NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments (which include normal recurring adjustments, unless otherwise noted) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. These Condensed Consolidated Financial Statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K of Oshkosh Corporation for the year ended September 30, 2019. The interim results are not necessarily indicative of results for the full year. “Oshkosh” refers to Oshkosh Corporation not including its subsidiaries and “the Company” refers to Oshkosh Corporation and its subsidiaries.
2.
|
New Accounting Standards
|
In February 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-02, Leases (Topic 842), which requires lessees to reflect most leases on their balance sheet as lease liabilities with corresponding right-of-use (“ROU”) assets, while leaving presentation of lease expense in the statement of income largely unchanged. ROU assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company adopted the new guidance on October 1, 2019 following the modified retrospective method of transition. Prior period comparative information was not recast to reflect the impact of the new guidance and therefore continues to be reported under the accounting guidance in effect during those periods (Accounting Standards Codification (ASC) 840).
The new standard provided a number of optional practical expedients for transition. The Company elected to adopt the standard using the package of practical expedients, which allowed the Company not to reassess prior conclusions about lease identification, lease classification and initial direct costs. In addition, the new guidance provides practical expedients for an entity’s ongoing lessee accounting. The Company has elected not to separate payments for lease components from payments for non-lease components for any classes of assets. The Company has elected the short-term lease recognition exemption for all leases that qualify, which means ROU assets and lease liabilities will not be recognized for leases with an initial term of twelve months or less.
The most significant quantitative effect of adoption relates to the recognition of ROU assets and lease liabilities on the balance sheet for operating leases. The adoption did not have a material impact on the Company’s results of operations or cash flows.
6
Table of Contents
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The cumulative effect of initially applying the new leasing guidance to the Company’s Condensed Consolidated Financial Statements as of October 1, 2019 was as follows (in millions):
|
|
Balance as of September 30, 2019
|
|
|
Cumulative
Impact from
Adopting New
Lease
Standard
|
|
|
Balance as of October 1,
2019
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
$
|
78.9
|
|
|
$
|
(0.5
|
)
|
|
$
|
78.4
|
|
Total current assets
|
|
|
3,408.3
|
|
|
|
(0.5
|
)
|
|
|
3,407.8
|
|
Other long-term assets
|
|
|
156.4
|
|
|
|
179.5
|
|
|
|
335.9
|
|
Total assets
|
|
|
5,566.3
|
|
|
|
179.0
|
|
|
|
5,745.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
|
$
|
307.3
|
|
|
$
|
46.4
|
|
|
$
|
353.7
|
|
Total current liabilities
|
|
|
1,741.9
|
|
|
|
46.4
|
|
|
|
1,788.3
|
|
Other long-term liabilities
|
|
|
405.6
|
|
|
|
132.6
|
|
|
|
538.2
|
|
Total liabilities and shareholders' equity
|
|
|
5,566.3
|
|
|
|
179.0
|
|
|
|
5,745.3
|
|
See Note 12 of the Notes to Condensed Consolidated Financial Statements for additional information regarding the Company’s accounting for leases.
Standards not yet adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The standard requires a change in the measurement approach for credit losses on financial assets measured on an amortized cost basis from an incurred loss method to an expected loss method, thereby eliminating the requirement that a credit loss be considered probable to impact the valuation of a financial asset measured on an amortized cost basis. The standard requires the measurement of expected credit losses to be based on relevant information about past events, including historical experience, current conditions, and a reasonable and supportable forecast that affects the collectability of the related financial asset. The Company will be required to adopt ASU 2016-13 as of October 1, 2020. The Company is currently evaluating the impact of ASU 2016-13 on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment. The standard simplifies the measurement of goodwill impairment by eliminating the requirement that an entity compute the implied fair value of goodwill based on the fair values of its assets and liabilities to measure impairment. Instead, goodwill impairment will be measured as the difference between the fair value of the reporting unit and the carrying value of the reporting unit. The standard also clarifies the treatment of the income tax effect of tax deductible goodwill when measuring goodwill impairment loss. The Company will be required to adopt ASU 2017-04 as of October 1, 2020. The Company does not expect the adoption of ASU 2017-04 will have a material impact on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company will be required to adopt ASU 2018-15 as of October 1, 2020. The Company intends to adopt the standard on a prospective basis and does not expect the adoption of ASU 2018-15 will have a material impact on the Company’s consolidated financial statements.
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 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
7
Table of Contents
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 reflect the effect of enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The Company will be required to adopt ASU 2019-12 as of October 1, 2021. Early adoption is permitted. The Company is currently evaluating the impact of 2019-12 on the Company’s consolidated financial statements.
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 in the defense segment increased net sales, operating income, net income and diluted earnings per share by $7.6 million, $3.8 million, $3.0 million and $0.04 per share, respectively, during the three months ended December 31, 2019. Contract adjustments in the defense segment increased net sales, operating income, net income and diluted earnings per share by $31.6 million, $30.3 million, $23.2 million and $0.32 per share, respectively, during the three months ended December 31, 2018.
8
Table of Contents
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Disaggregation of Revenue
The table below presents consolidated net sales disaggregated by segment and timing of revenue recognition (in millions):
|
|
Three Months Ended December 31, 2019
|
|
|
|
Access
equipment
|
|
|
Defense
|
|
|
Fire &
emergency
|
|
|
Commercial
|
|
|
Corporate and
intersegment
eliminations
|
|
|
Total
|
|
Point in time
|
|
$
|
695.3
|
|
|
$
|
0.5
|
|
|
$
|
252.0
|
|
|
$
|
119.4
|
|
|
$
|
(3.1
|
)
|
|
$
|
1,064.1
|
|
Over time
|
|
|
22.6
|
|
|
|
492.6
|
|
|
|
10.4
|
|
|
|
104.8
|
|
|
|
0.6
|
|
|
|
631.0
|
|
|
|
$
|
717.9
|
|
|
$
|
493.1
|
|
|
$
|
262.4
|
|
|
$
|
224.2
|
|
|
$
|
(2.5
|
)
|
|
$
|
1,695.1
|
|
|
|
Three Months Ended December 31, 2018
|
|
|
|
Access
equipment
|
|
|
Defense
|
|
|
Fire &
emergency
|
|
|
Commercial
|
|
|
Corporate and
intersegment
eliminations
|
|
|
Total
|
|
Point in time
|
|
$
|
807.8
|
|
|
$
|
0.3
|
|
|
$
|
290.9
|
|
|
$
|
121.2
|
|
|
$
|
(4.9
|
)
|
|
$
|
1,215.3
|
|
Over time
|
|
|
18.7
|
|
|
|
463.8
|
|
|
|
4.6
|
|
|
|
101.0
|
|
|
|
—
|
|
|
|
588.1
|
|
|
|
$
|
826.5
|
|
|
$
|
464.1
|
|
|
$
|
295.5
|
|
|
$
|
222.2
|
|
|
$
|
(4.9
|
)
|
|
$
|
1,803.4
|
|
See Note 20 of the Notes to Condensed Consolidated Financial Statements for further disaggregated sales information.
