UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period endedMarch 31, 2019
or
☐ | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number:1-31371
Oshkosh 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.) |
P.O.Box 2566 Oshkosh, Wisconsin | 54903-2566 | |
(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:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock $0.01 par value | OSK | New York Stock Exchange |
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.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
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 is a shell company (as defined in Rule 12b-2 of the Act).
As of April 23, 2019, 69,915,54222, 2020, 68,070,705 shares of the registrant’s Common Stock were outstanding.
OSHKOSH CORPORATION
FORM
10-Q INDEXFOR THE QUARTER ENDED MARCH 31, 2019
PART
I - FINANCIAL INFORMATIONITEM 1. | FINANCIAL STATEMENTS |
OSHKOSH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts; unaudited)
|
| Three Months Ended March 31, |
|
| Six Months Ended March 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Net sales |
| $ | 1,796.7 |
|
| $ | 1,990.2 |
|
| $ | 3,491.8 |
|
| $ | 3,793.6 |
|
Cost of sales |
|
| 1,504.3 |
|
|
| 1,632.3 |
|
|
| 2,909.9 |
|
|
| 3,107.4 |
|
Gross income |
|
| 292.4 |
|
|
| 357.9 |
|
|
| 581.9 |
|
|
| 686.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
| 157.4 |
|
|
| 173.0 |
|
|
| 330.8 |
|
|
| 331.6 |
|
Amortization of purchased intangibles |
|
| 1.4 |
|
|
| 9.3 |
|
|
| 8.4 |
|
|
| 18.5 |
|
Total operating expenses |
|
| 158.8 |
|
|
| 182.3 |
|
|
| 339.2 |
|
|
| 350.1 |
|
Operating income |
|
| 133.6 |
|
|
| 175.6 |
|
|
| 242.7 |
|
|
| 336.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (22.3 | ) |
|
| (13.7 | ) |
|
| (35.4 | ) |
|
| (27.4 | ) |
Interest income |
|
| 1.6 |
|
|
| 2.0 |
|
|
| 2.9 |
|
|
| 4.2 |
|
Miscellaneous, net |
|
| (5.8 | ) |
|
| 1.2 |
|
|
| (6.2 | ) |
|
| — |
|
Income before income taxes and earnings (losses) of unconsolidated affiliates |
|
| 107.1 |
|
|
| 165.1 |
|
|
| 204.0 |
|
|
| 312.9 |
|
Provision for income taxes |
|
| 38.3 |
|
|
| 36.2 |
|
|
| 59.0 |
|
|
| 75.9 |
|
Income before earnings (losses) of unconsolidated affiliates |
|
| 68.8 |
|
|
| 128.9 |
|
|
| 145.0 |
|
|
| 237.0 |
|
Equity in earnings (losses) of unconsolidated affiliates |
|
| (0.2 | ) |
|
| (0.4 | ) |
|
| (0.7 | ) |
|
| 0.5 |
|
Net income |
| $ | 68.6 |
|
| $ | 128.5 |
|
| $ | 144.3 |
|
| $ | 237.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 1.00 |
|
| $ | 1.84 |
|
| $ | 2.12 |
|
| $ | 3.37 |
|
Diluted |
|
| 0.99 |
|
|
| 1.82 |
|
|
| 2.09 |
|
|
| 3.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share on Common Stock |
| $ | 0.30 |
|
| $ | 0.27 |
|
| $ | 0.60 |
|
| $ | 0.54 |
|
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
As adjusted | As adjusted | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net sales | $ | 1,990.2 | $ | 1,886.4 | $ | 3,793.6 | $ | 3,472.7 | |||||||
Cost of sales | 1,632.3 | 1,550.4 | 3,107.4 | 2,893.7 | |||||||||||
Gross income | 357.9 | 336.0 | 686.2 | 579.0 | |||||||||||
Operating expenses: | |||||||||||||||
Selling, general and administrative | 173.0 | 170.4 | 331.6 | 328.3 | |||||||||||
Amortization of purchased intangibles | 9.3 | 9.2 | 18.5 | 19.8 | |||||||||||
Total operating expenses | 182.3 | 179.6 | 350.1 | 348.1 | |||||||||||
Operating income | 175.6 | 156.4 | 336.1 | 230.9 | |||||||||||
Other income (expense): | |||||||||||||||
Interest expense | (13.7 | ) | (16.1 | ) | (27.4 | ) | (31.5 | ) | |||||||
Interest income | 2.0 | 8.1 | 4.2 | 9.8 | |||||||||||
Miscellaneous, net | 1.2 | (1.3 | ) | — | (1.5 | ) | |||||||||
Income before income taxes and earnings (losses) of unconsolidated affiliates | 165.1 | 147.1 | 312.9 | 207.7 | |||||||||||
Provision for income taxes | 36.2 | 36.2 | 75.9 | 40.9 | |||||||||||
Income before earnings (losses) of unconsolidated affiliates | 128.9 | 110.9 | 237.0 | 166.8 | |||||||||||
Equity in earnings (losses) of unconsolidated affiliates | (0.4 | ) | (0.1 | ) | 0.5 | 0.4 | |||||||||
Net income | $ | 128.5 | $ | 110.8 | $ | 237.5 | $ | 167.2 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 1.84 | $ | 1.49 | $ | 3.37 | $ | 2.24 | |||||||
Diluted | 1.82 | 1.47 | 3.33 | 2.21 | |||||||||||
Cash dividends declared per share on Common Stock | $ | 0.27 | $ | 0.24 | $ | 0.54 | $ | 0.48 |
The accompanying notes are an integral part of these financial statements
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions; unaudited)
|
| Three Months Ended March 31, |
|
| Six Months Ended March 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Net income |
| $ | 68.6 |
|
| $ | 128.5 |
|
| $ | 144.3 |
|
| $ | 237.5 |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee pension and postretirement benefits |
|
| 0.7 |
|
|
| (3.8 | ) |
|
| 1.4 |
|
|
| (3.8 | ) |
Currency translation adjustments |
|
| (28.4 | ) |
|
| (6.9 | ) |
|
| (8.9 | ) |
|
| (15.7 | ) |
Change in fair value of derivative instruments |
|
| 0.7 |
|
|
| (0.2 | ) |
|
| 0.2 |
|
|
| (0.2 | ) |
Total other comprehensive income (loss), net of tax |
|
| (27.0 | ) |
|
| (10.9 | ) |
|
| (7.3 | ) |
|
| (19.7 | ) |
Comprehensive income |
| $ | 41.6 |
|
| $ | 117.6 |
|
| $ | 137.0 |
|
| $ | 217.8 |
|
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income | $ | 128.5 | $ | 110.8 | $ | 237.5 | $ | 167.2 | |||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Employee pension and postretirement benefits | (3.8 | ) | 0.5 | (3.8 | ) | 1.0 | |||||||||
Currency translation adjustments | (6.9 | ) | 16.5 | (15.7 | ) | 18.6 | |||||||||
Change in fair value of derivative instruments | (0.2 | ) | 0.3 | (0.2 | ) | 0.3 | |||||||||
Total other comprehensive income (loss), net of tax | (10.9 | ) | 17.3 | (19.7 | ) | 19.9 | |||||||||
Comprehensive income | $ | 117.6 | $ | 128.1 | $ | 217.8 | $ | 187.1 |
The accompanying notes are an integral part of these financial statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share amounts; unaudited)
|
| March 31, 2020 |
|
| September 30, 2019 |
| ||
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 403.9 |
|
| $ | 448.4 |
|
Receivables, net |
|
| 873.8 |
|
|
| 1,082.3 |
|
Unbilled receivables, net |
|
| 506.1 |
|
|
| 549.5 |
|
Inventories, net |
|
| 1,655.9 |
|
|
| 1,249.2 |
|
Other current assets |
|
| 93.9 |
|
|
| 78.9 |
|
Total current assets |
|
| 3,533.6 |
|
|
| 3,408.3 |
|
Property, plant and equipment, net |
|
| 551.7 |
|
|
| 573.6 |
|
Goodwill |
|
| 995.9 |
|
|
| 995.7 |
|
Purchased intangible assets, net |
|
| 423.9 |
|
|
| 432.3 |
|
Other long-term assets |
|
| 356.8 |
|
|
| 156.4 |
|
Total assets |
| $ | 5,861.9 |
|
| $ | 5,566.3 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Revolving credit facilities |
| $ | 4.9 |
|
| $ | — |
|
Accounts payable |
|
| 726.1 |
|
|
| 795.5 |
|
Customer advances |
|
| 593.0 |
|
|
| 382.0 |
|
Payroll-related obligations |
|
| 121.9 |
|
|
| 183.6 |
|
Income taxes payable |
|
| 27.0 |
|
|
| 73.5 |
|
Other current liabilities |
|
| 332.1 |
|
|
| 307.3 |
|
Total current liabilities |
|
| 1,805.0 |
|
|
| 1,741.9 |
|
Long-term debt, less current maturities |
|
| 817.4 |
|
|
| 819.0 |
|
Other long-term liabilities |
|
| 550.5 |
|
|
| 405.6 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
Preferred Stock ($0.01 par value; 2,000,000 shares authorized; NaN issued and outstanding) |
|
| — |
|
|
| — |
|
Common Stock ($0.01 par value; 300,000,000 shares authorized; 75,101,465 shares issued) |
|
| 0.7 |
|
|
| 0.7 |
|
Additional paid-in capital |
|
| 795.0 |
|
|
| 808.5 |
|
Retained earnings |
|
| 2,608.4 |
|
|
| 2,505.0 |
|
Accumulated other comprehensive loss |
|
| (208.9 | ) |
|
| (201.6 | ) |
Common Stock in treasury, at cost (7,030,760 and 7,114,349 shares, respectively) |
|
| (506.2 | ) |
|
| (512.8 | ) |
Total shareholders’ equity |
|
| 2,689.0 |
|
|
| 2,599.8 |
|
Total liabilities and shareholders’ equity |
| $ | 5,861.9 |
|
| $ | 5,566.3 |
|
March 31, | September 30, | ||||||
2019 | 2018 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 321.9 | $ | 454.6 | |||
Receivables, net | 1,077.8 | 1,521.6 | |||||
Unbilled receivables, net | 384.5 | — | |||||
Inventories, net | 1,503.5 | 1,227.7 | |||||
Other current assets | 82.0 | 66.0 | |||||
Total current assets | 3,369.7 | 3,269.9 | |||||
Property, plant and equipment, net | 504.0 | 481.1 | |||||
Goodwill | 1,001.6 | 1,007.9 | |||||
Purchased intangible assets, net | 450.9 | 469.4 | |||||
Other long-term assets | 143.2 | 65.9 | |||||
Total assets | $ | 5,469.4 | $ | 5,294.2 | |||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities: | |||||||
Revolving credit facilities and current maturities of long-term debt | $ | — | $ | — | |||
Accounts payable | 825.4 | 776.9 | |||||
Customer advances | 497.8 | 444.9 | |||||
Payroll-related obligations | 142.5 | 192.5 | |||||
Other current liabilities | 344.4 | 275.8 | |||||
Total current liabilities | 1,810.1 | 1,690.1 | |||||
Long-term debt, less current maturities | 818.5 | 818.0 | |||||
Other long-term liabilities | 341.1 | 272.6 | |||||
Commitments and contingencies | |||||||
Shareholders’ equity: | |||||||
Preferred Stock ($0.01 par value; 2,000,000 shares authorized; none issued and outstanding) | — | — | |||||
Common Stock ($0.01 par value; 300,000,000 shares authorized; 75,101,465 shares issued) | 0.7 | 0.7 | |||||
Additional paid-in capital | 798.1 | 814.8 | |||||
Retained earnings | 2,200.3 | 2,007.9 | |||||
Accumulated other comprehensive loss | (135.6 | ) | (106.8 | ) | |||
Common Stock in treasury, at cost (5,202,448 and 2,730,707 shares, respectively) | (363.8 | ) | (203.1 | ) | |||
Total shareholders’ equity | 2,499.7 | 2,513.5 | |||||
Total liabilities and shareholders’ equity | $ | 5,469.4 | $ | 5,294.2 |
The accompanying notes are an integral part of these financial statements
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS
’EQUITY(In millions, except per share amounts; unaudited)
|
| Three Months Ended March 31, 2020 |
| |||||||||||||||||||||
|
| Common Stock |
|
| Additional Paid-In Capital |
|
| Retained Earnings |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Common Stock in Treasury, at Cost |
|
| Total |
| ||||||
Balance at December 31, 2019 |
| $ | 0.7 |
|
| $ | 794.1 |
|
| $ | 2,560.3 |
|
| $ | (181.9 | ) |
| $ | (492.1 | ) |
| $ | 2,681.1 |
|
Net income |
|
| — |
|
|
| — |
|
|
| 68.6 |
|
|
| — |
|
|
| — |
|
|
| 68.6 |
|
Employee pension and postretirement benefits, net of tax of $0.2 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.7 |
|
|
| — |
|
|
| 0.7 |
|
Currency translation adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (28.4 | ) |
|
| — |
|
|
| (28.4 | ) |
Cash dividends ($0.30 per share) |
|
| — |
|
|
| — |
|
|
| (20.5 | ) |
|
| — |
|
|
| — |
|
|
| (20.5 | ) |
Repurchases of Common Stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (31.4 | ) |
|
| (31.4 | ) |
Exercise of stock options |
|
| — |
|
|
| (4.8 | ) |
|
| — |
|
|
| — |
|
|
| 13.6 |
|
|
| 8.8 |
|
Stock-based compensation expense |
|
| — |
|
|
| 8.3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8.3 |
|
Payment of stock-based restricted and performance shares |
|
| — |
|
|
| (0.3 | ) |
|
| — |
|
|
| — |
|
|
| 0.3 |
|
|
| — |
|
Other |
|
| — |
|
|
| (2.3 | ) |
|
| — |
|
|
| 0.7 |
|
|
| 3.4 |
|
|
| 1.8 |
|
Balance at March 31, 2020 |
| $ | 0.7 |
|
| $ | 795.0 |
|
| $ | 2,608.4 |
|
| $ | (208.9 | ) |
| $ | (506.2 | ) |
| $ | 2,689.0 |
|
|
| Three Months Ended March 31, 2019 |
| |||||||||||||||||||||
|
| Common Stock |
|
| Additional Paid-In Capital |
|
