint Urgent Operational Needs StatementL-ATV Light Combat Tactical All-Terrain Vehicle

LRIP Low Rate Initial ProductionLVSR Logistic Vehicle System ReplacementM-ATV MRAP All-Terrain VehicleMRAP Mine Resistant Ambush ProtectedMSVS Medium Support Vehicle System (Canada)NDAA National Defense Authorization ActNOL Net Operating LossNPD New Product DevelopmentNRC National Rental CompanyOCO Overseas Contingency OperationsOH OverheadOI Operating IncomeOPEB Other Post-Employment BenefitsPLS Palletized Load SystemPUC Pierce Ultimate ConfigurationR&D Research & DevelopmentRCV Refuse Collection VehicleRFP Request for ProposalROW Rest of WorldSMP Standard Military Pattern (Canadian MSVS)TACOM Tank-automotive and Armaments CommandTDP Technical Data PackageTPV Tactical Protector VehicleTWV Tactical Wheeled VehicleUCA Undefinitized Contract ActionUIK Underbody Improvement Kit (for M-ATV)UK United KingdomZR Zero Radius3PL Third Party Logistics


Fiscal Year ended September 30,

2019 2018 2017 2016

• Net cash flows provided by operating activities• Additions to property, plant and equipment, net• Proceeds from sale of equipment held for rental, net• Free cash flow

$ 589.1(165.3)

(14.6)$ 409.2

$ 436.3(89.6)

1.0$ 347.7

$ 246.5(85.0)22.1

$ 183.6

$ 583.9(92.4)

5.4$ 496.9

Appendix: GAAP to Non-GAAP reconciliationThe table below presents a reconciliation of the Company’s presented GAAP measures to the most directly comparable non-GAAP measures (in millions):



2019 2018 2017 2016

• Consolidated operating income (GAAP)*• Costs and inefficiencies related to restructuring actions• Litigation settlement• Business interruption insurance proceeds• Loss on sale of a small product line• Long-lived asset impairment charge• Adjusted consolidated operating income (non-GAAP)

$ 797.0-----

$ 797.0

$ 656.035.4

(19.0)(6.6)1.4

-$ 667.2

$ 470.343.3

----

$ 513.6

$ 364.00.9

---

26.9$ 391.8



*As restated for the adoption of ASU 2017-07


2019 2018 2017 2016

• Earnings per share-diluted (GAAP)• Costs and inefficiencies related to restructuring actions, net of tax• Impairment charge, net of tax• Litigation settlement gain, net of tax• Business interruption insurance proceeds, net of tax• Loss on sale of a small product line, net of tax• Debt extinguishment costs, net of tax• Revaluation of net deferred tax liabilities• Repatriation tax• Adjusted earnings per share-diluted (non-GAAP)

$ 8.21-------

0.10$ 8.31

$ 6.290.37

-(0.21)(0.07)0.010.10

(0.39)0.26

$ 6.36

$ 3.770.48

-------

$ 4.25

$ 2.910.010.22

------

$ 3.14

Appendix: GAAP to Non-GAAP reconciliationThe table below presents a reconciliation of the Company’s presented GAAP measures to the most directly comparable non-GAAP measures (in millions, except per share amounts):



FY20 expectations

• Net cash flows provided by operating activities • Additions to property, plant and equipment• Additions to equipment held for rental, net • Free cash flow

$ 600.0(150.0)

-$ 450.0


Fiscal year ended September 30

2019 2018

• Access equipment segment operating income (GAAP)• Costs and inefficiencies related to restructuring actions• Adjusted access equipment segment operating income (non-GAAP)

$ 502.6-

$ 502.6

$ 387.529.5

$ 417.0

• Defense segment operating income (GAAP)• Litigation settlement• Adjusted consolidated operating income (non-GAAP)

$ 203.3-

$ 203.3

$ 225.4(19.0)

$ 206.4

• Commercial segment operating income (GAAP)• Restructuring costs • Proceeds from business interruption insurance• Loss on sale of a business• Adjusted commercial segment operating income (non-GAAP)

$ 66.8---

$ 66.8

$ 67.55.9

(6.6)1.4

$ 68.2



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Baird’s 2019 Global Industrial Conference · 2019-11-05 · Forward-looking statements Baird's 2019 Global Industrial Conference November 5, 2019 2 This presentation contains statements