OSHKOSH CORP, 10-K filed on 11/18/2010
Annual Report
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, except Per Share data
Year Ended
Sep. 30,
2010
2009
2008
Net sales
$ 9,842 
$ 5,253 
$ 6,878 
Cost of sales
7,872 
4,550 
5,708 
Gross income
1,970 
703 
1,170 
Operating expenses:
 
 
 
Selling, general and administrative
490 
430 
483 
Amortization of purchased intangibles
61 
62 
69 
Intangible assets impairment charges
26 
1,190 
Total operating expenses
576 
1,683 
553 
Operating income (loss)
1,394 
(980)
617 
Other income (expense):
 
 
 
Interest expense
(187)
(211)
(210)
Interest income
Miscellaneous, net
(9)
Total other income (expense)
(183)
(199)
(214)
Income (loss) from continuing operations before income taxes and equity in earnings (losses) of unconsolidated affiliates
1,212 
(1,178)
404 
Provision for (benefit from) income taxes
414 
(13)
121 
Income (loss) from continuing operations before equity in earnings (losses) of unconsolidated affiliates
797 
(1,166)
283 
Equity in earnings (losses) of unconsolidated affiliates
(4)
(1)
Income (loss) from continuing operations
793 
(1,167)
289 
Discontinued operations (Note 3):
 
 
 
Income (loss) from discontinued operations
(3)
(213)
Income tax benefit
 
(62)
(3)
Income (loss) from discontinued operations, net of tax
(3)
67 
(210)
Net income (loss)
790 
(1,100)
79 
Net loss attributable to noncontrolling interest, net of income taxes of $0.0, $0.0 and $0.1
Net income (loss) attributable to Oshkosh Corporation
790 
(1,099)
79 
Earnings (loss) per share attributable to Oshkosh Corporation common shareholders-basic:
 
 
 
From continuing operations (in dollars per share)
8.81 
(15.26)
3.90 
From discontinued operations (in dollars per share)
(0.03)
0.89 
(2.83)
Total earnings (loss) per share attributable to Oshkosh Corporation common shareholders-basic (in dollars per share)
8.78 
(14.37)
1.07 
Earnings (loss) per share attributable to Oshkosh Corporation common shareholders-dilued:
 
 
 
From continuing operations (in dollars per share)
8.72 
(15.26)
3.86 
From discontinued operations (in dollars per share)
(0.03)
0.89 
(2.80)
Total earnings (loss) per share attributable to Oshkosh Corporation common shareholders-diluted (in dollars per share)
$ 8.69 
$ (14.37)
$ 1.06 
CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) (USD $)
In Millions
Year Ended
Sep. 30,
2010
2009
2008
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
Net loss attributable to the noncontrolling interest, tax portion
$ 0 
$ 0 
$ 0 
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions
Year Ended
Sep. 30,
2010
2009
Current assets:
 
 
Cash and cash equivalents
$ 339 
$ 530 
Receivables, net
890 
564 
Inventories, net
849 
790 
Deferred income taxes
87 
76 
Other current assets
52 
184 
Total current assets
2,216 
2,143 
Investment in unconsolidated affiliates
30 
37 
Property, plant and equipment, net
404 
410 
Goodwill
1,050 
1,077 
Purchased intangible assets, net
896 
968 
Other long-term assets
113 
132 
Total assets
4,709 
4,768 
Current liabilities:
 
 
Revolving credit facility and current maturities of long-term debt
216 
15 
Accounts payable
718 
556 
Customer advances
373 
732 
Payroll-related obligations
128 
75 
Income taxes payable
Accrued warranty
91 
73 
Other current liabilities
286 
206 
Total current liabilities
1,812 
1,659 
Long-term debt, less current maturities
1,086 
2,023 
Deferred income taxes
190 
240 
Other long-term liabilities
294 
330 
Commitments and contingencies
 
 
Equity:
 
 
Preferred Stock ($.01 par value; 2,000,000 shares authorized; none issued and outstanding)
 
 
Common Stock ($.01 par value; 300,000,000 shares authorized; 90,662,377 and 89,495,337 shares issued, respectively)
Additional paid-in capital
660 
620 
Retained earnings (accumulated deficit)
759 
(31)
Accumulated other comprehensive income (loss)
(93)
(75)
Common Stock in treasury, at cost (64,215 shares at September 30, 2009)
 
(1)
Total Oshkosh Corporation shareholders' equity
1,327 
514 
Noncontrolling interest
Total equity
1,327 
516 
Total liabilities and equity
$ 4,709 
$ 4,768 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Sep. 30, 2010
Sep. 30, 2009
CONSOLIDATED BALANCE SHEETS.
 
