Patrick N. Davidson - Oshkosh Corp. Wilson R. Jones - Oshkosh Corp. David M. Sagehorn - Oshkosh Corp..

Michael David Shlisky - Seaport Global Securities LLC Charles Brady - SunTrust Robinson Humphrey, Inc. Mig Dobre - Robert W. Baird & Co., Inc. (Broker) Nicole DeBlase - Deutsche Bank Securities, Inc. Ann P. Duignan - JPMorgan Securities LLC Ross P.

Gilardi - Bank of America Merrill Lynch Seth Weber - RBC Capital Markets LLC Stanley Elliott - Stifel, Nicolaus & Co., Inc. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker) Eli Lustgarten - Longbow Research LLC.

Greetings, and welcome to the Oshkosh Corporation Reports Fiscal 2016 Fourth Quarter and Full Year Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Patrick Davidson, VP of Investor Relations. Thank you, Mr. Davidson. You may begin..

Good morning and thanks for joining us. Earlier today, we published our fourth quarter and full year 2016 results. A copy of the release is available on our website at oshkoshcorporation.com.

Today's call is being webcast and is accompanied by a slide presentation, which includes a reconciliation of non-GAAP to GAAP financial measures that we will use during this call, and it's 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 2 of that presentation. Our remarks that follow including answers to your questions include 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 8-K 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, if at all. All references on this call to a quarter or a year are to our fiscal quarter or fiscal year, unless stated otherwise.

Our presenters today include, Wilson Jones, President and Chief Executive Officer; and Dave Sagehorn, Executive Vice President and Chief Financial Officer. Please, turn to slide three. And I'll turn it over to you, Wilson..

Thank you, Pat. Good morning, everyone. Today, we announced fourth quarter adjusted earnings per share of $1.05 and full-year 2016 adjusted earnings per share of $3.14. Our team members overcame a number of challenges this year to deliver solid, full-year results and to position us for a positive 2017 and beyond.

As we get started, I'd like to address our fourth quarter outperformance. We surpassed the full-year EPS guidance we provided at our Analyst Day in September.

So where did we outperform? The last several weeks of the quarter were always busy with numerous moving pieces representing both upside and downside potentials as we approach the end of the quarter. Fortunately for us, almost everything went in our favor this quarter as the Access Equipment team reported a higher than expected sales.

The Defense segment also had a delay in plan, bid and proposal cost for the FMTV recomplete and some positive year-end adjustments. These were the primary contributors to our better than expected performance. Dave Sagehorn will provide additional color during his discussion.

As is our standard approach, I'll talk about our performance in the quarter as well as the year, also provide some color on our four business segments before turning it over to Dave to discuss the numbers and our full-year 2017 outlook and we'll wrap it up with time for Q&A.

Our fourth quarter results benefited from strong performance in our Defense segment compared to the prior year, including higher sales and operating income margin. In particular, the Defense team sold 325 international M-ATVs in the quarter. Those of you who follow us remember that we discussed this at our Analyst Day.

The Access Equipment segment also delivered higher adjusted operating income margin compared to the prior-year quarter. Additionally, we had an exceptional quarter from a free cash flow standpoint as we benefited from significant cash receipts on international Defense contracts and continued inventory reductions at Access Equipment.

Based on the way we finished 2016, you may ask why we aren't raising our expectations for 2017. It's a question that we have considered thoroughly and thoughtfully. We concluded there haven't been any significant changes in our businesses and the outlooks for our markets haven't changed since our Analyst Day.

As a result, we are reaffirming our expected earnings per share range of $3 to $3.40. Please turn to slide four for a discussion of our full year results.

We grew both sales and adjusted earnings per share in 2016, which is only possible because the outstanding efforts of our Oshkosh team and the benefits we get from being a different integrated global industrial.

Our Defense and Fire & Emergency segments both grew sales by double-digit percentages for the year leading the way for our strong performance. Not all of our businesses benefited from growing markets, our Access Equipment business experienced lower replacement CapEx demand in its primary market of North America.

We also experienced a stagnant concrete mixer market in our Commercial segment. Looking internally, in 2016, we continued to focus on driving operational efficiencies and simplifying our businesses. As we noted during our Analyst Day, we recently announced some structural changes in our Access Equipment segment.

We continued to analyze opportunities to optimize our businesses to best serve customers in 2017, and beyond.

We continued to return cash to shareholders in 2016, demonstrating responsible capital allocation, as we repurchased approximately 2.5 million shares of our stock earlier in the year and we announced another increase in our quarterly dividend of more than 10% this morning.

This is our third straight year of double-digit percentage increases in our dividend. And our strong fourth quarter free cash flow helped us generate $490 million in free cash flow during the year, positioning us well to support our 2017 working capital requirements.

Please turn to slide five and we'll review our segments, starting with Access Equipment. While we are pleased with the better than expected results in the segment in the fourth quarter, our outlook for the Access Equipment market remains unchanged from our Analyst Day.

