OSHKOSH CORP, 10-Q filed on 4/30/2019
Quarterly Report
v3.19.1
Document and Entity Information - shares
6 Months Ended
Mar. 31, 2019
Apr. 23, 2019
Document and Entity Information [Abstract]    
Entity Registrant Name OSHKOSH CORP  
Entity Central Index Key 0000775158  
Current Fiscal Year End Date --09-30  
Entity Filer Category Large Accelerated Filer  
Document Type 10-Q  
Document Period End Date Mar. 31, 2019  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Entity Common Stock, Shares Outstanding   69,915,542
Entity Current Reporting Status Yes  
Entity Small Business false  
Entity Emerging Growth Company false  
v3.19.1
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Mar. 31, 2019
Mar. 31, 2018
Income Statement [Abstract]        
Revenues $ 1,990.2 $ 1,886.4 $ 3,793.6 $ 3,472.7
Cost of sales 1,632.3 1,550.4 3,107.4 2,893.7
Gross income 357.9 336.0 686.2 579.0
Operating expenses:        
Selling, general and administrative 173.0 170.4 331.6 328.3
Amortization of purchased intangibles 9.3 9.2 18.5 19.8
Total operating expenses 182.3 179.6 350.1 348.1
Operating income 175.6 156.4 336.1 230.9
Other income (expense):        
Interest expense (13.7) (16.1) (27.4) (31.5)
Interest income 2.0 8.1 4.2 9.8
Miscellaneous, net 1.2 (1.3) 0.0 (1.5)
Income before income taxes and earnings (losses) of unconsolidated affiliates 165.1 147.1 312.9 207.7
Provision for income taxes 36.2 36.2 75.9 40.9
Income before earnings (losses) of unconsolidated affiliates 128.9 110.9 237.0 166.8
Equity in earnings (losses) of unconsolidated affiliates (0.4) (0.1) 0.5 0.4
Net income $ 128.5 $ 110.8 $ 237.5 $ 167.2
Earnings per share:        
Basic earnings per share (in dollars per share) $ 1.84 $ 1.49 $ 3.37 $ 2.24
Diluted earnings per share (in dollars per share) 1.82 1.47 3.33 2.21
Cash dividends declared per share on common stock (in dollars per share) $ 0.27 $ 0.24 $ 0.54 $ 0.48
v3.19.1
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Mar. 31, 2019
Mar. 31, 2018
Statement of Comprehensive Income [Abstract]        
Net income $ 128.5 $ 110.8 $ 237.5 $ 167.2
Other comprehensive income (loss), net of tax:        
Employee pension and postretirement benefits (3.8) 0.5 (3.8) 1.0
Currency translation adjustments (6.9) 16.5 (15.7) 18.6
Change in fair value of derivative instruments (0.2) 0.3 (0.2) 0.3
Total other comprehensive income (loss), net of tax (10.9) 17.3 (19.7) 19.9
Comprehensive income $ 117.6 $ 128.1 $ 217.8 $ 187.1
v3.19.1
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Millions
Mar. 31, 2019
Sep. 30, 2018
Current assets:    
Cash and cash equivalents $ 321.9 $ 454.6
Receivables, net 1,077.8 1,521.6
Unbilled receivables, net 384.5 0.0
Inventories, net 1,503.5 1,227.7
Other current assets 82.0 66.0
Total current assets 3,369.7 3,269.9
Property, plant and equipment, net 504.0 481.1
Goodwill 1,001.6 1,007.9
Purchased intangible assets, net 450.9 469.4
Other long-term assets 143.2 65.9
Total assets 5,469.4 5,294.2
Current liabilities:    
Revolving credit facilities and current maturities of long-term debt 0.0 0.0
Accounts payable 825.4 776.9
Customer advances 497.8 444.9
Payroll-related obligations 142.5 192.5
Other current liabilities 344.4 275.8
Total current liabilities 1,810.1 1,690.1
Long-term debt, less current maturities 818.5 818.0
Other long-term liabilities 341.1 272.6
Commitments and contingencies
Shareholders’ equity:    
Preferred Stock ($0.01 par value; 2,000,000 shares authorized; none issued and outstanding) 0.0 0.0
Common Stock ($0.01 par value; 300,000,000 shares authorized; 75,101,465 shares issued) 0.7 0.7
Additional paid-in capital 798.1 814.8
Retained earnings 2,200.3 2,007.9
Accumulated other comprehensive loss (135.6) (106.8)
Common Stock in treasury, at cost (5,202,448 and 2,730,707 shares, respectively) (363.8) (203.1)
Total shareholders’ equity 2,499.7 2,513.5
Total liabilities and shareholders’ equity $ 5,469.4 $ 5,294.2
v3.19.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares
Mar. 31, 2019
Sep. 30, 2018
Stockholders' Equity, Number of Shares, Par Value and Other Disclosures [Abstract]    
Preferred Stock, par value (in dollars per share) $ 0.01 $ 0.01
Preferred Stock, shares authorized 2,000,000 2,000,000
Preferred Stock, shares issued 0 0
Preferred Stock, shares outstanding 0 0
Common Stock, par value (in dollars per share) $ 0.01 $ 0.01
Common Stock, shares authorized 300,000,000 300,000,000
Common Stock, shares issued 75,101,465 75,101,465
Common Stock in treasury, shares 5,202,448 2,730,707
v3.19.1
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($)
$ in Millions
Total
Common Stock
Additional Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Common Stock in Treasury, at Cost
Balance at Sep. 30, 2017 $ 2,307.4 $ 0.9 $ 802.2 $ 2,399.8 $ (125.0) $ (770.5)
Changes in Equity            
Net income 167.2     167.2    
Employee pension and postretirement benefits, net of tax 1.0       1.0  
Currency translation adjustments 18.6       18.6  
Cash dividends (35.9)     (35.9)    
Repurchases of Common Stock (128.7)         (128.7)
Exercise of stock options 12.5   (3.1)     15.6
Stock-based compensation expense 13.8   13.8      
Payment of stock-based restricted and performance shares 0.0   (8.9)     8.9
Shares tendered for taxes on stock-based compensation (7.5)         (7.5)
Other 1.2   0.3   0.3 0.6
Balance at Mar. 31, 2018 2,349.6 0.9 804.3 2,531.1 (105.1) (881.6)
Balance at Dec. 31, 2017 2,293.4 0.9 799.3 2,438.2 (122.4) (822.6)
Changes in Equity            
Net income 110.8     110.8    
Employee pension and postretirement benefits, net of tax 0.5       0.5  
Currency translation adjustments 16.5       16.5  
Cash dividends (17.9)     (17.9)    
Repurchases of Common Stock (65.0)         (65.0)
Exercise of stock options 3.9   (1.3)     5.2
Stock-based compensation expense 6.3   6.3      
Payment of stock-based restricted and performance shares 0.0   (0.3)     0.3
Shares tendered for taxes on stock-based compensation (0.1)         (0.1)
Other 1.2   0.3   0.3 0.6
Balance at Mar. 31, 2018 2,349.6 0.9 804.3 2,531.1 (105.1) (881.6)
Balance at Sep. 30, 2018 2,513.5 0.7 814.8 2,007.9 (106.8) (203.1)
Changes in Equity            
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | Accounting Standards Update 2014-09 [Member] (60.4)     (60.4)    
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | Accounting Standards Update 2016-16 [Member] 44.5     44.5    
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | Accounting Standards Update 2018-02 [Member] 0.0     9.1 (9.1)  
Balance at Oct. 01, 2018 2,497.6 0.7 814.8 2,001.1 (115.9) (203.1)
Balance at Sep. 30, 2018 2,513.5 0.7 814.8 2,007.9 (106.8) (203.1)
Changes in Equity            
Net income 237.5     237.5    
Employee pension and postretirement benefits, net of tax (3.8)       (3.8)  
Currency translation adjustments (15.7)       (15.7)  
Cash dividends (38.3)     (38.3)    
Repurchases of Common Stock (195.0)         (195.0)
Exercise of stock options 8.6   (7.4)     16.0
Stock-based compensation expense 15.3   15.3      
Payment of stock-based restricted and performance shares 0.0   (24.2)     24.2
Shares tendered for taxes on stock-based compensation (7.3)         (7.3)
Other 0.8   (0.4)   (0.2) 1.4
Balance at Mar. 31, 2019 2,499.7 0.7 798.1 2,200.3 (135.6) (363.8)
Balance at Dec. 31, 2018 2,411.2 0.7 797.6 2,090.8 (124.7) (353.2)
Changes in Equity            
Net income 128.5     128.5    
Employee pension and postretirement benefits, net of tax (3.8)       (3.8)  
Currency translation adjustments (6.9)       (6.9)  
Cash dividends (19.0)     (19.0)    
Repurchases of Common Stock (25.0)         (25.0)
Exercise of stock options 6.9   (5.6)     12.5
Stock-based compensation expense 7.4   7.4      
Payment of stock-based restricted and performance shares 0.0   (0.9)     0.9
Shares tendered for taxes on stock-based compensation (0.4)         (0.4)
Other 0.8   (0.4)   (0.2) 1.4
Balance at Mar. 31, 2019 $ 2,499.7 $ 0.7 $ 798.1 $ 2,200.3 $ (135.6) $ (363.8)
v3.19.1
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parenthetical) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Mar. 31, 2019
Mar. 31, 2018
Statement of Stockholders' Equity [Abstract]        
Employee pension and postretirement benefits, net of tax $ 0.9 $ 0.2 $ 1.0 $ 0.4
Cash dividends declared per share on common stock (in dollars per share) $ 0.27 $ 0.24 $ 0.54 $ 0.48
v3.19.1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Millions
6 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Operating activities:    
Net income $ 237.5 $ 167.2
Depreciation and amortization 57.1 61.3
Stock-based compensation expense 15.3 13.8
Deferred income taxes 3.4 (21.8)
(Gain) loss on sale of assets 0.7 (0.6)
Foreign currency transaction (gains) losses 1.7 (0.7)
Other non-cash adjustments (0.5) 1.1
Changes in operating assets and liabilities (162.2) (176.4)
Net cash provided by operating activities 153.0 43.9
Investing activities:    
Additions to property, plant and equipment (50.6) (37.9)
Additions to equipment held for rental (12.2) (2.9)
Proceeds from sale of equipment held for rental 6.6 4.4
Other investing activities (0.1) (0.5)
Net cash used by investing activities (56.3) (36.9)
Financing activities:    
Proceeds from issuance of debt (original maturities greater than three months) 0.0 13.1
Repayments of debt (original maturities greater than three months) 0.0 (17.9)
Repurchases of Common Stock (202.3) (136.2)
Dividends paid (38.3) (35.9)
Proceeds from exercise of stock options 8.6 12.5
Net cash used by financing activities (232.0) (164.4)
Effect of exchange rate changes on cash 2.6 (1.7)
Decrease in cash and cash equivalents (132.7) (159.1)
Cash and cash equivalents at beginning of period 454.6 447.0
Cash and cash equivalents at end of period 321.9 287.9
Supplemental disclosures:    
Cash paid for interest 28.3 29.7
Cash paid for income taxes $ 47.5 $ 24.0
v3.19.1
Basis of Presentation
6 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation
Basis of Presentation