| Retained Earnings |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Common Stock in Treasury, at Cost |
|
| Total |
| ||||||
Balance at December 31, 2018 |
| $ | 0.7 |
|
| $ | 797.6 |
|
| $ | 2,090.8 |
|
| $ | (124.7 | ) |
| $ | (353.2 | ) |
| $ | 2,411.2 |
|
Net income |
|
| — |
|
|
| — |
|
|
| 128.5 |
|
|
| — |
|
|
| — |
|
|
| 128.5 |
|
Employee pension and postretirement benefits, net of tax of $0.9 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3.8 | ) |
|
| — |
|
|
| (3.8 | ) |
Currency translation adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6.9 | ) |
|
| — |
|
|
| (6.9 | ) |
Cash dividends ($0.27 per share) |
|
| — |
|
|
| — |
|
|
| (19.0 | ) |
|
| — |
|
|
| — |
|
|
| (19.0 | ) |
Repurchases of Common Stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (25.0 | ) |
|
| (25.0 | ) |
Exercise of stock options |
|
| — |
|
|
| (5.6 | ) |
|
| — |
|
|
| — |
|
|
| 12.5 |
|
|
| 6.9 |
|
Stock-based compensation expense |
|
| — |
|
|
| 7.4 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7.4 |
|
Payment of stock-based restricted and performance shares |
|
| — |
|
|
| (0.9 | ) |
|
| — |
|
|
| — |
|
|
| 0.9 |
|
|
| — |
|
Shares tendered for taxes on stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.4 | ) |
|
| (0.4 | ) |
Other |
|
| — |
|
|
| (0.4 | ) |
|
| — |
|
|
| (0.2 | ) |
|
| 1.4 |
|
|
| 0.8 |
|
Balance at March 31, 2019 |
| $ | 0.7 |
|
| $ | 798.1 |
|
| $ | 2,200.3 |
|
| $ | (135.6 | ) |
| $ | (363.8 | ) |
| $ | 2,499.7 |
|
Three Months Ended March 31, 2019 | |||||||||||||||||||||||
Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Common Stock in Treasury, at Cost | Total | ||||||||||||||||||
Balance at December 31, 2018 | $ | 0.7 | $ | 797.6 | $ | 2,090.8 | $ | (124.7 | ) | $ | (353.2 | ) | $ | 2,411.2 | |||||||||
Net income | — | — | 128.5 | — | — | 128.5 | |||||||||||||||||
Employee pension and postretirement benefits, net of tax of $0.9 | — | — | — | (3.8 | ) | — | (3.8 | ) | |||||||||||||||
Currency translation adjustments | — | — | — | (6.9 | ) | — | (6.9 | ) | |||||||||||||||
Cash dividends ($0.27 per share) | — | — | (19.0 | ) | — | — | (19.0 | ) | |||||||||||||||
Repurchases of Common Stock | — | — | — | — | (25.0 | ) | (25.0 | ) | |||||||||||||||
Exercise of stock options | — | (5.6 | ) | — | — | 12.5 | 6.9 | ||||||||||||||||
Stock-based compensation expense | — | 7.4 | — | — | — | 7.4 | |||||||||||||||||
Payment of stock-based restricted and performance shares | — | (0.9 | ) | — | — | 0.9 | — | ||||||||||||||||
Shares tendered for taxes on stock-based compensation | — | — | — | — | (0.4 | ) | (0.4 | ) | |||||||||||||||
Other | — | (0.4 | ) | — | (0.2 | ) | 1.4 | 0.8 | |||||||||||||||
Balance at March 31, 2019 | $ | 0.7 | $ | 798.1 | $ | 2,200.3 | $ | (135.6 | ) | $ | (363.8 | ) | $ | 2,499.7 |
Three Months Ended March 31, 2018 | |||||||||||||||||||||||
Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Common Stock in Treasury, at Cost | Total | ||||||||||||||||||
Balance at December 31, 2017 | $ | 0.9 | $ | 799.3 | $ | 2,438.2 | $ | (122.4 | ) | $ | (822.6 | ) | $ | 2,293.4 | |||||||||
Net income | — | — | 110.8 | — | — | 110.8 | |||||||||||||||||
Employee pension and postretirement benefits, net of tax of $0.2 | — | — | — | 0.5 | — | 0.5 | |||||||||||||||||
Currency translation adjustments | — | — | — | 16.5 | — | 16.5 | |||||||||||||||||
Cash dividends ($0.24 per share) | — | — | (17.9 | ) | — | — | (17.9 | ) | |||||||||||||||
Repurchases of Common Stock | — | — | — | — | (65.0 | ) | (65.0 | ) | |||||||||||||||
Exercise of stock options | — | (1.3 | ) | — | — | 5.2 | 3.9 | ||||||||||||||||
Stock-based compensation expense | — | 6.3 | — | — | — | 6.3 | |||||||||||||||||
Payment of stock-based restricted and performance shares | — | (0.3 | ) | — | — | 0.3 | — | ||||||||||||||||
Shares tendered for taxes on stock-based compensation | — | — | — | — | (0.1 | ) | (0.1 | ) | |||||||||||||||
Other | — | 0.3 | — | 0.3 | 0.6 | 1.2 | |||||||||||||||||
Balance at March 31, 2018 | $ | 0.9 | $ | 804.3 | $ | 2,531.1 | $ | (105.1 | ) | $ | (881.6 | ) | $ | 2,349.6 |
The accompanying notes are an integral part of these financial statements
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS
’EQUITY(In millions, except per share amounts; unaudited)
|
| Six Months Ended March 31, 2020 |
| |||||||||||||||||||||
|
| Common Stock |
|
| Additional Paid-In Capital |
|
| Retained Earnings |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Common Stock in Treasury, at Cost |
|
| Total |
| ||||||
Balance at September 30, 2019 |
| $ | 0.7 |
|
| $ | 808.5 |
|
| $ | 2,505.0 |
|
| $ | (201.6 | ) |
| $ | (512.8 | ) |
| $ | 2,599.8 |
|
Net income |
|
| — |
|
|
| — |
|
|
| 144.3 |
|
|
| — |
|
|
| — |
|
|
| 144.3 |
|
Employee pension and postretirement benefits, net of tax of $0.4 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1.4 |
|
|
| — |
|
|
| 1.4 |
|
Currency translation adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8.9 | ) |
|
| — |
|
|
| (8.9 | ) |
Cash dividends ($0.60 per share) |
|
| — |
|
|
| — |
|
|
| (40.9 | ) |
|
| — |
|
|
| — |
|
|
| (40.9 | ) |
Repurchases of Common Stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (40.8 | ) |
|
| (40.8 | ) |
Exercise of stock options |
|
| — |
|
|
| (10.7 | ) |
|
| — |
|
|
| — |
|
|
| 34.3 |
|
|
| 23.6 |
|
Stock-based compensation expense |
|
| — |
|
|
| 17.7 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 17.7 |
|
Payment of stock-based restricted and performance shares |
|
| — |
|
|
| (18.2 | ) |
|
| — |
|
|
| — |
|
|
| 18.2 |
|
|
| — |
|
Shares tendered for taxes on stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8.5 | ) |
|
| (8.5 | ) |
Other |
|
| — |
|
|
| (2.3 | ) |
|
| — |
|
|
| 0.2 |
|
|
| 3.4 |
|
|
| 1.3 |
|
Balance at March 31, 2020 |
| $ | 0.7 |
|
| $ | 795.0 |
|
| $ | 2,608.4 |
|
| $ | (208.9 | ) |
| $ | (506.2 | ) |
| $ | 2,689.0 |
|
|
| Six Months Ended March 31, 2019 |
| |||||||||||||||||||||
|
| 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 Standard 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 |
|
| — |
|
|
| — |
|
|
| 237.5 |
|
|
| — |
|
|
| — |
|
|
| 237.5 |
|
Employee pension and postretirement benefits, net of tax of $1.0 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3.8 | ) |
|
| — |
|
|
| (3.8 | ) |
Currency translation adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (15.7 | ) |
|
| — |
|
|
| (15.7 | ) |
Cash dividends ($0.54 per share) |
|
| — |
|
|
| — |
|
|
| (38.3 | ) |
|
| — |
|
|
| — |
|
|
| (38.3 | ) |
Repurchases of Common Stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (195.0 | ) |
|
| (195.0 | ) |
Exercise of stock options |
|
| — |
|
|
| (7.4 | ) |
|
| — |
|
|
| — |
|
|
| 16.0 |
|
|
| 8.6 |
|
Stock-based compensation expense |
|
| — |
|
|
| 15.3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15.3 |
|
Payment of stock-based restricted and performance shares |
|
| — |
|
|
| (24.2 | ) |
|
| — |
|
|
| — |
|
|
| 24.2 |
|
|
| — |
|
Shares tendered for taxes on stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (7.3 | ) |
|
| (7.3 | ) |
Other |
|
| — |
|
|
| (0.4 | ) |
|
| — |
|
|
| (0.2 | ) |
|
| 1.4 |
|
|
| 0.8 |
|
Balance at March 31, 2019 |
| $ | 0.7 |
|
| $ | 798.1 |
|
| $ | 2,200.3 |
|
| $ | (135.6 | ) |
| $ | (363.8 | ) |
| $ | 2,499.7 |
|
Six Months Ended March 31, 2019 | |||||||||||||||||||||||
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 Standard 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 | — | — | 237.5 | — | — | 237.5 | |||||||||||||||||
Employee pension and postretirement benefits, net of tax of $1.0 | — | — | — | (3.8 | ) | — | (3.8 | ) | |||||||||||||||
Currency translation adjustments | — | — | — | (15.7 | ) | — | (15.7 | ) | |||||||||||||||
Cash dividends ($0.54 per share) | — | — | (38.3 | ) | — | — | (38.3 | ) | |||||||||||||||
Repurchases of Common Stock | — | — | — | — | (195.0 | ) | (195.0 | ) | |||||||||||||||
Exercise of stock options | — | (7.4 | ) | — | — | 16.0 | 8.6 | ||||||||||||||||
Stock-based compensation expense | — | 15.3 | — | — | — | 15.3 | |||||||||||||||||
Payment of stock-based restricted and performance shares | — | (24.2 | ) | — | — | 24.2 | — | ||||||||||||||||
Shares tendered for taxes on stock-based compensation | — | — | — | — | (7.3 | ) | (7.3 | ) | |||||||||||||||
Other | — | (0.4 | ) | — | (0.2 | ) | 1.4 | 0.8 | |||||||||||||||
Balance at March 31, 2019 | $ | 0.7 | $ | 798.1 | $ | 2,200.3 | $ | (135.6 | ) | $ | (363.8 | ) | $ | 2,499.7 |
Six Months Ended March 31, 2018 | |||||||||||||||||||||||
Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Common Stock in Treasury, at Cost | Total | ||||||||||||||||||
Balance at September 30, 2017 | $ | 0.9 | $ | 802.2 | $ | 2,399.8 | $ | (125.0 | ) | $ | (770.5 | ) | $ | 2,307.4 | |||||||||
Net income | — | — | 167.2 | — | — | 167.2 | |||||||||||||||||
Employee pension and postretirement benefits, net of tax of $0.4 | — | — | — | 1.0 | — | 1.0 | |||||||||||||||||
Currency translation adjustments | — | — | — | 18.6 | — | 18.6 | |||||||||||||||||
Cash dividends ($0.48 per share) | — | — | (35.9 | ) | — | — | (35.9 | ) | |||||||||||||||
Repurchases of Common Stock | — | — | — | — | (128.7 | ) | (128.7 | ) | |||||||||||||||
Exercise of stock options | — | (3.1 | ) | — | — | 15.6 | 12.5 | ||||||||||||||||
Stock-based compensation expense | — | 13.8 | — | — | — | 13.8 | |||||||||||||||||
Payment of stock-based restricted and performance shares | — | (8.9 | ) | — | — | 8.9 | — | ||||||||||||||||
Shares tendered for taxes on stock-based compensation | — | — | — | — | (7.5 | ) | (7.5 | ) | |||||||||||||||
Other | — | 0.3 | — | 0.3 | 0.6 | 1.2 | |||||||||||||||||
Balance at March 31, 2018 | $ | 0.9 | $ | 804.3 | $ | 2,531.1 | $ | (105.1 | ) | $ | (881.6 | ) | $ | 2,349.6 |
The accompanying notes are an integral part of these financial statements
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions; unaudited)
|
| Six Months Ended March 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Operating activities: |
|
|
|
|
|
|
|
|
Net income |
| $ | 144.3 |
|
| $ | 237.5 |
|
Depreciation and amortization |
|
| 50.6 |
|
|
| 57.1 |
|
Stock-based compensation expense |
|
| 17.7 |
|
|
| 15.3 |
|
Deferred income taxes |
|
| 11.4 |
|
|
| 3.4 |
|
(Gain) loss on sale of assets |
|
| (9.9 | ) |
|
| 0.7 |
|
Foreign currency transaction (gains) losses |
|
| (1.5 | ) |
|
| 1.7 |
|
Debt extinguishment expense |
|
| 8.5 |
|
|
| — |
|
Other non-cash adjustments |
|
| 0.9 |
|
|
| (0.5 | ) |
Changes in operating assets and liabilities |
|
| (157.2 | ) |
|
| (162.2 | ) |
Net cash provided by operating activities |
|
| 64.8 |
|
|
| 153.0 |
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Additions to property, plant and equipment |
|
| (57.5 | ) |
|
| (50.6 | ) |
Additions to equipment held for rental |
|
| (10.9 | ) |
|
| (12.2 | ) |
Proceeds from sale of equipment held for rental |
|
| 32.5 |
|
|
| 6.6 |
|
Other investing activities |
|
| (1.2 | ) |
|
| (0.1 | ) |
Net cash used by investing activities |
|
| (37.1 | ) |
|
| (56.3 | ) |
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of debt (original maturities greater than three months) |
|
| 303.9 |
|
|
| — |
|
Repayments of debt (original maturities greater than three months) |
|
| (300.0 | ) |
|
| — |
|
Debt extinguishment and issuance costs |
|
| (9.6 | ) |
|
| — |
|
Repurchases of Common Stock |
|
| (49.3 | ) |
|
| (202.3 | ) |
Dividends paid |
|
| (40.9 | ) |
|
| (38.3 | ) |
Proceeds from exercise of stock options |
|
| 23.6 |
|
|
| 8.6 |
|
Other financing activities |
|
| (0.8 | ) |
|
| — |
|
Net cash used by financing activities |
|
| (73.1 | ) |
|
