Washington, D.C. 20549
FORM 10-K
☒ | ANNUAL REPORT PURSUANT TO SECTION13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended September 30, 2017
or
☐ | TRANSITION REPORT PURSUANT TO SECTION13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number:
1-31371Oshkosh Corporation
(Exact name of registrant as specified in its charter)
Wisconsin | 39-0520270 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
1917 Four Wheel Drive Oshkosh, Wisconsin | 54902 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
(920)Securities registered pursuant to Section 12(b) of the Act:
Titleofeachclass | Trading Symbol(s) | Nameofeachexchangeonwhichregistered | |||
Common Stock | OSK | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. | |||||
☒ | Yes | ☐ | No | ||
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the | |||||
☐ | Yes | ☒ | No | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | |||||
☒ | Yes | ☐ | No | ||
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). | |||||
☒ | Yes | ☐ | No | ||
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ||||||
☐ | Smaller reporting company | ☐ | ||||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant ishas filed a shell company (as defined in Rule 12b-2report on and attestation to its management’s assessment of the Act).
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). | ||||
☐ | Yes | ☒ | No | |
At March 31, 2017,2021, the aggregate market value of the registrant’s Common Stock held by non-affiliates was $5,130,156,538$8,142,015,260 (based on the closing price of $68.59$118.66 per share on the New York Stock Exchange as of such date).
As of November 14, 2017, 75,170,1989, 2021, 67,487,008 shares of the registrant’s Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the 20182022 Annual Meeting of Shareholders (to be filed with the Commission under Regulation 14A within 120 days after the end of the registrant’s fiscal year and, upon such filing, to be incorporated by reference into Part III).
OSHKOSH CORPORATION
FISCAL 20172021 ANNUAL REPORT ON FORM
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As used herein, the “Company,” “we,” “us” and “our” refers to Oshkosh Corporation and its consolidated subsidiaries. “Oshkosh” refers to Oshkosh Corporation, not including JLG Industries, Inc. and its wholly-owned subsidiaries (JLG), Oshkosh Defense, LLC (Oshkosh Defense) and its wholly-owned subsidiary (Oshkosh Defense)subsidiaries, Pratt & Miller Engineering & Fabrications, LLC (Pratt Miller), Pierce Manufacturing Inc. (Pierce), McNeilus Companies, Inc. (McNeilus) and its wholly-owned subsidiaries, Oshkosh Airport Products, LLC (Airport Products), Kewaunee Fabrications, LLC (Kewaunee), Oshkosh Commercial Products, LLC (Oshkosh Commercial), Concrete Equipment Company, Inc. and its wholly-owned subsidiary (CON-E-CO), London Machinery Inc. and its wholly-owned subsidiary (London) and Iowa Mold Tooling Co., Inc. (IMT) or any other subsidiaries.
The “Oshkosh
®,” “JLG®,” “Oshkosh Defense®,” “Pierce®,” “McNeilus®,” “Jerr-Dan®,” “Frontline™,”All references herein to earnings per share refer to earnings per share assuming dilution, unless noted otherwise.
For ease of understanding, the Company refers to types of specialty vehicles for particular applications as “markets.” When the Company refers to “market” positions, these comments are based on information available to the Company concerning units sold by those companies currently manufacturing the same types of specialty vehicles and vehicle bodies as the Company and are therefore only estimates. Unless otherwise noted, these market positions are based on sales in the United States of America. There can be no assurance that the Company will maintain such market positions in the future.
Cautionary Statement About Forward-Looking Statements
The Company believes that certain statements in “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other statements located elsewhere in this Annual Report on Form 10-K are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this report, including, without limitation, statements regarding the Company’s future financial position, business strategy, targets, projected sales, costs, earnings, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations, including those under the captions “Executive Overview” and “Fiscal 2018 Outlook”caption “Overview” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are forward-looking statements. When used in this Annual Report on Form 10-K, words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “project” or “plan” or the negative thereof or variations thereon or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond the Company’s control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements.
All forward-looking statements, including those under the captions “Executive Overview” and “Fiscal 2018 Outlook”caption “Overview” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” speak only as of November 21, 2017.16, 2021. The Company assumes no obligation, and disclaims any obligation, to update information contained in this Annual Report on Form 10-K. Investors should be aware that the Company may not update such information until the Company’s next quarterly earnings conference call, if at all.
PART
IITEM 1. BUSINESS
The Company
Oshkosh Corporation is a leading designer,innovator, manufacturer and marketer of a broad range ofaccess equipment, specialty vehicles, and vehicle bodies. truck bodies for the primary markets of access equipment, defense, fire & emergency, refuse hauling and concrete placement. Each of our products and technologies is designed with customers and end-users in mind, from the four-wheel drive system that the Company patented in 1917 to advances in electrification, autonomy & active safety and intelligent products.
The Company partners with customers to deliver superior solutions that safelycomprises 11 brands and efficiently move people and materials at work, around the globe, and around the clock. The Company began business in 1917 as an early pioneer of four wheel drive technology and, after 100 years, off road mobility remains one of its core competencies. The Company maintains four reportable segments for financial reporting purposes: access equipment, defense, fireAccess Equipment, Defense, Fire & emergencyEmergency and commercial,Commercial, which comprised 44%40%, 27%32%, 15%16% and 14%12%, respectively, of the Company’s consolidated net sales in fiscal 2017. These segments, in some way, all share common customers2021. Oshkosh’s leading brands include a wide range of products to serve a diverse group of industries. This allows the Company to leverage innovations and distribution channels, leverage common components and suppliers, utilize common technologies andefficiencies across the enterprise, including supply chain, materials integration, manufacturing processes, facilities and share employees and manufacturing and distribution facilities, which resultscross portfolio innovation creating an industrial technology company that is a leader in the Company being a different integrated global industrial.its end markets. The Company made approximately 20%33%, 19%35% and 15%24% of its net sales for fiscal 2017, 20162021, 2020 and 2015,2019, respectively, to the U.S. government, a substantial majority of which were under multi-year contracts and programs in the defense vehicle market. See Note 2224 of the Notes to Consolidated Financial Statements for financial information related to the Company’s business segments.
JLG, a global designer and manufacturer of aerial work platforms and telehandlers used in a wide variety of construction, industrial, institutional and general maintenance applications to safely position workers and materials at elevated heights, forms the basefoundation of the Company’s access equipmentAccess Equipment segment. JLG’s customer base includes equipment rental companies, construction contractors, manufacturing companies and home improvement centers. The access equipmentAccess Equipment segment also includes Jerr-Dan-branded tow trucks (wreckers) and roll-back vehicle carriers (carriers) sold to towing companies in the U.S. and abroad.
The Company's defenseCompany’s Defense segment has designed, manufactured and sold military tactical wheeled vehicles to the DoD for more than 90100 years. In 1981, Oshkosh Defense was awarded the first Heavy Expanded Mobility Tactical Truck (HEMTT) contract for the DoD, and thereafter, it developed into the DoD’s leading supplier of severe-duty, heavy-payload tactical trucks. Since that time, Oshkosh Defense has broadened its product offerings to become the leading manufacturer of severe-duty, heavy- and medium-payload tactical trucks, for the DoD, manufacturing vehicles that perform a variety of demanding tasks such as hauling tanks, missile systems, ammunition, fuel, troops and cargo for combat units. Most recently,In August 2009, Oshkosh Defense solidifiedbecame the DoD’s sole producer of the Family of Medium Tactical Vehicles (FMTV). In February 2018, after successful completion of the original five-year requirements contract and several contract extensions, the DoD awarded Oshkosh Defense the FMTV A2 contract for the design, development, production and support of the next generation of FMTV. The Company is currently in the production verification testing phase of the FMTV A2 contract. In 2015, Oshkosh Defense extended its position ininto the light-payload tactical wheeled vehicle category throughby capturing the successful effort to capture the DoD'sDoD’s Joint Light Tactical Vehicle (JLTV) program. The Company is currently in the lowfull rate initial production phase of this eight-year $6.7 billioncontract. In February 2021, the USPS awarded Oshkosh Defense an indefinite delivery, indefinite quantity (IDIQ) contract to produce the Next Generation Delivery Vehicle (NGDV), the USPS’s first large-scale fleet procurement in three decades. The competitively awarded contract allows for the delivery of vehicles over a 10 year period. In June 2021, the U.S. Army awarded Oshkosh Defense a six-year contract to integrate a Medium Caliber Weapons System onto Stryker Double V Hull Infantry Carrier Vehicles. In addition, the Defense segment offers engineering and product development services to customers in 2015 for approximately 18,000 vehiclesthe motorsports and sustaining services.
The Company’s fireFire & emergencyEmergency segment designs and manufactures custom and commercial firefighting vehicles and equipment, aircraft rescue and firefighting (ARFF) vehicles, snow removal vehicles, simulators and other emergency vehicles primarily sold to fire departments, airports and other governmental units in the Americas and abroad and broadcast vehicles sold to broadcasters and television stations in the Americas and abroad.
The Company’s commercialCommercial segment manufactures rear-designs and front-discharge concrete mixers,manufactures refuse collection vehicles portable and stationary concrete batch plants and vehiclerelated components sold to ready-mix companies and commercial and municipal waste haulers, in North Americarear- and other international marketsfront-discharge concrete mixer vehicles and related components sold to ready-mix companies and field service vehicles and truck-mounted cranes sold to mining, construction and other companiescompanies.
In October 2021, the Company’s Board of Directors approved a change in the Americas and abroad.
Competitive Strengths
The following competitive strengths support the Company’s business strategy:
Strong Market Positions.
The Company has developed strong market positions and brand recognition in its core businesses, which it attributes to its reputation for quality products, advanced engineering, market leading innovation, vehicle performance, reliability, customer service and low totalDiversified Product Offering.
Quality Products and Customer Service.
The Company has developed strong brand recognition for its products as a result of its commitment to meet the stringent product quality and reliability requirements of its customers in the specialty vehicle and vehicle body markets it serves. The Company frequently achieves premium pricing due to the quality, durability and lowInnovative and Proprietary Components.
The Company’s advanced design and engineering capabilities have contributed to the development of innovative and/or proprietary, severe-duty components that enhance vehicle performance, reduce manufacturing costs and strengthen customer relationships. The Company’s advanced design and engineering capabilities have also allowed it to integrate many of these components across various segments and product lines, which enhances its ability to compete for new business and reduces its costs to manufacture its products compared to manufacturers who simply assemble purchased components.Flexible and Efficient Manufacturing.
The Company believes it has competitive advantages over larger vehicle manufacturers in its specialty vehicle markets due to its product quality, manufacturing flexibility, vertical integration, purchasing power in specialty vehicle components and tailored distribution networks. In addition, the Company believes it has competitive advantages over smaller vehicle and vehicle body manufacturers due to its relatively higher volumes of similar products that permit the use of moving assembly lines and allow it to leverage purchasing power and technology opportunities across product lines.Strong Management Team.
The Company is led by President and Chief Executive Officerexternal hires. The management teamCompany’s Board of Directors maintains a robust succession planning process for its Executive Officers to ensure strong continuity.
Business Strategy
The Company has successfully executedevolved its strategy to focus on its most important priorities. The strategy is grounded in its purpose of making a strategic reshapingdifference in the lives of those who build, serve, and expansion ofprotect communities around the Company's business, which has positionedworld. The strategy is reflected in three simple words: Innovate. Serve. Advance.
Innovate. The Company innovates customer solutions by combining leading technology and operational strength to empower and protect the everyday hero. The Company is developing and integrating the most advanced technologies to fulfill its purpose in areas such as electrification and autonomy. Electrification provides enhanced performance and economic benefits, as well as sustainability benefits for customers. Using systems like Light Detection and Ranging, Radio Detection and Ranging and Global Positioning Systems along with advanced machine learning algorithms, the Company is developing autonomous vehicles and active safety systems. The Company is using data science, artificial intelligence, and predictive analytics to deliver better solutions. The Company is leveraging these and other innovations across its businesses to help ensure that it continues to be a global leader inmarket leader.
Serve. The Company serves and supports customers and end users with a relentless focus on equipment productivity and safety throughout the specialty vehicleproduct lifecycle. The Company believes aftermarket parts and vehicle bodyservices provide a robust growth opportunity while offering stability throughout business cycles.
Advance. The Company advances by expanding into new markets and transformedgeographies to make a difference around the Company into a different integrated global industrial.
Products
The Company is focused on the following core segments of the specialty vehicle and vehicle body markets:
Access equipmentEquipment segment.
JLG also arranges equipment financing and leasing solutions for its customers, primarily through third-party funding arrangements with independent financial companies, and occasionally provides credit support in connection with these financing and leasing arrangements. Financing arrangements that JLG offers or arranges through this segment include various types of rental fleet loans and leases, as well as floor plan and retail financing. Terms of these arrangements vary depending on the type of transaction, but typically range betweenfrom 36 andto 72 months and generally require the customer to be responsible for maintenance of the equipment and to bear the risk of damage to or loss of the equipment.
The Company, through its Jerr-Dan brand, is a leading designer, manufacturer and marketer of towing and recovery equipment in the U.S. The Company believes Jerr-Dan is recognized as an industry leader in quality and innovation. Jerr-Dan offers a complete line of both carriers and wreckers. In addition to manufacturing equipment, Jerr-Dan provides its customers with one-stop service for carriers and wreckers and generates revenue from the installation of equipment, as well as the sale of chassis and service parts.
Defense segment.
Oshkosh Defense has designed and sold products to the DoD for overIn August 2009, the DoD awarded Oshkosh Defense a contract to be the sole producer of FMTVs under the U.S. Army'sArmy’s FMTV Rebuy program. Originally a five-year requirements contract, in fiscal 2015, the DoD extended the FMTV Rebuy program several times to allow for the delivery of vehicles and trailers through February 2017. In September 2016, the U.S. Army extended the FMTV contract with orders to produce FMTV trucks and trailers through July 2018. In September 2017, the DoD extended pricing for the contract through August 2019, and the DoD subsequently placed an order for over 1,000 FMTVs, extending the Company's FMTV backlog into the fourth quarter of fiscal 2019.2021. In February 2018, the DoD awarded Oshkosh Defense has submitted its bid and is actively pursuing a U.S. Armythe FMTV A2 contract for the design, development, production and support of an upgradeda fleet of future generation FMTVs. The FMTV vehicles after the expiration of the Company's current FMTV contract. A decision on the winner of the FMTV recompeteA2 contract is expecteda firm-fixed price requirements contract that initially covers a five-year delivery period starting in the second quarter of fiscal 2018.
In June 2015, the DoD awarded Oshkosh Defense a new Family of Heavy Tactical Vehicles (FHTV) contract for the recapitalization of HEMTT, HET and PLS vehicles as well as associated logistics and configuration management support. The contract iswas a five-year requirements contract for the continued remanufacturing of FHTVs. In April 2021, the DoD awarded Oshkosh Defense an FHTV vehicles through fiscal 2020.extension contract. The contract is fixed-price incentive firm where the price paid to the Company is subject to adjustment based on actual costs incurred. The impact of pricing adjustments under fixed-price incentive firm contracts are generally shared by the Company and the customer.
In August 2015, Oshkosh Defense solidified its position in the light-payload tactical wheeled vehicle category when the DoD awarded Oshkosh Defense an eight-year, fixed price JLTV contract valued at $6.7 billion for production and delivery of approximately 18,00016,901 of these technologically enhanced vehicles and sustainingrelated sustainment services. The Company delivered its first production JLTVs to the U.S. Army in September 2016. The program achieved the full rate production milestone decision in fiscal 2019. In fiscal 2021, the Army authorized an increase to the contract ceiling from 16,901 vehicles to 23,163. Under the current JLTV contract, Oshkosh Defense can accept vehicle orders through the first quarter of fiscal 2024 with deliveries into fiscal 2025. The U.S. Army, which purchased Government Purpose Rights to the Oshkosh JLTV design, is conducting a full and open competition for follow-on JLTV production, with a contract award expected in the second half of calendar 2022. The next phase of the JLTV program is expected to be valued at approximately $8.0 billion and to include requirements for more than 25,000 JLTVs and trailers. In total, the JLTV program is expected to be over a 20-year $30 billion program for the production of up to 55,000 vehicles support services and engineering. The Company delivered its first production JLTV vehicles tofor the U.S. Army in September 2016. The contract remained inmarket and potentially several thousand more units for international allies of the low rate initial production phase during fiscal 2017. A decision on moving to full rate production is expected in fiscal 2019.
In addition to retaining its current defense truck contracts, the Company’s objective is to continue to diversify into other areas of the U.S. and international defense vehicle markets by expanding applications, uses and vehicle body styles of its current tactical truck lines and growing aftermarket product and service offerings.
In October 2020, the Company transferred operational responsibility of the airport snow removal vehicle business, a global leader in airport snow removal, from the Fire & Emergency segment to the Defense segment. The Company’s specially designed airport snow removal vehicles are used by some of the largest airports in the world and military bases in the United States. The Company believes that the reliability of its high-performance snow removal vehicles and the speed with which they clear airport runways contribute to its strong position in this market.
In January 2021, the Company acquired Pratt Miller for $111.4 million. Through Pratt Miller, which is part of the Defense segment, the Company offers advanced engineering, product development and innovation services to the motorsport and multiple ground vehicle markets.
In February 2021, the Company was notified that the USPS selected Oshkosh Defense to build the NGDV. The IDIQ contract allows the USPS to purchase between 50,000 and 165,000 units over ten years. The NGDV provides the USPS the ability to significantly modernize its delivery fleet with improved safety, reliability, sustainability and cost-efficiency while providing a much better working experience for the nation’s postal carriers. The Company’s offering provides the USPS with both zero-emission battery electric vehicles (BEV) and fuel efficient, low emission internal combustion engine (ICE) vehicles. The vehicle design also provides the USPS with the flexibility of converting ICE units to BEV in the future. The initial $482 million contract provides for engineering to finalize the production vehicle design, and for tooling and factory build-out activities that are necessary prior to vehicle production. The Company expects to begin delivering production vehicles in the second half of calendar 2023.
In June 2021, the U.S. Army awarded Oshkosh Defense a six-year contract worth up to $943 million to integrate the Medium Caliber Weapons System onto Stryker Double V Hull Infantry Carrier Vehicles. This contract award is important as it represents the Defense segment’s entrance into the adjacent combat vehicles market.
Fire
&The Company, through Airport Products, is amonga leader in the leaders in salesdesign and sale of ARFF vehicles to domestic and international airports. These highly-specialized vehicles are required to be in service at most airports worldwide to support commercial airlines in the event of an emergency. Many of the world’s largest airports in the United States, including LaGuardia International Airport, O’HareJohn F. Kennedy International Airport, Hartsfield-JacksonO’Hare International Airport, Denver International Airport, Baltimore-Washington International Airport, Dallas/Fort Worth International Airport, Tampa International Airport, Philadelphia International Airport and San Francisco International Airport, in the U.S., are served by the Company’s ARFF vehicles. The U.S. Governmentgovernment also maintains a fleet of ARFF vehicles that are used to support military operations throughout the world. Internationally, the Company'sCompany’s vehicles serve, among others, Beijing, China and more than thirtyfifty other airports in China; Singapore; Toronto andIndonesia; Quebec, Canada; Abu Dhabi, UAE; and Birmingham, Cardiff, Manchester and Liverpool, United Kingdom. TheIn addition, the Company has recently delivered ARFF vehicles to multiple airports throughout Kuwait, Southeast Asia, Papua New Guinea,in Mexico, Chile, Japan, Bolivia, Australia, PeruEgypt, Nepal, Iraq and Ghana.the British Virgin Islands. The Company believes that the performance and reliability of its ARFF vehicles contribute to the Company’s strong position in this market.
The Company, through its Frontline brand, is a leading manufacturer, system designer and integrator of broadcast and communication vehicles, including electronic field production trailers, satellite news gathering and electronic news gathering vehicles for broadcasters and command trucks for local and federal governments along with being a leading supplier of military simulator shelters and trailers.trailers under the Oshkosh Specialty Vehicles (OSV) brand. The Company’s vehicles have been used worldwide to broadcast the NFL Super Bowl, the FIFA World Cup and the Olympics.
The Company offers three-two- to fifteen-year municipal lease financing programs to its fireFire & emergencyEmergency segment customers in the U.S. through Oshkosh Equipment Finance, LLC, doing business asthe Pierce Financial Solutions.Solutions program, provided by PNC Equipment Finance. Programs include competitive lease financing rates, creative and flexible finance arrangements and the ease of one-stop shopping for customers’ equipment and financing. The Company executes the lease financing transactions through a private labelco-branded arrangement with an independent third-party finance company. The Company typically provides credit support in connection with these financing and leasing arrangements.
Commercial segment.
Through IMT, the Company is a leading North American designer and manufacturer of field service vehicles and truck-mounted cranes for the construction, equipment dealer, building supply, utility, tire service, railroad and mining industries. The Company believes its commercialCommercial segment vehicles and equipment have a reputation for efficient, cost-effective, dependablemarket leading innovation, which drives enhanced safety, reliability and low maintenance operation.
The Company also arranges equipment financing and leasing solutions for its customers, primarily through third-party funding arrangements with independent financial companies, and occasionally provides credit support in connection with these financing and leasing arrangements.
Marketing, Sales, Distribution and Service
The Company believes it differentiates itself from many of its competitors by tailoring its distribution to the needs of its specialty vehicle and vehicle body markets and with its national and global sales and service capabilities. Distribution personnel demonstrate to customers how to use the Company’s vehicles and vehicle bodiesproducts properly. In addition, the Company’s flexible distribution is focused on meeting customers on their terms, whether on a job site, in an evening public meeting or at a municipality’s offices,office, compared to the showroom sales approach of the typical dealersdealer of large vehicle manufacturers. The Company backs all products with same-day parts shipment, and its service technicians are available in person or by telephone to domestic customers 365 days a year. The Company believes its dedication to keeping its products in-service in demanding conditions worldwide has contributed to customer loyalty.
The Company provides its salespeople, representatives and distributors with product and sales training on the operation and specifications of its products. The Company’s engineers, along with its product managers, develop operating manuals and provide field support at vehicle delivery.
U.S. dealers and representatives enter into agreements with the Company that allow for termination by either party generally upon 90 days'days’ notice, subject to applicable laws. Dealers and representatives, except for those utilized by JLG and IMT, are generally not permitted to market and sell competitive products.
Access equipmentEquipment segment.
The Company markets its Jerr-Dan-branded carriers and wreckers through its extensive network of independent distributors.
Defense segment.
While Oshkosh Defense sellsIn addition to marketing its current tactical wheeled vehicle offerings and competing for new contracts, Oshkosh Defense actively works with the U.S. Armed Servicesits customers to develop new applications for its vehicles and expand its services.
Logistics services are increasingly important in the defense market.to Oshkosh Defense. The Company believes that its proven worldwide logistics capabilities, and internet-based ordering, invoicing and electronic payment systems have significantly contributed to the expansion of its defense parts and service business. Oshkosh Defense maintains a large parts distribution warehouse in Milwaukee, Wisconsin to fulfill stringent parts delivery schedule requirements, as well as satellite facilities near DoD bases in the U.S., Europe, Asia and the Middle East.
The Company’s snow removal business uses a combination of internal sales and service representatives and distributor locations to focus on the sale of snow removal vehicles, principally to airports, but also to municipalities, counties and other governmental entities in the U.S. and Canada. In addition, the Company maintains offices in Dubai, UAE; Beijing, China; and Singapore to support airport product vehicle sales and aftermarket sales and support in Europe, the Middle East, China and Southeast Asia.
The Company markets Pratt Miller’s world class engineering and product development services primarily through internal sales representatives.
Fire & emergencyEmergency segment.
Pierce also sells directly to the DoD and other U.S. government agencies. Many of the Pierce fire apparatus sold to the DoD are placed in service at U.S. military bases, camps and stations overseas. Additionally, Pierce sells fire apparatus to international municipal and industrial fire departments through a network of international dealers.
The Company markets its Frontline-branded broadcast vehicles through sales representatives and its Frontline-branded command vehicles through both sales representatives and dealer organizations that are directed at government and commercial customers.
The Company markets its Oshkosh-branded ARFF vehicles through a combination of direct sales representatives domestically and an extensive network of representatives and distributors in international markets. Certain of these international representatives and distributors also handle Pierce products. The Company's snow removal business uses a combination of internal sales and service representatives and distributor locations to focus on the sale of snow removal vehicles, principally to airports, but also to municipalities, counties and other governmental entities in the U.S. and Canada. In addition, the Company maintains offices in Abu Dhabi, UAE; Beijing, China; Tonneins, France; and Singapore to support airport product vehicle sales and aftermarket sales and support in Europe, the Middle East, China and Southeast Asia.
Commercial segment.
The Company has also established an extensive network of representatives and dealers throughout the Americas for the sale of McNeilus-branded refuse collection vehicles and Oshkosh-, McNeilus-, CON-E-CO- and London-branded concrete mixers concrete batch plants and refuse collection vehicles.to international customers. The Company coordinates among its various businesses to respond to large international sales tenders with its most appropriate product offering for the tender.
The Company utilizes an extensive network of representatives and dealers supported by hundreds of internal and external sales and service representatives in North America to sell and service refuse collection vehicles and front- and rear-discharge concrete mixers. The Company also performs sales and service activities at the Company’s manufacturing facilities. Service centers located throughout the U.S. provide sales, service and parts distribution to customers in their
geographic regions. The Company believes this network represents one of the largest refuse collection vehicle and concrete mixer distribution networks in the U.S.
IMT distributes its products through a wide network of dealers in over one hundred locations worldwide. International dealers are primarily located in Central and South America, Australia and Asia and are primarily focused on mining and construction markets.
Manufacturing
The Company manufactures vehicles and vehicle bodiesits products at 2928 manufacturing facilities. To reduce production costs, the Company maintains a continuing emphasis on the development of proprietary components, self-sufficiency in fabrication, just-in-time inventory management, improvement in production flows interchangeability and simplificationinterchangeability of components among product lines, creation of jigs and fixtures to ensure repeatability of quality processes, utilization of robotics, and performance measurement to assure progress toward cost reduction targets. The Company encourages employee involvement to improve production processes and product quality. The Company opened a new state of the art manufacturing facility in Leon, Mexico during fiscal 2015 that is designed to supply components to multiple Company businesses and is expected to contribute to the attainment of the Company's production initiatives.
The Company uses a common Quality Management System globally to support the delivery of consistent, high quality products and services to customers. The Company educates and trains all employees at its facilities in quality principles. The Company requires employees at all levels to understand customer and supplier requirements, measure performance, develop systems and procedures to prevent product nonconformance with requirements and continually improve all work processes. The Company educates and trains all employees at its facilities in quality principles. The Company utilizes quality gates in its manufacturing facilities to identify quality issues early in the process and to analyze root cause at the source, resulting in improved quality, fewer defects and less rework. The Company'sCompany’s Quality Management System is based on ISO 9001, a set of internationally-accepted quality system requirements established by the International Organization for Standardization. ISO 9001 certification indicates that a company has established and follows a rigorous set of requirementsstandards aimed at achieving customer satisfaction by following the processa process-based approach to identify processand control the quality needs of suppliers, inputs, outputs, customers, critical processes and key performance indicators, and byoutputs. The Quality Management System helps ensure that the Company is continually improving these processes and sharing successful practices across the organization. The following brands are ISO 9001 certified: JLG, Oshkosh Defense, Pierce, McNeilus, Frontline, Jerr-Dan and Airport Products.
The Company has a team of employees dedicated to leading the implementation of the Oshkosh Continuous Improvement Management System (CIMS).Company’s simplification initiatives. The team is comprised of members with diverse backgrounds in quality, lean, finance,data analytics, product and process engineering, and culture change management. CIMS is a business system that defines and seeks to enhance customers' experiences with the Company's products and services by empowering all employees to improve business processes and create a great customer experience. CIMSSimplification includes lean tools to eliminate waste and to provide better value for customers. CIMSIt also guides customer satisfaction assessment and helpsassessments to help identify opportunities to improve the customer experience with Oshkosh. CIMS supports the execution of the Company's MOVE strategy, delivering value to both customers and shareholders. Within the Company’s facilities, CIMS improvementsimplification projects have contributed to manufacturing efficiency gains, materials management improvements, steady quality improvementsenhancements and reduction of lead times. CIMS improvementSimplification projects have also freed up manufacturing space, allowing the Companycapacity to pursue a program focused on increased vertical integration, further differentiating the Company as a different integrated global industrial.
Engineering, Research and Development
The Company believes its extensive engineering, research and development capabilities have been key drivers of the Company’s marketplace success. The Company maintains multiple facilities for new product development and testing with a staff of approximately 1,2001,600 engineers and technicians who are dedicated to improving existing products, development and testing of new vehicles, vehicle bodies and components and sustaining its production activities. The Company prepares multi-year new product development and technology plans for each of its markets and measures progress against those plans each month.
Virtually all of the Company’s sales of fire apparatus and broadcast vehicles require some level of custom engineering to meet the customer’s specifications and changing industry standards. Engineering is also a critical factor in defense vehicle markets due to the severe operating conditions under which the Company’s vehicles are utilized, new customer requirements and stringent government documentation requirements. In the access equipment and commercial segments, productProduct innovation is highly important to meetmeeting customers’ changing requirements. Accordingly, in addition to new product development engineers and technicians, the Company maintains an additional permanent staff of engineers and engineering technicians to sustain its production activities.
Recent examples of the Company’s product innovation include the DaVinci lift, a fully electric scissor lift that leverages highly sophisticated technology including linear actuators in place of traditional hydraulic cylinders in an elegant design to bring industry defining productivity and 2015, the Company incurred researchserviceability to both rental companies and development expenditures of $98.0 million, $103.1 million and $147.9 million, respectively, portions of which were recoverable from customers, principally the U.S. government. Higher spending in fiscal 2015 was generally due to product design costs associated with Tier IV engine emissions requirementsend users in the Company's access equipment market. The Company believes that by removing unnecessary parts and replacing them with electric components, the DaVinci will require virtually zero maintenance and deliver unprecedented performance, efficiency, and a lower total cost of ownership. The Company’s Fire & Emergency segment introduced the revolutionary Volterra platform of electric vehicles that meets the critical needs of fire departments while providing the operational performance customers expect from Pierce fire apparatus. The Volterra platform offers zero emissions, reduced noise, an electro-mechanical infinitely variable transmission (EMIVT), integrated onboard batteries and JLTV development costs in the defense segment.
Competition
In all of the Company’s segments, competitors include smaller, specialized manufacturers as well as large, mass producers. The Company believes that, in its specialty vehicle and vehicle body markets, it has been able to effectively compete against large, mass producers due to its product quality, innovation, manufacturing flexibility, vertical integration, purchasing power in specialty vehicle components and tailored distribution systems. In addition, the Company believes it has competitive advantages over smaller vehicle and vehicle body manufacturers due to its relatively higher volumes of similar products that permit the use of moving assembly lines, and which allow it to leverage purchasing power and technology opportunities across product lines. The Company believes that its competitive cost structure, strategic global purchasing capabilities, engineering expertise, product quality and global distribution and service systems have enabled it to compete effectively.
Certain of the Company’s competitors have greater financial, marketing, manufacturing, distribution and governmental affairs resources than the Company. There can be no assurance that the Company’s products will continue to compete effectively with the products of competitors or that the Company will be able to retain its customer base or improve or maintain its profit margins on sales to its customers, all of which could have a material adverse effect on the Company’s financial condition, results of operations and cash flows.
Access equipmentEquipment segment.
The principal competitor for Jerr-Dan-branded products is Miller Industries, Inc. Principal methods of competition for carriers and wreckers include product quality and innovation, product performance, price and service. The Company believes its competitive strengths in this market include its high quality, innovative and high-performance product line and its low-costcost competitive manufacturing capabilities.
Defense segment.
Oshkosh Defense produces heavy- and medium-payload, Mine Resistant Ambush Protected (MRAP) and light-payload tactical wheeled vehicles for the military and security forces around theto USPS. Competition for sales of these vehicles includes, among others, Man Group plc, Mercedes-Benz (a subsidiary of Daimler AG), Navistar Defense LLC (a subsidiary of Navistar International Corporation)Cerberus Capital Management, LP), General Dynamics Corporation, Lockheed Martin, AM General LLC (a subsidiary of KPS Capital Partners, LP), BAE Systems plc, General Motors Defense, Utilimaster (a subsidiary of The Shyft Group), Morgan Olson (a subsidiary of JB Poindexter & Co., Inc.), Workhorse Group and Textron Inc.Rivian. The principal method of competition in the defenseDefense segment involves a competitive bid process that takes into account factors as determined by the customer, such as price, product performance, product life cycle costs, small and disadvantaged business participation, product quality, adherence to bid specifications, production capability, project management capability, past performance and product support. Usually, the Company'sCompany’s vehicle systems must also pass extensive testing. The Company believes that its competitive strengths include: strategic global purchasing capabilities leveraged across multiple business segments; extensive pricing/costing and defense contracting expertise; a significant installed base of vehicles currently in use throughout the world; flexible and high-efficiency vertically-integrated manufacturing capabilities; patented and/or proprietary vehicle components such as the TAK-4 family of independent suspension systems, Oshkosh power transfer cases and Command Zone integrated vehicle diagnostics; weapons and communications integration; ability to develop new and improved product capabilities responsive to the needs of its customers; product quality; and aftermarket parts sales and service capabilities.
The Weapon Systems Acquisition Reform Act requires competition for defense programs in certain circumstances. Accordingly, it is possible that the U.S. Army and U.S. Marine Corps will conduct competitions for programs for which the Company currently has contracts upon the expiration of the existing contracts. Competition for these and other domestic programs could result in future contracts being awarded based upon different competitive factors than those described above and would primarily include price, production capability and past performance. Current economic conditions have also put significant pressure on the U.S. Federal budget. The overall military drawdowns in Iraq and Afghanistan and stated defense budget reductions have resulted in lower demand for tactical wheeled vehicles, and future program competitions could involve weighting price more heavily than the past competitive factors described above. In addition, the U.S. government has become more aggressive in seeking to acquire the design rights to the Company'sCompany’s current and potential future programs to facilitate competition for manufacturing our vehicles. The willingness of the bidders to license their design rights to the DoD was an evaluation factor in the JLTV and FMTV A2 contract competition.competitions. Certain of the Company'sCompany’s contracts with the DoD, including the JLTV contract,and FMTV A2 contracts, require that the Company effectively transfer the “technical know-how” necessary to produce and support the vehicles and/or other deliverables within the contract to the customer.
The Competition in Contracting Act requires competition for U.S. defense programs in most circumstances. Competition for DoD programs that we currently havesupplied by the Company could result in the U.S. government awarding future contracts to another manufacturer or the U.S. government awarding the contracts to usthe Company at lower prices and operating margins than we experiencethe Company experiences under current contracts. In particular, the DoD has begun a process to recompete the FMTV program. In October 2016, the DoD issued requests
The Company’s principal competitors for proposal to qualified bidders to submit a proposal to produce FMTVs for a five year period beginningsnow removal vehicle sales are M-B Companies, Inc. (owned by Aebi Schmidt Holding AG), Wausau-Everest LP (owned by Alamo Group, Inc.) and Overaasen AS. Principal methods of competition are product performance, price, service, product quality and innovation. The Company believes its competitive strengths in fiscal year 2021. The deadline for proposal submissions was May 2017,these airport markets include its high-quality, innovative products and a new FMTV production contract award to the successful bidder is expected in the second quarter of fiscal 2018.
The Company’s principal competitors for Pratt Miller’s engineering and product development services include Ricardo PLC, Corvid Technologies and GS Engineering Inc.
Fire & emergencyEmergency segment.
Airport Products manufactures ARFF vehicles for sale in the U.S. and abroad. Oshkosh’s principal competitorcompetitors for ARFF vehicle sales isare Rosenbauer International AG. Airport Products also manufactures snow removal vehicles, principally for U.S.AG and Canadian airports. The Company’s principal competitors for snow removal vehicle sales are M-B Companies,E-One, Inc., Wausau-Everest LP (owned by Alamo Group, Inc.) and Overaasen AS. Principal methods of competition are product performance, price, service, product quality and innovation. The Company believes its competitive strengths in these airport markets include its high-quality, innovative products and strong dealer support network.
Commercial segment.
The Company produces front- and rear-discharge concrete mixers for the Americas under the Oshkosh, McNeilus and London brands. Competition for concrete mixer sales includes Beck Industrial, Con-Tech Manufacturing, Inc., Terex Corporation and other regional competitors. Principal methods of competition are price, service, product features, product quality and product availability. The Company believes its competitive strengths include: strong brand recognition; large-scale and high-efficiency manufacturing; extensive product offerings; high product quality; innovative control systems; ability to offer factory-installed compressed natural gas fuel systems; a significant installed base of concrete mixers in use in the marketplace; and its nationwide network of sales and service centers.
IMT is a manufacturer of field service vehicles and truck-mounted cranes for the construction, equipment dealer, building supply, utility, tire service, railroad and mining industries. IMT’s principal field service vehicle competition is from Auto Crane Company (owned by Gridiron Capital)Ramsey Industries, Inc.), Stellar Industries, Inc., Maintainer Corporation of Iowa, Inc., the Knapheide Manufacturing Company and other regional companies. Competition in truck-mounted cranes comes primarily from European companies including Palfinger AG, Cargotec Corporation and Fassi Group SpA. Principal methods of competition are product quality, price and service. The Company believes its competitive strengths include its high-quality products, global distribution network and low-cost manufacturing capabilities.
Government Contracts
Approximately 20%33% of the Company’s net sales for fiscal 20172021 were made to the U.S. government, a substantial majority of which were under multi-year contracts and programs in the defense vehicle market. Accordingly, a significant portion of the Company’s sales are subject to risks specific to doing business with the U.S. government, including uncertainty of economic conditions, changes in government policies and requirements that may reflect rapidly changing military and political developments, the availability of funds and the ability to meet specified performance thresholds. Multi-year contracts may be conditioned upon continued availability of congressional appropriations and are being impacted by the uncertainty regarding the federal budget pressures. Variances between anticipated budget and congressional appropriations may result in a delay, reduction or termination of these contracts. In addition, continued weak economic conditions have put significant pressure on the U.S. federal budget. The U.S. government is currently operating under a continuing resolution budget that funds the federal government through December 8, 2017. The continuing resolution limits the DoD to funding caps set in the Budget Control Act of 2011. Absent a future budget agreement, the full effect of sequestration could return in the government’s fiscal 2018 budget. Budgetary concerns could result in future defense vehicle contracts being awarded more on price than the past competitive factors described above.
Oshkosh Defense'sDefense’s sales are substantially dependent upon periodic awards of new contracts, the purchase of base vehicle quantities and the exercise of options under existing contracts. The funding of U.S. government programs is subject to an annual congressional budget authorization and appropriation process. In years when the U.S. government has not completed its budget process before the end of its fiscal year, government operations are typically funded pursuant to a “continuing resolution,” which allows federal government agencies to operate at spending levels approved in the previous budget cycle but does not authorize new spending initiatives. When the U.S. government operates under a continuing resolution, delays can occur in the procurement of the products, services and solutions that we provideOshkosh Defense provides and may result in new initiatives being delayed or canceled, or funds could be reprogrammed away from ourOshkosh Defense’s programs to pay for higher priority operational needs. The U.S. government is currently operating under a continuing resolution budget that funds the federal government through December 8, 2017. In years when the U.S. government fails to complete its budget process or to provide for a continuing resolution, a federal government shutdown may result. This could in turn result in the delay or cancellation of key programs, which could have a negative effect on ourthe Company’s cash flows and adversely affect ourthe Company’s future results. In addition, payments to contractors for services performed during a federal government shutdown may be delayed, which would have a negative effect on ourthe Company’s cash flows.
Contract awards that Oshkosh Defense receives may be subject to protests by competing bidders. These protests, if successful, could result in the DoDcustomer revoking part or all of any defense contract it awards to Oshkosh Defense and an inability of Oshkosh Defense to recover amounts it has expended during the protest period in anticipation of initiating work under any such contract.
Under firm, fixed-price contracts with the U.S. government, the price paid to the Company is generally not subject to adjustment to reflect the Company’s actual costs, except costs incurred as a result of contract changes ordered by the U.S. government. However, under fixed-price incentive firm contracts with the U.S. government, the price paid to the Company is subject to adjustment based on the actual costs incurred. The impact of pricing adjustments under the fixed-price incentive firm contracts are generally shared by the Company and its customer. The Company generally attempts to negotiate with the U.S. government the amount of increased compensation to which the Company is entitled for government-ordered changes that result in higher costs. If the Company is unable to negotiate a satisfactory agreement to provide such increased compensation, then the Company may file an appeal with the Armed Services Board of Contract Appeals or the U.S. Claims Court. The Company has no such appeals pending. The Company seeks to mitigate risks with respect to fixed-price contracts by executing firm, fixed-price contracts with its suppliers of significant components for the duration of the Company’s contracts.
U.S. government contracts generally permit the government to terminate a contract, in whole or part, at the government'sgovernment’s convenience. If the U.S. government exercises its rights under this clause the contractor is entitled to payment for the allowable costs incurred and a reasonable profit on the work performed to date. The U.S. government can also terminate a contract for default. If a contract is terminated for default, the contractor is generally entitled to payment for work that has been accepted by the U.S. government. Termination for default may expose the Company to loss on work not yet accepted by the government and have a negative impact on the Company'sCompany’s ability to obtain future orders and contracts. The U.S. government'sgovernment’s right to terminate its contracts has not had a material effect on the operations or financial condition of the Company.
The Company, as a U.S. government contractor, is subject to financial audits and other reviews by the U.S. government relating to the performance of, and the accounting and general practices relating to, U.S. government contracts. Like most large government contractors, the Company is audited and reviewed by the government on a continual basis. Costs and prices under such contracts may be subject to adjustment based upon the results of such audits and reviews. Additionally, such audits and reviews can lead to civil, criminal or administrative proceedings. Such proceedings could involve claims by the government for fines, penalties, compensatory and treble damages, restitution and/or forfeitures. Under government regulations, a company or one or more of its subsidiaries can also be suspended or debarred from government contracts, or lose its export privileges based on the results of such proceedings. The Company believes that the outcome of all such audits and reviews that are now pending will not have a material effect on its financial condition, results of operations or cash flows.
Suppliers
The Company is dependent on its suppliers and subcontractors to meet commitments to its customers, and many components are procured or subcontracted on a sole-source basis with a number of domestic and foreign companies. Components for the Company’s products are generally available from a number of suppliers, although the transition to a new supplier may require several months to conclude. The Company purchases chassis components, such as vehicle frames, engines, transmissions, radiators, axles, tires, drive motors, bearings and hydraulic components and vehicle body options, such as cranes, cargo bodies and trailers, from third-party suppliers. These body options may be manufactured specific to the Company’s requirements; however, most of the body options could be manufactured by other suppliers or the Company itself. Through reliance on this supply network for the purchase of certain components, the Company is able to reduce many of the pre-production and fixed costs associated with the manufacture of these components and vehicle body options. The Company purchases a large amount of fabrications and outsources certain manufacturing services, each generally from small companies located near its facilities. While providing low-cost services and product surge capability, such companies often require additional management attention during difficult economic conditions or contract start-up. The Company also purchases complete vehicle chassis from truck chassis suppliers in its commercialCommercial segment and, to a lesser extent, in its fireFire & emergencyEmergency and access equipmentAccess Equipment segments. Increasingly, the Company is sourcing components globally, which may involve additional inventory requirements and introduces additional foreign currency exposures. The Company maintains an extensive qualification, on-site inspection, assistance and performance measurement system to attempt to control risks associated with reliance on suppliers. The Company occasionally experiences problems with
supplier and subcontractor performance and component, chassis and body availability and must identify alternate sources of supply and/or address related warranty claims from customers.
While the Company purchases many costly components such as chassis, engines and transmissions, it manufactures certain proprietary components and systems. These components include front drive steer axles, transfer cases, transaxles, cabs, the TAK-4 independent suspension system, Hercules and Husky compressed air foam systems, the Command Zone vehicle control system, body structures and many smaller parts that add uniqueness and value to the Company’s products. The Company believes controlling the production of these components provides a significant competitive advantage and also serves to reduce the production costs of the Company’s products. The Company intends to continue to pursue vertical integration opportunities to further increase its competitive advantage.
Intellectual Property
Patents and licenses are important in the operation of the Company'sCompany’s business. One of management'smanagement’s objectives is developing proprietary components to provide the Company'sCompany’s customers with advanced technological solutions at attractive prices. The Company holds in excess of 8001,100 active domestic and foreign patents. The Company believes patents for the TAK-4
The Company believes that patents for certain components of its ProPulse hybrid electric drive system and Command Zone electronics system offer potential competitive advantages to product lines across all its segments. To a lesser extent, other proprietary components provide the Company a competitive advantage in each of the Company'sCompany’s segments.
As part of the Company’s long-term alliance with Caterpillar Inc., the Company acquired a non-exclusive, non-transferable worldwide license to use certain Caterpillar Inc. intellectual property through 2025 in connection with the design and manufacture of Caterpillar Inc.’s current telehandler products. Additionally, Caterpillar Inc. assigned to JLG certain patents and patent applications relating to the Caterpillar-branded telehandler products.
The Company holds trademarks for “Oshkosh,” “Oshkosh Defense,” “TAK-4,” “ProPulse,” “JLG,” “SkyTrak,” “Pierce,” “McNeilus,” “Jerr-Dan,” “CON-E-CO,“London,” “London”“IMT,” “Pratt Miller,” “DaVinci” and “IMT”“Volterra” among others. These trademarks are considered to be important to the future success of the Company’s business.
Environmental Matters
The Company is subject to a wide variety of local, state, and federal environmental laws in the U.S., as well as in other countries where the Company conducts business. Our facilities, operations and products are subject to increasingly stringent environmental laws and regulations globally, including laws and regulations governing air emissions, noise, releases to soil and discharges to water and the generation, handling, storage, transportation, treatment, and disposal of non-hazardous and hazardous waste materials. Some environmental laws impose strict, retroactive, and joint and several liability for the release of hazardous substances, even for conduct that was lawful at the time it occurred, or for the conduct of, or conditions caused by prior operators, predecessors or other third parties. With respect to acquired properties and businesses, the Company conducts due diligence into potential exposure to environmental liabilities but cannot be certain that it has identified or will identify all adverse environmental conditions.
We believe that our policies, practices, and procedures are properly designed to prevent unreasonable risk of environmental damage and the consequent financial liability to the Company. Nevertheless, we could incur substantial costs as a result of non-compliance with or liability for cleanup or other costs or damages under environmental laws. Also, we may be subject to other more stringent environmental laws in the future. If more stringent environmental laws are
enacted in the future, these laws could have a material adverse impact on our business, results of operations, and financial condition.
Human Capital Management
As of September 30, 2017,2021, the Company had approximately 14,00015,000 employees, approximately 9,000 of whom are production employees. The Company tracks its human capital management performance by measuring numerous relevant elements relating to its employees, including but not limited to, safety and diversity and inclusion.
The United Auto Workers union (UAW) Union represented approximately 2,0001,800 production employees at the Company’s Oshkosh, Wisconsin facilities; the Boilermakers, Iron Shipbuilders, Blacksmiths and Forgers Union (Boilermakers) represented approximately 225200 employees at the Company’s Kewaunee, Wisconsin facility; and the International Brotherhood of Teamsters Union (Teamsters) represented approximately 85175 employees at the Company’s Garner, Iowa facility. The Company'sCompany’s agreement with the UAW expires in September 2021.2027. The Company'sCompany’s five-year agreement with the Boilermakers extends through Juneexpires in May 2022. The Company’s three-year agreement with the Teamsters expires in January 2018, and the Company is currently in negotiations with the Teamsters on a new agreement.extends through October 2023. In addition, the majorityapproximately 25% of the Company’s approximately 2,0002,300 employees located outside of the U.S. are represented by separate works councils or unions.
People First Culture.The Company maintains a People First culture that includes investing in team members’ engagement, safety, wellbeing, and personal and professional development, as well as diversity and inclusion. The Company believes its People First culture is a strength, and the Company intends to continue building upon that culture to drive long-term, sustainable performance across the business. In fiscal 2020, 67% of team members participated in the Company’s Employee Engagement Survey. Engagement was at a high point compared to past surveys with a 77% positive engagement score.
The Company expects all team members to adhere to the highest ethical standards every day. The Company’s Code of Ethics & Conduct, also known as The Oshkosh Way, lays out the Company’s core values and standards for ethical behavior.
The Company’s connection to its communities and corresponding volunteer efforts have long been an important part of the Company’s culture and team member engagement. The Company’s teams creatively identified opportunities to volunteer in fiscal 2021 donating over 15,000 hours to the communities in which they live and work.
For the last seven years, the Company has held the Oshkosh Excellence Awards (OEAs), an annual competition that invites team members to submit innovative ideas to foster improvements for its culture, operations, products and customers. The COVID-19 pandemic challenged the Company’s ability to have a global event, so it pivoted to create a new competition called Cheers to Peers, where team members could nominate those who demonstrated the Company’s core values through leadership, courage, and perseverance in the face of unprecedented challenges brought on by the COVID-19 pandemic. Over 450 nominations were submitted, highlighting the Company’s team members’ commitment to putting people first during a global pandemic.
Talent and Learning.The Company’s business strategy is enabled by its ability to attract, develop and retain world-class talent. In fiscal 2021, in spite of COVID-19-related challenges, the Company continued a series of executive leadership development events, shifting from in-person to virtual attendance. More than 350 global leaders completed over 2,000 hours of learning on topics including diversity, equity and inclusion, megatrends, data analytics and innovation.
The Company expanded its enterprise Learning Management System to enable all 15,000 team members to access learning content on its technology platform. Strategic succession planning, future leader pipelines and critical role depth were reviewed and updated during the fiscal year. All leaders are expected to complete regular check-ins to provide feedback, review annual goal progress and hold career development conversations with team members to help ensure alignment, drive engagement and facilitate strong business outcomes.