Rental customers in North America continue to have a positive outlook about their businesses for the remainder of 2016-2017, but they remain cautious with our capital expenditure plans.

Our rental customers are closely watching our fleet utilization rates and local market rental rates, leading them to continue to be selective with their capital expenditures. Additionally, you have heard us talk about the impact of extremely low levels of new Access Equipment purchases by rental companies during the years of 2009 and 2010.

We continue to experience lower placement driven demand in North America as a result of lower purchases during that timeframe. We are actively engaged in discussions with the national rental companies regarding their 2017 CapEx plans and we expect these discussions will continue through the end of the calendar year.

We did experience growth in Europe again this quarter. Southern European markets are recovering from very low basis and we saw some continued recovery in Benelux and the Nordics. The UK market took a pause after the Brexit vote, but we believe Europe and the broader Europe, Middle East and Africa region can be solid contributors again in 2017.

Operationally, the Access Equipment team achieved their target of responsibly lowering inventory levels during the year. I want to thank them for their efforts in helping drive our strong free cash flow in 2016. We also announced in September that the Access Equipment segment plans to outsource its aftermarket parts distribution.

This will take place over the next year as we work to implement this change with outstanding executions, so we maintained the high service levels our customers are accustomed to with JLG. A longer-term outlook for this business continues to be positive. We expect that the headwind of replacement demand will become a tailwind sometime beyond 2017.

This tailwind along with construction growth that we expect over the next several years, an overall trend toward improved safety and productivity, and product adoption opportunities globally, all contribute to our positive outlook for the Access Equipment business. Please turn to slide six for a discussion of our Defense segment.

It was a year of good news and improved results in our Defense segment and we finished the year with a strong quarter. Our leading position in the military, tactical wheeled vehicle business is a big source of pride for us at Oshkosh. Our JLTV only further enhances this pride.

During our Analyst Day, many of you listening on the phone today had the opportunity to take a ride on JLTV and experience the outstanding performance of this truly game-changing vehicle. Earlier this summer, we began building JLTVs on our production line in Oshkosh. We started shipping those initial units to the U.S.

Army in September to support government testing activities during the Low Rate Initial Production or LRIP phase of the program. To remind you, we are looking at approximately three years of LRIP, coupled with extensive government testing before we achieve full rate production, which is slated for 2019.

To support this milestone, our production ramps up over the next three years. We expect to deliver nearly 750 JLTVs in 2017 and based on the President's 2017 budget request, we expect to deliver approximately 2,000 in 2018 and 3,000 in 2019.

We also continue to be pleased with the level of interest we are receiving for the JLTV program from international militaries. We engaged in positive discussions with a number of foreign militaries at the recent AUSA defense trade show. We also recently supported the JLTV demonstration with the U.S. Government for NATO allies.

As we've said previously, we believe the international JLTV sales are few years away, but we're confident that international JLTV sales represent a significant opportunity for Oshkosh. We continue to execute on our legacy contracts, primarily FMTV and FHTV. During the quarter, we received orders for additional FMTVs.

We have spoken about this as a likely event and it did in fact occur. In the week or so following the issuance of the orders from the program management office at TACOM, the orders were protested by a competitor.

The protest was filed with the Government Accountability Office or GAO and is currently expected to be resolved by the GAO on or before January 9, 2017. We are confident that the Army acted appropriately and within its authority when it issued us the orders.

Most of the deliveries under these orders are scheduled for 2018, but about $70 million are planned for delivery later in 2017. As I mentioned earlier, we shipped a large amount of M-ATVs to the Middle East during the fourth quarter.

We still expect to ship nearly 1,000 M-ATVs during 2017, and we are continuing to pursue additional M-ATV orders around the globe. Our Defense team is excited and motivated as we have solid visibility for future business in this segment in the coming years. Let's turn to slide seven to discuss the Fire & Emergency segment.

The Fire & Emergency team delivered another quarter of year-over-year revenue growth and continued on its path toward achieving double-digit operating income margins. For the year, revenues grew almost 17% and operating income grew more than 50%, leading to a 160-basis-point increase in operating income margin.

As important, we believe F&E's 8.7% fourth quarter OI margin supports our 2017 full year OI margin estimate of 8.5%. Higher demand as a result of the continued recovery of the North American fire truck market has contributed to the margin improvement in the second, but that's not the only driver of the higher margins.

During the last couple of years, we've implemented a number of changes, in our Pierce factories in Wisconsin and Florida, as well as in our front-end order processing, and we're seeing the benefits of those actions.

We believe the combination of simplification activities, and the rewards delivered by the Oshkosh Operating System are very powerful drivers of margin improvement.

We've also spoken extensively about our new product launches, and the improved municipal spending environment in the U.S., which continues to benefit our traditional fire truck businesses as cities and towns look to replace aged equipment.

Additionally, we work with a motivated and experienced dealer network that has been investing in facilities and capabilities as they see the opportunities before them. We believe these factors bode well for this business, and expect the Fire & Emergency team will build on the momentum they've generated.