In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments (which include normal recurring adjustments, unless otherwise noted) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. These Condensed Consolidated Financial Statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K of Oshkosh Corporation for the year ended September 30, 2018. The interim results are not necessarily indicative of results for the full year. “Oshkosh” refers to Oshkosh Corporation not including its subsidiaries and “the Company” refers to Oshkosh Corporation and its subsidiaries. Certain reclassifications have been made to the fiscal 2018 financial statements to conform to the fiscal 2019 presentation.
v3.19.1
New Accounting Standards
6 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]  
New Accounting Standards
New Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued new revenue recognition guidance (Accounting Standard Codification (ASC) 606) to provide a single, comprehensive revenue recognition model for all contracts with customers, Accounting Standard Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). This guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard supersedes all existing U.S. GAAP guidance on revenue recognition and is expected to require the use of more judgment and result in additional disclosures.

The Company adopted the new guidance on October 1, 2018 following the modified retrospective method of transition. The Company applied the new guidance to contracts that were not completed at the date of initial adoption, resulting in a reduction of retained earnings by $60.4 million, after-tax, at that date. For contracts that were modified prior to October 1, 2018, the Company considered the aggregate impact of all modifications that occurred prior to the effective date of the standard for purposes of identifying performance obligations, determining transaction price and allocating transaction price to performance obligations. Prior period comparative information was not recast to reflect the impact of the new guidance and therefore continues to be reported under the accounting guidance in effect during those periods.

Under the new guidance, the majority of the Company’s contracts with the U.S. government follow an over time model that uses the cost-to-cost method to measure performance. Previously the Company had recognized revenue from these contracts on the percentage of completion method using either the cost-to-cost or the units-complete method. In addition, the new guidance changes the definition of a contract, resulting in the Company no longer considering unexercised government options in the measurement of completion and profitability. The new guidance is expected to result in additional volatility in the Company’s earnings based upon the date of receipt of contract orders.

In the fire & emergency segment, the point in time at which “control transfers” to the customer differs from when the Company no longer maintains “risk of loss”, which under the new guidance delays the point in time at which the Company will recognize revenue on contracts for which the end user, rather than the Company’s dealer, is the Company’s customer. In the commercial segment, the Company builds certain units on chassis owned by the end customer. Revenue related to these arrangements moved from a point in time revenue recognition model to an over time model that is measured using the cost-to-cost method of percentage-of-completion as the Company is enhancing a customer asset. In addition, under the new guidance, the Company defers revenue, including the estimated profit, for service warranties instead of recording a liability for estimated costs.

See Note 3 of the Notes to Condensed Consolidated Financial Statements for additional information regarding the Company’s revenue recognition method under the new revenue guidance.