Contract Assets and Contract Liabilities
The Company is generally entitled to bill its customers upon satisfaction of its performance obligations, with the exception of its long-term contracts in the defense segment which typically allow for billing upon acceptance of the finished good, advance payments from customers primarily within the fire & emergency segment and extended warranties that are usually billed in advance of the warranty coverage period. Customer payment is usually received shortly after billing and payment terms generally do not exceed one year. With the exception of the fire & emergency segment, the Company’s contracts typically do not contain a significant financing component. In the fire & emergency segment, customers earn interest on customer advances at a rate determined in a separate financing transaction between the fire & emergency segment and the customer at contract inception. Interest due on customer advances of $3.2 million and $3.6 million was recorded in “Interest expense” in the Condensed Consolidated Statements of Income for the three months ended December 31, 2019 and 2018, respectively.
The timing of billing does not always match the timing of revenue recognition. In instances where a customer pays consideration in advance or when the Company is entitled to bill a customer in advance of recognizing the related revenue, the Company records a contract liability within “Customer advances”, “Other current liabilities” or “Other long-term liabilities” in the Condensed Consolidated Balance Sheet. Total contract liabilities were $534.4 million as of December 31, 2019, of which $407.2 million, $75.3 million and $51.9 million was included in “Customer advances”, “Other current liabilities” and “Other long-term liabilities”, respectively. Total contract liabilities were $512.5 million as of September 30, 2019, of which $382.0 million, $78.2 million and $52.3 million was included in “Customer advances”, “Other current liabilities” and “Other long-term liabilities”, respectively. The Company reduces contract liabilities when revenue is recognized. The Company recognized $172.9 million and $236.0 million of revenue that was recorded as a contract liability as of the beginning of the period during the three months ended December 31, 2019 and 2018, respectively.
In instances where the Company recognizes revenue prior to having an unconditional right to payment, the Company records a contract asset within “Unbilled receivables, net” in the Condensed Consolidated Balance Sheet. The Company reduces contract assets when the Company has an unconditional right to payment. The Company periodically assesses its contract assets for impairment. Contract assets and liabilities are determined on a net basis for each contract. The Company did not record any impairment losses on contracts from customers during the three months ended December 31, 2019 and 2018, respectively. See Note 8 of the Notes to Condensed Consolidated Financial Statements for additional information on the Company’s receivable balances.
9
Table of Contents
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company offers a variety of service-type warranties, including optionally priced extended warranty programs. Outstanding balances related to service-type warranties are included within contract liabilities disclosed above. Revenue related to service warranties is deferred until after the expiration of the standard warranty period. The revenue is then recognized in income over the term of the extended warranty period in proportion to the costs that are expected to be incurred. Changes in the Company’s service-type warranties were as follows (in millions):
|
|
Three Months Ended
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Balance at beginning of period
|
|
$
|
68.2
|
|
|
$
|
30.7
|
|
Adoption of ASC 606
|
|
|
—
|
|
|
|
35.7
|
|
Deferred revenue for new service warranties
|
|
|
5.9
|
|
|
|
10.5
|
|
Amortization of deferred revenue
|
|
|
(7.2
|
)
|
|
|
(10.8
|
)
|
Foreign currency translation
|
|
|
0.3
|
|
|
|
—
|
|
Balance at end of period
|
|
$
|
67.2
|
|
|
$
|
66.1
|
|
Classification of service-type warranties in the Condensed Consolidated Balance Sheets consisted of the following (in millions):
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2019
|
|
|
2019
|
|
Other current liabilities
|
|
$
|
27.3
|
|
|
$
|
27.8
|
|
Other long-term liabilities
|
|
|
39.9
|
|
|
|
40.4
|
|
|
|
$
|
67.2
|
|
|
$
|
68.2
|
|
Remaining Performance Obligations
As of December 31, 2019, the Company had unsatisfied performance obligations for contracts with an original duration greater than one year totaling $4.28 billion, of which $2.64 billion is expected to be satisfied and revenue recognized in the remaining nine months of fiscal 2020, $1.44 billion is expected to be satisfied and revenue recognized in fiscal 2021 and $202.8 million is expected to be satisfied and revenue recognized beyond fiscal 2021.
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 that 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 December 31, 2019, the Company had reserved 6,025,328 shares of Common Stock available for issuance to provide for the exercise of outstanding stock options and the issuance of Common Stock under incentive compensation awards, including awards issued prior to the effective date of the 2017 Stock Plan.
The Company recognizes stock-based compensation expense over the requisite service period for vesting of an award, or to an employee’s eligible retirement date, if earlier and applicable. Total stock-based compensation expense, including cash-based liability awards, for the three months ended December 31, 2019 was $10.7 million ($8.9 million net of tax). Total stock-based compensation expense, including cash-based liability awards, for the three months ended December 31, 2018 was $7.6 million ($6.5 million net of tax).