In contrast to the strength that we're experiencing with traditional fire trucks, the Airport Products Group reported lower sales in the fourth quarter. Airport products are comprised of ARFF units, and snow blowers, plows and sweepers. More than half of Airport Products revenues come from outside the U.S.

and they're often impacted by the timing of large international delivery orders that can skew quarterly results. We saw that in the fourth quarter as the prior-year quarter included several large international sales. We believe the strength of the U.S. dollar has also had a negative impact on international orders for Airport Products.

Finally, we know that the equipment being used in North American fire truck industry is fairly old, with high average fleet age. We believe this dynamic will continue to be a solid demand driver for this business as we look out over the next several years. Please turn to slide eight, and we'll talk about our Commercial segment.

Commercial team finished 2016 with slightly higher operating income, and operating income margins compared to their prior year on sales that were even with last year. Overall, market conditions in this segment haven't changed since our Analyst Day.

The refuse collection vehicle market remains attractive and demonstrated growth in 2016 in large parts due to fleet replenishment of larger private waste haulers. I'm proud of our team as we outperformed our competitors and gained share during the year.

That said, we expect to see the market growth rate moderate in 2017, following several years of solid growth. Additionally, the fundamental drivers of municipal tax receipts and construction activity continue to be long-term positive drivers for the RCV market.

Now turning to concrete mixers, we continued to experience modest and choppy order flow from customers who placed orders for new equipment. Customers remained cautious due to short-term economic uncertainties, but the long-term economic in construction fundamentals remain favorable and show room to run.

And with each month that passes, fleets only get older. As we said at the Analyst Day, we're focused on simplification efforts in this segment to help drive both a better overall customer experience and improve operational efficiencies.

And as I mentioned a few minutes ago, we're also continuing to investigate other structural changes in our businesses. We're committed to delivering margin improvement in this segment. That wraps it up for our four business segments. I'm going to turn it over to Dave to discuss our financials and outlook for 2017 in greater detail..

Thanks, Wilson, and good morning, everyone. Please turn to slide nine. Today, I'm going to compare our fourth quarter results to the prior-year fourth quarter and our full-year results to the outlook we provided at our Analyst Day in September and to the prior year.

So, let's start with the comparison of our fourth quarter results to the prior-year quarter. Consolidated net sales for the quarter were $1.76 billion, up 11.2% from fourth quarter 2015 sales of $1.58 billion.

All segments reported higher sales in the quarter with Defense's 48% increase led by higher international M-ATV and FHTV sales, being the largest driver of the increase. Adjusted consolidated operating income for the fourth quarter was $123.3 million or 7% of sales compared to $89.5 million or 5.7% of sales in the prior-year quarter.

Higher Defense and Access Equipment segment adjusted operating income drove the improved results. Corporate expenses in the quarter were approximately $9 million higher than in the prior year, driven by higher share based and incentive compensation expenses.

Access equipment segment adjusted operating income for the fourth quarter 2016 excludes $27.8 million of asset impairment and workforce reduction charges related to transitioning its aftermarket parts distribution to a third party.

Access equipment segment and corporate fourth quarter 2015 adjusted operating income excludes the combined $2.9 million of costs related to workforce reduction charges. Further information on segment fourth quarter performance can be found in the appendix to the slide deck.

Adjusted earnings per share for the quarter was $1.05 compared to $0.67 in the fourth quarter of 2015. Fourth quarter 2016 results exclude a $0.23 earnings per share impact from the asset impairment and workforce restructuring charges in the Access Equipment segment that I discussed earlier.

And the fourth quarter 2015 results excluded $0.03 per share impact of workforce reduction costs in the Access Equipment segment and in corporate also as I discussed earlier.

Third quarter results benefited $0.03 per share compared to the prior-year quarter as a result of our share repurchase activity in the past year and we did not repurchase any shares of our common stock in the fourth quarter.

Switching gears to our full year results compared to the outlook we provided at our Analyst Day, the higher than expected results were concentrated in the Access Equipment and Defense segments. Results in the other segments and corporate largely offset each other.

The better than expected results in the Access Equipment segment were driven by higher than expected sales. There were several larger transactions that we weren't sure whether the sale would occur in 2016 or 2017.

Now, normally we would see the sale of some of the orders like this fall into the subsequent quarter, but in this instance a large percentage occurred in the current quarter.

The better than expected results in the Defense segment were due to a delay in bid and proposal costs for the FMTV program as a request for proposal was released by the government later than we expected and favorable year-end adjustments. Full-year adjusted earnings per share was $3.14, up from adjusted earnings per share of $3.02 in 2015.

A $113 million increase in Defense segment operating income on a 44% sales increase and higher Fire & Emergency segment operating income combined to effectively offset a decline in Access Equipment segment sales and adjusted operating income and higher corporate expenses.