The cumulative effect of initially applying the new revenue recognition guidance to the Company’s Condensed Consolidated Financial Statements as of October 1, 2018 was as follows (in millions):
 
 
Balance as of September 30, 2018
 
Cumulative Impact from Adopting New Revenue Standard
 
Balance as of October 1,
2018
Assets
 
 
 
 
 
 
Receivables, net
 
$
1,521.6

 
$
(248.9
)
 
$
1,272.7

Unbilled receivables, net
 

 
309.7

 
309.7

Inventories, net
 
1,227.7

 
(75.9
)
 
1,151.8

Other current assets
 
66.0

 
0.3

 
66.3

Total current assets
 
3,269.9

 
(14.8
)
 
3,255.1

Other long-term assets
 
65.9

 
18.7

 
84.6

Total assets
 
5,294.2

 
3.9

 
5,298.1

 
 
 
 
 
 
 
Liabilities and Shareholders Equity
 
 
 
 
 
 
Customer advances
 
$
444.9

 
$
27.2

 
$
472.1

Other current liabilities
 
275.8

 
6.4

 
282.2

Total current liabilities
 
1,690.1

 
33.6

 
1,723.7

Other long-term liabilities
 
272.6

 
30.7

 
303.3

Retained earnings
 
2,007.9

 
(60.4
)
 
1,947.5

Total shareholders equity
 
2,513.5

 
(60.4
)
 
2,453.1

Total liabilities and shareholders equity
 
5,294.2

 
3.9

 
5,298.1



The impact from adopting the new revenue recognition guidance on the Company’s Condensed Consolidated Financial Statements as of and for the three and six months ended March 31, 2019 was as follows (in millions):
 
 
Three Months Ended March 31, 2019
 
 
As Reported
 
Previous Accounting Guidance
 
Impact of New Revenue Recognition Standard
Condensed Consolidated Statement of Income
 
 
 
 
 
 
Net sales
 
$
1,990.2

 
$
1,974.7

 
$
15.5

Cost of sales
 
1,632.3

 
1,623.6

 
8.7

Gross income
 
$
357.9

 
$
351.1

 
$
6.8

 
 
 
 
 
 
 
Operating income
 
$
175.6

 
$
168.8

 
$
6.8

 
 
 
 
 
 
 
Income before income taxes and earnings of unconsolidated affiliates
 
$
165.1

 
$
158.3

 
$
6.8

Provision for income taxes
 
36.2

 
34.6

 
1.6

Income before earnings of unconsolidated affiliates
 
128.9

 
123.7

 
5.2

Equity in earnings of unconsolidated affiliates
 
(0.4
)
 
(0.4
)
 

Net income
 
$
128.5

 
$
123.3

 
$
5.2

 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
Basic
 
$
1.84

 
$
1.76

 
$
0.08

Diluted
 
1.82

 
1.74

 
0.08


 
 
Six Months Ended March 31, 2019
 
 
As Reported
 
Previous Accounting Guidance
 
Impact of New Revenue Recognition Standard
Condensed Consolidated Statement of Income
 
 
 
 
 
 
Net sales
 
$
3,793.6

 
$
3,740.0

 
$
53.6

Cost of sales
 
3,107.4

 
3,085.8

 
21.6

Gross income
 
$
686.2

 
$
654.2

 
$
32.0

 
 
 
 
 
 
 
Operating income
 
$
336.1

 
$
304.1

 
$
32.0

 
 
 
 
 
 
 
Income before income taxes and earnings of unconsolidated affiliates
 
$
312.9

 
$
280.9

 
$
32.0

Provision for income taxes
 
75.9

 
68.3

 
7.6

Income before earnings of unconsolidated affiliates
 
237.0

 
212.6

 
24.4

Equity in earnings of unconsolidated affiliates
 
0.5

 
0.5

 

Net income
 
$
237.5

 
$
213.1

 
$
24.4

 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
Basic
 
$
3.37

 
$
3.02

 
$
0.35

Diluted
 
3.33

 
2.99

 
0.34


 
 
March 31, 2019
 
 
As Reported
 
Previous Accounting Guidance
 
Impact of New Revenue Recognition Standard
Condensed Consolidated Balance Sheet
 
 
 
 
 
 
Assets
 
 
 
 
 
 
Receivables, net
 
$
1,077.8

 
$
1,376.0

 
$
(298.2
)
Unbilled receivables, net
 
384.5

 

 
384.5

Inventories, net
 
1,503.5

 
1,572.4

 
(68.9
)
Other current assets
 
82.0

 
82.0

 

Total current assets
 
3,369.7

 
3,352.3

 
17.4

Other long-term assets
 
143.2

 
132.1

 
11.1

Total assets
 
5,469.4

 
5,440.9

 
28.5

 
 
 
 
 
 
 
Liabilities and Shareholders Equity
 
 
 
 
 
 
Customer advances
 
$
497.8

 
$
491.6

 
$
6.2

Other current liabilities
 
344.4

 
321.9

 
22.5

Total current liabilities
 
1,810.1

 
1,781.4

 
28.7

Other long-term liabilities
 
341.1

 
305.3

 
35.8

Retained earnings
 
2,200.3

 
2,236.3

 
(36.0
)
Total shareholders equity
 
2,499.7

 
2,535.7

 
(36.0
)
Total liabilities and shareholders equity
 
5,469.4

 
5,440.9

 
28.5



In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory. The standard requires that an entity recognize the income tax consequences of an intra-entity transfer of an asset when the transfer occurs as opposed to when the asset is transferred to an outside party. The standard does not apply to intra-entity transfers of inventory. The Company adopted ASU 2016-16 on October 1, 2018 following the modified retrospective approach through a cumulative effect adjustment, which resulted in an increase to retained earnings of $44.5 million.

In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The standard requires that an entity report the service cost component of net periodic pension and postretirement cost in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The remaining components of net benefit costs are required to be presented in the income statement separately from the service component and outside a subtotal of income from operations. The amendment further allows only the service cost component of net periodic pension and postretirement costs to be eligible for capitalization, when applicable. The Company adopted ASU 2017-07 on October 1, 2018. The impact of this standard was a reclassification of $0.5 million and $1.2 million of other components of net periodic pension cost to “Miscellaneous, net” on the Condensed Consolidated Statement of Income for the three and six months ended March 31, 2018, respectively. The Company utilized a practical expedient included in the ASU which allowed the Company to use amounts previously disclosed in its Employee Benefit Plans footnote for the prior period as the estimation basis for applying the required retrospective presentation requirements.

In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The standard allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act enacted in the United States in December 2017 (the “Tax Reform Act”), thereby eliminating the resulting stranded tax effect. The Company adopted ASU 2018-02 on October 1, 2018. The Company increased retained earnings by $9.1 million upon adoption of ASU 2018-02 to eliminate the tax effects stranded in accumulated other comprehensive income resulting from the Tax Reform Act.

Standards not yet adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), and has since issued amendments to this standard, which requires lessees to reflect most leases on their balance sheet as lease liabilities with corresponding right-of-use assets, while leaving presentation of lease expense in the statement of income largely unchanged. The standard also eliminates the real-estate specific provisions that exist under current U.S. GAAP and modifies the classification criteria and accounting lessors must apply to sales-type and direct financing leases. Entities have the option to adopt the new guidance using a modified retrospective approach through a cumulative effect adjustment to retained earnings applied either to the beginning of the earliest period presented or the beginning of the period of adoption. In addition, the new guidance provides for certain practical expedients. The Company will be required to adopt ASU 2016-02 and related amendments to the standard as of October 1, 2019.