10
Table of Contents
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5.
|
Employee Benefit Plans
|
Components of net periodic pension benefit cost were as follows (in millions):
|
|
Three Months Ended
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Components of net periodic benefit cost
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
2.5
|
|
|
$
|
2.4
|
|
Interest cost
|
|
|
4.3
|
|
|
|
4.7
|
|
Expected return on plan assets
|
|
|
(5.1
|
)
|
|
|
(5.0
|
)
|
Amortization of prior service cost (benefit)
|
|
|
0.4
|
|
|
|
0.4
|
|
Amortization of net actuarial loss (gain)
|
|
|
0.8
|
|
|
|
—
|
|
Expenses paid
|
|
|
1.0
|
|
|
|
0.6
|
|
Net periodic benefit cost
|
|
$
|
3.9
|
|
|
$
|
3.1
|
|
Components of net periodic other post-employment benefit cost were as follows (in millions):
|
|
Three Months Ended
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Components of net periodic benefit cost
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
0.9
|
|
|
$
|
0.8
|
|
Interest cost
|
|
|
0.4
|
|
|
|
0.5
|
|
Amortization of prior service cost (benefit)
|
|
|
(0.2
|
)
|
|
|
(0.4
|
)
|
Amortization of net actuarial loss (gain)
|
|
|
(0.1
|
)
|
|
|
(0.1
|
)
|
Net periodic benefit cost
|
|
$
|
1.0
|
|
|
$
|
0.8
|
|
Components of net periodic benefit cost other than “Service cost” and “Expenses paid” are included in “Miscellaneous, net” in the Condensed Consolidated Statements of Income. Administrative expense for the three-months ended December 31, 2018, which was previously included in “Service cost”, is now reported in “Expenses paid” to improve the comparability between the periods.
The Company recorded income tax expense of $20.7 million for the three months ended December 31, 2019, or 21.4% of pre-tax income, compared to $39.7 million, or 26.9% of pre-tax income, for the three months ended December 31, 2018. Results for the three months ended December 31, 2019 were favorably impacted by $1.1 million of net discrete tax benefits, including a $1.5 million benefit related to employee stock-based compensation payments. Results for the three months ended December 31, 2018 were unfavorably impacted by $7.3 million of net discrete tax charges, including $6.2 million of charges related to uncertain tax position reserves and a $0.8 million charge related to adjustments to the repatriation tax required under tax legislation enacted in the United States in December 2017.
The Company’s liability for gross unrecognized tax benefits, excluding related interest and penalties, was $106.0 million and $97.3 million as of December 31, 2019 and September 30, 2019, respectively. As of December 31, 2019, net unrecognized tax benefits, excluding interest and penalties, of $21.4 million would affect the Company’s net income if recognized.
The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits in the “Provision for income taxes” in the Condensed Consolidated Statements of Income. During the three months ended December 31, 2019 and 2018, the Company recognized a benefit of $0.1 million and expense of $0.2 million, respectively, related to interest and penalties. At December 31, 2019, the Company had accruals for the payment of interest and penalties of $4.3 million. During the next twelve months, it is reasonably possible that federal, state and foreign tax audit resolutions could reduce net
11
Table of Contents
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
unrecognized tax benefits by approximately $7.2 million because the Company’s tax positions are sustained on audit, the Company agrees to their disallowance or the statutes of limitations close.
The reconciliation of basic weighted-average shares outstanding to diluted weighted-average shares outstanding was as follows:
|
|
Three Months Ended
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Basic weighted-average common shares outstanding
|
|
|
68,098,220
|
|
|
|
71,464,489
|
|
Dilutive stock options and other equity-based compensation awards
|
|
|
843,307
|
|
|
|
637,337
|
|
Diluted weighted-average common shares outstanding
|
|
|
68,941,527
|
|
|
|
72,101,826
|
|
Options not included in the computation of diluted earnings per share attributable to common shareholders because they would have been anti-dilutive were as follows:
|
|
Three Months Ended
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Stock options
|
|
|
516,256
|
|
|
|
943,089
|
|
Receivables consisted of the following (in millions):
|
|
December 31,
2019
|
|
|
September 30,
2019
|
|
Trade receivables - U.S. government
|
|
$
|
111.9
|
|
|
$
|
61.8
|
|
Trade receivables - other
|
|
|
774.3
|
|
|
|
997.7
|
|
Finance receivables
|
|
|
12.0
|
|
|
|
13.1
|
|
Notes receivable
|
|
|
0.4
|
|
|
|
0.4
|
|
Other receivables
|
|
|
33.5
|
|
|
|
32.0
|
|
|
|
|
932.1
|
|
|
|
1,105.0
|
|
Less allowance for doubtful accounts
|
|
|
(9.7
|
)
|
|
|
(11.3
|
)
|
|
|
$
|
922.4
|
|
|
$
|
1,093.7
|
|
Classification of receivables in the Condensed Consolidated Balance Sheets consisted of the following (in millions):
|
|
December 31,
2019
|
|
|
September 30,
2019
|
|
Current receivables
|
|
$
|
911.6
|
|
|
$
|
1,082.3
|
|
Long-term receivables
|
|
|
10.8
|
|
|
|
11.4
|
|
|
|
$
|
922.4
|
|
|
$
|
1,093.7
|
|
12
Table of Contents
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Changes in the Company’s allowance for doubtful accounts by type of receivable were as follows (in millions):
|
|
Three Months Ended December 31, 2019
|
|
|
Three Months Ended December 31, 2018
|
|
|
|
Finance Receivables
|
|
|
Notes
Receivable
|
|
|
Trade and
Other Receivables
|
|
|
Total
|
|
|
Finance Receivables
|
|
|
Notes
Receivable
|
|
|
Trade and
Other Receivables
|
|
|
Total
|
|
Allowance at beginning of period
|
|
$
|
2.2
|
|
|
$
|
0.4
|
|
|
$
|
8.7
|
|
|
$
|
11.3
|
|
|
$
|
2.8
|
|
|
$
|
—
|
|
|
$
|
7.1
|
|
|
$
|
9.9
|
|
Provision for doubtful accounts, net of recoveries
|
|
|
(0.2
|
)
|
|
|
—
|
|
|
|
(1.4
|
)
|
|
|
(1.6
|
)
|
|
|
(0.1
|
)
|
|
|
—
|
|
|
|
0.7
|
|
|
|
0.6
|
|
Allowance at end of period
|
|
$
|
2.0
|
|
|
$
|
0.4
|
|
|
$
|
7.3
|
|
|
$
|
9.7
|
|
|
$
|
2.7
|
|
|
$
|
—
|
|
|
$
|
7.8
|
|
|
$
|
10.5
|
|
Inventories consisted of the following (in millions):
|
|
December 31, 2019
|
|
|
September 30, 2019
|
|
Raw materials
|
|
$
|
701.2
|
|
|
$
|
676.0
|
|
Partially finished products
|
|
|
277.9
|
|
|
|
244.2
|
|
Finished products
|
|
|
557.2
|
|
|
|
433.0
|
|
Inventories at FIFO cost
|
|
|
1,536.3
|
|
|
|
1,353.2
|
|
Less: Excess of FIFO cost over LIFO cost
|
|
|
(105.6
|
)
|
|
|
(104.0
|
)
|
|
|
$
|
1,430.7
|
|
|
$
|
1,249.2
|
|
10.