2016 full-year adjusted results benefited $0.17 per share as a result of share repurchase activity. And as Wilson mentioned, we finished the year with free cash flow of $490 million, ahead of our estimate of $400 million as a result of strong cash collections in September.

The strong free cash flow in the year was driven by solid net income as well as positive cash generation from working capital, which is largely due to the significant inventory reduction in the Access Equipment segment. Please turn to slide 10 for a review of our expectations for 2017.

As we mentioned earlier, our view of our markets in 2017 hasn't changed since our Analyst Day. And as a result, our financial expectations for 2017 are unchanged from our Analyst Day with an EPS estimate range of $3 to $3.40 per share and free cash flow was zero to $50 million.

As a reminder, we expect the Access Equipment segment sales to be approximately $2.7 billion to $2.8 billion, down 7% to 10% from 2016. We expect operating income margin in this segment to be in a range of 7.75% to 8.5%.

The positive impact of MOVE cost reduction initiatives, and modestly higher absorption are expected to mitigate the negative impact of continued challenging pricing, foreign exchange headwinds, and overall higher material costs, but not enough to offset the impact of lower sales on operating income.

Defense segment sales are expected to be up another 35% to 40% in 2017, with the increase driven by the sale of a higher quantity of international M-ATVs and the ramp up of JLTV production. We expect margins in this segment to be approximately 9.5%.

Fire & Emergency and Commercial segment sales are both expected to be up approximately $1 billion, up mid-single digit percent at Fire & Emergency and up slightly at Commercial. We expect operating income margins for Fire & Emergency to increase to 8.5% and remain flattish in the Commercial segment.

And we expect corporate expenses to be in the range of $140 million to $145 million. We've included some other items at the bottom of the slide to help you with your modeling.

As we said previously, while we expect strong free cash flow in total over the next few years, we're expecting lower free cash flow in 2017, as we invest working capital in support of the large international M-ATV contract.

Remaining deliveries for this contract are expected to be weighted to the second half of the year with a large amount of the cash proceeds expected to be received in 2018. I'll conclude with a brief comment on our first quarter outlook.

As we discussed at our Analyst Day, we expect the first quarter of the year to be our lowest earnings quarter due to seasonal factors. In addition, last year, we sold more than 200 M-ATVs in the first quarter, and we don't expect to sell any in the first quarter of 2017.

The Defense segment is also going to be busy working on the FMTV re-compete request for proposal during the first quarter. Combined, these items are expected to lead to first quarter results that are lower than 2016's first quarter. Please turn to slide 11 and I'll turn it back over to Wilson for some closing remarks..

Thanks, Dave. I want to thank all of you who attended our Analyst Day where you heard us talk about three key things. I'd like to remind you of those in support of our positive long-term outlook for the company before we go to Q&A. First, we are a different integrated global industrial.

We bring a unique blend of businesses with a variety of attractive end markets, as well as our differentiated approach to operating them as a cohesive integrated enterprise. Defense and municipal are two of our primary end markets with positive near-term outlooks, which differentiate us.

We also have shared operations that allow for synergies in engineering, purchasing, manufacturing and logistics. These provide us with knowledge sharing opportunities and advantages of scale that are beyond the reach of many of our competitors.

And of course, leveraging the strengths of our team members with our people first culture provides additional advantages for the company. Second, our MOVE strategy has been a big success and driver of solid results for the company. MOVE has much more to deliver.

We're excited to have augmented this, as we include areas such as a focus on reducing complexity, eliminating unnecessary cost and driving profitable growth through our simplification activities. And third, we believe we are well-positioned for long-term success with a number of opportunities to drive shareholder value in the future.

We discussed these in great length at our Analyst Day and I believe we've touched on many of them during our call today. I'll turn it back over to Pat to get the Q&A started..

Thanks, Wilson. I'd like to remind everybody please limit your questions to one plus a follow-up. After the follow-up, we ask that you get back in queue if you'd like to ask additional questions. Operator, let's please begin the question-and-answer period of this call..

Thank you. We will now be conducting the question-and-answer session. Our first question comes from the line of Mike Shlisky of Seaport Global. Please proceed with your question..

Good morning, guys..

Hey, Mike..

Great quarter..

Thank you..

Thank you..

Hey, just wanted to touch quickly on Access first.

With what looks like some bigger orders getting shipped here in the fourth quarter, did your sort of fiscal 2017 outlook for Access just come down a touch to the sort of lower end due to the timing?.

You know, Mike, timing was some of that, Dave mentioned in his prepared remarks that we had some large transactions, it wasn't just the transactions. We had some really strong finish, in a couple of our international markets, Europe and Asia Pacific.

When you look at – looking out to next year, you've heard us say this before, we're at a bit of a disadvantage because this is still the fourth quarter of our customers. And so, it's early for us to know specifically the timing, if that's going to affect 2017.

We believe with the ebbs and flows that normally happen in Access that we still are in a good position with where we have forecasted for next year, that's why we talked about holding our guidance. And again, I wouldn't suggest that it's on the lower end, it's just too early. We'll continue to update as we go.