The Company is currently evaluating its lease landscape to assess the effect of the new guidance on the Company’s consolidated financial statements. It is also focused on designing new processes, controls and a system solution to support the Company’s implementation and compliance with the requirements of the new standard. The Company plans to adopt the new guidance effective October 1, 2019 using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The standard requires a change in the measurement approach for credit losses on financial assets measured on an amortized cost basis from an incurred loss method to an expected loss method, thereby eliminating the requirement that a credit loss be considered probable to impact the valuation of a financial asset measured on an amortized cost basis. The standard requires the measurement of expected credit losses to be based on relevant information about past events, including historical experience, current conditions, and a reasonable and supportable forecast that affects the collectability of the related financial asset. The Company will be required to adopt ASU 2016-13 as of October 1, 2020. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2016-13 on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment. The standard simplifies the measurement of goodwill impairment by eliminating the requirement that an entity compute the implied fair value of goodwill based on the fair values of its assets and liabilities to measure impairment. Instead, goodwill impairment will be measured as the difference between the fair value of the reporting unit and the carrying value of the reporting unit. The standard also clarifies the treatment of the income tax effect of tax deductible goodwill when measuring goodwill impairment loss. The Company will be required to adopt ASU 2017-04 as of October 1, 2020. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2017-04 on the Company’s consolidated financial statements.
v3.19.1
Sales and Revenue Recognition Sales and Revenue Recognition
6 Months Ended
Mar. 31, 2019
Sales and Revenue Recognition [Abstract]  
Revenue from Contract with Customer [Text Block]
Revenue Recognition

Revenue is recognized when control of the goods or services promised under a contract are transferred to the customer either at a point in time (e.g., upon delivery) or over time (e.g., as the Company performs under the contract) in an amount that reflects the consideration to which the Company expects to be entitled in exchange for the goods or services. The Company accounts for a contract when it has approval and commitment from both parties, the rights and payment terms of the parties are identified, the contract has commercial substance and collectability of consideration is probable. If collectability is not probable, the sale is deferred until collection becomes probable or payment is received.

Contracts are reviewed to determine whether there is one or multiple performance obligations. A performance obligation is a promise to transfer a distinct good or service to a customer and represents the unit of accounting for revenue recognition. For contracts with multiple performance obligations, the expected consideration (e.g., the transaction price) is allocated to each performance obligation identified in the contract based on the relative standalone selling price of each performance obligation, which are determinable based on observable standalone selling prices or are estimated using an expected cost plus a margin approach. Revenue is then recognized for the transaction price allocated to the performance obligation when control of the promised goods or services underlying the performance obligation is transferred. When the amount of consideration allocated to a performance obligation through this process differs from the invoiced amount, it results in a contract asset or liability. The identification of performance obligations within a contract requires significant judgment.

The following is a description of the primary activities from which the Company generates revenue.

Access equipment, Fire & emergency and Commercial segments revenue

The Company derives revenue in the access equipment, fire & emergency and commercial segments (non-defense segments) through the sale of machinery, vehicles and related aftermarket parts and services. Customers include distributors and end-users. Contracts with customers generally exist upon the approval of a quote and/or purchase order by the Company and customer. Each contract is also assessed at inception to determine whether it is necessary to combine the contract with other contracts.

The Company’s non-defense segments offer various customer incentives within contracts, such as sales and marketing rebates, volume discounts and interest subsidies, some of which are variable and therefore must be estimated by the Company. Transaction prices may also be impacted by rights of return, primarily within the aftermarket parts business, which requires the Company to record a liability and asset representing its rights and obligations in the event a return occurs. The estimated return liability is based on historical experience rates.

Revenue for performance obligations consisting of machinery, vehicle and after-market parts (together, “product”) is recognized when the customer obtains control of the product, which typically occurs at a point in time, based on the shipping terms within the contract. In the commercial segment, concrete mixer and refuse collection products are sold on both Company owned chassis and customer owned chassis. When performing work on a customer owned chassis, revenue is recognized over time based on the cost-to-cost method, as the Company is enhancing a customer owned asset.

All non-defense segments offer aftermarket services related to their respective products such as repair, refurbishment and maintenance (together, “services”). The Company generally recognizes revenue on service performance obligations over time using the method that results in the most faithful depiction of transfer of control to the customer. Non-defense segments also offer extended warranty coverage as an option on most products. The Company considers extended warranties to be service-type warranties and therefore a performance obligation. Service-type warranties differ from the Company’s standard, or assurance-type warranties, as they are generally separately priced and negotiated as part of the contract and/or provide additional coverage beyond what the customer or customer group that purchases the product would receive under an assurance-type warranty. The Company has concluded that its extended warranties are stand-ready obligations to perform and therefore recognizes revenue ratably over the coverage period. The Company also provides a standard warranty on its products and services at no additional cost to its customers in most instances. See Note 13 of the Notes to Condensed Consolidated Financial Statements for further discussion on product assurance warranties.

Defense segment revenue

The majority of the Company’s defense segment net sales are derived through long-term contracts with the U.S. government to design, develop, manufacture or modify defense products. These contracts, which also include those under the U.S. Government-sponsored Foreign Military Sales (FMS) program, accounted for approximately 90% of defense segment revenue in fiscal 2018. Contracts with defense segment customers are generally fixed-price or cost-reimbursement type contracts. Under fixed-price contracts, the price paid to the Company is generally not adjusted to reflect the Company’s actual costs except for costs incurred as a result of contract modifications. Certain fixed-price contracts include an incentive component under which the price paid to the Company is subject to adjustment based on the actual costs incurred. Under cost-reimbursement contracts, the price paid to the Company is determined based on the allowable costs incurred to perform plus a fee. The fee component of cost-reimbursement contracts can be fixed based on negotiations at contract inception or can vary based on performance against target costs established at the time of contract inception. The Company also designs, develops, manufactures or modifies defense products for international customers through Direct Commercial Sale contracts. The defense segment supports its products through the sale of aftermarket parts and services. Aftermarket contracts can range from long-term supply agreements to ad hoc purchase orders for replacement parts.

The Company evaluates the promised goods and services within defense segment contracts at inception to identify performance obligations. The goods and services in defense segment contracts are typically not distinct from one another as they are generally customized and have complex inter-relationships and the Company is responsible for overall management of the contract. As a result, defense segment contracts are typically accounted for as a single performance obligation. The defense segment provides standard warranties for its products for periods that typically range from one to two years. These assurance-type warranties typically cannot be purchased separately and do not meet the criteria to be considered a performance obligation. See Note 13 of the Notes to Condensed Consolidated Financial Statements for further discussion on product assurance warranties.

The Company determines the transaction price for each contract at inception based on the consideration that it expects to receive for the goods and services promised under the contract. This determination is made based on the Company’s current rights, excluding the impact of any subsequent contract modifications (including unexercised options) until they become legally enforceable. Contract modifications frequently occur within the defense segment. The Company evaluates each modification to identify changes that impact price or scope of its contracts, which are then assessed to determine if the modification should be accounted for as an adjustment to an existing contract or as a separate contract. Contract modifications within the defense segment are generally accounted for as a cumulative effect adjustment to existing contracts as they are not distinct from the goods and services within the existing contract.

For defense segment contracts that include a variable component of the sale price, the Company estimates variable consideration. Variable consideration is included within the contract’s transaction price to the extent it is probable that a significant reversal of revenue will not occur. The Company evaluates its estimates of variable consideration on an ongoing basis and any adjustments are accounted for as changes in estimates in the period identified. Common forms of variable consideration within defense segment contracts include cost reimbursement contracts that contain incentives, customer reimbursement rights and regulatory or customer negotiated penalties tied to contract performance.