 
Preferred Stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Preferred Stock, shares authorized
2,000,000 
2,000,000 
Preferred Stock, shares issued
Preferred Stock, shares outstanding
Common Stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Common Stock, shares authorized
300,000,000 
300,000,000 
Common Stock, shares issued
90,662,377 
89,495,337 
Common Stock in treasury, shares
 
64,215 
CONSOLIDATED STATEMENTS OF EQUITY
In Millions
Common Stock
Additional Paid-In Capital
Retained Earnings (Accumulated Deficit)
Accumulated Other Comprehensive Income (Loss)
Common Stock in Treasury at Cost
Non-Controlling Interest
Comprehensive Income (Loss)
Total
Balance at Sep. 30, 2007
229 
1,036 
129 
(2)
 
 
Comprehensive income (loss):
 
 
 
 
 
 
 
 
Net income (loss)
 
 
79 
 
 
(1)
79 
79 
Change in fair value of derivative instruments, net of tax of $19.2, $21.3, $1.2 for September 30, 2008, 2009, and 2010, respectively
 
 
 
(30)
 
 
(30)
 
Losses reclassified into earnings from other comprehensive income, net of tax of $9.1, $18.6, $14.9 for September 30, 2008, 2009, and 2010, respectively
 
 
 
15 
 
 
15 
 
Employee pension and postretirement benefits, net of tax of $11.1, $19.2, $3.2 for September 30, 2008, 2009, and 2010, respectively
 
 
 
(17)
 
 
(17)
 
Currency translation adjustments, net
 
 
 
(41)
 
(40)
 
Total comprehensive income (loss)
 
 
 
 
 
 
 
Cash dividends ($0.40 and $0.20 per share) for September 30, 2008 and 2009, respectively
 
 
(30)
 
 
 
 
 
Exercise of stock options
 
 
 
 
 
 
Tax benefit related to stock-based compensation
 
 
 
 
 
 
 
Repurchase of Common Stock
 
 
 
 
(1)
 
 
 
Stock-based compensation and award of nonvested shares
 
15 
 
 
 
 
 
 
Adjustment to initially adopt standard on uncertain income tax positions - See Note 19
 
 
(3)
 
 
 
 
 
Balance at Sep. 30, 2008
251 
1,083 
56 
(1)
 
 
Comprehensive income (loss):
 
 
 
 
 
 
 
 
Net income (loss)
 
 
(1,099)
 
 
(1)
(1,100)
(1,100)
Change in fair value of derivative instruments, net of tax of $19.2, $21.3, $1.2 for September 30, 2008, 2009, and 2010, respectively
 
 
 
(34)
 
 
(34)
 
Losses reclassified into earnings from other comprehensive income, net of tax of $9.1, $18.6, $14.9 for September 30, 2008, 2009, and 2010, respectively
 
 
 
30 
 
 
30 
 
Employee pension and postretirement benefits, net of tax of $11.1, $19.2, $3.2 for September 30, 2008, 2009, and 2010, respectively
 
 
 
(32)
 
 
(32)
 
Currency translation adjustments reclassified into earnings from other comprehensive income, net
 
 
 
(92)
 
 
(92)
 
Currency translation adjustments, net
 
 
 
(2)
 
(0)
(3)
 
Total comprehensive income (loss)
 
 
 
 
 
 
(1,230)
 
Issuance of shares for public equity offering - See Note 15
358 
 
 
 
 
 
 
Cash dividends ($0.40 and $0.20 per share) for September 30, 2008 and 2009, respectively
 