Health and Safety.The Company focuses on protecting the health and safety of its team members. This has been even more important with COVID-19 creating new disruptions and health threats to the Company’s team members. The Company follows government-mandated health and safety guidance including mask and social distancing requirements
within its facilities. In addition to complying with external safety mandates, each facility continues to manage its response to COVID-19 based on localized risk factors.
The Company takes a proactive approach to managing safety, is committed to achieving zero workplace injuries and has consistently improved its safety performance over the past few years as illustrated below.
The Company offers a competitive, inclusive and empowering benefit platform to help ensure that no matter where team members are in their wellbeing journey, they are supported in their physical, financial and emotional goals. In calendar 2021, the Company cared for over 25,000 team members and their families on its medical plan. The Company introduced a program supporting the health and wellness of the team members that account for the highest number of preventable illnesses. In addition, the Company launched an expert second opinion medical service to support team members in confirming diagnosis and treatment plans. The Company also focused on improving team members’ financial goals by securing a new retirement plan administrator in fiscal 2021.
The Company has adoptedset several goals and benchmarks for Diversity, Equity and Inclusion (DEI) performance, using both internal goals and federal standards. The Company’s diversity representation is published in its fiscal 2020 Sustainability Report and the Company is driving proactive programs to improve its diverse employee representation. The Company measures diverse hires for full-time U.S. non-production positions and has a people first culture to build meaningful relationships with its employeesgoal that 50% of such hires be diverse in any given year. Diverse hires include ethnicity, gender, veteran and believes its relationship with its employee team members is satisfactory.
Seasonal Nature of Business
In the Company’s access equipmentAccess Equipment and commercialCommercial segments, business tends to be seasonal with an increase in sales occurring in the spring and summer months that constitute the traditional construction season in the northern hemisphere. In addition, sales are generally lower in the first fiscal quarterthree months ended December 31 in all segments due to the relatively high number of holidays in the United States, which reduce available production and shipping days.
Available Information
The Company maintains a website with the address
ITEM 1A. RISK FACTORS
The Company'sCompany’s financial position, results of operations and cash flows are subject to various risks, many of which are not exclusively within the Company'sCompany’s control, which may cause actual performance to differ materially from historical or projected future performance. Investors should carefully consider carefully information in this Annual Report on Form 10-K in light of the risk factors described below.
Business and Operational Risks
The novel coronavirus (COVID-19) pandemic has disrupted our operations and could have a material adverse effect on our business and financial condition.
As a result of the COVID-19 pandemic, governments across the world have implemented numerous measures to attempt to contain or lessen the impact of the virus on their populations, such as travel bans, quarantines, shut-downs and shelter in place orders. The COVID-19 pandemic has disrupted our operations and is expected to continue to negatively impact our operations in numerous ways, including but not limited to those outlined below:
• | The rapid increase in demand as the COVID-19 pandemic wanes has caused and is expected to continue to cause significant stress on global supply chains, resulting in parts or components shortages and/or inefficiencies in production. For example, supply chain disruptions, primarily within the Access Equipment segment, adversely impacted sales by approximately $100 million during the fourth quarter of fiscal 2021 and it is likely that parts or components shortages could limit our production in the future. |
• | President Biden recently issued an Executive Order that requires federal employees and contractors, including federal contractors and subcontractors, to be vaccinated against the coronavirus. It is also expected that the Occupational Safety and Health Administration (OSHA) will also issue an Emergency Temporary Standard requiring employers with at least 100 employees to require their employees to get vaccinated or submit to regular COVID-19 testing. The implementation of such government mandated vaccination or testing mandates may impact our ability to retain current employees and attract new employees. Further, implementation could also have similar consequences for our subcontractors, which may impact their ability to deliver the goods and services we need from them. |
• | Because working remotely has become more prevalent and accepted as a result of the COVID-19 pandemic, companies could determine that it will be acceptable for employees to work from their homes on a long-term basis, which could reduce demand for future nonresidential construction, which in turn could reduce demand for access equipment, refuse collection vehicles and concrete mixers. |
• | Our customers may experience financial hardships during the COVID-19 pandemic that could result in lower demand for our products and/or default on financial and other commitments to us. |
The impacts that we list above and other impacts of the COVID-19 pandemic are likely to also have the effect of heightening many of the other risks that we describe in the Current Report on Form 8-K. The impact of the COVID-19 pandemic continues to evolve and its ultimate duration, severity and disruption to our business, customers and supply chain, and the related financial impact to us, cannot be accurately forecasted at this time. Should such disruption continue for an extended period, the adverse effect on our business, results of operations, financial condition and/or cash flows could be more severe than previously anticipated.
We are dependent upon third-party suppliers, making us vulnerable to supply shortages and price increases.
We have experienced, and in the future are likely to experience, significant disruption or termination of the supply of some of our parts, materials, components and final assemblies that we obtain from suppliers or subcontractors. For example, the rapid increase in demand as the COVID-19 pandemic wanes has caused, and is expected to continue to cause, significant stress on global supply chains. Delays in obtaining parts, materials, components and final assemblies may result from a number of factors affecting our suppliers including capacity constraints, labor shortages or disputes, supplier product quality issues, suppliers’ impaired financial condition and suppliers’ allocations to other purchasers. These risks are increased in a weak economic environment or when demand increases coming out of an economic downturn. Such disruptions have resulted and could further result in manufacturing inefficiencies caused by us having to wait for parts to arrive on production lines, could delay sales and could result in a material adverse effect on our results of operations, financial condition, and/or cash flows.
We are dependent on our suppliers of engines and other power sources to continue to timely deliver such components that meet applicable emissions regulations and customer preferences. If we fail to have adequate relationships with suppliers that will supply appropriate engines and powertrain components to us or fail to timely receive appropriate components from our suppliers, that could result in our being placed in an uncompetitive position or without finished product when needed.
Raw material price fluctuations may adversely impact our results.
We purchase, directly and indirectly through component purchases, significant amounts of steel, aluminum and other commodities. Steel, aluminum, and other commodity prices have historically been highly volatile. For example, U.S. hot rolled steel prices have more than tripled between September 2020 and September 2021. Costs for these items may continue to increase and/or remain elevated in the future due to one or more of the following: a sustained economic recovery, the level of tariffs that the U.S. imposes on imported steel and aluminum or a weakening U.S. dollar.
In addition, the cost of parts, materials, components or final assemblies may significantly increase for reasons other than changes in commodity prices. Factors such as supply and demand, freight costs, availability of transportation, availability of labor, inventory levels, the level of imports, the imposition of duties and tariffs and other trade barriers and general economic conditions may affect the price of our parts, materials, components or final assembly purchases.
Increases in parts, materials, components or final assemblies costs negatively impact the profitability of orders in backlog as prices on those orders are usually fixed. If we are not able to recover cost increases through surcharges or permanent price increases to our customers, then such increases will have an adverse effect on our financial condition, profitability and/or cash flows. Furthermore, surcharges and permanent price increases may not be accepted by our customers, resulting in them choosing to order from our competitors instead of us or delaying orders to us. Any significant decrease in orders could have an adverse effect on our financial condition, profitability and/or cash flows. Additionally, if costs decrease and we are unable to negotiate timely component cost decreases commensurate with any decrease in costs, then our higher component costs could put us at a material disadvantage as compared to our competition which could have a material adverse effect on our net sales, financial condition, profitability and/or cash flows.
Our dependency on contracts with U.S. and foreign government agencies subjects us to a variety of risks that could materially reduce our revenues or profits.
We are dependent on U.S. and foreign government contracts for a substantial portion of our business. Approximately 33% of our sales in fiscal 2021 were to the U.S. government. That business is subject to the following risks, among others, that could have a material adverse effect on our operating performance:
• | The Weapon Systems Acquisition Reform Act and the Competition in Contracting Act require competition for U.S. defense programs in most circumstances. Competition for DoD programs that we currently have could result in the U.S. government awarding future contracts to another manufacturer or the U.S. government awarding the contracts to us at lower prices and operating margins than we experience under the current contracts. The U.S. Army has stated that it is its intent to recompete the JLTV production contract. There are a number of competitors vying for the new contract and there is no assurance that we will be successful in competing for the new contract. We expect the new contract to be awarded in the second half of calendar 2022. |
• | Competitions for U.S. government contracts are intense, and we cannot provide any assurance that we will be successful in current or future procurement competitions in which we participate. In addition, the U.S. government has become more aggressive in seeking to acquire the design rights to the Company’s current and potential future programs to facilitate competition for manufacturing our vehicles. The willingness of bidders to license their design rights to the DoD was an evaluation factor in the JLTV and FMTV A2 competitions. |
• | Most of our contracts with the DoD are multi-year firm, fixed-price contracts. These contracts typically contain annual sales price increases. Under the JLTV contract, we bear the risk of material, labor and overhead cost escalation for the full eight years of the contract, which is three to five years longer than has been the case under our other defense contracts. We attempt to limit the risk related to raw material price fluctuations on prices for |
major defense components by obtaining firm pricing from suppliers at the time a contract is awarded. However, if these suppliers do not honor their contracts, then we could face margin pressure. Furthermore, if our actual costs on any of these contracts exceed our projected costs, it could result in profits lower than historically realized or than we anticipate or net losses under these contracts. |
• | Our business is susceptible to changes in the annual U.S. defense budget. Such changes may reduce revenues that we expect in our Defense segment, especially in light of federal budget pressures, lower levels of U.S. ground troops deployed in foreign conflicts and the level of defense funding that will be allocated to the DoD’s tactical wheeled vehicle strategy generally. |
• | The U.S. government may not budget for or appropriate funding that we expect for our U.S. government contracts, which may prevent us from realizing revenues under current contracts or receiving additional orders that we anticipate we will receive. The DoD could also seek to reprogram certain funds originally planned for the purchase of vehicles we manufacture under the current defense budget allocations. The U.S. Army has identified its top modernization and readiness priorities and has re-programmed funds away from the Company’s JLTV program to support its modernization and readiness priorities and may re-program additional funds in the future. |
• | The funding of DoD programs is subject to an annual congressional budget authorization and appropriations process. In years when the U.S. government has not completed its budget process before the end of its fiscal year, government operations are typically funded pursuant to a “continuing resolution,” which allows federal government agencies to operate at spending levels approved in the previous budget cycle but does not authorize new spending initiatives. When the U.S. government operates under a continuing resolution, delays can occur in the procurement of the products, services and solutions that we provide and may result in new initiatives being delayed or canceled, or funds could be reprogrammed away from our programs to pay for higher priority operational needs. The U.S. government is currently operating under a continuing resolution that funds the federal government through December 3, 2021. Furthermore, in years when the U.S. government fails to complete its budget process or to provide for a continuing resolution, a federal government shutdown may result. This could in turn result in the delay or cancellation of key programs, which could have a negative effect on our cash flows and adversely affect our future results. In addition, payments to contractors for services performed during a federal government shutdown may be delayed, which would have a negative effect on our cash flows. |
• | Certain of our U.S. government contracts could be delayed or terminated, and all such contracts expire in the future and may not be replaced, which could reduce revenues that we expect under the contracts and negatively affect margins in our Defense segment. |
• | Defense tactical wheeled vehicles contract awards that we receive may be subject to protests or lawsuits by competing bidders, which protests or lawsuits, if successful, could result in the U.S. government customer revoking part or all of any defense tactical wheeled vehicle contracts it awards to us and our inability to recover amounts we have expended in anticipation of initiating production under any such contract. |
• | We must spend significant sums on product development and testing, bid and proposal activities, and pre-contract engineering, tooling and design activities in competitions to have the opportunity to be awarded these contracts. |
• | As a U.S. government contractor, our DoD contracts and systems are subject to audit and review by the Defense Contract Audit Agency and the Defense Contract Management Agency. These agencies review our performance under our U.S. government contracts, our cost structure and our compliance with laws and regulations applicable to U.S. government contractors. Systems that are subject to review include, but are not limited to, our accounting systems, estimating systems, material management systems, earned value management systems, purchasing systems and government property systems. If improper or illegal activities, errors or system inadequacies come to the attention of the U.S. government, as a result of an audit or otherwise, then we may be subject to civil and criminal penalties, contract adjustments and/or agreements to upgrade existing systems as well as administrative sanctions that may include the termination of our U.S. government contracts, forfeiture of profits, suspension of payments, fines and, under certain circumstances, suspension or debarment from future U.S. government contracts for a period of time. Whether or not illegal activities are alleged and regardless of materiality, the U.S. |
government also has the ability to decrease or withhold certain payments when it deems systems subject to its review to be inadequate. These laws and regulations affect how we do business with our customers and, in many instances, impose added costs on our business. |
• | Our Defense segment results may fluctuate significantly from time to time as a result of the start and completion of existing and new domestic and international contract awards that we may receive. A majority of our contracts in the Defense segment are large in size and require significant personnel and production resources, and when our government customers allow such contracts to expire or significantly reduce their vehicle requirements under such contracts, we must make adjustments to personnel and production resources. The start and completion of existing and new contract awards that we may receive can cause our Defense segment results to fluctuate significantly. |
• | We periodically experience difficulties with sourcing sufficient vehicle carcasses from the U.S. military to maintain our defense tactical wheeled vehicles remanufacturing schedule, which can create uncertainty and inefficiencies for this area of our business. |
Our markets are highly cyclical. Declines in these markets could have a material adverse effect on our operating performance.
The access equipment market is highly cyclical and impacted (i) by the strength of economies in general and customers’ perceptions concerning the timing of economic cycles, (ii) by residential and non-residential construction spending, (iii) by the ability of rental companies to obtain third-party financing to purchase revenue generating assets, (iv) by capital expenditures of rental companies in general, including the rate at which they replace aged rental equipment, which is impacted in part by historical purchase levels, including lower levels of purchasing during the Great Recession, which we believe contributed to a decrease in access equipment sales from fiscal 2015 to fiscal 2017, (v) by the timing of engine emissions standardsregulatory standard changes, and (vi) by other factors, including oil and gas related activity. Refuse collection vehicle markets are also cyclical and impacted by the strength of economies in general, by municipal tax receipts and by the size and timing of capital expenditures, including replacement demand, by large waste haulers. The ready-mix concrete market that we serve is highly cyclical and impacted by the strength of the economy generally, by the number of housing starts and by other factors that may have an effect on the level of concrete placement activity, either regionally or nationally. Refuse collection vehicle markets are also cyclical and impacted by the strength of economies in general, by municipal tax receipts and by the size and timing of capital expenditures, including replacement demand, by large waste haulers. Fire & emergency markets are cyclical later in an economic downturncycle and are impacted by the economy generally and by municipal tax receipts and capital expenditures.
The USPS may not purchase quantities from us that we expect.
In February 2021, the USPS notified us that it selected us to a varietybuild its NGDV. The IDIQ contract allows for the purchase of risksbetween 50,000 and 165,000 units over 10 years. To date, we have received an order for $482 million for engineering to finalize the production vehicle design and for tooling and factory build-out activities that could materially reduceare necessary prior to vehicle production. The USPS awards that we currently anticipate receiving from the USPS and our revenues or profits.
• | Budget constraints facing the USPS and continuously changing demands for postal services may result in the USPS ordering fewer units than we expect the USPS to award to us under the contract. |
• | Engineering time to finalize the production vehicle design may be greater than we anticipate. |
• | Tooling and factory build-out activities that we must complete prior to production may be greater than we anticipate. |
• | We plan to use a new manufacturing facility to perform under the contract, and the costs and other challenges associated with recruiting and training a new workforce may be greater than we anticipate. |
• | The USPS’ obligation to order the minimum order quantity under the contract (50,000 units) is contingent upon USPS satisfactory completion of the National Environmental Policy Act (NEPA) Environmental Impact Statement (EIS) process. Failure to complete this process in a satisfactory manner could result in a loss of the minimum quantity and prevent additional awards under the NGDV contract. |
Our business is susceptible to changesresults could be adversely affected by severe weather, natural disasters, and other events in the U.S. defense budget, which changes may reduce revenues that we expect from our defense business, especially in light of federal budget pressures, lower levels of U.S. ground troops deployed in foreign conflicts, sequestration and the level of defense funding that will be allocated to the DoD's tactical wheeled vehicle strategy generally.
We have manufacturing and other operations in locations prone to severe weather and natural disasters, including earthquakes, floods, hurricanes or tsunamis that could disrupt our operations. Our suppliers and customers also have operations in such locations. Severe weather or a natural disaster that results in a prolonged disruption to our operations, or the U.S. government has become more aggressive in seeking to acquire the design rights to the Company's current and potential future programs to facilitate competition for manufacturingoperations of our vehicles. The willingnesscustomers or suppliers could delay delivery of bidders to license their design rights to the DoD was an evaluation factor in the JLTV contract competition and is expected to be an evaluation factor in the recompete for the FMTV program.
Disruptions within our dealer network could adversely affect our business.
Although we sell the opportunity to be awarded these contracts.
In addition, our vehicles and vehicle bodies.
Consolidation within our customer and dealer bases may impact our strategy, pricing and product margins.
Significant consolidation in our customer and dealer bases could enhance the influence of customers and dealers over our business strategy. Intensified consolidation in the industries we serve may provide our customers and dealers with additional leverage in negotiations around our product and service offerings. For example, the Access Equipment segment’s largest customers are rental companies that serve the end user equipment rental markets. Should larger access equipment customers continue to grow through the acquisition of smaller rental companies, their buying influence may grow and may impact the competitive environment within the industry. Similarly, the Fire & Emergency segment’s distribution channel is comprised of a relatively small number of dealers that if they were to consolidate may create additional pricing pressure, as well as concentrated credit exposures, as our reliance on a smaller group of larger individual dealerships increases. If that trend in customer and dealer consolidation continues, it could have an unfavorable impact on our pricing and product margins.
Competition and Strategy Risks
We face significant competition in the markets we serve.
The markets in which we operate are highly competitive. We compete worldwide with a number of other manufacturers that produce and sell similar products. Our products primarily compete on the basis of brand awareness, product innovation, performance, quality, reliability, availability, price, service and support, ability to meet customer specifications and the extent to which a company offers single-source customer solutions. Certain of our competitors have greater financial, marketing, manufacturing, distribution and governmental affairs resources than we do, which may put us at a competitive disadvantage. We also face pricing pressure from international competitors that attempt to gain domestic market share through importing and selling products at below market prices, particularly in the Access Equipment segment. If competition in our industry intensifies or if our current competitors lower their prices for competing products, we may lose sales or be required to lower the prices we charge for our products. We cannot provide any assurance that our products will continue to compete effectively with the products of competitors or that we will be able to retain our customer base or improve or maintain our profit margins on sales to our customers.
If we are unable to continue to enhance existing products and develop new products that respond to customer needs and preferences, we may experience a decrease in demand for our products and our business could suffer.
One of our growth strategies is emphasizing our new product development as we seek to expand sales and margins by leading our core markets in the introduction of new or improved products and technologies. Our ability to match product improvements and new product offerings to diverse global customer’s anticipated needs for different types of products and various product features and functions, at acceptable prices, is critical to our success. We may not be able to compete as effectively, and ultimately satisfy the needs and preferences of our customers, unless we can continue to improve existing products and develop new innovative products in the global markets in which we compete. While we spent $103.1 million, $103.9 million and $99.0 million for research and development in fiscal 2021, 2020 and 2019, respectively, we cannot provide any assurance that this level of investment in research and development will be sufficient to maintain our competitive strength in product innovation, which could cause our business to suffer. Product improvements and new product introductions also require significant planning, design, development and testing at the technological, product and manufacturing process levels, and we may not be able to timely develop product improvements or new products. Our competitors’ new products may arrive in the market before our products arrive and be more attractive with more features and functions and/or lower prices than our products. If we are unable to provide continued technological improvements in our products that meet our customers’ or the industry’s expectations, then the demand for our products could be adversely affected.
In response to changes in customer preferences concerning global climate changes and related changes in regulations, we may face greater pressure to develop products that generate less greenhouse gas emissions. Many manufacturers foresee sales of electric-powered vehicles and mobile equipment becoming increasingly important to their businesses, and we may not have the expertise or resources to successfully address these pressures on a cost-effective basis. While we are developing and offering more propulsion choices in our products, such as electric-powered vehicles or mobile equipment, with lower emissions, this may require us to spend additional funds on product research and development and implementation costs and subject us to the risk that our competitors may respond to these pressures in a manner that gives them a competitive advantage. If we do not accurately predict, prepare for and respond to new kinds of technological innovations with respect to electric-powered vehicles or mobile equipment and other technologies that minimize emissions, competition from others could make our specialty vehicles or mobile equipment less desirable in the marketplace.
We are subject to fluctuations in exchange rates associated with our non-U.S. operations that could adversely affect our results of operations and may significantly affect the comparability of our results between financial periods.
Approximately 25%15% of our net sales in fiscal 20172021 were attributable to products sold outside of the United States, of which approximately 73%52% involved export sales from the United States. The majority of export sales are denominated in U.S. dollars. Sales that originate outside the United States are typically transacted in the local currencies of those countries. Fluctuations in foreign currency as we experienced during fiscal 2015 and 2016, can have an adverse impact on our sales and profits as amounts that are measured in
foreign currency are translated back to U.S. dollars. We have sales of inventory denominated in U.S. dollars to certain of our subsidiaries that have functional currencies other than the U.S. dollar. The exchange rates between many of these currencies and the U.S. dollar have fluctuated significantly in recent years and may fluctuate significantly in the future. In June 2016, the United Kingdom held a referendum in which a majority of voters voted for the United Kingdom to exit the European Union (Brexit), the announcement of which resulted in a significant devaluation of the British pound sterling. Such fluctuations, in particular those with respect to the Euro, the Chinese renminbi, the Canadian dollar, the Mexican peso, the Brazilian real, the Australian dollar and the British pound sterling, may have a material effect on our net sales, financial condition, profitability and/or cash flows and may significantly affect the comparability of our results between financial periods. In addition, any appreciation in the value of the U.S. dollar in relation to the value of the local currency of those countries where our products are sold will increase our costs of goods in our foreign operations, to the extent such costs are payable in U.S. dollars, and impact the competitiveness of our product offerings in international markets.
Our objective is to expand international operations and sales, the conduct of which subjects us to risks that may have a material adverse effect on our business.
Expanding international operations and sales is a significant part of our growth strategy. International operations and sales are subject to various risks, including political, religious and economic instability, local labor market conditions, the imposition of foreign tariffs upon our products (which include tariffs in response to tariffs that the U.S. imposes) and other trade barriers, the impact of foreign government regulations and the effects of income and withholding taxes, sporadic order patterns, governmental expropriation, uncertainties or delays in collection of accounts receivable and differences in business practices. We may incur increased costs, including increased supply chain costs, and experience delays or disruptions in production schedules, product deliveries or payments in connection with international manufacturing and sales that could cause loss of revenues and earnings. Among other things, there are additional logistical requirements associated with international sales, which increase the amount of time between the completion of vehicle production and our ability to recognize related revenue. In addition, expansion into foreign markets requires the establishment of distribution networks and may require modification of products to meet local requirements or preferences. Establishment of distribution networks or modification to the design of our products to meet local requirements and preferences may take longer or be more costly than we anticipate and could have a material adverse effect on our ability to achieve international sales growth. Some of these international sales require financing to enable potential customers to make purchases. Availability of financing to non-U.S. customers depends in part on the U.S. Export-Import Bank. If U.S. Export-Import Bank authorization financing is not secured for certain transactions, we may not be able to effectively compete for international sales against foreign competitors who are able to benefit from direct or indirect financial support from governments where they have operations. In addition, our entry into certain markets that we wish to enter may require us to establish a joint venture. Identifying an appropriate joint venture partner and creating a joint venture could be more time consuming, more costly and more difficult than we anticipate.
We may not be able to execute on our business strategy.
The Company’s strategy is grounded in its purpose of making a difference in the lives of those who build, serve, and protect communities around the world. The strategy is reflected in three simple words: Innovate. Serve. Advance. We cannot provide any assurance we will be able to successfully execute our business strategy due to a variety of risks, including our inability to design new products that meet our customers’ requirements and bring them to market; higher costs than anticipated to launch new products or delays in new product launches; our inability to expand our aftermarket parts and services availability; and slow adoption of our products in emerging markets and/or our inability to successfully expand into new markets.
We may not realize all of the anticipated benefits of our acquisitions.
We are continuously evaluating potential acquisitions to support our business strategy. As part of this evaluation process, we perform due diligence to identify potential risks associated with the potential transaction. We also make assumptions regarding future performance of the acquired business. We cannot provide any assurance we will be able to successfully achieve the benefits of any business acquisition due to a variety of risks, including the following:
• | Our failure to achieve the acquisition’s assumed future financial performance or realize assumed efficiencies or assumed cost reductions; |
• | There may be a cultural mismatch that exists between us and the acquired business; |
• | We may incur unforeseen expenses or liabilities or may be subject to other unanticipated regulatory or government actions related to the acquired business; and |
• | We may incur higher transaction costs than expected. |
Financial Risks
We are subject to changes in contract estimates.
We account for substantially all long-term contracts in the Defense segment utilizing the cost to cost method of percentage-of-completion accounting. This accounting requires judgment relative to assessing risks, estimating revenues and costs and making assumptions regarding the timing of receipt of delivery orders from our government customer and technical issues. Due to the size and nature of these contracts, the estimation of total revenues and costs is complicated and subject to many variables. We must make assumptions regarding expected increases in wages and employee benefits, engineering hours, productivity and availability of labor, material costs and allocated fixed costs. Changes to production costs, overhead rates, learning curves and/or supplier performance can also impact these estimates. Furthermore, under the revenue recognition accounting rules, we can only include units in our estimates of overall contract profitability after we have received a firm delivery order for those units. Because new orders have the potential to significantly change the overall profitability of cumulative orders received to date, particularly early in the contract when fewer overall units are on order, the period in which we receive those orders from the government will impact the estimated life-to-date contract profitability. Changes in underlying assumptions, circumstances or estimates could have a material adverse effect on our net sales, financial condition and/or profitability.
We may experience losses in excess of our recorded reserves for doubtful accounts, finance receivables, notes receivable and guarantees of indebtedness of others.
As of September 30, 2021, we had consolidated gross receivables of $1.03 billion. In addition, we were subject to obligations to guarantee customer indebtedness to third parties of $846.6 million, under which we estimate our maximum exposure to be $167.0 million. We evaluate the collectability of receivables and our guarantees of indebtedness of others based on a combination of factors and establish reserves based on our estimates of potential current and future losses. In circumstances where we believe it is probable that a specific customer will have difficulty meeting its financial obligations, a specific reserve is recorded to reduce the net recognized receivable to the amount we expect to collect, and/or we recognize a liability for a guarantee we expect to pay, taking into account any amounts that we would anticipate realizing if we are forced to repossess the equipment that supports the customer’s financial obligations to us. We also establish additional reserves based upon our perception of the quality of the current receivables, the current financial position of our customers, past collections experience, existing and future market conditions. Prolonged or more severe economic weakness may result in additional requirements for specific reserves. During periods of economic weakness, the collateral underlying our guarantees of indebtedness of customers or receivables can decline sharply, thereby increasing our exposure to losses. We also face a concentration of credit risk as the Access Equipment segment’s ten largest debtors at September 30, 2021 represented approximately 33% of our consolidated gross receivables. Some of these customers are highly leveraged. We may incur losses in excess of our recorded reserves if the financial condition of our customers were to deteriorate or the full amount of any anticipated proceeds from the sale of the collateral supporting our customers’ financial obligations is not realized. Our cash flows and overall liquidity may be materially adversely affected if any of the financial institutions that finance our customer receivables become unable or unwilling, due to unfavorable economic conditions, a weakening of our or their financial position or otherwise, to continue providing such credit.
An impairment in the carrying value of goodwill and other indefinite-lived intangible assets could negatively affect our operating results.
We have a substantial amount of goodwill and other indefinite-lived intangible assets on our balance sheet as a result of acquisitions we have completed. At September 30, 2021, approximately 85% of these intangibles were concentrated in the Access Equipment segment. We evaluate goodwill and indefinite-lived intangible assets for impairment at least annually, or more frequently if potential interim indicators exist that could result in impairment. Events and conditions that could result in impairment include a prolonged period of global economic weakness, a decline in economic conditions or a slow, weak economic recovery, a sustained decline in the price of our common stock, adverse changes in the regulatory environment, adverse changes in the market share of our products, adverse changes in interest rates, or other factors leading to reductions in the long-term sales or profitability that we expect. Determination of the fair value of a reporting unit includes developing estimates which are highly subjective and incorporate calculations that are sensitive to minor changes in underlying assumptions. Management’s assumptions change as more information becomes available. Changes
in these events and conditions or other assumptions could result in an impairment charge in the future, which could have a significant adverse impact on our reported earnings.
Financing costs and restrictive covenants in our current debt facilities could limit our flexibility in managing our business and increase our vulnerability to general adverse economic and industry conditions.
Our credit agreement contains financial and restrictive covenants which, among other things, require us to satisfy quarter-end financial ratios. Our ability to meet the financial ratios in such covenants may be affected by a number of risks or events, including the risks described in this Current Report on Form 8-K and events beyond our control. The indenture governing our senior notes also contain restrictive covenants. Any failure by us to comply with these restrictive covenants or the financial and restrictive covenants in our credit agreement could have a material adverse effect on our financial condition, results of operations and debt service capability.
Our access to debt financing at competitive risk-based interest rates is partly a function of our credit ratings. A downgrade to our credit ratings could increase our interest rates, could limit our access to public debt markets, could limit the institutions willing to provide us credit facilities, and could make any future credit facilities or credit facility amendments more costly and/or difficult to obtain. In addition, a portion of our debt is subject to variable interest rates. An increase in general interest rates would also increase our cost of borrowing under our credit agreement.
Additional liabilities relating to changes in tax rates or exposure to additional income tax liabilities could adversely impact our financial condition and cash flow.
We are subject to income taxes in the U.S. and various non-U.S. jurisdictions. Our domestic and international tax liabilities are dependent upon the location of earnings among these different jurisdictions. Changes in our effective tax rate as a result of changes in tax laws or regulations and judicial or regulatory interpretations of those laws or regulations, the mix of earnings in countries with differing statutory tax rates, changes in overall profitability, changes in U.S. generally accepted accounting principles, or changes in the valuation of deferred tax assets could adversely affect our future results of operations. In addition, the amount of income taxes that the Company pays is subject to ongoing audits by U.S. federal, state and local tax authorities and by non-U.S. tax authorities. If these audits result in assessments different from amounts that the Company has reserved for potential tax liabilities, future financial results may include unfavorable adjustments to the Company’s tax liabilities, which could have a material adverse effect on the Company’s results of operations.
Cybersecurity Risks
Increased cybersecurity threats and more sophisticated computer crime pose a risk to our systems, networks, products and services.
As a defense contractor, we face many cyber and security threats that can range from attacks common to most industries, which could have financial or reputational consequences, to advanced persistent threats on our Defense programs, which could involve information that is considered a matter of national security. We rely extensively on information technology systems and networks, some of which third parties manage, supporting a variety of business activities. Operating these information technology systems and networks and processing and maintaining related data in a secure manner, is critical to our business operations and strategy. Information technology security threats -- from user error to cybersecurity attacks designed to gain unauthorized access to our systems, networks and data -- are increasing in frequency and sophistication. Cybersecurity attacks may range from random attempts to coordinated and targeted attacks, including sophisticated computer crime and advanced persistent threats. These threats pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. Cybersecurity attacks could also include attacks targeting the security, integrity and/or reliability of the hardware and software that we have installed in our products. It is possible that our information technology systems and networks, or those that third parties manage or provide, could have vulnerabilities, which could go unnoticed for a period of time. While we have utilized and continue to utilize various procedures and controls to mitigate such risks, we cannot assure that the actions and controls we have implemented and are implementing, or that we cause or have caused third-party service providers to implement, will be sufficient to protect our systems, information or other property. We have experienced cyber security threats and vulnerabilities in our systems and those of our third-party providers, and we have experienced viruses and attacks targeting
our information technology systems and networks. Such prior events, to date, have not had a material impact on our financial condition, results of operations or liquidity. However, the potential consequences of a future material cybersecurity attack include reputational damage, litigation with third-parties, government enforcement actions, penalties, disruption to systems, unauthorized release of confidential or otherwise protected information, corruption of data, diminution in the value of our investment in research, development and engineering, and increased cybersecurity protection and remediation costs, which in turn could adversely affect our competitiveness, results of operations and financial condition.
Legal and Regulatory Risks
Our international sales and operations subject us to risks that may have a material adverse effect on our business.
As a result of our international operations and sales, we are subject to the Foreign Corrupt Practices Act (FCPA) and other laws that prohibit improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business. Our international activities create the risk of unauthorized payments or offers of payments in violation of the FCPA by one of our employees, consultants, sales agents or distributors, because these parties are not always subject to our control. Any violations of the FCPA could result in significant fines, criminal sanctions against us or our employees, and prohibitions on the conduct of our business, including our business with the U.S. government. We are also increasingly subject to export control regulations, including, without limitation, the United States Export Administration Regulations and the International Traffic in Arms Regulations. Unfavorable changes in the political, regulatory or business climate could have a material adverse effect on our net sales, financial condition, profitability and/or cash flows.
We have manufacturing and other operations in locations prone to severe weather and natural disasters, including earthquakes, hurricanes or tsunamis that could disrupt our operations. Our suppliers and customers also have operations in such locations. Severe weather or a natural disaster that results in a prolonged disruption to our operations, or the operations of our customers or suppliers could delay delivery of parts, materials or components to us or sales to our customers and could have a material adverse effect on our net sales, financial condition, profitability and/or cash flows.
Both our products and the operation of our manufacturing facilities are subject to statutory and regulatory requirements. These include environmental requirements applicable to manufacturing and vehicle emissions, government contracting regulations, regulations impacting our supply chain and domestic and international trade regulations. A significant change to these regulatory requirements could substantially increase manufacturing costs, or impact the size or timing of demand for our products, all of which could make our business results more variable.
Climate change attributed to increased levels of greenhouse gases, including carbon dioxide, which has led to significant legislative and regulatory efforts to limit greenhouse gas emissions. Congress has previously consideredThese considerations may lead to new international, national, regional, or local legislation or regulatory response. The legislation of greenhouse gases could result in unfavorable financial impact through various forms including taxation, emission allowances, fines, facilities improvement investment and higher energy costs. The impact of any future greenhouse gas legislation, regulatory, or product standard requirements is unknown and therefore, we are uncertain of the potential impact that future changes may have.
Our global facilities, operations and products are subject to increasingly stringent environmental laws and regulations, including laws and regulations governing air emissions, noise, releases to soil and discharges to water and the generation, handling, storage, transportation, treatment, and disposal of non-hazardous and hazardous waste materials. Certain environmental laws impose strict, retroactive, and joint and several liability for the release of hazardous substances, even for conduct that was lawful at the time it occurred, or for the conduct of, or conditions caused, by prior operators, predecessors or other third parties. With respect to acquired properties and businesses, we conduct due diligence into potential environmental exposure. However, we cannot be certain that we have identified or will identify all adverse environmental conditions. We could be subject to fines, cleanup costs or other costs or damages under environmental laws if we are not in compliance with environmental regulations. We may be subject to other more stringent environmental laws in the future implement restrictions on greenhouse gas emissions through a cap-and-trade system under which emitters would be required to buy allowances to offset emissions of greenhouse gas. In addition, several states, including states where we have manufacturing plants, are considering various greenhouse gas registration and reduction programs. Our manufacturing plants use energy, including electricity and natural gas, and certain of our plants emit amounts of greenhouse gas that may be affected by these legislative and regulatory efforts. Greenhouse gas regulation could increase the price of the electricity we purchase, increase costs for our use of natural gas, potentially restrict access to or the use of natural gas, require us to purchase allowances to offset our own emissions or result in an overall increase in our costs of raw materials, any one of which could increase our costs, reduce our competitiveness in a global economy or otherwise negatively affect our business, operations or financial results.
ITEM 1B. UNRESOLVED STAFF COMMENTS
The Company has no unresolved staff comments regarding its periodic or current reports from the staff of the SEC that were issued 180 days or more preceding September 30, 2017.
ITEM 2. PROPERTIES
The Company believes its equipment and buildings are well maintained and adequate for its present and anticipated needs. As of September 30, 20172021, the Company operated in 2928 manufacturing facilities. The locations of the Company’s principal manufacturing facilities are provided in the table below:
Segment | ||||||
Location (# of facilities) | Segment | Location (# of facilities) | ||||
Access Equipment | McConnellsburg, Pennsylvania (3)(a) | Fire & Emergency | Appleton, Wisconsin (2) | |||
Shippensburg, Pennsylvania (1) | Bradenton, Florida (1) | |||||
Greencastle, Pennsylvania (1) | Kewaunee, Wisconsin (1) | |||||
Tianjin, China (2) (c) | Clearwater, Florida (1) | |||||
Tonneins, France (1) | Neenah, Wisconsin (1) | |||||
Port Macquarie, Australia (1) | ||||||
Leicester, United Kingdom (1) | Commercial | Dodge Center, Minnesota (1) | ||||
Bedford, Pennsylvania (1) | Garner, Iowa (1) | |||||
Leon, Mexico (1) | ||||||
Riceville, Iowa (1) | ||||||
London, Canada (1) | ||||||
Defense | Oshkosh, Wisconsin (4) | |||||
Jefferson City, Tennessee (1)(b) | ||||||
Spartanburg, South Carolina (1) (b) |
(a)
Two facilities are owned and the other is leased.(b)These facilities are leased.
(c)One facility is owned and the other is leased.
The Company’s manufacturing facilities generally operate five days per week on one or two shifts, except for seasonal shutdowns for one- to three-week periods. The Company believes its manufacturing capacity could be significantly increased with limited capital spending by operating an additional shift at each facility.
The Company also performs contract maintenance services out of multiple warehousing and service facilities owned and/or operated by the U.S. government and third parties, including locations in the U.S., Japan and multiple other countries in Europe and the Middle East.
In addition to sales and service activities at the Company’s manufacturing facilities, the Company maintains a network of sales and service centers in the U.S. The Company uses these facilities primarily for sales and service of concrete mixers and refuse collection vehicles.vehicles and concrete mixers. The access equipmentAccess Equipment segment also leases a number of small distribution, engineering, administration or service facilities throughout the world.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to environmental matters and legal proceedings and claims, including patent, antitrust, product liability, warranty and state dealership regulation compliance proceedings that arise in the ordinary course of business. Although the final results of all such matters and claims cannot be predicted with certainty, the Company believes that the ultimate resolution of all such matters and claims will not have a material effect on the Company’s financial condition, results of operations or cash flows.
Personal injury actions and other.
At September 30,ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information as of November 21, 201716, 2021 concerning the Company’s executive officers. All of the Company’s executive officers serve terms of one year and until their successors are elected and qualified.
Name | Age | Title | ||
John C. Pfeifer | 56 | |||
President and Chief Executive Officer | ||||
John J. Bryant | 63 | Executive Vice President and President, Defense Segment | ||
Ignacio A. Cortina | 50 | Executive Vice President, General Counsel and Secretary | ||
James W. Johnson | 57 | Executive Vice President and President, Fire & Emergency Segment | ||
Bradley M. Nelson | 52 | Executive Vice President | ||
Frank R. Nerenhausen | 57 | Executive Vice President and President, Access Equipment Segment | ||
Michael E. Pack | 47 | |||
Executive Vice President and Chief Financial Officer | ||||
Jason P. Baab | 47 | Senior Vice President, Corporate Development and Strategy | ||
Bryan K. Brandt | 53 | Senior Vice President and Chief Marketing Officer | ||
Thomas P. Hawkins | 56 | Senior Vice President, Government Relations | ||
Anupam Khare | 57 | Senior Vice President and Chief Information Officer | ||
Emma M. McTague | 48 | Senior Vice President and Chief Human Resources Officer | ||
John C. Pfeifer. Mr. JonesPfeifer joined the Company in 20052019 as Executive Vice President and Chief Operating Officer. In May 2020, Mr. Pfeifer assumed the position of President and Chief Operating Officer of the Company. On November 18, 2020, it was announced that Mr. Pfeifer was appointed President and Chief Executive Officer effective on April 2, 2021. Prior to joining the Company, he served as Senior Vice President and President - Mercury Marine, of Brunswick Corporation, a designer, manufacturer and marketer of marine engines and marine parts and accessories, from 2014 to 2019. Prior to that, Mr. Pfeifer served as Vice President and President - Mercury Marine of Brunswick Corporation from 2014 to 2018. Mr. Pfeifer is a director of The Manitowoc Company, Inc.
John J. Bryant. Mr. Bryant joined the Company in 2010 as Vice President and General Manager of the Company's airport products business.Marine Corps Programs - Defense segment. He served as Vice President Pierce;of Programs - Defense segment from 2013 to 2016 and as Senior Vice President and President, Defense Segment from 2016 until his appointment to his current position of Executive Vice President and President, Fire & EmergencyDefense Segment in February 2018. Prior to joining Oshkosh Defense, he served as a Professor of Program Management at the Defense Acquisition University. Mr. Bryant retired from 2008 to 2010, Executive Vice President and President, Access Equipment Segment from 2010 to 2012 and most recently President and Chief Operating Officerthe U.S. Marine Corps with the rank of the Company from 2012 to 2016. Effective January 1, 2016, Mr. Jones assumed the position of President and Chief Executive Officer. Mr. Jones is also a director of the Company. Mr. Jones is a director of Thor Industries, Inc.
Ignacio A. Cortina.
Mr. Cortina joined the Company in 2006 with the acquisition of JLG. He has held various roles of increasing responsibility, serving as theJames W. Johnson.
Mr. Johnson joined the Company in 2007 as Director of Dealer Development for Pierce. He was appointed to Senior Vice President of Sales and Marketing for Pierce in 2009 and was appointed to his current position of Executive Vice President and President, Fire & Emergency Segment in 2010.Bradley M. Nelson. Mr. KimmittNelson joined the Company in 20012011 and served as Global Vice President Government Operationsof Marketing for JLG from 2011 to 2013. He then served as Senior Vice President and President, Commercial Segment from 2013 to September 2021 and was appointed to his current position of Executive Vice President Government Operations and Industry RelationsPresident, Commercial Segment in 2006.
Frank R. Nerenhausen.
Mr. Nerenhausen joined the Company in 1986 and has served in various assignments, including Vice President of Concrete & Refuse Sales & Marketing for McNeilus from 2008 to 2010 and Executive Vice President and President, Commercial Segment from 2010 to 2012. He was appointed to his current position of Executive Vice President and President, Access Equipment Segment in 2012.Michael E. Pack. Mr. RaduePack joined the Company in 20052006 as Senior Director of Financial Analysis and Controls. He served as Senior Vice President, Business Development from 2011 to 2016 prior to being appointed to his current position of Executive Vice President and Chief Strategy Officer in November 2016.
Jason P. Baab. Mr. SimsBaab joined the Company in August 2016 as Executive Vice President and Chief Human Resources Officer. He previously served as a Senior Vice President Human Resources Officer at Eaton Corporation, a global power management company, from 2009 to August 2016. Prior to Eaton Corporation, Mr. Sims served in a variety of executive human resources roles with a number of major consumer brand companies.
Bryan K. Brandt. Mr. Bryant retired from the U.S. Marine Corps with the rank of Colonel in 2008.
Thomas P. Hawkins. Mr. MessinaHawkins joined the Company in 2009September 2018 as Chief Engineer, Advanced Products and served in various assignments, including Vice President Engineering - Defense Segment from 2011 to 2013 and the Vice President Engineering - Access Equipment Segment from 2013 to February 2015. He was appointed to his current position of Senior Vice President Engineering and Technology in February 2015.
Anupam Khare. Mr. Khare joined the Company in 2011 as Senior Vice President, Quality & Continuous Improvement. She previously served as Director of Global Quality & Manufacturing Engineering at Caterpillar Inc. from 2007 to 2011.
Emma M. McTague. Ms. McTague joined the Company in commercial2015 as Vice President and military aviation, most recently as DirectorChief Human Resources Officer for the Access Equipment segment. She was appointed to her current position of Enterprise Sourcing from 2012 to 2014.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Common Stock Repurchases
The following table sets forth information with respect to repurchase shares of the Company's Common Stock by 10,000,000 shares, taking the authorized number of sharespurchases of Common Stock available for repurchase to 10,299,198 as of that date. As of September 30, 2017,made by the Company had repurchased 2,786,624 shares of Common Stock under this authorization. As a result, 7,512,574 shares of Common Stock remained available for repurchase underor on the repurchase authorization at September 30, 2017. The Company can use this authorization at any time as there is no expiration date associated with the authorization. From time to time, the Company may enter into a Rule 10b5-1 trading plan for the purpose of repurchasing shares under this authorization. The Company did not repurchase any Common Stock under the authorizationCompany’s behalf during the fourth quarter of fiscal 2017.2021:
Period |
| Total Number of Shares Purchased |
|
| Average Price Paid per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) |
|
| Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) |
| ||||
July 1 - July 31 |
|
| 261,689 |
|
| $ | 120.39 |
|
|
| 261,689 |
|
|
| 7,090,501 |
|
August 1 - August 31 |
|
| 286,164 |
|
| $ | 116.25 |
|
|
| 286,164 |
|
|
| 6,804,337 |
|
September 1 - September 30 |
|
| 272,943 |
|
| $ | 109.93 |
|
|
| 272,943 |
|
|
| 6,531,394 |
|
Total |
|
| 820,796 |
|
|
|
|
|
|
| 820,796 |
|
|
| 6,531,394 |
|
(1) | In May 2019, the Board of Directors approved a stock repurchase authorization of 10,000,000 shares. At September 30, 2021, the Company had repurchased 3,468,606 shares under this authorization. As a result, 6,531,394 shares of Common Stock remained available for repurchase under the repurchase authorization at September 30, 2021. The Company can use this authorization at any time as there is no expiration date associated with the authorization. From time to time, the Company may enter into a Rule 10b5-1 trading plan for the purpose of repurchasing shares under this authorization. |
Common Stock Price
The Company’s Common Stock is listed on the New York Stock Exchange (NYSE) under the symbol OSK. As of November 14, 2017,9, 2021, there were 1,0451,936 holders of record of the Common Stock. The following table sets forth prices reflecting actual sales of the Common Stock as reported on the NYSE for the periods indicated.
| Fiscal 2017 | Fiscal 2016 | ||||||||||||||
| Quarter Ended | High | Low | High | Low | |||||||||||
| September 30 | $ | 83.49 | $ | 64.14 | $ | 57.75 | $ | 45.19 | |||||||
| June 30 | 75.00 | 61.74 | 49.71 | 38.47 | |||||||||||
| March 31 | 74.16 | 64.66 | 41.54 | 29.59 | |||||||||||
| December 31 | 71.99 | 52.00 | 44.13 | 35.08 | |||||||||||
Item 12 of this Annual Report on Form 10-K contains certain information relating to the Company’s equity compensation plans.
The following information in this Item 5 is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 (Exchange Act) or to the liabilities of Section 18 of the Exchange Act, and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent the Company specifically incorporates it by reference into such a filing. The SEC requires the Company to include a line graph presentation comparing cumulative five year Common Stock returns with a broad-based stock index and either a nationally recognized industry index or an index of peer companies selected by the Company. The Company has chosen to use the Standard & Poor’s MidCap 400 market index as the broad-based index and the companies currently in the Standard Industry Classification Code 371 Index (motor vehicles and equipment) (the SIC Code 371 Index) as a more specific comparison.