The Company recognizes revenue on defense segment contracts as performance obligations are satisfied and control of the underlying goods and services is transferred to the customer. In making this evaluation, the defense segment considers contract terms, payment terms and whether there is an alternative future use for the good or service. Through this process the Company has concluded that substantially all of the defense segment’s performance obligations, including a majority of performance obligations for aftermarket goods and services, transfer to the customer continuously during the contract term and therefore revenue is recognized over time. For U.S. government and FMS program contracts, this determination is supported by the inclusion of clauses within contracts that allow the customer to terminate a contract at its convenience. When the clause is present, the Company is entitled to compensation for the work performed through the date of notification at a price that reflects actual costs plus a reasonable margin in exchange for transferring its work in process to the customer. For contracts that do not contain termination for convenience provisions, the Company is generally able to support the continuous transfer of control determination as a result of the customized nature of its goods and services and contractual rights.

The defense segment recognizes revenue on its performance obligations that are satisfied over time by measuring progress using the cost-to-cost method of percentage-of-completion because it best depicts the transfer of control to the customer. Under the cost-to-cost method of percentage-of-completion, the defense segment measures progress based on the ratio of costs incurred to date to total estimated costs for the performance obligation. The Company recognizes changes in estimated sales or costs and the resulting profit or loss on a cumulative basis. Cumulative estimate-at completion (EAC) adjustments represent the cumulative effect of the changes on prior periods. If a loss is expected on a performance obligation, the complete estimated loss is recorded in the period in which the loss is identified. For contracts with only aftermarket parts performance obligations, revenue is recognized at the time the parts are physically committed to the order or based on shipping terms depending on whether the contracts contain a termination for convenience clause. For performance obligations consisting solely of services, revenue is recognized either by using the cost-to-cost method of percentage-of-completion method or as the Company has the right to bill the customer in instances that billing rights approximates timing of transfer of control to the customer.

There is significant judgment involved in estimating sales and costs within the defense segment. Each contract is evaluated at contract inception to identify risks and estimate revenue and costs. In performing this evaluation, the defense segment considers risks of contract performance such as technical requirements, schedule, duration and key contract dependencies. These considerations are then factored into the Company’s estimated revenue and costs. Preliminary contract estimates are subject to change throughout the duration of the contract as additional information becomes available that impacts risks and estimated revenue and costs. In addition, as contract modifications (e.g., new orders) are received, the additional units are factored into the overall contract estimate of costs and transaction price. Contract adjustments in the defense segment increased net sales, operating income, net income and diluted earnings per share by $18.0 million, $11.3 million, $8.7 million and $0.13 per share, respectively, during the three months ended March 31, 2019 and $49.6 million, $41.6 million, $31.9 million and $0.45 per share, respectively, during the six months ended March 31, 2019.

Disaggregation of Revenue

The table below presents consolidated net sales disaggregated by segment and timing of revenue recognition (in millions):

 
Three Months Ended March 31, 2019
 
Access equipment
 
Defense
 
Fire & emergency
 
Commercial
 
Corporate and Intersegment Eliminations
 
Total
Point in time
$
968.9

 
$
1.4

 
$
274.3

 
$
148.1

 
$
(5.2
)
 
$
1,387.5

Over time
18.7

 
485.3

 
8.9

 
89.8

 

 
602.7

 
$
987.6

 
$
486.7

 
$
283.2

 
$
237.9

 
$
(5.2
)
 
$
1,990.2


 
Six Months Ended March 31, 2019
 
Access equipment
 
Defense
 
Fire & emergency
 
Commercial
 
Corporate and Intersegment Eliminations
 
Total
Point in time
$
1,776.7

 
$
1.7

 
$
565.2

 
$
269.3

 
$
(10.1
)
 
$
2,602.8

Over time
37.4

 
949.1

 
13.5

 
190.8

 

 
1,190.8

 
$
1,814.1

 
$
950.8

 
$
578.7

 
$
460.1

 
$
(10.1
)
 
$
3,793.6



See Note 19 of the Notes to Condensed Consolidated Financial Statements for further disaggregated sales information.

Contract Assets and Contract Liabilities

The Company is generally entitled to bill its customers upon satisfaction of its performance obligations, with the exception of its long-term contracts in the defense segment which typically allow for billing upon acceptance of the finished good, advance payments from customers primarily within the fire & emergency segment and extended warranties that are usually billed in advance of the warranty coverage period. Customer payment is usually received shortly after billing and payment terms generally do not exceed one year. With the exception of the fire & emergency segment, the Company’s contracts typically do not contain a significant financing component. In the fire & emergency segment, customers earn interest on customer advances at a rate determined in a separate financing transaction between the fire & emergency segment and the customer at contract inception. Interest due on customer advances of $3.7 million and $7.3 million was recorded in “Interest expense” in the Condensed Consolidated Statements of Income for the three and six months ended March 31, 2019, respectively. Interest due on customer advances of $4.8 million and $9.4 million was recorded in “Interest expense” in the Condensed Consolidated Statements of Income for the three and six months ended March 31, 2018, respectively.

The timing of billing does not always match the timing of revenue recognition. In instances where a customer pays consideration in advance or when the Company is entitled to bill a customer in advance of recognizing the related revenue, the Company records a contract liability within “Customer advances”, “Other current liabilities” or “Other long-term liabilities” in the Condensed Consolidated Balance Sheet. Total contract liabilities were $608.8 million as of March 31, 2019, of which $497.8 million, $62.8 million and $48.2 million was included in “Customer advances”, “Other current liabilities” and “Other long-term liabilities”, respectively. Total contract liabilities were $594.4 million as of October 1, 2018, of which $472.1 million, $75.0 million and $47.3 million was included in “Customer advances”, “Other current liabilities” and “Other long-term liabilities”, respectively. The Company reduces contract liabilities when revenue is recognized. The Company recognized $237.4 million and $473.4 million of revenue that was recorded as a contract liability as of the beginning of the period during the three and six months ended March 31, 2019, respectively.

In instances where the Company recognizes revenue prior to having an unconditional right to payment, the Company records a contract asset within “Unbilled receivables, net” in the Condensed Consolidated Balance Sheet. The Company reduces contract assets when the Company has an unconditional right to payment. The Company periodically assesses its contract assets for impairment.

Contract assets and liabilities are determined on a net basis for each contract. The Company did not record any impairment losses on contracts from customers during the three or six months ended March 31, 2019. See Note 8 of the Notes to Condensed Consolidated Financial Statements for additional information on the Company’s receivable balances.