|
Property, Plant and Equipment
|
Property, plant and equipment consisted of the following (in millions):
|
|
December 31, 2019
|
|
|
September 30, 2019
|
|
Land and land improvements
|
|
$
|
63.5
|
|
|
$
|
55.8
|
|
Buildings
|
|
|
365.0
|
|
|
|
325.8
|
|
Machinery and equipment
|
|
|
713.1
|
|
|
|
701.0
|
|
Software and related costs
|
|
|
172.5
|
|
|
|
181.2
|
|
Equipment on operating lease to others
|
|
|
19.0
|
|
|
|
39.5
|
|
Construction in progress
|
|
|
23.4
|
|
|
|
57.6
|
|
|
|
|
1,356.5
|
|
|
|
1,360.9
|
|
Less accumulated depreciation
|
|
|
(797.7
|
)
|
|
|
(787.3
|
)
|
|
|
$
|
558.8
|
|
|
$
|
573.6
|
|
Depreciation expense was $20.3 million and $19.1 million for the three months ended December 31, 2019 and 2018, respectively. Capitalized interest was insignificant for all reported periods.
Equipment on operating lease to others represents the cost of equipment shipped to customers for whom the Company has guaranteed the residual value and equipment on short-term leases. These transactions are accounted for as operating leases with the related assets capitalized and depreciated over their estimated economic lives of five to ten years. Cost less accumulated depreciation for equipment on operating lease at December 31, 2019 and September 30, 2019 was $17.3 million and $31.3 million, respectively.
13
Table of Contents
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
11.Goodwill and Purchased Intangible Assets
Goodwill and other indefinite-lived intangible assets are not amortized but are reviewed for impairment annually or more frequently if potential interim indicators exist that could result in impairment. The Company performs its annual impairment test in the fourth quarter of its fiscal year.
The following table presents changes in goodwill during the three months ended December 31, 2019 (in millions):
|
|
Access
equipment
|
|
|
Fire &
emergency
|
|
|
Commercial
|
|
|
Total
|
|
Net goodwill at September 30, 2019
|
|
$
|
868.8
|
|
|
$
|
106.1
|
|
|
$
|
20.8
|
|
|
$
|
995.7
|
|
Foreign currency translation
|
|
|
5.7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5.7
|
|
Net goodwill at December 31, 2019
|
|
$
|
874.5
|
|
|
$
|
106.1
|
|
|
$
|
20.8
|
|
|
$
|
1,001.4
|
|
The following table presents details of the Company’s goodwill allocated to the reportable segments (in millions):
|
|
December 31, 2019
|
|
|
September 30, 2019
|
|
|
|
Gross
|
|
|
Accumulated
Impairment
|
|
|
Net
|
|
|
Gross
|
|
|
Accumulated
Impairment
|
|
|
Net
|
|
Access equipment
|
|
$
|
1,806.6
|
|
|
$
|
(932.1
|
)
|
|
$
|
874.5
|
|
|
$
|
1,800.9
|
|
|
$
|
(932.1
|
)
|
|
$
|
868.8
|
|
Fire & emergency
|
|
|
108.1
|
|
|
|
(2.0
|
)
|
|
|
106.1
|
|
|
|
108.1
|
|
|
|
(2.0
|
)
|
|
|
106.1
|
|
Commercial
|
|
|
196.7
|
|
|
|
(175.9
|
)
|
|
|
20.8
|
|
|
|
196.7
|
|
|
|
(175.9
|
)
|
|
|
20.8
|
|
|
|
$
|
2,111.4
|
|
|
$
|
(1,110.0
|
)
|
|
$
|
1,001.4
|
|
|
$
|
2,105.7
|
|
|
$
|
(1,110.0
|
)
|
|
$
|
995.7
|
|
Details of the Company’s total purchased intangible assets are as follows (in millions):
|
|
December 31, 2019
|
|
|
|
Weighted-
Average
Life (in years)
|
|
|
Gross
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution network
|
|
|
39.1
|
|
|
$
|
55.4
|
|
|
$
|
(32.7
|
)
|
|
$
|
22.7
|
|
Technology-related
|
|
|
11.9
|
|
|
|
104.7
|
|
|
|
(102.7
|
)
|
|
|
2.0
|
|
Customer relationships
|
|
|
12.8
|
|
|
|
555.0
|
|
|
|
(543.3
|
)
|
|
|
11.7
|
|
Other
|
|
|
16.2
|
|
|
|
16.4
|
|
|
|
(15.0
|
)
|
|
|
1.4
|
|
|
|
|
14.7
|
|
|
|
731.5
|
|
|
|
(693.7
|
)
|
|
|
37.8
|
|
Non-amortizable trade names
|
|
|
|
|
|
|
387.7
|
|
|
|
—
|
|
|
|
387.7
|
|
|
|
|
|
|
|
$
|
1,119.2
|
|
|
$
|
(693.7
|
)
|
|
$
|
425.5
|
|
|
|
September 30, 2019
|
|
|
|
Weighted-
Average
Life (in years)
|
|
Gross
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution network
|
|
39.1
|
|
$
|
55.4
|
|
|
$
|
(32.3
|
)
|
|
$
|
23.1
|
|
Technology-related
|
|
11.9
|
|
|
104.7
|
|
|
|
(102.6
|
)
|
|
|
2.1
|
|
Customer relationships
|
|
12.8
|
|
|
554.8
|
|
|
|
(536.8
|
)
|
|
|
18.0
|
|
Other
|
|
16.1
|
|
|
16.3
|
|
|
|
(14.9
|
)
|
|
|
1.4
|
|
|
|
14.7
|
|
|
731.2
|
|
|
|
(686.6
|
)
|
|
|
44.6
|
|
Non-amortizable trade names
|
|
|
|
|
387.7
|
|
|
|
—
|
|
|
|
387.7
|
|
|
|
|
|
$
|
1,118.9
|
|
|
$
|
(686.6
|
)
|
|
$
|
432.3
|
|
14
Table of Contents
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The estimated future amortization expense of purchased intangible assets for the remainder of fiscal 2020 and the five years succeeding September 30, 2020 are as follows: 2020 (remaining nine months) - $4.0 million; 2021 - $5.3 million; 2022 - $4.9 million; 2023 - $3.5 million; 2024 - $1.7 million; and 2025 - $1.5 million.