 
(15)
 
 
 
 
 
Exercise of stock options
 
(0)
 
 
 
 
 
Stock-based compensation and award of nonvested shares
 
11 
 
 
 
 
 
 
Other
 
 
 
(0)
 
 
 
Balance at Sep. 30, 2009
620 
(31)
(75)
(1)
 
516 
Changes in Equity
 
 
 
 
 
 
 
 
Sale of discontinued operations
 
 
 
 
 
(2)
 
 
Comprehensive income (loss):
 
 
 
 
 
 
 
 
Net income (loss)
 
 
790 
 
 
 
790 
790 
Change in fair value of derivative instruments, net of tax of $19.2, $21.3, $1.2 for September 30, 2008, 2009, and 2010, respectively
 
 
 
(6)
 
 
(6)
 
Losses reclassified into earnings from other comprehensive income, net of tax of $9.1, $18.6, $14.9 for September 30, 2008, 2009, and 2010, respectively
 
 
 
27 
 
 
27 
 
Employee pension and postretirement benefits, net of tax of $11.1, $19.2, $3.2 for September 30, 2008, 2009, and 2010, respectively
 
 
 
(13)
 
 
(13)
 
Currency translation adjustments reclassified into earnings from other comprehensive income, net
 
 
 
(1)
 
 
(1)
 
Currency translation adjustments, net
 
 
 
(26)
 
 
(26)
 
Total comprehensive income (loss)
 
 
 
 
 
 
772 
 
Exercise of stock options
 
18 
 
 
 
 
 
Tax benefit related to stock-based compensation
 
 
 
 
 
 
 
Stock-based compensation and award of nonvested shares
 
15 
 
 
 
 
 
 
Other
 
 
 
 
 
 
Balance at Sep. 30, 2010
660 
759 
(93)
 
 
1,327 
CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) (USD $)
In Millions, except Per Share data
Year Ended
Sep. 30,
2010
2009
2008
CONSOLIDATED STATEMENTS OF EQUITY
 
 
 
Change in fair value of derivative instruments, tax
$ 1 
$ 21 
$ 19 
Losses reclassified into earnings from other comprehensive income, tax
15 
19 
Employee pension and postretirement benefits, tax
$ 3 
$ 19 
$ 11 
Cash dividends per share (in dollars per share)
 
0.20 
0.40 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions
Year Ended
Sep. 30,
2010
2009
2008
Operating activities:
 
 
 
Net income (loss)
$ 790 
$ (1,100)
$ 79 
Intangible assets impairment charges
26 
1,200 
175 
Loss (gain) on sale of discontinued operations
(34)
 
Depreciation and amortization
173 
152 
153 
Stock-based compensation expense
15 
11 
15 
Deferred income taxes
(71)
(51)
(10)
Equity in losses (earnings) of unconsolidated affiliates
(4)
Gain on sale of assets
(1)
(3)
(1)
Foreign currency transaction losses
11 
Changes in operating assets and liabilities:
 
 
 
Receivables, net
(340)
377 
66 
Inventories, net
(83)
113 
(39)
Other current assets
101 
(89)
(9)
Accounts payable
169 
(56)
16 
Customer advances
(356)
436 
(41)
Income taxes
21 
(26)
(22)
Other current liabilities
180 
(50)
(29)
Other long-term assets and liabilities
(23)
16 
38 
Net cash provided by operating activities
620 
899 
390 
Investing activities:
 
 
 
Additions to property, plant and equipment
(83)
(46)
(76)
Additions to equipment held for rental
(6)
(15)
(43)
Proceeds from sale of property, plant and equipment
Proceeds from sale of equipment held for rental
10 
13 
Other investing activities
(6)
(5)
Net cash used by investing activities
(84)
(56)
(100)
Financing activities:
 
 
 
Repayment of long-term debt
(2,021)
(682)
(305)
Proceeds from issuance of long-term debt
1,150 
 
 
Proceeds from issuance of Common Stock, net
 
358 
 
Net borrowings (repayments) under revolving credit facility
150 
(49)
55 
Debt issuance/amendment costs
(26)
(20)
 