At the next earnings call, we'll have a lot more information as we finish our discussions with the national rental companies this quarter..

Okay. Got it. I also want to ask secondly, I mean, it sounds like you guys are kind of agonized a bit about your guidance for 2017, I know it's only been a month since the Analyst Day, you were speaking about making changes.

If you could give us some kind of thoughts as to which businesses you feel most confident about potentially raising estimates for 2017, and maybe which do you feel least confident about, based upon where things are kind of headed at the start of the year here?.

Well, Mike, you know us, we're confident going forward. We've talked about a positive long-term outlook. I wouldn't say specifically that there is any concerns about the four business segments where we are today. I think we still feel good. As we said in our remarks, we were very thoughtful in working through that.

We always want to be as close dialed in on our forecast as possible. And I think going forward, we'll update you as we go, but I wouldn't say there is any upside or downside that we would need to share with you today..

All right, guys. I'll leave it there. Thank you very much..

Thanks, Mike..

Thank you..

Thanks..

Our next question comes from the line of Charley Brady of SunTrust Robinson Humphrey. Please proceed with your question..

Hey, thanks. Good morning, guys..

Good morning..

Good morning..

More questions on Access, sort of bigger picture. You've got an ANSI Standard coming into play in beginning of 2017 with a year adoption rate.

And, I'm just wondering, from a manufacturing OEM standpoint, what you guys are doing to really wrap your hands around that and try and estimate kind of what that might do to demand as far as accelerating and/or pushing out replacing vehicles, because of those new standards that are going to have to be required by, I guess, beginning of 2018?.

Well. Charley, I'd say we're in the middle of all the analyses and working through that modeling, how that's going to go flow. At this point, I wouldn't suggest, it's going to affect the market either way. I think it's early.

Our take is that, we kind of tackle this like a tier-change, where we work through a nice project plan, and we'll be ready to go at the time the requirement is supposed to be in place..

Does it accelerate though – I mean, it's not – clearly the cost up is not as much as the engine change was, so I'm just wondering from a manufacturing cost standpoint, as we look out over the next 12 months, should we expect to see some slight tick-up in manufacturing cost to bring products into compliance with this, or is that kind of already baked into existing new product development and R&D?.

Well, with a change like this, Charley, there's always some minimal cost. I think I want to be careful in how I answer, how we're going to flow this in from a competitive standpoint, there's always strategies around this on how you work it into the market.

And again, it's early, and I don't want to get too far out of our skis in how I answer this question..

Got you. Thanks..

All right, Charley. Thanks..

Our next question comes from the line of Mig Dobre of Robert W. Baird. Please proceed with your question..

I mean, you've had in fiscal 2016 about $2.85 billion worth of orders, and if I remember correctly in 1Q 2016 you benefited from a pre-buy ahead of Tier-4 I think on Telehandlers, and you're guiding for 2017 at the midpoint roughly $100 million down from the orders that you've gotten in fiscal 2016 even though we all know kind of the headwinds that are setting up for 2017.

So, I guess, my question is this, what are you hearing from customers to give you confidence that the top-line at this point – the guidance on the top-line in Access is properly calibrated?.

Okay. Mig, I'll start and Dave may jump in here with me too. First of all, the pre-buy was in 2015. So, you mentioned Q1 2016; that was actually in our fiscal 2015.

And so, when you take that off the table, then you go back to just where we are with our discussions, the way we size the market from the macro and micro trends, and again with our discussions with all of our both national rental companies and independents, we believe that the 7% to 10% down from last year is a logical spot for us right now.

So I don't have a lot of concern, especially if you're tying it back to the pre-buy with the $100 million difference. Now, Dave....

Yeah. Mig, I would just add, our view is that the rental customers are in general in pretty good shape and I think they have a fairly positive outlook for their 2017. We do know that we're going through this replacement cycle issue. We've talked about that. We do expect that that's going to continue.

And then I guess I would add just additionally, I think when we look internationally, Europe I think is going to be a solid contributor for us again next year, maybe not quite the growth we saw this year. And then Asia Pacific is I think setting up to again be a nice contributor next year.

Latin America can't really go any further down than it already is, just given the challenging conditions in certain areas there. So, as Wilson said, we've taken a look at it. We hear what customers say. We are in discussions with the national rental companies. Those discussions are not complete yet.

But overall we think the range that we have put out there is appropriate at this time..

All right.

Then if I switch to Defense, can you maybe give us a little more color as to exactly what the cadence on deliveries on M-ATVs is going to be next year? You said none in the first quarter, but beyond that because I would imagine this is going to cost quite a bit a swing in margin sequentially?.

Yeah. So, Mig, as we looked at it and as we said previously, we do expect it to be very much second-half weighted. None in the first quarter. We do think we'll get some into the second quarter, but very much weighted to the second half of the year..

All right. Thank you..