| (232.0 | ) |
Effect of exchange rate changes on cash |
|
| 0.9 |
|
|
| 2.6 |
|
Decrease in cash and cash equivalents |
|
| (44.5 | ) |
|
| (132.7 | ) |
Cash and cash equivalents at beginning of period |
|
| 448.4 |
|
|
| 454.6 |
|
Cash and cash equivalents at end of period |
| $ | 403.9 |
|
| $ | 321.9 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures: |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 34.0 |
|
| $ | 28.3 |
|
Cash paid for income taxes |
|
| 94.5 |
|
|
| 47.5 |
|
Cash paid for operating lease liabilities |
|
| 28.3 |
|
|
| — |
|
Operating right-of-use assets obtained |
|
| 27.5 |
|
|
| — |
|
Six Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Operating activities: | |||||||
Net income | $ | 237.5 | $ | 167.2 | |||
Depreciation and amortization | 57.1 | 61.3 | |||||
Stock-based compensation expense | 15.3 | 13.8 | |||||
Deferred income taxes | 3.4 | (21.8 | ) | ||||
(Gain) loss on sale of assets | 0.7 | (0.6 | ) | ||||
Foreign currency transaction (gains) losses | 1.7 | (0.7 | ) | ||||
Other non-cash adjustments | (0.5 | ) | 1.1 | ||||
Changes in operating assets and liabilities | (162.2 | ) | (176.4 | ) | |||
Net cash provided by operating activities | 153.0 | 43.9 | |||||
Investing activities: | |||||||
Additions to property, plant and equipment | (50.6 | ) | (37.9 | ) | |||
Additions to equipment held for rental | (12.2 | ) | (2.9 | ) | |||
Proceeds from sale of equipment held for rental | 6.6 | 4.4 | |||||
Other investing activities | (0.1 | ) | (0.5 | ) | |||
Net cash used by investing activities | (56.3 | ) | (36.9 | ) | |||
Financing activities: | |||||||
Proceeds from issuance of debt (original maturities greater than three months) | — | 13.1 | |||||
Repayments of debt (original maturities greater than three months) | — | (17.9 | ) | ||||
Repurchases of Common Stock | (202.3 | ) | (136.2 | ) | |||
Dividends paid | (38.3 | ) | (35.9 | ) | |||
Proceeds from exercise of stock options | 8.6 | 12.5 | |||||
Net cash used by financing activities | (232.0 | ) | (164.4 | ) | |||
Effect of exchange rate changes on cash | 2.6 | (1.7 | ) | ||||
Decrease in cash and cash equivalents | (132.7 | ) | (159.1 | ) | |||
Cash and cash equivalents at beginning of period | 454.6 | 447.0 | |||||
Cash and cash equivalents at end of period | $ | 321.9 | $ | 287.9 | |||
Supplemental disclosures: | |||||||
Cash paid for interest | $ | 28.3 | $ | 29.7 | |||
Cash paid for income taxes | 47.5 | 24.0 |
The accompanying notes are an integral part of these financial statements
6
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. | Basis of Presentation |
In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments (which include normal recurring adjustments, unless otherwise noted) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. These Condensed Consolidated Financial Statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K of Oshkosh Corporation for the year ended September 30, 2018.2019. 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. Certain reclassifications have been made to the fiscal 2018 financial statements to conform to the fiscal 2019 presentation.
2. | New Accounting Standards |
In May 2014,February 2016, the Financial Accounting Standards Board (FASB) issued new revenue recognition guidance (Accounting Standard Codification (ASC) 606)ASU 2016-02, Leases (Topic 842), which requires lessees to provide a single, comprehensive revenue recognition model for all contractsreflect most leases on their balance sheet as lease liabilities with customers, Accounting Standard Update (ASU) 2014-09,
The new standard provided a number of optional practical expedients for transition. The Company elected to adopt the new guidance,standard using the majoritypackage of the Company’s contracts with the U.S. government follow an over time model that uses the cost-to-cost method to measure performance. Previouslypractical expedients, which allowed the Company had recognized revenue from these contracts on the percentage of completion method using either the cost-to-cost or the units-complete method.not to reassess prior conclusions about lease identification, lease classification and initial direct costs. In addition, the new guidance changesprovides 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 definitionshort-term lease recognition exemption for all leases that qualify, which means ROU assets and lease liabilities are not 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 contract, resulting in the Company no longer considering unexercised government options in the measurement of completion and profitability. The new guidance is expected to result in additional volatility inmaterial impact on the Company’s earnings based uponresults of operations or cash flows.
7
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The cumulative effect of initially applying the date of receipt of contract orders.
|
| 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 312 of the Notes to Condensed Consolidated Financial Statements for additional information regarding the Company’s revenue recognition method under the new revenue guidance.
Balance as of September 30, 2018 | Cumulative Impact from Adopting New Revenue Standard | Balance as of October 1, 2018 | ||||||||||
Assets | ||||||||||||
Receivables, net | $ | 1,521.6 | $ | (248.9 | ) | $ | 1,272.7 | |||||
Unbilled receivables, net | — | 309.7 | 309.7 | |||||||||
Inventories, net | 1,227.7 | (75.9 | ) | 1,151.8 | ||||||||
Other current assets | 66.0 | 0.3 | 66.3 | |||||||||
Total current assets | 3,269.9 | (14.8 | ) | 3,255.1 | ||||||||
Other long-term assets | 65.9 | 18.7 | 84.6 | |||||||||
Total assets | 5,294.2 | 3.9 | 5,298.1 | |||||||||
Liabilities and Shareholders’ Equity | ||||||||||||
Customer advances | $ | 444.9 | $ | 27.2 | $ | 472.1 | ||||||
Other current liabilities | 275.8 | 6.4 | 282.2 | |||||||||
Total current liabilities | 1,690.1 | 33.6 | 1,723.7 | |||||||||
Other long-term liabilities | 272.6 | 30.7 | 303.3 | |||||||||
Retained earnings | 2,007.9 | (60.4 | ) | 1,947.5 | ||||||||
Total shareholders’ equity | 2,513.5 | (60.4 | ) | 2,453.1 | ||||||||
Total liabilities and shareholders’ equity | 5,294.2 | 3.9 | 5,298.1 |
Three Months Ended March 31, 2019 | ||||||||||||
As Reported | Previous Accounting Guidance | Impact of New Revenue Recognition Standard | ||||||||||
Condensed Consolidated Statement of Income | ||||||||||||
Net sales | $ | 1,990.2 | $ | 1,974.7 | $ | 15.5 | ||||||
Cost of sales | 1,632.3 | 1,623.6 | 8.7 | |||||||||
Gross income | $ | 357.9 | $ | 351.1 | $ | 6.8 | ||||||
Operating income | $ | 175.6 | $ | 168.8 | $ | 6.8 | ||||||
Income before income taxes and earnings of unconsolidated affiliates | $ | 165.1 | $ | 158.3 | $ | 6.8 | ||||||
Provision for income taxes | 36.2 | 34.6 | 1.6 | |||||||||
Income before earnings of unconsolidated affiliates | 128.9 | 123.7 | 5.2 | |||||||||
Equity in earnings of unconsolidated affiliates | (0.4 | ) | (0.4 | ) | — | |||||||
Net income | $ | 128.5 | $ | 123.3 | $ | 5.2 | ||||||
Earnings per share: | ||||||||||||
Basic | $ | 1.84 | $ | 1.76 | $ | 0.08 | ||||||
Diluted | 1.82 | 1.74 | 0.08 |
Six Months Ended March 31, 2019 | ||||||||||||
As Reported | Previous Accounting Guidance | Impact of New Revenue Recognition Standard | ||||||||||
Condensed Consolidated Statement of Income | ||||||||||||
Net sales | $ | 3,793.6 | $ | 3,740.0 | $ | 53.6 | ||||||
Cost of sales | 3,107.4 | 3,085.8 | 21.6 | |||||||||
Gross income | $ | 686.2 | $ | 654.2 | $ | 32.0 | ||||||
Operating income | $ | 336.1 | $ | 304.1 | $ | 32.0 | ||||||
Income before income taxes and earnings of unconsolidated affiliates | $ | 312.9 | $ | 280.9 | $ | 32.0 | ||||||
Provision for income taxes | 75.9 | 68.3 | 7.6 | |||||||||
Income before earnings of unconsolidated affiliates | 237.0 | 212.6 | 24.4 | |||||||||
Equity in earnings of unconsolidated affiliates | 0.5 | 0.5 | — | |||||||||
Net income | $ | 237.5 | $ | 213.1 | $ | 24.4 | ||||||
Earnings per share: | ||||||||||||
Basic | $ | 3.37 | $ | 3.02 | $ | 0.35 | ||||||
Diluted | 3.33 | 2.99 | 0.34 |
March 31, 2019 | ||||||||||||
As Reported | Previous Accounting Guidance | Impact of New Revenue Recognition Standard | ||||||||||
Condensed Consolidated Balance Sheet | ||||||||||||
Assets | ||||||||||||
Receivables, net | $ | 1,077.8 | $ | 1,376.0 | $ | (298.2 | ) | |||||
Unbilled receivables, net | 384.5 | — | 384.5 | |||||||||
Inventories, net | 1,503.5 | 1,572.4 | (68.9 | ) | ||||||||
Other current assets | 82.0 | 82.0 | — | |||||||||
Total current assets | 3,369.7 | 3,352.3 | 17.4 | |||||||||
Other long-term assets | 143.2 | 132.1 | 11.1 | |||||||||
Total assets | 5,469.4 | 5,440.9 | 28.5 | |||||||||
Liabilities and Shareholders’ Equity | ||||||||||||
Customer advances | $ | 497.8 | $ | 491.6 | $ | 6.2 | ||||||
Other current liabilities | 344.4 | 321.9 | 22.5 | |||||||||
Total current liabilities | 1,810.1 | 1,781.4 | 28.7 | |||||||||
Other long-term liabilities | 341.1 | 305.3 | 35.8 | |||||||||
Retained earnings | 2,200.3 | 2,236.3 | (36.0 | ) | ||||||||
Total shareholders’ equity | 2,499.7 | 2,535.7 | (36.0 | ) | ||||||||
Total liabilities and shareholders’ equity | 5,469.4 | 5,440.9 | 28.5 |
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.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.
8
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 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 ASU 2017-042019-12 on the Company’s consolidated financial statements.
3. | Revenue Recognition |
The defense segment recognizes revenue on its performance obligations that are satisfied over time by measuring progress using the cost-to-cost method of percentage-of-completion because it best depicts the transfer of control to the customer. Under the cost-to-cost method of percentage-of-completion, the defense segment measures progress based on the ratio of costs incurred to date to total estimated costs for the performance obligation. The Company recognizes changes in estimated sales or costs and the resulting profit or loss on a cumulative basis. Cumulative estimate-at completion (EAC)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. For contracts with only aftermarket parts performance obligations, revenue is recognized at the time the parts are physically committed to the order or based on shipping terms depending on whether the contracts contain a termination for convenience clause. For performance obligations consisting solely of services, revenue is recognized either by using the cost-to-cost method of percentage-of-completion method or as the Company has the right to bill the customer in instances that billing rights approximates timing of transfer of control to the customer.
There is significant judgment involved in estimating sales and costs within the defense segment. Each contract is evaluated at contract inception to identify risks and estimate revenue and costs. In performing this evaluation, the defense segment considers risks of contract performance such as technical requirements, schedule, duration and key contract dependencies. These considerations are then factored into the Company’s estimated revenue and costs. Preliminary contract estimates are subject to change throughout the duration of the contract as additional information becomes available that impacts risks and estimated revenue and costs. In addition, as contract modifications (e.g., new orders) are received, the additional units are factored into the overall contract estimate of costs and transaction price.