Proceeds from exercise of stock options
19 
Excess tax benefits from stock-based compensation
 
Dividends paid
 
(15)
(30)
Other financing activities
(0)
(0)
(1)
Net cash used by financing activities
(723)
(408)
(274)
Effect of exchange rate changes on cash
(5)
(4)
Increase (decrease) in cash and cash equivalents
(191)
442 
13 
Cash and cash equivalents at beginning of year
530 
88 
75 
Cash and cash equivalents at end of year
339 
530 
88 
Supplemental disclosures:
 
 
 
Cash paid for interest
181 
184 
211 
Cash paid for income taxes
$ 457 
$ 6 
$ 138 
Nature of Operations
Nature of Operations

1.    Nature of Operations

 

Oshkosh Corporation and its subsidiaries (the “Company”), are leading manufacturers of a wide variety of specialty vehicles and vehicle bodies predominately for the Americas and European markets.  “Oshkosh” refers to Oshkosh Corporation, not including its subsidiaries.  The Company sells its products into four principal vehicle markets — defense, access equipment, fire & emergency and commercial.  The defense business is conducted through the operations of Oshkosh.  The access equipment business is conducted through its wholly-owned subsidiary, JLG Industries, Inc. and its wholly-owned subsidiaries (“JLG”) and JerrDan Corporation (“JerrDan”).  JLG holds, along with an unaffiliated third-party, a 50% interest in a joint venture in The Netherlands, RiRent Europe, B.V. (“RiRent”).  The Company’s fire & emergency business is principally conducted through its wholly-owned subsidiaries Pierce Manufacturing Inc. (“Pierce”), the airport products division of Oshkosh, Kewaunee Fabrications, LLC (“Kewaunee”), Medtec Ambulance Corporation (“Medtec”) and Oshkosh Specialty Vehicles, Inc., AK Specialty Vehicles B.V. and their wholly-owned subsidiaries (together “OSV”).  The Company’s commercial business is principally conducted through its wholly-owned subsidiaries, McNeilus Companies, Inc. (“McNeilus”), Concrete Equipment Company, Inc. and its wholly-owned subsidiary (“CON-E-CO”), London Machinery Inc. and its wholly-owned subsidiary (“London”), Iowa Mold Tooling Co., Inc. (“IMT”) and the commercial division of Oshkosh.  McNeilus is one of two general partners in Oshkosh/McNeilus Financial Services Partnership (“OMFSP”), which provides lease financing to the Company’s commercial customers.  McNeilus owns a 49% interest in Mezcladores Trailers de Mexico, S.A. de C.V. (“Mezcladores”), which manufactures and markets concrete mixers, concrete batch plants and refuse collection vehicles in Mexico.

 

During fiscal 2010, in conjunction with the appointment of a new segment president, the Company transferred operational responsibility of JerrDan from the fire & emergency segment to the access equipment segment.  As a result, JerrDan has been included with the access equipment segment for financial reporting purposes.  Historical information has been reclassified to include JerrDan in the access equipment segment for all periods presented.

 

In July 2009, the Company completed the sale of its ownership in Geesink Group B.V., Geesink Norba Limited and Norba A. B. (collectively, “Geesink”).  Geesink, a European refuse collection vehicle manufacturer, was previously included in the Company’s commercial segment.  In October 2009, the Company sold its 75% ownership interest in BAI Brescia Antincendi International S.r.l. (“BAI”) to the BAI management team.  BAI, a European fire apparatus manufacturer, was previously included in the Company’s fire & emergency segment.  The historical operating results of these businesses have been reclassified and are presented in “Income (loss) from discontinued operations, net of tax” in the Consolidated Statements of Operations for all periods.  See Note 3 of the Notes to Consolidated Financial Statements for further information regarding the sales of Geesink and BAI.

