Oshkosh Corporation is a leading designer, manufacturer and marketer of a
broad range of specialty vehicles and vehicle bodies. The Company partners with
customers to deliver superior solutions that safely and efficiently move people
and materials at work, around the globe, and around the clock. The Company began
business in 1917 as an early pioneer of four-wheel drive technology, and off
road mobility technology remains one of its core competencies. The Company maintains
four reportable segments for financial reporting purposes: access equipment,
defense, fire & emergency and commercial. These segments, in some way, all
share common customers and distribution channels, leverage common components
and suppliers, utilize common technologies and manufacturing processes and share
manufacturing and distribution facilities, which results in the Company being
an integrated specialty vehicle manufacturer. The Company made approximately
15%, of its net sales, to the U.S. government, a substantial majority of which
were under multi-year contracts and programs in the defense vehicle market.
JLG, a global manufacturer of aerial work platforms and telehandlers used in
a wide variety of construction, agricultural, industrial, institutional and
general maintenance applications to position workers and materials at elevated
heights, forms the base of the Company’s access equipment segment. JLG’s
customers include equipment rental companies, construction contractors, manufacturing
companies and home improvement centers. The access equipment segment also includes
Jerr-Dan-branded tow trucks (“wreckers”) and roll-back vehicle carriers
(“carriers”) sold to towing companies in the U.S. and abroad.
The Companys defense segment has manufactured and sold military tactical wheeled
vehicles to the DoD for more than 90 years. In 1981, Oshkosh Defense was awarded
the first Heavy Expanded Mobility Tactical Truck (“HEMTT”) contract
for the DoD and thereafter developed into the DoD’s leading supplier of
severe-duty, heavy-payload tactical trucks. Since that time, Oshkosh Defense
has broadened its product offerings to become the leading manufacturer of severe-duty,
heavy- and medium-payload tactical trucks for the DoD, manufacturing vehicles
that perform a variety of demanding tasks such as hauling tanks, missile systems,
ammunition, fuel, troops and cargo for combat units and light-payload tactical
vehicles, through its M-ATVs. In October 2011, Oshkosh Defense introduced the
Light Combat All-Terrain Vehicle (“L-ATV”) to continue to expand
its light protected tactical wheeled vehicle offering. The L-ATV incorporates
field-proven technologies, advanced armor solutions and expeditionary levels
of off-road mobility to redefine safety and performance standards. The L-ATV
also is designed for future growth, with the ability to accept additional armor
packages and technology upgrades as the mission requires. The L-ATV was Oshkosh
Defenses entrant in the DoDs JLTV competition. In August 2015, the DoD awarded
the Company an eight-year fixed price contract valued at $6.7 billion for the
production and delivery of approximately 17,000 vehicles and sustaining services
under the U.S. Army and Marine Corps JLTV program. The JLTV program is expected
to be a 20-year, $30 billion program for the production of up to 55,000 vehicles
as well as support services and engineering.
The Company’s fire & emergency segment manufactures custom and commercial
firefighting vehicles and equipment, aircraft rescue and firefighting (“ARFF”)
vehicles, snow removal vehicles, simulators and other emergency vehicles primarily
sold to fire departments, airports and other governmental units in the Americas
and abroad and broadcast vehicles sold to broadcasters and television stations
in the Americas and abroad.
The Company’s commercial segment manufactures rear- and front-discharge
concrete mixers, refuse collection vehicles, portable and stationary concrete
batch plants and vehicle components sold to ready-mix companies and commercial
and municipal waste haulers in North America and other international markets
and field service vehicles and truck-mounted cranes sold to mining, construction
and other companies in the Americas and abroad.
The Company is focused on increasing its net sales, profitability and cash
flow and maintaining a strong balance sheet by capitalizing on its competitive
strengths and pursuing an integrated business strategy. The Company completed
a comprehensive strategic planning process in fiscal 2011 with the assistance
of a globally-recognized consulting firm that culminated in the creation of
the Company’s roadmap, named MOVE, to deliver outstanding long-term shareholder
value.