The Company offers a variety of service-type warranties, including optionally priced extended warranty programs. Outstanding balances related to service-type warranties are included within contract liabilities disclosed above. Revenue related to service warranties is deferred until after the expiration of the standard warranty period. The revenue is then recognized in income over the term of the extended warranty period in proportion to the costs that are expected to be incurred. Changes in the Company’s service-type warranties were as follows (in millions):

 
Six Months Ended 
 March 31,
 
2019
 
2018
Balance at beginning of period
$
30.7

 
$
30.8

Adoption of ASC 606
35.7

 

Deferred revenue for new service warranties
12.8

 
5.6

Amortization of deferred revenue
(12.5
)
 
(5.0
)
Changes in liability for pre-existing warranties, net
0.1

 
(0.5
)
Foreign currency translation
(0.3
)
 
0.2

Balance at end of period
$
66.5

 
$
31.1


Remaining Performance Obligations

As of March 31, 2019, the Company had unsatisfied performance obligations for contracts with an original duration greater than one year totaling $4.61 billion, of which $1.95 billion is expected to be satisfied and revenue recognized in the remaining six months of fiscal 2019, $2.19 billion is expected to be satisfied and revenue recognized in fiscal 2020 and $464.3 million is expected to be satisfied and revenue recognized beyond fiscal 2020. The Company has elected the practical expedient to not disclose unsatisfied performance obligations with an original contract duration of one year or less.

Practical Expedients and Policy Elections

The Company has elected to apply the following practical expedients and accounting policy elections when determining revenue from contracts with customers and capitalization of related costs:

Shipping and handling costs incurred after control of the related product has transferred to the customer are considered costs to fulfill the related promise and are included in “Cost of Sales” in the Condensed Consolidated Statement of Income when incurred or when the related product revenue is recognized, whichever is earlier.
Except for the fire & emergency segment, the Company has elected to not adjust revenue for the effects of a significant finance component when the timing difference between receipt of payment and recognition of revenue is less than one year.
Sales and similar taxes that are collected from customers are excluded from the transaction price.
The Company has elected to expense incremental costs to obtain a contract when the amortization period of the related asset is expected to be less than one year.
v3.19.1
Stock-Based Compensation
6 Months Ended
Mar. 31, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation
Stock-Based Compensation

In February 2017, the Company’s shareholders approved the 2017 Incentive Stock and Awards Plan (the “2017 Stock Plan”). The 2017 Stock Plan replaced the 2009 Incentive Stock and Awards Plan (as amended, the “2009 Stock Plan”). While no new awards will be granted under the 2009 Stock Plan or its predecessor, the 2004 Incentive Stock and Awards Plan, awards previously made under these two plans that were outstanding as of the approval date of the 2017 Stock Plan will remain outstanding and continue to be governed by the provisions of the respective stock plan under which they were issued. At March 31, 2019, the Company had reserved 6,979,736 shares of Common Stock available for issuance to provide for the exercise of outstanding stock options and the issuance of Common Stock under incentive compensation awards, including awards issued prior to the effective date of the 2017 Stock Plan.

The Company recognizes stock-based compensation expense over the requisite service period for vesting of an award, or to an employee’s eligible retirement date, if earlier and applicable. Total stock-based compensation expense, including cash-based liability awards, for the three and six months ended March 31, 2019 was $8.3 million ($6.7 million net of tax) and $15.9 million ($13.2 million net of tax), respectively. Total stock-based compensation expense, including cash-based liability awards, for the three and six months ended March 31, 2018 was $5.7 million ($4.4 million net of tax) and $14.2 million ($11.0 million net of tax), respectively.
v3.19.1
Employee Benefit Plans
6 Months Ended
Mar. 31, 2019
Defined Benefit Plan [Abstract]  
Employee Benefit Plans
Employee Benefit Plans

Components of net periodic pension benefit cost were as follows (in millions):
 
Three Months Ended 
 March 31,
 
Six Months Ended 
 March 31,
 
2019
 
2018
 
2019
 
2018
Components of net periodic benefit cost
 
 
 
 
 
 
 
Service cost
$
3.0

 
$
3.1

 
$
6.0

 
$
6.2

Interest cost
4.7

 
4.5

 
9.4

 
9.0

Expected return on plan assets
(5.0
)
 
(5.1
)
 
(10.0
)
 
(10.1
)
Amortization of prior service cost
0.5

 
0.5

 
0.9

 
0.9

Curtailment
1.2

 

 
1.2

 

Amortization of net actuarial loss
0.1

 
0.4

 
0.1

 
0.9

Net periodic benefit cost
$
4.5

 
$
3.4

 
$
7.6

 
$
6.9



Components of net periodic other post-employment benefit cost were as follows (in millions):
 
Three Months Ended 
 March 31,
 
Six Months Ended 
 March 31,
 
2019
 
2018
 
2019
 
2018
Components of net periodic benefit cost
 
 
 
 
 
 
 
Service cost
$
0.7

 
$
0.9

 
$
1.5

 
$
1.8

Interest cost
0.5

 
0.4

 
1.0

 
0.9

Amortization of prior service benefit
(0.3
)
 
(0.3
)
 
(0.7
)
 
(0.5
)
Amortization of net actuarial gain

 
0.1

 
(0.1
)
 
0.1

Net periodic benefit cost
$
0.9

 
$
1.1

 
$
1.7

 
$
2.3



Components of net periodic benefit cost other than service cost are included in “Miscellaneous, net” in the Condensed Consolidated Statements of Income.
v3.19.1
Income Taxes
6 Months Ended
Mar. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes

The Company recorded income tax expense of $36.2 million for the three months ended March 31, 2019, or 21.9% of pre-tax income, compared to $36.2 million, or 24.6% of pre-tax income, for the three months ended March 31, 2018. As a result of the Tax Reform Act, results for the three months ended March 31, 2019 were subject to a federal income tax rate of 21% versus the 24.5% blended rate applicable to results for the three months ended March 31, 2018. Results for the three months ended March 31, 2019 were favorably impacted by $0.2 million of net discrete tax benefits, including a $1.5 million benefit related to receiving tax incentives in a foreign jurisdiction and a $1.3 million charge related to remeasuring deferred tax assets and liabilities in response to a corporate tax rate change in a foreign jurisdiction. Results for the three months ended March 31, 2018 were favorably impacted by $1.1 million of net discrete tax benefits, including a $1.2 million benefit related to employee share-based payments.

The Company recorded income tax expense of $75.9 million for the six months ended March 31, 2019, or 24.3% of pre-tax income, compared to $40.9 million, or 19.7% of pre-tax income for the six months ended March 31, 2018. Due to the Tax Reform Act, results for the six months ended March 31, 2019 were subject to a federal income tax rate of 21% versus the 24.5% blended rate applicable to results for the six months ended March 31, 2018. Results for the six months ended March 31, 2019 were unfavorably impacted by $7.1 million of net discrete tax charges, including $6.2 million of tax charges related to uncertain tax position reserves, a $1.5 million benefit related to receiving tax incentives in a foreign jurisdiction, a $1.3 million charge related to remeasuring deferred tax assets and liabilities in response to a corporate tax rate change in a foreign jurisdiction and a $0.8 million charge related to adjustments to the repatriation tax required under the Tax Reform Act. Results for the six months ended March 31, 2018 were favorably impacted by $11.4 million of net discrete tax benefits, including $4.5 million of tax benefits related to employee share-based payments and a $6.5 million net tax benefit related to the Tax Reform Act.

On December 22, 2017, the Tax Reform Act was signed into law by President Trump. The Tax Reform Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018, while also repealing the deduction for domestic production activities, implementing a territorial tax system, imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries (the “Transition Tax”), and creating new taxes on certain foreign-sourced earnings. U.S. GAAP requires that the impact of tax legislation be recognized in the period in which the law was enacted. The U.S. Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 118, which provided guidance on how to account for the effects of the Tax Reform Act under ASC 740, Income Taxes. SAB No. 118 enabled companies to record a provisional amount for the effects for the Tax Reform Act based on a reasonable estimate, subject to adjustment during a measurement period of up to one year.