 

Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

2.    Summary of Significant Accounting Policies

 

Principles of Consolidation and Presentation — The consolidated financial statements include the accounts of Oshkosh and all of its majority-owned or controlled subsidiaries and are prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”).  All significant intercompany accounts and transactions have been eliminated in consolidation.  The 25% historical book value of BAI at the date of acquisition and 25% of the subsequent operating results related to that portion of BAI not owned by the Company have been reflected as a noncontrolling interest on the Company’s Consolidated Balance Sheets and Consolidated Statements of Operations, respectively.  The Company accounts for its 50% voting interest in OMFSP and RiRent and its 49% interest in Mezcladores under the equity method.

 

Use of Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

Revenue Recognition — The Company recognizes revenue on equipment and parts sales when contract terms are met, collectability is reasonably assured and a product is shipped or risk of ownership has been transferred to and accepted by the customer.  Revenue from service agreements is recognized as earned when services have been rendered.  Appropriate provisions are made for discounts, returns and sales allowances.  Sales are recorded net of amounts invoiced for taxes imposed on the customer such as excise or value-added taxes.

 

Sales to the U.S. government of non-commercial whole goods manufactured to the government’s specifications are recognized using the units-of-delivery measure under the percentage-of-completion accounting method as units are accepted by the government.  The Company includes amounts representing contract change orders, claims or other items in sales only when they can be reliably estimated and realization is probable.  The Company charges anticipated losses on contracts or programs in progress to earnings when identified.  Bid and proposal costs are expensed as incurred.

 

Shipping and Handling Fees and Costs — Revenue received from shipping and handling fees is reflected in net sales.  Shipping and handling fee revenue was not significant for all periods presented.  Shipping and handling costs are included in cost of sales.

 

Warranty — Provisions for estimated warranty and other related costs are recorded in cost of sales at the time of sale and are periodically adjusted to reflect actual experience.  The amount of warranty liability accrued reflects management’s best estimate of the expected future cost of honoring Company obligations under the warranty plans.  Historically, the cost of fulfilling the Company’s warranty obligations has principally involved replacement parts, labor and sometimes travel for any field retrofit campaigns.  The Company’s estimates are based on historical experience, the extent of pre-production testing, the number of units involved and the extent of features/components included in product models. Also, each quarter, the Company reviews actual warranty claims experience to determine if there are systemic defects that would require a field campaign.

 

Research and Development and Similar Costs — Except for customer sponsored research and development costs incurred pursuant to contracts, research and development costs are expensed as incurred and included as part of cost of sales.  Research and development costs charged to expense amounted to $109.3 million, $72.7 million and $88.3 million during fiscal 2010, 2009 and 2008, respectively.  Customer sponsored research and development costs incurred pursuant to contracts are accounted for as contract costs.

 

Advertising — Advertising costs are included in selling, general and administrative expense and are expensed as incurred.  These expenses totaled $15.4 million, $11.7 million and $21.7 million in fiscal 2010, 2009 and 2008, respectively.

 

Environmental Remediation Costs — The Company accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable.  The liabilities are developed based on currently available information and reflect the participation of other potentially responsible parties, depending on the parties’ financial condition and probable contribution.  The accruals are recorded at undiscounted amounts and are reflected as liabilities on the accompanying consolidated balance sheets.  Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable.  The accruals are adjusted as further information develops or circumstances change.

 

Stock-Based Compensation — The Company recognizes stock-based compensation using the fair value provisions prescribed by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation — Stock Compensation.  Accordingly, compensation costs for stock options, restricted stock and performance shares are calculated based on the fair value of the stock-based instrument at the time of grant and are recognized as expense over the vesting period of the stock-based instrument.  See Note 16 of the Notes to Consolidated Financial Statements for information regarding the Company’s stock-based incentive plans.

 

Income Taxes — Deferred income taxes are provided to recognize temporary differences between the financial reporting basis and the income tax basis of the Company’s assets and liabilities using currently enacted tax rates and laws.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.  In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

 

The Company evaluates uncertain income tax positions in a two-step process.  The first step is recognition, where the Company evaluates whether an individual tax position has a likelihood of greater than 50% of being sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation processes.  For tax positions that are currently estimated to have a less than 50% likelihood of being sustained, zero tax benefit is recorded.  For tax positions that have met the recognition threshold in the first step, the Company performs the second step of measuring the benefit to be recorded.  The actual benefits ultimately realized may differ from the Company’s estimates.  In future periods, changes in facts and circumstances and new information may require the Company to change the recognition and measurement estimates with regard to individual tax positions.  Changes in recognition and measurement estimates are recorded in results of operations and financial position in the period in which such changes occur.