The MOVE strategy consists of the following four key initiatives:
Market Recovery and Growth. This initiative focuses on capturing and improving
the Companys historical share in a market recovery. A number of the markets
in which the Company participates were down anywhere from 40% to more than 90%
from peak levels as a result of the Great Recession. The Company has experienced
some recovery in a number of markets in which it participates, but the recovery
has been slower than the Company anticipated, and these markets have still not
returned to pre-recession levels. In addition, adverse weather conditions in
parts of the U.S. and the impact of a sudden and significant drop in the price
of oil and gas on oil and gas exploration and related construction activity
both negatively impacted demand for the Companys access equipment segment in
fiscal 2015 and accelerated into fiscal 2015 a mid-cycle dip in access equipment
demand as a result of low purchases of access equipment in the 2009-2010 time-period.
The Company believes that the defense segment troughed in fiscal 2015 and is
poised for a rebound with recent international and domestic contract awards
and additional opportunities on the horizon. Continued slow recovery in U.S.
municipal spending has positively impacted the fire & emergency and commercial
segments, although overall municipal spending continues to remain below normalized
levels. U.S. residential and non-residential construction markets have also
continued to recover from the Great Recession, although neither has returned
to pre-recession levels. The Company believes that this recovery will continue
in the coming years, driving demand for its businesses with exposure to construction
markets. The Company continues to work on improving its sales, inventory and
operations planning and sales capture processes to more effectively respond
to customers’ needs as the recovery occurs in each of its markets. Also,
the Company has continued to focus on staying close to its customers by providing
high-quality customer service through its extensive parts and service support
programs, which are generally available to customers 365 days a year in all
product lines throughout the Company’s distribution systems.
Optimize Cost and Capital Structure. This initiative focuses on optimizing
the Companys cost and capital structure (“O” initiative) to provide
value for customers and shareholders by aggressively attacking its product,
process and overhead costs and opportunistically using its expected strong free
cash flow to return capital to shareholders or invest in acquisition opportunities.
The Company utilizes a comprehensive lean enterprise focus to drive to be a
low cost producer in all of its product lines while sustaining premium product
features and quality and to deliver low product life cycle costs for its customers.
Lean is a methodology to eliminate non-value added work from a process stream.
The Company has successfully implemented this initiative by:
Combining the Company’s strategic purchasing teams globally into a single
organization to capture its full purchasing power across all of its businesses
and to promote low-cost-country sourcing;
Managing the business to target breakthrough objectives, including aggressive
cost reduction targets, via the Company-wide use of strategy deployment scorecards
to provide effective, timely assessment of progress toward objectives and implementation
of countermeasures as needed;
Utilizing integrated project teams to reduce product and process costs across
the Company;
Creating a single quality management system to drive enhanced quality throughout
all of the Company’s businesses to improve customer satisfaction and lower
the cost of quality;
Expanding its production capabilities with the launch of a new manufacturing
facility in Leon, Mexico, which is expected to reduce the costs of components
currently sourced from third party suppliers;
Launching and leveraging the Oshkosh Operating System (“OOS”) to
create common practices across the Company to enhance its performance. The OOS
is a system of doing business that is focused on serving and delighting customers
by utilizing continuous improvement and lean practices. The Company has trained
substantially all of its employees in elements of the OOS. The Company believes
that the OOS enables it to sustain strong performance for its customers, shareholders,
employees and other stakeholders;
Developing and communicating to shareholders a comprehensive capital allocation
strategy that has resulted in reducing the Companys leverage to create options
for internal investments, acquisitions and return of capital to shareholders;
and
Returning value to shareholders through the reinstatement of a quarterly dividend
and through executing the Companys stock repurchase program. Over the three-year
period ended September 30, 2015, the Company returned over $900 million to shareholders
through quarterly cash dividends and repurchases of the Companys Common Stock,
including the repurchase of 19.3 million shares, or 21% of the shares outstanding
and a 13% increase in the Companys quarterly cash dividend in December 2014
and an additional 12% increase in November 2015.