The comparisons assume that $100 was invested on September 30, 20122016 in each of: the Company’s Common Stock, the Standard & Poor’s MidCap 400 market index and the SIC Code 371 Index. The total return assumes reinvestment of dividends and is adjusted for stock splits. The fiscal 20172021 return listed in the charts below is based on closing prices per share on
* $100 invested on September 30, 20122016 in stock or index, including reinvestment of dividends.
|
| September 30, |
| |||||||||||||||||
|
| 2017 |
|
| 2018 |
|
| 2019 |
|
| 2020 |
|
| 2021 |
| |||||
Oshkosh Corporation |
| $ | 149.20 |
|
| $ | 130.38 |
|
| $ | 140.81 |
|
| $ | 138.67 |
|
| $ | 195.66 |
|
S&P MidCap 400 market index |
|
| 117.52 |
|
|
| 134.21 |
|
|
| 130.87 |
|
|
| 128.04 |
|
|
| 183.97 |
|
SIC Code 371 Index |
|
| 129.91 |
|
|
| 125.37 |
|
|
| 129.17 |
|
|
| 234.03 |
|
|
| 372.18 |
|
| September 30, | ||||||||||||||||||||
| 2013 | 2014 | 2015 | 2016 | 2017 | ||||||||||||||||
| Oshkosh Corporation | $ | 178.56 | $ | 162.86 | $ | 136.03 | $ | 213.60 | $ | 318.70 | ||||||||||
| S&P MidCap 400 market index | 127.68 | 142.77 | 144.76 | 166.95 | 196.19 | |||||||||||||||
| SIC Code 371 Index | 161.92 | 168.54 | 169.15 | 190.31 | 251.19 | |||||||||||||||
ITEM 6. SELECTEDRESERVED
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL DATA
| Fiscal Year Ended September 30, | ||||||||||||||||||||
| (In millions, except per share amounts) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||
| Income Statement Data: | ||||||||||||||||||||
| Net sales | $ | 6,829.6 | $ | 6,279.2 | $ | 6,098.1 | $ | 6,808.2 | $ | 7,665.1 | ||||||||||
| Gross income | 1,174.4 | 1,055.8 | 1,039.2 | 1,182.7 | 1,191.8 | |||||||||||||||
| Asset impairment charges | — | 26.9 | — | — | 9.0 | |||||||||||||||
| Depreciation | 81.5 | 73.3 | 64.9 | 65.3 | 65.3 | |||||||||||||||
Amortization of purchased intangibles, deferred financing costs and stock-based compensation (1) | 71.2 | 74.2 | 81.0 | 86.5 | 85.9 | |||||||||||||||
Operating income (2) | 463.0 | 364.0 | 398.6 | 503.3 | 505.7 | |||||||||||||||
| Income (loss) attributable to Oshkosh Corporation common shareholders: | ||||||||||||||||||||
| From continuing operations | 285.6 | 216.4 | 229.0 | 308.1 | 314.3 | |||||||||||||||
From discontinued operations (3) | — | — | — | — | 1.7 | |||||||||||||||
| Net income | 285.6 | 216.4 | 229.0 | 308.1 | 316.0 | |||||||||||||||
| Income (loss) attributable to Oshkosh Corporation common shareholders per share assuming dilution: | ||||||||||||||||||||
| From continuing operations | $ | 3.77 | $ | 2.91 | $ | 2.90 | $ | 3.61 | $ | 3.53 | ||||||||||
From discontinued operations (3) | — | — | — | — | 0.02 | |||||||||||||||
| Net income | 3.77 | 2.91 | 2.90 | 3.61 | 3.55 | |||||||||||||||
| Dividends per share | $ | 0.84 | $ | 0.76 | $ | 0.68 | $ | 0.60 | $ | — | ||||||||||
| Balance Sheet Data: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 447.0 | $ | 321.9 | $ | 42.9 | $ | 313.8 | $ | 733.5 | ||||||||||
| Total assets | 5,098.9 | 4,513.8 | 4,552.7 | 4,503.2 | 4,688.9 | |||||||||||||||
| Net working capital | 1,356.7 | 1,049.9 | 919.0 | 1,006.4 | 1,105.1 | |||||||||||||||
| Long-term debt (including current maturities) | 830.9 | 846.2 | 927.8 | 882.7 | 945.6 | |||||||||||||||
| Shareholders’ equity | 2,307.4 | 1,976.5 | 1,911.1 | 1,985.0 | 2,107.8 | |||||||||||||||
| Other Financial Data: | ||||||||||||||||||||
| Expenditures for property, plant and equipment | $ | 85.8 | $ | 92.5 | $ | 131.7 | $ | 92.2 | $ | 46.0 | ||||||||||
| Backlog | 3,791.0 | 3,537.9 | 2,607.4 | 1,891.0 | 2,838.0 | |||||||||||||||
| Book value per share | $ | 30.76 | $ | 26.74 | $ | 25.33 | $ | 24.86 | $ | 24.36 | ||||||||||
GENERAL
The Company is a leading designer,innovator, manufacturer and marketer of a wide range of essential specialty vehicles and vehicle bodies, including access equipment, defense trucks and trailers, fire & emergency vehicles, concrete mixers and refuse collection vehicles.vehicles and concrete mixers. The Company is a leading global designer and manufacturer of aerial work platforms under the “JLG” brand name. The Company is among the worldwide leaders in the design and manufacturing of telehandlers under the “JLG” and “SkyTrak” brand names. Under the “Jerr-Dan” brand name, the Company is a leading domestic designer and manufacturer and marketer of towing and recovery equipment. The Company manufactures defense trucks under the “Oshkosh” brand name and is a leading designer and manufacturer of severe-duty, tactical wheeled vehicles for the DoD.U.S. Department of Defense (DoD). The Company also designs and manufactures delivery vehicles for the United States Postal Service (USPS) and airport snow removal vehicles under the “Oshkosh” brand name. Under the “Pierce” brand name, the Company is among the leading global designers and manufacturers of fire trucks assembled on both custom and commercial chassis. Under the “Frontline” brand name, the Company is a leading domestic designer, manufacturer and marketer of broadcast and command vehicles. The Company designs and manufactures aircraft rescueAircraft Rescue and firefighting and airport snow removalFirefighting (ARFF) vehicles under the “Oshkosh” brand name. Under the “McNeilus,” “Oshkosh,” “London” and “CON-E-CO” brand names, the Company manufactures rear- and front-discharge concrete mixers and portable and stationary concrete batch plants. Under the “McNeilus” brand name, the Company designs and manufactures a wide range of automated, rear, front, side and top loading refuse collection vehicles. Under the “McNeilus,” “Oshkosh,” and “London” brand names, the Company designs and manufactures rear- and front-discharge concrete mixers. Under the “IMT” brand name, the Company is a leading domestic designer and manufacturer of field service vehicles and truck-mounted cranes.
Major products manufactured and marketed by each of the Company’s business segments are as follows:
Access equipment
Defense
— tacticalFire & emergency
Commercial
—All estimates referred to in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” refer to the Company’s estimates as of November 21, 2017.
In October 2021, the Company’s Board of Directors approved a change in the Company’s fiscal year end from September 30 to December 31. Accordingly, the Company will report a transition quarter that runs from October 1, 2021 through December 31, 2021 (Stub Period). The Company’s next full fiscal year will run from January 1, 2022 through December 31, 2022. As a result, all references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to a quarter or year are to the Company’s historical fiscal quarter or fiscal year unless stated otherwise.
OVERVIEW
The Company deliveredentered fiscal 2021 in the midst of the COVID-19 pandemic, which negatively impacted its sales in the first half of the year, particularly in the Access Equipment segment. As a result of the reduction in demand, the Access Equipment segment implemented production shutdowns of two weeks per month in the first quarter of fiscal 2021 and one week per month in the second quarter of fiscal 2021. Higher COVID-19 infection rates also resulted in production challenges in both the Defense and Fire & Emergency segments in the first half of fiscal 2021. During the second quarter of fiscal 2021, positive vaccination progress, and the confidence that brought to the marketplace, caused the U.S. economy to begin to rebound. As a result of the improving economy, the Company experienced a strong financial resultsreturn in demand for many of its products. This rapid rebound has coincided with significant supply chain and logistics disruptions across the globe, which in turn have led to labor inefficiencies within the Company’s production facilities and higher freight costs to expedite parts. The rapid increase in business activity across the globe has also caused the Company to experience significant inflation in materials, freight and labor costs. The Company increased prices multiple times during fiscal 2017,2021 in its non-Defense segments in an effort to offset the Company's 100th year in business. higher input costs, but the realization of the price increases is delayed due to existing backlog at the time the price increases were implemented.
Consolidated net sales in fiscal 2021 increased $550.4$880.5 million, or 8.8%12.8%, to $6.83$7.74 billion compared to fiscal 2020 primarily as a result of an increase in sales in the Access Equipment segment in the second half of fiscal 2021 as the COVID-19 pandemic significantly impacted demand in this segment in the third and fourth quarters of fiscal 2020. Higher Joint Light Tactical Vehicle (JLTV) production in the Defense segment and increased deliveries in the Fire & Emergency segment, including the recognition of several multi-unit international deliveries, also favorably impacted sales in fiscal 2021.
Consolidated operating income was $544.7 million, or 7.0% of sales, in fiscal 2021, an increase of 11.5% compared to fiscal 2020. The increase in consolidated operating income increased $99.0 million, or 27.2%,was primarily due to $463.0 million,the impact of higher gross margin associated with higher sales volume, offset in part by higher material & freight costs and higher incentive compensation expense.
The increase in operating income, along with a significant tax benefit associated with the carryback of a U.S. net operating loss to prior years, resulted in diluted earnings per share increased $0.86of $6.83 in fiscal 2021, up significantly from $4.72 in fiscal 2020.
Fiscal 2021 results included a $75.3 million tax benefit associated with the carryback of the U.S. net operating loss to prior years and an $11.7 million tax benefit associated with the release of a valuation allowance on deferred tax assets in Europe, offset in part by after-tax charges of $11.7 million associated with restructuring actions in the Access Equipment segment and $0.8 million associated with business acquisition costs in the Defense segment. In the aggregate, these items accounted for a net $74.5 million, or $1.08 per share, or 29.6%, to $3.77 per share. The significant improvementbenefit in fiscal 20172021. Fiscal 2020 results was achievedincluded after-tax charges related to restructuring actions of $17.9 million, the establishment of a valuation allowance on deferred tax assets in spiteEurope of incurring $0.25$11.4 million, an after-tax charge of $6.5 million associated with debt extinguishment costs incurred in connection with the refinancing of the Company’s senior notes, offset in part by a $14.2 million after-tax gain on a property and business interruption insurance recovery, an after-tax gain of $3.2 million on an arbitration settlement in the Defense segment and an after-tax gain of $2.8 million on the sale of a business in the Commercial segment. In the aggregate, these items accounted for a net $15.6 million, or $0.22 per share, higher restructuring-related and asset impairment charges thancharge in fiscal 2016. Fiscal 2017 results were negatively impacted by $0.482020.
In January 2021, the Company acquired Pratt & Miller Engineering & Fabrications, LLC (Pratt Miller), an advanced engineering, technology and innovation provider for motorsports and multiple ground vehicle markets, for $111 million.
In February 2021, the Company was notified that the USPS selected the Company to build its Next Generation Delivery Vehicle (NGDV). The indefinite delivery, indefinite quantity (IDIQ) contract allows the USPS to purchase between 50,000 and 165,000 units over 10 years. The NGDV provides the USPS the ability to significantly modernize its delivery fleet with improved safety, reliability, sustainability and cost-efficiency while providing a much better working experience for the nation’s postal carriers. The Company’s offering provides the USPS with both zero-emission battery electric vehicles (BEV) and fuel efficient, low emission internal combustion engine (ICE) vehicles. The vehicle design also provides the USPS with the flexibility of converting ICE units to BEV in the future. The initial $482 million contract provides for engineering to
finalize the production vehicle design, and for tooling and factory build-out activities that are necessary prior to vehicle production. The Company expects to begin delivering production vehicles in the second half of calendar 2023.
In June 2021, the U.S. Army awarded the Company a 6-year contract worth up to $943 million for the Stryker Medium Caliber Weapons System, representing an important new adjacency for the Defense segment. In June 2021, the Company also announced that Madison, Wisconsin is operating the Company’s revolutionary new electric fire truck, the Pierce Volterra. The Volterra is a significant step forward for electric vehicles and is another milestone in Oshkosh’s two decade-plus history of electrifying products.
Demand for the Company’s products has been robust. Backlog is up significantly in all segments, leading to consolidated backlog of $8.08 billion at September 30, 2021. However, the current supply chain and logistics disruptions are making it difficult to forecast sales volume. While the Company’s backlogs support a 10% to 15% increase in sales in the Stub Period compared to the first quarter of fiscal 2021, the Company expects parts availability to constrain its ability to deliver higher sales. As a result of this uncertainty, the Company is unable to provide quantitative expectations for the Stub Period. The Company expects that Stub Period earnings per share will be significantly lower than the first quarter of restructuring-related charges. Fiscal 2016 results were negatively impacted by $0.23 per share relatedfiscal 2021 and may approach break-even levels.
The Company expects that unfavorable price/cost dynamics will be a $75 million to asset impairment$85 million headwind in the Stub Period versus the first quarter of fiscal 2021. Steel and workforce reduction charges. other component costs have continued to increase. The Company has taken multiple pricing actions in its non-Defense businesses over the past several quarters, and in many cases, prices are now greater than 10% above early fiscal 2021 levels. The Company expects these price increases to enable it to achieve price/cost equilibrium based on the cost escalation that it has seen to date. However, the Company still needs to work through large backlogs, so the Company anticipates it will take until the end of the second quarter of calendar 2022 for these pricing actions to largely catch up with costs. If costs escalate further, the Company expects to take additional pricing actions.
The Company also expects higher spending levels in the Stub Period versus the first quarter of fiscal 2021. COVID-19 infection rates spiked early in the first quarter of fiscal 2021 and the Company’s spending levels remained low. Since then, spending levels have begun to normalize to pre-COVID-19 levels. The Company also expects that parts availability constraints will continue to drive labor inefficiencies.
The Company continued to execute its disciplined capital allocation strategy in fiscal 2021. The Company returned $198.2 million of cash to shareholders through the repurchase of 927,934 shares of stock and payment of quarterly dividends. In addition, the Company recently announced an increase in its quarterly dividend rate of approximately 14%12%, to $0.24$0.37, per share beginning in November 2017.2021. This was the Company's fourthCompany’s eighth straight year of double digita double-digit percentage increasesincrease in its dividend rate.
RESULTS OF OPERATIONS – FISCAL 2021 COMPARED WITH FISCAL 2020
CONSOLIDATED RESULTS
The following table presents net sales (see definition of net sales contained in Note 2 of the Notes to Consolidated Financial Statements) by business segmentconsolidated results (in millions):
| Fiscal Year Ended September 30, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Net sales: | |||||||||||
| Access equipment | $ | 3,026.4 | $ | 3,012.4 | $ | 3,400.6 | |||||
| Defense | 1,820.1 | 1,351.1 | 939.8 | ||||||||
| Fire & emergency | 1,030.9 | 953.3 | 815.1 | ||||||||
| Commercial | 970.3 | 979.2 | 978.0 | ||||||||
| Intersegment eliminations and other | (18.1 | ) | (16.8 | ) | (35.4 | ) | |||||
| $ | 6,829.6 | $ | 6,279.2 | $ | 6,098.1 | ||||||
|
| Fiscal Year Ended September 30, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % Change |
| ||||
Net sales |
| $ | 7,737.3 |
|
| $ | 6,856.8 |
|
| $ | 880.5 |
|
|
| 12.8 | % |
Cost of sales |
|
| 6,516.5 |
|
|
| 5,736.5 |
|
|
| 780.0 |
|
|
| 13.6 | % |
Gross income |
|
| 1,220.8 |
|
|
| 1,120.3 |
|
|
| 100.5 |
|
|
| 9.0 | % |
% of sales |
|
| 15.8 | % |
|
| 16.3 | % |
|
| -0.5 | % |
|
|
|
|
SG&A expenses |
|
| 666.5 |
|
|
| 620.6 |
|
|
| 45.9 |
|
|
| 7.4 | % |
Amortization |
|
| 9.6 |
|
|
| 11.0 |
|
|
| (1.4 | ) |
|
| -12.7 | % |
Operating income |
|
| 544.7 |
|
|
| 488.7 |
|
|
| 56.0 |
|
|
| 11.5 | % |
% of sales |
|
| 7.0 | % |
|
| 7.1 | % |
|
| -0.1 | % |
|
|
|
|
The following table presents net sales by geographic region based on product shipment destination (in millions):
|
| Fiscal Year Ended September 30, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % Change |
| ||||
North America |
| $ | 6,748.5 |
|
| $ | 6,023.7 |
|
| $ | 724.8 |
|
|
| 12.0 | % |
Europe, Africa and Middle East |
|
| 504.8 |
|
|
| 413.7 |
|
|
| 91.1 |
|
|
| 22.0 | % |
Rest of the world |
|
| 484.0 |
|
|
| 419.4 |
|
|
| 64.6 |
|
|
| 15.4 | % |
|
| $ | 7,737.3 |
|
| $ | 6,856.8 |
|
| $ | 880.5 |
|
|
| 12.8 | % |
| Fiscal Year Ended September 30, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Net sales: | |||||||||||
| United States | $ | 5,094.8 | $ | 4,756.6 | $ | 4,789.3 | |||||
| Other North America | 191.6 | 219.5 | 302.8 | ||||||||
| Europe, Africa and the Middle East | 1,146.9 | 905.5 | 564.4 | ||||||||
| Rest of the world | 396.3 | 397.6 | 441.6 | ||||||||
| $ | 6,829.6 | $ | 6,279.2 | $ | 6,098.1 | ||||||
Net sales increased $550.4 million, or 8.8%, to $6.83 billion in fiscal 2017 compared to fiscal 2016. The increase in sales was primarily the result of higher sales volumes in the defense segment and improved fire & emergency segment sales.
| Fiscal Year Ended September 30, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Cost of sales: | |||||||||||
| Access equipment | $ | 2,472.9 | $ | 2,435.4 | $ | 2,697.7 | |||||
| Defense | 1,518.3 | 1,147.7 | 862.7 | ||||||||
| Fire & emergency | 849.2 | 816.0 | 703.9 | ||||||||
| Commercial | 827.2 | 817.5 | 820.6 | ||||||||
| Intersegment eliminations and other | (12.4 | ) | 6.8 | (26.0 | ) | ||||||
| $ | 5,655.2 | $ | 5,223.4 | $ | 5,058.9 | ||||||
The decrease in fiscal 2016. The 90 basis point increase in cost of sales as a percentage of sales in fiscal 2017 compared to fiscal 2016gross margin was primarily due to higher restructuring-related and asset impairmentmaterial costs (140(130 basis points), offset in part by improved manufacturing absorption as a result of increasedhigher production volume (50 basis points) and favorable mixlower engineering & product development costs (40 basis points).
| Fiscal Year Ended September 30, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Operating income (loss): | |||||||||||
| Access equipment | $ | 259.1 | $ | 263.4 | $ | 407.0 | |||||
| Defense | 207.9 | 122.5 | 9.2 | ||||||||
| Fire & emergency | 104.2 | 67.0 | 43.8 | ||||||||
| Commercial | 43.8 | 67.6 | 64.5 | ||||||||
| Corporate | (152.0 | ) | (156.5 | ) | (126.0 | ) | |||||
| Intersegment eliminations | — | — | 0.1 | ||||||||
| $ | 463.0 | $ | 364.0 | $ | 398.6 | ||||||
The increase in operating income in fiscal 2017 compared to fiscal 2016 was driven by higher gross margin associated with higher sales, improved performance in the fire & emergency and defense segments as well as lower start-up costs of the corporate-led shared manufacturing facility in Mexico, offset in part by lower performance in the commercial segment. In addition, consolidated operating income was adversely impacted by $43.3 million of restructuring-related charges in fiscal 2017 and by an asset impairment and workforce reduction charges of $27.8 million in fiscal 2016.
The increase in operating income was primarily due to the higher gross margin associated with higher consolidated sales volume ($180 million), favorable mix ($20 million), improved manufacturing absorption as a result of favorable product mix (up $11higher production volume ($13 million) and lower restructuring-related costs ($12 million), offset in part by production inefficiencies associated with the start-up of new products.
The following table presents consolidated non-operating changes (in millions):
|
| Fiscal Year Ended September 30, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % Change |
| ||||
Interest expense, net of interest income |
| $ | (44.7 | ) |
| $ | (51.8 | ) |
| $ | 7.1 |
|
|
| -13.7 | % |
Miscellaneous income (expense) |
|
| (2.1 | ) |
|
| 2.2 |
|
|
| (4.3 | ) |
|
| -195.5 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
| 25.2 |
|
|
| 112.8 |
|
|
| (87.6 | ) |
|
| -77.7 | % |
Effective tax rate |
|
| 5.1 | % |
|
| 25.7 | % |
|
| -20.6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses of unconsolidated affiliates |
| $ | — |
|
| $ | (1.8 | ) |
| $ | 1.8 |
|
|
| -100.0 | % |
The decrease in fiscal 2016 compared to $587.4 million, or 9.6% of sales, in fiscal 2015. The increase in consolidated selling, general and administrative expenses in fiscal 2016 compared to fiscal 2015 was generally a result of higher incentive compensation, offset in part by reductions in outside services and travel spending.
Other miscellaneous income net of $3.2 million in fiscal 2017 and $1.3 million in fiscal 2016(expense) primarily related to gains and losses on investments, net foreign currency transaction gains and losses, and investment gains and losses.
Income tax expense in fiscal 20162021 included discrete tax benefits of lower interest rates on the senior notes refinanced in the second quarter of fiscal 2015 was offset by increased borrowings to support increased working capital requirements throughout fiscal 2016.
Losses of unconsolidated affiliates of $1.5 million in fiscal 2017 and $1.8 million in fiscal 2016 primarily represented the Company'sCompany’s equity interest in a commercial entity in MexicoMexico.
SEGMENT RESULTS
Access Equipment
The following table presents the Access Equipment segment results (in millions):
|
| Fiscal Year Ended September 30, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % Change |
| ||||
Net sales |
| $ | 3,072.1 |
|
| $ | 2,515.1 |
|
| $ | 557.0 |
|
|
| 22.1 | % |
Cost of sales |
|
| 2,599.1 |
|
|
| 2,090.6 |
|
|
| 508.5 |
|
|
| 24.3 | % |
Gross income |
|
| 473.0 |
|
|
| 424.5 |
|
|
| 48.5 |
|
|
| 11.4 | % |
% of sales |
|
| 15.4 | % |
|
| 16.9 | % |
|
| -1.5 | % |
|
|
|
|
Operating expenses |
|
| 223.9 |
|
|
| 225.9 |
|
|
| (2.0 | ) |
|
| -0.9 | % |
Operating income |
|
| 249.1 |
|
|
| 198.6 |
|
|
| 50.5 |
|
|
| 25.4 | % |
% of sales |
|
| 8.1 | % |
|
| 7.9 | % |
|
| 0.2 | % |
|
|
|
|
Segment net sales increased as a result of improved market demand, led by North America. The third and fourth quarters of fiscal 2020 were impacted by lower market demand due in large part to the economic downturn as a joint ventureresult of the COVID-19 pandemic.
The decrease in Europe.segment gross margin was due to unfavorable material & logistics costs (190 basis points), unfavorable product and customer mix (60 basis points) and product liability activity (50 basis points), offset in part by favorable fixed manufacturing absorption as a result of higher production volume (160 basis points).
The increase in segment operating income was primarily due to the impact of higher gross margin associated with higher sales volume ($135 million) and favorable fixed manufacturing absorption as a result of higher production volume ($25 million), offset in part by unfavorable material and logistics costs ($56 million), higher incentive compensation costs ($34 million) and higher product liability activity ($17 million).
Defense
The following table presents the Defense segment results (in millions):
|
| Fiscal Year Ended September 30, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % Change |
| ||||
Net sales |
| $ | 2,525.6 |
|
| $ | 2,311.5 |
|
| $ | 214.1 |
|
|
| 9.3 | % |
Cost of sales |
|
| 2,199.1 |
|
|
| 2,017.5 |
|
|
| 181.6 |
|
|
| 9.0 | % |
Gross income |
|
| 326.5 |
|
|
| 294.0 |
|
|
| 32.5 |
|
|
| 11.1 | % |
% of sales |
|
| 12.9 | % |
|
| 12.7 | % |
|
| 0.2 | % |
|
|
|
|
Operating expenses |
|
| 128.7 |
|
|
| 105.9 |
|
|
| 22.8 |
|
|
| 21.5 | % |
Operating income |
|
| 197.8 |
|
|
| 188.1 |
|
|
| 9.7 |
|
|
| 5.2 | % |
% of sales |
|
| 7.8 | % |
|
| 8.1 | % |
|
| -0.3 | % |
|
|
|
|
Segment net sales increased as a result of higher JLTV and Family of Heavy Tactical Vehicles (FHTV) program volumes and sales of Pratt Miller ($64 million) after its acquisition in January 2021, offset in part by lower Family of Medium Tactical Vehicles (FMTV) program volume. The Company expects domestic JLTV sales will decrease after fiscal 2021.
The increase in segment gross margin was due to lower engineering & product development costs (50 basis points) and improved product mix (30 basis points), offset in part by production inefficiencies (60 basis points).
The increase in earningssegment operating income was primarily a result of unconsolidated affiliatesthe impact of $1.8higher gross margin associated with higher sales volume ($28 million), lower engineering & product development costs ($9 million) and favorable mix ($9 million), offset by production inefficiencies ($16 million), higher warranty costs ($6 million), higher incentive compensation costs ($5 million), higher material costs ($4 million) and the amortization of intangibles associated with the Pratt Miller acquisition ($4 million). Changes in estimates on contracts accounted for under the cost-to-cost method increased operating income by $19.4 million and $16.2 million in fiscal 20162021 and $2.6 million2020, respectively.
Fire & Emergency
The following table presents the Fire & Emergency segment results (in millions):
|
| Fiscal Year Ended September 30, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % Change |
| ||||
Net sales |
| $ | 1,226.6 |
|
| $ | 1,107.0 |
|
| $ | 119.6 |
|
|
| 10.8 | % |
Cost of sales |
|
| 959.7 |
|
|
| 874.3 |
|
|
| 85.4 |
|
|
| 9.8 | % |
Gross income |
|
| 266.9 |
|
|
| 232.7 |
|
|
| 34.2 |
|
|
| 14.7 | % |
% of sales |
|
| 21.8 | % |
|
| 21.0 | % |
|
| 0.8 | % |
|
|
|
|
Operating expenses |
|
| 92.7 |
|
|
| 86.2 |
|
|
| 6.5 |
|
|
| 7.5 | % |
Operating income |
|
| 174.2 |
|
|
| 146.5 |
|
|
| 27.7 |
|
|
| 18.9 | % |
% of sales |
|
| 14.2 | % |
|
| 13.2 | % |
|
| 1.0 | % |
|
|
|
|
Segment net sales increased due to higher ARFF vehicle volume ($54 million) as a number of multi-unit awards were recognized in fiscal 20152021, higher fire truck sales volume ($50 million) and improved pricing ($18 million). Fire truck deliveries in fiscal 2020 were negatively impacted by workforce availability constraints resulting from the COVID-19 pandemic and delivery delays resulting from COVID-19 related travel restrictions that prevented customers from inspecting and accepting trucks.
The increase in segment gross margin was primarily representedattributable to improved pricing (90 basis points) and favorable product mix (40 basis points), offset in part by higher material costs (60 basis points).
The increase in segment operating income was largely a result of the Company's equity interestimpact of higher gross margin associated with higher sales volume ($27 million), improved pricing ($18 million), offset in part by higher material costs ($9 million) and higher incentive compensation costs ($7 million).
Commercial
The following table presents the Commercial segment results (in millions):
|
| Fiscal Year Ended September 30, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % Change |
| ||||
Net sales |
| $ | 937.6 |
|
| $ | 957.8 |
|
| $ | (20.2 | ) |
|
| -2.1 | % |
Cost of sales |
|
| 782.8 |
|
|
| 788.5 |
|
|
| (5.7 | ) |
|
| -0.7 | % |
Gross income |
|
| 154.8 |
|
|
| 169.3 |
|
|
| (14.5 | ) |
|
| -8.6 | % |
% of sales |
|
| 16.5 | % |
|
| 17.7 | % |
|
| -1.2 | % |
|
|
|
|
Operating expenses |
|
| 83.8 |
|
|
| 88.1 |
|
|
| (4.3 | ) |
|
| -4.9 | % |
Operating income |
|
| 71.0 |
|
|
| 81.2 |
|
|
| (10.2 | ) |
|
| -12.6 | % |
% of sales |
|
| 7.6 | % |
|
| 8.5 | % |
|
| -0.9 | % |
|
|
|
|
Segment net sales decreased as a commercial entityresult of the sale of the concrete batch plant business in Mexicothe fourth quarter of fiscal 2020 ($35 million) and lower package sales, which include both a third-party chassis and a joint venturebody ($26 million), offset in Europe.
The decrease in gross margin was primarily attributable to unfavorable material & logistics costs (290 basis points) and Capital Resourcesthe absence of a business interruption insurance recovery (130 basis points), offset in part by favorable product mix (160 basis points), lower product liability costs (40 basis points), lower engineering spending (40 basis points) and the absence of restructuring costs (40 basis points).
The decrease in segment operating income was primarily due to unfavorable material costs ($27 million) and the absence of the business interruption insurance recovery ($12 million), offset in part by favorable product mix ($8 million), the absence of restructuring costs ($6 million), lower engineering costs ($5 million), improved pricing ($5 million) and lower product liability costs ($4 million).
Corporate and Intersegment eliminations
The following table presents the corporate costs and intersegment eliminations (in millions):
|
| Fiscal Year Ended September 30, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % Change |
| ||||
Net sales |
| $ | (24.6 | ) |
| $ | (34.6 | ) |
| $ | 10.0 |
|
|
| -28.9 | % |
Cost of sales |
|
| (24.2 | ) |
|
| (34.4 | ) |
|
| 10.2 |
|
|
| -29.7 | % |
Gross income |
|
| (0.4 | ) |
|
| (0.2 | ) |
|
| (0.2 | ) |
|
| 100.0 | % |
Operating expenses |
|
| 147.0 |
|
|
| 125.5 |
|
|
| 21.5 |
|
|
| 17.1 | % |
Operating income |
|
| (147.4 | ) |
|
| (125.7 | ) |
|
| (21.7 | ) |
|
| 17.3 | % |
Corporate operating expenses increased as a result of higher incentive compensation costs ($15 million) and the return of spending related to temporary cost reductions in fiscal 2020 in response to the COVID-19 pandemic ($5 million).
FISCAL 2020 COMPARED WITH FISCAL 2019
The comparison of the fiscal 2020 results with the fiscal 2019 results can be found in the “Management’s Discussion and Analysis” section in the Company’s fiscal 2020 Annual Report on Form 10-K.
LIQUIDITY AND CAPITAL RESOURCES
The Company generates significant capital resources from operating activities, which is the expected primary source of funding for its operations. Otherthe Company. In addition to cash generated from operations, the Company had other sources of liquidity are availability under the Revolving Credit Facility (as defined in “Liquidity”) and available cash and cash equivalents. Atat September 30, 2017, the Company had2021, including $1.38 billion of cash and cash equivalents of $447.0 million. In addition to cash and cash equivalents, the Company had $753.1$832.8 million of unused available capacity under the Revolving Credit Facility (as defined in “Liquidity”) as of September 30, 2017.. Borrowings under the Revolving Credit Facility could, as discussed below, be limited by the financial covenants contained withinin the Credit Agreement (as defined in “Liquidity”). These sources ofThe Company was in compliance and expects to remain in compliance with all financial covenants contained in the Credit Agreement.
The Company continues to actively monitor its liquidity are needed to fund the Company'sposition and working capital requirements, debt service requirements,needs and prioritizes capital expenditures dividendsrelated to capacity and strategic investments. The Company remains in a stable overall capital resources and liquidity position that is adequate to meet its projected needs. In March 2020, the Company suspended its share repurchases. Atrepurchase program in response to business uncertainty resulting from the COVID-19 pandemic. During June 2021, the Company reinitiated the share repurchase program and repurchased over $100 million in shares during the remainder of fiscal 2021. As of September 30, 2017,2021, the Company had approximately 7.56.5 million shares of Common Stock remaining under athe repurchase authorization approved by the Company's Board of Directors in August 2015. The Company expects to meet its fiscal 2018 U.S. funding needs without repatriating undistributed profits that are indefinitely reinvested outside the United States.
Financial Condition at September 30, 2017
The Company’s capitalization was as follows (in millions):
|
| September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Cash and cash equivalents |
| $ | 1,375.8 |
|
| $ | 582.9 |
|
Total debt |
|
| 818.8 |
|
|
| 823.1 |
|
Total shareholders’ equity |
|
| 3,247.8 |
|
|
| 2,850.7 |
|
Total capitalization (debt plus equity) |
|
| 4,066.6 |
|
|
| 3,673.8 |
|
Debt to total capitalization |
|
| 20.1 | % |
|
| 22.4 | % |
| September 30, | |||||||
| 2017 | 2016 | ||||||
| Cash and cash equivalents | $ | 447.0 | $ | 321.9 | |||
| Total debt | 830.9 | 846.2 | |||||
| Total shareholders’ equity | 2,307.4 | 1,976.5 | |||||
| Total capitalization (debt plus equity) | 3,138.3 | 2,822.7 | |||||
| Debt to total capitalization | 26.5 | % | 30.0 | % | |||
The Company'sCompany’s ratio of debt to total capitalization of 26.5%20.1% at September 30, 20172021 remained within its targeted range. The Company’s goal is to maintain an investment-grade credit rating. The rating agencies periodically update the Company’s credit ratings as events or changes in economic conditions occur. At September 30, 2021, the long-term credit ratings assigned to the Company’s senior debt securities by the credit rating agencies engaged by the Company were as follows:
Rating Agency | Rating | |
Fitch Ratings | BBB- | |
Moody’s Investor Services, Inc. | Baa3 | |
Standards & Poor’s | BBB |
Consolidated days sales outstanding (defined as “Trade Receivables” at quarter end divided by “Net Sales” for the most recent quarter multiplied by 90 days) were 56was 42 days at September 30, 2017,2021, up slightly from 4941 days at September 30, 2016.2020. Days sales outstanding for segments other than the defenseDefense segment were 52 days at September 30, 2017, up slightly fromwas 51 days at September 30, 2016. This increase in2021, up slightly from 50 days sales outstanding was primarily due to higher receivables in the defense segment compared to the prior year driven by the longer collection cycle on international sales.at September 30, 2020. Consolidated inventory turns (defined as “Cost of Sales” on an annualized basis, divided by the average “Inventory” at the past five quarter end periods) was 4.5increased from 3.8 times at September 30, 2017, up from 4.12020 to 4.7 times at September 30, 2016. The increase in inventory turns was largely due to2021 primarily as a result of lower average inventory levels in the access equipmentAccess Equipment segment. Inventories in the Access Equipment segment duringwere elevated in fiscal 2017.
Operating Cash Flows
Operating activities provided $1.22 billion of a plancash during fiscal 2021 compared to level-load production$327.3 million during fiscal 2020. The increase in cash provided by operating activities in fiscal 2021 compared to fiscal 2020 was due to the timing of year-end within the COVID-19 pandemic. Sales declined significantly during the year to address seasonal fluctuationsthird and fourth quarters of fiscal 2020, which drove up finished goods inventory and reduced accounts receivable outstanding at September 30, 2020. At the same time, the Company reduced production at its manufacturing plants, which drove down accounts payable at September 30, 2020. Demand increased significantly in demand and a subsequent reduction in access equipmentthe third and fourth quarter of fiscal 2021, which allowed the Company to reduce finished goods inventory levels while at the same time increasing production. The higher sales and production resulted in an increase in accounts receivable and accounts payable levels at September 30, 2021. Altogether, inventory, accounts receivable and accounts payable provided $573 million more cash in fiscal 2021 than in fiscal 2020. Improved results coming out of the COVID-19 pandemic also resulted in an increase in consolidated net income of $148 million.
Investing Cash Flows
Investing activities used cash of $245.6 million during fiscal 2021 compared to previous estimates as a result of the start of a mid-cycle dip in North American demand for access equipment related to lower oil & gas related demand and lower replacement demand as a result of lower purchases of access equipment by rental companies in 2009 and 2010. In fiscal 2015, defense inventory levels grew (up $134.0 million)
of equipment in the first quarter of fiscal 2020 that the customer was previously renting. This transaction increased proceeds received from the sale of equipment held for rental by $26.8 million in fiscal 2020 as compared to fiscal 2016.
Financing Cash Flows
Financing activities used cash used in investing activities in fiscal 2016 was $89.2 million compared to $140.1of $180.4 million in fiscal 2015. Additions2021 compared to property, plant and equipment of $92.5$115.5 million in fiscal 2016 reflected a decrease2020. The increase in capital spendingcash utilized for financing activities was due to an increase in Common Stock repurchases under the authorization approved by the Company’s Board of $39.2 million comparedDirectors as the Company paused repurchases in fiscal 2020 to fiscal 2015.preserve liquidity when the COVID-19 pandemic struck. In fiscal 2015, the Company increased investments in property, plant and equipment to fund the Company's vertical integration strategy and global information systems replacement initiative.
Liquidity
Senior Secured Credit Agreement
In March 2014,April 2018, the Company entered into ana Second Amended and Restated Credit Agreement with various lenders (the “Credit Agreement”). The Credit Agreement provides for (i) aan unsecured revolving credit facility (Revolving(the “Revolving Credit Facility)Facility”) that matures in March 2019April 2023 with an initial maximum aggregate amount of availability of $600$850 million and (ii) a $400an unsecured $325 million term loan (the “Term Loan”) due in quarterly principal installments of $5.0$4.1 million commencing as of September 30, 2019 with a balloon payment of $310.0$264.1 million due at maturity in March 2019. In January 2015,April 2023. As of September 30, 2021, the Company entered into an agreement with lendershas prepaid all required quarterly principal installments and $39.1 million of the balloon payment on the Term Loan. At September 30, 2021, outstanding letters of credit of $17.2 million reduced available capacity under the Credit Agreement that increased the Revolving Credit Facility to an aggregate maximum amount of $850$832.8 million. Refer to Note 9 of the Notes to Consolidated Financial Statements for additional information regarding the Credit Agreement.
Under the Credit Agreement, the Company mustis obligated to pay (i) an unused commitment fee ranging from 0.225%0.125% to 0.35%0.275% per annum of the average daily unused portion of the aggregate revolving credit commitments under the Credit Agreement and (ii) a fee ranging from 0.625%0.563% to 2.00%1.75% per annum of the maximum amount available to be drawn for each letter of credit issued and outstanding under the Credit Agreement.
Borrowings under the Credit Agreement bear interest at a variable rate equal to (i) LIBOR plus a specified margin, which may be adjusted upward or downward depending on whether certain criteria are satisfied, or (ii) for dollar-denominated loans only, the base rate (which is the highest of (a) the administrative agent'sagent’s prime rate, (b) the federal funds rate plus 0.50% or (c) the sum of 1% plus one-month LIBOR) plus a specified margin, which may be adjusted upward or downward depending on whether certain criteria are satisfied.
Covenant Compliance
The Credit Agreement contains various restrictions and covenants, including requirements that the Company maintain certain financial ratios at prescribed levels and restrictions, subject to certain exceptions, on the ability of the Company and certain of its subsidiaries to consolidate or merge, create liens, incur additional indebtedness, and dispose of assets, consummate acquisitions and make investments in joint ventures and foreign subsidiaries.
Senior Notes
In February 2014,May 2018, the Company issued $250.0$300.0 million of 5.375%4.600% unsecured senior notes due May 15, 2028 (the “2028 Senior Notes”). In February 2020, the Company issued $300.0 million of 3.100% unsecured senior notes due March 1, 20222030 (the “2022“2030 Senior Notes”). In March 2015, at a discount of $1.2 million. The Company recognized an approximately $8.5 million loss associated with the issuance of the 2030 Senior Notes in fiscal 2020. The 2028 Senior Notes and the 2030 Senior Notes were issued pursuant to an indenture (the “Indenture”) between the Company issued $250.0 million of 5.375% unsecured senior notes due March 1, 2025 (the “2025 Senior Notes”).and a trustee. The net proceeds of both note issuances were used to repay existing outstanding notes of the Company.Indenture contains customary affirmative and negative covenants. The Company has the option to redeem the 20222028 and 2030 Senior Notes and the 2025 Senior Notesat any time for a premium after March 1, 2017 and March 1, 2020, respectively.
Refer to Note 915 of the Notes to Consolidated Financial Statements for additional information regarding the Company’s outstanding debt as of September 30, 2017.
Contractual Obligations Commitments and Off-Balance Sheet Arrangements
The total amount of gross unrecognized tax benefits, including interest, for uncertain tax positions was $52.4 million as of September 30, 2021. Payment of these obligations would result from settlements with tax authorities. Due to the difficulty in determining the timing of the settlement, these obligations are not included in the summary of the Company’s fixed contractual obligations. See Note 6 of the Notes to Consolidated Financial Statements for additional information regarding the Company’s unrecognized tax benefits as of September 30, 2021. Following is a summary of the Company’s contractual obligations and payments due by period following September 30, 20172021 (in millions):
|
| Payments Due by Period |
| |||||||||||||||||
|
|
|
|
|
| Less Than |
|
|
|
|
|
|
|
|
|
| More Than |
| ||
|
| Total |
|
| 1 Year |
|
| 1-3 Years |
|
| 3-5 Years |
|
| 5 Years |
| |||||
Long-term debt (including interest)(1) |
| $ | 1,000.8 |
|
| $ | 26.3 |
|
| $ | 274.2 |
|
| $ | 46.2 |
|
| $ | 654.1 |
|
Lease obligations |
|
| 249.7 |
|
|
| 52.1 |
|
|
| 72.8 |
|
|
| 41.6 |
|
|
| 83.2 |
|
Purchase obligations(2) |
|
| 2,020.5 |
|
|
| 1,946.7 |
|
|
| 73.8 |
|
|
| — |
|
|
| — |
|
Other long-term liabilities(3) |
|
| 734.9 |
|
|
| 51.0 |
|
|
| 91.5 |
|
|
| 58.3 |
|
|
| 534.1 |
|
|
| $ | 4,005.9 |
|
| $ | 2,076.1 |
|
| $ | 512.3 |
|
| $ | 146.1 |
|
| $ | 1,271.4 |
|
| Payments Due by Period | |||||||||||||||||||
| Less Than | More Than | ||||||||||||||||||
| Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | |||||||||||||||
Long-term debt (including interest)(1) | $ | 1,006.1 | $ | 56.0 | $ | 372.8 | $ | 294.8 | $ | 282.5 | |||||||||
| Operating leases | 80.0 | 24.3 | 31.2 | 16.8 | 7.7 | ||||||||||||||
Purchase obligations(2) | 831.1 | 831.0 | 0.1 | — | — | ||||||||||||||
| Other long-term liabilities: | |||||||||||||||||||
Uncertain tax positions(3) | — | — | — | — | — | ||||||||||||||
Other(4) | 595.7 | 35.8 | 79.9 | 48.5 | 431.5 | ||||||||||||||
| $ | 2,512.9 | $ | 947.1 | $ | 484.0 | $ | 360.1 | $ | 721.7 | ||||||||||
(1) | Interest was calculated based upon the interest rate in effect on September 30, |
(2) | The amounts for purchase obligations included above represent all obligations to purchase goods or services under agreements that are enforceable and legally binding and that specify all significant terms. |
(3) | |
Represents other long-term liabilities on the |
| Amount of Commitment Expiration Per Period | |||||||||||||||||||
| Less Than | More Than | ||||||||||||||||||
| Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | |||||||||||||||
| Customer financing guarantees to third parties | $ | 101.9 | $ | 21.9 | $ | 29.3 | $ | 28.8 | $ | 21.9 | |||||||||
| Standby letters of credit | 96.9 | 93.5 | 2.6 | 0.8 | — | ||||||||||||||
| $ | 198.8 | $ | 115.4 | $ | 31.9 | $ | 29.6 | $ | 21.9 | ||||||||||
| Fiscal 2018 Expectations | |||||||
| Low | High | ||||||
| Adjusted access equipment operating income margin (non-GAAP) | 10.5 | % | 11.0 | % | |||
| Restructuring-related costs | (0.2 | )% | (0.2 | )% | |||
| Access equipment operating income margin (GAAP) | 10.3 | % | 10.8 | % | |||
| Adjusted consolidated operating income (non-GAAP) | $ | 515.0 | $ | 565.0 | |||
| Restructuring-related costs | (5.0 | ) | (5.0 | ) | |||
| Consolidated operating income (GAAP) | $ | 510.0 | $ | 560.0 | |||
| Adjusted effective income tax rate (non-GAAP) | 30.5 | % | 30.5 | % | |||
| Impact of restructuring-related costs on effective income tax rate | (0.2 | )% | (0.2 | )% | |||
| Effective income tax rate (GAAP) | 30.3 | % | 30.3 | % | |||
| Adjusted earnings per share-diluted (non-GAAP) | $ | 4.25 | $ | 4.65 | |||
| Restructuring-related costs, net of tax | (0.05 | ) | (0.05 | ) | |||
| Earnings per share-diluted (GAAP) | $ | 4.20 | $ | 4.60 | |||
CRITICAL ACCOUNTING POLICIES
The Company’s significant accounting policies are described in Note 2 of the Notes to Consolidated Financial Statements. The Company considers the following policy to be the most critical in understanding the judgments that are involved in the preparation of the Company’s consolidated financial statements and the uncertainties that could impact the Company’s financial condition, results of operations and cash flows.
Revenue Recognition.
The Company recognizes revenueContracts 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 is determinable based on observable standalone selling prices or is 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, vehicles and aftermarket 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 the Company’s standard 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.
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 95% of Defense segment revenue in fiscal 2021. 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.
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 control to the customer 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 over time transfer of control determination as a result of the customized nature of its goods and services, which create assets without an alternative use and contractual rights.
When transfer of control is not determined to be continuous over the term of the contract, the Company initially defers contract costs that relate to the contract or anticipated contract, as they generate or enhance assets that will be utilized to satisfy performance obligations in the future and are expected to be recovered. Deferred contract costs are subsequently amortized on a systematic basis consistent with the pattern of transfer of the goods and services to which they relate. Unlike the JLTV and FMTV A2 contracts, for which the Company has concluded control of the performance obligations transfers continuously over the contract terms, the Company has concluded that control of the performance obligation for the USPS contract transfers during the production phase of the contract. As a result, the Company has recognized $34.8 million of deferred contract costs related to the USPS contract at September 30, 2021 consisting of engineering costs, setup costs and tooling costs. The Company anticipates the production phase of the contract will begin in 2023. The USPS contract contains milestone billings provisions, under which the Company billed and received $39.6 million of advance payments from the customer as of September 30, 2021.
CRITICAL ACCOUNTING ESTIMATES
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based on the Company'sCompany’s Consolidated Financial Statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). The preparation of financial statements in accordance with U.S. GAAP requires
management to make estimates and judgments that affect reported amounts and related disclosures. On an ongoing basis, management evaluates and updates its estimates. Management employs judgment in making its estimates but they are based on historical experience and currently available information and various other assumptions that the Company believes to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results could differ from those estimates.
Management believes that its judgment is applied consistently and produces financial information that fairly depicts the results of operations for all periods presented.
Estimate-at-Completion (EAC). The percentage-of-completion accounting method is usedCompany has concluded that control of substantially all of the Defense segment’s performance obligations transfers to account for long-term contracts that involve the design, development, manufacture, or modification of complex equipment to a buyer's specification. Contracts accounted for under this method generally are long-term in naturecustomer continuously and may involve related services. Revenuetherefore revenue is recognized over time. The Defense segment recognizes revenue on these typesits performance obligations that are satisfied over time by measuring progress using the cost-to-cost method of contracts based onpercentage-of-completion because it best depicts the extenttransfer of progress toward completion ofcontrol to the overall contract. The determination of the method to measure progress toward completion of a contract requires judgment, which is generally dependent on the nature of the Company's obligations under the contract. Under the units-of-delivery measure of progress, the extent of progress on a contract is measured as units are accepted by the DoD generally based on unit sales values stated in the respective contracts. Costs of sales are based on actual costs incurred to produce the units delivered under the contract.customer. Under the cost-to-cost measuremethod of progress,percentage-of-completion, the extent ofDefense segment measures progress toward completion is measured based on the ratio of costs incurred to date to total estimated costs for the performance obligations. Due to the size and nature of these contracts, the estimation of total revenues and costs is highly complicated and judgmental. The Company must make assumptions regarding expected increases in wages and employee benefits, productivity and availability of labor, material costs and allocated fixed costs. 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. If a loss is expected on a performance obligation, the complete estimated loss is recorded in the period in which the loss is identified. 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. Changes to production costs, overhead rates, learning curve and/or supplier performance can also impact these estimates. These estimates are highly judgmental, particularly the non-production costs on the JLTV and FMTV A2 contracts. The Company recognizes changes in estimated sales or costs and the resulting profit or loss on a cumulative basis. In addition, as contract modifications (e.g., new orders) are received, they are evaluated to determine if they represent a separate contract or the impact on the existing contract. As of September 30, 2021, the estimated remaining costs on the JLTV and FMTV A2 contracts represent the majority of the total estimated costs atto complete in the completion of the contract. Revenues, including margins, are recorded as costs are incurred. The revenue and costDefense segment.
Changes in estimates usedon contracts accounted for under the cost-to-cost measurement method are complex and involve significant judgment. The Company has implemented a rigorous Estimate at Completion (EAC) process that requires management to perform a detailed evaluation of contract progress and performance on at least a quarterly basis. During this process all key inputs and variables that may impact contract performance are analyzed and the EAC is updated for any changes. Adjustments to revenue, costs andprior year revenues increased Defense segment operating income resulting from this process are recorded in the period they become known.
NEW ACCOUNTING STANDARDS
See Note 2 of the Notes to Consolidated Financial Statements for a discussion of the impact of new accounting standards on the Company’s consolidated financial statements.
CUSTOMERS AND BACKLOG
Sales to the U.S. government comprised approximately 20%33% of the Company’s net sales in fiscal 2017.2021. No other single customer accounted for more than 10% of the Company’s net sales for this period. A substantial majority of the Company’s net sales are derived from the fulfillment of customer orders that are received prior to commencing production.
The Company’s backlog as of September 30, 20172021 increased 7.2%76.4% to $3.79$8.08 billion compared to $3.54$4.58 billion at September 30, 2016 due largely to strong order volumes in the non-defense segments.2020. Access equipmentEquipment segment backlog increased 152.2%652.1% to $452.2$2.76 billion at September 30, 2021 compared to $366.7 million at September 30, 20172020 as demand rebounded following the re-opening of economies and as a result of elevated customer fleet ages. The Access Equipment segment also faced significant supply chain disruptions as the economy rebounded from the COVID-19 pandemic, which limited production in the second half of fiscal 2021 and contributed to the higher backlog. Defense segment backlog increased 18.3% to $3.36 billion at September 30, 2021 compared to $179.3$2.84 billion at September 30, 2020 primarily due to the initial order from the USPS for the NGDV program, offset in part by shipments under the JLTV contract. Fire & Emergency segment backlog increased 27.6% to $1.39 billion at September 30, 2021 compared to $1.09 billion at September 30, 2020 due to strong demand for fire trucks coming out of
the COVID-19 pandemic as municipal budgets have been more resilient than the Company previously expected. Although Fire & Emergency segment backlog remained strong, orders softened for ARFF vehicles due to the impact of the COVID-19 pandemic on airport budgets. Commercial segment backlog increased 101.1% to $569.4 million at September 30, 2016 primarily due to improved market conditions in North America and Europe. Defense segment backlog decreased 10.6% to $2.09 billion at September 30, 20172021 compared to $2.33 billion at September 30, 2016 primarily due to the fulfillment of a large international contract for the delivery of M-ATVs. Fire & emergency segment backlog increased 9.2% to $931.6$283.1 million at September 30, 2017 compared to $852.9 million at September 30, 2016 due largely to favorable custom chassis mix and a higher mix of aerial orders. Commercial segment backlog increased 85.2% to $321.0 million at September 30, 2017 compared to $173.3 million at September 30, 2016. Unit backlog for concrete mixers as of September 30, 2017 was up 61.8%2020 due to a lower production ratehigh demand for the Company’s new front-discharge concrete mixers as a result of a shift to increase refuse collection vehicle production. Unit backlogmixer and improved market demand for refuse collection vehicles and concrete mixers as demand returned coming out of September 30, 2017 was up 103.5%, compared to September 30, 2016 due to improved market conditions.