 

Income taxes are provided on financial statement earnings of non-U.S. subsidiaries expected to be repatriated.  The Company determines annually the amount of undistributed non-U.S. earnings to invest indefinitely in its non-U.S. operations.  As a result of anticipated cash requirements in the foreign subsidiaries, the Company currently believes that all earnings of non-U.S. subsidiaries will be reinvested indefinitely to finance foreign activities.  Accordingly, no deferred income taxes have been provided for the repatriation of those earnings.

 

Fair Value of Financial Instruments — Based on Company estimates, the carrying amounts of cash equivalents, receivables, accounts payable and accrued liabilities approximated fair value as of September 30, 2010 and 2009.

 

Cash and Cash Equivalents — The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.  Cash equivalents at September 30, 2010 consisted principally of bank deposits and money market instruments.

 

Receivables — Receivables consist of amounts billed and currently due from customers and unbilled costs and accrued profits related to revenues on long-term contracts with the U.S. government that have been recognized for accounting purposes but not yet billed to customers.  The Company extends credit to customers in the normal course of business and maintains an allowance for estimated losses resulting from the inability or unwillingness of customers to make required payments.  The accrual for estimated losses is based on the Company’s historical experience, existing economic conditions and any specific customer collection issues the Company has identified.

 

Concentration of Credit Risk — Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash equivalents, trade accounts receivable, OMFSP lease receivables and guarantees of certain customers’ obligations under deferred payment contracts and lease purchase agreements.

 

The Company maintains cash and cash equivalents, and other financial instruments, with various major financial institutions.  The Company performs periodic evaluations of the relative credit standing of these financial institutions and limits the amount of credit exposure with any institution.

 

Concentration of credit risk with respect to trade accounts and leases receivable is limited due to the large number of customers and their dispersion across many geographic areas.  However, a significant amount of trade and lease receivables are with the U.S. government, with rental companies globally, with companies in the ready-mix concrete industry, with municipalities and with several large waste haulers in the United States.  The Company continues to monitor credit risk associated with its trade receivables, especially during this period of global economic weakness.

 

Inventories — Inventories are stated at the lower of cost or market.  Cost has been determined using the last-in, first-out (“LIFO”) method for 86.2% of the Company’s inventories at September 30, 2010 and 80.6% at September 30, 2009.  For the remaining inventories, cost has been determined using the first-in, first-out (“FIFO”) method.

 

Performance-Based Payments — The Company’s contracts with the U.S. Department of Defense (“DoD”) to deliver heavy-payload tactical vehicles (Family of Heavy Tactical Vehicles and Logistic Vehicle System Replacement), medium-payload tactical vehicles (Family of Medium Tactical Vehicles and Medium Tactical Vehicle Replacement) and MRAP-All Terrain Vehicles (“M-ATVs”), as well as certain other defense-related contracts, include requirements for “performance-based payments.”  The performance-based payment provisions in the contracts require the DoD to pay the Company based on the completion of certain pre-determined events in connection with the production under these contracts.  Performance-based payments received are first applied to reduce outstanding receivables for units accepted in accordance with contractual terms, with any remaining amount recorded as an offset to inventory to the extent of related inventory on hand.  Amounts received in excess of receivables and inventories are included in liabilities as customer advances.

 

Property, Plant and Equipment — Property, plant and equipment are recorded at cost.  Depreciation is provided over the estimated useful lives of the respective assets using accelerated and straight-line methods.  The estimated useful lives range from 10 to 50 years for buildings and improvements, from 4 to 25 years for machinery and equipment and from 3 to 10 years for capitalized software and related costs.  The Company capitalizes interest on borrowings during the active construction period of major capital projects.  Capitalized interest is immaterial for all periods presented.  All capitalized interest has been added to the cost of the underlying assets and is amortized over the useful lives of the assets.