Mig, you're not going to ask about the USPS? Rob Messina is going to be disappointed if you didn't ask that question..

All right, fine. I'm going to ask about it.

How's that going?.

It's going good. We were one of the six companies that received the contract to build six prototypes. The prototypes are due next fall. It's always nice to have these other types of projects that come in, and it picks up morale in the company. Just again, different things to work on. I know Rob and his team are focused on it. The opportunity could be big.

The Postal Services talked about a total of a 180,000 vehicles over a five-year to seven-year period. So anything like that. We're pleased that we got into the competition, and you've seen this over the years. So when we get in competitions, we normally do pretty well. And thanks for asking it..

Do you know when the contract actually gets awarded?.

I don't think it's been specifically defined. I think, they want to get the prototypes in and formulate, do some testing, and then they'll be putting out a new RFP..

Mig, I would assume the RFP probably isn't going to come out for another 18 months or so for the production contract at least..

Yeah. Okay. Thank you..

Thanks, Mig..

Our next question comes from the line of Nicole DeBlase of Deutsche Bank. Please proceed with your question..

Yeah, thanks, guys. Good morning..

Hey, Nicole..

Good morning..

Hey, there.

So my first question is around the FMTV, the $70 million that you guys are expecting to book in 2017, was that already embedded in your guidance or is that incremental?.

That is in our guidance..

Okay. Okay. Got it. Great. And then with respect to the international M-ATV programs, since you guys did ship more than you expected to ship in 4Q, I am clear that 2017 is looking similar to the 1,000 that you guided to before.

But does that mean that there is not really much that flows over into 2018?.

Yeah, there would be a small quantity from that specific order that does flow into our fiscal 2018..

Okay. Thanks. I'll pass it on..

Thanks, Nicole..

Thank you..

Our next question comes from the line of Ann Duignan from JPMorgan. Please proceed with your question..

Hi. Good morning, guys..

Hi, Ann..

Hi. Lot of my questions have been asked. But just on the Commercial side you said that the dollar weighed on international orders.

Is the strong dollar weighing on orders anywhere else? Is it weighing on any of your Defense customers or can you just talk about the impact of the stronger dollar across your different businesses?.

Yeah. What I think I believe I said in my prepared remarks the strong dollar was affecting our airport business unit....

Yeah..

Where about 50% of their sales are global. Outside of that, JLG obviously is affected by the strong dollar in international markets and then with some of the international competition coming into North America..

Okay. And can you talk about Brexit in the UK and what impact that might have on your outlook going forward into 2017. I mean, I know, Brexit is unclear, (35:31) but is it weighing on UK purchases..

Just, overall UK Brexit impact on the market outlook there..

Yeah. We do couple percent in the UK through JLG. We expect there'll be continued pressure there with some of the UK manufacturers, but what we're seeing around Europe and there's some growth opportunities in the Nordics, Benelux, I think, Dave mentioned it that we do see some solid contributions coming from that region, Middle East and Africa.

So overall, our forecast is to continue navigate around some of that currency and what currency we do know about is in our forecast..

Ann, and we do believe that we're going to see a headwind just on the translation of the sales, so that is a headwind in the Access Equipment market specifically that we do have factored into our outlook for fiscal 2017..

For the UK..

Yeah, for the UK..

Okay.

Can you tell us what exchange rate you're using for your 2017 forecast, U.S., Europe?.

Somewhere, but I don't have it off the – right in front of me, but somewhere between $1.20 and $1.25..

Okay. I appreciate it. I'll get back in line. Thank you..

Thanks, Ann..

Our next question comes from the line of Ross Gilardi of Bank of America Merrill Lynch. Please proceed with your question..

Hey, good morning, guys. Thank you..

Hi, Ross..

Good morning..

I just want to ask you about the stagnation in the concrete business.

I mean, you guys seem to look at that as sort of an isolated situation on a very specific product category, but why isn't that a canary in the coal mine for the broader nonresidential market, which you clearly remain pretty optimistic on? I mean, in the past, when you've seen a slowing there, has it led to a slowing in some of your other non-res exposed businesses, what I'm really asking..

Well, Ross, the way I would describe that where we are with our concrete mixer business is we're seeing kind of a tale of two cities here. Our front discharge business is up significantly year-over-year. Longer lead times, so we're seeing some responsible buying patterns there.

It's the rear discharge market that I think is where there is the most consternation, the ready-mix customer was hit really hard. If you recall, they were down four to five years through the recession and after the recession. So, they're a little more cautious about the buying equipment. The equipment is very old.

So, the advantages they have is there are a lot of commercial chassis available out there and they can get quick builds, if they get on projects and need more equipment. Where we see that the aged fleet is really coming into play is our aftermarket business is up in the concrete mixer area.

So, it's a little bit of a weird dynamic, and with the FAST Act we think that that will be some positive. But then again, if you look at the highways around the country here, only about 15% or 20% are concrete, majority are asphalt.