Reported backlog excludes purchase options and announced orders for which definitive contracts have not been executed. Backlog information and comparisons thereof as of different dates may not be accurate indicators of future sales or the ratio of the Company’s future sales to the DoD versus its sales to other customers. Approximately12%Approximately 24% of the Company’s September 30, 20172021 backlog is not expected to be filled in fiscal 2018.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates, certain commodity prices and foreign currency exchange rates. To reduce the risk from changes in foreign currency exchange and interest rates, the Company selectively uses financial instruments. All hedging transactions are authorized and executed pursuant to clearly defined policies and procedures, which strictly prohibit the use of financial instruments for speculative purposes.
Interest Rate Risk.
The Company’s earnings exposure related to adverse movements in interest rates is primarily derived from outstanding floating rate debt instruments that are indexed to short-term market interest rates. In this regard, changes in U.S. and off-shore interest rates affect interest payable on the Company’s borrowings under its Credit Agreement. Based on debt outstanding at September 30,The table below provides information about the Company’s debt obligations, which are sensitive to changes in interest rates (dollars in millions):
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| Variable rate ($US) | $ | 23.0 | $ | 315.0 | $ | — | $ | — | $ | — | $ | — | $ | 338.0 | $ | 338.0 | |||||||||||||||
| Average interest rate | 3.5078 | % | 3.4243 | % | — | % | — | % | — | % | — | % | 3.4300 | % | |||||||||||||||||
| Fixed rate ($US) | $ | — | $ | — | $ | — | $ | — | $ | 250.0 | $ | 250.0 | $ | 500.0 | $ | 524.0 | |||||||||||||||
| Average interest rate | 5.3750 | % | 5.3750 | % | 5.3750 | % | 5.3750 | % | 5.3750 | % | 5.3750 | % | 5.3750 | % | |||||||||||||||||
Commodity Price Risk.
The Company is a purchaser of certain commodities, including steel, aluminum and composites. In addition, the Company is a purchaser of components and parts containing various commodities, including steel, aluminum, rubber and others which are integrated into the Company’s end products. The Company generally buys these commodities and components based upon market prices that are established with the vendor as part of the purchase process. The Company does not use commodity financial instruments to hedge commodity prices.The Company generally obtains firm quotations from its significant componentscomponents’ suppliers for its orders under firm, fixed-price contracts in its defenseDefense segment. In the Company’s access equipment, fireAccess Equipment, Fire & emergencyEmergency and commercialCommercial segments, the Company generally attempts to obtain firm pricing from most of its suppliers, consistent with backlog requirements and/or forecasted annual sales. To the extent that commodity prices increase and the Company does not have firm pricing from its suppliers, or its suppliers are not able to honor such prices, then the Company may experience margin declines to the extent it is not able to increase selling prices of its products.
Foreign Currency Risk.
The Company’s operations consist of manufacturing in the U.S., Mexico, Canada,manufacture and sale of the Company’s products in foreign markets, the Company’s earnings are affected by fluctuations in the value of foreign currencies in which certain of the Company’s transactions are denominated as compared to the value of the U.S. dollar. The Company’s operating results are principally exposed to changes in exchange rates between the U.S. dollar and the European currencies, primarily the Euro and the U.K. pound sterling, changes between the U.S. dollar and the Australian dollar, changes between the U.S. dollar and the Brazilian real, changes between the U.S. dollar and the Mexican peso, changes between the U.S. dollar and the Chinese renminbi and changes between the U.S. dollar and the Chinese renminbi.
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| Sell USD / Buy EUR | $ | 28.8 | 1.2039 | $ | (0.5 | ) | $ | (2.8 | ) | $ | 2.8 | |||||||
| Sell EUR / Buy SEK | 18.9 | 0.1051 | (0.2 | ) | (1.9 | ) | 1.9 | |||||||||||
| Sell AUD / Buy USD | 13.1 | 0.8009 | 0.3 | (1.3 | ) | 1.3 | ||||||||||||
| Sell EUR / Buy USD | 11.6 | 1.2037 | 0.2 | (1.1 | ) | 1.1 | ||||||||||||
| Sell CAD / Buy USD | 7.9 | 0.7980 | (0.4 | ) | (0.9 | ) | 0.8 | |||||||||||
| Sell CAD / Buy EUR | 6.9 | 1.4783 | — | (0.7 | ) | 0.7 | ||||||||||||
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors and Shareholders of Oshkosh Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Oshkosh Corporation and subsidiaries (the “Company”) as of September 30, 20172021 and 2016, and2020, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows, for each of the three years in the period ended September 30, 2017. Our audits also included2021, and the consolidatedrelated notes (collectively referred to as the “financial statements”). In our opinion, the financial statement schedule listedstatements present fairly, in all material respects, the financial position of the Company as of September 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the Tableperiod ended September 30, 2021, in conformity with accounting principles generally accepted in the United States of Contents at Item 15. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedule based on our audits.
We conducted our auditshave also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States). (PCAOB), the Company’s internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 16, 2021 expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesmisstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion such consolidated financial statements present fairly, in all material respects,on the financial position of Oshkosh Corporation and subsidiaries at September 30, 2017 and 2016 and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2017, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements, taken as a whole, presents fairly, in all material respects,and we are not, by communicating the information set forth therein.critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Defense Segment Revenue – Refer to Note 3 to the financial statements
Critical Audit Matter Description
The Company’s Defense segment recognized revenue on long-term contracts primarily with the standardsU.S. Government for the production of goods, the provision of services, or a combination of both totaling $2,482.1 million for the year ended September 30, 2021. The Company’s firm-fixed long-term contracts are typically accounted for as a single performance obligation because the goods and services are generally customized and have complex inter-relationships and the Company is responsible for overall management of the Publiccontract. The Company Accounting Oversight Board (United States),recognizes revenue on Defense segment contracts as performance obligations are satisfied and control of the Company's internal control over financial reportingunderlying goods and services is transferred to the customer. The Company measures progress based on the ratio of costs incurred to date to total estimated costs for the performance obligation under the cost-to-cost method of percentage-of-completion.
The estimated costs to complete for the Joint Light Tactical Vehicles (JLTV) contract represents the majority of the total estimated costs to complete in the Defense segment as of September 30, 2017, based on2021. Given the criteria established in
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the estimated costs for the JLTV contract included the following, among others:
• | We tested the effectiveness of controls over revenue recognized over time, including management’s controls over estimated costs. |
• | We evaluated the appropriateness and consistency of the methods and assumptions used by management to develop the estimates of costs to completion. |
• | We tested the mathematical accuracy of management’s estimates of costs to completion. |
• | We evaluated the estimates of costs to completion by performing the following: |
o | Observed completed vehicles and trailers on a sample basis to evaluate the progress to completion. |
o | Compared costs incurred to date to the costs management estimated to be incurred to date. |
o | Evaluated management’s ability to achieve the estimates of costs to completion by performing corroborating inquiries with the Company’s project managers and engineers, and comparing the estimates to management’s work plans, engineering specifications, and supplier contracts. |
• | We evaluated management’s ability to accurately estimate costs to completion by comparing actual results to management’s historical estimates and actual results on similar completed contracts. |
/s/ Deloitte & Touche LLP
Milwaukee, Wisconsin
November 16, 2021
We have served as the Company’s auditor since 2002.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors and Shareholders of Oshkosh Corporation
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Oshkosh Corporation and subsidiaries (the “Company”) as of September 30, 2017,2021, based on criteria established in
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended September 30, 2021, of the Company and our report dated November 16, 2021, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company'sCompany’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company'sCompany’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company'scompany’s internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company'scompany’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company'scompany’s assets that could have a material effect on the consolidated financial statements.
Because of theits inherent limitations, of internal control over financial reporting including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be preventedprevent or detected on a timely basis.detect misstatements. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Milwaukee, Wisconsin
November 16, 2021
OSHKOSH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(InDollars in millions, except per share amounts)
|
| Fiscal Year Ended September 30, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Net sales |
| $ | 7,737.3 |
|
| $ | 6,856.8 |
|
| $ | 8,382.0 |
|
Cost of sales |
|
| 6,516.5 |
|
|
| 5,736.5 |
|
|
| 6,864.6 |
|
Gross income |
|
| 1,220.8 |
|
|
| 1,120.3 |
|
|
| 1,517.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
| 666.5 |
|
|
| 620.6 |
|
|
| 683.5 |
|
Amortization of purchased intangibles |
|
| 9.6 |
|
|
| 11.0 |
|
|
| 36.9 |
|
Total operating expenses |
|
| 676.1 |
|
|
| 631.6 |
|
|
| 720.4 |
|
Operating income |
|
| 544.7 |
|
|
| 488.7 |
|
|
| 797.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (48.2 | ) |
|
| (59.3 | ) |
|
| (54.4 | ) |
Interest income |
|
| 3.5 |
|
|
| 7.5 |
|
|
| 6.8 |
|
Miscellaneous, net |
|
| (2.1 | ) |
|
| 2.2 |
|
|
| 1.3 |
|
Income before income taxes and losses of unconsolidated affiliates |
|
| 497.9 |
|
|
| 439.1 |
|
|
| 750.7 |
|
Provision for income taxes |
|
| 25.2 |
|
|
| 112.8 |
|
|
| 171.3 |
|
Income before losses of unconsolidated affiliates |
|
| 472.7 |
|
|
| 326.3 |
|
|
| 579.4 |
|
Equity in losses of unconsolidated affiliates |
|
| — |
|
|
| (1.8 | ) |
|
| — |
|
Net income |
| $ | 472.7 |
|
| $ | 324.5 |
|
| $ | 579.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 6.90 |
|
| $ | 4.76 |
|
| $ | 8.30 |
|
Diluted |
|
| 6.83 |
|
|
| 4.72 |
|
|
| 8.21 |
|
| Fiscal Year Ended September 30, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Net sales | $ | 6,829.6 | $ | 6,279.2 | $ | 6,098.1 | |||||
| Cost of sales | 5,655.2 | 5,223.4 | 5,058.9 | ||||||||
| Gross income | 1,174.4 | 1,055.8 | 1,039.2 | ||||||||
| Operating expenses: | |||||||||||
| Selling, general and administrative | 665.6 | 612.4 | 587.4 | ||||||||
| Amortization of purchased intangibles | 45.8 | 52.5 | 53.2 | ||||||||
| Asset impairment charge | — | 26.9 | — | ||||||||
| Total operating expenses | 711.4 | 691.8 | 640.6 | ||||||||
| Operating income | 463.0 | 364.0 | 398.6 | ||||||||
| Other income (expense): | |||||||||||
| Interest expense | (59.8 | ) | (60.4 | ) | (70.1 | ) | |||||
| Interest income | 4.9 | 2.1 | 2.5 | ||||||||
| Miscellaneous, net | 3.2 | 1.3 | (4.9 | ) | |||||||
| Income before income taxes and equity in earnings of unconsolidated affiliates | 411.3 | 307.0 | 326.1 | ||||||||
| Provision for income taxes | 127.2 | 92.4 | 99.2 | ||||||||
| Income before equity in earnings of unconsolidated affiliates | 284.1 | 214.6 | 226.9 | ||||||||
| Equity in earnings of unconsolidated affiliates | 1.5 | 1.8 | 2.6 | ||||||||
| Net income | $ | 285.6 | $ | 216.4 | $ | 229.5 | |||||
| Earnings per share attributable to common shareholders: | |||||||||||
| Basic | $ | 3.82 | $ | 2.94 | $ | 2.94 | |||||
| Diluted | 3.77 | 2.91 | 2.90 | ||||||||
The accompanying notes are an integral part of these financial statements
OSHKOSH CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in millions)
|
| Fiscal Year Ended September 30, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Net income |
| $ | 472.7 |
|
| $ | 324.5 |
|
| $ | 579.4 |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
Employee pension and postretirement benefits |
|
| 61.7 |
|
|
| (26.5 | ) |
|
| (49.4 | ) |
Currency translation adjustments |
|
| 3.8 |
|
|
| 30.4 |
|
|
| (36.3 | ) |
Change in fair value of derivative instruments |
|
| 1.9 |
|
|
| (0.7 | ) |
|
| — |
|
Total other comprehensive income (loss), net of tax |
|
| 67.4 |
|
|
| 3.2 |
|
|
| (85.7 | ) |
Comprehensive income |
| $ | 540.1 |
|
| $ | 327.7 |
|
| $ | 493.7 |
|
| Fiscal Year Ended September 30, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Net income | $ | 285.6 | $ | 216.4 | $ | 229.5 | |||||
| Other comprehensive income (loss), net of tax: | |||||||||||
| Employee pension and postretirement benefits | 27.7 | (27.5 | ) | (2.2 | ) | ||||||
| Currency translation adjustments | 22.5 | (3.0 | ) | (73.1 | ) | ||||||
| Change in fair value of derivative instruments | (0.2 | ) | (0.1 | ) | 0.1 | ||||||
| Total other comprehensive income (loss), net of tax | 50.0 | (30.6 | ) | (75.2 | ) | ||||||
| Comprehensive income | $ | 335.6 | $ | 185.8 | $ | 154.3 | |||||
The accompanying notes are an integral part of these financial statements
OSHKOSH CORPORATION
CONSOLIDATED BALANCE SHEETS
(InDollars in millions, except share and per share amounts)
|
| September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 1,375.8 |
|
| $ | 582.9 |
|
Receivables, net |
|
| 1,017.3 |
|
|
| 857.6 |
|
Unbilled receivables, net |
|
| 421.1 |
|
|
| 483.6 |
|
Inventories, net |
|
| 1,267.4 |
|
|
| 1,505.4 |
|
Income taxes receivable |
|
| 278.1 |
|
|
| 45.4 |
|
Other current assets |
|
| 58.2 |
|
|
| 60.9 |
|
Total current assets |
|
| 4,417.9 |
|
|
| 3,535.8 |
|
Property, plant and equipment, net |
|
| 595.9 |
|
|
| 565.9 |
|
Goodwill |
|
| 1,052.0 |
|
|
| 1,009.5 |
|
Purchased intangible assets, net |
|
| 466.8 |
|
|
| 418.2 |
|
Other long-term assets |
|
| 359.0 |
|
|
| 286.5 |
|
Total assets |
| $ | 6,891.6 |
|
| $ | 5,815.9 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Revolving credit facility and current maturities of long-term debt |
| $ | — |
|
| $ | 5.2 |
|
Accounts payable |
|
| 860.4 |
|
|
| 577.8 |
|
Customer advances |
|
| 654.3 |
|
|
| 491.4 |
|
Payroll-related obligations |
|
| 215.1 |
|
|
| 150.8 |
|
Income taxes payable |
|
| 64.9 |
|
|
| 14.7 |
|
Other current liabilities |
|
| 357.0 |
|
|
| 345.2 |
|
Total current liabilities |
|
| 2,151.7 |
|
|
| 1,585.1 |
|
Long-term debt, less current maturities |
|
| 818.8 |
|
|
| 817.9 |
|
Other long-term liabilities |
|
| 673.3 |
|
|
| 562.2 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
Preferred Stock ($.01 par value; 2,000,000 shares authorized; NaN issued and outstanding) |
|
| — |
|
|
| — |
|
Common Stock ($.01 par value; 300,000,000 shares authorized; 75,101,465 shares issued) |
|
| 0.7 |
|
|
| 0.7 |
|
Additional paid-in capital |
|
| 804.6 |
|
|
| 800.9 |
|
Retained earnings |
|
| 3,129.3 |
|
|
| 2,747.7 |
|
Accumulated other comprehensive loss |
|
| (131.0 | ) |
|
| (198.4 | ) |
Common Stock in treasury, at cost (7,089,782 and 6,950,298 shares, respectively) |
|
| (555.8 | ) |
|
| (500.2 | ) |
Total shareholders’ equity |
|
| 3,247.8 |
|
|
| 2,850.7 |
|
Total liabilities and shareholders’ equity |
| $ | 6,891.6 |
|
| $ | 5,815.9 |
|
|
|
|
|
|
|
|
|
|
| September 30, | |||||||
| 2017 | 2016 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 447.0 | $ | 321.9 | |||
| Receivables, net | 1,306.3 | 1,021.9 | |||||
| Inventories, net | 1,198.4 | 979.8 | |||||
| Other current assets | 88.1 | 93.9 | |||||
| Total current assets | 3,039.8 | 2,417.5 | |||||
| Property, plant and equipment, net | 469.9 | 452.1 | |||||
| Goodwill | 1,013.0 | 1,003.5 | |||||
| Purchased intangible assets, net | 507.8 | 553.5 | |||||
| Other long-term assets | 68.4 | 87.2 | |||||
| Total assets | $ | 5,098.9 | $ | 4,513.8 | |||
| Liabilities and Shareholders' Equity | |||||||
| Current liabilities: | |||||||
| Revolving credit facility and current maturities of long-term debt | $ | 23.0 | $ | 20.0 | |||
| Accounts payable | 651.0 | 466.1 | |||||
| Customer advances | 513.4 | 471.8 | |||||
| Payroll-related obligations | 191.8 | 147.9 | |||||
| Other current liabilities | 303.9 | 261.8 | |||||
| Total current liabilities | 1,683.1 | 1,367.6 | |||||
| Long-term debt, less current maturities | 807.9 | 826.2 | |||||
| Other long-term liabilities | 300.5 | 343.5 | |||||
| Commitments and contingencies | |||||||
| Shareholders' equity: | |||||||
| Preferred Stock ($.01 par value; 2,000,000 shares authorized; none issued and outstanding) | — | — | |||||
| Common Stock ($.01 par value; 300,000,000 shares authorized; 92,101,465 shares issued) | 0.9 | 0.9 | |||||
| Additional paid-in capital | 802.2 | 782.3 | |||||
| Retained earnings | 2,399.8 | 2,177.0 | |||||
| Accumulated other comprehensive loss | (125.0 | ) | (175.0 | ) | |||
| Common Stock in treasury, at cost (17,088,224 and 18,175,669 shares, respectively) | (770.5 | ) | (808.7 | ) | |||
| Total shareholders’ equity | 2,307.4 | 1,976.5 | |||||
| Total liabilities and shareholders' equity | $ | 5,098.9 | $ | 4,513.8 | |||
The accompanying notes are an integral part of these financial statements
OSHKOSH CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS'SHAREHOLDERS’ EQUITY
(InDollars in millions, except per share amounts)
|
| Common Stock |
|
| Additional Paid-In Capital |
|
| Retained Earnings |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Common Stock in Treasury at Cost |
|
| Total |
| ||||||
Balance at September 30, 2018 |
| $ | 0.7 |
|
| $ | 814.8 |
|
| $ | 2,007.9 |
|
| $ | (106.8 | ) |
| $ | (203.1 | ) |
| $ | 2,513.5 |
|
Effect of adopting new Accounting Standards Updates (ASU): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue recognition (ASU 2014-09) |
|
| — |
|
|
| — |
|
|
| (60.4 | ) |
|
| — |
|
|
| — |
|
|
| (60.4 | ) |
Tax accounting for intra-entity asset transfers (ASU 2016-16) |
|
| — |
|
|
| — |
|
|
| 44.5 |
|
|
| — |
|
|
| — |
|
|
| 44.5 |
|
Tax impact of U.S. tax reform on Accumulated Other Comprehensive Income (ASU 2018-02) |
|
| — |
|
|
| — |
|
|
| 9.1 |
|
|
| (9.1 | ) |
|
| — |
|
|
| — |
|
Balance at October 1, 2018 |
|
| 0.7 |
|
|
| 814.8 |
|
|
| 2,001.1 |
|
|
| (115.9 | ) |
|
| (203.1 | ) |
|
| 2,497.6 |
|
Net income |
|
| — |
|
|
| — |
|
|
| 579.4 |
|
|
| — |
|
|
| — |
|
|
| 579.4 |
|
Employee pension and postretirement benefits, net of tax of $14.9 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (49.4 | ) |
|
| — |
|
|
| (49.4 | ) |
Currency translation adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (36.3 | ) |
|
| — |
|
|
| (36.3 | ) |
Cash dividends ($1.08 per share) |
|
| — |
|
|
| — |
|
|
| (75.5 | ) |
|
| — |
|
|
| — |
|
|
| (75.5 | ) |
Repurchases of Common Stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (350.1 | ) |
|
| (350.1 | ) |
Exercise of stock options |
|
| — |
|
|
| (10.4 | ) |
|
| — |
|
|
| — |
|
|
| 21.7 |
|
|
| 11.3 |
|
Stock-based compensation expense |
|
| — |
|
|
| 29.0 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 29.0 |
|
Payment of stock-based restricted and performance shares |
|
| — |
|
|
| (24.6 | ) |
|
| — |
|
|
| — |
|
|
| 24.6 |
|
|
| — |
|
Shares tendered for taxes on stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (7.3 | ) |
|
| (7.3 | ) |
Other |
|
| — |
|
|
| (0.3 | ) |
|
| — |
|
|
| — |
|
|
| 1.4 |
|
|
| 1.1 |
|
Balance at September 30, 2019 |
|
| 0.7 |
|
|
| 808.5 |
|
|
| 2,505.0 |
|
|
| (201.6 | ) |
|
| (512.8 | ) |
|
| 2,599.8 |
|
Net income |
|
| — |
|
|
| — |
|
|
| 324.5 |
|
|
| — |
|
|
| — |
|
|
| 324.5 |
|
Employee pension and postretirement benefits, net of tax of $8.6 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (26.5 | ) |
|
| — |
|
|
| (26.5 | ) |
Currency translation adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 30.4 |
|
|
| — |
|
|
| 30.4 |
|
Cash dividends ($1.20 per share) |
|
| — |
|
|
| — |
|
|
| (81.8 | ) |
|
| — |
|
|
| — |
|
|
| (81.8 | ) |
Repurchases of Common Stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (40.8 | ) |
|
| (40.8 | ) |
Exercise of stock options |
|
| — |
|
|
| (11.6 | ) |
|
| — |
|
|
| — |
|
|
| 37.7 |
|
|
| 26.1 |
|
Stock-based compensation expense |
|
| — |
|
|
| 29.3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 29.3 |
|
Payment of stock-based restricted and performance shares |
|
| — |
|
|
| (23.0 | ) |
|
| — |
|
|
| — |
|
|
| 23.0 |
|
|
| — |
|
Shares tendered for taxes on stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10.7 | ) |
|
| (10.7 | ) |
Other |
|
| — |
|
|
| (2.3 | ) |
|
| — |
|
|
| (0.7 | ) |
|
| 3.4 |
|
|
| 0.4 |
|
Balance at September 30, 2020 |
|
| 0.7 |
|
|
| 800.9 |
|
|
| 2,747.7 |
|
|
| (198.4 | ) |
|
| (500.2 | ) |
|
| 2,850.7 |
|
Net income |
|
| — |
|
|
| — |
|
|
| 472.7 |
|
|
| — |
|
|
| — |
|
|
| 472.7 |
|
Employee pension and postretirement benefits, net of tax of $19.4 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 61.7 |
|
|
| — |
|
|
| 61.7 |
|
Currency translation adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3.8 |
|
|
| — |
|
|
| 3.8 |
|
Cash dividends ($1.32 per share) |
|
| — |
|
|
| — |
|
|
| (90.4 | ) |
|
| — |
|
|
| — |
|
|
| (90.4 | ) |
Repurchases of Common Stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (107.8 | ) |
|
| (107.8 | ) |
Exercise of stock options |
|
| — |
|
|
| 0.2 |
|
|
| — |
|
|
| — |
|
|
| 42.6 |
|
|
| 42.8 |
|
Stock-based compensation expense |
|
| — |
|
|
| 27.2 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 27.2 |
|
Payment of stock-based restricted and performance shares |
|
| — |
|
|
| (23.3 | ) |
|
| — |
|
|
| — |
|
|
| 23.3 |
|
|
| — |
|
Shares tendered for taxes on stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (14.3 | ) |
|
| (14.3 | ) |
Other |
|
| — |
|
|
| (0.4 | ) |
|
| (0.7 | ) |
|
| 1.9 |
|
|
| 0.6 |
|
|
| 1.4 |
|
Balance at September 30, 2021 |
| $ | 0.7 |
|
| $ | 804.6 |
|
| $ | 3,129.3 |
|
| $ | (131.0 | ) |
| $ | (555.8 | ) |
| $ | 3,247.8 |
|
Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Common Stock in Treasury at Cost | Total | ||||||||||||||||||
| Balance at September 30, 2014 | $ | 0.9 | $ | 758.0 | $ | 1,840.1 | $ | (69.2 | ) | $ | (544.8 | ) | $ | 1,985.0 | |||||||||
| Net income | — | — | 229.5 | — | — | 229.5 | |||||||||||||||||
Employee pension and postretirement benefits, net of tax of ($1.2) | — | — | — | (2.2 | ) | — | (2.2 | ) | |||||||||||||||
| Currency translation adjustments | — | — | — | (73.1 | ) | — | (73.1 | ) | |||||||||||||||
| Cash dividends ($0.68 per share) | — | — | (53.1 | ) | — | — | (53.1 | ) | |||||||||||||||
| Repurchases of Common Stock | — | — | — | — | (200.4 | ) | (200.4 | ) | |||||||||||||||
| Exercise of stock options | — | 0.3 | — | — | 8.3 | 8.6 | |||||||||||||||||
| Stock-based compensation expense | — | 21.4 | — | — | — | 21.4 | |||||||||||||||||
| Excess tax benefit from stock-based compensation | — | 3.8 | — | — | — | 3.8 | |||||||||||||||||
| Payment of earned performance shares | — | (7.4 | ) | — | — | 7.4 | — | ||||||||||||||||
| Shares tendered for taxes on stock-based compensation | — | — | — | — | (8.9 | ) | (8.9 | ) | |||||||||||||||
| Derivative instruments | — | — | — | 0.1 | — | 0.1 | |||||||||||||||||
| Other | — | (4.6 | ) | — | — | 5.0 | 0.4 | ||||||||||||||||
| Balance at September 30, 2015 | 0.9 | 771.5 | 2,016.5 | (144.4 | ) | (733.4 | ) | 1,911.1 | |||||||||||||||
| Net income | — | — | 216.4 | — | — | 216.4 | |||||||||||||||||
Employee pension and postretirement benefits, net of tax of ($14.2) | — | — | — | (27.5 | ) | — | (27.5 | ) | |||||||||||||||
| Currency translation adjustments | — | — | — | (3.0 | ) | — | (3.0 | ) | |||||||||||||||
| Cash dividends ($0.76 per share) | — | — | (55.9 | ) | — | — | (55.9 | ) | |||||||||||||||
| Repurchases of Common Stock | — | — | — | — | (100.1 | ) | (100.1 | ) | |||||||||||||||
| Exercise of stock options | — | 0.5 | — | — | 21.2 | 21.7 | |||||||||||||||||
| Stock-based compensation expense | — | 18.7 | — | — | — | 18.7 | |||||||||||||||||
| Excess tax benefit from stock-based compensation | — | 1.1 | — | — | — | 1.1 | |||||||||||||||||
| Payment of earned performance shares | — | (2.6 | ) | — | — | 2.6 | — | ||||||||||||||||
| Shares tendered for taxes on stock-based compensation | — | — | — | — | (6.2 | ) | (6.2 | ) | |||||||||||||||
| Derivative instruments | — | — | — | (0.1 | ) | — | (0.1 | ) | |||||||||||||||
| Other | — | (6.9 | ) | — | — | 7.2 | 0.3 | ||||||||||||||||
| Balance at September 30, 2016 | 0.9 | 782.3 | 2,177.0 | (175.0 | ) | (808.7 | ) | 1,976.5 | |||||||||||||||
| Net income | — | — | 285.6 | — | — | 285.6 | |||||||||||||||||
Employee pension and postretirement benefits, net of tax of $15.2 | — | — | — | 27.7 | — | 27.7 | |||||||||||||||||
| Currency translation adjustments | — | — | — | 22.5 | — | 22.5 | |||||||||||||||||
| Cash dividends ($0.84 per share) | — | — | (62.8 | ) | — | — | (62.8 | ) | |||||||||||||||
| Exercise of stock options | — | 4.3 | — | — | 35.6 | 39.9 | |||||||||||||||||
| Stock-based compensation expense | — | 22.4 | — | — | — | 22.4 | |||||||||||||||||
| Payment of earned performance shares | — | (1.3 | ) | — | — | 1.3 | — | ||||||||||||||||
| Shares tendered for taxes on stock-based compensation | — | — | — | — | (4.8 | ) | (4.8 | ) | |||||||||||||||
| Derivative instruments | — | — | — | (0.2 | ) | — | (0.2 | ) | |||||||||||||||
| Other | — | (5.5 | ) | — | — | 6.1 | 0.6 | ||||||||||||||||
| Balance at September 30, 2017 | $ | 0.9 | $ | 802.2 | $ | 2,399.8 | $ | (125.0 | ) | $ | (770.5 | ) | $ | 2,307.4 | |||||||||
The accompanying notes are an integral part of these financial statements
OSHKOSH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
|
| Fiscal Year Ended September 30, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 472.7 |
|
| $ | 324.5 |
|
| $ | 579.4 |
|
Depreciation and amortization |
|
| 104.0 |
|
|
| 104.2 |
|
|
| 115.2 |
|
Stock-based compensation expense |
|
| 27.2 |
|
|
| 29.3 |
|
|
| 29.0 |
|
Deferred income taxes |
|
| 88.6 |
|
|
| 22.4 |
|
|
| 10.4 |
|
Gain on sale of assets |
|
| (3.6 | ) |
|
| (11.8 | ) |
|
| (3.3 | ) |
Debt extinguishment |
|
| — |
|
|
| 8.5 |
|
|
| — |
|
Other non-cash adjustments |
|
| (0.1 | ) |
|
| (1.2 | ) |
|
| 1.1 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Receivables, net |
|
| (128.3 | ) |
|
| 266.7 |
|
|
| 173.2 |
|
Unbilled receivables, net |
|
| 62.8 |
|
|
| 65.8 |
|
|
| (239.8 | ) |
Inventories, net |
|
| 246.7 |
|
|
| (246.7 | ) |
|
| (111.0 | ) |
Other current assets |
|
| 8.1 |
|
|
| (17.4 | ) |
|
| (5.8 | ) |
Accounts payable |
|
| 252.1 |
|
|
| (222.5 | ) |
|
| 12.8 |
|
Customer advances |
|
| 162.6 |
|
|
| 112.3 |
|
|
| (90.2 | ) |
Payroll-related obligations |
|
| 61.2 |
|
|
| (32.3 | ) |
|
| (7.6 | ) |
Income taxes payable |
|
| (156.7 | ) |
|
| (52.1 | ) |
|
| 36.2 |
|
Other current liabilities |
|
| 6.4 |
|
|
| (37.1 | ) |
|
| 45.6 |
|
Other long-term assets and liabilities |
|
| 17.9 |
|
|
| 14.7 |
|
|
| 23.1 |
|
Total changes in operating assets and liabilities |
|
| 532.8 |
|
|
| (148.6 | ) |
|
| (163.5 | ) |
Net cash provided by operating activities |
|
| 1,221.6 |
|
|
| 327.3 |
|
|
| 568.3 |
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment |
|
| (104.4 | ) |
|
| (112.3 | ) |
|
| (147.6 | ) |
Additions to equipment held for rental |
|
| (10.4 | ) |
|
| (17.9 | ) |
|
| (26.6 | ) |
Acquisition of business, net of cash acquired |
|
| (110.6 | ) |
|
| — |
|
|
| — |
|
Proceeds from sale of property, plant and equipment |
|
| 1.2 |
|
|
| 2.4 |
|
|
| 3.1 |
|
Proceeds from sale of equipment held for rental |
|
| 16.3 |
|
|
| 38.8 |
|
|
| 12.0 |
|
Investments in unconsolidated affiliates |
|
| (41.0 | ) |
|
| (2.9 | ) |
|
| 0.5 |
|
Other investing activities |
|
| 3.3 |
|
|
| 14.3 |
|
|
| 5.6 |
|
Net cash used by investing activities |
|
| (245.6 | ) |
|
| (77.6 | ) |
|
| (153.0 | ) |
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of debt (original maturities greater than three months) |
|
| — |
|
|
| 303.9 |
|
|
| — |
|
Repayments of debt (original maturities greater than three months) |
|
| (5.2 | ) |
|
| (300.0 | ) |
|
| — |
|
Debt issuance costs |
|
| — |
|
|
| (9.6 | ) |
|
| — |
|
Repurchases of Common Stock |
|
| (122.1 | ) |
|
| (51.5 | ) |
|
| (357.4 | ) |
Dividends paid |
|
| (90.4 | ) |
|
| (81.8 | ) |
|
| (75.5 | ) |
Proceeds from exercise of stock options |
|
| 42.8 |
|
|
| 26.1 |
|
|
| 11.3 |
|
Other financing activities |
|
| (5.5 | ) |
|
| (2.6 | ) |
|
| — |
|
Net cash used by financing activities |
|
| (180.4 | ) |
|
| (115.5 | ) |
|
| (421.6 | ) |
Effect of exchange rate changes on cash |
|
| (2.7 | ) |
|
| 0.3 |
|
|
| 0.1 |
|
Increase (decrease) in cash and cash equivalents |
|
| 792.9 |
|
|
| 134.5 |
|
|
| (6.2 | ) |
Cash and cash equivalents at beginning of year |
|
| 582.9 |
|
|
| 448.4 |
|
|
| 454.6 |
|
Cash and cash equivalents at end of year |
| $ | 1,375.8 |
|
| $ | 582.9 |
|
| $ | 448.4 |
|
Supplemental disclosures: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 45.2 |
|
| $ | 55.9 |
|
| $ | 53.6 |
|
Cash paid for income taxes |
|
| 153.9 |
|
|
| 157.2 |
|
|
| 117.6 |
|
Proceeds from income tax refunds |
|
| 26.6 |
|
|
|
|
|
|
|
|
|
Cash paid for operating lease liabilities |
|
| 51.4 |
|
|
| 55.8 |
|
|
|
|
|
Operating right-of-use assets obtained |
|
| 92.5 |
|
|
| 23.3 |
|
|
|
|
|
| Fiscal Year Ended September 30, | |||||||||||
| as adjusted | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Operating activities: | |||||||||||
| Net income | $ | 285.6 | $ | 216.4 | $ | 229.5 | |||||
| Asset impairment charge | — | 26.9 | — | ||||||||
| Depreciation and amortization | 130.3 | 128.8 | 124.5 | ||||||||
| Stock-based compensation expense | 22.4 | 18.7 | 21.4 | ||||||||
| Deferred income taxes | 7.8 | (17.0 | ) | (12.2 | ) | ||||||
| Gain on sale of assets | (6.6 | ) | (19.1 | ) | (9.3 | ) | |||||
| Foreign currency transaction (gains) losses | 1.6 | (1.1 | ) | 10.4 | |||||||
| Other non-cash adjustments | 0.1 | 0.3 | 14.1 | ||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Receivables, net | (295.9 | ) | (39.6 | ) | (13.9 | ) | |||||
| Inventories, net | (202.3 | ) | 327.2 | (378.8 | ) | ||||||
| Other current assets | 14.6 | (19.0 | ) | (1.7 | ) | ||||||
| Accounts payable | 177.2 | (87.6 | ) | (28.7 | ) | ||||||
| Customer advances | 41.5 | 31.6 | 130.1 | ||||||||
| Payroll-related obligations | 43.5 | 31.2 | (28.3 | ) | |||||||
| Income taxes | (14.8 | ) | (14.0 | ) | 17.6 | ||||||
| Other current liabilities | 43.7 | 10.8 | (9.1 | ) | |||||||
| Other long-term assets and liabilities | (2.2 | ) | (10.6 | ) | 25.8 | ||||||
| Total changes in operating assets and liabilities | (194.7 | ) | 230.0 | (287.0 | ) | ||||||
| Net cash provided by operating activities | 246.5 | 583.9 | 91.4 | ||||||||
| Investing activities: | |||||||||||
| Additions to property, plant and equipment | (85.8 | ) | (92.5 | ) | (131.7 | ) | |||||
| Additions to equipment held for rental | (27.4 | ) | (34.8 | ) | (26.3 | ) | |||||
| Acquisition of a business, net of cash acquired | — | — | (10.0 | ) | |||||||
| Proceeds from sale of equipment held for rental | 49.5 | 40.2 | 26.8 | ||||||||
| Other investing activities | (1.5 | ) | (2.1 | ) | 1.1 | ||||||
| Net cash used by investing activities | (65.2 | ) | (89.2 | ) | (140.1 | ) | |||||
| Financing activities: | |||||||||||
| Net increase (decrease) in short-term debt | — | (33.5 | ) | 33.5 | |||||||
| Proceeds from issuance of debt (original maturities greater than three months) | 5.9 | 323.5 | 375.0 | ||||||||
| Repayments of debt (original maturities greater than three months) | (23.0 | ) | (373.5 | ) | (365.0 | ) | |||||
| Debt issuance costs | — | — | (15.5 | ) | |||||||
| Repurchases of Common Stock | (4.8 | ) | (106.3 | ) | (209.3 | ) | |||||
| Dividends paid | (62.8 | ) | (55.9 | ) | (53.1 | ) | |||||
| Proceeds from exercise of stock options | 39.9 | 21.7 | 8.6 | ||||||||
| Excess tax benefit from stock-based compensation | — | 2.0 | 4.0 | ||||||||
| Net cash used by financing activities | (44.8 | ) | (222.0 | ) | (221.8 | ) | |||||
| Effect of exchange rate changes on cash | (11.4 | ) | 6.3 | (0.4 | ) | ||||||
| Increase (decrease) in cash and cash equivalents | 125.1 | 279.0 | (270.9 | ) | |||||||
| Cash and cash equivalents at beginning of year | 321.9 | 42.9 | 313.8 | ||||||||
| Cash and cash equivalents at end of year | $ | 447.0 | $ | 321.9 | $ | 42.9 | |||||
| Supplemental disclosures: | |||||||||||
| Cash paid for interest | $ | 57.1 | $ | 54.7 | $ | 51.0 | |||||
| Cash paid for income taxes | 129.9 | 116.8 | 89.9 | ||||||||
The accompanying notes are an integral part of these financial statements
1. Nature of Operations
Oshkosh Corporation and its subsidiaries (the “Company”) are leading designers and manufacturers of a wide variety of essential specialty vehicles and vehicle bodies for the Americas and global markets. “Oshkosh” refers to Oshkosh Corporation, not including its subsidiaries. The Company sells its products into
In July 2020, the Company sold its interest in Concrete Equipment Company, Inc. and its wholly-owned subsidiary (CON-E-CO) to Astec, Inc. CON-E-CO had sales of $35.0 million and $32.7 million in fiscal 2020 and 2019, respectively.
On October 1, 2020, the Company transferred operational responsibility of the airport snow removal vehicle business from the Fire & Emergency segment to the Defense segment. As a result, the results of the airport snow removal vehicle business have been included within the Defense segment for financial reporting purposes. Historical information has been reclassified to include the airport snow removal vehicle business in the Defense segment for all periods presented.
On January 19, 2021, the Company acquired all of the outstanding membership interests of Pratt Miller, which specializes in advanced engineering, technology and innovation across the motorsports and multiple ground vehicle markets, for $111.4 million, including $110.6 million in cash and contingent cash consideration of $1.4 million, reduced by a receivable of $0.6 million for certain post-closing working capital adjustments. The contingent cash consideration is required to be paid if the revenue earned by the acquired business exceeds certain targets over a three year future period.
The operating results of Pratt Miller have been included in the Company’s Consolidated Statements of Income from the date of acquisition. Pratt Miller had sales of $64.3 million from the acquisition date to September 30, 2021. Pro forma results of operations have not been presented as the effect of the acquisition is not material to any periods presented.
The following table summarizes the fair values of the assets acquired and liabilities assumed as of the date of acquisition (in millions):
Assets Acquired: |
|
|
|
|
Current assets, excluding cash of $4.9 |
| $ | 15.4 |
|
Property, plant and equipment |
|
| 7.8 |
|
Goodwill |
|
| 44.4 |
|
Purchased intangible assets |
|
| 57.9 |
|
Other long-term assets |
|
| 5.8 |
|
Total assets |
|
| 131.3 |
|
|
|
|
|
|
Liabilities Assumed: |
|
|
|
|
Current liabilities |
|
| 15.1 |
|
Long-term liabilities |
|
| 4.8 |
|
Total liabilities |
|
| 19.9 |
|
Net assets acquired |
| $ | 111.4 |
|
As of September 30, 2021, the valuation of intangible assets consisted of $25.6 million of assets subject to amortization with an estimated 5.6 year average life and $32.3 million of assets with an indefinite life. The purchase price, net of cash acquired, was allocated based on the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition with the excess purchase price of $44.4 million recorded as goodwill, representing expected synergies of the combined entity, all of which was allocated to the Defense segment. Approximately $43.9 million of the goodwill is deductible for income tax purposes. The Company expensed $1.1 million of transaction costs related to the acquisition in fiscal 2021.
2. Summary of Significant Accounting Policies
Principles of Consolidation and Presentation
— The consolidated financial statements include the accounts of Oshkosh and all of its majority-owned or controlled subsidiaries and are prepared in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP). All intercompany accounts and transactions have been eliminated in consolidation.Use of Estimates
— The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Revenue Recognition
— The Company recognizes revenueThe Company has significant experience in contractingelected to apply the following practical expedients and producing vehicles for the defense industry, which has resulted in a historyaccounting policy elections when determining revenue from contracts with customers and capitalization of making reasonable estimates of revenues and costs when measuring progress toward contract completion. The Company charges anticipated losses on contracts or programs in progress to earnings when identified. Approximately 16%, 19% and 13%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 Consolidated Statements 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. |
• | The Company has elected to not disclose unsatisfied performance obligations with an original contract duration of one year or less. |
See Note 3 of the Company’s revenues were recognized underNotes to Consolidated Financial Statements for information regarding the percentage-of-completion accounting method in fiscal 2017, 2016 and 2015, respectively.
Assurance Warranty
— Provisions for estimatedResearch and Development and Similar Costs
— Except for customer sponsored research and development costs incurred pursuant to contracts (generally with theAdvertising
— Advertising costs are included in selling, general and administrative expense and are expensed as incurred. These expenses totaledStock-Based Compensation
— The Company recognizes stock-based compensation using the fair value provisions prescribed byDebt Financing Costs
— Debt issuance costs on term debt are amortized using the interest method over the term of the debt. Deferred financing costs on lines of credit are amortized on a straight-line basis over the term of the related lines of credit. Amortization expense wasIncome Taxes
— Deferred income taxes are provided to recognize temporary differences between the financial reporting basis and the income tax basis of the Company’s assets and liabilities using currently enacted tax rates and laws. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.The Company evaluates uncertain income tax positions in a two-step2-step process. The first step is recognition, where the Company evaluates whether an individual tax position has a likelihood of greater than 50% of being sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation processes. For tax positions that are currently estimated to have a less than 50% likelihood of being sustained, zero0 tax benefit is recorded. For tax positions that have met the recognition threshold in the first step, the Company performs the second step of measuring the benefit to be recorded. The actual benefits ultimately realized may differ from the Company’s estimates. In future periods, changes in facts and circumstances and new information may require the Company to change the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recorded in results of operations and financial position in the period in which such changes occur.
Fair Value of Financial Instruments
— Based on Company estimates, the carrying amounts of cash equivalents, receivables, unbilled receivables, accounts payable and accrued liabilities approximated fair value as of September 30,Cash and Cash Equivalents
— The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents at September 30,Receivables
— Receivables consist of amounts billed and currently due fromFinance 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. 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 continuous 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 individual, and pools of receivables with similar risk characteristics, estimates of inherent losses. Additional allowances are established based upon the Company’s evaluation of the quality of the finance receivables, including the length of time the receivables are past due, past experience of collectability and underlying current and future 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. 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.
The Company does not accrue interest income on finance receivables in circumstances where the Company believes collectability is no longer reasonably assured. Any cash payments received on nonaccrual finance receivables 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.
Unbilled Receivables — Unbilled receivables consist of unbilled costs and accrued profits related to revenues on contracts with customers that have been recognized for accounting purposes but not yet billed to customers. In the Company’s Defense segment, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either upon achievement of contractual milestones (e.g. acceptance of the vehicle) or at periodic intervals (e.g., biweekly or monthly). Generally, billing occurs subsequent to revenue recognition, resulting in unbilled receivables (contract assets).
Concentration of Credit Risk
— Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash equivalents, trade accounts receivable, unbilled receivables and guarantees of certain customers’ obligations under deferred payment contracts and lease purchase agreements.The Company maintains cash and cash equivalents, and other financial instruments, with various major financial institutions. The Company performs periodic evaluations of the relative credit standing of these financial institutions and limits the amount of credit exposure with any institution.
Concentration of credit risk with respect to trade accounts and lease receivables is limited due to the large number of customers and their dispersion across many geographic areas. However, a significant amount of trade and lease receivablesaccounts receivable are with the U.S. government, with rental companies globally, with companies in the ready-mix concrete industry, with municipalities and with several large waste haulers in the United States. The Company continues to monitor credit risk associated with its trade receivables.
Inventories
— Inventories are stated at the lower of cost or market. Cost has been determined using the last-in, first-out (LIFO) method forProperty, Plant and Equipment
— Property, plant and equipment are recorded at cost. Depreciation expense is recognized over the estimated useful lives of the respective assets usingGoodwill
— Goodwill reflects the cost of an acquisition in excess of the aggregate fair value assigned to identifiable net assets acquired. Goodwill is not amortized; however, it is assessed for impairment at least annually and as triggering events or “indicators of potential impairment” occur. The Company performs its annual impairment test as of July 1 of each fiscal year. The Company evaluates the recoverability of goodwill by estimating the fair value of the businesses to which the goodwill relates. Estimated cash flows and related goodwill are grouped at the reporting unit level. A reporting unit is an operating segment or, under certain circumstances, a component of an operating segment. When the fair value of the reporting unit is less than the carrying value of the reporting unit, a further analysis is performed to measure and recognize the amount of the impairment loss, if any. Impairment losses, limited to the carrying value of goodwill, represent the excess of the carrying amount of a reporting unit’s goodwill over the implied fair value of that goodwill.In evaluating the recoverability of goodwill, it is necessary to estimate the fair value of the reporting units. The Company evaluates the recoverability of goodwill utilizing the income approach and the market approach. The Company weighted the income approach more heavily (75%) as the Company believes the income approach more accurately considers long-term fluctuations in the U.S. and European construction markets than the market approach. Under the income approach, the Company determines fair value based on estimated future cash flows discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent risk of a reporting unit and the rate of return an outside investor would expect to earn. Estimated future cash flows are based on the Company’s internal projection models, industry projections and other assumptions deemed reasonable by management. Rates used to discount estimated cash flows correspond to the Company’s cost of capital,
Impairment of Long-Lived Assets
— Property, plant and equipment, right-of-use (“ROU”) lease assets and amortizable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair value and carrying value of the asset or group of assets.Non-amortizable trade names are assessed for impairment at least annually and as triggering events or “indicators of potential impairment” occur. The Company performs its annual impairment test in the fourth quarter of its fiscal year. The Company evaluates the potential impairment by estimating the fair value of the non-amortizing intangible assets using the “relief from royalty” method. When the fair value of the non-amortizable trade name is less than the carrying value of the trade name, a further analysis is performed to measure and recognize the amount of the impairment loss, if any. Impairment losses, limited to the carrying value of the non-amortizable trade name, represent the excess of the carrying amount over the implied fair value of that non-amortizable trade name.
Customer Advances
— Customer advances include amounts received in advance of the completion ofOther Long-Term Liabilities
— Other long-term liabilities are comprised principally of the portions of theForeign Currency Translation
— All balance sheet accounts have been translated into U.S. dollars using the exchange rates in effect at the balance sheet date. Income statement amounts have been translated using the average exchange rate during the period in which the transactions occurred. Resulting translation adjustments are included in “Accumulated other comprehensiveDerivative Financial Instruments
— The Company recognizes all derivative financial instruments, such as foreign exchange contracts, in the consolidated financial statements at fair value regardless of the purpose or intent for holding the instrument. Changes in the fair value of derivative financial instruments are either recognized periodically in income or in equity as a component of comprehensive income depending on whether the derivative financial instrument qualifies for hedge accounting, and if so, whether it qualifies as a fair value hedge or cash flow hedge. Generally, changes in fair values of derivatives accounted for as fair value hedges are recorded in income along with the portions of the changes in the fair values of the hedged items that relate to the hedged risks. Changes in fair values of derivatives accounted for as cash flow hedges, to the extent they are effective as hedges, are recorded in other comprehensive income, net of deferred income taxes. Changes in fair value of derivatives not qualifying as hedges are reported in income. Cash flows from derivatives that are accounted for as cash flow or fair value hedges are included in the Consolidated Statements of Cash Flows in the same category as the item being hedged.Reclassifications
— Certain reclassifications have been made to the fiscalRecent Accounting Pronouncements
— InIn 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 CompanyIn March 2017,August 2018, the FASB issued ASU 2017-07,
Standards not yet adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. The standard simplifies the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification (ASC) 740 such as recognizing deferred taxes for equity investments, the incremental approach to performing intraperiod tax allocation and calculating income taxes in interim periods. The standard also simplifies accounting for income taxes under U.S. GAAP by clarifying and amending existing guidance, including the recognition of deferred taxes for goodwill, the allocation of taxes to members of a consolidated group and requiring that an entity reportreflect the service cost componenteffect of net periodic pension and postretirement costenacted changes in tax laws or rates 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 presentedannual effective tax rate computation in the income statement separately frominterim period that includes the service component and outside a subtotal of income from operations, if one is presented. The amendment further allows only the service cost component of net periodic pension and postretirement costs to be eligible for capitalization, when applicable.enactment date. The Company will be required to adopt ASU 2017-072019-12 as of October 1, 2018. Early2021. The Company does not expect the adoption of ASU 2019-12 will have a material impact on the Company’s consolidated financial statements.