Contract adjustments resulted in increases within the defense segment increased net sales, operating income, net income and diluted earningsas follows (in millions, except for per share by $18.0 million, $11.3 million, $8.7 million and $0.13 per share, respectively, during the three months ended March 31, 2019 and $49.6 million, $41.6 million, $31.9 million and $0.45 per share, respectively, during the six months ended March 31, 2019.amounts):
|
| Three Months Ended March 31, |
|
| Six Months Ended March 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Net sales |
| $ | 15.6 |
|
| $ | 18.0 |
|
| $ | 24.8 |
|
| $ | 49.6 |
|
Operating income |
|
| 10.6 |
|
|
| 11.3 |
|
|
| 14.6 |
|
|
| 41.6 |
|
Net income |
|
| 7.6 |
|
|
| 8.7 |
|
|
| 10.4 |
|
|
| 31.9 |
|
Diluted earnings per share |
| $ | 0.11 |
|
| $ | 0.13 |
|
| $ | 0.15 |
|
| $ | 0.45 |
|
9
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 March 31, 2020 |
| |||||||||||||||||||||
|
| Access equipment |
|
| Defense |
|
| Fire & emergency |
|
| Commercial |
|
| Corporate and intersegment eliminations |
|
| Total |
| ||||||
Point in time |
| $ | 670.8 |
|
| $ | 0.4 |
|
| $ | 242.9 |
|
| $ | 118.1 |
|
| $ | (4.3 | ) |
| $ | 1,027.9 |
|
Over time |
|
| 22.2 |
|
|
| 614.6 |
|
|
| 12.7 |
|
|
| 118.6 |
|
|
| 0.7 |
|
|
| 768.8 |
|
|
| $ | 693.0 |
|
| $ | 615.0 |
|
| $ | 255.6 |
|
| $ | 236.7 |
|
| $ | (3.6 | ) |
| $ | 1,796.7 |
|
|
| Three Months Ended March 31, 2019 |
| |||||||||||||||||||||
|
| Access equipment |
|
| Defense |
|
| Fire & emergency |
|
| Commercial |
|
| Corporate and intersegment eliminations |
|
| Total |
| ||||||
Point in time |
| $ | 968.9 |
|
| $ | 1.4 |
|
| $ | 274.3 |
|
| $ | 148.1 |
|
| $ | (5.2 | ) |
| $ | 1,387.5 |
|
Over time |
|
| 18.7 |
|
|
| 485.3 |
|
|
| 8.9 |
|
|
| 89.8 |
|
|
| — |
|
|
| 602.7 |
|
|
| $ | 987.6 |
|
| $ | 486.7 |
|
| $ | 283.2 |
|
| $ | 237.9 |
|
| $ | (5.2 | ) |
| $ | 1,990.2 |
|
|
| Six Months Ended March 31, 2020 |
| |||||||||||||||||||||
|
| Access equipment |
|
| Defense |
|
| Fire & emergency |
|
| Commercial |
|
| Corporate and intersegment eliminations |
|
| Total |
| ||||||
Point in time |
| $ | 1,366.1 |
|
| $ | 0.9 |
|
| $ | 494.9 |
|
| $ | 237.5 |
|
| $ | (7.4 | ) |
| $ | 2,092.0 |
|
Over time |
|
| 44.8 |
|
|
| 1,107.2 |
|
|
| 23.1 |
|
|
| 223.4 |
|
|
| 1.3 |
|
|
| 1,399.8 |
|
|
| $ | 1,410.9 |
|
| $ | 1,108.1 |
|
| $ | 518.0 |
|
| $ | 460.9 |
|
| $ | (6.1 | ) |
| $ | 3,491.8 |
|
|
| Six Months Ended March 31, 2019 |
| |||||||||||||||||||||
|
| Access equipment |
|
| Defense |
|
| Fire & emergency |
|
| Commercial |
|
| Corporate and intersegment eliminations |
|
| Total |
| ||||||
Point in time |
| $ | 1,776.7 |
|
| $ | 1.7 |
|
| $ | 565.2 |
|
| $ | 269.3 |
|
| $ | (10.1 | ) |
| $ | 2,602.8 |
|
Over time |
|
| 37.4 |
|
|
| 949.1 |
|
|
| 13.5 |
|
|
| 190.8 |
|
|
| — |
|
|
| 1,190.8 |
|
|
| $ | 1,814.1 |
|
| $ | 950.8 |
|
| $ | 578.7 |
|
| $ | 460.1 |
|
| $ | (10.1 | ) |
| $ | 3,793.6 |
|
Three Months Ended March 31, 2019 | |||||||||||||||||||||||
Access equipment | Defense | Fire & emergency | Commercial | Corporate and Intersegment Eliminations | Total | ||||||||||||||||||
Point in time | $ | 968.9 | $ | 1.4 | $ | 274.3 | $ | 148.1 | $ | (5.2 | ) | $ | 1,387.5 | ||||||||||
Over time | 18.7 | 485.3 | 8.9 | 89.8 | — | 602.7 | |||||||||||||||||
$ | 987.6 | $ | 486.7 | $ | 283.2 | $ | 237.9 | $ | (5.2 | ) | $ | 1,990.2 |
Six Months Ended March 31, 2019 | |||||||||||||||||||||||
Access equipment | Defense | Fire & emergency | Commercial | Corporate and Intersegment Eliminations | Total | ||||||||||||||||||
Point in time | $ | 1,776.7 | $ | 1.7 | $ | 565.2 | $ | 269.3 | $ | (10.1 | ) | $ | 2,602.8 | ||||||||||
Over time | 37.4 | 949.1 | 13.5 | 190.8 | — | 1,190.8 | |||||||||||||||||
$ | 1,814.1 | $ | 950.8 | $ | 578.7 | $ | 460.1 | $ | (10.1 | ) | $ | 3,793.6 |
See Note 1920 of the Notes to Condensed Consolidated Financial Statements for further disaggregated sales information.
Contract Assets and Contract Liabilities
The Company is generally entitled to bill its customers upon satisfaction of its performance obligations, with the exception of its long-term contracts in the defense segment which typically allow for billing upon acceptance of the finished good, advance payments from customers primarily within the fire & emergency segment and extended warranties that are usually billed in advance of the warranty coverage period. Customer payment is usually received shortly after billing and payment terms generally do not exceed one year. With the exception of the fire & emergency segment, the Company’s contracts typically do not contain a significant financing component. In the fire & emergency segment, customers earn interest on customer advances at a rate determined in a separate financing transaction between the fire & emergency segment and the customer at contract inception. Interest due on customer advances of $3.7$4.0 million and $7.3$7.2 million was recorded in “Interest expense” in the Condensed Consolidated Statements of Income for the three and six months ended March 31, 2019, respectively. Interest due on customer advances of $4.82020, respectively, and $3.7 million and $9.4$7.3 million was recorded in “Interest expense” in the Condensed Consolidated Statements of Income for the three and six months ended March 31, 2018,2019, respectively.
10
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The timing of billing does not always match the timing of revenue recognition. In instances where a customer pays consideration in advance or when the Company is entitled to bill a customer in advance of recognizing the related revenue, the Company records a contract liability within “Customer advances”, “Other current liabilities” or “Other long-term liabilities” in the Condensed Consolidated Balance Sheet. Total contract liabilities were $608.8$701.0 million as of March 31, 2019,2020, of which $497.8$593.0 million, $62.8$56.7 million and $48.2$51.3 million was included in “Customer advances”, “Other current liabilities” and “Other long-term liabilities”, respectively. Total contract liabilities were $594.4$512.5 million as of October 1, 2018,September 30, 2019, of which $472.1$382.0 million, $75.0$78.2 million and $47.3$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 $117.7 million and $290.6 million of revenue that was recorded as a contract liability as of the beginning of the period during the three and six months ended March 31, 2020. The Company recognized $237.4 million and $473.4 million of revenue that was recorded as a contract liability as of the beginning of the period during the three and six months ended March 31, 2019, respectively.
In instances where the Company recognizes revenue prior to having an unconditional right to payment, the Company records a contract asset within “Unbilled receivables, net” in the Condensed Consolidated Balance Sheet. The Company reduces contract assets when the Company has an unconditional right to payment. The Company periodically assesses its contract assets for impairment.
The Company offers a variety of service-type warranties, including optionally priced extended warranty programs. Outstanding balances related to service-type warranties are included within contract liabilities disclosed above. Revenue related to service warranties is deferred until after the expiration of the standard warranty period. The revenue is then recognized in income over the term of the extended warranty period in proportion to the costs that are expected to be incurred. Changes in the Company’s service-type warranties were as follows (in millions):
|
| Six Months Ended March 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Balance at beginning of period |
| $ | 68.2 |
|
| $ | 30.7 |
|
Adoption of ASC 606 |
|
| — |
|
|
| 35.7 |
|
Deferred revenue for new service warranties |
|
| 11.8 |
|
|
| 12.8 |
|
Amortization of deferred revenue |
|
| (14.2 | ) |
|
| (12.5 | ) |
Changes in liability for pre-existing warranties, net |
|
| — |
|
|
| 0.1 |
|
Foreign currency translation |
|
| 0.1 |
|
|
| (0.3 | ) |
Balance at end of period |
| $ | 65.9 |
|
| $ | 66.5 |
|
Classification of service-type warranties in the Condensed Consolidated Balance Sheets consisted of the following (in millions):
|
| March 31, |
|
| September 30, |
| ||
|
| 2020 |
|
| 2019 |
| ||
Other current liabilities |
| $ | 26.4 |
|
| $ | 27.8 |
|
Other long-term liabilities |
|
| 39.5 |
|
|
| 40.4 |
|
|
| $ | 65.9 |
|
| $ | 68.2 |
|
Six Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Balance at beginning of period | $ | 30.7 | $ | 30.8 | |||
Adoption of ASC 606 | 35.7 | — | |||||
Deferred revenue for new service warranties | 12.8 | 5.6 | |||||
Amortization of deferred revenue | (12.5 | ) | (5.0 | ) | |||
Changes in liability for pre-existing warranties, net | 0.1 | (0.5 | ) | ||||
Foreign currency translation | (0.3 | ) | 0.2 | ||||
Balance at end of period | $ | 66.5 | $ | 31.1 |
11
Remaining Performance Obligations
As of March 31, 2019,2020, the Company had unsatisfied performance obligations for contracts with an original duration greater than one year totaling $4.61$4.96 billion, of which $1.95$1.87 billion is expected to be satisfied and revenue recognized in the remaining six months of fiscal 2019, $2.192020, $2.71 billion is expected to be satisfied and revenue recognized in fiscal 20202021 and $464.3$380.1 million is expected to be satisfied and revenue recognized beyond fiscal 2020. The Company has elected the practical expedient to not disclose unsatisfied performance obligations with an original contract duration of one year or less.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, or its predecessor, the 2004 Incentive Stock and Awards Plan, awards previously made under these two plansthat 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 the respective stock plan under which they were issued.that plan. At March 31, 2019,2020, the Company had reserved 6,979,7365,810,640 shares of Common Stock available for issuance to provide for the exercise of outstanding stock options and the issuance of Common Stock under incentive compensation awards, including awards issued prior to the effective date of the 2017 Stock Plan.
The Company recognizes stock-based compensation expense over the requisite service period for vesting of an award, or to an employee’s eligible retirement date, if earlier and applicable. Total stock-based compensation expense, including cash-based liability awards, for the three and six months ended March 31, 20192020 was $8.3$7.2 million ($6.76.4 million net of tax) and $15.9$17.9 million ($13.215.7 million net of tax), respectively. Total stock-based compensation expense, including cash-based liability awards, for the three and six months ended March 31, 20182019 was $5.7$8.3 million ($4.46.7 million net of tax) and $14.2$15.9 million ($11.013.2 million net of tax), respectively.
5. | Employee Benefit Plans |
Components of net periodic pension benefit cost were as follows (in millions):
|
| Three Months Ended March 31, |
|
| Six Months Ended March 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Components of net periodic benefit cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
| $ | 2.6 |
|
| $ | 2.4 |
|
| $ | 5.1 |
|
| $ | 4.8 |
|
Interest cost |
|
| 4.3 |
|
|
| 4.7 |
|
|
| 8.6 |
|
|
| 9.4 |
|
Expected return on plan assets |
|
| (5.2 | ) |
|
| (5.0 | ) |
|
| (10.3 | ) |
|
| (10.0 | ) |
Amortization of prior service cost (benefit) |
|
| 0.4 |
|
|
| 0.5 |
|
|
| 0.8 |
|
|
| 0.9 |
|
Curtailment |
|
| — |
|
|
| 1.2 |
|
|
| — |
|
|
| 1.2 |
|
Amortization of net actuarial loss (gain) |
|
| 0.8 |
|
|
| 0.1 |
|
|
| 1.6 |
|
|
| 0.1 |
|
Expenses paid |
|
| 1.0 |
|
|
| 0.6 |
|
|
| 2.0 |
|
|
| 1.2 |
|
Net periodic benefit cost |
| $ | 3.9 |
|
| $ | 4.5 |
|
| $ | 7.8 |
|
| $ | 7.6 |
|
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Components of net periodic benefit cost | |||||||||||||||
Service cost | $ | 3.0 | $ | 3.1 | $ | 6.0 | $ | 6.2 | |||||||
Interest cost | 4.7 | 4.5 | 9.4 | 9.0 | |||||||||||
Expected return on plan assets | (5.0 | ) | (5.1 | ) | (10.0 | ) | (10.1 | ) | |||||||
Amortization of prior service cost | 0.5 | 0.5 | 0.9 | 0.9 | |||||||||||
Curtailment | 1.2 | — | 1.2 | — | |||||||||||
Amortization of net actuarial loss | 0.1 | 0.4 | 0.1 | 0.9 | |||||||||||
Net periodic benefit cost | $ | 4.5 | $ | 3.4 | $ | 7.6 | $ | 6.9 |
Components of net periodic other post-employment benefit cost were as follows (in millions):
|
| Three Months Ended March 31, |
|
| Six Months Ended March 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Components of net periodic benefit cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
| $ | 0.8 |
|
| $ | 0.7 |
|
| $ | 1.7 |
|
| $ | 1.5 |
|
Interest cost |
|
| 0.4 |
|
|
| 0.5 |
|
|
| 0.8 |
|
|
| 1.0 |
|
Amortization of prior service cost (benefit) |
|
| (0.3 | ) |
|
| (0.3 | ) |
|
| (0.5 | ) |
|
| (0.7 | ) |
Amortization of net actuarial loss (gain) |
|
| — |
|
|
| — |
|
|
| (0.1 | ) |
|
| (0.1 | ) |
Net periodic benefit cost |
| $ | 0.9 |
|
| $ | 0.9 |
|
| $ | 1.9 |
|
| $ | 1.7 |
|
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Components of net periodic benefit cost | |||||||||||||||
Service cost | $ | 0.7 | $ | 0.9 | $ | 1.5 | $ | 1.8 | |||||||
Interest cost | 0.5 | 0.4 | 1.0 | 0.9 | |||||||||||
Amortization of prior service benefit | (0.3 | ) | (0.3 | ) | (0.7 | ) | (0.5 | ) | |||||||
Amortization of net actuarial gain | — | 0.1 | (0.1 | ) | 0.1 | ||||||||||
Net periodic benefit cost | $ | 0.9 | $ | 1.1 | $ | 1.7 | $ | 2.3 |
12
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Components of net periodic benefit cost other than service cost“Service cost” and “Expenses paid” are included in “Miscellaneous, net” in the Condensed Consolidated Statements of Income. Administrative expense for the three and six months ended March 31, 2019, which was previously included in “Service cost”, is now reported in “Expenses paid” to improve the comparability between the periods.