So, I think, a lot of people believe we'll have a nice pickup of the FAST Act around concrete and we will have a pickup, but it won't be as significant, I think, as most people think..

All right. Thanks, guys. That's really helpful. And could you talk about in the overall environment for used pricing with Access. I mean, I imagine you track that pretty closely and there was an inventory overhang. You having a lot of that sort of last year on new equipment that you've worked down.

I mean, are you seeing anything notable in the used equipment market, which would tell you that sort of an oversupply of equipment is working through the system or to reverse, you know, getting worse..

Yeah, Ross. I don't believe there is an oversupply of equipment. You've heard some of the larger rental companies talk about their margins are good on their used disposals. Our inventory is in good shape. We are waiting on the Rouse data to come out, we haven't seen Rouse data in a while just to get the latest calibration on where used is.

But I would tell you overall, it's not having any top of material effect on our new machine sales. We watch that, you're right, we do watch that very closely on the orderly liquidation values. So, today, I'd just tell you that it's very similar to what it's been the last few quarters, with no change to our business..

Got it. Thanks, Wilson..

All right. Thanks, Ross..

Our next question comes from the line of Seth Weber of RBC Capital Markets. Please proceed with your question..

Hey, good morning everybody?.

Hi, Seth..

A lot of questions have been asked and answered but on the plans to outsource the aftermarket parts distribution. Can you talk about what does that mean for your inventory, specifically.

Does that inventory go off of your books at that point? Or do you keep that inventory in your working capital?.

That's still our inventory, Seth. It's just being managed, and fulfilled by a third-party..

Okay. Thanks, Dave.

And then on the Defense costs that you're expecting to hit in the fourth quarter, do those just slide into the – I mean, should we think about those sliding into the first quarter, is it first half? Can you help us with the cadence on how we should be thinking about the headwind there for costs that you didn't see in the fourth quarter?.

Yeah, I think you're talking about the bid and proposal costs for the FMTV?.

That's right, yeah..

That RFP did hit the street in mid-October. So, our team is fully engaged and working on that right now. So, we will see a large component of those costs in the first quarter and probably filling into the second quarter as well..

Okay. Thanks.

And then just lastly, can you size for us the – on the Access business, there was the, I guess the reversal on a used provision, sorry – so the lower provision for valuation reserve, was that meaningful?.

Let's call it mid single-digit millions..

Okay.

And is that something you do every quarter or is it just the end of year kind of thing?.

That was the prior year, we took a charge in the fourth quarter of last year to a net realizable value adjustment to our used inventory last year. We didn't do that this year, so it ended up being a year-over-year..

It's just the year-over-year delta. Okay. Sorry, thanks. That's very helpful. I appreciate it, guys. Thanks a lot..

Thanks Seth..

Thanks..

Our next question comes from the line of Stanley Elliott of Stifel. Please proceed with your question..

Hey, guys. Good morning. Thank you for taking my question. A quick question. In the release you guys talked about continuing to work additional opportunities on the Defense side.

What sort of vehicle classes are we talking about here and what's the potential for some of those to be shipped in 2017?.

Stanley, I wouldn't say that we have any in our forecast in 2017, but it's a good question because I think most people believe internationally we're just working M-ATVs, but we're working FMTVs, FHTVs, our full line of Defense products are being quoted internationally.

So, there's more than just the M-ATV opportunity and then, as we've said before, in a few years we'll be getting into JLTV opportunities. But most recently we had some great discussions at the AUSA Show, the big defense show, and then we just did a nice demonstration for our NATO allies, with our U.S.

Military in Europe and received some really nice interest there. So, it's a little bit of balance. There's probably more interest on M-ATV and eventually JLTV, but there is interest on our heavies and on our FMTVs..

Great. And then, when we think about the Fire business and kind of the progress towards a kind of a 10% sort of a margin, you've done nice job with a lot of new product development.

Is it really now a function of more the volumes taking place to hit that target or how do we think about the progression towards achieving that hurdle?.

No, Stanley. It's not just volume, what we've said all along is we want to get this business foundationally set for the future where volumes do go up and down. And I have to applaud the F&E team, they've been very focused on simplifying their business, the front end process, the order entry process, all the way through their manufacturing process.

And I know if they were on the call, they would tell you they still have plenty of run room there to improve internally and that will be the plan. We want to get again the foundation there.

So, as you know we have a lot of fixed cost in that business and so we want to make sure all those processes and manufacturing operational efficiencies are in place, if and when they do have a little bit of a downturn..

Perfect, guys. Thank you very much. Best of luck..

Thanks, Stanley..

Our next question comes from the line of Jamie Cook of Credit Suisse. Please proceed with your question..

Hi. Good morning. Most of the questions have been asked, so I guess a follow-up on the Access Equipment market.

Do you have any sort of update on how you're thinking about when this business troughs, whether you're more confident it's 2018 or 2019, just given sort of the negative non-res data points and just concerns over Europe? And then also, and I'm sorry I've been on a couple of earnings calls, have you seen anything or is there any reason to be more optimistic about Brazil, because historically that had been a good market within Access.