3. Revenue Recognition
The Company recognizes revenue in accordance with ASC 606. Accordingly, revenue is permitted. 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 is determinable based on observable standalone selling prices or is 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, equipment rental providers 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 aftermarket 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, refuse collection and concrete mixer 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 16 of the Notes to Consolidated Financial Statements for further discussion on product assurance warranties.
Defense segment revenue
The majority of the Company’s Defense segment 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 95% of Defense segment revenue in fiscal 2021. 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 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 16 of the Notes to 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 control to the customer 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 over time transfer of control determination as a result of the customized nature of its goods and services, which create assets without an alternative use and contractual rights. When control is not determined to be continuous over the term of the contract, the Company initially defers contract costs that relate to the contract or anticipated contract, generate or enhance assets that will be utilized in satisfying future performance obligations and are expected to be recovered. Deferred contract costs are subsequently amortized on a systematic basis consistent with the pattern of the transfer of the goods and services to which it relates.
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 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.
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 resulted in changes within Defense segment results as follows (in millions, except for per share amounts):
|
| Fiscal Year Ended September 30, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Net sales |
| $ | 13.1 |
|
| $ | 31.2 |
|
| $ | 63.9 |
|
Operating income |
|
| 19.4 |
|
|
| 16.2 |
|
|
| 44.7 |
|
Net income |
|
| 14.9 |
|
|
| 12.4 |
|
|
| 34.5 |
|
Diluted earnings per share |
|
| 0.21 |
|
|
| 0.18 |
|
|
| 0.49 |
|
Disaggregation of Revenue
The table below presents consolidated net sales disaggregated by segment and timing of revenue recognition (in millions):
|
| Fiscal Year Ended September 30, 2021 |
| |||||||||||||||||||||
|
| Access Equipment |
|
| Defense |
|
| Fire & Emergency |
|
| Commercial |
|
| Corporate and Intersegment Eliminations |
|
| Total |
| ||||||
Point in time |
| $ | 3,006.9 |
|
| $ | 43.5 |
|
| $ | 1,205.9 |
|
| $ | 532.8 |
|
| $ | (25.1 | ) |
| $ | 4,764.0 |
|
Over time |
|
| 65.2 |
|
|
| 2,482.1 |
|
|
| 20.7 |
|
|
| 404.8 |
|
|
| 0.5 |
|
|
| 2,973.3 |
|
|
| $ | 3,072.1 |
|
| $ | 2,525.6 |
|
| $ | 1,226.6 |
|
| $ | 937.6 |
|
| $ | (24.6 | ) |
| $ | 7,737.3 |
|
|
| Fiscal Year Ended September 30, 2020 |
| |||||||||||||||||||||
|
| Access Equipment |
|
| Defense (a) |
|
| Fire & Emergency (a) |
|
| Commercial |
|
| Corporate and Intersegment Eliminations (a) |
|
| Total |
| ||||||
Point in time |
| $ | 2,437.5 |
|
| $ | 34.8 |
|
| $ | 1,085.1 |
|
| $ | 556.7 |
|
| $ | (36.0 | ) |
| $ | 4,078.1 |
|
Over time |
|
| 77.6 |
|
|
| 2,276.7 |
|
|
| 21.9 |
|
|
| 401.1 |
|
|
| 1.4 |
|
|
| 2,778.7 |
|
|
| $ | 2,515.1 |
|
| $ | 2,311.5 |
|
| $ | 1,107.0 |
|
| $ | 957.8 |
|
| $ | (34.6 | ) |
| $ | 6,856.8 |
|
|
| Fiscal Year Ended September 30, 2019 |
| |||||||||||||||||||||
|
| Access Equipment |
|
| Defense (a) |
|
| Fire & Emergency (a) |
|
| Commercial |
|
| Corporate and Intersegment Eliminations (a) |
|
| Total |
| ||||||
Point in time |
| $ | 4,001.6 |
|
| $ | 45.4 |
|
| $ | 1,192.5 |
|
| $ | 591.7 |
|
| $ | (30.1 | ) |
| $ | 5,801.1 |
|
Over time |
|
| 78.1 |
|
|
| 2,052.1 |
|
|
| 18.2 |
|
|
| 430.5 |
|
|
| 2.0 |
|
|
| 2,580.9 |
|
|
| $ | 4,079.7 |
|
| $ | 2,097.5 |
|
| $ | 1,210.7 |
|
| $ | 1,022.2 |
|
| $ | (28.1 | ) |
| $ | 8,382.0 |
|
(a) | Results have been reclassified to reflect the move of the airport snow removal vehicle business from the Fire & Emergency segment to the Defense segment. |
See Note 24 of the Notes to 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, payments received from customers received in advance of performance and extended warranties that are 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. See Note 8 of the Notes to Consolidated Financial Statements for additional information on the Company’s receivable balances.
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 charges of $17.2 million, $15.6 million and $14.5 million were recorded in “Interest expense” in the Consolidated Statements of Income for fiscal 2021, 2020 and 2019, 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” in the Consolidated Balance Sheet. The Company reduces contract liabilities when the Company transfers control of promised goods and services. Contract liabilities consisted of the following (in millions):
|
| September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Customer advances |
| $ | 654.3 |
|
| $ | 491.4 |
|
Other current liabilities |
|
| 82.0 |
|
|
| 59.5 |
|
Other long-term liabilities |
|
| 175.2 |
|
|
| 53.7 |
|
Total contract liabilities |
| $ | 911.5 |
|
| $ | 604.6 |
|
|
| Fiscal Year Ended September 30, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Beginning liabilities recognized in revenue |
| $ | 521.7 |
|
| $ | 441.0 |
|
| $ | 530.9 |
|
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 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 contract assets during fiscal 2021, 2020 or 2019.
The Defense segment recognizes an asset for costs incurred on existing and highly probable anticipated contracts prior to the transfer of control of goods or services to the customer. Deferred contract related costs of $50.6 million at September 30, 2021 are included in “Other long-term assets” within the Company’s Consolidated Balance Sheet, of which $4.8 million related to costs for anticipated contracts, $42.3 million related to engineering costs, $2.2 million related to setup costs and $1.3 million related to tooling.
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-type 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):
|
| Fiscal Year Ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Balance at beginning of period |
| $ | 64.4 |
|
| $ | 68.2 |
|
Deferred revenue for new service-type warranties |
|
| 26.2 |
|
|
| 23.6 |
|
Amortization of deferred revenue |
|
| (25.0 | ) |
|
| (27.9 | ) |
Foreign currency translation |
|
| 0.2 |
|
|
| 0.5 |
|
Balance at end of period |
| $ | 65.8 |
|
| $ | 64.4 |
|
Classification of service-type warranties in the Consolidated Balance Sheets consisted of the following (in millions):
|
| September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Other current liabilities |
| $ | 21.8 |
|
| $ | 24.7 |
|
Other long-term liabilities |
|
| 44.0 |
|
|
| 39.7 |
|
|
| $ | 65.8 |
|
| $ | 64.4 |
|
Remaining Performance Obligations
As of September 30, 2021, the Company had unsatisfied performance obligations for contracts with an original duration greater than one year totaling $5.3 billion, of which $3.5 billion is expected to be satisfied and revenue recognized
in fiscal 2022, $1.6 billion is expected to be satisfied and revenue recognized in fiscal 2023 and $235.3 million is expected to be satisfied and revenue recognized beyond fiscal 2023.
4. 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, awards previously made under the 2009 Stock Plan 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 that plan. At September 30, 2021, the Company had reserved 4,426,671 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.
Under the 2017 Stock Plan, officers, directors, including non-employee directors, and employees of the Company may be granted stock options, stock appreciation rights (SAR), performance shares, performance units, shares of Common Stock, restricted stock, restricted stock units (RSU) or other stock-based awards. The 2017 Stock Plan provides for the granting of options to purchase shares of the Company’s Common Stock at not less than the fair market value of such shares on the date of grant. Stock options granted under the 2017 Stock Plan generally become exercisable in equal installments over a three-year period, beginning with the first anniversary of the date of grant of the option, unless a shorter or longer duration is established by the Human Resources Committee of the Board of Directors at the time of the option grant. Stock options terminate not more than ten years from the date of grant. The exercise price of stock options and the market value of restricted stock unit awards are determined based on the closing market price of the Company’s Common Stock on the date of grant. Except to the extent vesting is accelerated upon early retirement and except for performance shares and performance units, vesting is based solely on continued service as an employee of the Company. 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.
Information related to the Company’s equity-based compensation plans in effect as of September 30, 2021 was as follows:
Plan Category |
| Number of Securities to be Issued Upon Exercise of Outstanding Options or Vesting of Share Awards |
|
| Weighted-Average Exercise Price of Outstanding Options |
|
| Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans |
| |||
Equity compensation plans approved by security holders |
|
| 1,115,679 |
|
| $ | 77.96 |
|
|
| 3,310,992 |
|
Equity compensation plans not approved by security holders |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
| 1,115,679 |
|
| $ | 77.96 |
|
|
| 3,310,992 |
|
Total stock-based compensation expense was as follows (in millions):
|
| Fiscal Year Ended September 30, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Stock options |
| $ | 1.8 |
|
| $ | 6.8 |
|
| $ | 6.9 |
|
Stock awards (shares and units) |
|
| 19.3 |
|
|
| 15.8 |
|
|
| 15.0 |
|
Performance share awards |
|
| 6.1 |
|
|
| 6.7 |
|
|
| 7.1 |
|
Cash-settled stock appreciation rights |
|
| 1.1 |
|
|
| 0.2 |
|
|
| 0.4 |
|
Cash-settled restricted stock unit awards |
|
| 1.5 |
|
|
| 0.7 |
|
|
| 0.6 |
|
Total stock-based compensation cost |
|
| 29.8 |
|
|
| 30.2 |
|
|
| 30.0 |
|
Income tax benefit recognized for stock-based compensation |
|
| (4.4 | ) |
|
| (3.6 | ) |
|
| (4.9 | ) |
Stock-based compensation cost, net of tax |
| $ | 25.4 |
|
| $ | 26.6 |
|
| $ | 25.1 |
|
Stock Options — A summary of the Company’s stock option activity is as follows:
|
| Fiscal Year Ended September 30, |
| |||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||||||||||||||
|
| Options |
|
| Weighted- Average Exercise Price |
|
| Options |
|
| Weighted- Average Exercise Price |
|
| Options |
|
| Weighted- Average Exercise Price |
| ||||||
Outstanding, beginning of year |
|
| 1,083,402 |
|
| $ | 74.38 |
|
|
| 1,328,390 |
|
| $ | 62.62 |
|
|
| 1,268,984 |
|
| $ | 57.03 |
|
Granted |
|
| — |
|
|
| — |
|
|
| 301,025 |
|
|
| 90.28 |
|
|
| 372,450 |
|
|
| 66.09 |
|
Forfeited |
|
| (8,065 | ) |
|
| 81.40 |
|
|
| (40,965 | ) |
|
| 79.00 |
|
|
| (24,175 | ) |
|
| 72.88 |
|
Expired |
|
| (3,999 | ) |
|
| 86.59 |
|
|
| (5,869 | ) |
|
| 84.25 |
|
|
| (8,721 | ) |
|
| 76.92 |
|
Exercised |
|
| (599,662 | ) |
|
| 71.38 |
|
|
| (499,179 | ) |
|
| 52.18 |
|
|
| (280,148 | ) |
|
| 40.62 |
|
Outstanding, end of year |
|
| 471,676 |
|
|
| 77.96 |
|
|
| 1,083,402 |
|
|
| 74.38 |
|
|
| 1,328,390 |
|
|
| 62.62 |
|
Exercisable, end of year |
|
| 251,049 |
|
|
| 74.73 |
|
|
| 537,241 |
|
|
| 68.16 |
|
|
| 709,826 |
|
|
| 55.11 |
|
Stock options outstanding and exercisable as of September 30, 2021 were as follows (in millions, except share and per share amounts):
|
| Outstanding |
|
| Exercisable |
| ||||||||||||||||||||||||||
Exercise Prices |
| Options |
|
| Weighted Average Remaining Contractual Life (in years) |
|
| Weighted Average Exercise Price |
|
| Aggregate Intrinsic Value |
|
| Options |
|
| Weighted Average Remaining Contractual Life (in years) |
|
| Weighted Average Exercise Price |
|
| Aggregate Intrinsic Value |
| ||||||||
$40.00 - $60.00 |
|
| 14,838 |
|
|
| 1.1 |
|
| $ | 41.52 |
|
| $ | 0.9 |
|
|
| 14,838 |
|
|
| 1.1 |
|
| $ | 41.52 |
|
| $ | 0.9 |
|
$60.01 - $80.00 |
|
| 201,069 |
|
|
| 6.0 |
|
|
| 66.28 |
|
|
| 7.3 |
|
|
| 122,137 |
|
|
| 5.2 |
|
|
| 66.40 |
|
|
| 4.4 |
|
$80.01 - $100.00 |
|
| 255,769 |
|
|
| 7.6 |
|
|
| 89.25 |
|
|
| 3.3 |
|
|
| 114,074 |
|
|
| 6.9 |
|
|
| 87.97 |
|
|
| 1.6 |
|
|
|
| 471,676 |
|
|
| 6.7 |
|
|
| 77.96 |
|
| $ | 11.5 |
|
|
| 251,049 |
|
|
| 5.7 |
|
|
| 74.73 |
|
| $ | 6.9 |
|
The aggregate intrinsic values in the tables above represent the total pre-tax intrinsic value (difference between the Company’s closing stock price on the last trading day of fiscal 2021 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on September 30, 2021. This amount changes based on the fair market value of the Company’s Common Stock.
The total intrinsic value of options exercised for fiscal 2021, 2020 and 2019 was $22.6 million, $18.5 million and $10.2 million, respectively. The actual income tax benefit realized totaled $3.5 million, $4.3 million and $2.4 million for those same periods.
As of September 30, 2021, total unrecognized compensation cost related to outstanding stock options was $0.7 million, net of estimated forfeitures, which the Company expects to be recognized over a weighted-average period of 1.1 years.
The Company uses the Black-Scholes valuation model to value stock options utilizing the following weighted-average assumptions:
|
| Fiscal Year Ended September 30, |
| |||||
Options Granted During |
| 2020 |
|
| 2019 |
| ||
Assumptions: |
|
|
|
|
|
|
|
|
Expected term (in years) |
|
| 5.4 |
|
|
| 5.4 |
|
Expected volatility |
|
| 34.10 | % |
|
| 33.40 | % |
Risk-free interest rate |
|
| 1.63 | % |
|
| 2.87 | % |
Expected dividend yield |
|
| 1.37 | % |
|
| 1.50 | % |
The expected option term represents the period of time that the options granted are expected to be outstanding and was based on historical experience. The Company used its historical stock prices over the expected term as the basis for the Company’s volatility assumption. The assumed risk-free interest rates were based on five-year U.S. Treasury rates in effect
at the time of grant. The expected dividend yield was based on average actual yield on the ex-dividend date. The weighted-average per share grant date fair values for stock option grants during fiscal 2020 and 2019 were $26.16 and $20.00, respectively.
Stock Awards — A summary of the Company’s stock award activity is as follows:
|
| Fiscal Year Ended September 30, |
| |||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||||||||||||||
|
| Number of Shares |
|
| Weighted- Average Grant Date Fair Value |
|
| Number of Shares |
|
| Weighted- Average Grant Date Fair Value |
|
| Number of Shares |
|
| Weighted- Average Grant Date Fair Value |
| ||||||
Nonvested, beginning of year |
|
| 346,808 |
|
| $ | 79.44 |
|
|
| 411,510 |
|
| $ | 72.66 |
|
|
| 332,473 |
|
| $ | 69.15 |
|
Granted |
|
| 307,025 |
|
|
| 82.80 |
|
|
| 183,725 |
|
|
| 87.82 |
|
|
| 278,175 |
|
|
| 69.98 |
|
Forfeited |
|
| (36,545 | ) |
|
| 78.81 |
|
|
| (27,076 | ) |
|
| 80.57 |
|
|
| (13,610 | ) |
|
| 71.17 |
|
Vested |
|
| (222,400 | ) |
|
| 80.39 |
|
|
| (221,351 | ) |
|
| 73.64 |
|
|
| (185,528 | ) |
|
| 62.47 |
|
Nonvested, end of year |
|
| 394,888 |
|
|
| 81.58 |
|
|
| 346,808 |
|
|
| 79.44 |
|
|
| 411,510 |
|
|
| 72.66 |
|
The total fair value of shares vested during fiscal 2021, 2020 and 2019 was $21.0 million, $18.6 million and $12.3 million, respectively. The actual income tax benefit realized totaled $2.0 million, $3.1 million and $2.1 million for those same periods.
As of September 30, 2021, total unrecognized compensation cost related to stock awards was $11.6 million, net of estimated forfeitures, which the Company expects to be recognized over a weighted-average period of 2.0 years.
Performance Share Awards — A summary of the Company’s performance share awards activity is as follows:
|
| Fiscal Year Ended September 30, |
| |||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||||||||||||||
|
| Number of Shares |
|
| Weighted- Average Grant Date Fair Value |
|
| Number of Shares |
|
| Weighted- Average Grant Date Fair Value |
|
| Number of Shares |
|
| Weighted- Average Grant Date Fair Value |
| ||||||
Nonvested, beginning of year |
|
| 110,450 |
|
| $ | 89.54 |
|
|
| 124,750 |
|
| $ | 84.10 |
|
|
| 98,375 |
|
| $ | 89.11 |
|
Granted |
|
| 86,550 |
|
|
| 86.09 |
|
|
| 55,325 |
|
|
| 109.09 |
|
|
| 73,950 |
|
|
| 74.70 |
|
Forfeited |
|
| (52,099 | ) |
|
| 90.03 |
|
|
| (16,615 | ) |
|
| 92.88 |
|
|
| (1,600 | ) |
|
| 93.92 |
|
Performance adjustments |
|
| 63,843 |
|
|
| 80.45 |
|
|
| 33,941 |
|
|
| 87.44 |
|
|
| 31,768 |
|
|
| 71.43 |
|
Vested |
|
| (136,269 | ) |
|
| 80.73 |
|
|
| (86,951 | ) |
|
| 92.73 |
|
|
| (77,743 | ) |
|
| 76.12 |
|
Nonvested, end of year |
|
| 72,475 |
|
|
| 93.62 |
|
|
| 110,450 |
|
|
| 89.54 |
|
|
| 124,750 |
|
|
| 84.10 |
|
Performance share awards generally vest over a three-year service period following the grant date. Performance shares vest under two separate measurement criteria. The first type vest only if the Company’s total shareholder return (TSR) over the three year term of the awards compares favorably to that of a comparator group of companies. The second type vest only if the Company’s return on invested capital (ROIC) over the vesting period compares favorably to that of a comparator group of companies. Potential payouts range from 0 to 200% of the target awards and changes from target amounts are reflected as performance adjustments. Actual payouts for TSR performance share awards vesting in fiscal 2021, 2020 and 2019 were 185%, 111% and 126% of target levels, respectively. Actual payout for the ROIC performance share award vesting in fiscal 2021, 2020 and 2019 were 200%, 200%, and 200% of target levels. In October 2021, 55,819 shares of Common Stock were issued from treasury for unpaid performance shares that vested in fiscal 2021.
The total fair value of performance shares vested during fiscal 2021, 2020 and 2019 was $15.4 million, $6.9 million and $5.8 million, respectively. The actual income tax benefit realized totaled $0.5 million, $0.2 million and $1.4 million for the same periods.
As of September 30, 2021, the Company had $5.3 million of unrecognized compensation expense related to performance share awards, which will be recognized over a weighted-average period of 1.9 years.
The grant date fair values of the TSR performance share awards were estimated using a Monte Carlo simulation model utilizing the following weighted-average assumptions:
|
| Fiscal Year Ended September 30, |
| |||||||||
Total Shareholder Return Performance Shares Granted During |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Assumptions: |
|
|
|
|
|
|
|
|
|
|
|
|
Expected term (in years) |
|
| 2.87 |
|
|
| 2.87 |
|
|
| 2.86 |
|
Expected volatility |
|
| 40.33 | % |
|
| 31.16 | % |
|
| 32.72 | % |
Risk-free interest rate |
|
| 0.23 | % |
|
| 1.59 | % |
|
| 2.80 | % |
The Company used its historical stock prices as the basis for the Company’s volatility assumption. The assumed risk-free interest rates were based on U.S. Treasury rates in effect at the time of grant. The expected term was based on the vesting period. The weighted-average fair value used to record compensation expense for TSR performance share awards granted during fiscal 2021, 2020 and 2019 was $94.86, $137.74 and $85.89 per award, respectively.
The grant date fair value of the ROIC awards were determined based on the Company’s stock price at the time of the grant and the anticipated awards expected to vest. Compensation expense is recorded ratably over the vesting period based on the amount of award that is expected to be earned under the plan formula, adjusted each reporting period based on current information.
Cash-Settled Stock Appreciation Rights — The Company did 0t grant employees any cash-settled SARs in fiscal 2021. In fiscal 2020 and 2019, the Company granted employees 14,875 and 18,250 cash-settled SARs, respectively. Each SAR award represents the right to receive cash equal to the excess of the per share price of the Company’s Common Stock on the date that a participant exercises such right over the grant date price of the Company’s Common Stock. Compensation cost for SARs is remeasured at each reporting period based on the estimated fair value on the date of grant using the Black Scholes option-pricing model, utilizing assumptions similar to stock option awards and is recognized as an expense over the requisite service period. The total value of SARs exercised during fiscal 2021, 2020 and 2019 was $0.5 million, $0.7 million and $0.6 million, respectively.
Cash-Settled Restricted Stock Units — In fiscal 2021, 2020 and 2019 the Company granted employees 14,550, 7,925 and 8,350 cash-settled RSUs, respectively. Each RSU award provides recipients the right to receive cash equal to the value of a share of the Company’s Common Stock at predetermined vesting dates. Compensation cost for RSUs is remeasured at each reporting period and is recognized as an expense over the requisite service period. The total value of RSUs vested during fiscal 2021, 2020 and 2019 was $0.7 million, $0.8 million and $0.4 million, respectively.
5. Employee Benefit Plans
Defined Benefit Plans — Oshkosh and certain of its subsidiaries sponsor multiple defined benefit pension plans for certain employees providing services to Oshkosh, Oshkosh Defense, Airport Products, Oshkosh Commercial and Pierce. The benefits provided are based primarily on average compensation, years of service and date of birth. Hourly plans are generally based on years of service and a benefit dollar multiplier. The Company periodically amends the plans, including changing the benefit dollar multipliers and other revisions. In December 2012, salaried participants in the pension plans no longer receive credit, other than for vesting purposes, for eligible earnings. In December 2013, the Pierce pension plan was amended to close participation in the plan for new production employees. In October 2016, the Oshkosh Defense hourly defined benefit pension plan was closed to new production employees. The Company commenced a plan to terminate its defined benefit plan for salaried participants. As a result, the plan is being presented on a liquidation basis in fiscal 2021.
Determination of defined benefit pension and postretirement plan obligations and their associated expenses requires the use of actuarial valuations to estimate the benefits that employees earn while working, as well as the present value of those benefits. The Company uses the services of independent actuaries to assist with these calculations. The Company determines the discount rate used each year based on the rate of return currently evaluatingavailable on a portfolio of high-quality fixed-income investments with a maturity that is consistent with the projected benefit payout period. The Company’s long-term rate of return on assets is based on consideration of historical and forward-looking returns and the current asset allocation strategy.
Supplemental Executive Retirement Plans (SERP) — The Company maintains defined benefit and defined contribution SERPs for certain executive officers of Oshkosh and its subsidiaries. In fiscal 2013, the Oshkosh defined benefit SERP was amended to freeze benefits under the plan and certain executive officers became eligible for the new Oshkosh defined contribution SERP. At the same time, the Company established the Trust to fund obligations under the Oshkosh SERPs. As of September 30, 2021, the Trust held assets of $21.3 million. The Trust assets are subject to claims of the Company’s creditors. The Trust assets are included in “Other current assets” and “Other long-term assets” in the Consolidated Balance Sheets. The Company recognized $2.6 million, $1.6 million and $1.6 million of expense under the Oshkosh defined contribution SERP in fiscal 2021, 2020 and 2019, respectively.
Postretirement Medical Plans — Oshkosh and certain of its subsidiaries sponsor multiple postretirement benefit plans for Oshkosh Defense, JLG, and Kewaunee hourly employees, retirees and their spouses. The plans generally provide health benefits based on years of service and date of birth. These plans are unfunded.
Changes in benefit obligations and plan assets, as well as the funded status of the Company’s defined benefit pension plans and postretirement benefit plans as of and for the fiscal years ended September 30, 2021 and 2020, were as follows (in millions):
|
|
|
|
|
|
|
|
|
| Postretirement |
| |||||
|
| Pension Benefits |
|
| Health and Other |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Accumulated benefit obligation at September 30 |
| $ | 594.2 |
|
| $ | 601.1 |
|
| $ | 53.3 |
|
| $ | 53.3 |
|
Change in projected benefit obligation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at October 1 |
| $ | 613.6 |
|
| $ | 546.5 |
|
| $ | 53.3 |
|
| $ | 51.4 |
|
Service cost |
|
| 11.5 |
|
|
| 10.1 |
|
|
| 2.2 |
|
|
| 3.5 |
|
Interest cost |
|
| 16.4 |
|
|
| 17.1 |
|
|
| 1.2 |
|
|
| 1.6 |
|
Actuarial loss (gain) |
|
| (22.6 | ) |
|
| 44.0 |
|
|
| (1.1 | ) |
|
| 5.4 |
|
Plan amendments |
|
| — |
|
|
| 9.8 |
|
|
| — |
|
|
| (6.5 | ) |
Benefits paid |
|
| (16.4 | ) |
|
| (15.8 | ) |
|
| (2.3 | ) |
|
| (2.1 | ) |
Currency translation adjustments |
|
| 1.7 |
|
|
| 1.9 |
|
|
| — |
|
|
| — |
|
Benefit obligation at September 30 |
| $ | 604.2 |
|
| $ | 613.6 |
|
| $ | 53.3 |
|
| $ | 53.3 |
|
Change in plan assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at October 1 |
| $ | 437.3 |
|
| $ | 408.9 |
|
| $ | — |
|
| $ | — |
|
Actual return on plan assets |
|
| 71.3 |
|
|
| 35.4 |
|
|
| — |
|
|
| — |
|
Company contributions |
|
| 25.2 |
|
|
| 11.4 |
|
|
| 2.3 |
|
|
| 2.1 |
|
Expenses paid |
|
| (2.9 | ) |
|
| (4.3 | ) |
|
| — |
|
|
| — |
|
Benefits paid |
|
| (16.4 | ) |
|
| (15.8 | ) |
|
| (2.3 | ) |
|
| (2.1 | ) |
Currency translation adjustments |
|
| 1.4 |
|
|
| 1.7 |
|
|
| — |
|
|
| — |
|
Fair value of plan assets at September 30 |
| $ | 515.9 |
|
| $ | 437.3 |
|
| $ | — |
|
| $ | — |
|
Funded status of plan - underfunded at September 30 |
| $ | (88.3 | ) |
| $ | (176.3 | ) |
| $ | (53.3 | ) |
| $ | (53.3 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized in consolidated balance sheet at September 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid benefit cost (long-term asset) |
| $ | 2.1 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Accrued benefit liability (current liability) |
|
| (2.0 | ) |
|
| (1.9 | ) |
|
| (2.4 | ) |
|
| (2.5 | ) |
Accrued benefit liability (long-term liability) |
|
| (88.4 | ) |
|
| (174.4 | ) |
|
| (50.9 | ) |
|
| (50.8 | ) |
|
| $ | (88.3 | ) |
| $ | (176.3 | ) |
| $ | (53.3 | ) |
| $ | (53.3 | ) |
Recognized in accumulated other comprehensive income (loss) as of September 30 (net of taxes) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss |
| $ | (29.0 | ) |
| $ | (89.0 | ) |
| $ | (5.1 | ) |
| $ | (6.1 | ) |
Prior service (cost) benefit |
|
| (11.6 | ) |
|
| (13.4 | ) |
|
| 11.5 |
|
|
| 12.6 |
|
|
| $ | (40.6 | ) |
| $ | (102.4 | ) |
| $ | 6.4 |
|
| $ | 6.5 |
|
Weighted-average assumptions as of September 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
| 2.91 | % |
|
| 2.71 | % |
|
| 2.61 | % |
|
| 2.36 | % |
Expected return on plan assets |
|
| 4.46 | % |
|
| 4.89 | % |
| n/a |
|
| n/a |
| ||
Pension benefit plans with accumulated benefit obligations in excess of plan assets consisted of the following (in millions):
|
| September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Projected benefit obligation |
| $ | 565.7 |
|
| $ | 613.6 |
|
Accumulated benefit obligation |
|
| 555.7 |
|
|
| 601.1 |
|
Fair value of plan assets |
|
| 475.4 |
|
|
| 437.3 |
|
The components of net periodic benefit cost for fiscal years ended September 30 were as follows (in millions):
|
|
|
|
| Postretirement |
| ||||||||||||||||||
|
| Pension Benefits |
|
| Health and Other |
| ||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
| ||||||
Components of net periodic benefit cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
| $ | 11.5 |
|
| $ | 10.1 |
|
| $ | 9.1 |
|
| $ | 2.2 |
|
| $ | 3.5 |
|
| $ | 3.1 |
|
Interest cost |
|
| 16.4 |
|
|
| 17.1 |
|
|
| 18.7 |
|
|
| 1.2 |
|
|
| 1.6 |
|
|
| 1.9 |
|
Expected return on plan assets |
|
| (19.8 | ) |
|
| (20.6 | ) |
|
| (19.9 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Amortization of prior service cost (benefit) |
|
| 2.3 |
|
|
| 1.6 |
|
|
| 1.7 |
|
|
| (1.4 | ) |
|
| (0.9 | ) |
|
| (1.5 | ) |
Curtailment/settlement |
|
| — |
|
|
| 0.1 |
|
|
| 1.2 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Amortization of net actuarial loss (gain) |
|
| 4.9 |
|
|
| 3.3 |
|
|
| 0.2 |
|
|
| 0.3 |
|
|
| (0.2 | ) |
|
| (0.2 | ) |
Expenses paid |
|
| 3.0 |
|
|
| 4.0 |
|
|
| 2.5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Net periodic benefit cost |
| $ | 18.3 |
|
| $ | 15.6 |
|
| $ | 13.5 |
|
| $ | 2.3 |
|
| $ | 4.0 |
|
| $ | 3.3 |
|
Other changes in plan assets and benefit obligations recognized in other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss (gain) |
| $ | (74.1 | ) |
| $ | 29.4 |
|
| $ | 63.3 |
|
| $ | (1.1 | ) |
| $ | 5.5 |
|
| $ | 1.4 |
|
Prior service cost (benefit) |
|
| — |
|
|
| 9.8 |
|
|
| 0.2 |
|
|
| — |
|
|
| (6.5 | ) |
|
| — |
|
Amortization of prior service benefit (cost) |
|
| (2.3 | ) |
|
| (1.6 | ) |
|
| (1.7 | ) |
|
| 1.4 |
|
|
| 0.9 |
|
|
| 1.5 |
|
Amortization of net actuarial (loss) gain |
|
| (4.9 | ) |
|
| (3.3 | ) |
|
| (0.2 | ) |
|
| (0.3 | ) |
|
| 0.2 |
|
|
| 0.2 |
|
|
| $ | (81.3 | ) |
| $ | 34.3 |
|
| $ | 61.6 |
|
| $ | — |
|
| $ | 0.1 |
|
| $ | 3.1 |
|
Weighted-average assumptions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
| 2.71% |
|
| 3.17% |
|
|
| 4.18 | % |
| 2.36% |
|
| 3.10% |
|
|
| 4.20 | % | ||||
Expected return on plan assets |
| 4.89% |
|
| 5.49% |
|
|
| 5.50 | % |
| n/a |
|
| n/a |
|
| n/a |
| |||||
Components of net periodic benefit cost other than “Service cost” and “Expenses paid” are included in “Miscellaneous, net” in the Consolidated Statements of Income.
Amounts expected to be recognized in pension and supplemental employee retirement plan net periodic benefit costs during fiscal 2022 included in “Accumulated other comprehensive loss” in the Consolidated Balance Sheet at September 30, 2021 are prior service costs of $0.6 million ($0.4 million net of tax) and unrecognized net actuarial losses of $0.2 million ($0.2 million net of tax).
The Company’s Board of Directors has appointed an Investment Committee (Committee), which consists of members of management, to manage the investment of the Company’s pension plan assets. The Committee has established and operates under an Investment Policy. The Committee determines the asset allocation and target ranges based upon periodic asset/liability studies and capital market projections. The Committee retains external investment managers to invest the assets and an adviser to monitor the performance of the investment managers. The Investment Policy prohibits
certain investment transactions, such as commodity contracts, margin transactions, short selling and investments in Company securities, unless the Committee gives prior approval.
The weighted-average of the Company’s pension plan asset allocations and target allocations at September 30, 2021 by asset category, were as follows:
Target % | Actual | |||||
Asset Category | ||||||
Fixed income | 50% - 60% | 53 | % | |||
Large-cap equity | 15% - 25% | 22 | % | |||
Mid-cap equity | 5% - 15% | 11 | % | |||
Small-cap equity | 5% - 10% | 8 | % | |||
Global equity | 0% - 5% | 1 | % | |||
Other | 0% - 10% | 5 | % | |||
100 | % | |||||
The Company’s pension plan investment strategy is based on an expectation that, over time, equity securities will provide higher returns than debt securities. The plans primarily minimize the risk of larger losses under this strategy through diversification of investments by asset class, by investing in different styles of investment management within the classes and using a number of different investment managers. Beginning in fiscal 2016, the Company implemented a dynamic liability driven investment strategy for those pension plans with frozen benefits. The objective of this strategy is to more closely align the pension plan assets with the pension plan liabilities in terms of how both respond to changes in interest rates. Plan assets are allocated to two investment categories, including a category containing high quality fixed income securities and another category comprised of traditional securities and alternative asset classes. Assets are managed externally according to guidelines approved by the Company. Over time, the Company is reducing assets allocated to the return seeking category and correspondingly increasing assets allocated to the high quality fixed income category to align assets more closely with the pension plan obligations.
The plans’ expected return on assets is based on management’s and the Committee’s expectations of long-term average rates of return to be achieved by the plans’ investments. These expectations are based on the plans’ historical returns and expected returns for the asset classes in which the plans are invested.
The fair value of plan assets by major category and level within the fair value hierarchy was as follows (in millions):
|
| Quoted Prices for Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total |
| ||||
September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stocks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. companies (a) |
| $ | 94.7 |
|
| $ | 7.6 |
|
| $ | — |
|
| $ | 102.3 |
|
International companies (b) |
|
| — |
|
|
| 13.9 |
|
|
| — |
|
|
| 13.9 |
|
Mutual funds (a) |
|
| 100.4 |
|
|
| — |
|
|
| — |
|
|
| 100.4 |
|
Government and agency bonds (c) |
|
| — |
|
|
| 12.7 |
|
|
| — |
|
|
| 12.7 |
|
Corporate bonds and notes (d) |
|
| — |
|
|
| 8.9 |
|
|
| — |
|
|
| 8.9 |
|
Money market funds (e) |
|
| 24.5 |
|
|
| — |
|
|
| — |
|
|
| 24.5 |
|
Other |
|
| — |
|
|
| — |
|
|
| 0.9 |
|
|
| 0.9 |
|
|
| $ | 219.6 |
|
| $ | 43.1 |
|
| $ | 0.9 |
|
|
| 263.6 |
|
Investments measured at net asset value (NAV) (f) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 252.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 515.9 |
|
September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stocks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. companies (a) |
| $ | 77.4 |
|
| $ | 8.1 |
|
| $ | — |
|
| $ | 85.5 |
|
International companies (b) |
|
| — |
|
|
| 13.5 |
|
|
| — |
|
|
| 13.5 |
|
Mutual funds (a) |
|
| 81.5 |
|
|
| — |
|
|
| — |
|
|
| 81.5 |
|
Government and agency bonds (c) |
|
| — |
|
|
| 7.7 |
|
|
| — |
|
|
| 7.7 |
|
Corporate bonds and notes (d) |
|
| — |
|
|
| 8.3 |
|
|
| — |
|
|
| 8.3 |
|
Money market funds (e) |
|
| 12.5 |
|
|
| — |
|
|
| — |
|
|
| 12.5 |
|
Other |
|
| — |
|
|
| — |
|
|
| 0.8 |
|
|
| 0.8 |
|
|
| $ | 171.4 |
|
| $ | 37.6 |
|
| $ | 0.8 |
|
|
| 209.8 |
|
Investments measured at net asset value (NAV) (f) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 227.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 437.3 |
|
(a) | Primarily valued using a market approach based on the quoted market prices of identical instruments that are actively traded on public exchanges. |
(b) | Valuation model looks at underlying security “best” price, exchange rate for underlying security’s currency against the U.S. dollar and ratio of underlying security to American depository receipt. |
(c) | These investments consist of debt securities issued by the U.S. Treasury, U.S. government agencies and U.S. government-sponsored enterprises and have a variety of structures, coupon rates and maturities. These investments are considered to have low default risk as they are guaranteed by the U.S. government. Fixed income securities are primarily valued using a market approach with inputs that include broker quotes, benchmark yields, base spreads and reported trades. |
(d) | These investments consist of debt obligations issued by a variety of private and public corporations. These are investment grade securities which historically have provided a steady stream of income. Fixed income securities are primarily valued using a market approach with inputs that include broker quotes, benchmark yields, base spreads and reported trades. |
(e) | These investments largely consist of short-term investment funds and are valued using a market approach based on the quoted market prices of identical instruments. |
(f) | These investments consist of privately placed funds that are valued based on NAV. NAV of the funds is based on the fair value of each fund’s underlying investments. In accordance with ASC Subtopic 820-10, certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. |
The following table sets forth additional disclosures for the fair value measurement of the fair value of pension plans assets that calculate fair value based on NAV per share practical expedient as of September 30, 2021 (in millions):
|
| Fair Value |
|
| Unfunded Commitments |
|
| Redemption Frequency (if Currently Eligible) |
| Redemption Notice Period (1) | ||
Common collective trust |
| $ | 252.3 |
|
| $ | — |
|
| N/A |
| 15 days |
(1) | Represents the maximum redemption period. A portion of the investment does not have any redemption period restrictions. |
The following table sets forth additional disclosures for the fair value measurement of the fair value of pension plans assets that calculate fair value based on NAV per share practical expedient as of September 30, 2020 (in millions):
|
| Fair Value |
|
| Unfunded Commitments |
|
| Redemption Frequency (if Currently Eligible) |
| Redemption Notice Period (1) | ||
Common collective trust |
| $ | 227.5 |
|
| $ | — |
|
| N/A |
| 15 days |
(1) | Represents the maximum redemption period. A portion of the investment does not have any redemption period restrictions. |
The Company’s policy is to fund the pension plans in amounts that comply with contribution limits imposed by law. The Company expects to make contributions of approximately $10.0 million to its pension plans in fiscal 2022.
The Company’s estimated future benefit payments under Company sponsored plans were as follows (in millions):
Fiscal Year Ending |
| Pension Benefits |
|
| Postretirement Health |
| ||||||
September 30, |
| Qualified |
|
| Non-Qualified |
|
| and Other |
| |||
2022 |
| $ | 16.9 |
|
| $ | 2.0 |
|
| $ | 2.4 |
|
2023 |
|
| 18.6 |
|
|
| 2.0 |
|
|
| 2.7 |
|
2024 |
|
| 20.2 |
|
|
| 2.0 |
|
|
| 3.2 |
|
2025 |
|
| 21.8 |
|
|
| 1.9 |
|
|
| 3.6 |
|
2026 |
|
| 23.3 |
|
|
| 2.0 |
|
|
| 4.2 |
|
2027-2031 |
|
| 133.8 |
|
|
| 10.0 |
|
|
| 21.2 |
|
Multi-Employer Pension Plans — The Company participates in the Boilermaker-Blacksmith National Pension Trust (Employer Identification Number 48-6168020), a multi-employer defined benefit pension plan related to collective bargaining employees at the Company’s Kewaunee facility. The Company’s contributions and pension benefits payable under the plan and the administration of the plan are determined by the terms of the related collective-bargaining agreement, which expires on May 1, 2022. The multi-employer plan poses different risks to the Company than single-employer plans in the following respects:
1. | The Company’s contributions to the multi-employer plan may be used to provide benefits to all participating employees of the program, including employees of other employers. |
2. | In the event that another participating employer ceases contributions to the multi-employer plan, the Company may be responsible for any unfunded obligations along with the remaining participating employers. |
3. | If the Company chooses to withdraw from the multi-employer plan, the Company may be required to pay a withdrawal liability based on the underfunded status of the plan at that time. |
As of March 31, 2021, the plan-certified zone status as defined by the Pension Protection Act of 2006 was Yellow and accordingly the plan has implemented a financial improvement plan. The Company’s contributions to the multi-employer plan did not exceed 5% of the total plan contributions for fiscal 2021, 2020 or 2019. The Company made contributions to the plan of $1.4 million, $1.5 million and $1.4 million in fiscal 2021, 2020 and 2019, respectively.
401(k) and Defined Contribution Pension Replacement Plans — The Company has defined contribution 401(k) plans for substantially all domestic employees. The plans allow employees to defer 2% to 100% of their income on a pre-tax basis. Each employee who elects to participate is eligible to receive Company matching contributions, which are based on employee contributions to the plans, subject to certain limitations. For pension replacement plans, the Company contributes between 2% and 6% of an employee’s base pay, depending on age. Amounts expensed for Company matching and discretionary contributions were $45.5 million, $39.5 million and $43.3 million in fiscal 2021, 2020 and 2019, respectively.
6. Income Taxes
Pre-tax income was taxed in the following jurisdictions (in millions):
|
| Fiscal Year Ended September 30, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Domestic |
| $ | 441.6 |
|
| $ | 429.7 |
|
| $ | 697.9 |
|
Foreign |
|
| 56.3 |
|
|
| 9.4 |
|
|
| 52.8 |
|
|
| $ | 497.9 |
|
| $ | 439.1 |
|
| $ | 750.7 |
|
Significant components of the provision for income taxes were as follows (in millions):
|
| Fiscal Year Ended September 30, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Allocated to Income Before Losses of Unconsolidated Affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
| $ | (94.7 | ) |
| $ | 70.1 |
|
| $ | 140.9 |
|
Foreign |
|
| 8.5 |
|
|
| 8.2 |
|
|
| (0.2 | ) |
State |
|
| 22.8 |
|
|
| 12.1 |
|
|
| 20.2 |
|
Total current |
|
| (63.4 | ) |
|
| 90.4 |
|
|
| 160.9 |
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
| 108.1 |
|
|
| 14.3 |
|
|
| 2.1 |
|
Foreign |
|
| (5.6 | ) |
|
| 9.7 |
|
|
| 7.3 |
|
State |
|
| (13.9 | ) |
|
| (1.6 | ) |
|
| 1.0 |
|
Total deferred |
|
| 88.6 |
|
|
| 22.4 |
|
|
| 10.4 |
|
|
| $ | 25.2 |
|
| $ | 112.8 |
|
| $ | 171.3 |
|
Allocated to Other Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred federal, state and foreign |
| $ | (20.0 | ) |
| $ | 8.8 |
|
| $ | (14.9 | ) |
The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax expense was:
|
| Fiscal Year Ended September 30, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Effective Rate Reconciliation |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal tax rate |
|
| 21.0 | % |
|
| 21.0 | % |
|
| 21.0 | % |
State income taxes, net |
|
| 2.2 | % |
|
| 2.8 | % |
|
| 2.5 | % |
Foreign taxes |
|
| 1.7 | % |
|
| 0.8 | % |
|
| -0.2 | % |
Tax audit settlements |
|
| -1.0 | % |
|
| 0 | % |
|
| 0 | % |
Valuation allowance |
|
| -1.3 | % |
|
| 3.3 | % |
|
| -0.1 | % |
Domestic tax credits |
|
| -2.5 | % |
|
| -3.2 | % |
|
| -1.0 | % |
Foreign-derived intangible income deduction |
|
| 0 | % |
|
| -0.4 | % |
|
| -1.0 | % |
Mandatory repatriation tax - U.S. Tax Reform |
|
| 0 | % |
|
| 0 | % |
|
| 0.7 | % |
CARES Act net operating loss carryback |
|
| -15.1 | % |
|
| 0 | % |
|
| 0 | % |
Other, net |
|
| 0.1 | % |
|
| 1.4 | % |
|
| 0.9 | % |
|
|
| 5.1 | % |
|
| 25.7 | % |
|
| 22.8 | % |
Under U.S. Internal Revenue Service (IRS) procedures, a taxpayer can change automatic tax accounting methods without explicit prior IRS consent, but they are generally required to maintain the new tax accounting method for five years. In 2019, acknowledging that taxpayers may require multiple tax accounting method changes associated with the implementation of the Tax Cuts and Jobs Act of 2017 (Tax Reform Act), the IRS waived the five-year “eligibility rule” for certain tax accounting method changes for the first three years ending on or after November 20, 2018. Citing a need to help companies impacted by the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) allows a taxpayer to carryback net operating losses generated in years beginning after December 31, 2017 and before January 1, 2021 for five years.
In fiscal 2021, the Company implemented a plan to make certain tax accounting method changes and change the timing of certain deductible payments. The plan generated a fiscal 2021 net operating loss of approximately $800 million. The Company was able to carryback the net operating loss to prior tax years with higher federal statutory rates. The Company’s effective tax rate for fiscal 2021 reflects a discrete tax benefit of $75.3 million related to this plan. Certain tax positions taken to implement the plan are highly complex and subject to judgmental estimates. The Company recorded a liability for unrecognized tax benefits of $13.6 million reflecting the uncertainty of those tax positions, of which $3.7 million impacted the Company’s provision for income taxes.
During fiscal 2021, the Company recorded net discrete tax benefits of $96.0 million, which included a discrete tax benefit of $75.3 million as a result of the net operating losses (NOL) carrybacks and a discrete benefit of $11.7 million related to the release of a valuation allowance against certain foreign net deferred tax assets in Europe. During fiscal 2020, the Company recorded net discrete tax charges of $8.0 million, which included a valuation allowance against certain foreign net deferred tax assets in Europe of $11.4 million, offset in part by benefits related to excess tax deductions from share-based compensation. During fiscal 2019, the Company recorded discrete tax charges of $1.9 million, which included charges related to new tax legislation in the United States, offset in part by benefits related to excess tax deductions from share-based compensation, provision to return adjustments for federal, state, and foreign jurisdictions and tax reserve releases due to expiration of statutes of limitations and other resolutions.
The Tax Reform Act contains a provision that requires recognition of revenue for tax purposes no later than when recognized in an audited financial statement. The Company determined that revenue from the sale of goods under U.S. defense production contracts was not required to be recognized under this provision until customer acceptance. The Company filed its fiscal 2019 tax returns on this basis and originally intended to file its fiscal 2020 tax returns on this basis. The U.S. Treasury Department released regulations in January 2021 providing for a method to defer a portion of the revenue that would otherwise be recognized under the provision of the Tax Reform Act. The Company intends to early apply the regulations for purposes of its fiscal 2021 tax returns and adopt this revenue deferral method. In addition, the Company changed its position regarding the realization of revenue under U.S. production contracts and filed its fiscal 2020 tax returns following the provision of the Tax Reform Act and intends to similarly amend its fiscal 2019 tax returns. The deferred taxes and noncurrent liabilities on the balance sheet for the position intended to be taken on the fiscal 2020 tax returns have been reversed. The Company has recorded an accrual to the income tax payable for tax due with the amended fiscal 2019 tax returns including estimated interest charges by the IRS.
Deferred income tax assets and liabilities were comprised of the following (in millions):
|
| September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Deferred tax assets: |
|
|
|
|
|
|
|
|
Other long-term liabilities |
| $ | 57.3 |
|
| $ | 127.0 |
|
Losses and credits |
|
| 61.5 |
|
|
| 34.8 |
|
Accrued warranty |
|
| 16.3 |
|
|
| 15.8 |
|
Other current liabilities |
|
| 24.5 |
|
|
| 17.7 |
|
Payroll-related obligations |
|
| 26.2 |
|
|
| 18.5 |
|
Other |
|
| 8.9 |
|
|
| 6.0 |
|
Gross deferred tax assets |
|
| 194.7 |
|
|
| 219.8 |
|
Less valuation allowance |
|
| (6.2 | ) |
| �� | (17.4 | ) |
Deferred tax assets, net |
|
| 188.5 |
|
|
| 202.4 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Intangible assets |
|
| (51.6 | ) |
|
| (42.2 | ) |
Property, plant and equipment |
|
| (143.9 | ) |
|
| (55.9 | ) |
Inventories |
|
| (18.0 | ) |
|
| (18.6 | ) |
Other |
|
| (40.6 | ) |
|
| (7.1 | ) |
Deferred tax liabilities |
|
| (254.1 | ) |
|
| (123.8 | ) |
Net deferred tax asset (liability) |
| $ | (65.6 | ) |
| $ | 78.6 |
|
The net deferred tax asset is classified in the Consolidated Balance Sheets as follows (in millions):
|
| September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Long-term net deferred tax asset |
| $ | 8.3 |
|
| $ | 78.6 |
|
Long-term net deferred tax liability |
|
| (73.9 | ) |
|
| — |
|
Net deferred tax asset (liability) |
| $ | (65.6 | ) |
| $ | 78.6 |
|
As of September 30, 2021, the Company had $17.7 million of net operating loss carryforwards available to reduce future taxable income of certain foreign subsidiaries in countries which allow such losses to be carried forward anywhere from seven years to an unlimited period. In addition, the Company had $40.4 billion of state net operating loss carryforwards, which can be carried forward anywhere from five years to an unlimited period and state credit carryforwards of $28.9 million, which are subject to expiration in 2027 to 2036. Deferred tax assets for foreign net operating loss carryforwards, state net operating loss carryforwards, state credit carryforwards and foreign tax credit carryforwards were $4.5 million, $30.7 million, $19.8 million and $6.4 million, respectively. Amounts are reviewed for recoverability based on historical taxable income, the expected reversals of existing temporary differences, tax-planning strategies and projections of future taxable income. The Company maintains a valuation allowance against foreign deferred tax assets of $0.8 million and foreign tax credit deferred tax assets of $5.4 million as of September 30, 2021.