6. | Income Taxes |
The Company recorded income tax expense of $36.2$38.3 million for the three months ended March 31, 2019,2020, or 21.9%35.8% of pre-tax income, compared to $36.2 million, or 24.6%21.9% of pre-tax income, for the three months ended March 31, 2018. As a result of the Tax Reform Act, results2019. Results for the three months ended March 31, 20192020 were subjectunfavorably impacted by $11.1 million of net discrete tax charges, including an $11.4 million charge related to a federal incomevaluation allowance recorded against certain foreign net deferred tax rate of
The Company recorded income tax expense of $75.9$59.0 million for the six months ended March 31, 2019,2020, or 24.3%28.9% of pre-tax income, compared to $40.9$75.9 million, or 19.7%24.3% of pre-tax income, for the six months ended March 31, 2018. Due to the Tax Reform Act, results2019. Results for the six months ended March 31, 20192020 were subjectunfavorably impacted by $10.0 million of net discrete tax charges, including an $11.4 million charge related to a federal incomevaluation allowance recorded against certain foreign net deferred tax rate of 21% versus the
The Company’s liability for gross unrecognized tax benefits, excluding related interest and penalties, was $90.9$106.5 million and $33.7$97.3 million as of March 31, 20192020 and September 30, 2018,2019, respectively. Included in the Company’s March 31, 2019 liability for gross unrecognized tax benefits is a $4.4 million reserve related to the Transition Tax liability and a $53.1 million reserve recorded with respect to a temporary deferred position that the Company anticipates taking on its fiscal year 2019 federal income tax return. As of March 31, 2019,2020, net unrecognized tax benefits, excluding interest and penalties, of $22.9$21.7 million would affect the Company’s net income if recognized.
The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits in the “Provision for income taxes” in the Condensed Consolidated Statements of Income. During each of the six months ended March 31, 20192020 and 2018,2019, the Company recognized ana benefit of $0.7 million and expense of $0.6 million, respectively, related to interest and penalties. At March 31, 2019,2020, the Company had accruals for the payment of interest and penalties of $5.8$5.1 million. During the next twelve months, it is reasonably possible that federal, state and foreign tax audit resolutions could reduce net unrecognized tax benefits by approximately $6.3$7.3 million because the Company’s tax positions are sustained on audit, the Company agrees to their disallowance or the statutes of limitations close.
7. | Earnings Per Share |
The reconciliation of basic weighted-average shares outstanding to diluted weighted-average shares outstanding was as follows:
|
| Three Months Ended March 31, |
|
| Six Months Ended March 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Basic weighted-average common shares outstanding |
|
| 68,281,213 |
|
|
| 70,042,761 |
|
|
| 68,189,216 |
|
|
| 70,761,437 |
|
Dilutive stock options and other equity-based compensation awards |
|
| 590,811 |
|
|
| 714,033 |
|
|
| 717,059 |
|
|
| 675,685 |
|
Diluted weighted-average common shares outstanding |
|
| 68,872,024 |
|
|
| 70,756,794 |
|
|
| 68,906,275 |
|
|
| 71,437,122 |
|
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
Basic weighted-average common shares outstanding | 70,042,761 | 74,519,741 | 70,761,437 | 74,685,082 | |||||||
Dilutive stock options and other equity-based compensation awards | 714,033 | 977,808 | 675,685 | 1,077,722 | |||||||
Diluted weighted-average common shares outstanding | 70,756,794 | 75,497,549 | 71,437,122 | 75,762,804 |
13
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Options not included in the computation of diluted earnings per share attributable to common shareholders because they would have been anti-dilutive were as follows:
|
| Three Months Ended March 31, |
|
| Six Months Ended March 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Stock options |
|
| 511,881 |
|
|
| 608,698 |
|
|
| 514,069 |
|
|
| 775,894 |
|
8. | Receivables |
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
Stock options | 608,698 | 254,000 | 775,894 | 257,837 |
Receivables consisted of the following (in millions):
|
| March 31, 2020 |
|
| September 30, 2019 |
| ||
Trade receivables - U.S. government |
| $ | 129.9 |
|
| $ | 61.8 |
|
Trade receivables - other |
|
| 717.2 |
|
|
| 997.7 |
|
Finance receivables |
|
| 45.2 |
|
|
| 13.1 |
|
Notes receivable |
|
| — |
|
|
| 0.4 |
|
Other receivables |
|
| 31.9 |
|
|
| 32.0 |
|
|
|
| 924.2 |
|
|
| 1,105.0 |
|
Less allowance for doubtful accounts |
|
| (13.0 | ) |
|
| (11.3 | ) |
|
| $ | 911.2 |
|
| $ | 1,093.7 |
|
March 31, 2019 | September 30, 2018 | ||||||
U.S. government: | |||||||
Amounts billed | $ | 81.0 | $ | 156.3 | |||
Costs and profits not billed | — | 235.4 | |||||
81.0 | 391.7 | ||||||
Other trade receivables | 975.4 | 1,089.4 | |||||
Finance receivables | 11.3 | 11.7 | |||||
Notes receivable | 0.7 | 1.4 | |||||
Other receivables | 31.4 | 48.6 | |||||
1,099.8 | 1,542.8 | ||||||
Less allowance for doubtful accounts | (11.2 | ) | (9.9 | ) | |||
$ | 1,088.6 | $ | 1,532.9 |
Classification of receivables in the Condensed Consolidated Balance Sheets consisted of the following (in millions):
|
| March 31, 2020 |
|
| September 30, 2019 |
| ||
Current receivables |
| $ | 873.8 |
|
| $ | 1,082.3 |
|
Long-term receivables |
|
| 37.4 |
|
|
| 11.4 |
|
|
| $ | 911.2 |
|
| $ | 1,093.7 |
|
March 31, 2019 | September 30, 2018 | ||||||
Current receivables | $ | 1,077.8 | $ | 1,521.6 | |||
Long-term receivables | 10.8 | 11.3 | |||||
$ | 1,088.6 | $ | 1,532.9 |
Finance Receivables | Notes Receivable | ||||||||||||||
March 31, 2019 | September 30, 2018 | March 31, 2019 | September 30, 2018 | ||||||||||||
Receivables on nonaccrual status | $ | 2.7 | $ | 10.2 | $ | — | $ | — | |||||||
Receivables past due 90 days or more and still accruing | — | — | — | — | |||||||||||
Receivables subject to general reserves | 8.0 | 1.5 | — | — | |||||||||||
Allowance for doubtful accounts | — | — | — | — | |||||||||||
Receivables subject to specific reserves | 3.3 | 10.2 | 0.7 | 1.4 | |||||||||||
Allowance for doubtful accounts | (2.4 | ) | (2.8 | ) | — | — |
Changes in the Company’s allowance for doubtful accounts by type of receivable were as follows (in millions):
|
| Three Months Ended March 31, 2020 |
|
| Three Months Ended March 31, 2019 |
| ||||||||||||||||||||||||||
|
| Finance Receivables |
|
| Notes Receivable |
|
| Trade and Other Receivables |
|
| Total |
|
| Finance Receivables |
|
| Notes Receivable |
|
| Trade and Other Receivables |
|
| Total |
| ||||||||
Allowance at beginning of period |
| $ | 2.0 |
|
| $ | 0.4 |
|
| $ | 7.3 |
|
| $ | 9.7 |
|
| $ | 2.7 |
|
| $ | — |
|
| $ | 7.8 |
|
| $ | 10.5 |
|
Provision for doubtful accounts, net of recoveries |
|
| 1.1 |
|
|
| — |
|
|
| 2.8 |
|
|
| 3.9 |
|
|
| (0.3 | ) |
|
| — |
|
|
| 1.1 |
|
|
| 0.8 |
|
Charge-off of accounts |
|
| — |
|
|
| (0.4 | ) |
|
| (0.2 | ) |
|
| (0.6 | ) |
|
| — |
|
|
| — |
|
|
| (0.1 | ) |
|
| (0.1 | ) |
Allowance at end of period |
| $ | 3.1 |
|
| $ | — |
|
| $ | 9.9 |
|
| $ | 13.0 |
|
| $ | 2.4 |
|
| $ | — |
|
| $ | 8.8 |
|
| $ | 11.2 |
|
|
| Six Months Ended March 31, 2020 |
|
| Six Months Ended March 31, 2019 |
| ||||||||||||||||||||||||||
|
| 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 |
|
| 0.9 |
|
|
| — |
|
|
| 1.4 |
|
|
| 2.3 |
|
|
| (0.4 | ) |
|
| — |
|
|
| 1.8 |
|
|
| 1.4 |
|
Charge-off of accounts |
|
| — |
|
|
| (0.4 | ) |
|
| (0.2 | ) |
|
| (0.6 | ) |
|
| — |
|
|
| — |
|
|
| (0.1 | ) |
|
| (0.1 | ) |
Allowance at end of period |
| $ | 3.1 |
|
| $ | — |
|
| $ | 9.9 |
|
| $ | 13.0 |
|
| $ | 2.4 |
|
| $ | — |
|
| $ | 8.8 |
|
| $ | 11.2 |
|
Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | ||||||||||||||||||||||||||||||
Finance | Notes | Trade and Other | Total | Finance | Notes | Trade and Other | Total | ||||||||||||||||||||||||
Allowance at beginning of period | $ | 2.7 | $ | — | $ | 7.8 | $ | 10.5 | $ | 1.5 | $ | 6.1 | $ | 6.9 | $ | 14.5 | |||||||||||||||
Provision for doubtful accounts, net of recoveries | (0.3 | ) | — | 1.1 | 0.8 | 0.2 | (4.5 | ) | 0.6 | (3.7 | ) | ||||||||||||||||||||
Charge-off of accounts | — | — | (0.1 | ) | (0.1 | ) | — | 2.0 | (0.1 | ) | 1.9 | ||||||||||||||||||||
Foreign currency translation | — | — | — | — | — | 0.2 | — | 0.2 | |||||||||||||||||||||||
Allowance at end of period | $ | 2.4 | $ | — | $ | 8.8 | $ | 11.2 | $ | 1.7 | $ | 3.8 | $ | 7.4 | $ | 12.9 |
Six Months Ended March 31, 2019 | Six Months Ended March 31, 2018 | ||||||||||||||||||||||||||||||
Finance | Notes | Trade and Other | Total | Finance | Notes | Trade and Other | Total | ||||||||||||||||||||||||
Allowance at beginning of period | $ | 2.8 | $ | — | $ | 7.1 | $ | 9.9 | $ | 1.5 | $ | 10.0 | $ | 6.8 | $ | 18.3 | |||||||||||||||
Provision for doubtful accounts, net of recoveries | (0.4 | ) | — | 1.8 | 1.4 | 0.2 | (8.5 | ) | 0.8 | (7.5 | ) | ||||||||||||||||||||
Charge-off of accounts | — | — | (0.1 | ) | (0.1 | ) | — | 2.0 | (0.2 | ) | 1.8 | ||||||||||||||||||||
Foreign currency translation | — | — | — | — | — | 0.3 | — | 0.3 | |||||||||||||||||||||||
Allowance at end of period | $ | 2.4 | $ | — | $ | 8.8 | $ | 11.2 | $ | 1.7 | $ | 3.8 | $ | 7.4 | $ | 12.9 |
14
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
9. | Inventories |
Inventories consisted of the following (in millions):
|
| March 31, 2020 |
|
| September 30, 2019 |
| ||
Raw materials |
| $ | 724.6 |
|
| $ | 676.0 |
|
Partially finished products |
|
| 330.5 |
|
|
| 244.2 |
|
Finished products |
|
| 708.0 |
|
|
| 433.0 |
|
Inventories at FIFO cost |
|
| 1,763.1 |
|
|
| 1,353.2 |
|
Less: Excess of FIFO cost over LIFO cost |
|
| (107.2 | ) |
|
| (104.0 | ) |
|
| $ | 1,655.9 |
|
| $ | 1,249.2 |
|
10. | Property, Plant and Equipment |
March 31, 2019 | September 30, 2018 | ||||||
Raw materials | $ | 766.3 | $ | 639.2 | |||
Partially finished products | 278.5 | 354.3 | |||||
Finished products | 559.4 | 330.2 | |||||
Inventories at FIFO cost | 1,604.2 | 1,323.7 | |||||
Less: Excess of FIFO cost over LIFO cost | (100.7 | ) | (96.0 | ) | |||
$ | 1,503.5 | $ | 1,227.7 |
Property, plant and equipment consisted of the following (in millions):
|
| March 31, 2020 |
|
| September 30, 2019 |
| ||
Land and land improvements |
| $ | 62.8 |
|
| $ | 55.8 |
|
Buildings |
|
| 363.5 |
|
|
| 325.8 |
|
Machinery and equipment |
|
| 718.7 |
|
|
| 701.0 |
|
Software and related costs |
|
| 165.8 |
|
|
| 181.2 |
|
Equipment on operating lease to others |
|
| 20.0 |
|
|
| 39.5 |
|
Construction in progress |
|
| 25.6 |
|
|
| 57.6 |
|
|
|
| 1,356.4 |
|
|
| 1,360.9 |
|
Less accumulated depreciation |
|
| (804.7 | ) |
|
| (787.3 | ) |
|
| $ | 551.7 |
|
| $ | 573.6 |
|
March 31, 2019 | September 30, 2018 | ||||||
Land and land improvements | $ | 54.4 | $ | 54.2 | |||
Buildings | 310.9 | 297.6 | |||||
Machinery and equipment | 682.4 | 673.0 | |||||
Software and related costs | 172.9 | 164.4 | |||||
Equipment on operating lease to others | 29.2 | 22.1 | |||||
Construction in progress | 27.7 | 11.4 | |||||
1,277.5 | 1,222.7 | ||||||
Less accumulated depreciation | (773.5 | ) | (741.6 | ) | |||
$ | 504.0 | $ | 481.1 |
Depreciation expense was $18.7$20.4 million and $19.9$18.7 million for the three months ended March 31, 20192020 and 2018,2019, respectively. Depreciation expense was $37.8$40.7 million and $40.0$37.8 million for the six months ended March 31, 20192020 and 2018,2019, respectively. Capitalized interest was insignificant for all reported periods.
