Oshkosh Corporation (OSK)

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Oshkosh Corporation (OSK)

Baird 2011 Industrial Conference Call

November 8, 2011 11:05 am ET


Rob Mccarthy - Sr. Analyst, Robert W. Baird

Charlie Szews - President and CEO

Dave Sagehorn - EVP and CFO

Pat Davidson - VP and IR



Rob Mccarthy

Welcome, my name is Rob Mccarthy. I lead Baird's research team for machinery and diversified manufacturing. And we're very pleased to have Oshkosh Corporation back with us at Baird Industrial Conference.

As you're probably aware Oshkosh has built an impressive track record of market share expansion in the markets for military, fire and vocational trucks through leading product innovation and superior product support. And although pressure is building on the U.S. defense budget, Oshkosh have significant cyclical upside and secular growth potential in its construction driven access equipment business and is rapidly expanding its presence in international markets.

Bring us up to date on how Oshkosh is responding to its challenges, today we have President and CEO, Charlie Szews; Executive Vice President, Chief Financial Officer Dave Sagehorn; and Vice President and Investor Relations, Pat Davidson.

And I'll turn it over to Charlie.

Charlie Szews

Thank you, Baird, for inviting us to this conference. Oshkosh, as mentioned, is driven to perform for its shareholders and customers. From a great recession to now the slow economic recovery, and the defense downturn and markets haven't cooperated very well and we had chopped the equity markets as well. For as the performers we had historically here were the same strong company that outperformed the market for over a decade. And we have a new strategy we call it MOVE, to create a new legacy and growth for our shareholders and investors. So please read this at your leisure the forward-looking statements.

Here's a quick agenda of what we're going to talk about this morning is a brief business overview. We're going to talk about the current operating environment in every one of our markets. And then, we'll conclude with the MOVE strategy, as to adjust the marketing conditions that we face today, increased shareholder value.

So let's look at the overview of our businesses. Oshkosh safely, efficiently and cost effectively moves people and material that work around the globe and around the clock. We move our men, women safely through Afghanistan and Iraq. In the roughest terrain, we rescue people in crises. We rebuild America and we even pick up the trash.

Our portfolio business is certainly diverse customer base. So what that means is that from multiple segments, for example, we'll start with Department of Defense. We sell them telehandlers from our Access Equipment business. We sell them airport products and fire truck fro our Fire and Emergency segment. We sell concrete mixers from our Commercial segment to DOD. And of course we are the leading tactical wheeled vehicle manufacturer for the U.S. Department of Defense.

Everything we do virtually moves on wheel. So there's tremendous technology, distribution, purchasing in synergies. We do a lot of manufacturing in multiple segments for other segments. So some is varied in the parts and that's how we grow faster and make more money in our market than our competition.

We're a global leader in niche specialty vehicles with the leading brands in virtually every one of our markets as you see here. We generally maintained or increased our shares during the downturn, and well positioned with significant leverage when there is a recovery.

Just last week, we reported earnings for the fourth fiscal quarter although our focus is more on the year. Fiscal year '11 was a transition year for us and fiscal year '10, the year before, our operations were bullied by the M-ATV contract. The MRAP All-Terrain (inaudible) sales and we're really speeding vehicles into Afghanistan to save our men and women's lives in that environment.

So we had a transition year in 2011. We ended up hitting another roadblock with missile spending taking another downturn, slower economic recovery. And they've pushed out our recovery of our business really into 2012, which we expect to be another transition year. And this time we really do believe it's going to be a tough year.

Despite those headwinds, we delivered a year up of our revenues in fiscal 2011. They were top only by 2010, which was void by the M-ATV contract and we solidified our market leading positions across our business.

First talk briefly about the current environment. It's too much to go into today and try to debate what are the Defense budgets is going to be in United States. What we do know is that U.S. troops are pulling out of Iraq, big reductions are coming. We don't know if the reductions are $450 billion over 10 years or $1 trillion over 10 year. And obviously it's going to have a big impact for all defense contractors like ourselves.

Outside the U.S. and Europe, however there are several countries that are looking at major tactical wheeled vehicle wise. And even in the U.S. there remain opportunities to sustain a strong tactical wheeled vehicle business in this space.

And in fact we are in an new era of competition. We're actually bidding more new contracts in the next 4 months to 6 months, probably than anytime in our history. This table shows a few of the opportunities. There are some almost as large that are not listed.

The Canadian TAPV for example is a MRAP type vehicle that we're competing for in Canada that we submitted our bid in August. We also provided two vehicles for testing blast as well as security testing off road at our Aberdeen Test Center in Maryland going through their paces. It's 500 units plus and 20 years of service and support.

Read the rest of this transcript for free on seekingalpha.com