At September 30, 2021, the Company had undistributed earnings of $380.4 million from its investment in non-U.S. subsidiaries. The Company has not recognized deferred tax liabilities for temporary differences related to the Company’s foreign operations as the Company considers that its undistributed earnings are intended to be indefinitely reinvested. Should the Company’s undistributed earnings from its investment in non-U.S. subsidiaries be distributed in the future in the form of dividends or otherwise, the Company may be subject to foreign and domestic income taxes and withholding taxes estimated at $22.4 million, including the impact of ASU 2017-07 on the Company's consolidated financial statements.
On August 2017,21, 2020, the FASB issued ASU 2017-12,
The Company has analyzed the tax regulations and concluded that the U.S. Treasury Department exceeded regulatory authority and that the temporary tax regulations are contrary to the congressional intent of the hedging instrumentunderlying statute. The Company believes it has strong arguments in favor of its position and that it has met the hedged itemmore likely than not recognition threshold that its position will be sustained. The Company intends to vigorously defend its position, however, due to the uncertainty involved in challenging the validity of regulations as well as a potential litigation process, there can be no assurances that the temporary tax regulations will be invalidated, modified or that a court of law will rule in favor of the Company. An unfavorable resolution of this issue would result in $18.4 million of tax liability which is included in the financial statements.$22.4 million disclosed withholding tax above. The payment of such liability would only occur if the undistributed earnings were distributed.
A reconciliation of gross unrecognized tax benefits, excluding interest and penalties, was as follows (in millions):
|
| Fiscal Year Ended September 30, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Balance at beginning of year |
| $ | 79.8 |
|
| $ | 97.3 |
|
| $ | 33.7 |
|
Additions for tax positions related to current year |
|
| 15.8 |
|
|
| 46.2 |
|
|
| 63.3 |
|
Additions for tax positions related to prior years |
|
| 0.6 |
|
|
| 1.4 |
|
|
| 5.4 |
|
Reductions for tax positions related to prior years |
|
| (46.0 | ) |
|
| (61.8 | ) |
|
| (0.8 | ) |
Settlements |
|
| — |
|
|
| (1.3 | ) |
|
| (0.9 | ) |
Lapse of statutes of limitations |
|
| (4.2 | ) |
|
| (2.0 | ) |
|
| (3.4 | ) |
Balance at end of year |
| $ | 46.0 |
|
| $ | 79.8 |
|
| $ | 97.3 |
|
As of September 30, 2021, net unrecognized tax benefits of $21.9 million would affect the Company’s effective tax rate if recognized. The Company will be requiredrecognizes accrued interest and penalties, if any, related to adopt ASU 2017-12unrecognized tax benefits in the “Provision for income taxes” in the Consolidated Statements of Income. During fiscal 2021, 2020 and 2019, the Company recognized expense of $0.7 million, $1.3 million and $0.1 million related to interest and penalties, respectively. At September 30, 2021 and 2020, the Company had accruals for the payment of interest and penalties of $6.4 million and $5.7 million, respectively. During fiscal 2022, it is reasonably possible that federal, state and foreign tax audit resolutions could reduce unrecognized tax benefits by approximately $2.8 million, either because the Company’s tax positions are sustained on audit, because the Company agrees to their disallowance or the statute of limitations closes. In addition to the interest related to uncertain tax positions, the Company recognized net interest income of $1.6 million related to federal income tax refunds in fiscal 2021.
The Company files federal income tax returns, as of October 1, 2020. Early adoption is permitted.well as multiple state, local and non-U.S. jurisdiction tax returns. The Company is currently evaluatingregularly audited by federal, state and foreign tax authorities. As of September 30, 2021, tax years open for examination under applicable statutes were as follows:
Tax Jurisdiction | Open Tax Years | |
Australia | 2016 - 2021 | |
Belgium | 2019 - 2021 | |
Brazil | 2016 - 2021 | |
Canada | 2017 - 2021 | |
China | 2016 - 2021 | |
Mexico | 2017 - 2021 | |
Romania | 2016 - 2021 | |
Netherlands | 2015 - 2021 | |
United Kingdom | 2019 - 2021 | |
Other Non-U.S. Countries | 2015 - 2021 | |
United States (federal general) | 2018 - 2021 | |
United States (state and local) | 2007 - 2021 |
7. Earnings Per Share
The reconciliation of basic weighted-average shares outstanding to diluted weighted-average shares outstanding was as follows:
|
| Fiscal Year Ended September 30, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Basic weighted-average common shares outstanding |
|
| 68,482,363 |
|
|
| 68,149,324 |
|
|
| 69,819,980 |
|
Dilutive stock options and other equity-based compensation awards |
|
| 726,388 |
|
|
| 638,405 |
|
|
| 738,255 |
|
Diluted weighted-average common shares outstanding |
|
| 69,208,751 |
|
|
| 68,787,729 |
|
|
| 70,558,235 |
|
Options not included in the impactcomputation of ASU 2017-12 on the Company's consolidated financial statements.
|
| Fiscal Year Ended September 30, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Stock options |
|
| 121,274 |
|
|
| 581,634 |
|
|
| 506,207 |
|
8. Receivables
Receivables consisted of the following (in millions):
|
| September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Trade receivables - U.S. government |
| $ | 133.5 |
|
| $ | 105.8 |
|
Trade receivables - other |
|
| 849.2 |
|
|
| 734.0 |
|
Finance receivables |
|
| 6.4 |
|
|
| 18.8 |
|
Other receivables |
|
| 39.3 |
|
|
| 17.1 |
|
|
|
| 1,028.4 |
|
|
| 875.7 |
|
Less allowance for doubtful accounts |
|
| (3.6 | ) |
|
| (9.6 | ) |
|
| $ | 1,024.8 |
|
| $ | 866.1 |
|
| September 30, | |||||||
| 2017 | 2016 | ||||||
| U.S. government: | |||||||
| Amounts billed | $ | 137.8 | $ | 49.0 | |||
| Cost and profits not billed | 137.9 | 55.3 | |||||
| 275.7 | 104.3 | ||||||
| Other trade receivables | 985.4 | 881.8 | |||||
| Finance receivables | 5.8 | 7.6 | |||||
| Notes receivable | 34.2 | 36.1 | |||||
| Other receivables | 46.3 | 38.6 | |||||
| 1,347.4 | 1,068.4 | ||||||
| Less allowance for doubtful accounts | (18.3 | ) | (21.2 | ) | |||
| $ | 1,329.1 | $ | 1,047.2 | ||||
Classification of receivables in the Consolidated Balance Sheets consisted of the following (in millions):
|
| September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Current receivables |
| $ | 1,017.3 |
|
| $ | 857.6 |
|
Long-term receivables |
|
| 7.5 |
|
|
| 8.5 |
|
|
| $ | 1,024.8 |
|
| $ | 866.1 |
|
| September 30, | |||||||
| 2017 | 2016 | ||||||
| Current receivables | $ | 1,306.3 | $ | 1,021.9 | |||
| Long-term receivables (included in “Other long-term assets”) | 22.8 | 25.3 | |||||
| $ | 1,329.1 | $ | 1,047.2 | ||||
Finance and notes receivable accrual status consisted of the following (in millions):
|
| September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Receivables on nonaccrual status |
| $ | 0 |
|
| $ | 0.2 |
|
Receivables past due 90 days or more and still accruing |
|
| 0 |
|
|
| 0 |
|
Receivables subject to general reserves |
|
| 5.9 |
|
|
| 16.3 |
|
Allowance for doubtful accounts |
|
| (0.1 | ) |
|
| (0.4 | ) |
Receivables subject to specific reserves |
|
| 0.5 |
|
|
| 2.5 |
|
Allowance for doubtful accounts |
|
| (0.5 | ) |
|
| (2.3 | ) |
| September 30, | |||||||||||||||
| Finance Receivables | Notes Receivables | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Aging of receivables that are past due: | |||||||||||||||
| Greater than 30 days and less than 60 days | $ | — | $ | — | $ | — | $ | — | |||||||
| Greater than 60 days and less than 90 days | — | — | — | — | |||||||||||
| Greater than 90 days | 2.1 | 2.9 | 0.2 | — | |||||||||||
| Receivables on nonaccrual status | 3.7 | 4.5 | 21.3 | 25.1 | |||||||||||
| Receivables past due 90 days or more and still accruing | — | — | — | — | |||||||||||
| Receivables subject to general reserves | 2.1 | 3.1 | — | — | |||||||||||
| Allowance for doubtful accounts | — | (0.1 | ) | — | — | ||||||||||
| Receivables subject to specific reserves | 3.7 | 4.5 | 34.2 | 36.1 | |||||||||||
| Allowance for doubtful accounts | (1.5 | ) | (0.9 | ) | (10.0 | ) | (13.0 | ) | |||||||
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.receivables. Modifications generally consist of restructured payment terms and time-frames in which no payments are required. At
Changes in the Company’s allowance for doubtful accounts by type of receivable were as follows (in millions):
|
| Fiscal Year Ended September 30, 2021 |
| |||||||||||||
|
| Finance Receivables |
|
| Notes Receivable |
|
| Trade and Other Receivables |
|
| Total |
| ||||
Allowance for doubtful accounts at beginning of year |
| $ | 2.7 |
|
| $ | — |
|
| $ | 6.9 |
|
| $ | 9.6 |
|
Provision for doubtful accounts, net of recoveries |
|
| (2.1 | ) |
|
| — |
|
|
| (3.4 | ) |
|
| (5.5 | ) |
Charge-off of accounts |
|
| — |
|
|
| — |
|
|
| (0.5 | ) |
|
| (0.5 | ) |
Allowance for doubtful accounts at end of year |
| $ | 0.6 |
|
| $ | — |
|
| $ | 3.0 |
|
| $ | 3.6 |
|
|
| Fiscal Year Ended September 30, 2020 |
| |||||||||||||
|
| Finance Receivables |
|
| Notes Receivable |
|
| Trade and Other Receivables |
|
| Total |
| ||||
Allowance for doubtful accounts at beginning of year |
| $ | 2.2 |
|
| $ | 0.4 |
|
| $ | 8.7 |
|
| $ | 11.3 |
|
Provision for doubtful accounts, net of recoveries |
|
| 0.5 |
|
|
| — |
|
|
| (1.1 | ) |
|
| (0.6 | ) |
Charge-off of accounts |
|
| — |
|
|
| (0.4 | ) |
|
| (0.7 | ) |
|
| (1.1 | ) |
Allowance for doubtful accounts at end of year |
| $ | 2.7 |
|
| $ | — |
|
| $ | 6.9 |
|
| $ | 9.6 |
|
| Fiscal Year Ended September 30, 2017 | |||||||||||||||
Finance Receivables | Notes Receivable | Trade and Other Receivables | Total | ||||||||||||
| Allowance for doubtful accounts at beginning of year | $ | 1.0 | $ | 13.0 | $ | 7.2 | $ | 21.2 | |||||||
| Provision for doubtful accounts, net of recoveries | 1.4 | (1.3 | ) | 0.7 | 0.8 | ||||||||||
| Charge-off of accounts | (0.9 | ) | (2.2 | ) | (1.1 | ) | (4.2 | ) | |||||||
| Foreign currency translation | — | 0.5 | — | 0.5 | |||||||||||
| Allowance for doubtful accounts at end of year | $ | 1.5 | $ | 10.0 | $ | 6.8 | $ | 18.3 | |||||||
| Fiscal Year Ended September 30, 2016 | |||||||||||||||
Finance Receivables | Notes Receivable | Trade and Other Receivables | Total | ||||||||||||
| Allowance for doubtful accounts at beginning of year | $ | 0.1 | $ | 12.7 | $ | 7.5 | $ | 20.3 | |||||||
| Provision for doubtful accounts, net of recoveries | 0.9 | 1.3 | 0.5 | 2.7 | |||||||||||
| Charge-off of accounts | — | (1.0 | ) | (0.9 | ) | (1.9 | ) | ||||||||
| Foreign currency translation | — | — | 0.1 | 0.1 | |||||||||||
| Allowance for doubtful accounts at end of year | $ | 1.0 | $ | 13.0 | $ | 7.2 | $ | 21.2 | |||||||
9. Inventories
Inventories consisted of the following (in millions):
|
| September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Raw materials |
| $ | 873.5 |
|
| $ | 745.7 |
|
Partially finished products |
|
| 276.2 |
|
|
| 295.2 |
|
Finished products |
|
| 265.2 |
|
|
| 565.0 |
|
Inventories at FIFO cost |
|
| 1,414.9 |
|
|
| 1,605.9 |
|
Excess of FIFO cost over LIFO cost |
|
| (147.5 | ) |
|
| (100.5 | ) |
|
| $ | 1,267.4 |
|
| $ | 1,505.4 |
|
| September 30, | |||||||
| 2017 | 2016 | ||||||
| Raw materials | $ | 578.1 | $ | 481.2 | |||
| Partially finished products | 336.6 | 307.8 | |||||
| Finished products | 398.1 | 286.9 | |||||
| Inventories at FIFO cost | 1,312.8 | 1,075.9 | |||||
| Less: Progress/performance-based payments on U.S. government contracts | (31.6 | ) | (17.8 | ) | |||
| Excess of FIFO cost over LIFO cost | (82.8 | ) | (78.3 | ) | |||
| $ | 1,198.4 | $ | 979.8 | ||||
Liquidation of previously established LIFO layers had a favorable impact on net income and diluted earnings per share of $9.5 million and $0.14 per share, respectively, in fiscal 2021. There were 0 material liquidations of previously established LIFO layers in fiscal 2020 or 2019.
10. Property, Plant and Equipment
Property, plant and equipment consisted of the following (in millions):
|
| September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Land and land improvements |
| $ | 71.4 |
|
| $ | 63.9 |
|
Buildings |
|
| 407.3 |
|
|
| 377.1 |
|
Machinery and equipment |
|
| 729.5 |
|
|
| 723.7 |
|
Software and related costs |
|
| 203.0 |
|
|
| 175.6 |
|
Equipment on operating lease to others |
|
| 18.8 |
|
|
| 21.7 |
|
Construction in progress |
|
| 37.1 |
|
|
| 35.0 |
|
|
|
| 1,467.1 |
|
|
| 1,397.0 |
|
Less accumulated depreciation |
|
| (871.2 | ) |
|
| (831.1 | ) |
|
| $ | 595.9 |
|
| $ | 565.9 |
|
| September 30, | |||||||
| 2017 | 2016 | ||||||
| Land and land improvements | $ | 58.5 | $ | 56.8 | |||
| Buildings | 298.5 | 283.4 | |||||
| Machinery and equipment | 652.2 | 597.3 | |||||
| Software and related costs | 149.6 | 147.4 | |||||
| Equipment on operating lease to others | 30.0 | 25.7 | |||||
| 1,188.8 | 1,110.6 | ||||||
| Less accumulated depreciation | (718.9 | ) | (658.5 | ) | |||
| $ | 469.9 | $ | 452.1 | ||||
Depreciation expense was $81.5$87.5 million $73.3(including $3.6 million of accelerated depreciation related to restructuring actions), $89.1 million (including $6.9 million of accelerated depreciation related to restructuring actions) and $64.9$76.7 million in fiscal 2017, 20162021, 2020 and 2015,2019, respectively. The Company recognized a long-lived asset impairment charge of $26.9 million during fiscal 2016. 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 to others at September 30, 20172021 and 20162020 was $21.6$15.4 million and $18.6$18.9 million, respectively.
11. Goodwill and Purchased Intangible Assets
As of July 1, 2017,2021, the Company performed its annual impairment review relative to goodwill and indefinite-lived intangible assets (principally non-amortizable trade names). The Company performed the valuation analysis with the assistance of a third-party valuation adviser. To derive the fair value of its reporting units, the Company utilized both the income and market approaches. For the annual impairment testing in the fourth quarter of fiscal
At July 1, 2017,2021, approximately 89%85% of the Company’s recorded goodwill and indefinite-lived purchased intangibles were concentrated within the JLG reporting unit in the access equipmentAccess Equipment segment. The impairment model assumes that the U.S. economy and construction spending will continue to improve over time. Assumptions utilized in the impairment analysis are highly judgmental. While the Company currently believes that an impairment of intangible assets at JLG is unlikely, events and conditions that could result in the impairment of intangibles at JLG include a sharp prolonged decline in economic conditions, significantly increased pricing pressure on JLG'sJLG’s margins or other factors leading to reductions in expected long-term sales or profitability at JLG. Based on the Company’s annual impairment review, the Company concluded that there was no0 impairment of goodwill.goodwill or indefinite-lived intangible assets. Changes in estimates or the application of alternative assumptions could have produced significantly different results.
The Company acquired Pratt Miller on January 19, 2021. See Note 1 of the Notes to Consolidated Financial Statements for additional information.
The following table presents changes in goodwill during fiscal
|
| Access Equipment |
|
| Defense |
|
| Fire & Emergency |
|
| Commercial |
|
| Total |
| |||||
Net goodwill at September 30, 2019 |
| $ | 868.8 |
|
| $ | — |
|
| $ | 106.1 |
|
| $ | 20.8 |
|
| $ | 995.7 |
|
Foreign currency translation |
|
| 13.8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13.8 |
|
Net goodwill at September 30, 2020 |
|
| 882.6 |
|
|
| — |
|
|
| 106.1 |
|
|
| 20.8 |
|
|
| 1,009.5 |
|
Foreign currency translation |
|
| (2.0 | ) |
|
| — |
|
|
| — |
|
|
| 0.1 |
|
|
| (1.9 | ) |
Acquisition |
|
| — |
|
|
| 44.4 |
|
|
| — |
|
|
| — |
|
|
| 44.4 |
|
Net goodwill at September 30, 2021 |
| $ | 880.6 |
|
| $ | 44.4 |
|
| $ | 106.1 |
|
| $ | 20.9 |
|
| $ | 1,052.0 |
|
Access Equipment | Fire & Emergency | Commercial | Total | ||||||||||||
| Net goodwill at September 30, 2015 | $ | 874.2 | $ | 106.1 | $ | 20.8 | $ | 1,001.1 | |||||||
| Foreign currency translation | 2.4 | — | — | 2.4 | |||||||||||
| Net goodwill at September 30, 2016 | 876.6 | 106.1 | 20.8 | 1,003.5 | |||||||||||
| Foreign currency translation | 9.3 | — | 0.2 | 9.5 | |||||||||||
| Net goodwill at September 30, 2017 | $ | 885.9 | $ | 106.1 | $ | 21.0 | $ | 1,013.0 | |||||||
The following table presents details of the Company’s goodwill allocated to the reportable segments (in millions):
|
| September 30, 2021 |
|
| September 30, 2020 |
| ||||||||||||||||||
|
| Gross |
|
| Accumulated Impairment |
|
| Net |
|
| Gross |
|
| Accumulated Impairment |
|
| Net |
| ||||||
Access Equipment |
| $ | 1,812.7 |
|
| $ | (932.1 | ) |
| $ | 880.6 |
|
| $ | 1,814.7 |
|
| $ | (932.1 | ) |
| $ | 882.6 |
|
Defense |
|
| 44.4 |
|
|
| — |
|
|
| 44.4 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Fire & Emergency |
|
| 108.1 |
|
|
| (2.0 | ) |
|
| 106.1 |
|
|
| 108.1 |
|
|
| (2.0 | ) |
|
| 106.1 |
|
Commercial |
|
| 188.5 |
|
|
| (167.6 | ) |
|
| 20.9 |
|
|
| 196.7 |
|
|
| (175.9 | ) |
|
| 20.8 |
|
|
| $ | 2,153.7 |
|
| $ | (1,101.7 | ) |
| $ | 1,052.0 |
|
| $ | 2,119.5 |
|
| $ | (1,110.0 | ) |
| $ | 1,009.5 |
|
| September 30, 2017 | September 30, 2016 | ||||||||||||||||||||||
| Gross | Accumulated Impairment | Net | Gross | Accumulated Impairment | Net | ||||||||||||||||||
| Access Equipment | $ | 1,818.0 | $ | (932.1 | ) | $ | 885.9 | $ | 1,808.7 | $ | (932.1 | ) | $ | 876.6 | |||||||||
| Fire & Emergency | 108.1 | (2.0 | ) | 106.1 | 108.1 | (2.0 | ) | 106.1 | |||||||||||||||
| Commercial | 196.9 | (175.9 | ) | 21.0 | 196.7 | (175.9 | ) | 20.8 | |||||||||||||||
| $ | 2,123.0 | $ | (1,110.0 | ) | $ | 1,013.0 | $ | 2,113.5 | $ | (1,110.0 | ) | $ | 1,003.5 | ||||||||||
Details of the Company’s total purchased intangible assets were as follows (in millions):
|
| September 30, 2021 |
| |||||||||||||
|
| Weighted- Average Life |
|
| Gross |
|
| Accumulated Amortization |
|
| Net |
| ||||
Amortizable intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution network |
|
| 39.1 |
|
| $ | 55.4 |
|
| $ | (35.1 | ) |
| $ | 20.3 |
|
Technology-related |
|
| 11.9 |
|
|
| 104.7 |
|
|
| (103.9 | ) |
|
| 0.8 |
|
Customer relationships |
|
| 12.6 |
|
|
| 572.6 |
|
|
| (550.0 | ) |
|
| 22.6 |
|
Other |
|
| 12.1 |
|
|
| 23.6 |
|
|
| (17.6 | ) |
|
| 6.0 |
|
|
|
| 14.4 |
|
|
| 756.3 |
|
|
| (706.6 | ) |
|
| 49.7 |
|
Non-amortizable trade names |
|
|
|
|
|
| 417.1 |
|
|
| — |
|
|
| 417.1 |
|
|
|
|
|
|
| $ | 1,173.4 |
|
| $ | (706.6 | ) |
| $ | 466.8 |
|
|
| September 30, 2020 |
| |||||||||||||
|
| Weighted- Average Life |
|
| Gross |
|
| Accumulated Amortization |
|
| Net |
| ||||
Amortizable intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution network |
|
| 39.1 |
|
| $ | 55.4 |
|
| $ | (33.8 | ) |
| $ | 21.6 |
|
Technology-related |
|
| 11.9 |
|
|
| 104.7 |
|
|
| (103.3 | ) |
|
| 1.4 |
|
Customer relationships |
|
| 12.8 |
|
|
| 554.7 |
|
|
| (545.6 | ) |
|
| 9.1 |
|
Other |
|
| 16.3 |
|
|
| 16.4 |
|
|
| (15.0 | ) |
|
| 1.4 |
|
|
|
| 14.7 |
|
|
| 731.2 |
|
|
| (697.7 | ) |
|
| 33.5 |
|
Non-amortizable trade names |
|
|
|
|
|
| 384.7 |
|
|
| — |
|
|
| 384.7 |
|
|
|
|
|
|
| $ | 1,115.9 |
|
| $ | (697.7 | ) |
| $ | 418.2 |
|
| September 30, 2017 | |||||||||||||
Weighted- Average Life | Gross | Accumulated Amortization | Net | ||||||||||
| Amortizable intangible assets: | |||||||||||||
| Distribution network | 39.1 | $ | 55.4 | $ | (29.5 | ) | $ | 25.9 | |||||
| Technology-related | 11.9 | 104.7 | (99.7 | ) | 5.0 | ||||||||
| Customer relationships | 12.8 | 555.0 | (467.6 | ) | 87.4 | ||||||||
| Other | 16.3 | 16.4 | (14.7 | ) | 1.7 | ||||||||
| 14.4 | 731.5 | (611.5 | ) | 120.0 | |||||||||
| Non-amortizable trade names | 387.8 | — | 387.8 | ||||||||||
| $ | 1,119.3 | $ | (611.5 | ) | $ | 507.8 | |||||||
| September 30, 2016 | |||||||||||||
Weighted- Average Life | Gross | Accumulated Amortization | Net | ||||||||||
| Amortizable intangible assets: | |||||||||||||
| Distribution network | 39.1 | $ | 55.4 | $ | (28.0 | ) | $ | 27.4 | |||||
| Technology-related | 11.9 | 104.7 | (91.5 | ) | 13.2 | ||||||||
| Customer relationships | 12.8 | 550.8 | (427.4 | ) | 123.4 | ||||||||
| Other | 16.3 | 16.5 | (14.7 | ) | 1.8 | ||||||||
| 14.5 | 727.4 | (561.6 | ) | 165.8 | |||||||||
| Non-amortizable trade names | 387.7 | — | 387.7 | ||||||||||
| $ | 1,115.1 | $ | (561.6 | ) | $ | 553.5 | |||||||
When determining the value of customer relationships for purposes of allocating the purchase price of an acquisition, the Company looks at existing customer contracts of the acquired business to determine if they represent a reliable future source of income and hence, a valuable intangible asset for the Company. The Company determines the fair value of the customer relationships based on the estimated future benefits the Company expects from the acquired customer contracts. In performing its evaluation and estimation of the useful lives of customer relationships, the Company looks to the historical growth rate of revenue of the acquired company’s existing customers as well as the historical attrition rates.
In connection with the valuation of intangible assets, a 40-year life was assigned to the value of the Pierce distribution network (net book value of $25.1$19.8 million at September 30, 2017)2021). The Company believes Pierce maintains the largest North American fire apparatus distribution network. Pierce has exclusive contracts with each distributor related to the fire apparatus product offerings manufactured by Pierce. The useful life of the Pierce distribution network was based on a historical turnover analysis. Non-compete intangible asset lives are based on the terms of the applicable agreements.
The estimated future amortization expense of purchased intangible assets for the five years succeeding September 30, 20172021 are as follows: 2018 - $38.3 million; 2019 - $36.9 million; 20202022 - $11.0 million; 20212023 - $5.3$7.2 million; 2024 - $4.3 million; 2025 - $4.2 million and 20222026 - $4.9$4.2 million.
12. Leases
The Company leases certain real estate, information technology equipment, warehouse equipment, vehicles and other equipment almost exclusively through operating leases. The Company determines whether an arrangement contains a lease at inception. A lease liability and corresponding right of use (ROU) asset are recognized for qualifying leased assets based on the present value of fixed and certain index-based lease payments at lease commencement. Variable payments, which are generally determined based on the usage rate of the underlying asset, are excluded from the present value of lease payments and are recognized in the period in which the payment is made. To determine the present value of lease payments, the Company uses the stated interest rate in the lease, when available, or more commonly a secured incremental borrowing rate that reflects risk, term and economic environment in which the lease is denominated. The incremental borrowing rate is determined using a portfolio approach based on the current rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. The Company has elected not to separate payments for lease components from payments for non-lease components in contracts that contain both components. Lease agreements may include options to extend or terminate the lease. Those options that are reasonably certain of exercise at lease commencement have been included in the term of the lease used to recognize the right of use assets and lease liabilities. The lease terms of the Company’s real estate and equipment leases extend up to 29 years and 18 years, respectively. The Company has elected not to recognize ROU assets or lease liabilities for leases with a term of twelve months or less. Expense is recognized on a straight-line basis over the lease term for operating leases.
The components of lease costs were as follows (in millions):
| Fiscal Year Ended September 30, |
| |||||
| 2021 |
|
| 2020 |
| ||
Operating lease cost | $ | 53.3 |
|
| $ | 57.4 |
|
Variable lease cost |
| 34.0 |
|
|
| 46.1 |
|
Short-term lease cost |
| 9.5 |
|
|
| 8.4 |
|
Supplemental information related to leases was as follows (in millions):
|
|
|
| September 30, 2021 |
| |||||||||
|
| Balance Sheet Classification |
| Finance leases |
|
| Operating leases |
|
| Total |
| |||
Lease right of use assets |
| Other long-term assets |
| $ | 22.2 |
|
| $ | 194.7 |
|
| $ | 216.9 |
|
Current lease liabilities |
| Other current liabilities |
|
| 6.9 |
|
|
| 39.3 |
|
|
| 46.2 |
|
Long-term lease liabilities |
| Other long-term liabilities |
|
| 15.6 |
|
|
| 160.8 |
|
|
| 176.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining lease term |
|
|
| 3.5 years |
|
| 8 years |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average discount rates |
|
|
|
| 1.9 | % |
|
| 2.9 | % |
|
|
|
|
|
|
|
| September 30, 2020 |
| |||||||||
|
| Balance Sheet Classification |
| Finance leases |
|
| Operating leases |
|
| Total |
| |||
Lease right of use assets |
| Other long-term assets |
| $ | 13.2 |
|
| $ | 149.0 |
|
| $ | 162.2 |
|
Current lease liabilities |
| Other current liabilities |
|
| 3.6 |
|
|
| 43.5 |
|
|
| 47.1 |
|
Long-term lease liabilities |
| Other long-term liabilities |
|
| 9.7 |
|
|
| 109.1 |
|
|
| 118.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining lease term |
|
|
| 4.0 years |
|
| 5.5 years |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average discount rates |
|
|
|
| 2.4 | % |
|
| 2.9 | % |
|
|
|
|
The table below presents the right of Contents
|
| September 30, 2021 |
| |||||||||||||||||||||
|
| Access Equipment |
|
| Defense |
|
| Fire & Emergency |
|
| Commercial |
|
| Corporate and intersegment eliminations |
|
| Total |
| ||||||
Real estate leases |
| $ | 84.3 |
|
| $ | 55.6 |
|
| $ | 6.2 |
|
| $ | 15.9 |
|
| $ | 12.2 |
|
| $ | 174.2 |
|
Equipment leases |
|
| 5.5 |
|
|
| 2.0 |
|
|
| 1.7 |
|
|
| 2.5 |
|
|
| 8.8 |
|
|
| 20.5 |
|
|
| $ | 89.8 |
|
| $ | 57.6 |
|
| $ | 7.9 |
|
| $ | 18.4 |
|
| $ | 21.0 |
|
| $ | 194.7 |
|
|
| September 30, 2020 |
| |||||||||||||||||||||
|
| Access Equipment |
|
| Defense |
|
| Fire & Emergency |
|
| Commercial |
|
| Corporate and intersegment eliminations |
|
| Total |
| ||||||
Real estate leases |
| $ | 61.4 |
|
| $ | 28.2 |
|
| $ | 6.5 |
|
| $ | 17.9 |
|
| $ | 7.0 |
|
| $ | 121.0 |
|
Equipment leases |
|
| 7.3 |
|
|
| 4.2 |
|
|
| 2.2 |
|
|
| 1.9 |
|
|
| 12.4 |
|
|
| 28.0 |
|
|
| $ | 68.7 |
|
| $ | 32.4 |
|
| $ | 8.7 |
|
| $ | 19.8 |
|
| $ | 19.4 |
|
| $ | 149.0 |
|
Maturities of operating lease liabilities at September 30, 2021 and minimum payments for operating leases having initial or remaining non-cancelable terms in excess of one year were as follows (in millions):
Amounts due in |
|
|
|
|
2022 |
| $ | 44.8 |
|
2023 |
|
| 35.0 |
|
2024 |
|
| 25.7 |
|
2025 |
|
| 20.9 |
|
2026 |
|
| 16.8 |
|
Thereafter |
|
| 83.2 |
|
Total lease payments |
|
| 226.4 |
|
Less: imputed interest |
|
| (26.3 | ) |
Present value of lease liability |
| $ | 200.1 |
|
13. Investments in Unconsolidated Affiliates
Equity method investments — Investments in equity securities where the Company’s ownership interest exceeds 20% and the Company does not have a controlling interest or where the ownership is less than 20% and for which the Company has a significant influence are accounted for by the equity method.
Investments in unconsolidated affiliates accounted for under the equity method consisted of the following (in millions):
|
|
|
|
|
| September 30, |
| |||||
|
| Ownership % |
|
| 2021 |
|
| 2020 |
| |||
Mezcladores Trailers de Mexico, S.A. de C.V. |
|
| 49 | % |
| $ | 8.3 |
|
| $ | 7.9 |
|
BME Fire Trucks LLC |
|
| 25 | % |
|
| 5.1 |
|
|
| — |
|
Construction Robotics, LLC |
|
| 10 | % |
|
| 2.9 |
|
|
| 1.8 |
|
AutoTech Fund II, L.P. |
|
| 7 | % |
|
| 6.5 |
|
|
| 2.9 |
|
Carnegie Foundry LLC |
|
| 7 | % |
|
| 5.0 |
|
|
| — |
|
Westly Capital Partners Fund IV, L.P. |
|
| 7 | % |
|
| 1.1 |
|
|
| — |
|
|
|
|
|
|
| $ | 28.9 |
|
| $ | 12.6 |
|
Recorded investments generally represent the Company’s maximum exposure to loss as a result of the Company’s ownership interest. Earnings or losses are reflected in “Equity in losses of unconsolidated affiliates” in the Consolidated Statements of Income. Due to the timing and availability of information, earnings or losses from unconsolidated affiliates accounted for using the equity method are recorded on a three-month lag.
The Company and an unaffiliated third party are joint venture partners in Mezcladores Trailers de Mexico, S.A. de C.V. (Mezcladoras). Mezcladoras is a manufacturer and distributor of industrial and commercial machinery with primary operations in Mexico. The Company recognized sales to Mezcladoras of $3.4 million, $3.3 million and $3.6 million in fiscal 2021, 2020 and 2019, respectively. The Company recognizes income on sales to Mezcladoras at the time of shipment in proportion to the outside third-party interest in Mezcladoras and recognizes the remaining income upon the joint venture's sale of inventory to an unaffiliated customer. The Company earns a service fee for certain operational support services provided to Mezcladoras. The Company recognized service fees of $0.8 million, $1.1 million and $1.4 million in fiscal 2021, 2020 and 2019, respectively.
The Company holds an equity interest in BME Fire Trucks LLC (Boise Mobile). Boise Mobile is a manufacturer and distributor of custom fire apparatus specializing in challenging environments, such as wild fires. There were no material transactions between the Company and Boise Mobile in fiscal 2021.
Investments in equity securities — Investments in equity securities where the Company does not have a controlling interest or significant influence are recorded at fair value to the extent it is readily determinable. Investments in equity securities without a readily determinable fair value are recorded at cost and adjusted for any impairments and any observable price changes in orderly transactions for the identical or a similar investment of the same issuer should they occur. Gains or losses are reflected in “Miscellaneous, net” in the Consolidated Statements of Income.
Investments in unconsolidated affiliates not accounted for under the equity method consisted of the following (in millions):
|
| September 30, 2021 |
|
| September 30, 2020 |
| ||||||||||||||||||
|
| Cost Basis |
|
| Unrealized Gain (Loss) |
|
| Fair Value |
|
| Cost Basis |
|
| Unrealized Gain (Loss) |
|
| Fair Value |
| ||||||
Equity investments with readily determinable fair value |
| $ | 25.0 |
|
| $ | (4.4 | ) |
| $ | 20.6 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
|
| September 30, 2021 |
|
| September 30, 2020 |
| ||||||||||||||||||
|
| Cost Basis |
|
| Accumulated Impairment and Adjustments |
|
| Carrying Value |
|
| Cost Basis |
|
| Accumulated Impairment and Adjustments |
|
| Carrying Value |
| ||||||
Equity investments without readily determinable fair value |
| $ | 1.7 |
|
| $ | — |
|
| $ | 1.7 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
14. Other Long-Term Assets
Other long-term assets consisted of the following (in millions):
|
| September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Lease right of use asset (See Note 12 of Notes to Consolidated Financial Statements) |
| $ | 216.9 |
|
| $ | 162.2 |
|
Investments in affiliates (See Note 13 of Notes to Consolidated Financial Statements) |
|
| 51.2 |
|
|
| 12.6 |
|
Deferred contract costs (See Note 3 of Notes to Consolidated Financial Statements) |
|
| 50.6 |
|
|
| — |
|
Rabbi trust, less current portion |
|
| 15.4 |
|
|
| 17.9 |
|
Deferred income taxes, net (See Note 6 of Notes to Consolidated Financial Statements) |
|
| 8.3 |
|
|
| 78.6 |
|
Customer finance receivables |
|
| 2.4 |
|
|
| 5.6 |
|
Other |
|
| 14.3 |
|
|
| 10.1 |
|
|
|
| 359.1 |
|
|
| 287.0 |
|
Less allowance for doubtful receivables |
|
| (0.1 | ) |
|
| (0.5 | ) |
|
| $ | 359.0 |
|
| $ | 286.5 |
|
| September 30, | |||||||
| 2017 | 2016 | ||||||
| Rabbi trust, less current portion | $ | 20.6 | $ | 20.5 | |||
| Customer notes receivable | 25.7 | 30.8 | |||||
| Deferred income taxes, net | 4.2 | 8.4 | |||||
| Investments in unconsolidated affiliates | 15.5 | 14.9 | |||||
| Other | 11.0 | 24.4 | |||||
| 77.0 | 99.0 | ||||||
| Less allowance for doubtful notes receivable | (8.6 | ) | (11.8 | ) | |||
| $ | 68.4 | $ | 87.2 | ||||
The rabbi trust (the “Trust”) holds investments to fund certain of the Company'sCompany’s obligations under its nonqualified supplemental executive retirement plan (SERP).SERP. Trust investments include money market and mutual funds. The Trust assets are subject to claims of the Company'sCompany’s creditors.
15. Credit Agreements
The Company was obligated under the following debt instruments (in millions):
| September 30, 2017 | ||||||||||||
| Principal | Debt Issuance Costs | Debt, Net | ||||||||||
| Senior Secured Term Loan | $ | 335.0 | $ | (0.8 | ) | $ | 334.2 | |||||
| 5.375% Senior notes due March 2022 | 250.0 | (3.5 | ) | 246.5 | ||||||||
| 5.375% Senior notes due March 2025 | 250.0 | (2.8 | ) | 247.2 | ||||||||
| $ | 835.0 | $ | (7.1 | ) | 827.9 | |||||||
| Less current maturities | (20.0 | ) | ||||||||||
| $ | 807.9 | |||||||||||
| Revolving Credit Facility | $ | — | ||||||||||
| Other short-term debt | 3.0 | |||||||||||
| Current maturities of long-term debt | 20.0 | |||||||||||
| $ | 23.0 | |||||||||||
| September 30, 2016 | |||||||||||||
| Principal | Debt Issuance Costs | Debt, Net | |||||||||||
| Senior Secured Term Loan | $ | 355.0 | $ | (1.4 | ) | $ | 353.6 | ||||||
| 5.375% Senior notes due March 2022 | 250.0 | (4.3 | ) | 245.7 | |||||||||
| 5.375% Senior notes due March 2025 | 250.0 | (3.1 | ) | 246.9 | |||||||||
| $ | 855.0 | $ | (8.8 | ) | 846.2 | ||||||||
| Less current maturities | (20.0 | ) | |||||||||||
| $ | 826.2 | ||||||||||||
| Revolving Credit Facility | $ | — | |||||||||||
| Current maturities of long-term debt | 20.0 | ||||||||||||
| $ | 20.0 | ||||||||||||
|
| September 30, 2021 |
| |||||||||
|
| Principal |
|
| Debt Issuance Costs |
|
| Debt, Net |
| |||
Senior Term Loan |
| $ | 225.0 |
|
| $ | (0.2 | ) |
| $ | 224.8 |
|
4.600% Senior notes due May 2028 |
|
| 300.0 |
|
|
| (2.6 | ) |
|
| 297.4 |
|
3.100% Senior notes due March 2030 |
|
| 300.0 |
|
|
| (3.4 | ) |
|
| 296.6 |
|
|
| $ | 825.0 |
|
| $ | (6.2 | ) |
| $ | 818.8 |
|
|
| September 30, 2020 |
| |||||||||
|
| Principal |
|
| Debt Issuance Costs |
|
| Debt, Net |
| |||
Senior Term Loan |
| $ | 225.0 |
|
| $ | (0.3 | ) |
| $ | 224.7 |
|
4.600% Senior notes due May 2028 |
|
| 300.0 |
|
|
| (3.0 | ) |
|
| 297.0 |
|
3.100% Senior notes due March 2030 |
|
| 300.0 |
|
|
| (3.8 | ) |
|
| 296.2 |
|
|
| $ | 825.0 |
|
| $ | (7.1 | ) |
| $ | 817.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other short-term debt |
|
|
|
|
|
|
|
|
| $ | 5.2 |
|
On April 3, 2018, the Company entered into ana Second Amended and Restated Credit Agreement with various lenders (the “Credit Agreement”). The Credit Agreement provides for (i) aan unsecured revolving credit facility (Revolving(the “Revolving Credit Facility)Facility”) that matures in March 2019April 2023 with an initial maximum aggregate amount of availability of $600850 million and (ii) a an unsecured $400325 million term loan (Term Loan)(the “Term Loan”) due in quarterly principal installments of $54.1 million commencing September 30, 2019 with a balloon payment of $310264.1 million due at maturity in March 2019. In January 2015,April 2023. The Company has prepaid all required quarterly principal installments and $39.1 million of the Company entered into an agreement with lenders underballoon payment on the Credit Agreement that increased the Revolving Credit Facility to an aggregate maximum amount of $850 million. Term Loan.
At September 30, 2017,2021, outstanding letters of credit of $96.9$17.2 million reduced the available capacity under the Revolving Credit Facility to $753.1$832.8 million.
Under the Credit Agreement, the Company mustis obligated to pay (i) an unused commitment fee ranging from
Borrowings under the Credit Agreement bear interest at a variable rate equal to (i)
LIBOR plus a specified margin, which may be adjusted upward or downward depending on whether certain criteria are satisfied, or (ii) for dollar-denominated loans only, the base rate (which is the highest of (a) the administrative agent’s prime rate, (b) the federal funds rate plus 0.50% or (c) the sum of 1% plus one-month LIBOR) plus a specified margin, which may be adjusted upward or downward depending on whether certain criteria are satisfied. At September 30,The Credit Agreement contains various restrictions and covenants, including requirements that the Company maintain certain financial ratios at prescribed levels and restrictions, subject to certain exceptions, on the ability of the Company and certain of its subsidiaries to consolidate or merge, create liens, incur additional indebtedness, and dispose of assets, consummate acquisitions and make investments in joint ventures and foreign subsidiaries.
The Credit Agreement contains the following financial covenants:
• | Leverage Ratio: A maximum leverage ratio (defined as, with certain adjustments, the ratio of the Company’s consolidated indebtedness to consolidated net income for the previous four quarters before interest, taxes, depreciation, amortization, non-cash charges and certain other items (EBITDA)) as of the last day of any fiscal quarter of 3.75 to 1.00. |
• | Interest Coverage Ratio: A minimum interest coverage ratio (defined as, with certain adjustments, the ratio of the Company’s consolidated EBITDA to the Company’s consolidated cash interest expense for the previous four quarters) as of the last day of any fiscal quarter of 2.50 to 1.00. |
The Company was in compliance with the financial covenants contained in the Credit Agreement as of
September 30,In May 2018, the Company issued $300.0 million of 4.600% unsecured senior notes due May 15, 2028 (the “2028 Senior Notes”).
Loan. In February 2014,2020, the Company issued $250.0$300.0 million of 5.375%3.100% unsecured senior notes due March 1, 20222030 (the “2022“2030 Senior Notes”). In March 2015, at a discount of $1.2 million. The Company used a portion of the Company issued $250.0 million of 5.375% unsecured senior notes due March 1, 2025 (the “2025 Senior Notes”). The net proceeds from the sale of both note issuances were usedthe 2030 Senior Notes to repay existingredeem certain outstanding notes of the Company. The Company used the remaining net proceeds to pre-pay all outstanding future quarterly principal installments, as well as pay down a portion of the balloon payment due at maturity on the Term Loan. The Company recognized approximately $8.5 million of expense associated with the 2030 Senior Notes transaction, comprised of unamortized debt issuance costs and call premium costs on the 2025 Senior Notes. Expenses related to the transaction are included in interest expense. Additionally, approximately $2.9 million of debt issuance costs were capitalized to long-term debt in connection with the transaction. The 2028 Senior Notes and the 2030 Senior Notes were issued pursuant to an indenture (the “Indenture”) between the Company and a trustee. The indenture contains customary affirmative and negative covenants. The Company has the option to redeem the 20222028 and 2030 Senior Notes and the 2025 Senior Notesat any time for a premium after March 1, 2017 and March 1, 2020, respectively.
In fiscal 2015,September 2019, the Company recognized $14.7entered into a 220.0 million Chinese renminbi uncommitted line of expense associated withcredit to provide short-term finance support to operations in China. At September 30, 2021, there were 0 outstanding borrowings on the 2025 Senior Notes transaction, compriseduncommitted line of call premium, third-party costscredit. There was 35.0 million Chinese renminbi ($5.2 million) outstanding on the uncommitted line of credit at September 30, 2020. The line of credit carries a variable interest rate that is set by the lender, which was 3.5% at both September 30, 2021 and $3.3 million of write-off of unamortized debt issuance costs. Expenses related to the transaction were included in interest expense. Additionally, $3.7 million of debt issuance costs was recognized as a reduction of the carrying value of the related debt in connection with the transaction in fiscal 2015.
The fair value of the long-term debt is estimated based upon Level 2 inputs to reflect market rate of the Company’s debt. At September 30, 2017,2021, the fair value of the 20222028 Senior Notes and the 20252030 Senior Notes was estimated to be $260$344 million ($262342 million at September 30, 2016)2020) and $264$317 million ($263316 million at September 30, 2016)2020), respectively. The fair value of the Term Loan approximated book value at both September 30, 20172021 and 2016.2020. See Note 1423 of the Notes to Consolidated Financial Statements for the definition of a Level 2 input.
16. Warranties
The Company’s products generally carry explicit warranties that extend from six months to five years, based on terms that are generally accepted in the marketplace. Selected components (such as engines, transmissions, tires, etc.) included in the Company’s end products may include manufacturers’ warranties. These manufacturers’ warranties are generally passed on to the end customer of the Company’s products, and the customer would generally deal directly with the component manufacturer. Warranty costs recorded were $60.4$66.3 million, $46.8$57.9 million and $42.3$54.9 million in fiscal 2017, 20162021, 2020 and 2015,2019, respectively.
Fiscal Year Ended September 30, | |||||||
| 2017 | 2016 | ||||||
| Balance at beginning of year | $ | 89.6 | $ | 92.1 | |||
| Warranty provisions | 57.4 | 45.9 | |||||
| Settlements made | (51.8 | ) | (52.5 | ) | |||
| Changes in liability for pre-existing warranties, net | 2.5 | 0.9 | |||||
| Premiums received | 12.4 | 14.8 | |||||
| Amortization of premiums received | (12.0 | ) | (11.3 | ) | |||
| Foreign currency translation | 0.7 | (0.3 | ) | ||||
| Balance at end of year | $ | 98.8 | $ | 89.6 | |||
Provisions for estimated warranty and other related costs are recorded at the time of sale and are periodically adjusted to reflect actual experience. Certain warranty and other related claims involve matters of dispute that ultimately are resolved by negotiation, arbitration or litigation. At times, warranty issues arise that are beyond the scope of the Company'sCompany’s historical experience. It is reasonably possible that additional warranty and other related claims could arise from disputes or other matters in excess of amounts accrued; however, the Company does not expect that any such amounts, while not determinable, would have a material effect on the Company'sCompany’s consolidated financial condition, results of operations or cash flows.
Changes in the Company’s assurance-type warranty liability were as follows (in millions):
|
| Fiscal Year Ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Balance at beginning of year |
| $ | 67.4 |
|
| $ | 65.1 |
|
Warranty provisions |
|
| 50.1 |
|
|
| 43.1 |
|
Settlements made |
|
| (65.0 | ) |
|
| (55.9 | ) |
Changes in liability for pre-existing warranties, net |
|
| 16.2 |
|
|
| 14.8 |
|
Foreign currency translation |
|
| — |
|
|
| 0.3 |
|
Acquisition |
|
| 0.3 |
|
|
| — |
|
Balance at end of year |
| $ | 69.0 |
|
| $ | 67.4 |
|
Changes in the liability for pre-existing warranties in fiscal 2021 and 2020 of $16.9 million and $12.3 million, respectively, within the Defense segment primarily relate to additional warranty costs on the Joint Light Tactical Vehicle
17. Guarantee Arrangements
Customers of the Company, from time to time, may fund purchases of the Company’s equipment through third-party finance companies. In certain instances, the Company may be requested to provide support for these arrangements through credit or residual value guarantees, by which the Company agrees to make payments to the finance companies in certain circumstances as further described below.
Credit Guarantees:The Company is party to multiple agreements whereby at September 30, 2017 and 2016 it2021 the Company guaranteed an aggregate of $568.2$846.6 million and $563.2 million, respectively, in indebtedness of customers. The Company estimated that its maximum loss exposure under these contracts at September 30, 20172021 was $167.0 million. Terms of these guarantees coincide with the financing arranged by the customer and 2016 was $101.9 million and $116.3 million, respectively.generally do not exceed five years. Under the terms of these and various related agreements and upon the occurrence of certain events, the Company generally has the ability to, among other things, take possession of the underlying collateral. If the financial condition of the customers were to deteriorate and result in their inability to make payments, then additional accrualsloss provisions in excess of amounts provided for at inception may be required. Given the Company’s position as original equipment manufacturer and its knowledge of end markets, the Company, when called upon to fulfill a guarantee, generally has been able to liquidate the financed equipment at a minimal loss, if any, to the Company. While the Company does not expect to experience losses under these agreements that are materially in excess of the amounts reserved, it cannot provide any assurance that the financial condition of the third parties will not deteriorate resulting in the third parties'parties’ inability to meet their obligations. In the event that this occurs, the Company cannot guarantee that the collateral underlying the agreements will be sufficient to avoid losses materially in excess of the amounts reserved. Any losses under these guarantees would generally be mitigated by the value of any underlying collateral, including financed equipment, and are generally subject to the finance company's ability to provide the Company clear title to foreclosed equipment and other conditions.equipment. During periods of economic weakness, collateral values generally decline and can contribute to higher exposure to losses.