Equipment on operating lease to others represents the cost of equipment shipped to customers for whom the Company has guaranteed the residual value and equipment on short-term leases. These transactions are accounted for as operating leases with the related assets capitalized and depreciated over their estimated economic lives of five to ten years. Cost less accumulated depreciation for equipment on operating lease at March 31, 20192020 and September 30, 20182019 was $23.0$17.9 million and $17.2$31.3 million, respectively.
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.
15
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents changes in goodwill during the six months ended March 31, 20192020 (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 |
|
| 0.3 |
|
|
| — |
|
|
| (0.1 | ) |
|
| 0.2 |
|
Net goodwill at March 31, 2020 |
| $ | 869.1 |
|
| $ | 106.1 |
|
| $ | 20.7 |
|
| $ | 995.9 |
|
Access equipment | Fire & emergency | Commercial | Total | ||||||||||||
Net goodwill at September 30, 2018 | $ | 880.9 | $ | 106.1 | $ | 20.9 | $ | 1,007.9 | |||||||
Foreign currency translation | (6.2 | ) | — | (0.1 | ) | (6.3 | ) | ||||||||
Net goodwill at March 31, 2019 | $ | 874.7 | $ | 106.1 | $ | 20.8 | $ | 1,001.6 |
The following table presents details of the Company’s goodwill allocated to the reportable segments (in millions):
|
| March 31, 2020 |
|
| September 30, 2019 |
| ||||||||||||||||||
|
| Gross |
|
| Accumulated Impairment |
|
| Net |
|
| Gross |
|
| Accumulated Impairment |
|
| Net |
| ||||||
Access equipment |
| $ | 1,801.2 |
|
| $ | (932.1 | ) |
| $ | 869.1 |
|
| $ | 1,800.9 |
|
| $ | (932.1 | ) |
| $ | 868.8 |
|
Fire & emergency |
|
| 108.1 |
|
|
| (2.0 | ) |
|
| 106.1 |
|
|
| 108.1 |
|
|
| (2.0 | ) |
|
| 106.1 |
|
Commercial |
|
| 196.6 |
|
|
| (175.9 | ) |
|
| 20.7 |
|
|
| 196.7 |
|
|
| (175.9 | ) |
|
| 20.8 |
|
|
| $ | 2,105.9 |
|
| $ | (1,110.0 | ) |
| $ | 995.9 |
|
| $ | 2,105.7 |
|
| $ | (1,110.0 | ) |
| $ | 995.7 |
|
March 31, 2019 | September 30, 2018 | ||||||||||||||||||||||
Gross | Accumulated Impairment | Net | Gross | Accumulated Impairment | Net | ||||||||||||||||||
Access equipment | $ | 1,806.8 | $ | (932.1 | ) | $ | 874.7 | $ | 1,813.0 | $ | (932.1 | ) | $ | 880.9 | |||||||||
Fire & emergency | 108.1 | (2.0 | ) | 106.1 | 108.1 | (2.0 | ) | 106.1 | |||||||||||||||
Commercial | 196.7 | (175.9 | ) | 20.8 | 196.8 | (175.9 | ) | 20.9 | |||||||||||||||
$ | 2,111.6 | $ | (1,110.0 | ) | $ | 1,001.6 | $ | 2,117.9 | $ | (1,110.0 | ) | $ | 1,007.9 |
Details of the Company’s total purchased intangible assets are as follows (in millions):
|
| March 31, 2020 |
| |||||||||||||
|
| Weighted- Average Life (in years) |
|
| Gross |
|
| Accumulated Amortization |
|
| Net |
| ||||
Amortizable intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution network |
|
| 39.1 |
|
| $ | 55.4 |
|
| $ | (33.1 | ) |
| $ | 22.3 |
|
Technology-related |
|
| 11.9 |
|
|
| 104.7 |
|
|
| (102.9 | ) |
|
| 1.8 |
|
Customer relationships |
|
| 12.8 |
|
|
| 554.8 |
|
|
| (544.0 | ) |
|
| 10.8 |
|
Other |
|
| 16.1 |
|
|
| 16.4 |
|
|
| (15.0 | ) |
|
| 1.4 |
|
|
|
| 14.7 |
|
|
| 731.3 |
|
|
| (695.0 | ) |
|
| 36.3 |
|
Non-amortizable trade names |
|
|
|
|
|
| 387.6 |
|
|
| — |
|
|
| 387.6 |
|
|
|
|
|
|
| $ | 1,118.9 |
|
| $ | (695.0 | ) |
| $ | 423.9 |
|
|
| 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 |
|
March 31, 2019 | |||||||||||||
Weighted- Average Life (in years) | Gross | Accumulated Amortization | Net | ||||||||||
Amortizable intangible assets: | |||||||||||||
Distribution network | 39.1 | $ | 55.4 | $ | (31.6 | ) | $ | 23.8 | |||||
Technology-related | 11.9 | 104.7 | (102.2 | ) | 2.5 | ||||||||
Customer relationships | 12.8 | 555.0 | (519.6 | ) | 35.4 | ||||||||
Other | 16.3 | 16.4 | (14.9 | ) | 1.5 | ||||||||
14.7 | 731.5 | (668.3 | ) | 63.2 | |||||||||
Non-amortizable trade names | 387.7 | — | 387.7 | ||||||||||
$ | 1,119.2 | $ | (668.3 | ) | $ | 450.9 |
September 30, 2018 | |||||||||||||
Weighted- Average Life (in years) | Gross | Accumulated Amortization | Net | ||||||||||
Amortizable intangible assets: | |||||||||||||
Distribution network | 39.1 | $ | 55.4 | $ | (30.9 | ) | $ | 24.5 | |||||
Technology-related | 11.9 | 104.7 | (101.8 | ) | 2.9 | ||||||||
Customer relationships | 12.8 | 555.0 | (502.3 | ) | 52.7 | ||||||||
Other | 16.2 | 16.4 | (14.8 | ) | 1.6 | ||||||||
14.7 | 731.5 | (649.8 | ) | 81.7 | |||||||||
Non-amortizable trade names | 387.7 | — | 387.7 | ||||||||||
$ | 1,119.2 | $ | (649.8 | ) | $ | 469.4 |
The estimated future amortization expense of purchased intangible assets for the remainder of fiscal 20192020 and the five years succeeding September 30, 20192020 are as follows: 20192020 (remaining six months) - $18.4 million; 2020 - $11.0$2.7 million; 2021 - $5.3 million; 2022 - $4.9 million; 2023 - $3.5 million; and 2024 - $1.7 million; and 2025 - $1.5 million.
16
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 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 March 31, 2020 |
|
| Six Months Ended March 31, 2020 |
| ||
Operating lease cost |
| $ | 15.0 |
|
| $ | 28.8 |
|
Variable lease cost |
|
| 4.7 |
|
|
| 8.5 |
|
Short-term lease cost |
|
| 0.7 |
|
|
| 1.8 |
|
Supplemental information related to operating leases was as follows (in millions):
|
| Balance Sheet Classification |
| March 31, 2020 |
| |
Operating leases |
|
|
|
|
|
|
Lease ROU assets |
| Other long-term assets |
| $ | 177.3 |
|
Current lease liabilities |
| Other current liabilities |
|
| 48.9 |
|
Long-term lease liabilities |
| Other long-term liabilities |
|
| 131.2 |
|
|
|
|
|
|
|
|
Weighted average remaining lease term |
|
|
| 6 years |
| |
|
|
|
|
|
|
|
Weighted average discount rates |
|
|
|
| 3.0 | % |
17
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):
|
| March 31, 2020 |
| |||||||||||||||||||||
|
| Access equipment |
|
| Defense |
|
| Fire & emergency |
|
| Commercial |
|
| Corporate and intersegment eliminations |
|
| Total |
| ||||||
Real estate leases |
| $ | 76.1 |
|
| $ | 29.8 |
|
| $ | 7.7 |
|
| $ | 20.2 |
|
| $ | 8.5 |
|
| $ | 142.3 |
|
Equipment leases |
|
| 9.0 |
|
|
| 5.4 |
|
|
| 2.9 |
|
|
| 2.7 |
|
|
| 15.0 |
|
|
| 35.0 |
|
|
| $ | 85.1 |
|
| $ | 35.2 |
|
| $ | 10.6 |
|
| $ | 22.9 |
|
| $ | 23.5 |
|
| $ | 177.3 |
|
Maturities of operating lease liabilities at March 31, 2020 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 six months of 2020 |
| $ | 27.2 |
|
2021 |
|
| 46.5 |
|
2022 |
|
| 33.1 |
|
2023 |
|
| 24.8 |
|
2024 |
|
| 16.6 |
|
2025 |
|
| 12.5 |
|
Thereafter |
|
| 35.3 |
|
Total lease payments |
|
| 196.0 |
|
Less: imputed interest |
|
| (15.9 | ) |
Present value of lease liability |
| $ | 180.1 |
|
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 |
|
13.Credit Agreements
The Company was obligated under the following debt instruments (in millions):
|
| March 31, 2020 |
| |||||||||
|
| Principal |
|
| Debt Issuance Costs |
|
| Debt, Net |
| |||
Senior Term Loan |
| $ | 225.0 |
|
| $ | (0.4 | ) |
| $ | 224.6 |
|
4.600% Senior Notes due May 2028 |
|
| 300.0 |
|
|
| (3.2 | ) |
|
| 296.8 |
|
3.100% Senior Notes due March 2030 |
|
| 300.0 |
|
|
| (4.0 | ) |
|
| 296.0 |
|
|
| $ | 825.0 |
|
| $ | (7.6 | ) |
| $ | 817.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other short-term debt |
|
|
|
|
|
|
|
|
| $ | 4.9 |
|
18
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
| 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 |
|
March 31, 2019 | |||||||||||
Principal | Debt Issuance Costs | Debt, Net | |||||||||
Senior Term Loan | $ | 275.0 | $ | (0.7 | ) | $ | 274.3 | ||||
5.375% Senior Notes due March 2025 | 250.0 | (2.2 | ) | 247.8 | |||||||
4.600% Senior Notes due May 2028 | 300.0 | (3.6 | ) | 296.4 | |||||||
$ | 825.0 | $ | (6.5 | ) | $ | 818.5 |
September 30, 2018 | |||||||||||
Principal | Debt Issuance Costs | Debt, Net | |||||||||
Senior Term Loan | $ | 275.0 | $ | (0.8 | ) | $ | 274.2 | ||||
5.375% Senior Notes due March 2025 | 250.0 | (2.4 | ) | 247.6 | |||||||
4.600% Senior Notes due May 2028 | 300.0 | (3.8 | ) | 296.2 | |||||||
$ | 825.0 | $ | (7.0 | ) | $ | 818.0 |
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, theThe Company has prepaid all required quarterly principal installments and $39.1 million of the balloon payment on the Term Loan through June 2022. Loan.
At March 31, 2019,2020, outstanding letters of credit of $65.2$62.2 million reduced available capacity under the Revolving Credit Facility to $784.8$787.8 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 March 31, 2019,2020, 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 March 31, 20192020 was 3.75%2.24%.