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 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 ROU assets and lease liabilities. The lease term of the Company’s real estate and equipment leases extend up to 29 years and 16 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 Company’s finance leases are not significant.
The components of lease costs were as follows (in millions):
|
|
Three Months Ended
December 31, 2019
|
|
Operating lease cost
|
|
$
|
13.8
|
|
Variable lease cost
|
|
|
3.8
|
|
Short-term lease cost
|
|
|
1.1
|
|
Supplemental information related to operating leases was as follows (in millions):
|
|
Balance Sheet Classification
|
|
December 31,
2019
|
|
Operating leases
|
|
|
|
|
|
|
Lease ROU assets
|
|
Other long-term assets
|
|
$
|
172.0
|
|
Current lease liabilities
|
|
Other current liabilities
|
|
|
46.6
|
|
Long-term lease liabilities
|
|
Other long-term liabilities
|
|
|
126.7
|
|
|
|
|
|
|
|
|
Weighted average remaining lease term
|
|
|
|
6 years
|
|
|
|
|
|
|
|
|
Weighted average discount rates
|
|
|
|
|
3.0
|
%
|
15
Table of Contents
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The table below presents the ROU asset balance for operating leases disaggregated by segment and type of lease (in millions):
|
|
December 31, 2019
|
|
|
|
Access equipment
|
|
|
Defense
|
|
|
Fire &
emergency
|
|
|
Commercial
|
|
|
Corporate and
intersegment
eliminations
|
|
|
Total
|
|
Real estate leases
|
|
$
|
67.1
|
|
|
$
|
32.1
|
|
|
$
|
8.1
|
|
|
$
|
21.2
|
|
|
$
|
9.2
|
|
|
$
|
137.7
|
|
Equipment leases
|
|
|
8.9
|
|
|
|
5.3
|
|
|
|
3.1
|
|
|
|
1.7
|
|
|
|
15.3
|
|
|
|
34.3
|
|
|
|
$
|
76.0
|
|
|
$
|
37.4
|
|
|
$
|
11.2
|
|
|
$
|
22.9
|
|
|
$
|
24.5
|
|
|
$
|
172.0
|
|
Maturities of operating lease liabilities at December 31, 2019 and minimum payments for operating leases (under ASC 842) having initial or remaining non-cancelable terms in excess of one year were as follows (in millions):
Amounts due in
|
|
|
|
|
Remaining nine months of 2020
|
|
$
|
39.0
|
|
2021
|
|
|
43.7
|
|
2022
|
|
|
28.8
|
|
2023
|
|
|
21.8
|
|
2024
|
|
|
14.9
|
|
2025
|
|
|
11.1
|
|
Thereafter
|
|
|
29.8
|
|
Total lease payments
|
|
|
189.1
|
|
Less: imputed interest
|
|
|
(15.8
|
)
|
Present value of lease liability
|
|
$
|
173.3
|
|
At September 30, 2019, future minimum operating lease payments (under ASC 840) were as follows (in millions):
Amounts due in
|
|
|
|
|
2020
|
|
$
|
34.0
|
|
2021
|
|
|
26.7
|
|
2022
|
|
|
15.9
|
|
2023
|
|
|
11.3
|
|
2024
|
|
|
7.1
|
|
Thereafter
|
|
|
11.7
|
|
16
Table of Contents
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company was obligated under the following debt instruments (in millions):
|
|
December 31, 2019
|
|
|
|
Principal
|
|
|
Debt Issuance Costs
|
|
|
Debt, Net
|
|
Senior Term Loan
|
|
$
|
275.0
|
|
|
$
|
(0.6
|
)
|
|
$
|
274.4
|
|
5.375% Senior Notes due March 2025
|
|
|
250.0
|
|
|
|
(1.9
|
)
|
|
|
248.1
|
|
4.600% Senior Notes due May 2028
|
|
|
300.0
|
|
|
|
(3.3
|
)
|
|
|
296.7
|
|
|
|
$
|
825.0
|
|
|
$
|
(5.8
|
)
|
|
$
|
819.2
|
|
|
|
September 30, 2019
|
|
|
|
Principal
|
|
|
Debt Issuance Costs
|
|
|
Debt, Net
|
|
Senior Term Loan
|
|
$
|
275.0
|
|
|
$
|
(0.6
|
)
|
|
$
|
274.4
|
|
5.375% Senior Notes due March 2025
|
|
|
250.0
|
|
|
|
(2.0
|
)
|
|
|
248.0
|
|
4.600% Senior Notes due May 2028
|
|
|
300.0
|
|
|
|
(3.4
|
)
|
|
|
296.6
|
|
|
|
$
|
825.0
|
|
|
$
|
(6.0
|
)
|
|
$
|
819.0
|
|
On April 3, 2018, the Company entered into a Second Amended and Restated Credit Agreement with various lenders (the “Credit Agreement”). The Credit Agreement provides for (i) an unsecured revolving credit facility (the “Revolving Credit Facility”) that matures in April 2023 with an initial maximum aggregate amount of availability of $850 million and (ii) an unsecured $325 million term loan (the “Term Loan”) due in quarterly principal installments of $4.1 million commencing September 30, 2019 with a balloon payment of $264.1 million due at maturity in April 2023. During fiscal 2018, the Company prepaid all required quarterly principal installments on the Term Loan through June 2022.
At December 31, 2019, outstanding letters of credit of $63.5 million reduced available capacity under the Revolving Credit Facility to $786.5 million.
Under the Credit Agreement, the Company is obligated to pay (i) an unused commitment fee ranging from 0.125% to 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 0.563% to 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’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 December 31, 2019, the interest spread on the Revolving Credit Facility and Term Loan was 125 basis points. The weighted-average interest rate on borrowings outstanding under the Term Loan at December 31, 2019 was 3.05%.