Residual Value Guarantees: The Company is party to multiple agreements whereby at September 30, 2021 the Company guaranteed to support an aggregate of $94.1 million of customer equipment value. The Company estimated that its maximum loss exposure under these contracts at September 30, 2021 was $10.9 million. Terms of these guarantees coincide with the financing arranged by the customer and generally do not exceed five years. Under the terms of these agreements, the Company guarantees that a piece of equipment will have a minimum residual value at a future date. If the counterparty is not able to recover the agreed upon residual value through sale, or alternative disposition, the Company is responsible for a portion of the shortfall. The Company is generally able to mitigate a portion of the risk associated with these guarantees by staggering the maturity terms of the guarantees, diversification of the portfolio and leveraging knowledge gained through the Company’s own experience in the used equipment markets. There can be no assurance the Company’s historical experience in used equipment markets will be indicative of future results. The Company’s ability to recover losses experienced from its guarantees may be affected by economic conditions in used equipment markets at the time of loss. During periods of economic weakness, residual values generally decline and can contribute to higher exposure to losses.
Changes in the Company’s credit guarantee liability were as follows (in millions):
|
| Fiscal Year Ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Balance at beginning of year |
| $ | 15.5 |
|
| $ | 15.8 |
|
Adoption of ASC 326 |
|
| (0.6 | ) |
|
| — |
|
Provision for new credit guarantees |
|
| 2.4 |
|
|
| 4.9 |
|
Changes for pre-existing guarantees, net |
|
| (0.5 | ) |
|
| (0.5 | ) |
Amortization of previous guarantees |
|
| (2.8 | ) |
|
| (5.0 | ) |
Foreign currency translation |
|
| 0.1 |
|
|
| 0.3 |
|
Balance at end of year |
| $ | 14.1 |
|
| $ | 15.5 |
|
Fiscal Year Ended September 30, | |||||||
| 2017 | 2016 | ||||||
| Balance at beginning of year | $ | 8.4 | $ | 5.6 | |||
| Provision for new credit guarantees | 3.2 | 4.1 | |||||
| Changes for pre-existing guarantees, net | 0.5 | 1.7 | |||||
| Amortization of previous guarantees | (3.1 | ) | (3.0 | ) | |||
| Foreign currency translation | 0.1 | — | |||||
| Balance at end of year | $ | 9.1 | $ | 8.4 | |||
Due to the Company's Boardadoption of Directors increasedASC 326, the Company's Common Stock repurchase authorization by 10,000,000 shares, increasingportion of the repurchase authorizationguarantee liabilities that relates to 10,299,198 fromcurrent expected credit losses is now recognized separately and is recorded within “Other current liabilities” and “Other long-term liabilities” in the balance remaining from prior authorizations. As of September 30, 2017,Company’s Consolidated Balance Sheets.
18. Restructuring and Other Charges
In June 2020, the Access Equipment segment announced that it would close its Medias, Romania manufacturing facility and relocate the production to factories in the United States, Mexico and China. The Company repurchased 2,786,624 shares under this authorization at a cost of $112.0 million. As a result, thealso announced that it would close its service center in Riverside, California. Both facilities were closed to simplify and better align operations to support customers and enable sustainable growth. The Company had 7,512,574 shares of Common Stock remaining under this repurchase authorizationceased all operations in Medias as of SeptemberJune 30, 2017.2021 and in Riverside as of December 31, 2020. The Access Equipment segment also initiated targeted reductions in its salaried workforce in response to the ongoing COVID-19 pandemic. The Company did not repurchase any shares under this authorization during fiscal 2017. Including shares repurchased under prior authorizations, the Company repurchased 2.5 million shares and 4.9 million shares at a costincurred restructuring charges of $100.1$3.1 million and $200.4$10.4 million during fiscal 20162021 and 2015, respectively.2020, respectively, for severance, other post-employment-related benefits, lease impairments, long-lived asset impairments and lease termination costs. The Company is restricted byAccess Equipment segment incurred additional charges of $7.4 million related to these restructuring actions during fiscal 2021, consisting of $2.8 million of accelerated depreciation, $4.1 million of inventory obsolescence and $0.5 million of other operational costs. The Access Equipment segment incurred additional charges of $4.7 million related to these restructuring actions during fiscal 2020, consisting of $2.8 million of accelerated depreciation, $1.6 million in inventory obsolescence and $0.3 million of other operational costs.
In July 2020, the Commercial segment announced that it will cease production of rear discharge concrete mixers at its Credit AgreementDodge Center, Minnesota, facility and relocate it to London, Ontario and the Dodge Center factory would be dedicated to refuse collection vehicle manufacturing. Both product lines benefit from repurchasing sharesthe focused facilities. The Commercial segment incurred restructuring charges of $1.5 million during fiscal 2020, consisting of severance costs and other post-employment-related benefits. In addition, the Commercial segment experienced $4.1 million of accelerated depreciation as a result of this action during fiscal 2020.
Pre-tax restructuring charges were as follows (in millions):
|
| Fiscal Year Ended September 30, |
| |||||||||||||||||||||
|
| 2021 |
|
| 2020 |
| ||||||||||||||||||
|
| Cost of Sales |
|
| Selling, General and Administrative Expenses |
|
| Total |
|
| Cost of Sales |
|
| Selling, General and Administrative Expenses |
|
| Total |
| ||||||
Access Equipment |
| $ | 4.6 |
|
| $ | (1.5 | ) |
| $ | 3.1 |
|
| $ | 2.9 |
|
| $ | 7.5 |
|
| $ | 10.4 |
|
Commercial |
|
| 0.1 |
|
|
| — |
|
|
| 0.1 |
|
|
| 0.7 |
|
|
| 0.8 |
|
|
| 1.5 |
|
Fire & Emergency |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.3 |
|
|
| 1.1 |
|
|
| 1.4 |
|
Corporate |
|
| — |
|
|
| (0.4 | ) |
|
| (0.4 | ) |
|
| — |
|
|
| 1.1 |
|
|
| 1.1 |
|
Total |
| $ | 4.7 |
|
| $ | (1.9 | ) |
| $ | 2.8 |
|
| $ | 3.9 |
|
| $ | 10.5 |
|
| $ | 14.4 |
|
Changes in certain situations. See Note 9 of the Notes to Consolidated Financial Statements for information regarding these restrictions.
| September 30, 2017 | September 30, 2016 | ||||||||||||||
Other Current Assets | Other Current Liabilities | Other Current Assets | Other Current Liabilities | ||||||||||||
| Cash flow hedges: | |||||||||||||||
| Foreign exchange contracts | $ | — | $ | 0.4 | $ | — | $ | — | |||||||
| Not designated as hedging instruments: | |||||||||||||||
| Foreign exchange contracts | 0.5 | 0.8 | 0.1 | 0.4 | |||||||||||
| Interest rate contracts | 0.3 | 0.7 | — | 0.4 | |||||||||||
| $ | 0.8 | $ | 1.9 | $ | 0.1 | $ | 0.8 | ||||||||
|
| Employee Severance and Termination Benefits |
|
| Property, Plant and Equipment Impairment |
|
| Other Costs |
|
| Total |
| ||||
Balance at September 30, 2019 |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Restructuring provision |
|
| 13.3 |
|
|
| 0.8 |
|
|
| 0.3 |
|
|
| 14.4 |
|
Utilized - cash |
|
| (3.5 | ) |
|
| — |
|
|
| — |
|
|
| (3.5 | ) |
Utilized - noncash |
|
| — |
|
|
| (0.8 | ) |
|
| — |
|
|
| (0.8 | ) |
Foreign currency translation |
|
| (0.1 | ) |
|
| — |
|
|
| — |
|
|
| (0.1 | ) |
Balance at September 30, 2020 |
|
| 9.7 |
|
|
| — |
|
|
| 0.3 |
|
|
| 10.0 |
|
Restructuring provision |
|
| — |
|
|
| 2.3 |
|
|
| 0.5 |
|
|
| 2.8 |
|
Utilized - cash |
|
| (9.3 | ) |
|
| — |
|
|
| (2.3 | ) |
|
| (11.6 | ) |
Utilized - noncash |
|
| — |
|
|
| (2.3 | ) |
|
| 1.6 |
|
|
| (0.7 | ) |
Balance at September 30, 2021 |
| $ | 0.4 |
|
| $ | — |
|
| $ | 0.1 |
|
| $ | 0.5 |
|
Classification of Gains (Losses) | Fiscal Year Ended September 30, | ||||||||||||
| 2017 | 2016 | 2015 | |||||||||||
| Cash flow hedges: | |||||||||||||
| Foreign exchange contracts | Net sales | $ | (0.1 | ) | $ | — | $ | — | |||||
| Foreign exchange contracts | Cost of sales | (0.1 | ) | — | 0.2 | ||||||||
| Foreign exchange contracts | Miscellaneous, net | (0.1 | ) | (0.2 | ) | 0.1 | |||||||
| Not designated as hedging instruments: | |||||||||||||
| Foreign exchange contracts | Miscellaneous, net | 3.5 | (7.6 | ) | 12.7 | ||||||||
| Interest rate contracts | Miscellaneous, net | 0.2 | (0.2 | ) | — | ||||||||
| $ | 3.4 | $ | (8.0 | ) | $ | 13.0 | |||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| September 30, 2017: | |||||||||||||||
| Assets: | |||||||||||||||
SERP plan assets (a) | $ | 21.7 | $ | — | $ | — | $ | 21.7 | |||||||
Foreign currency exchange derivatives (b) | — | 0.5 | — | 0.5 | |||||||||||
Interest rate contracts (c) | — | 0.3 | — | 0.3 | |||||||||||
| Liabilities: | |||||||||||||||
Foreign currency exchange derivatives (b) | $ | — | $ | 1.2 | $ | — | $ | 1.2 | |||||||
Interest rate contracts (c) | — | 0.7 | — | 0.7 | |||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| September 30, 2016: | |||||||||||||||
| Assets: | |||||||||||||||
SERP plan assets (a) | $ | 21.7 | $ | — | $ | — | $ | 21.7 | |||||||
Foreign currency exchange derivatives (b) | — | 0.1 | — | 0.1 | |||||||||||
| Liabilities: | |||||||||||||||
Foreign currency exchange derivatives (b) | $ | — | $ | 0.4 | $ | — | $ | 0.4 | |||||||
Interest rate contracts (c) | — | 0.4 | — | 0.4 | |||||||||||
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options or Vesting of Share Awards | Weighted-Average Exercise Price of Outstanding Options | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | |||||||
| Equity compensation plans approved by security holders | 2,190,550 | $ | 45.14 | 6,740,105 | ||||||
| Equity compensation plans not approved by security holders | — | — | — | |||||||
| 2,190,550 | $ | 45.14 | 6,740,105 | |||||||
| Fiscal Year Ended September 30, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Stock options | $ | 7.5 | $ | 6.7 | $ | 6.0 | |||||
| Stock awards (shares and units) | 11.6 | 9.7 | 11.5 | ||||||||
| Performance share awards | 3.3 | 2.3 | 3.9 | ||||||||
| Cash-settled stock appreciation rights | 3.3 | 3.4 | (0.9 | ) | |||||||
| Cash-settled restricted stock unit awards | 0.5 | 0.9 | 0.9 | ||||||||
| Total stock-based compensation cost | 26.2 | 23.0 | 21.4 | ||||||||
| Income tax benefit recognized for stock-based compensation | (9.6 | ) | (8.4 | ) | (7.9 | ) | |||||
| $ | 16.6 | $ | 14.6 | $ | 13.5 | ||||||
| Fiscal Year Ended September 30, | ||||||||||||||||||||
| 2017 | 2016 | 2015 | ||||||||||||||||||
| Options | Weighted- Average Exercise Price | Options | Weighted- Average Exercise Price | Options | Weighted- Average Exercise Price | |||||||||||||||
| Outstanding, beginning of year | 2,104,929 | $ | 39.55 | 2,369,872 | $ | 36.57 | 2,690,507 | $ | 36.20 | |||||||||||
| Granted | 393,975 | 66.89 | 567,550 | 41.52 | 6,725 | 44.92 | ||||||||||||||
| Forfeited | (11,145 | ) | 52.54 | (70,177 | ) | 44.31 | (25,215 | ) | 42.20 | |||||||||||
| Expired | — | — | (43,392 | ) | 49.19 | (24,866 | ) | 54.41 | ||||||||||||
| Exercised | (956,068 | ) | 41.70 | (718,924 | ) | 30.25 | (277,279 | ) | 31.05 | |||||||||||
| Outstanding, end of year | 1,531,691 | 45.14 | 2,104,929 | 39.55 | 2,369,872 | 36.57 | ||||||||||||||
| Exercisable, end of year | 819,906 | 36.47 | 1,473,761 | 38.28 | 1,939,478 | 34.25 | ||||||||||||||
| Outstanding | Exercisable | |||||||||||||||||||||||||||||||
| Exercise Prices | Number Outstanding | Weighted Average Remaining Contractual Life (in years) | Weighted Average Exercise Price | Aggregate Intrinsic Value | Number Outstanding | Weighted Average Remaining Contractual Life (in years) | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||||||||||||||||
| $ | 7.95 | - | $ | 19.24 | 123,234 | 1.0 | $ | 14.54 | $ | 8.4 | 123,234 | 1.0 | $ | 14.54 | $ | 8.4 | ||||||||||||||||
| $ | 28.96 | - | $ | 41.59 | 684,477 | 4.0 | 37.55 | 30.8 | 355,034 | 3.0 | 33.87 | 17.3 | ||||||||||||||||||||
| $ | 46.94 | - | $ | 66.89 | 723,980 | 5.0 | 57.51 | 18.1 | 341,638 | 3.5 | 47.07 | 12.1 | ||||||||||||||||||||
| 1,531,691 | 4.2 | 45.14 | $ | 57.3 | 819,906 | 3.0 | 36.47 | $ | 37.8 | |||||||||||||||||||||||
| Fiscal Year Ended September 30, | |||||||||
| Options Granted During | 2017 | 2016 | 2015 | ||||||
| Assumptions: | |||||||||
| Expected term (in years) | 5.1 | 5.1 | 5.1 | ||||||
| Expected volatility | 37.30 | % | 40.40 | % | 42.08 | % | |||
| Risk-free interest rate | 1.79 | % | 1.73 | % | 1.55 | % | |||
| Expected dividend yield | 1.52 | % | 1.65 | % | 1.25 | % | |||
| Fiscal Year Ended September 30, | ||||||||||||||||||||
| 2017 | 2016 | 2015 | ||||||||||||||||||
Number of Shares | Weighted- Average Grant Date Fair Value | Number of Shares | Weighted- Average Grant Date Fair Value | Number of Shares | Weighted- Average Grant Date Fair Value | |||||||||||||||
| Beginning of year | 313,806 | $ | 42.93 | 273,992 | $ | 46.84 | 609,869 | $ | 41.70 | |||||||||||
| Granted | 214,325 | 66.84 | 323,800 | 40.33 | 37,725 | 44.50 | ||||||||||||||
| Forfeited | (16,381 | ) | 51.67 | (53,928 | ) | 45.71 | (17,606 | ) | 41.36 | |||||||||||
| Vested | (159,591 | ) | 47.01 | (230,058 | ) | 43.28 | (355,996 | ) | 38.06 | |||||||||||
| End of year | 352,159 | 55.22 | 313,806 | 42.93 | 273,992 | 46.84 | ||||||||||||||
| Fiscal Year Ended September 30, | ||||||||||||||||||||
| 2017 | 2016 | 2015 | ||||||||||||||||||
Number of Shares | Weighted- Average Grant Date Fair Value | Number of Shares | Weighted- Average Grant Date Fair Value | Number of Shares | Weighted- Average Grant Date Fair Value | |||||||||||||||
| Beginning of year | 103,550 | $ | 49.83 | 129,475 | $ | 54.94 | 257,475 | $ | 45.44 | |||||||||||
| Granted | 49,800 | 79.01 | 78,175 | 47.07 | — | — | ||||||||||||||
| Forfeited | — | — | (31,326 | ) | 52.90 | — | — | |||||||||||||
| Performance adjustments | 36,750 | 54.84 | (27,874 | ) | 54.71 | (44,800 | ) | 35.84 | ||||||||||||
| Vested | (73,500 | ) | 54.84 | (44,900 | ) | 54.59 | (83,200 | ) | 35.84 | |||||||||||
| End of year | 116,600 | 60.71 | 103,550 | 49.83 | 129,475 | 54.94 | ||||||||||||||
Fiscal Year Ended September 30, | ||||||
| Total Shareholder Return Performance Shares Granted During | 2017 | 2016 | ||||
| Assumptions: | ||||||
| Expected term (in years) | 2.86 | 2.88 | ||||
| Expected volatility | 34.09 | % | 33.28 | % | ||
| Risk-free interest rate | 1.32 | % | 1.20 | % | ||
| Cost of Sales | Selling, General and Administrative Expenses | Total | ||||||||||
| Access equipment | $ | 35.8 | $ | — | $ | 35.8 | ||||||
| Cost of Sales | Operating Expenses | Total | ||||||||||
| Access equipment | $ | 0.9 | $ | 26.9 | $ | 27.8 | ||||||
| Employee Severance and Termination Benefits | Property, Plant and Equipment Impairment | Other Costs | Total | |||||||||||||
| Balance at September 30, 2015 | $ | — | $ | — | $ | — | $ | — | ||||||||
| Restructuring provision | 0.9 | 26.9 | — | 27.8 | ||||||||||||
| Utilized - noncash | — | (26.9 | ) | — | (26.9 | ) | ||||||||||
| Balance at September 30, 2016 | 0.9 | — | — | 0.9 | ||||||||||||
| Restructuring provision | 27.3 | 4.3 | 4.2 | 35.8 | ||||||||||||
| Utilized - cash | (9.7 | ) | — | (3.3 | ) | (13.0 | ) | |||||||||
| Utilized - noncash | — | (4.3 | ) | — | (4.3 | ) | ||||||||||
| Foreign currency translation | 1.3 | — | 0.1 | 1.4 | ||||||||||||
| Balance at September 30, 2017 | $ | 19.8 | $ | — | $ | 1.0 | $ | 20.8 | ||||||||
| Postretirement | |||||||||||||||
| Pension Benefits | Health and Other | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Accumulated benefit obligation at September 30 | $ | 468.9 | $ | 474.9 | $ | 50.0 | $ | 47.2 | |||||||
| Change in projected benefit obligation | |||||||||||||||
| Benefit obligation at October 1 | $ | 482.3 | $ | 414.9 | $ | 47.2 | $ | 37.5 | |||||||
| Service cost | 10.7 | 8.8 | 2.5 | 2.0 | |||||||||||
| Interest cost | 17.8 | 18.3 | 1.6 | 1.5 | |||||||||||
| Actuarial loss (gain) | (12.1 | ) | 56.4 | 0.5 | 8.3 | ||||||||||
| Participant contributions | 0.2 | 0.2 | — | — | |||||||||||
| Plan amendments | — | 1.1 | — | — | |||||||||||
| Curtailments | 0.5 | — | — | — | |||||||||||
| Benefits paid | (26.6 | ) | (13.2 | ) | (1.8 | ) | (2.1 | ) | |||||||
| Currency translation adjustments | 0.9 | (4.2 | ) | — | — | ||||||||||
| Benefit obligation at September 30 | $ | 473.7 | $ | 482.3 | $ | 50.0 | $ | 47.2 | |||||||
| Postretirement | |||||||||||||||
| Pension Benefits | Health and Other | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Change in plan assets | |||||||||||||||
| Fair value of plan assets at October 1 | $ | 334.0 | $ | 312.5 | $ | — | $ | — | |||||||
| Actual return on plan assets | 43.5 | 37.7 | — | — | |||||||||||
| Company contributions | 17.7 | 3.1 | 1.8 | 2.1 | |||||||||||
| Participant contributions | 0.2 | 0.2 | — | — | |||||||||||
| Expenses paid | (1.9 | ) | (2.2 | ) | — | — | |||||||||
| Benefits paid | (26.6 | ) | (13.2 | ) | (1.8 | ) | (2.1 | ) | |||||||
| Currency translation adjustments | 0.9 | (4.1 | ) | — | — | ||||||||||
| Fair value of plan assets at September 30 | $ | 367.8 | $ | 334.0 | $ | — | $ | — | |||||||
| Funded status of plan - underfunded at September 30 | $ | (105.9 | ) | $ | (148.3 | ) | $ | (50.0 | ) | $ | (47.2 | ) | |||
| Recognized in consolidated balance sheet at September 30 | |||||||||||||||
| Accrued benefit liability (current liability) | $ | (1.9 | ) | $ | (2.0 | ) | $ | (1.1 | ) | $ | (1.5 | ) | |||
| Accrued benefit liability (long-term liability) | (104.0 | ) | (146.3 | ) | (48.9 | ) | (45.7 | ) | |||||||
| $ | (105.9 | ) | $ | (148.3 | ) | $ | (50.0 | ) | $ | (47.2 | ) | ||||
| Recognized in accumulated other comprehensive income (loss) as of September 30 (net of taxes) | |||||||||||||||
| Net actuarial (loss) gain | $ | (41.7 | ) | $ | (69.0 | ) | $ | (4.6 | ) | $ | (4.5 | ) | |||
| Prior service (cost) benefit | (7.9 | ) | (9.1 | ) | 8.0 | 8.7 | |||||||||
| $ | (49.6 | ) | $ | (78.1 | ) | $ | 3.4 | $ | 4.2 | ||||||
| Weighted-average assumptions as of September 30 | |||||||||||
| Discount rate | 3.85 | % | 3.70 | % | 3.71 | % | 3.47 | % | |||
| Expected return on plan assets | 5.93 | % | 5.78 | % | n/a | n/a | |||||
| September 30 | |||||||
| 2017 | 2016 | ||||||
| Projected benefit obligation | $ | 473.7 | $ | 482.3 | |||
| Accumulated benefit obligation | 468.9 | 474.9 | |||||
| Fair value of plan assets | 367.8 | 334.0 | |||||
| Postretirement | |||||||||||||||||||||||
| Pension Benefits | Health and Other | ||||||||||||||||||||||
| 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||||||||||||||
| Components of net periodic benefit cost (income) | |||||||||||||||||||||||
| Service cost | $ | 10.7 | $ | 8.8 | $ | 8.2 | $ | 2.5 | $ | 2.0 | $ | 1.7 | |||||||||||
| Interest cost | 17.8 | 18.3 | 18.1 | 1.6 | 1.5 | 1.7 | |||||||||||||||||
| Expected return on plan assets | (17.9 | ) | (17.4 | ) | (17.9 | ) | — | — | — | ||||||||||||||
| Amortization of prior service cost (benefit) | 1.8 | 1.8 | 1.7 | (0.9 | ) | (0.9 | ) | (0.9 | ) | ||||||||||||||
| Curtailment/settlement | 0.5 | — | — | — | — | (3.4 | ) | ||||||||||||||||
| Amortization of net actuarial loss (gain) | 4.5 | 2.3 | 2.6 | 0.2 | (0.1 | ) | 0.1 | ||||||||||||||||
| Expenses paid | 1.9 | 2.2 | 2.8 | — | — | — | |||||||||||||||||
| Net periodic benefit cost (income) | $ | 19.3 | $ | 16.0 | $ | 15.5 | $ | 3.4 | $ | 2.5 | $ | (0.8 | ) | ||||||||||
| Other changes in plan assets and benefit obligations recognized in other comprehensive income | |||||||||||||||||||||||
| Net actuarial loss (gain) | $ | (37.8 | ) | $ | 36.6 | $ | 10.0 | $ | 0.5 | $ | 8.3 | $ | (7.7 | ) | |||||||||
| Prior service cost | — | 1.1 | 1.1 | — | — | — | |||||||||||||||||
| Amortization of prior service benefit (cost) | (1.8 | ) | (1.8 | ) | (1.7 | ) | 0.9 | 0.9 | 0.9 | ||||||||||||||
| Curtailment/settlement | — | — | — | — | — | 3.4 | |||||||||||||||||
| Amortization of net actuarial (loss) gain | (4.5 | ) | (2.3 | ) | (2.6 | ) | (0.2 | ) | 0.1 | (0.1 | ) | ||||||||||||
| $ | (44.1 | ) | $ | 33.6 | $ | 6.8 | $ | 1.2 | $ | 9.3 | $ | (3.5 | ) | ||||||||||
| Weighted-average assumptions | |||||||||||||||||
| Discount rate | 3.70 | % | 4.45 | % | 4.52 | % | 3.47 | % | 4.08 | % | 4.04 | % | |||||
| Expected return on plan assets | 5.78 | % | 6.03 | % | 6.25 | % | n/a | n/a | n/a | ||||||||
Quoted Prices for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
| September 30, 2017: | |||||||||||||||
| Common stocks | |||||||||||||||
U.S. companies (a) | $ | 70.8 | $ | 5.7 | $ | — | $ | 76.5 | |||||||
International companies (b) | — | 11.4 | — | 11.4 | |||||||||||
Mutual funds (a) | 71.3 | — | — | 71.3 | |||||||||||
Government and agency bonds (c) | — | 5.4 | — | 5.4 | |||||||||||
Corporate bonds and notes (d) | — | 4.5 | — | 4.5 | |||||||||||
Money market funds (e) | 9.1 | — | — | 9.1 | |||||||||||
| $ | 151.2 | $ | 27.0 | $ | — | 178.2 | |||||||||
Investments measured at net asset value (NAV) (f) | 189.6 | ||||||||||||||
| $ | 367.8 | ||||||||||||||
Quoted Prices for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
| September 30, 2016: | |||||||||||||||
| Common stocks | |||||||||||||||
U.S. companies (a) | $ | 66.8 | $ | 5.4 | $ | — | $ | 72.2 | |||||||
International companies (b) | — | 11.5 | — | 11.5 | |||||||||||
Mutual funds (a) | 61.9 | — | — | 61.9 | |||||||||||
Government and agency bonds (c) | — | 5.3 | — | 5.3 | |||||||||||
Corporate bonds and notes (d) | — | 6.0 | — | 6.0 | |||||||||||
Money market funds (e) | 5.8 | — | — | 5.8 | |||||||||||
| $ | 134.5 | $ | 28.2 | $ | — | 162.7 | |||||||||
Investments measured at net asset value (NAV) (f) | 171.3 | ||||||||||||||
| $ | 334.0 | ||||||||||||||
| Fair Value | Unfunded Commitments | Redemption Frequency (if Currently Eligible) | Redemption Notice Period(1) | |||||||||
| Common collective trust | $ | 189.6 | $ | — | N/A | 15 days | ||||||
| Fair Value | Unfunded Commitments | Redemption Frequency (if Currently Eligible) | Redemption Notice Period(1) | |||||||||
| Common collective trust | $ | 171.3 | $ | — | N/A | 15 days | ||||||
| Postretirement Health and Other | ||||||||||||
| Fiscal Year Ending | Pension Benefits | |||||||||||
| September 30, | Qualified | Non-Qualified | ||||||||||
| 2018 | $ | 12.3 | $ | 1.9 | $ | 1.1 | ||||||
| 2019 | 13.5 | 1.9 | 1.6 | |||||||||
| 2020 | 14.9 | 1.9 | 2.2 | |||||||||
| 2021 | 16.2 | 1.8 | 2.7 | |||||||||
| 2022 | 17.5 | 1.8 | 3.1 | |||||||||
| 2023-2027 | 107.0 | 9.7 | 20.8 | |||||||||
| Fiscal Year Ended September 30, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Domestic | $ | 392.7 | $ | 277.1 | $ | 316.4 | |||||
| Foreign | 18.6 | 29.9 | 9.7 | ||||||||
| $ | 411.3 | $ | 307.0 | $ | 326.1 | ||||||
| Fiscal Year Ended September 30, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Allocated to Income Before Equity in Earnings of Unconsolidated Affiliates | |||||||||||
| Current: | |||||||||||
| Federal | $ | 104.9 | $ | 103.6 | $ | 108.8 | |||||
| Foreign | 13.5 | 3.2 | 1.5 | ||||||||
| State | 1.0 | 2.6 | 1.1 | ||||||||
| Total current | 119.4 | 109.4 | 111.4 | ||||||||
| Deferred: | |||||||||||
| Federal | 6.6 | (18.5 | ) | (10.8 | ) | ||||||
| Foreign | 4.2 | 2.0 | (1.3 | ) | |||||||
| State | (3.0 | ) | (0.5 | ) | (0.1 | ) | |||||
| Total deferred | 7.8 | (17.0 | ) | (12.2 | ) | ||||||
| $ | 127.2 | $ | 92.4 | $ | 99.2 | ||||||
| Allocated to Other Comprehensive Income (Loss) | |||||||||||
| Deferred federal, state and foreign | $ | 15.1 | $ | (14.2 | ) | $ | (1.2 | ) | |||
| Fiscal Year Ended September 30, | ||||||||
| 2017 | 2016 | 2015 | ||||||
| Effective Rate Reconciliation | ||||||||
| U.S. federal tax rate | 35.0 | % | 35.0 | % | 35.0 | % | ||
| State income taxes, net | 1.3 | 1.3 | 2.5 | |||||
| Foreign taxes | 0.6 | (1.7 | ) | (2.4 | ) | |||
| Tax audit settlements | — | 0.1 | (2.6 | ) | ||||
| Valuation allowance | 0.5 | (0.6 | ) | 0.4 | ||||
| Domestic tax credits | (4.2 | ) | (1.5 | ) | (1.3 | ) | ||
| Manufacturing deduction | (2.8 | ) | (3.0 | ) | (2.8 | ) | ||
| Share-based compensation | (1.3 | ) | — | — | ||||
| Other, net | 1.8 | 0.5 | 1.6 | |||||
| 30.9 | % | 30.1 | % | 30.4 | % | |||
| September 30, | |||||||
| 2017 | 2016 | ||||||
| Deferred tax assets: | |||||||
| Other long-term liabilities | $ | 81.0 | $ | 109.9 | |||
| Losses and credits | 31.2 | 36.4 | |||||
| Accrued warranty | 31.8 | 27.0 | |||||
| Other current liabilities | 24.5 | 31.1 | |||||
| Payroll-related obligations | 34.9 | 28.2 | |||||
| Receivables | 7.0 | 6.3 | |||||
| Other | 12.4 | (0.8 | ) | ||||
| Gross deferred tax assets | 222.8 | 238.1 | |||||
| Less valuation allowance | (10.4 | ) | (8.6 | ) | |||
| Deferred tax assets, net | 212.4 | 229.5 | |||||
| Deferred tax liabilities: | |||||||
| Intangible assets | 154.8 | 167.0 | |||||
| Property, plant and equipment | 52.4 | 47.4 | |||||
| Inventories | 17.6 | 15.5 | |||||
| Other | 3.6 | 2.5 | |||||
| Deferred tax liabilities | 228.4 | 232.4 | |||||
| Deferred tax liabilities, net of deferred tax assets | $ | (16.0 | ) | $ | (2.9 | ) | |
| September 30, | |||||||
| 2017 | 2016 | ||||||
| Long-term net deferred tax asset | $ | 4.2 | $ | 8.4 | |||
| Long-term net deferred tax liability | (20.2 | ) | (11.3 | ) | |||
| Net deferred tax liabilities | $ | (16.0 | ) | $ | (2.9 | ) | |
| Fiscal Year Ended September 30, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Balance at beginning of year | $ | 37.4 | $ | 27.0 | $ | 33.5 | |||||
| Additions for tax positions related to current year | 1.2 | 7.6 | 4.6 | ||||||||
| Additions for tax positions related to prior years | 6.0 | 8.4 | 2.1 | ||||||||
| Reductions for tax positions related to prior years | (5.5 | ) | (1.1 | ) | — | ||||||
| Settlements | — | (3.0 | ) | (8.6 | ) | ||||||
| Lapse of statutes of limitations | (1.9 | ) | (1.5 | ) | (4.5 | ) | |||||
| Foreign currency translation | — | — | (0.1 | ) | |||||||
| Balance at end of year | $ | 37.2 | $ | 37.4 | $ | 27.0 | |||||
19. Accumulated Other Comprehensive Income (Loss)
| Employee Pension and Postretirement Benefits, Net of Tax | Cumulative Translation Adjustments | Derivative Instruments | Accumulated Other Comprehensive Income (Loss) | ||||||||||||
| Balance at September 30, 2014 | $ | (44.2 | ) | $ | (25.0 | ) | $ | — | $ | (69.2 | ) | ||||
| Other comprehensive income (loss) before reclassifications | (3.7 | ) | (73.1 | ) | 0.3 | (76.5 | ) | ||||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | 1.5 | — | (0.2 | ) | 1.3 | ||||||||||
| Net current period other comprehensive income (loss) | (2.2 | ) | (73.1 | ) | 0.1 | (75.2 | ) | ||||||||
| Balance at September 30, 2015 | (46.4 | ) | (98.1 | ) | 0.1 | (144.4 | ) | ||||||||
| Other comprehensive income (loss) before reclassifications | (29.5 | ) | (3.0 | ) | (0.2 | ) | (32.7 | ) | |||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | 2.0 | — | 0.1 | 2.1 | |||||||||||
| Net current period other comprehensive income (loss) | (27.5 | ) | (3.0 | ) | (0.1 | ) | (30.6 | ) | |||||||
| Balance at September 30, 2016 | (73.9 | ) | (101.1 | ) | — | (175.0 | ) | ||||||||
| Other comprehensive income (loss) before reclassifications | 23.7 | 22.5 | (0.2 | ) | 46.0 | ||||||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | 4.0 | — | — | 4.0 | |||||||||||
| Net current period other comprehensive income (loss) | 27.7 | 22.5 | (0.2 | ) | 50.0 | ||||||||||
| Balance at September 30, 2017 | $ | (46.2 | ) | $ | (78.6 | ) | $ | (0.2 | ) | $ | (125.0 | ) | |||
| Fiscal Year Ended September 30, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Amortization of employee pension and postretirement benefits items | |||||||||||
| Prior service costs | $ | (0.9 | ) | $ | (0.9 | ) | $ | (0.8 | ) | ||
| Actuarial losses | (4.7 | ) | (2.2 | ) | (2.7 | ) | |||||
| Curtailment/settlement | (0.5 | ) | — | 1.2 | |||||||
| Total before tax | (6.1 | ) | (3.1 | ) | (2.3 | ) | |||||
| Tax benefit | 2.1 | 1.1 | 0.8 | ||||||||
| Net of tax | $ | (4.0 | ) | $ | (2.0 | ) | $ | (1.5 | ) | ||
| Fiscal Year Ended September 30, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Net income | $ | 285.6 | $ | 216.4 | $ | 229.5 | |||||
| Earnings allocated to participating securities | — | — | (0.5 | ) | |||||||
| Earnings available to common shareholders | $ | 285.6 | $ | 216.4 | $ | 229.0 | |||||
| Basic weighted-average common shares outstanding | 74,674,115 | 73,570,020 | 77,990,432 | ||||||||
| Dilutive stock options and other equity-based compensation awards | 1,115,930 | 862,898 | 1,101,303 | ||||||||
| Participating restricted stock | — | — | (110,317 | ) | |||||||
| Diluted weighted-average common shares outstanding | 75,790,045 | 74,432,918 | 78,981,418 | ||||||||
| Fiscal Year Ended September 30, | ||||||||
| 2017 | 2016 | 2015 | ||||||
| Stock options | 381,350 | 224,200 | 1,153,252 | |||||
Personal Injury Actions and Other
— Product and general liability claims are made against the Company from time to time in the ordinary course of business. The Company is generally self-insured for future claims up to $5.0 million per claim. Accordingly, a reserve is maintained for the estimated costs of such claims. At September 30,Market Risks
— The Company was contingently liable under bid, performance and specialty bonds totalingOther Matters
— The Company is subject to other environmental matters and legal proceedings and claims, including patent, antitrust, product liability, warranty and state dealership regulation compliance proceedings that arise in the ordinary course of business. Although the final results of all such matters and claims cannot be predicted with certainty, management believes that the ultimate resolution of all such matters and claims will not have a material effect on the Company’s financial condition, results of operations or cash flows. Actual results could vary, among other things, due to the uncertainties involved in litigation.At September 30, 2017,2021, approximately 27%19% of the Company’s workforce was covered under collective bargaining agreements.
The Company derived a significant portion of its revenue from the DoD, as follows (in millions):
|
| Fiscal Year Ended September 30, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
DoD |
| $ | 2,395.1 |
|
| $ | 2,300.4 |
|
| $ | 2,006.9 |
|
Foreign military sales |
|
| 139.2 |
|
|
| 71.2 |
|
|
| 27.7 |
|
Total DoD sales |
| $ | 2,534.3 |
|
| $ | 2,371.6 |
|
| $ | 2,034.6 |
|
| Fiscal Year Ended September 30, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| DoD | $ | 1,314.6 | $ | 1,205.0 | $ | 922.1 | |||||
| Foreign military sales | 32.1 | 1.8 | 0.3 | ||||||||
| Total DoD sales | $ | 1,346.7 | $ | 1,206.8 | $ | 922.4 | |||||
No other customer represented more than 10% of sales for fiscal 2017, 20162021, 2020 or 2015.
Certain risks are inherent in doing business with the DoD, including technological changes and changes in levels of defense spending. All DoD contracts contain a provision that they may be terminated at any time at the convenience of the U.S. government. In such an event, the Company is entitled to recover allowable costs plus a reasonable profit earned to the date of termination.
Because the Company is a relatively large defense contractor, the Company’s U.S. government contract operations are subject to extensive annual audit processes and to U.S. government investigations of business practices and cost classifications from which legal or administrative proceedings can result. Based on U.S. government procurement regulations, under certain circumstances the Company could be fined, as well as suspended or debarred from U.S. government contracting. During a suspension or debarment, the Company would also be prohibited from selling equipment or services to customers that depend on loans or financial commitments from the Export-Import Bank, Overseas Private Investment Corporation and similar U.S. government agencies.
The Company recognized an $18.5 million gain during fiscal 2020 upon receipt of proceeds for a claim under its property and business interruption insurance. The claim was primarily for property damage and lost profits due to a weather-related roof collapse that occurred at one of the Commercial segment’s facilities in February 2019. The gain was recognized as a reduction of cost of sales ($10.8 million), a reduction of selling, general and administrative expense ($1.5 million) and miscellaneous income ($6.2 million).
20. Shareholders’ Equity
In May 2019, the Company’s Board of Directors approved a Common Stock repurchase authorization of 10,000,000 shares. The Company repurchased 927,934 shares of its Common Stock under this authorization in fiscal 2021 at a cost of $107.8 million. The Company repurchased 550,853 shares of Common Stock under this authorization in fiscal 2020 at a cost of $40.8 million. The Company repurchased 4,866,532 shares of Common Stock under this authorization in fiscal 2019 at a cost of $350.1 million. The Company has remaining authority to repurchase 6,531,394 shares of Common Stock as of September 30, 2021.
21. Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) by component were as follows (in millions):
|
| Employee Pension and Postretirement Benefits, Net of Tax |
|
| Cumulative Translation Adjustments |
|
| Derivative Instruments, Net of Tax |
|
| Accumulated Other Comprehensive Income (Loss) |
| ||||
Balance at September 30, 2018 |
| $ | (10.9 | ) |
| $ | (96.2 | ) |
| $ | 0.3 |
|
| $ | (106.8 | ) |
Tax impact of U.S. tax reform on Accumulated Other Comprehensive Income (ASU 2018-02) |
|
| (9.1 | ) |
|
| — |
|
|
| — |
|
|
| (9.1 | ) |
Balance at October 1, 2018 |
|
| (20.0 | ) |
|
| (96.2 | ) |
|
| 0.3 |
|
|
| (115.9 | ) |
Other comprehensive income (loss) before reclassifications |
|
| (49.5 | ) |
|
| (36.3 | ) |
|
| — |
|
|
| (85.8 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) |
|
| 0.1 |
|
|
| — |
|
|
| — |
|
|
| 0.1 |
|
Net current period other comprehensive income (loss) |
|
| (49.4 | ) |
|
| (36.3 | ) |
|
| — |
|
|
| (85.7 | ) |
Balance at September 30, 2019 |
|
| (69.4 | ) |
|
| (132.5 | ) |
|
| 0.3 |
|
|
| (201.6 | ) |
Other comprehensive income (loss) before reclassifications |
|
| (29.3 | ) |
|
| 30.4 |
|
|
| (0.5 | ) |
|
| 0.6 |
|
Amounts reclassified from accumulated other comprehensive income (loss) |
|
| 2.8 |
|
|
| — |
|
|
| (0.2 | ) |
|
| 2.6 |
|
Net current period other comprehensive income (loss) |
|
| (26.5 | ) |
|
| 30.4 |
|
|
| (0.7 | ) |
|
| 3.2 |
|
Balance at September 30, 2020 |
|
| (95.9 | ) |
|
| (102.1 | ) |
|
| (0.4 | ) |
|
| (198.4 | ) |
Other comprehensive income (loss) before reclassifications |
|
| 57.1 |
|
|
| 3.8 |
|
|
| 1.5 |
|
|
| 62.4 |
|
Amounts reclassified from accumulated other comprehensive income (loss) |
|
| 4.6 |
|
|
| — |
|
|
| 0.4 |
|
|
| 5.0 |
|
Net current period other comprehensive income (loss) |
|
| 61.7 |
|
|
| 3.8 |
|
|
| 1.9 |
|
|
| 67.4 |
|
Balance at September 30, 2021 |
| $ | (34.2 | ) |
| $ | (98.3 | ) |
| $ | 1.5 |
|
| $ | (131.0 | ) |
Reclassifications out of accumulated other comprehensive income (loss) included in the computation of net periodic pension and postretirement benefit cost (See Note 5 of the Notes to Consolidated Financial Statements for additional details regarding employee benefit plans) were as follows (in millions):
|
| Classification of |
| Fiscal Year Ended September 30, |
| |||||||||
|
| income (expense) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Amortization of employee pension and postretirement benefits items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service costs |
| Miscellaneous, net |
| $ | 0.9 |
|
| $ | 0.7 |
|
| $ | 0.2 |
|
Actuarial (gains) losses |
| Miscellaneous, net |
|
| 5.2 |
|
|
| 3.1 |
|
|
| — |
|
Total before tax |
|
|
|
| 6.1 |
|
|
| 3.8 |
|
|
| 0.2 |
|
Tax benefit |
|
|
|
| (1.5 | ) |
|
| (1.0 | ) |
|
| (0.1 | ) |
Net of tax |
|
|
| $ | 4.6 |
|
| $ | 2.8 |
|
| $ | 0.1 |
|
22. Derivative Financial Instruments and Hedging Activities
The Company was oneuses forward foreign currency exchange contracts (derivatives) to reduce the exchange rate risk of several bidders onspecific foreign currency denominated transactions. These derivatives typically require the exchange of a large, multi-year military truck solicitationforeign currency for the Canadian government. The Company's bid was not selected andU.S. dollars at a fixed rate at a future date. At times, the Company subsequently submittedhas designated these hedges as either cash flow hedges or fair value hedges under FASB ASC Topic 815, Derivatives and Hedging, as follows:
Fair Value Hedging Strategy: The Company enters into forward foreign exchange contracts to hedge firm commitments denominated in foreign currencies. The purpose of the Company’s foreign currency hedging activities is to protect the Company from risk that the eventual U.S. dollar-equivalent cash flows from the sale of products to international customers will be adversely affected by changes in exchange rates.
Cash Flow Hedging Strategy: To protect against the impact of movements in foreign exchange rates on forecasted purchases or sales transactions denominated in foreign currency, the Company has a legal challengeforeign currency cash flow hedging program. The Company hedges portions of that conclusion. In May 2016,its forecasted transactions denominated in foreign currency with forward contracts.
At September 30, 2021, the Canadian International Trade Tribunal ruledtotal notional U.S. dollar equivalent of outstanding forward foreign exchange contracts designated as hedges in accordance with ASC Topic 815 was $113.5 million. Net gains or losses related to these contracts are recorded within the same line item in the Company's favor in connection with that challenge. At thisConsolidated Statements of Income impacted by the hedged item. The maximum length of time the Company is unablehedging its exposure to estimate the ultimatevariability in future cash flows is two years.
The Company enters into forward foreign currency exchange contracts to create economic hedges to manage foreign exchange risk exposure associated with non-functional currency denominated receivables and payables resulting from global sales and sourcing activities. The Company has not designated these derivative contracts as hedge transactions under FASB ASC Topic 815, and accordingly, the mark-to-market impact of this challenge and subsequent rulingthese derivatives is recorded each period in current earnings within “Miscellaneous, net” in the Company's favor.Consolidated Statements of Income. The fair value of foreign currency related derivatives is included in the Consolidated Balance Sheets in “Other current assets” and “Other current liabilities.” At September 30, 2021, the U.S. dollar equivalent of these outstanding forward foreign exchange contracts totaled $64.0 million in notional amounts covering a variety of foreign currency exposures.
The fair values of all open derivative instruments were as follows (in millions):
|
| September 30, 2021 |
|
| September 30, 2020 |
| ||||||||||||||||||||||||||
|
| Other Current Assets |
|
| Other Long Term Assets |
|
| Other Current Liabilities |
|
| Other Long Term Liabilities |
|
| Other Current Assets |
|
| Other Long Term Assets |
|
| Other Current Liabilities |
|
| Other Long Term Liabilities |
| ||||||||
Cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
| $ | 0.5 |
|
| $ | 1.8 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 0.5 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
|
| 0.2 |
|
|
| 0.1 |
|
|
| 1.5 |
|
|
| 0.2 |
|
|
| — |
|
|
| — |
|
|
| 2.0 |
|
|
| — |
|
|
| $ | 0.7 |
|
| $ | 1.9 |
|
| $ | 1.5 |
|
| $ | 0.2 |
|
| $ | — |
|
| $ | — |
|
| $ | 2.5 |
|
| $ | — |
|
The pre-tax effects of derivative instruments consisted of the following (in millions):
|
|
|
| Fiscal Year Ended September 30, |
| |||||||||
|
| Classification of Gains (Losses) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
| Cost of sales |
| $ | (0.7 | ) |
| $ | 0.6 |
|
| $ | 1.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
| Miscellaneous, net |
|
| 0.2 |
|
|
| 1.7 |
|
|
| (1.7 | ) |
|
|
|
| $ | (0.5 | ) |
| $ | 2.3 |
|
| $ | (0.4 | ) |
23. Fair Value Measurement
FASB ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e., exit price) in an orderly transaction between market participants at the measurement date. FASB ASC Topic 820 requires disclosures that categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation. Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment.
The three levels are defined as follows:
Level 1: | Unadjusted quoted prices in active markets for identical assets or liabilities. |
Level 2: | Observable inputs other than quoted prices in active markets for identical assets or liabilities, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets. |
Level 3: | Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability. |
The fair values of the Company’s financial assets and liabilities were as follows (in millions):
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERP plan assets (a) |
| $ | 21.3 |
|
| $ | — |
|
| $ | — |
|
| $ | 21.3 |
|
Investment in equity securities (b) |
|
| 20.6 |
|
|
| — |
|
|
| — |
|
|
| 20.6 |
|
Foreign currency exchange derivatives (c) |
|
| — |
|
|
| 2.6 |
|
|
| — |
|
|
| 2.6 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange derivatives (c) |
| $ | — |
|
| $ | 1.7 |
|
| $ | — |
|
| $ | 1.7 |
|
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERP plan assets (a) |
| $ | 21.4 |
|
| $ | — |
|
| $ | — |
|
| $ | 21.4 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange derivatives (c) |
| $ | — |
|
| $ | 2.5 |
|
| $ | — |
|
| $ | 2.5 |
|
(a) | Represents investments in a rabbi trust for the Company’s non-qualified SERP. The fair values of these investments are determined using a market approach. Investments include mutual funds for which quoted prices in active markets are available. The Company records changes in the fair value of investments in “Miscellaneous, net” in the Consolidated Statements of Income. |
(b) | Represents investments in equity securities for which quoted prices in active markets are available. The Company records changes in the fair value of investments in “Miscellaneous, net” in the Consolidated Statements of Income. |
(c) | Based on observable market transactions of forward currency prices. |
See Notes 5, 13 and 15 of the Notes to Consolidated Financial Statements for fair value information related to pension assets, investments and debt.
Items Measured at Fair Value on a Nonrecurring Basis — In addition to items that are measured at fair value on a recurring basis, the Company also has assets and liabilities in its balance sheet that are measured at fair value on a nonrecurring basis. As these assets and liabilities are not measured at fair value on a recurring basis, they are not included in the tables above. Assets and liabilities that are measured at fair value on a nonrecurring basis include long-lived assets (See Note 1 of Notes to Consolidated Financial Statements fair value of assets acquired and liabilities assumed through acquisition, Note 10 of the Notes to Consolidated Financial Statements for impairments of long-lived assets, Note 11 of the Notes to Consolidated Financial Statements for impairment valuation analysis of intangible assets and Note 12 of the Notes to Consolidated Financial Statements for impairments of right of use assets). The Company has determined that the fair value measurements related to each of these assets rely primarily on Company-specific inputs and the Company’s assumptions about the use of the assets, as observable inputs are not available. As such, the Company has determined that each of these fair value measurements reside within Level 3 of the fair value hierarchy.