The Company recorded a tax benefit of $30.2 million during fiscal 2018 as a result of the remeasurement of deferred tax assets and liabilities required as a result of the Tax Reform Act, which completed the Company’s remeasurement of deferred taxes under the Tax Reform Act. To-date, the Company has recorded net total expense of $20.3 million with respect to the Transition Tax.

The Company’s liability for gross unrecognized tax benefits, excluding related interest and penalties, was $90.9 million and $33.7 million as of March 31, 2019 and September 30, 2018, respectively. Included in the Company’s March 31, 2019 liability for gross unrecognized tax benefits is a $4.4 million reserve related to the Transition Tax liability and a $53.1 million reserve recorded with respect to a temporary deferred position that the Company anticipates taking on its fiscal year 2019 federal income tax return. As of March 31, 2019, net unrecognized tax benefits, excluding interest and penalties, of $22.9 million would affect the Company’s net income if recognized.

The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits in the “Provision for income taxes” in the Condensed Consolidated Statements of Income. During each of the six months ended March 31, 2019 and 2018, the Company recognized an expense of $0.6 million related to interest and penalties. At March 31, 2019, the Company had accruals for the payment of interest and penalties of $5.8 million. During the next twelve months, it is reasonably possible that federal, state and foreign tax audit resolutions could reduce net unrecognized tax benefits by approximately $6.3 million because the Company’s tax positions are sustained on audit, the Company agrees to their disallowance or the statutes of limitations close.
v3.19.1
Earnings Per Share
6 Months Ended
Mar. 31, 2019
Earnings Per Share [Abstract]  
Earnings Per Share
Earnings Per Share

The reconciliation of basic weighted-average shares outstanding to diluted weighted-average shares outstanding was as follows:
 
Three Months Ended 
 March 31,
 
Six Months Ended 
 March 31,
 
2019
 
2018
 
2019
 
2018
Basic weighted-average common shares outstanding
70,042,761

 
74,519,741

 
70,761,437

 
74,685,082

Dilutive stock options and other equity-based compensation awards
714,033

 
977,808

 
675,685

 
1,077,722

Diluted weighted-average common shares outstanding
70,756,794

 
75,497,549

 
71,437,122

 
75,762,804



Options not included in the computation of diluted earnings per share attributable to common shareholders because they would have been anti-dilutive were as follows:
 
Three Months Ended 
 March 31,
 
Six Months Ended 
 March 31,
 
2019
 
2018
 
2019
 
2018
Stock options
608,698

 
254,000

 
775,894

 
257,837

v3.19.1
Receivables
6 Months Ended
Mar. 31, 2019
Receivables [Abstract]  
Receivables
    Receivables

Receivables consisted of the following (in millions):
 
March 31, 2019
 
September 30, 2018
U.S. government:
 
 
 
Amounts billed
$
81.0

 
$
156.3

Costs and profits not billed

 
235.4

 
81.0

 
391.7

Other trade receivables
975.4

 
1,089.4

Finance receivables
11.3

 
11.7

Notes receivable
0.7

 
1.4

Other receivables
31.4

 
48.6

 
1,099.8

 
1,542.8

Less allowance for doubtful accounts
(11.2
)
 
(9.9
)
 
$
1,088.6

 
$
1,532.9



Classification of receivables in the Condensed Consolidated Balance Sheets consisted of the following (in millions):
 
March 31, 2019
 
September 30, 2018
Current receivables
$
1,077.8

 
$
1,521.6

Long-term receivables
10.8

 
11.3

 
$
1,088.6

 
$
1,532.9


Due to the adoption of ASC 606, certain contracts in the defense and commercial segments are now recognized on the cost-to-cost method of percentage-of-completion. Costs and profits not billed under these contracts are now recognized as “Unbilled receivables, net” on the Company’s Condensed Consolidated Balance Sheets.

Finance and notes receivable accrual status consisted of the following (in millions):
 
Finance Receivables
 
Notes Receivable
 
March 31, 2019
 
September 30, 2018
 
March 31, 2019
 
September 30, 2018
Receivables on nonaccrual status
$
2.7

 
$
10.2

 
$

 
$

Receivables past due 90 days or more and still accruing

 

 

 

 
 
 
 
 
 
 
 
Receivables subject to general reserves
8.0

 
1.5

 

 

Allowance for doubtful accounts

 

 

 

Receivables subject to specific reserves
3.3

 
10.2

 
0.7

 
1.4

Allowance for doubtful accounts
(2.4
)
 
(2.8
)
 

 



Finance Receivables: Finance receivables represent sales-type leases resulting from the sale of the Company’s products and the purchase of finance receivables from lenders pursuant to customer defaults under program agreements with finance companies. As of March 31, 2019, approximately 81% of the outstanding finance receivables balance was due from three parties. Finance receivables originated by the Company generally include a residual value component. Residual values are determined based on the expectation that the underlying equipment will have a minimum fair market value at the end of the lease term. This residual value accrues to the Company at the end of the lease. The Company uses its experience and knowledge as an original equipment manufacturer and participant in end markets for the related products along with third-party studies to estimate residual values. The Company monitors these values for impairment on a periodic basis and reflects any resulting reductions in value in current earnings.

Delinquency is the primary indicator of credit quality of finance receivables. The Company maintains a general allowance for finance receivables considered doubtful of future collection based upon historical experience. Additional allowances are established based upon the Company’s perception of the quality of the finance receivables, including the length of time the receivables are past due, past experience of collectability and underlying economic conditions. In circumstances where the Company believes collectability is no longer reasonably assured, a specific allowance is recorded to reduce the net recognized receivable to the amount reasonably expected to be collected. Finance receivables are written off if management determines that the specific borrower does not have the ability to repay the loan amounts due in full. The terms of the finance agreements generally give the Company the ability to take possession of the underlying collateral. The Company may incur losses in excess of recorded allowances if the financial condition of its customers were to deteriorate or the full amount of any anticipated proceeds from the sale of the collateral supporting its customers’ financial obligations is not realized.

Notes Receivable: Notes receivable include amounts related to refinancing of trade accounts and finance receivables. The Company routinely evaluates the creditworthiness of its customers and establishes reserves where the Company believes collectability is no longer reasonably assured. Certain notes receivable are collateralized by a security interest in the underlying assets and/or other assets owned by the debtor. The Company may incur losses in excess of recorded allowances if the financial condition of its customers were to deteriorate or the full amount of any anticipated proceeds from the sale of the collateral supporting its customers’ financial obligations is not realized.

Quality of Finance and Notes Receivable: The Company does not accrue interest income on finance and notes receivable in circumstances where the Company believes collectability is no longer reasonably assured. Any cash payments received on nonaccrual finance and notes receivable are applied first to the principal balances. The Company does not resume accrual of interest income until the customer has shown that it is capable of meeting its financial obligations by making timely payments over a sustained period of time. The Company determines past due or delinquency status based upon the due date of the receivable.