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, dispose of assets, and consummate acquisitions.
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 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) as of the last day of any fiscal quarter of 2.50 to 1.00.
|
17
Table of Contents
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
With certain exceptions, the Credit Agreement limits the ability of the Company to pay dividends and other distributions, including repurchases of shares of its Common Stock. However, so long as no event of default exists under the Credit Agreement or would result from such payment, the Company may pay dividends and other distributions after April 3, 2018, in an aggregate amount not exceeding the sum of:
|
ii.
|
50% of the consolidated net income of the Company and its subsidiaries (or if such consolidated net income is a deficit, minus 100% of such deficit), accrued on a cumulative basis during the period beginning on April 3, 2018 and ending on the last day of the fiscal quarter immediately preceding the date of the applicable proposed dividend or distribution; and
|
|
iii.
|
100% of the aggregate net proceeds received by the Company subsequent to April 3, 2018 either as a contribution to its common equity capital or from the issuance and sale of its Common Stock.
|
The Company was in compliance with the financial covenants contained in the Credit Agreement as of December 31, 2019.
In March 2015, the Company issued $250.0 million of 5.375% unsecured senior notes due March 1, 2025 (the “2025 Senior Notes”). The proceeds of the note issuance were used to repay existing outstanding notes of the Company. On May 17, 2018, the Company issued $300.0 million of 4.600% unsecured senior notes due May 15, 2028 (the “2028 Senior Notes”). The Company used the net proceeds from the sale of the 2028 Senior Notes to repay certain outstanding notes of the Company and to pre-pay $49.2 million of quarterly principal installment payments under the Term Loan. The 2025 Senior Notes and the 2028 Senior Notes were issued pursuant to separate indentures (the “Indentures”) between the Company and a trustee. The Indentures contain customary affirmative and negative covenants. The Company has the option to redeem the 2025 Senior Notes for a premium after March 1, 2020. The Company has the option to redeem the 2028 Senior Notes at any time for a premium.
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 December 31, 2019, the fair value of the 2025 Senior Notes and the 2028 Senior Notes was estimated to be $258 million ($259 million at September 30, 2019) and $326 million ($322 million at September 30, 2019), respectively. The fair value of the Term Loan approximated book value at both December 31, 2019 and September 30, 2019. See Note 19 of the Notes to Condensed Consolidated Financial Statements for the definition of a Level 2 input.
18
Table of Contents
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
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’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’s consolidated financial condition, results of operations or cash flows.
Changes in the Company’s assurance-type warranty liability were as follows (in millions):
|
|
Three Months Ended
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Balance at beginning of period
|
|
$
|
65.1
|
|
|
$
|
75.3
|
|
Adoption of ASC 606
|
|
|
—
|
|
|
|
(14.3
|
)
|
Warranty provisions
|
|
|
10.6
|
|
|
|
10.4
|
|
Settlements made
|
|
|
(11.0
|
)
|
|
|
(11.0
|
)
|
Changes in liability for pre-existing warranties, net
|
|
|
(0.5
|
)
|
|
|
(1.2
|
)
|
Foreign currency translation
|
|
|
0.1
|
|
|
|
(0.1
|
)
|
Balance at end of period
|
|
$
|
64.3
|
|
|
$
|
59.1
|
|
Due to the adoption of ASC 606, the Company determined that certain warranties previously classified as assurance-type warranties are service-type warranties. The liabilities associated with service-type warranties are disclosed in Note 3 of the Notes to Condensed Consolidated Financial Statements.
19
Table of Contents
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
15.
|
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 December 31, 2019 the Company guaranteed an aggregate of $740.6 million in indebtedness of customers. The Company estimated that its maximum loss exposure under these contracts at December 31, 2019 was $144.0 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 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 loss 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’ 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. 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 December 31, 2019 the Company guaranteed to support an aggregate of $91.9 million of customer equipment value. The Company estimated that its maximum loss exposure under these contracts at December 31, 2019 was $11.4 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 guarantee liabilities were as follows (in millions):
|
|
Three Months Ended
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Balance at beginning of period
|
|
$
|
15.8
|
|
|
$
|
10.4
|
|
Provision for new credit guarantees
|
|
|
1.5
|
|
|
|
1.3
|
|
Changes for pre-existing guarantees, net
|
|
|
—
|
|
|
|
(0.9
|
)
|
Amortization of previous guarantees
|
|
|
(1.4
|
)
|
|
|
(0.7
|
)
|
Foreign currency translation
|
|
|
0.1
|
|
|
|
—
|
|
Balance at end of period
|
|
$
|
16.0
|
|
|
$
|
10.1
|
|
20
Table of Contents
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
16.
|
Contingencies, Significant Estimates and Concentrations
|
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 December 31, 2019 and September 30, 2019, the estimated net liabilities for product and general liability claims totaled $34.6 million and $36.2 million, respectively. There is inherent uncertainty as to the eventual resolution of unsettled claims. Management, however, believes that any losses in excess of established reserves will not have a material effect on the Company’s financial condition, results of operations or cash flows.
Market Risks - The Company was contingently liable under bid, performance and specialty bonds totaling $631.7 million and $552.2 million at December 31, 2019 and September 30, 2019, respectively. Open standby letters of credit issued by the Company’s banks in favor of third parties totaled $63.5 million and $63.7 million at December 31, 2019 and September 30, 2019, respectively.
Other Matters - 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, 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.
Major contracts for military systems are performed over extended periods of time and are subject to changes in scope of work and delivery schedules. Pricing negotiations on changes and settlement of claims often extend over prolonged periods of time. The Company’s ultimate profitability on such contracts may depend on the eventual outcome of an equitable settlement of contractual issues with the Company’s customers.