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 before interest, taxes, depreciation, amortization, non-cash charges and certain other items (EBITDA)) as of • Interest Coverage Ratio: A minimum interest coverage ratio (defined as, with certain adjustments, the The Company was in compliance with the financial covenants contained in the Credit Agreement as of March 31, 19 OSHKOSH CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) In March 2015, the Company issued $250.0 million of 5.375% unsecured senior notes due March 1, 2025 (the “2025 Senior Notes”). In September 2019, the Company entered into a 220.0 million Chinese renminbi uncommitted line of credit to provide short-term finance support to operations in China. There was 35.0 million Chinese renminbi ($4.9 million) outstanding on the uncommitted line of credit at March 31, 2020. The line of credit carries a variable interest rate that is set by the lender, which was 3.5% at March 31, 2020. 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 March 31, 14. 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. 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): Six Months Ended March 31, 2020 2019 Balance at beginning of period $ 65.1 $ 75.3 Adoption of ASC 606 — (14.3 ) Warranty provisions 21.0 21.2 Settlements made (26.1 ) (22.8 ) Changes in liability for pre-existing warranties, net 5.2 (0.3 ) Foreign currency translation — (0.2 ) Balance at end of period $ 65.2 $ 58.9 20 OSHKOSH CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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. 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: Residual Value Guarantees: Changes in the Company’s guarantee liabilities were as follows (in millions): Three Months Ended March 31, Six Months Ended March 31, 2020 2019 2020 2019 Balance at beginning of period $ 16.0 $ 10.1 $ 15.8 $ 10.4 Provision for new credit guarantees 1.7 3.1 3.2 4.4 Changes for pre-existing guarantees, net 1.4 1.0 1.4 0.1 Amortization of previous guarantees (2.8 ) (1.3 ) (4.2 ) (2.0 ) Foreign currency translation (0.1 ) — — — Balance at end of period $ 16.2 $ 12.9 $ 16.2 $ 12.9 21 OSHKOSH CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 16. Contingencies, Significant Estimates and Concentrations Personal Injury Actions and Other Market Risks Other Matters 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. 17. Shareholders’ Equity In August 2015, the Company’s 18. Accumulated Other Comprehensive Income (Loss) Changes in accumulated other comprehensive income (loss) by component were as follows (in millions): Three Months Ended March 31, 2020 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 $ (68.7 ) $ (113.0 ) $ (0.2 ) $ (181.9 ) Other comprehensive income (loss) before reclassifications — (28.4 ) 0.7 (27.7 ) Amounts reclassified from accumulated other comprehensive income (loss) 0.7 — — 0.7 Net current period other comprehensive income (loss) 0.7 (28.4 ) 0.7 (27.0 ) Balance at end of period $ (68.0 ) $ (141.4 ) $ 0.5 $ (208.9 ) 22 OSHKOSH CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Three Months Ended March 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 $ (20.0 ) $ (105.0 ) $ 0.3 $ (124.7 ) Other comprehensive income (loss) before reclassifications (3.9 ) (6.9 ) (0.2 ) (11.0 ) Amounts reclassified from accumulated other comprehensive income (loss) 0.1 — — 0.1 Net current period other comprehensive income (loss) (3.8 ) (6.9 ) (0.2 ) (10.9 ) Balance at end of period $ (23.8 ) $ (111.9 ) $ 0.1 $ (135.6 ) Six Months Ended March 31, 2020 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 — (8.9 ) 0.2 (8.7 ) Amounts reclassified from accumulated other comprehensive income (loss) 1.4 — — 1.4 Net current period other comprehensive income (loss) 1.4 (8.9 ) 0.2 (7.3 ) Balance at end of period $ (68.0 ) $ (141.4 ) $ 0.5 $ (208.9 ) Six Months Ended March 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 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 beginning of period (20.0 ) (96.2 ) 0.3 (115.9 ) Other comprehensive income (loss) before reclassifications (3.9 ) (15.7 ) (0.2 ) (19.8 ) Amounts reclassified from accumulated other comprehensive income (loss) 0.1 — — 0.1 Net current period other comprehensive income (loss) (3.8 ) (15.7 ) (0.2 ) (19.7 ) Balance at end of period $ (23.8 ) $ (111.9 ) $ 0.1 $ (135.6 ) 23 OSHKOSH CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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 March 31, Six Months Ended March 31, 2020 2019 2020 2019 Amortization of employee pension and postretirement benefits items Prior service costs Miscellaneous, net $ 0.1 $ 0.2 $ 0.3 $ 0.2 Actuarial (gains) losses Miscellaneous, net 0.8 0.1 1.5 — Total before tax 0.9 0.3 1.8 0.2 Tax provision (benefit) (0.2 ) (0.2 ) (0.4 ) (0.1 ) Net of tax $ 0.7 $ 0.1 $ 1.4 $ 0.1 19. Fair Value Measurement FASB ASC Topic 820, 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 and six months ended March 31, The fair values of the Company’s financial assets and liabilities were as follows (in millions): Level 1 Level 2 Level 3 Total March 31, 2020 Assets: SERP plan assets (a) $ 18.7 $ — $ — $ 18.7 Foreign currency exchange derivatives (b) — 1.2 — 1.2 Liabilities: Foreign currency exchange derivatives (b) $ — $ 0.8 $ — $ 0.8 24 OSHKOSH CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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 held 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. 20. Business Segment Information The Company is organized into In accordance with FASB ASC Topic 280, 25 Selected financial information concerning the Company’s reportable segments and product lines is as follows (in millions): Three Months Ended March 31, 2020 2019 External Customers Inter- segment Net Sales External Customers Inter- segment Net Sales Access equipment Aerial work platforms $ 273.7 $ — $ 273.7 $ 463.5 $ — $ 463.5 Telehandlers 217.6 — 217.6 319.5 — 319.5 Other 201.7 — 201.7 204.6 — 204.6 Total access equipment 693.0 — 693.0 987.6 — 987.6 Defense 614.6 0.4 615.0 486.2 0.5 486.7 Fire & emergency 253.4 2.2 255.6 279.0 4.2 283.2 Commercial Concrete placement 89.7 — 89.7 115.3 — 115.3 Refuse collection 115.2 — 115.2 92.0 — 92.0 Other 30.1 1.7 31.8 29.8 0.8 30.6 Total commercial 235.0 1.7 236.7 237.1 0.8 237.9 Corporate and intersegment eliminations 0.7 (4.3 ) (3.6 ) 0.3 (5.5 ) (5.2 ) Consolidated $ 1,796.7 $ — $ 1,796.7 $ 1,990.2 $ — $ 1,990.2 Six Months Ended March 31, 2020 2019 External Customers Inter- segment Net Sales External Customers Inter- segment Net Sales Access equipment Aerial work platforms $ 579.7 $ — $ 579.7 $ 801.2 $ — $ 801.2 Telehandlers 419.0 — 419.0 589.0 — 589.0 Other 412.2 — 412.2 423.9 — 423.9 Total access equipment 1,410.9 — 1,410.9 1,814.1 — 1,814.1 Defense 1,107.2 0.9 1,108.1 950.0 0.8 950.8 Fire & emergency 513.4 4.6 518.0 570.2 8.5 578.7 Commercial Concrete placement 165.4 — 165.4 197.0 — 197.0 Refuse collection 231.1 — 231.1 201.2 — 201.2 Other 62.4 2.0 64.4 60.5 1.4 61.9 Total commercial 458.9 2.0 460.9 458.7 1.4 460.1 Corporate and intersegment eliminations 1.4 (7.5 ) (6.1 ) 0.6 (10.7 ) (10.1 ) Consolidated $ 3,491.8 $ — $ 3,491.8 $ 3,793.6 $ — $ 3,793.6 26 OSHKOSH CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Three Months Ended March 31, Six Months Ended March 31, 2020 2019 2020 2019 Operating income (loss): Access equipment $ 70.8 $ 119.8 $ 139.8 $ 186.2 Defense 58.2 52.2 89.1 123.3 Fire & emergency 20.5 36.6 51.5 76.5 Commercial 8.1 7.8 25.9 26.5 Corporate (24.0 ) (40.8 ) (63.6 ) (76.4 ) Consolidated 133.6 175.6 242.7 336.1 Interest expense, net of interest income (20.7 ) (11.7 ) (32.5 ) (23.2 ) Miscellaneous other (expense) income (5.8 ) 1.2 (6.2 ) — Income before income taxes and earnings (losses) of unconsolidated affiliates $ 107.1 $ 165.1 $ 204.0 $ 312.9 March 31, 2020 September 30, 2019 Identifiable assets: Access equipment: U.S. $ 2,320.1 $ 2,317.2 Europe, Africa and Middle East 383.6 403.4 Rest of the World (b) 344.4 252.6 Total access equipment 3,048.1 2,973.2 Defense: U.S. 1,015.4 883.0 Rest of the World 6.0 6.7 Total defense 1,021.4 889.7 Fire & emergency - U.S. 610.3 587.9 Commercial: U.S. 436.9 383.6 Rest of the World 40.8 48.9 Total commercial 477.7 432.5 Corporate: U.S. (a) 704.4 597.6 Rest of the World (b) — 85.4 Total corporate 704.4 683.0 Consolidated $ 5,861.9 $ 5,566.3 (a) Primarily includes cash and short-term (b) Control of a 27 The following table presents net sales by geographic region based on product shipment destination (in millions): Three Months Ended March 31, 2020 Access equipment Defense Fire & emergency Commercial Eliminations Total Net sales: North America $ 553.9 $ 596.0 $ 247.6 $ 234.0 $ (3.6 ) $ 1,627.9 Europe, Africa and Middle East 84.7 17.7 0.3 0.6 — 103.3 Rest of the World 54.4 1.3 7.7 2.1 — 65.5 $ 693.0 $ 615.0 $ 255.6 $ 236.7 $ (3.6 ) $ 1,796.7 Three Months Ended March 31, 2019 Access equipment Defense Fire & emergency Commercial Eliminations Total Net sales: North America $ 724.0 $ 465.6 $ 274.0 $ 230.1 $ (5.3 ) $ 1,688.4 Europe, Africa and Middle East 163.2 21.0 0.9 0.3 — 185.4 Rest of the World 100.4 0.1 8.3 7.5 0.1 116.4 $ 987.6 $ 486.7 $ 283.2 $ 237.9 $ (5.2 ) $ 1,990.2 Six Months Ended March 31, 2020 Access equipment Defense Fire & emergency Commercial Eliminations Total Net sales: North America $ 1,101.0 $ 1,081.5 $ 491.5 $ 452.8 $ (6.1 ) $ 3,120.7 Europe, Africa and Middle East 158.9 23.8 0.7 0.9 — 184.3 Rest of the World 151.0 2.8 25.8 7.2 — 186.8 $ 1,410.9 $ 1,108.1 $ 518.0 $ 460.9 $ (6.1 ) $ 3,491.8 Six Months Ended March 31, 2019 Access equipment Defense Fire & emergency Commercial Eliminations Total Net sales: North America $ 1,370.2 $ 913.8 $ 547.0 $ 447.7 $ (10.1 ) $ 3,268.6 Europe, Africa and Middle East 276.9 36.9 11.9 2.2 — 327.9 Rest of the World 167.0 0.1 19.8 10.2 — 197.1 $ 1,814.1 $ 950.8 $ 578.7 $ 460.1 $ (10.1 ) $ 3,793.6 28 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Statement About Forward-Looking Statements This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Quarterly Report on Form 10-Q contain statements that Oshkosh Corporation (the “Company”) believes to be “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 Quarterly Report on Form 10-Q, 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 caption “Executive Overview” are forward-looking statements. When used in this Quarterly Report on Form 10-Q, 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. These factors include the overall impact of the COVID-19 pandemic on the Company’s business, results of operations and financial condition, including the ultimate geographic spread of the COVID-19 pandemic; the duration and severity of the COVID-19 pandemic; actions that may be taken by governmental authorities to address or otherwise mitigate the impact of the COVID-19 pandemic; the potential negative impacts of the COVID-19 pandemic on global economies and the Company’s customers and suppliers; the cyclical nature of the Company’s access equipment, commercial and fire & emergency markets, which are particularly impacted by the strength of U.S. and European economies and construction seasons; All forward-looking statements, including those under the caption “Executive Overview,” speak only as of the date the Company files this Quarterly Report on Form 10-Q with the SEC. The Company assumes no obligation, and disclaims any obligation, to update information contained in this Quarterly Report on Form 10-Q. Investors should be aware that the Company may not update such information until the Company’s next quarterly earnings conference call, if at all. All references herein to earnings per share refer to earning per share assuming dilution. General Major products manufactured and marketed by each of the Company’s business segments are as follows: Access equipment Defense Fire & emergency Commercial Executive Overview The Company reported earnings per share of $0.99 in the second quarter of fiscal 2020, down from earnings per share of $1.82 in the second quarter of fiscal Consolidated net sales in the second quarter of fiscal Consolidated operating income decreased $42.0 million to The COVID-19 pandemic has caused many challenges, but the Company is better positioned to navigate through a crisis like the COVID-19 pandemic than ever before. The Company has a strong balance sheet and liquidity, strong backlogs in the defense and fire & emergency segments and it has a strong People First culture driven to persevere through adversity. The Company responded quickly to the 30 Table of The Company has Coming into fiscal 2020, the Company As COVID-19 began to spread globally in the As demand for the defense segment’s product has been unaffected by the COVID-19 pandemic, it provides a While defense segment demand has remained strong, it still faces production challenges due to COVID-19 related supply chain disruptions and workforce availability. The defense segment has successfully navigated through numerous supplier shutdowns by re-sourcing critical components, and it has addressed workforce issues with social distancing and increased cleaning frequency to enable continued production. However, it is possible these factors could cause a shutdown of defense segment production in the coming months. Fire trucks remain critical assets to first responders battling the COVID-19 pandemic on the frontlines. The fire truck orders that Pierce received in the second quarter represented the largest quarterly order amount in the Company’s history, leading to a Like the Company’s other segments, operations in the commercial segment have remained open since these products are considered essential. COVID-19, however, is impacting the mixer product line orders as construction sites in some states face temporary shutdowns and customers look to With near term demand and 31 reduction actions across the Company that target pre-tax cost reductions of $80 million to As a result of the evolving impact of the The Company Results of Operations Analysis of Consolidated Net Sales The following table presents net sales by business segment (in millions): Second Quarter Fiscal First Six Months Fiscal 2020 2019 2020 2019 Net sales: Access equipment $ 693.0 $ 987.6 $ 1,410.9 $ 1,814.1 Defense 615.0 486.7 1,108.1 950.8 Fire & emergency 255.6 283.2 518.0 578.7 Commercial 236.7 237.9 460.9 460.1 Intersegment eliminations and other (3.6 ) (5.2 ) (6.1 ) (10.1 ) $ 1,796.7 $ 1,990.2 $ 3,491.8 $ 3,793.6 SecondQuarter Fiscal Consolidated net sales in the second quarter of fiscal Access equipment segment net sales in the second quarter of fiscal Defense segment net sales in the second quarter of fiscal Fire & emergency segment net sales in the second quarter of fiscal Commercial segment net sales in the second quarter of fiscal 32 First Six Months of Fiscal Consolidated net sales Access equipment segment net sales Defense segment net sales increased Fire & emergency segment net sales decreased $60.7 million, or 10.5%, to $518.0 million in the first six months of fiscal Commercial segment net sales increased Analysis of Consolidated Cost of Sales The following table presents cost of sales by business segment (in millions): Second Quarter Fiscal First Six Months Fiscal 2020 2019 2020 2019 Cost of sales: Access equipment $ 563.6 $ 795.0 $ 1,146.3 $ 1,490.5 Defense 529.3 410.0 964.7 779.5 Fire & emergency 212.3 224.4 419.3 458.7 Commercial 202.2 205.6 384.5 386.9 Intersegment eliminations and other (3.1 ) (2.7 ) (4.9 ) (8.2 ) $ 1,504.3 $ 1,632.3 $ 2,909.9 $ 3,107.4 Second Quarter Fiscal Consolidated cost of sales in the second quarter of fiscal Access equipment segment cost of sales in the second quarter of fiscal 2020 was $563.6 million, or 81.3% of sales, compared to $795.0 million, or 80.5% of sales, in the second quarter of fiscal 2019. The 80 basis point increase in cost of sales as a percentage of sales was largely due to adverse absorption as a result of a planned slowdown in production (210 basis points), offset in part by lower incentive compensation accruals (120 basis points). Defense segment cost of sales in the second quarter of fiscal 2020 was $529.3 million, or 86.1% of sales, compared to $410.0 million, or 84.2% of sales, in the second quarter of fiscal 2019. The 190 basis point increase in cost of sales as a percentage of sales was the result of unfavorable product mix due to the lower FHTV sales and higher JLTV sales. 