Oshkosh Corporation (Holding Company)Common Stock

Greetings and welcome to the Oshkosh Corporation fiscal 2021 second quarter results conference call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Pat Davidson, Senior Vice President of Investor Relations for Oshkosh Corporation. Thank you, sir. You may begin.

Good morning, and thanks for joining us. Earlier today, we published our second quarter 2021 results. A copy of the release is available on our website at OshkoshCorp.com. Today's call is being webcast and is accompanied by a slide presentation. which includes a reconciliation of GAAP to non-GAAP financial measures that we will use during this call and is also available on our website. The audio replay and slide presentation will be available on our website for approximately 12 months. Please refer now to slide two of that presentation. Our remarks that follow, including answers to your questions, contain statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks that could cause actual results to be materially different from those expressed or implied by such forward-looking statements. These risks include, among others, matters that we have described in our Form 8K filed with the SEC this morning and other filings we make with the SEC. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all. All references on this call to a quarter or year are to our fiscal quarter or our fiscal year, unless stated otherwise. Our presenters today include John Pfeiffer, President and Chief Executive Officer, and Mike Pack, Executive Vice President and Chief Financial Officer. Please turn to slide three, and I'll turn it over to you, John. Thank you, Pat, and good morning, everyone.

We're happy to announce outstanding second quarter results. highlighted by sales of $1.9 billion and adjusted earnings per share of $1.48, both of which exceeded the prior year and our expectations. Demand across the company, and particularly in our access equipment segment, has come back stronger and faster than we expected as a result of positive vaccination progress and the confidence that that brings to the marketplace. Our production rates are back to pre-pandemic levels across the company, and our 14,000 dedicated team members continue to do an exceptional job of rapidly adapting to changing situations as we recover from the pandemic. Companies across the globe are facing significant supply chain challenges as the economy rebounds. including a global semiconductor shortage, record high steel prices, and resin shortages from the deep freeze in Texas back in February. Our supply chain team members and third-party suppliers have worked hard to maintain production, but supply chain disruptions will likely remain a risk we will continue to manage for the duration of 2021. In addition to our strong second quarter performance, we received some great news on February 23rd when we were notified that we won the next generation delivery vehicle program with the United States Postal Service. I am very proud of the efforts of our team over the past several years that culminated in this historic win, which supports President Biden's goal to electrify the federal fleet with zero emission vehicles and create new sustainable manufacturing jobs in America. Our defense segment will supply the Postal Service with as many zero-emission battery electric vehicles, or BEV units, that they desire as they performance for Oshkosh in our industry category and underscores our commitment to creating a more sustainable future and culture that is centered on a safe and inclusive workplace. Additionally, we have pledged to further reduce greenhouse gas emissions and energy consumption as we continue to make investments in technology including the development of battery electric products in all of our businesses. I'm also pleased to announce our expectations for 2021 adjusted EPS to be in the range of $6.35 to $6.85 as we return to our practice of providing quantitative guidance. Mike will share more details in his section. Let's turn to slide four and get started on our segment updates with access equipment. The improvements we started to see in our markets back in December and January following positive vaccine news rapidly accelerated over the past few months and helped drive the strong performance we are reporting today. Revenue increased by 6.5% over the prior year, leading to a solid adjusted operating margin of over 11%. We previously expected a return to growth in the second half of the year, so we are pleased to be ahead of schedule. These strong results would not be possible without the Access team's disciplined execution through the pandemic, which has enabled the business to quickly respond to changing customer demand, particularly in North America. Orders were also strong, leading to a solid backlog of $1.5 billion for this segment, up 80% versus last year. Since most forecasts project non-residential construction to be down in 2021, we believe replacement demand is driving access equipment sales growth. As we've discussed for the past several quarters, fleet ages are elevated throughout the North American market, and we believe the need to replace these age fleets will be a significant driver for new equipment sales in the coming quarters. We are further encouraged that demand is returned for a broad cross-section of customers, not just the largest and most.