Thanks..

Thank you, Jamie. I don't think we're banking much on Brazil these days. We're going to take a real wait-and-see approach there and hopefully that country gets their act together here in the next several years, but we're not forecasting any uptick there in the near term.

The question after 2017, as you know, we're still working through 2017, and finalizing with the national rental company discussions and those are going well.

We like I think some of our competitors agree that logically 2018 should be some type of inflection point, but we don't want to just put a stake in the sand and say that's definitely going to happen because, as you know, this Access market has not been easy to forecast. So, we'll keep you posted as we move through this.

For now, as you know, we're really focused on 2017 performance..

Okay. Thanks. I'll get back in queue..

Our next question comes from the line of Eli Lustgarten of Longbow Securities. Please proceed with your question..

Thank you. Good morning, everyone..

Hi, Eli..

Hi, good morning..

Can I get some clarification to the last one asked on the Access business, some near term or longer term details? You mentioned that you were happy with inventories. Are inventory levels at the place you wanted it to be, that you're going to be producing at retail or would there be a period of time that you still produce below what you're selling.

Two, you're down 7% to 10% for the year, is that going to be first half weighted, in other words will most of that decline happen over the next two quarters, the fourth quarter, into next year or is it spread out? And you're down 7% to 10%, do you have any FX impact in that 7% to 10%, and is that parts distribution agreement, does that impact your profitability or margins or how will that affect it?.

All right. A lot packed in there Eli, if we miss some, please remind us and we'll try to circle back and catch them. As it relates to inventory, yes, we think, we are appropriately positioned from an inventory standpoint to be able to produce what I would call at a retail level for fiscal 2017.

The team did a really good job throughout the year responsibly bringing the inventory levels down and they followed their plan really almost to a T throughout the year, so. I think, they did a really good job with that.

In terms of the outlook for sales on a quarterly spread, I think, we do believe, we're going to be down in the first quarter and we didn't provide a lot of specifics around that, but I think, as we look through the year, if you take the 7% to 10% down, I think on a quarterly basis, it could range within that in each of those quarters.

I don't know that we've got it dialed in a lot tighter than that especially since we're still in discussions with our national rental company customers.

Regarding the FX impact, a little bit of that 7% to 10% decline is going to be FX related, I would say more so focused probably on the UK piece as Wilson mentioned, the pound is down about incremental 15% compared to the prior year and we've got a couple of percent of our sales in that market typically, so we will see a little bit of an impact from that, but that's certainly isn't going to be the big driver of the 7% to 10% down.

And then, I think, I'm running out of (48:57). Yeah, we don't think that's going to have a much of a negative impact. We're not planning for it to have a negative impact. As Wilson mentioned, we're going to go about this thoughtfully.

It is going to take some time to transition here, but we know the importance of maintaining strong customer service levels, in terms of aftermarket fulfillment, and the Access Equipment team is laser focused on that, and are going to make sure they do everything they can to have a smooth transition here..

I would just add to that Eli that, this is not a turn, switch off at our current parts distribution and turn one on at the 3PL. We're going to keep our current distribution center open until this transition has happened, and we're satisfied that we're executing 100%..

All right. Thank you very, very much..

Thanks, Eli..

You have a follow up question from the line of Mig Dobre of Robert W. Baird. Please proceed with your question..

Yes. Thanks for taking my follow up. I don't know if I missed this, or you didn't mention it, but can you may be breakup, I'm going to call, on kind of one-time items that you had in fourth quarter in Defense that aided margin.

I'm trying to understand what the core margin was excluding like LIFO and all these other items that you kind of called out?.

Yeah. Mig, there were about four items I think that we called out, the FMTV bid and proposal costs, LIFO, warranty, and then benefit costs.

In total if we go back to our – compare that to what we were talking about out at Analyst Day, they all add up to a total of about $8 million and there isn't one of them that necessarily stands out, as being the main driver of all those, so it's, I guess I would call it four smaller things, certainly the FMTV costs are going to carry over into the next year, LIFO's all is a little bit of a wildcard, so I wouldn't really expect much there.

And then the warranty and the benefit costs, hopefully we can see some of those carry over, but again I think those would be offset to a great extent by the bid and proposal costs..

Dave, those were versus our expectations or versus prior year?.

Versus our expectations..

Okay..

Yes..

Good..

Okay. Thank you..

There are no further questions at this time of the conference. I would now like to turn the conference back over to Wilson Jones, President and CEO of the company for closing remarks..

All right, thank you for participating on our call today. We certainly appreciate your interest in the Oshkosh Corporation. We have a motivated team delivering strong shareholder value and we're certainly looking forward to exceeding our customers' expectations well into the future.

We look forward to seeing you all, out on the road, in Oshkosh here or during the next investor conference. Thanks again for your time today. Have a good day..

This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful rest of your day..