33 Fire & emergency segment cost of sales in the second quarter of fiscal 2020 was $212.3 million, or 83.1% of sales, compared to $224.4 million, or 79.2% of sales, in the second quarter of fiscal 2019. The 390 basis point increase in cost of sales as a percentage of sales was primarily attributable to adverse product mix (470 basis points), manufacturing inefficiencies (140 basis points) and higher engineering costs on lower sales (80 basis points), offset in part by improved pricing (330 basis points). Commercial segment cost of sales in the second quarter of fiscal 2020 was $202.2 million, or 85.4% of sales, compared to $205.6 million, or 86.4% of sales, in the second quarter of fiscal 2019. The 100 basis point decrease in cost of sales as a percentage of sales was primarily attributable to a weather-related production disruption in the second quarter of the prior year (280 basis points) offset in part by higher litigation costs (180 basis points). First Six Months of Fiscal 2020 Compared to 2019 Consolidated cost of sales was $2.91 billion, or 83.3% of sales, in the first six months of fiscal 2020 compared to $3.11 billion, or 81.9% of sales, in the first six months of fiscal 2019. The 140 basis point increase in cost of sales as a percentage of sales was due to adverse product mix (110 basis points), larger cumulative catch-up adjustments on contracts in the defense segment in the prior year first quarter, primarily as a result of the dollar amount of orders received in that quarter (60 basis points) and higher new product development spending (50 basis points), offset in part by improved price/cost dynamics (140 basis points). Access equipment segment cost of sales was $1.15 billion, or 81.2% of sales, in the first six months of fiscal 2020 compared to $1.49 billion, or 82.2% of sales, in the first six months of fiscal 2019. The 100 basis point decrease in cost of sales as a percentage of sales was due to improved Defense segment cost of sales Fire & emergency segment cost of sales was $419.3 million, or 80.9% of sales, in the first six months of fiscal 2020 compared to $458.7 million, or 79.3% of sales, in the first six months of fiscal 2019. The 160 basis point increase in cost of sales as a percentage of sales was primarily attributable to adverse product mix (300 basis points), manufacturing inefficiencies (90 basis points) and higher engineering costs on lower sales (60 basis points), offset in part by improved pricing (330 basis points). Commercial segment cost of sales was $384.5 million, or 83.4% of sales, in the first six months of fiscal 2020 compared to $386.9 million, or 84.1% of sales, in the first six months of fiscal 2019. The 70 basis point decrease in cost of sales as a percentage of sales was largely due to improved Analysis of Consolidated Operating Income (Loss) The following table presents operating income (loss) by business segment (in millions): Second Quarter Fiscal First Six Months Fiscal 2020 2019 2020 2019 Operating income (loss): Access equipment $ 70.8 $ 119.8 $ 139.8 $ 186.2 Defense 58.2 52.2 89.1 123.3 Fire & emergency 20.5 36.6 51.5 76.5 Commercial 8.1 7.8 25.9 26.5 Corporate (24.0 ) (40.8 ) (63.6 ) (76.4 ) $ 133.6 $ 175.6 $ 242.7 $ 336.1 Second Quarter Fiscal Consolidated operating income in the second quarter of fiscal Access equipment segment operating income in the second quarter of fiscal Defense segment operating income in the second quarter of fiscal 2020 increased 11.5% to $58.2 million, or 9.5% of sales, compared to $52.2 million, or 10.7% of sales, in the second quarter of fiscal 2019. The increase in operating income was due to the higher gross margin associated with higher sales volume ($ Fire & emergency segment operating income in the second quarter of fiscal Commercial segment operating income in the second quarter of fiscal Corporate operating costs decreased $16.8 million 35 Consolidated selling, general and administrative expenses decreased 9.0% to First Six Months of Fiscal Consolidated operating income in the first six months of fiscal Access equipment segment operating income in the first six months of fiscal Defense segment operating income in the first six months of fiscal Fire & emergency segment operating income in the first six months of fiscal Commercial segment operating income in the first six months of fiscal Corporate operating costs in the first six months of fiscal Consolidated selling, general and administrative expenses 36 Analysis of Non-Operating Income Statement Items Second Quarter Fiscal Interest expense net of interest income increased Other miscellaneous expense of $5.8 million in the second quarter of fiscal The Company recorded income tax expense in the second quarter of fiscal Equity in First Six Months of Fiscal Interest expense net of interest income increased Other miscellaneous expense of The Company recorded income tax expense in the first six months of fiscal Equity in losses of unconsolidated affiliates of $0.7 million in the Liquidity and Capital Resources The Company generates significant capital resources from operating activities, which is the expected primary source of funding. 37 These sources of liquidity are needed to fund the Company’s working capital requirements, capital expenditures, dividends, share repurchases, debt service requirements and acquisitions. The Company continues to expect to have sufficient liquidity to finance its operations over the next twelve months. Financial Condition atMarch 31, 2020 The Company’s capitalization was as follows (in millions): March 31, 2020 September 30, 2019 Cash and cash equivalents $ 403.9 $ 448.4 Total debt 822.3 819.0 Total shareholders’ equity 2,689.0 2,599.8 Total capitalization (debt plus equity) 3,511.3 3,418.8 Debt to total capitalization 23.4 % 24.0 % The Company’s ratio of debt to total capitalization of 23.4% at March 31, 2020 remained within its targeted range. Consolidated days sales outstanding (defined as “Trade Receivables” at quarter end divided by “Net Sales” for the most recent quarter multiplied by 90 days) Cash Flows Operating Cash Flows Operating activities Investing Cash Flows Investing activities used cash of $37.1 million in the first six months of fiscal 2020 compared to $56.3 million in the first six months of fiscal 2019 Financing Cash Flows Financing activities used cash of $73.1 million in the first six months of fiscal 38 under the Liquidity Senior Credit Agreement In April 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 as of September 30, 2019 with a balloon payment of $264.1 million due at maturity in April 2023. As of March 31, 2020, all required quarterly principal installments and $39.1 million of the balloon payment on the Term Loan have been prepaid. At March 31, 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. 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 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 • Interest Coverage Ratio: A minimum interest coverage ratio (defined as, with certain adjustments, the The Company was in compliance with the financial covenants contained in the Credit Agreement as of March 31, Senior Notes In March 2015, the Company issued $250.0 million of 5.375% unsecured senior notes due March 1, 2025 (the “2025 Senior Notes”). 39 down a portion of the balloon payment due at maturity on the Term Loan. The The 2028 Senior Notes and the Refer to Note Contractual Obligations, Commercial Commitments and Off-Balance Sheet Arrangements The Company’s contractual obligations, commercial commitments and off-balance sheet arrangement disclosures in its Annual Report on Form 10-K for the year ended September 30, Application of Critical Accounting Policies The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires the Company to make judgments, assumptions and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. The accounting policies that the Company believes are most critical to the portrayal of its financial condition and results of operations are reported in Item 7 of the Company’s Annual Report on Form 10-K for the year ended September 30, Critical Accounting Estimates The Company’s disclosures of critical accounting estimates in its Annual Report on Form 10-K for the year ended September 30, New Accounting Standards See Note 2 of the Notes to Condensed Consolidated Financial Statements for a discussion of the impact on the Company’s Condensed Consolidated Financial Statements of new accounting standards. Customers and Backlog Sales to the U.S. government comprised approximately The Company’s backlog at March 31, 40 Reported backlog excludes purchase options and announced orders for which definitive contracts have not been executed. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company’s quantitative and qualitative disclosures about market risk for changes in interest rates and commodity risk, which are incorporated by reference to Item 7A of the Company’s Annual Report on Form 10-K for the year ended September 30, ITEM 4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures. Changes in Internal Control over Financial Reporting. 41 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 1A. RISK FACTORS The Company’s financial position, results of operations and cash flows are subject to various risks, many of which are not exclusively within the Company’s control, which may cause actual performance to differ materially from historical or projected future performance. In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Item 1A. of our Annual Report on Form 10-K for the year ended September 30, The COVID-19 pandemic could further materially adversely affect our business, workforce, supply chain, results of operation, financial condition and/or cash flows. COVID-19, a novel strain of coronavirus, was identified in late 2019 in China. The COVID-19 virus spread, and continues to spread, rapidly and has been declared a global pandemic by the World Health Organization. Governments across the world have implemented numerous measures in attempt to contain or lessen the impact of COVID-19 on their populations, such as travel bans, quarantines, shut-downs and shelter in place orders. The pandemic, as well as the current and future measures directed toward COVID-19, has resulted in significant uncertainty in capital markets and a global economic slowdown that may last for an extended duration and could result in a global recession. The pandemic has negatively impacted, and is likely to continue to negatively impact, our business in numerous ways, including but not limited to those outlined below: •The COVID-19 pandemic has reduced demand for access equipment and concrete mixers, and some customers have begun to push out and cancel orders. The COVID-19 pandemic could also have the effect of reducing demand for our other products. In addition, travel restrictions related to the COVID-19 pandemic have prevented customers in our fire & emergency segment from inspecting and accepting vehicles. Furthermore, 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. •We operate a global supply chain that has been, and could in the future continue to be, disrupted by the COVID-19 pandemic, resulting in delays or inefficiencies in production in all of our segments. Some of our suppliers have limited their production or shut down due to “shelter-in-place” requirements. While we have generally been successful in mitigating these supply chain challenges to date, it is possible that a part or component shortage could limit our production. •Government or regulatory responses to the COVID-19 pandemic have negatively impacted, and are likely to continue to negatively impact, our business. Mandatory lockdowns or other restrictions on operations in some countries may disrupt our ability to manufacture or distribute our products in some of these markets. For example, our factory in China was part of the shutdown that the Chinese government mandated in February 2020 to stop the spread of COVID-19. Governments may continue to impose travel restrictions and close borders, impose prolonged quarantines and further restrict business activity, which could impact our ability to support our operations and customers and the ability of our employees to get to their workplaces to produce products and services, limit the ability of our suppliers to provide us with products, or hamper our products from moving through the supply chain. •The COVID-19 pandemic adversely affects our workforce and business as a result of impacts associated with required, preventive and precautionary measures that we, other businesses, our communities and governments are taking. These impacts include our requiring certain employees to work from home, limiting the number of employees attending meetings, reducing the number of people in our sites at any one time, reducing employee travel and adopting other employee safety measures. These measures may also impact our ability to meet production demands or requests depending on employee attendance or ability to continue to work. Restrictions on, as well as the health of, our workforce could limit our ability to support our business. 42 •We have instituted temporary plant shutdowns in our access equipment segment to match production with customer demand and supply chain constraints and implemented salary reductions, furloughs and other cost reduction actions across our company. However, the impacts of the COVID-19 pandemic may limit our ability to reduce our overall operating costs as we are incurring increased costs relating to our enhanced sanitization procedures and our efforts to mitigate the impact of the COVID-19 pandemic through social-distancing measures we have enacted at our facilities. •The impact of the COVID-19 pandemic on global economies could reduce our ability to execute our business strategy. Disruptions or uncertainties related to the COVID-19 pandemic could result in delays or modifications to our strategic plans and initiatives. •The COVID-19 pandemic has led to disruption and volatility in the global capital markets, which depending on future developments could impact our capital resources and liquidity in the future. Although the balance sheet remains strong, we have been focused on preserving capital resources given the uncertain duration of the pandemic. To maintain strong liquidity, the Company has paused its share repurchase program and implemented other cost reduction actions, such as salary reductions, furloughs and deferring non-critical projects. 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 this Current Report on Form 8-K. The ultimate impact of the COVID-19 pandemic, including the extent of its impact on our business, results of operations, financial condition and/or cash flow, is dependent, among other things, on the duration and severity of the pandemic, the effect of actions taken by government authorities and other third parties in response to the pandemic and the impact of the pandemic on global economies, each of which is uncertain, rapidly changing and difficult to predict. We cannot at this time predict the overall impact of the COVID-19 pandemic on us, but it could have a material adverse impact on our business, workforce, supply chain, results of operations, financial condition and/or cash flows. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Common Stock Repurchases The following table sets forth information with respect to purchases of Common Stock made by the Company or on the Company’s behalf during the second quarter of fiscal 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) January 1 - January 31 — $ — — 7,881,312 February 1 - February 29 146,042 $ 83.90 146,042 7,735,270 March 1 - March 31 275,942 $ 69.59 275,942 7,459,328 Total 421,984 421,984 7,459,328 (1) In August The Company intends to declare and pay dividends on a regular basis. However, the payment of future dividends is at the discretion of the Company’s Board of Directors and will depend upon, among other things, future earnings and cash flows, capital requirements, the Company’s general financial condition, general business conditions and other factors. 43 ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ITEM 6. EXHIBITS Exhibit No. Description 4.1 10.1 10.2 31.1 31.2 32.1 32.2 101.INS The instance document does not appear in the interactive data file because its XBRL (Extensible Business Reporting Language) tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (embedded within the Inline XBRL document). Pursuant to the requirements 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 April 29, 2020 By /s/ Wilson R. Jones Wilson R. Jones, President and Chief Executive Officer April By /s/ Michael E. Pack, Executive Vice President and Chief Financial Officer (Principal Financial Officer) April By /s/ James C. Freeders James C. Freeders, Senior Vice President Finance and Controller (Principal Accounting Officer) 45 |