As a result of its focus on cost optimization, the Company expects to more
efficiently utilize its manufacturing facilities, increase inventory turns,
reduce product, process and overhead costs, lower manufacturing lead times and
new product development cycle times and increase its operating income margins.
Value Innovation. This initiative focuses on emphasizing the Companys new
product development as it seeks to expand sales and margins by leading its core
markets in the introduction of new or improved products and new technologies.
The Company primarily uses internal development but also uses licensing of technology
and strategic acquisitions to execute multi-generational product plans in each
of the Company’s businesses. The Company actively seeks to commercialize
emerging technologies that are capable of expanding customer uses of its products.
Examples of the Company’s innovation successes include:
The L-ATV, which was selected by the U.S. DoD for the JLTV production contract,
incorporates field-proven technologies, advanced armor solutions and expeditionary
levels of mobility to redefine safety and performance standards;
The TAK-4 family of independent suspension systems, which the Company uses on
multiple vehicle platforms in its defense and fire & emergency segments,
including the TAK-4i “intelligent” independent suspension system,
which the Company is using on the L-ATV for the JLTV program;
The JLG 185-foot self-propelled boom lift, the worlds tallest self-propelled
boom, which enables operators to tackle high level access needs for construction
and maintenance projects;
The JLG 34-foot articulated hybrid boom, which is the world’s first true
four-wheel electric-drive hybrid boom. This boom combines a diesel engine and
an electric power system to provide the power and durability of a diesel powered
machine while also allowing substantial fuel savings, quieter operation and
lower carbon emissions;
The Power Towers Nano offers world class performance in low level access equipment.
The Nano line includes manual and automated propulsion variants, providing a
range of options for low level access needs;
The Pierce Ascendant heavy-duty aerial ladder, a highly maneuverable 107-foot
steel aerial device that rides on a single rear axle fire truck configuration;
The Command Zone multiplexing technology, which the Company has applied to numerous
products in each of its segments to control, monitor and diagnose electronic
components;
The Pierce Ultimate Configuration (“PUC”) vehicle configuration,
which eliminates the bulky pumphouse from firefighting vehicles, making such
vehicles easier to use and service;
The redesigned Pierce Saber custom fire chassis. The new Saber chassis features
a 96-inch wide cab with a single-piece bonded windshield. It also includes a
smaller engine tunnel that is lower-placed, allowing more room for firefighters
with ergonomic hip and elbow room for the driver and officer;
The integration of compressed natural gas to power McNeilus’ refuse collection
vehicles and concrete mixers and Oshkosh Commercials front-discharge mixer,
which reduces fuel costs and emissions;
The Meridian Front Loader refuse collection vehicle, which offers the perfect
balance between the performance of a lightweight vehicle with the strength and
durability of a heavyweight vehicle;
The split-body refuse collection vehicle with automatic tailgate locks to collect
and separate multiple waste streams and safely eject loads from inside the cab;
and
The Pacific Series Ultra Front Loader refuse collection vehicle, which offers
a lightweight alternative to traditional industry product offerings.
Emerging Market Expansion. This initiative focuses on the Companys continued
expansion into those specialty vehicle and vehicle body markets globally where
it has or can acquire strong market positions over time and where it believes
it can leverage synergies in purchasing, manufacturing, technology and distribution
to increase sales and profitability. Business development teams actively pursue
new customers in targeted developing countries in Asia, Eastern Europe, the
Middle East, Latin America and Africa. In pursuit of this strategy, the Company
opened new sales and service offices in recent years in Russia, India, Saudi
Arabia, China, South Korea and Japan to pursue various opportunities in each
of those countries. In addition, the Company recently expanded its sales and
aftermarket personnel in multiple countries in Europe, Latin America, Asia and
the Middle East. The Company would also consider selectively pursuing strategic
acquisitions to enhance the Company’s product offerings and expand its
international presence in the specialty vehicle and vehicle body markets. A
significant strengthening of the U.S. dollar in fiscal 2015 negatively impacted
the Companys international sales when translated into U.S. dollars, thereby
muting the results of the Companys global expansion activities in fiscal 2015.