In August 2015, the Company’s Board of Directors approved a stock repurchase authorization for which there was as of May 7, 2019 a remaining authority to repurchase 1,362,821 shares of Common Stock. On May 7, 2019, the Company’s Board of Directors increased the Company’s Common Stock repurchase authorization by 8,637,179 shares to 10,000,000 shares as of that date. The Company repurchased 128,869 shares of its Common Stock under this authorization during the three months ended December 31, 2019 at a cost of $9.4 million. The Company repurchased 2,563,087 shares of Common Stock under this authorization during the three months ended December 31, 2018 at a cost of $170.0 million. As of December 31, 2019, the Company had repurchased 2,118,688 shares under this authorization, resulting in remaining authority to repurchase 7,881,312 shares of Common Stock. The Company is restricted by its Credit Agreement from repurchasing shares in certain situations. See Note 13 of the Notes to Condensed Consolidated Financial Statements for information regarding these restrictions.
21
Table of Contents
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
18.
|
Accumulated Other Comprehensive Income (Loss)
|
Changes in accumulated other comprehensive income (loss) by component were as follows (in millions):
|
|
Three Months Ended December 31, 2019
|
|
|
|
Employee Pension
and
Postretirement
Benefits, Net of Tax
|
|
|
Cumulative
Translation
Adjustments
|
|
|
Derivative
Instruments,
Net of Tax
|
|
|
Accumulated Other
Comprehensive
Income (Loss)
|
|
Balance at beginning of period
|
|
$
|
(69.4
|
)
|
|
$
|
(132.5
|
)
|
|
$
|
0.3
|
|
|
$
|
(201.6
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
|
—
|
|
|
|
19.5
|
|
|
|
(0.5
|
)
|
|
|
19.0
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
|
0.7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.7
|
|
Net current period other comprehensive income (loss)
|
|
|
0.7
|
|
|
|
19.5
|
|
|
|
(0.5
|
)
|
|
|
19.7
|
|
Balance at end of period
|
|
$
|
(68.7
|
)
|
|
$
|
(113.0
|
)
|
|
$
|
(0.2
|
)
|
|
$
|
(181.9
|
)
|
|
|
Three Months Ended December 31, 2018
|
|
|
|
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
|
|
|
—
|
|
|
|
(8.8
|
)
|
|
|
—
|
|
|
|
(8.8
|
)
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net current period other comprehensive income (loss)
|
|
|
—
|
|
|
|
(8.8
|
)
|
|
|
—
|
|
|
|
(8.8
|
)
|
Balance at end of period
|
|
$
|
(20.0
|
)
|
|
$
|
(105.0
|
)
|
|
$
|
0.3
|
|
|
$
|
(124.7
|
)
|
The effects of the reclassifications out of Accumulated other comprehensive income (loss) on the Condensed Consolidated Statements of Income were as follows (in millions):
|
|
Classification of
income (expense)
|
|
Three Months Ended
December 31,
|
|
|
|
|
|
2019
|
|
|
2018
|
|
Amortization of employee pension and postretirement benefits items
|
|
|
|
|
|
|
|
|
|
|
Prior service costs
|
|
Miscellaneous, net
|
|
$
|
0.2
|
|
|
$
|
—
|
|
Actuarial (gains) losses
|
|
Miscellaneous, net
|
|
|
0.7
|
|
|
|
(0.1
|
)
|
Total before tax
|
|
|
|
|
0.9
|
|
|
|
(0.1
|
)
|
Tax provision (benefit)
|
|
|
|
|
(0.2
|
)
|
|
|
0.1
|
|
Net of tax
|
|
|
|
$
|
0.7
|
|
|
$
|
—
|
|
22
Table of Contents
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
19.
|
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.
|
There were no transfers of assets between levels during the three months ended December 31, 2019.
The fair values of the Company’s financial assets and liabilities were as follows (in millions):
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERP plan assets (a)
|
|
$
|
22.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
22.0
|
|
Foreign currency exchange derivatives (b)
|
|
|
—
|
|
|
|
0.6
|
|
|
|
—
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange derivatives (b)
|
|
$
|
—
|
|
|
$
|
0.7
|
|
|
$
|
—
|
|
|
$
|
0.7
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERP plan assets (a)
|
|
$
|
21.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21.4
|
|
Foreign currency exchange derivatives (b)
|
|
|
—
|
|
|
|
0.8
|
|
|
|
—
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange derivatives (b)
|
|
$
|
—
|
|
|
$
|
0.4
|
|
|
$
|
—
|
|
|
$
|
0.4
|
|
(a)
|
Represents investments in a rabbi trust for the Company’s non-qualified supplemental executive retirement plan (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 Condensed Consolidated Statements of Income.
|
(b)
|
Based on observable market transactions of forward currency prices.
|
23
Table of Contents
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
20.
|
Business Segment Information
|
The Company is organized into four 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.
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, stock-based compensation, costs of certain business initiatives and shared services or operations benefiting multiple segments, and results of insignificant operations. Identifiable assets of the business segments exclude general corporate assets, which principally consist of cash and cash equivalents, certain property, plant and equipment, and certain other assets pertaining to corporate activities. Intersegment sales generally include amounts invoiced by a segment for work performed for another segment. Amounts are based on actual work performed and agreed-upon pricing, which is intended to be reflective of the contribution made by the supplying business segment.