Receivables subject to specific reserves also include loans that the Company has modified in troubled debt restructurings as a concession to customers experiencing financial difficulty. To minimize the economic loss, the Company may modify certain finance and notes receivable. Modifications generally consist of restructured payment terms and time frames in which no payments are required. Losses on troubled debt restructurings were not significant during the three and six months ended March 31, 2019 and 2018.

Changes in the Company’s allowance for doubtful accounts by type of receivable were as follows (in millions):
 
Three Months Ended March 31, 2019
 
Three Months Ended March 31, 2018
 
Finance
 
Notes
 
Trade and Other
 
Total
 
Finance
 
Notes
 
Trade and Other
 
Total
Allowance at beginning of period
$
2.7

 
$

 
$
7.8

 
$
10.5

 
$
1.5

 
$
6.1

 
$
6.9

 
$
14.5

Provision for doubtful accounts, net of recoveries
(0.3
)
 

 
1.1

 
0.8

 
0.2

 
(4.5
)
 
0.6

 
(3.7
)
Charge-off of accounts

 

 
(0.1
)
 
(0.1
)
 

 
2.0

 
(0.1
)
 
1.9

Foreign currency translation

 

 

 

 

 
0.2

 

 
0.2

Allowance at end of period
$
2.4

 
$

 
$
8.8

 
$
11.2

 
$
1.7

 
$
3.8

 
$
7.4

 
$
12.9

 
Six Months Ended March 31, 2019
 
Six Months Ended March 31, 2018
 
Finance
 
Notes
 
Trade and Other
 
Total
 
Finance
 
Notes
 
Trade and Other
 
Total
Allowance at beginning of period
$
2.8

 
$

 
$
7.1

 
$
9.9

 
$
1.5

 
$
10.0

 
$
6.8

 
$
18.3

Provision for doubtful accounts, net of recoveries
(0.4
)
 

 
1.8

 
1.4

 
0.2

 
(8.5
)
 
0.8

 
(7.5
)
Charge-off of accounts

 

 
(0.1
)
 
(0.1
)
 

 
2.0

 
(0.2
)
 
1.8

Foreign currency translation

 

 

 

 

 
0.3

 

 
0.3

Allowance at end of period
$
2.4

 
$

 
$
8.8

 
$
11.2

 
$
1.7

 
$
3.8

 
$
7.4

 
$
12.9




v3.19.1
Inventories
6 Months Ended
Mar. 31, 2019
Inventory Disclosure [Abstract]  
Inventories
Inventories

Inventories consisted of the following (in millions):
 
March 31, 2019
 
September 30, 2018
Raw materials
$
766.3

 
$
639.2

Partially finished products
278.5

 
354.3

Finished products
559.4

 
330.2

Inventories at FIFO cost
1,604.2

 
1,323.7

Less: Excess of FIFO cost over LIFO cost
(100.7
)
 
(96.0
)
 
$
1,503.5

 
$
1,227.7



Due to the adoption of ASC 606, certain contracts in the defense and commercial segments are now recognized on the cost-to-cost method of percentage-of-completion. Costs incurred under these contracts are now recognized as “Unbilled receivables, net” on the Company’s Condensed Consolidated Balance Sheets.
v3.19.1
Property, Plant and Equipment
6 Months Ended
Mar. 31, 2019
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment
Property, Plant and Equipment

Property, plant and equipment consisted of the following (in millions):
 
March 31, 2019
 
September 30, 2018
Land and land improvements
$
54.4

 
$
54.2

Buildings
310.9

 
297.6

Machinery and equipment
682.4

 
673.0

Software and related costs
172.9

 
164.4

Equipment on operating lease to others
29.2

 
22.1

Construction in progress
27.7

 
11.4

 
1,277.5

 
1,222.7

Less accumulated depreciation
(773.5
)
 
(741.6
)
 
$
504.0

 
$
481.1



Depreciation expense was $18.7 million and $19.9 million for the three months ended March 31, 2019 and 2018, respectively. Depreciation expense was $37.8 million and $40.0 million for the six months ended March 31, 2019 and 2018, respectively. Capitalized interest was insignificant for all reported periods.

Equipment on operating lease to others represents the cost of equipment shipped to customers for whom the Company has guaranteed the residual value and equipment on short-term leases. These transactions are accounted for as operating leases with the related assets capitalized and depreciated over their estimated economic lives of five to ten years. Cost less accumulated depreciation for equipment on operating lease at March 31, 2019 and September 30, 2018 was $23.0 million and $17.2 million, respectively.
v3.19.1
Goodwill and Purchased Intangible Assets
6 Months Ended
Mar. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Purchased Intangible Assets
Goodwill and Purchased Intangible Assets

Goodwill and other indefinite-lived intangible assets are not amortized, but are reviewed for impairment annually or more frequently if potential interim indicators exist that could result in impairment. The Company performs its annual impairment test in the fourth quarter of its fiscal year.

The following table presents changes in goodwill during the six months ended March 31, 2019 (in millions):
 
Access
equipment
 
Fire &
emergency
 
Commercial
 
Total
Net goodwill at September 30, 2018
$
880.9

 
$
106.1

 
$
20.9

 
$
1,007.9

Foreign currency translation
(6.2
)
 

 
(0.1
)
 
(6.3
)
Net goodwill at March 31, 2019
$
874.7

 
$
106.1

 
$
20.8

 
$
1,001.6



The following table presents details of the Company’s goodwill allocated to the reportable segments (in millions):
 
March 31, 2019
 
September 30, 2018
 
Gross
 
Accumulated
Impairment
 
Net
 
Gross
 
Accumulated
Impairment
 
Net
Access equipment
$
1,806.8

 
$
(932.1
)
 
$
874.7

 
$
1,813.0

 
$
(932.1
)
 
$
880.9

Fire & emergency
108.1

 
(2.0
)
 
106.1

 
108.1

 
(2.0
)
 
106.1

Commercial
196.7

 
(175.9
)
 
20.8

 
196.8

 
(175.9
)
 
20.9

 
$
2,111.6

 
$
(1,110.0
)
 
$
1,001.6

 
$
2,117.9

 
$
(1,110.0
)
 
$
1,007.9



Details of the Company’s total purchased intangible assets are as follows (in millions):
 
March 31, 2019
 
Weighted-
Average
Life (in years)
 
Gross
 
Accumulated
Amortization
 
Net
Amortizable intangible assets:
 
 
 
 
 
 
 
Distribution network
39.1
 
$
55.4

 
$
(31.6
)
 
$
23.8

Technology-related
11.9
 
104.7

 
(102.2
)
 
2.5

Customer relationships
12.8
 
555.0

 
(519.6
)
 
35.4

Other
16.3
 
16.4

 
(14.9
)
 
1.5

 
14.7
 
731.5

 
(668.3
)
 
63.2

Non-amortizable trade names
 
 
387.7

 

 
387.7

 
 
 
$
1,119.2

 
$
(668.3
)
 
$
450.9


 
September 30, 2018
 
Weighted-
Average
Life (in years)
 
Gross
 
Accumulated
Amortization
 
Net
Amortizable intangible assets:
 
 
 
 
 
 
 
Distribution network
39.1
 
$
55.4

 
$
(30.9
)
 
$
24.5

Technology-related
11.9
 
104.7

 
(101.8
)
 
2.9

Customer relationships
12.8
 
555.0

 
(502.3
)
 
52.7

Other
16.2
 
16.4

 
(14.8
)
 
1.6