24. Business Segment Information
The Company is organized into four4 reportable segments based on the internal organization used by the President and Chief Executive Officer for making operating decisions and measuring performance and based on the similarity of customers served, common management, common use of facilities and economic results attained. The Company’s segments are as follows:
Access Equipment
: This segment consists of JLG and JerrDan. JLG designs and manufactures aerial work platforms and telehandlers that are sold worldwide for use in a wide variety of construction, industrial, institutional and general maintenance applications to position workers and materials at elevated heights. AccessDefense
: This segment consists of OshkoshFire & Emergency
: This segment includes Pierce, Airport Products and Kewaunee. These business units design, manufacture and market commercial and custom fire vehicles, simulators and emergency vehicles primarily for fire departments, airports and other governmental units, and broadcast vehicles for broadcasters and TV stations in the U.S. and abroad.Commercial
: This segment includes McNeilus,In accordance with FASB ASC Topic 280,
Segment Reporting, for purposes of business segment performance measurement, the Company does not allocate to individual business segments costs or items that are of a non-operating nature or organizational or functional expenses of a corporate nature. The caption “Corporate” includes corporate office expenses, share-based compensation, costs of certain business initiatives and shared services or operations benefiting multiple segments,Selected financial information concerning the Company’s reportable segments and product lines is as follows (in millions):
|
| Fiscal Year Ended September 30, |
| |||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||||||||||||||||||||||||||
|
| External Customers |
|
| Inter- segment |
|
| Net Sales |
|
| External Customers |
|
| Inter- segment |
|
| Net Sales |
|
| External Customers |
|
| Inter- segment |
|
| Net Sales |
| |||||||||
Access Equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerial work platforms |
| $ | 1,471.4 |
|
| $ | — |
|
| $ | 1,471.4 |
|
| $ | 1,101.7 |
|
| $ | — |
|
| $ | 1,101.7 |
|
| $ | 1,944.4 |
|
| $ | — |
|
| $ | 1,944.4 |
|
Telehandlers |
|
| 769.4 |
|
|
| — |
|
|
| 769.4 |
|
|
| 680.4 |
|
|
| — |
|
|
| 680.4 |
|
|
| 1,254.9 |
|
|
| — |
|
|
| 1,254.9 |
|
Other |
|
| 826.5 |
|
|
| 4.8 |
|
|
| 831.3 |
|
|
| 723.6 |
|
|
| 9.4 |
|
|
| 733.0 |
|
|
| 880.4 |
|
|
| — |
|
|
| 880.4 |
|
Total Access Equipment |
|
| 3,067.3 |
|
|
| 4.8 |
|
|
| 3,072.1 |
|
|
| 2,505.7 |
|
|
| 9.4 |
|
|
| 2,515.1 |
|
|
| 4,079.7 |
|
|
| — |
|
|
| 4,079.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defense (a) |
|
| 2,524.1 |
|
|
| 1.5 |
|
|
| 2,525.6 |
|
|
| 2,300.4 |
|
|
| 11.1 |
|
|
| 2,311.5 |
|
|
| 2,085.7 |
|
|
| 11.8 |
|
|
| 2,097.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fire & Emergency (a) |
|
| 1,211.6 |
|
|
| 15.0 |
|
|
| 1,226.6 |
|
|
| 1,098.0 |
|
|
| 9.0 |
|
|
| 1,107.0 |
|
|
| 1,194.4 |
|
|
| 16.3 |
|
|
| 1,210.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refuse collection |
|
| 465.9 |
|
|
| — |
|
|
| 465.9 |
|
|
| 437.2 |
|
|
| — |
|
|
| 437.2 |
|
|
| 451.9 |
|
|
| — |
|
|
| 451.9 |
|
Concrete |
|
| 364.8 |
|
|
| — |
|
|
| 364.8 |
|
|
| 403.5 |
|
|
| — |
|
|
| 403.5 |
|
|
| 439.9 |
|
|
| — |
|
|
| 439.9 |
|
Other |
|
| 102.9 |
|
|
| 4.0 |
|
|
| 106.9 |
|
|
| 110.6 |
|
|
| 6.5 |
|
|
| 117.1 |
|
|
| 128.3 |
|
|
| 2.1 |
|
|
| 130.4 |
|
Total Commercial |
|
| 933.6 |
|
|
| 4.0 |
|
|
| 937.6 |
|
|
| 951.3 |
|
|
| 6.5 |
|
|
| 957.8 |
|
|
| 1,020.1 |
|
|
| 2.1 |
|
|
| 1,022.2 |
|
Corporate and intersegment eliminations (a) |
|
| 0.7 |
|
|
| (25.3 | ) |
|
| (24.6 | ) |
|
| 1.4 |
|
|
| (36.0 | ) |
|
| (34.6 | ) |
|
| 2.1 |
|
|
| (30.2 | ) |
|
| (28.1 | ) |
Consolidated |
| $ | 7,737.3 |
|
| $ | — |
|
| $ | 7,737.3 |
|
| $ | 6,856.8 |
|
| $ | — |
|
| $ | 6,856.8 |
|
| $ | 8,382.0 |
|
| $ | — |
|
| $ | 8,382.0 |
|
| Fiscal Year Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2017 | 2016 | 2015 | |||||||||||||||||||||||||||||||||
External Customers | Inter- segment | Net Sales | External Customers | Inter- segment | Net Sales | External Customers | Inter- segment | Net Sales | |||||||||||||||||||||||||||
| Access equipment | |||||||||||||||||||||||||||||||||||
| Aerial work platforms | $ | 1,629.6 | $ | — | $ | 1,629.6 | $ | 1,539.5 | $ | — | $ | 1,539.5 | $ | 1,627.0 | $ | — | $ | 1,627.0 | |||||||||||||||||
| Telehandlers | 661.8 | — | 661.8 | 773.9 | — | 773.9 | 1,126.1 | — | 1,126.1 | ||||||||||||||||||||||||||
| Other | 735.0 | — | 735.0 | 699.0 | — | 699.0 | 647.5 | — | 647.5 | ||||||||||||||||||||||||||
| Total access equipment | 3,026.4 | — | 3,026.4 | 3,012.4 | — | 3,012.4 | 3,400.6 | — | 3,400.6 | ||||||||||||||||||||||||||
| Defense | 1,818.6 | 1.5 | 1,820.1 | 1,349.3 | 1.8 | 1,351.1 | 931.8 | 8.0 | 939.8 | ||||||||||||||||||||||||||
| Fire & emergency | 1,015.4 | 15.5 | 1,030.9 | 941.5 | 11.8 | 953.3 | 791.5 | 23.6 | 815.1 | ||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||
| Concrete placement | 474.0 | — | 474.0 | 463.6 | — | 463.6 | 461.0 | — | 461.0 | ||||||||||||||||||||||||||
| Refuse collection | 391.1 | — | 391.1 | 409.1 | — | 409.1 | 385.0 | — | 385.0 | ||||||||||||||||||||||||||
| Other | 99.3 | 5.9 | 105.2 | 103.3 | 3.2 | 106.5 | 128.2 | 3.8 | 132.0 | ||||||||||||||||||||||||||
| Total commercial | 964.4 | 5.9 | 970.3 | 976.0 | 3.2 | 979.2 | 974.2 | 3.8 | 978.0 | ||||||||||||||||||||||||||
| Corporate and intersegment eliminations | 4.8 | (22.9 | ) | (18.1 | ) | — | (16.8 | ) | (16.8 | ) | — | (35.4 | ) | (35.4 | ) | ||||||||||||||||||||
| Consolidated | $ | 6,829.6 | $ | — | $ | 6,829.6 | $ | 6,279.2 | $ | — | $ | 6,279.2 | $ | 6,098.1 | $ | — | $ | 6,098.1 | |||||||||||||||||
(a) | Results for fiscal 2020 and fiscal 2019 have been reclassified to reflect the move of the airport snow removal vehicle business from the Fire & Emergency segment to the Defense segment. |
|
| Fiscal Year Ended September 30, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Access Equipment (a) |
| $ | 249.1 |
|
| $ | 198.6 |
|
| $ | 502.6 |
|
Defense (b) (c) |
|
| 197.8 |
|
|
| 188.1 |
|
|
| 207.8 |
|
Fire & Emergency (b) (d) |
|
| 174.2 |
|
|
| 146.5 |
|
|
| 172.0 |
|
Commercial (e) |
|
| 71.0 |
|
|
| 81.2 |
|
|
| 66.8 |
|
Corporate (f) |
|
| (147.4 | ) |
|
| (125.7 | ) |
|
| (152.2 | ) |
Consolidated |
|
| 544.7 |
|
|
| 488.7 |
|
|
| 797.0 |
|
Interest expense, net of interest income (g) |
|
| (44.7 | ) |
|
| (51.8 | ) |
|
| (47.6 | ) |
Miscellaneous other (expense) income (h) |
|
| (2.1 | ) |
|
| 2.2 |
|
|
| 1.3 |
|
Income before income taxes and losses of unconsolidated affiliates |
| $ | 497.9 |
|
| $ | 439.1 |
|
| $ | 750.7 |
|
| Fiscal Year Ended September 30, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Operating income (loss): | |||||||||||
Access equipment (a) | $ | 259.1 | $ | 263.4 | $ | 407.0 | |||||
| Defense | 207.9 | 122.5 | 9.2 | ||||||||
| Fire & emergency | 104.2 | 67.0 | 43.8 | ||||||||
| Commercial | 43.8 | 67.6 | 64.5 | ||||||||
| Corporate | (152.0 | ) | (156.5 | ) | (126.0 | ) | |||||
| Intersegment eliminations | — | — | 0.1 | ||||||||
| Consolidated | 463.0 | 364.0 | 398.6 | ||||||||
Interest expense net of interest income (b) | (54.9 | ) | (58.3 | ) | (67.6 | ) | |||||
| Miscellaneous other income (expense) | 3.2 | 1.3 | (4.9 | ) | |||||||
| Income before income taxes and equity in earnings of unconsolidated affiliates | $ | 411.3 | $ | 307.0 | $ | 326.1 | |||||
(a) | Fiscal |
(b) | Results for fiscal 2020 and fiscal 2019 have been reclassified to reflect the move of the airport snow removal vehicle business from the Fire & Emergency segment to the Defense segment. |
(c) | Fiscal 2021 results include $1.0 million of acquisition related costs. Fiscal 2020 results include reimbursement of $0.9 million of legal costs associated with an arbitration settlement. |
(d) | Fiscal 2020 includes $1.4 million of restructuring costs. |
(e) | Fiscal 2020 results include $1.5 million of restructuring costs, $4.1 million of accelerated depreciation related to restructuring actions, a |
(f) | Fiscal 2021 includes a $0.4 million |
(g) | |
Fiscal |
| Fiscal Year Ended September 30, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Depreciation and amortization: | |||||||||||
| Access equipment | $ | 72.1 | $ | 77.0 | $ | 74.1 | |||||
| Defense | 14.5 | 11.1 | 12.2 | ||||||||
| Fire & emergency | 9.4 | 9.7 | 10.3 | ||||||||
| Commercial | 12.7 | 12.0 | 11.2 | ||||||||
Corporate (a) | 21.6 | 19.0 | 16.7 | ||||||||
| Consolidated | $ | 130.3 | $ | 128.8 | $ | 124.5 | |||||
| Capital expenditures: | |||||||||||
Access equipment (b) | $ | 51.4 | $ | 52.5 | $ | 56.6 | |||||
| Defense | 31.9 | 22.2 | 2.2 | ||||||||
| Fire & emergency | 7.2 | 7.2 | 4.7 | ||||||||
Commercial (b) | 10.9 | 10.0 | 11.5 | ||||||||
Corporate (c) | 11.8 | 35.4 | 83.0 | ||||||||
| Consolidated | $ | 113.2 | $ | 127.3 | $ | 158.0 | |||||
(h) | Fiscal 2020 results include a $6.2 million gain from insurance proceeds in excess of property loss in the Commercial segment. |
|
| Fiscal Year Ended September 30, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Depreciation and amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
Access Equipment (a) |
| $ | 37.9 |
|
| $ | 42.1 |
|
| $ | 58.2 |
|
Defense (b) |
|
| 27.8 |
|
|
| 20.1 |
|
|
| 17.8 |
|
Fire & Emergency (b) |
|
| 10.0 |
|
|
| 10.0 |
|
|
| 9.0 |
|
Commercial (c) |
|
| 13.1 |
|
|
| 17.1 |
|
|
| 12.4 |
|
Corporate |
|
| 15.2 |
|
|
| 14.9 |
|
|
| 17.8 |
|
Consolidated |
| $ | 104.0 |
|
| $ | 104.2 |
|
| $ | 115.2 |
|
Capital expenditures: |
|
|
|
|
|
|
|
|
|
|
|
|
Access Equipment (d) |
| $ | 55.8 |
|
| $ | 56.5 |
|
| $ | 61.4 |
|
Defense (b) |
|
| 23.8 |
|
|
| 32.4 |
|
|
| 32.0 |
|
Fire & Emergency (b) |
|
| 8.1 |
|
|
| 6.7 |
|
|
| 12.2 |
|
Commercial (d) |
|
| 21.3 |
|
|
| 18.9 |
|
|
| 18.1 |
|
Corporate (e) |
|
| 5.8 |
|
|
| 15.7 |
|
|
| 50.5 |
|
Consolidated |
| $ | 114.8 |
|
| $ | 130.2 |
|
| $ | 174.2 |
|
(a) | Includes $3.6 million and $2.8 million of accelerated depreciation associated with restructuring actions in fiscal |
(b) | Results for fiscal 2020 and fiscal 2019 have been reclassified to reflect the move of the airport snow removal vehicle business from the Fire & Emergency segment to the |
(c) | Includes $4.1 million of |
(d) | |
Capital expenditures include both the purchase of property, plant and equipment and equipment held for rental. |
(e) | |
Capital expenditures include capital |
|
| September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Identifiable assets: |
|
|
|
|
|
|
|
|
Access Equipment: |
|
|
|
|
|
|
|
|
U.S. |
| $ | 2,191.3 |
|
| $ | 2,151.4 |
|
Europe, Africa and Middle East |
|
| 470.9 |
|
|
| 383.4 |
|
Rest of the world |
|
| 371.4 |
|
|
| 359.0 |
|
Total Access Equipment |
|
| 3,033.6 |
|
|
| 2,893.8 |
|
Defense: (a) |
|
|
|
|
|
|
|
|
U.S. |
|
| 1,151.1 |
|
|
| 1,078.7 |
|
Rest of the world |
|
| 7.2 |
|
|
| 7.2 |
|
Total Defense |
|
| 1,158.3 |
|
|
| 1,085.9 |
|
Fire & Emergency - U.S. (a) |
|
| 536.3 |
|
|
| 563.6 |
|
Commercial: |
|
|
|
|
|
|
|
|
U.S. |
|
| 377.8 |
|
|
| 370.7 |
|
Rest of the world |
|
| 54.8 |
|
|
| 47.5 |
|
Total Commercial |
|
| 432.6 |
|
|
| 418.2 |
|
Corporate - U.S. (b) |
|
| 1,730.8 |
|
|
| 854.4 |
|
Consolidated |
| $ | 6,891.6 |
|
| $ | 5,815.9 |
|
| September 30, | |||||||
| 2017 | 2016 | ||||||
| Identifiable assets: | |||||||
| Access equipment: | |||||||
| U.S. | $ | 1,905.5 | $ | 1,856.0 | |||
| Europe | 541.0 | 521.5 | |||||
| Rest of the world | 246.1 | 193.7 | |||||
| Total access equipment | 2,692.6 | 2,571.2 | |||||
| Defense: | |||||||
| U.S. | 775.1 | 522.2 | |||||
| Rest of the world | 7.0 | 3.0 | |||||
| Total defense | 782.1 | 525.2 | |||||
| Fire & emergency - U.S. | 552.6 | 522.7 | |||||
| Commercial: | |||||||
| U.S. | 377.3 | 358.4 | |||||
| Rest of the world | 42.3 | 33.4 | |||||
| Total commercial | 419.6 | 391.8 | |||||
| Corporate: | |||||||
U.S. (a) | 543.9 | 408.3 | |||||
Rest of the world (b) | 108.1 | 94.6 | |||||
| Total corporate | 652.0 | 502.9 | |||||
| Consolidated | $ | 5,098.9 | $ | 4,513.8 | |||
(a) | Results for September 30, 2020 have been reclassified to reflect the move of the airport snow removal vehicle business from the Fire & Emergency segment to the Defense segment. |
(b) | Primarily includes cash and short-term |
The following table presents net sales by geographic region based on product shipment destination (in millions):
|
| Fiscal Year Ended September 30, 2021 |
| |||||||||||||||||||||
|
| Access Equipment |
|
| Defense |
|
| Fire & Emergency |
|
| Commercial |
|
| Eliminations |
|
| Total |
| ||||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
| $ | 2,358.9 |
|
| $ | 2,337.8 |
|
| $ | 1,147.4 |
|
| $ | 929.0 |
|
| $ | (24.6 | ) |
| $ | 6,748.5 |
|
Europe, Africa and Middle East |
|
| 273.4 |
|
|
| 183.2 |
|
|
| 46.7 |
|
|
| 1.5 |
|
|
| — |
|
|
| 504.8 |
|
Rest of the World |
|
| 439.8 |
|
|
| 4.6 |
|
|
| 32.5 |
|
|
| 7.1 |
|
|
| — |
|
|
| 484.0 |
|
Consolidated |
| $ | 3,072.1 |
|
| $ | 2,525.6 |
|
| $ | 1,226.6 |
|
| $ | 937.6 |
|
| $ | (24.6 | ) |
| $ | 7,737.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fiscal Year Ended September 30, 2020 |
| |||||||||||||||||||||
|
| Access Equipment |
|
| Defense (a) |
|
| Fire & Emergency (a) |
|
| Commercial |
|
| Eliminations (a) |
|
| Total |
| ||||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
| $ | 1,881.6 |
|
| $ | 2,200.4 |
|
| $ | 1,029.3 |
|
| $ | 947.0 |
|
| $ | (34.6 | ) |
| $ | 6,023.7 |
|
Europe, Africa and Middle East |
|
| 275.3 |
|
|
| 107.0 |
|
|
| 29.8 |
|
|
| 1.6 |
|
|
| — |
|
|
| 413.7 |
|
Rest of the World |
|
| 358.2 |
|
|
| 4.1 |
|
|
| 47.9 |
|
|
| 9.2 |
|
|
| — |
|
|
| 419.4 |
|
Consolidated |
| $ | 2,515.1 |
|
| $ | 2,311.5 |
|
| $ | 1,107.0 |
|
| $ | 957.8 |
|
| $ | (34.6 | ) |
| $ | 6,856.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fiscal Year Ended September 30, 2019 |
| |||||||||||||||||||||
|
| Access Equipment |
|
| Defense (a) |
|
| Fire & Emergency (a) |
|
| Commercial |
|
| Eliminations (a) |
|
| Total |
| ||||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
| $ | 3,147.9 |
|
| $ | 2,012.1 |
|
| $ | 1,086.9 |
|
| $ | 997.8 |
|
| $ | (28.1 | ) |
| $ | 7,216.6 |
|
Europe, Africa and Middle East |
|
| 548.6 |
|
|
| 84.0 |
|
|
| 27.7 |
|
|
| 3.9 |
|
|
| — |
|
|
| 664.2 |
|
Rest of the World |
|
| 383.2 |
|
|
| 1.4 |
|
|
| 96.1 |
|
|
| 20.5 |
|
|
| — |
|
|
| 501.2 |
|
Consolidated |
| $ | 4,079.7 |
|
| $ | 2,097.5 |
|
| $ | 1,210.7 |
|
| $ | 1,022.2 |
|
| $ | (28.1 | ) |
| $ | 8,382.0 |
|
(a) | Results for fiscal 2020 and fiscal 2019 have been reclassified to reflect the move of the airport snow removal vehicle business from the Fire & Emergency segment to the Defense segment. |
| Fiscal Year Ended September 30, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Net sales: | |||||||||||
| United States | $ | 5,094.8 | $ | 4,756.6 | $ | 4,789.3 | |||||
| Other North America | 191.6 | 219.5 | 302.8 | ||||||||
| Europe, Africa and the Middle East | 1,146.9 | 905.5 | 564.4 | ||||||||
| Rest of the world | 396.3 | 397.6 | 441.6 | ||||||||
| Consolidated | $ | 6,829.6 | $ | 6,279.2 | $ | 6,098.1 | |||||
25. Subsequent Event
On October 6, 2021, the Company’s 100% owned existing and future subsidiaries thatBoard of Directors approved a change in the Company’s fiscal year end from time to time guarantee obligations under the Credit Agreement, with certain exceptions (the “Guarantors”).
Oshkosh Corporation | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Total | |||||||||||||||
| Net sales | $ | — | $ | 5,837.5 | $ | 1,181.7 | $ | (189.6 | ) | $ | 6,829.6 | ||||||||
| Cost of sales | 1.9 | 4,838.0 | 1,004.4 | (189.1 | ) | 5,655.2 | |||||||||||||
| Gross income (loss) | (1.9 | ) | 999.5 | 177.3 | (0.5 | ) | 1,174.4 | ||||||||||||
| Selling, general and administrative expenses | 136.5 | 424.2 | 104.9 | — | 665.6 | ||||||||||||||
| Amortization of purchased intangibles | — | 38.4 | 7.4 | — | 45.8 | ||||||||||||||
| Operating income (loss) | (138.4 | ) | 536.9 | 65.0 | (0.5 | ) | 463.0 | ||||||||||||
| Interest expense | (56.9 | ) | (54.4 | ) | (2.2 | ) | 53.7 | (59.8 | ) | ||||||||||
| Interest income | 3.4 | 18.1 | 37.1 | (53.7 | ) | 4.9 | |||||||||||||
| Miscellaneous, net | 91.7 | (179.6 | ) | 91.1 | — | 3.2 | |||||||||||||
| Income (loss) before income taxes | (100.2 | ) | 321.0 | 191.0 | (0.5 | ) | 411.3 | ||||||||||||
| Provision for (benefit from) income taxes | (29.3 | ) | 93.7 | 63.0 | (0.2 | ) | 127.2 | ||||||||||||
| Income (loss) before equity in earnings of affiliates | (70.9 | ) | 227.3 | 128.0 | (0.3 | ) | 284.1 | ||||||||||||
| Equity in earnings of consolidated subsidiaries | 356.5 | 81.7 | 42.5 | (480.7 | ) | — | |||||||||||||
| Equity in earnings of unconsolidated affiliates | — | — | 1.5 | — | 1.5 | ||||||||||||||
| Net income | 285.6 | 309.0 | 172.0 | (481.0 | ) | 285.6 | |||||||||||||
| Other comprehensive income (loss), net of tax | 50.0 | 18.1 | 22.5 | (40.6 | ) | 50.0 | |||||||||||||
| Comprehensive income | $ | 335.6 | $ | 327.1 | $ | 194.5 | $ | (521.6 | ) | $ | 335.6 | ||||||||
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL STATEMENTS
Oshkosh Corporation | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Total | |||||||||||||||
| Net sales | $ | — | $ | 5,289.7 | $ | 1,119.4 | $ | (129.9 | ) | $ | 6,279.2 | ||||||||
| Cost of sales | 2.6 | 4,410.7 | 940.1 | (130.0 | ) | 5,223.4 | |||||||||||||
| Gross income (loss) | (2.6 | ) | 879.0 | 179.3 | 0.1 | 1,055.8 | |||||||||||||
| Selling, general and administrative expenses | 121.8 | 390.7 | 99.9 | — | 612.4 | ||||||||||||||
| Amortization of purchased intangibles | — | 38.6 | 13.9 | — | 52.5 | ||||||||||||||
| Asset impairment charge | — | 26.9 | — | — | 26.9 | ||||||||||||||
| Operating income (loss) | (124.4 | ) | 422.8 | 65.5 | 0.1 | 364.0 | |||||||||||||
| Interest expense | (277.6 | ) | (63.3 | ) | (2.1 | ) | 282.6 | (60.4 | ) | ||||||||||
| Interest income | 1.7 | 89.5 | 193.5 | (282.6 | ) | 2.1 | |||||||||||||
| Miscellaneous, net | 60.8 | (208.3 | ) | 148.8 | — | 1.3 | |||||||||||||
| Income (loss) before income taxes | (339.5 | ) | 240.7 | 405.7 | 0.1 | 307.0 | |||||||||||||
| Provision for (benefit from) income taxes | (108.8 | ) | 75.4 | 125.8 | — | 92.4 | |||||||||||||
| Income (loss) before equity in earnings of affiliates | (230.7 | ) | 165.3 | 279.9 | 0.1 | 214.6 | |||||||||||||
| Equity in earnings of consolidated subsidiaries | 447.4 | 101.5 | 77.9 | (626.8 | ) | — | |||||||||||||
| Equity in earnings of unconsolidated affiliates | (0.3 | ) | — | 2.1 | — | 1.8 | |||||||||||||
| Net income | 216.4 | 266.8 | 359.9 | (626.7 | ) | 216.4 | |||||||||||||
| Other comprehensive income (loss), net of tax | (30.6 | ) | (18.3 | ) | (6.2 | ) | 24.5 | (30.6 | ) | ||||||||||
| Comprehensive income | $ | 185.8 | $ | 248.5 | $ | 353.7 | $ | (602.2 | ) | $ | 185.8 | ||||||||
Oshkosh Corporation | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Total | |||||||||||||||
| Net sales | $ | — | $ | 5,127.7 | $ | 1,050.6 | $ | (80.2 | ) | $ | 6,098.1 | ||||||||
| Cost of sales | 0.4 | 4,321.7 | 816.7 | (79.9 | ) | 5,058.9 | |||||||||||||
| Gross income (loss) | (0.4 | ) | 806.0 | 233.9 | (0.3 | ) | 1,039.2 | ||||||||||||
| Selling, general and administrative expenses | 101.8 | 390.9 | 94.7 | — | 587.4 | ||||||||||||||
| Amortization of purchased intangibles | — | 39.2 | 14.0 | — | 53.2 | ||||||||||||||
| Operating income (loss) | (102.2 | ) | 375.9 | 125.2 | (0.3 | ) | 398.6 | ||||||||||||
| Interest expense | (256.2 | ) | (53.8 | ) | (1.3 | ) | 241.2 | (70.1 | ) | ||||||||||
| Interest income | 1.6 | 67.4 | 174.7 | (241.2 | ) | 2.5 | |||||||||||||
| Miscellaneous, net | 25.7 | (129.9 | ) | 99.3 | — | (4.9 | ) | ||||||||||||
| Income (loss) before income taxes | (331.1 | ) | 259.6 | 397.9 | (0.3 | ) | 326.1 | ||||||||||||
| Provision for (benefit from) income taxes | (106.4 | ) | 83.4 | 122.3 | (0.1 | ) | 99.2 | ||||||||||||
| Income (loss) before equity in earnings of affiliates | (224.7 | ) | 176.2 | 275.6 | (0.2 | ) | 226.9 | ||||||||||||
| Equity in earnings of consolidated subsidiaries | 454.4 | 129.2 | 149.7 | (733.3 | ) | — | |||||||||||||
| Equity in earnings of unconsolidated affiliates | (0.2 | ) | — | 2.8 | — | 2.6 | |||||||||||||
| Net income | 229.5 | 305.4 | 428.1 | (733.5 | ) | 229.5 | |||||||||||||
| Other comprehensive income (loss), net of tax | (75.2 | ) | (4.3 | ) | (67.7 | ) | 72.0 | (75.2 | ) | ||||||||||
| Comprehensive income | $ | 154.3 | $ | 301.1 | $ | 360.4 | $ | (661.5 | ) | $ | 154.3 | ||||||||
Oshkosh Corporation | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Total | |||||||||||||||
| Assets | |||||||||||||||||||
| Current assets: | |||||||||||||||||||
| Cash and cash equivalents | $ | 399.5 | $ | 4.6 | $ | 42.9 | $ | — | $ | 447.0 | |||||||||
| Receivables, net | 28.3 | 1,025.5 | 316.1 | (63.6 | ) | 1,306.3 | |||||||||||||
| Inventories, net | — | 819.3 | 379.1 | — | 1,198.4 | ||||||||||||||
| Other current assets | 45.4 | 31.9 | 10.8 | — | 88.1 | ||||||||||||||
| Total current assets | 473.2 | 1,881.3 | 748.9 | (63.6 | ) | 3,039.8 | |||||||||||||
| Investment in and advances to consolidated subsidiaries | 3,138.3 | 1,340.4 | (59.6 | ) | (4,419.1 | ) | — | ||||||||||||
| Intercompany receivables | 48.0 | 261.6 | 1,971.8 | (2,281.4 | ) | — | |||||||||||||
| Intangible assets, net | — | 909.5 | 611.3 | — | 1,520.8 | ||||||||||||||
| Other long-term assets | 69.1 | 242.9 | 226.3 | — | 538.3 | ||||||||||||||
| Total assets | $ | 3,728.6 | $ | 4,635.7 | $ | 3,498.7 | $ | (6,764.1 | ) | $ | 5,098.9 | ||||||||
| Liabilities and Shareholders' Equity | |||||||||||||||||||
| Current liabilities: | |||||||||||||||||||
| Accounts payable | $ | 11.6 | $ | 517.2 | $ | 176.4 | $ | (54.2 | ) | $ | 651.0 | ||||||||
| Customer advances | — | 510.7 | 2.7 | — | 513.4 | ||||||||||||||
| Other current liabilities | 105.2 | 304.9 | 118.0 | (9.4 | ) | 518.7 | |||||||||||||
| Total current liabilities | 116.8 | 1,332.8 | 297.1 | (63.6 | ) | 1,683.1 | |||||||||||||
| Long-term debt, less current maturities | 807.9 | — | — | — | 807.9 | ||||||||||||||
| Intercompany payables | 452.9 | 1,780.5 | 48.0 | (2,281.4 | ) | — | |||||||||||||
| Other long-term liabilities | 43.6 | 134.1 | 122.8 | — | 300.5 | ||||||||||||||
| Total shareholders’ equity | 2,307.4 | 1,388.3 | 3,030.8 | (4,419.1 | ) | 2,307.4 | |||||||||||||
| Total liabilities and shareholders' equity | $ | 3,728.6 | $ | 4,635.7 | $ | 3,498.7 | $ | (6,764.1 | ) | $ | 5,098.9 | ||||||||
Oshkosh Corporation | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Total | |||||||||||||||
| Assets | |||||||||||||||||||
| Current assets: | |||||||||||||||||||
| Cash and cash equivalents | $ | 285.4 | $ | 1.7 | $ | 34.8 | $ | — | $ | 321.9 | |||||||||
| Receivables, net | 13.0 | 734.3 | 319.6 | (45.0 | ) | 1,021.9 | |||||||||||||
| Inventories, net | — | 679.1 | 300.7 | — | 979.8 | ||||||||||||||
| Other current assets | 28.0 | 58.5 | 7.4 | — | 93.9 | ||||||||||||||
| Total current assets | 326.4 | 1,473.6 | 662.5 | (45.0 | ) | 2,417.5 | |||||||||||||
| Investment in and advances to consolidated subsidiaries | 6,148.2 | 1,253.6 | (120.0 | ) | (7,281.8 | ) | — | ||||||||||||
| Intercompany receivables | 48.0 | 1,353.7 | 4,632.2 | (6,033.9 | ) | — | |||||||||||||
| Intangible assets, net | — | 947.5 | 609.5 | — | 1,557.0 | ||||||||||||||
| Other long-term assets | 87.3 | 232.7 | 219.3 | — | 539.3 | ||||||||||||||
| Total assets | $ | 6,609.9 | $ | 5,261.1 | $ | 6,003.5 | $ | (13,360.7 | ) | $ | 4,513.8 | ||||||||
| Liabilities and Shareholders' Equity | |||||||||||||||||||
| Current liabilities: | |||||||||||||||||||
| Accounts payable | $ | 13.3 | $ | 375.0 | $ | 122.6 | $ | (44.8 | ) | $ | 466.1 | ||||||||
| Customer advances | — | 465.8 | 6.0 | — | 471.8 | ||||||||||||||
| Other current liabilities | 85.5 | 246.5 | 97.9 | (0.2 | ) | 429.7 | |||||||||||||
| Total current liabilities | 98.8 | 1,087.3 | 226.5 | (45.0 | ) | 1,367.6 | |||||||||||||
| Long-term debt, less current maturities | 826.2 | — | — | — | 826.2 | ||||||||||||||
| Intercompany payables | 3,639.4 | 2,346.5 | 48.0 | (6,033.9 | ) | — | |||||||||||||
| Other long-term liabilities | 69.0 | 147.9 | 126.6 | — | 343.5 | ||||||||||||||
| Total shareholders’ equity | 1,976.5 | 1,679.4 | 5,602.4 | (7,281.8 | ) | 1,976.5 | |||||||||||||
| Total liabilities and shareholders' equity | $ | 6,609.9 | $ | 5,261.1 | $ | 6,003.5 | $ | (13,360.7 | ) | $ | 4,513.8 | ||||||||
Oshkosh Corporation | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Total | |||||||||||||||
| Net cash provided (used) by operating activities | $ | (49.5 | ) | $ | 153.9 | $ | 142.1 | $ | — | $ | 246.5 | ||||||||
| Investing activities: | |||||||||||||||||||
| Additions to property, plant and equipment | (7.4 | ) | (53.2 | ) | (25.2 | ) | — | (85.8 | ) | ||||||||||
| Additions to equipment held for rental | — | — | (27.4 | ) | — | (27.4 | ) | ||||||||||||
| Proceeds from sale of equipment held for rental | — | — | 49.5 | — | 49.5 | ||||||||||||||
| Intercompany investing | — | 467.5 | (122.2 | ) | (345.3 | ) | — | ||||||||||||
| Other investing activities | (2.0 | ) | 0.5 | — | — | (1.5 | ) | ||||||||||||
| Net cash provided (used) by investing activities | (9.4 | ) | 414.8 | (125.3 | ) | (345.3 | ) | (65.2 | ) | ||||||||||
| Financing activities: | |||||||||||||||||||
Proceeds from issuance of debt (original maturities greater than three months) | — | — | 5.9 | — | 5.9 | ||||||||||||||
| Repayments of debt (original maturities greater than three months) | (20.0 | ) | — | (3.0 | ) | — | (23.0 | ) | |||||||||||
| Repurchases of Common Stock | (4.8 | ) | — | — | — | (4.8 | ) | ||||||||||||
| Dividends paid | (62.8 | ) | — | — | — | (62.8 | ) | ||||||||||||
Proceeds from exercise of stock options | 39.9 | — | — | — | 39.9 | ||||||||||||||
| Intercompany financing | 220.7 | (566.0 | ) | — | 345.3 | — | |||||||||||||
| Net cash provided (used) by financing activities | 173.0 | (566.0 | ) | 2.9 | 345.3 | (44.8 | ) | ||||||||||||
| Effect of exchange rate changes on cash | — | 0.2 | (11.6 | ) | — | (11.4 | ) | ||||||||||||
| Increase in cash and cash equivalents | 114.1 | 2.9 | 8.1 | — | 125.1 | ||||||||||||||
| Cash and cash equivalents at beginning of year | 285.4 | 1.7 | 34.8 | — | 321.9 | ||||||||||||||
| Cash and cash equivalents at end of year | $ | 399.5 | $ | 4.6 | $ | 42.9 | $ | — | $ | 447.0 | |||||||||
Oshkosh Corporation | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Total | |||||||||||||||
| Net cash provided (used) by operating activities | $ | (211.3 | ) | $ | 466.7 | $ | 328.5 | $ | — | $ | 583.9 | ||||||||
| Investing activities: | |||||||||||||||||||
| Additions to property, plant and equipment | (22.4 | ) | (40.4 | ) | (29.7 | ) | — | (92.5 | ) | ||||||||||
| Additions to equipment held for rental | — | — | (34.8 | ) | — | (34.8 | ) | ||||||||||||
| Proceeds from sale of equipment held for rental | — | 0.6 | 39.6 | — | 40.2 | ||||||||||||||
| Intercompany investing | (0.7 | ) | (405.8 | ) | (297.2 | ) | 703.7 | — | |||||||||||
| Other investing activities | (2.0 | ) | (0.1 | ) | — | — | (2.1 | ) | |||||||||||
| Net cash used by investing activities | (25.1 | ) | (445.7 | ) | (322.1 | ) | 703.7 | (89.2 | ) | ||||||||||
| Financing activities: | |||||||||||||||||||
Proceeds from issuance of debt (original maturities greater than three months) | 320.0 | — | 3.5 | — | 323.5 | ||||||||||||||
| Repayments of debt (original maturities greater than three months) | (370.0 | ) | — | (3.5 | ) | — | (373.5 | ) | |||||||||||
| Net decrease in short-term debt | (33.5 | ) | — | — | — | (33.5 | ) | ||||||||||||
| Repurchases of Common Stock | (106.3 | ) | — | — | — | (106.3 | ) | ||||||||||||
| Dividends paid | (55.9 | ) | — | — | — | (55.9 | ) | ||||||||||||
Proceeds from exercise of stock options | 21.7 | — | — | — | 21.7 | ||||||||||||||
| Excess tax benefit from stock-based compensation | 2.0 | — | — | — | 2.0 | ||||||||||||||
| Intercompany financing | 729.0 | (26.0 | ) | 0.7 | (703.7 | ) | — | ||||||||||||
| Net cash provided (used) by financing activities | 507.0 | (26.0 | ) | 0.7 | (703.7 | ) | (222.0 | ) | |||||||||||
| Effect of exchange rate changes on cash | — | 0.4 | 5.9 | — | 6.3 | ||||||||||||||
| Increase (decrease) in cash and cash equivalents | 270.6 | (4.6 | ) | 13.0 | — | 279.0 | |||||||||||||
| Cash and cash equivalents at beginning of year | 14.8 | 6.3 | 21.8 | — | 42.9 | ||||||||||||||
| Cash and cash equivalents at end of year | $ | 285.4 | $ | 1.7 | $ | 34.8 | $ | — | $ | 321.9 | |||||||||
Oshkosh Corporation | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Total | |||||||||||||||
| Net cash provided (used) by operating activities | $ | (169.9 | ) | $ | 58.5 | $ | 202.8 | $ | — | $ | 91.4 | ||||||||
| Investing activities: | |||||||||||||||||||
| Additions to property, plant and equipment | (29.3 | ) | (27.9 | ) | (74.5 | ) | — | (131.7 | ) | ||||||||||
| Additions to equipment held for rental | — | — | (26.3 | ) | — | (26.3 | ) | ||||||||||||
| Acquisition of a business, net of cash acquired | — | — | (10.0 | ) | — | (10.0 | ) | ||||||||||||
| Proceeds from sale of equipment held for rental | — | — | 26.8 | — | 26.8 | ||||||||||||||
| Intercompany investing | (30.7 | ) | (2.8 | ) | (154.2 | ) | 187.7 | — | |||||||||||
| Other investing activities | 0.7 | 0.9 | (0.5 | ) | — | 1.1 | |||||||||||||
| Net cash used by investing activities | (59.3 | ) | (29.8 | ) | (238.7 | ) | 187.7 | (140.1 | ) | ||||||||||
| Financing activities: | |||||||||||||||||||
Proceeds from issuance of debt (original maturities greater than three months) | 375.0 | — | — | — | 375.0 | ||||||||||||||
| Repayments of debt (original maturities greater than three months) | (365.0 | ) | — | — | — | (365.0 | ) | ||||||||||||
| Net increase in short-term debt | 33.5 | — | — | — | 33.5 | ||||||||||||||
| Debt issuance costs | (15.5 | ) | — | — | — | (15.5 | ) | ||||||||||||
| Repurchases of Common Stock | (209.3 | ) | — | — | — | (209.3 | ) | ||||||||||||
| Dividends paid | (53.1 | ) | — | — | — | (53.1 | ) | ||||||||||||
Proceeds from exercise of stock options | 8.6 | — | — | — | 8.6 | ||||||||||||||
| Excess tax benefit from stock-based compensation | 4.0 | — | — | — | 4.0 | ||||||||||||||
| Intercompany financing | 184.0 | (26.0 | ) | 29.7 | (187.7 | ) | — | ||||||||||||
| Net cash provided (used) by financing activities | (37.8 | ) | (26.0 | ) | 29.7 | (187.7 | ) | (221.8 | ) | ||||||||||
| Effect of exchange rate changes on cash | — | (1.1 | ) | 0.7 | — | (0.4 | ) | ||||||||||||
| Increase (decrease) in cash and cash equivalents | (267.0 | ) | 1.6 | (5.5 | ) | — | (270.9 | ) | |||||||||||
| Cash and cash equivalents at beginning of year | 281.8 | 4.7 | 27.3 | — | 313.8 | ||||||||||||||
| Cash and cash equivalents at end of year | $ | 14.8 | $ | 6.3 | $ | 21.8 | $ | — | $ | 42.9 | |||||||||
| Fiscal Year Ended September 30, 2017 | |||||||||||||||
4th Quarter (a) | 3rd Quarter (b) | 2nd Quarter (c) | 1st Quarter (d) | ||||||||||||
| Net sales | $ | 1,963.0 | $ | 2,036.9 | $ | 1,618.3 | $ | 1,211.4 | |||||||
| Gross income | 326.5 | 386.9 | 261.3 | 199.7 | |||||||||||
| Operating income | 134.5 | 211.9 | 80.4 | 36.2 | |||||||||||
| Net income | 93.5 | 128.6 | 44.3 | 19.2 | |||||||||||
| Earnings per share: | |||||||||||||||
| Basic | $ | 1.25 | $ | 1.72 | $ | 0.59 | $ | 0.26 | |||||||
| Diluted | $ | 1.23 | $ | 1.69 | $ | 0.58 | $ | 0.26 | |||||||
| Common Stock per share dividends | $ | 0.21 | $ | 0.21 | $ | 0.21 | $ | 0.21 | |||||||
| Fiscal Year Ended September 30, 2016 | |||||||||||||||
4th Quarter (a) | 3rd Quarter | 2nd Quarter | 1st Quarter | ||||||||||||
| Net sales | $ | 1,755.4 | $ | 1,747.5 | $ | 1,524.3 | $ | 1,252.0 | |||||||
| Gross income | 299.1 | 314.6 | 259.3 | 182.8 | |||||||||||
| Operating income | 95.5 | 146.8 | 91.4 | 30.3 | |||||||||||
| Net income | 61.5 | 84.2 | 56.1 | 14.6 | |||||||||||
| Earnings per share: | |||||||||||||||
| Basic | $ | 0.83 | $ | 1.15 | $ | 0.77 | $ | 0.20 | |||||||
| Diluted | $ | 0.82 | $ | 1.13 | $ | 0.76 | $ | 0.19 | |||||||
| Common Stock per share dividends | $ | 0.19 | $ | 0.19 | $ | 0.19 | $ | 0.19 | |||||||
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
In accordance with Rule 13a-15(b) of the Exchange Act, the Company’s management evaluated, with the participation of the Company’s President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of September 30,Management’s Report on Internal Control Over Financial Reporting.
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of published financial statements in accordance with generally accepted accounting principles.The Company’s management, with the participation of the Company’s President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, has assessed the effectiveness of the Company’s internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, the Company’s management has concluded that, as of
September 30,Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Deloitte & Touche LLP, the Company’s independent registered public accounting firm, issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of
September 30,Attestation Report of Independent Registered Public Accounting Firm.
The attestation report required under this Item 9A is contained in Item 8 of Part II of this Annual Report on Form 10-K under the heading “Report of Independent Registered Public Accounting Firm.”Changes in Internal Control over Financial Reporting.
There were no changes in the Company’s internal control over financial reporting,ITEM 9B. OTHER INFORMATION
The Company has no information to report pursuant to Item 9B.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information to be included under the captions “Proposal 1: Elections of Directors, Board of Director Nominees - Committees,” “Governance of the Company — Audit Committee” and “Stock Ownership — Delinquent Section 16(a) Beneficial Ownership Reporting Compliance”Reports”, if applicable, in the Company’s definitive proxy statement for the 20182022 annual meeting of shareholders, to be filed with the Securities and Exchange Commission, is hereby incorporated by reference in answer to this item. Reference is also made to the information under the heading “Executive Officers of the Registrant”“Information about our Executive Officers” included under Part I of this report.
The Company has adopted the Oshkosh Corporation Code of Ethics Applicable to Directors and Senior Executives, including, the Company’s President and Chief Executive Officer, the Company’s Executive Vice President and Chief Financial Officer, the Company’s Executive Vice President, General Counsel and Secretary, the Company’s Senior Vice President Finance and Controller and the Presidents, Vice Presidents of Finance and Controllers of the Company’s business units, or persons holding positions with similar responsibilities at business units, and other officers elected by the Company’s Board of Directors at the vice president level or higher. The Company has posted a copy of the Oshkosh Corporation Code of Ethics Applicable to Directors and Senior Executives on the Company’s website at
The Company is not including the information contained on its website as part of, or incorporating it by reference into, this report.
ITEM 11. EXECUTIVE COMPENSATION
The information to be included under the captions “Compensation Discussion and Analysis,” “Compensation Tables,” “Compensation Agreements” and “Director Compensation” contained in the Company’s definitive proxy statement for the 20182022 annual meeting of shareholders, to be filed with the Securities and Exchange Commission, is hereby incorporated by reference in answer to this item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information to be included under the caption “Stock Ownership — Stock Ownership of Directors, Executive Officers and Other Large Shareholders” in the Company’s definitive proxy statement for the 20182022 annual meeting of shareholders, to be filed with the Securities and Exchange Commission, is hereby incorporated by reference in answer to this item.
Equity Compensation Plan Information
The following table provides information about the Company’s equity compensation plans as of
September 30,Plan Category |
| Number of Securities to be Issued Upon Exercise of Outstanding Options or Vesting of Share Awards(1) |
|
| Weighted-Average Exercise Price of Outstanding Options |
|
| Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans |
| |||
Equity compensation plans approved by security holders |
|
| 1,115,679 |
|
| $ | 77.96 |
|
|
| 3,310,992 |
|
Equity compensation plans not approved by security holders |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
| 1,115,679 |
|
| $ | 77.96 |
|
|
| 3,310,992 |
|
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options or Vesting of Share Awards(1) | Weighted-Average Exercise Price of Outstanding Options | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | |||||||
| Equity compensation plans approved by security holders | 2,190,550 | $ | 45.14 | 6,740,105 | ||||||
| Equity compensation plans not approved by security holders | — | — | — | |||||||
| 2,190,550 | $ | 45.14 | 6,740,105 | |||||||
(1) | |
Represents options to purchase shares of the Company’s Common Stock granted under the |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information to be included under the caption “Governance of the Company — Board of Directors Independence,” “Governance of the Company — Audit Committee,” “Governance of the Company — Governance Committee,” “Governance of the Company — Human Resources Committee” and “Governance of the Company — Policies and Procedures Regarding Related Person Transactions” in the Company’s definitive proxy statement for the 20182022 annual meeting of shareholders, to be filed with the Securities and Exchange Commission, is hereby incorporated by reference in answer to this item.
ITEM 14. PRINCIPAL ACCOUNTINGACCOUNTANT FEES AND SERVICES
The information to be included under the caption “Proposal 2: Ratification of the Appointment of the Independent Registered Public Accounting FirmAuditor for Fiscal 2022 — Report of the Audit Committee”and Non-Audit Fees” in the Company’s definitive proxy statement for the 20182022 annual meeting of shareholders, to be filed with the Securities and Exchange Commission, is hereby incorporated by reference in answer to this item.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) 1.Financial Statements: The following consolidated financial statements of the Company and the report of the Independent Registered Public Accounting Firm included in the Annual Report to Shareholders for the fiscal year ended September 30, 2021, are contained in Item 8:
2. Financial Statement Schedule:
All other schedules are omitted because they are not applicable, or the required information is included in the consolidated financial statements or notes thereto.
3. Exhibits:
The exhibits listed in the following Exhibit Index are filed as part of this Annual Report on Form 10-K. Each management contract or compensatory plan or arrangement required to be filed as an exhibit to this report is identified in the Exhibit Index by an asterisk following the Exhibit Number.
EXHIBIT INDEX
3.1 | |
3.2 | |
4.1 | |
4.2 | |
4.3 | |
4.4 | |
4.5 | |
10.1 | |
10.2 | |
10.3 | |
10.4 | |
10.5 | |
10.6 | |
10.7 | |
10.8 | |
10.9 | |
10.10 | |
10.11 | |
10.12 | |
10.13 | |
10.14 | |
10.15 | |
10.16 | |
10.17 | |
10.18 |
10.19 | |
21 | |
23 | |
31.1 | |
31.2 | |
32.1 | |
32.2 | |
101.INS | The |
101.SCH | Inline XBRL Taxonomy Extension Schema Document. |
101.CAL | Inline XBRL Taxonomy Extension Calculations Linkbase Document. |
101.DEF | Inline XBRL Taxonomy Extension Definitions Linkbase Document. |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE | Inline XBRL Taxonomy Extension Presentations Linkbase Document. |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
* Denotes a management contract or compensatory plan or arrangement.
ITEM 16. FORM 10-K SUMMARY
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
OSHKOSH CORPORATION | ||
November 16, 2021 | By | /s/ John C. Pfeifer |
John C. Pfeifer, President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated.
November 16, 2021 | By | /s/ John C. Pfeifer |
John C. Pfeifer, President, | ||
November | By | /s/ |
Michael E. Pack, Executive Vice President and Chief Financial Officer | ||
November | By | /s/ James C. Freeders |
James C. Freeders, Senior Vice President Finance and Controller | ||
November | By | /s/ Keith J. Allman |
Keith J. Allman, Director | ||
November | By | /s/ |
Douglas L. Davis, Director | ||
November | By | /s/ |
Tyrone M. Jordan, Director | ||
November | By | /s/ Kimberley Metcalf-Kupres |
Kimberley Metcalf-Kupres, Director | ||
November | By | |
/s/ Stephen D. Newlin | ||
Stephen D. Newlin, | ||
November | By | /s/ Craig P. Omtvedt |
Craig | ||
November | By | /s/ Duncan J. Palmer |
Duncan J. Palmer, Director | ||
November | By | /s/ Sandra E. Rowland |
Sandra E. Rowland, Director | ||
November 16, 2021 | By | /s/ John S. Shiely |
John S. Shiely, Director | ||
Fiscal Year | Balance at Beginning of Year | Additions Charged to Expense | Reductions* | Balance at End of Year | ||||||||||||
| 2015 | $ | 21.8 | $ | 2.0 | $ | (3.5 | ) | $ | 20.3 | |||||||
| 2016 | $ | 20.3 | $ | 2.7 | $ | (1.8 | ) | $ | 21.2 | |||||||
| 2017 | $ | 21.2 | $ | 0.8 | $ | (3.7 | ) | $ | 18.3 | |||||||
109