Selected financial information concerning the Company’s reportable segments and product lines is as follows (in millions):
|
|
Three Months Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
External
Customers
|
|
|
Inter-
segment
|
|
|
Net
Sales
|
|
|
External
Customers
|
|
|
Inter-
segment
|
|
|
Net
Sales
|
|
Access equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerial work platforms
|
|
$
|
306.0
|
|
|
$
|
—
|
|
|
$
|
306.0
|
|
|
$
|
337.7
|
|
|
$
|
—
|
|
|
$
|
337.7
|
|
Telehandlers
|
|
|
201.4
|
|
|
|
—
|
|
|
|
201.4
|
|
|
|
269.5
|
|
|
|
—
|
|
|
|
269.5
|
|
Other
|
|
|
210.5
|
|
|
|
—
|
|
|
|
210.5
|
|
|
|
219.3
|
|
|
|
—
|
|
|
|
219.3
|
|
Total access equipment
|
|
|
717.9
|
|
|
|
—
|
|
|
|
717.9
|
|
|
|
826.5
|
|
|
|
—
|
|
|
|
826.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defense
|
|
|
492.6
|
|
|
|
0.5
|
|
|
|
493.1
|
|
|
|
463.8
|
|
|
|
0.3
|
|
|
|
464.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fire & emergency
|
|
|
260.0
|
|
|
|
2.4
|
|
|
|
262.4
|
|
|
|
291.2
|
|
|
|
4.3
|
|
|
|
295.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concrete placement
|
|
|
75.7
|
|
|
|
—
|
|
|
|
75.7
|
|
|
|
81.7
|
|
|
|
—
|
|
|
|
81.7
|
|
Refuse collection
|
|
|
115.9
|
|
|
|
—
|
|
|
|
115.9
|
|
|
|
109.2
|
|
|
|
—
|
|
|
|
109.2
|
|
Other
|
|
|
32.3
|
|
|
|
0.3
|
|
|
|
32.6
|
|
|
|
30.7
|
|
|
|
0.6
|
|
|
|
31.3
|
|
Total commercial
|
|
|
223.9
|
|
|
|
0.3
|
|
|
|
224.2
|
|
|
|
221.6
|
|
|
|
0.6
|
|
|
|
222.2
|
|
Corporate and intersegment eliminations
|
|
|
0.7
|
|
|
|
(3.2
|
)
|
|
|
(2.5
|
)
|
|
|
0.3
|
|
|
|
(5.2
|
)
|
|
|
(4.9
|
)
|
Consolidated
|
|
$
|
1,695.1
|
|
|
$
|
—
|
|
|
$
|
1,695.1
|
|
|
$
|
1,803.4
|
|
|
$
|
—
|
|
|
$
|
1,803.4
|
|
|
|
Three Months Ended
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
Access equipment
|
|
$
|
69.0
|
|
|
$
|
66.4
|
|
Defense
|
|
|
30.9
|
|
|
|
71.1
|
|
Fire & emergency
|
|
|
31.0
|
|
|
|
39.9
|
|
Commercial
|
|
|
17.8
|
|
|
|
18.7
|
|
Corporate
|
|
|
(39.6
|
)
|
|
|
(35.6
|
)
|
Consolidated
|
|
|
109.1
|
|
|
|
160.5
|
|
Interest expense, net of interest income
|
|
|
(11.8
|
)
|
|
|
(11.5
|
)
|
Miscellaneous other (expense) income
|
|
|
(0.4
|
)
|
|
|
(1.2
|
)
|
Income before income taxes and earnings (losses) of unconsolidated affiliates
|
|
$
|
96.9
|
|
|
$
|
147.8
|
|
24
Table of Contents
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
December 31, 2019
|
|
|
September 30, 2019
|
|
Identifiable assets:
|
|
|
|
|
|
|
|
|
Access equipment:
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
2,295.8
|
|
|
$
|
2,317.2
|
|
Europe, Africa and Middle East
|
|
|
390.5
|
|
|
|
403.4
|
|
Rest of the World (b)
|
|
|
357.4
|
|
|
|
252.6
|
|
Total access equipment
|
|
|
3,043.7
|
|
|
|
2,973.2
|
|
Defense:
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
1,032.6
|
|
|
|
883.0
|
|
Rest of the World
|
|
|
6.6
|
|
|
|
6.7
|
|
Total defense
|
|
|
1,039.2
|
|
|
|
889.7
|
|
Fire & emergency - U.S.
|
|
|
569.1
|
|
|
|
587.9
|
|
Commercial:
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
373.6
|
|
|
|
383.6
|
|
Rest of the World
|
|
|
41.9
|
|
|
|
48.9
|
|
Total commercial
|
|
|
415.5
|
|
|
|
432.5
|
|
Corporate:
|
|
|
|
|
|
|
|
|
U.S. (a)
|
|
|
488.7
|
|
|
|
597.6
|
|
Rest of the World (b)
|
|
|
—
|
|
|
|
85.4
|
|
Total corporate
|
|
|
488.7
|
|
|
|
683.0
|
|
Consolidated
|
|
$
|
5,556.2
|
|
|
$
|
5,566.3
|
|
(a)
|
Primarily includes cash and short-term investments and the Company’s new global headquarters.
|
(b)
|
Control of a shared manufacturing facility in Mexico transferred to the access equipment segment effective October 1, 2019.
|
The following table presents net sales by geographic region based on product shipment destination (in millions):
|
|
Three Months Ended December 31, 2019
|
|
|
|
Access
equipment
|
|
|
Defense
|
|
|
Fire &
emergency
|
|
|
Commercial
|
|
|
Eliminations
|
|
|
Total
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
547.1
|
|
|
$
|
485.6
|
|
|
$
|
243.9
|
|
|
$
|
218.6
|
|
|
$
|
(2.5
|
)
|
|
$
|
1,492.7
|
|
Europe, Africa and Middle East
|
|
|
74.2
|
|
|
|
6.0
|
|
|
|
0.4
|
|
|
|
0.4
|
|
|
|
—
|
|
|
|
81.0
|
|
Rest of the World
|
|
|
96.6
|
|
|
|
1.5
|
|
|
|
18.1
|
|
|
|
5.2
|
|
|
|
—
|
|
|
|
121.4
|
|
|
|
$
|
717.9
|
|
|
$
|
493.1
|
|
|
$
|
262.4
|
|
|
$
|
224.2
|
|
|
$
|
(2.5
|
)
|
|
$
|
1,695.1
|
|
|
|
Three Months Ended December 31, 2018
|
|
|
|
Access
equipment
|
|
|
Defense
|
|
|
Fire &
emergency
|
|
|
Commercial
|
|
|
Eliminations
|
|
|
Total
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
646.2
|
|
|
$
|
448.1
|
|
|
$
|
273.1
|
|
|
$
|
217.7
|
|
|
$
|
(5.0
|
)
|
|
$
|
1,580.1
|
|
Europe, Africa and Middle East
|
|
|
113.7
|
|
|
|
15.9
|
|
|
|
11.0
|
|
|
|
1.8
|
|
|
|
0.1
|
|
|
|
142.5
|
|
Rest of the World
|
|
|
66.6
|
|
|
|
0.1
|
|
|
|
11.4
|
|
|
|
2.7
|
|
|
|
—
|
|
|
|
80.8
|
|
|
|
$
|
826.5
|
|
|
$
|
464.1
|
|
|
$
|
295.5
|
|
|
$
|
222.2
|
|
|
$
|
(4.9
|
)
|
|
$
|
1,803.4
|
|
25
Table of Contents