 

Goodwill — Goodwill reflects the cost of an acquisition in excess of the aggregate fair value assigned to identifiable net assets acquired.  Goodwill is not amortized; however, it is assessed for impairment at least annually and as triggering events or “indicators of potential impairment” occur.  The Company performs its annual impairment test in the fourth quarter of its fiscal year.  The Company evaluates the recoverability of goodwill by estimating the future discounted cash flows of the businesses to which the goodwill relates.  Estimated cash flows and related goodwill are grouped at the reporting unit level.  A reporting unit is an operating segment or, under certain circumstances, a component of an operating segment that constitutes a business.  When estimated future discounted cash flows are less than the carrying value of the net assets and related goodwill, an impairment test is performed to measure and recognize the amount of the impairment loss, if any.  Impairment losses, limited to the carrying value of goodwill, represent the excess of the carrying amount of a reporting unit’s goodwill over the implied fair value of that goodwill. In fiscal 2010 and 2009, the Company recorded non-cash impairment charges of $16.8 million and $1,169.2 million, respectively, of which, $8.1 million related to discontinued operations in fiscal 2009.  See Note 8 of the Notes to Consolidated Financial Statements for a discussion of these charges.

 

In evaluating the recoverability of goodwill, it is necessary to estimate the fair value of the reporting units.  The Company evaluates the recoverability of goodwill primarily utilizing the income approach and, to a lesser extent, the market approach.  The Company weighted the income approach more heavily (75%) as the income approach uses long-term estimates that consider the expected operating profit of each reporting unit during periods where residential and non-residential construction and other macroeconomic indicators are nearer historical averages.  The Company believes the income approach more accurately considers the expected recovery in the U.S. and European construction markets than the market approach.  Under the income approach, the Company determines fair value based on estimated future cash flows discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent risk of a reporting unit and the rate of return an outside investor would expect to earn.  Estimated future cash flows are based on the Company’s internal projection models, industry projections and other assumptions deemed reasonable by management.  Rates used to discount estimated cash flows correspond to the Company’s cost of capital, adjusted for risk where appropriate, and are dependent upon interest rates at a point in time.  There are inherent uncertainties related to these factors and management’s judgment in applying them to the analysis of goodwill impairment.  Under the market approach, the Company derives the fair value of its reporting units based on revenue multiples of comparable publicly-traded companies.  It is possible that assumptions underlying the impairment analysis will change in such a manner that impairment in value may occur in the future.

 

Impairment of Long-Lived Assets — Property, plant and equipment and amortizable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  Non-amortizable trade names are assessed for impairment at least annually and as triggering events or “indicators of potential impairment” occur.  If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair value and carrying value of the asset or group of assets.  Such analyses necessarily involve significant judgment.  In fiscal 2010 and 2009, the Company recorded non-cash impairment charges of $8.8 million and $30.6 million, respectively, related to long-lived assets of which $1.5 million related to discontinued operations in fiscal 2009.

 

Floor Plan Notes Payable — Floor plan notes payable represent liabilities related to the purchase of commercial vehicle chassis upon which the Company mounts its manufactured vehicle bodies.  Floor plan notes payable are non-interest bearing for terms ranging up to 120 days and must be repaid upon the sale of the vehicle to a customer.  The Company’s practice is to repay all floor plan notes for which the non-interest bearing period has expired without sale of the vehicle to a customer.

 

Customer Advances — Customer advances include amounts received in advance of the completion of fire & emergency and commercial vehicles.  Most of these advances bear interest at variable rates approximating the prime rate.  Advances also include any performance-based payments received from the DoD in excess of the value of related inventory.  Advances from the DoD are non-interest bearing.  See the discussion above regarding performance-based payments.

 

Accumulated Other Comprehensive Income (Loss) — Comprehensive income (loss) is a more inclusive financial reporting method that includes disclosure of financial information that historically has not been recognized in the calculation of net income.  The Company has chosen to report comprehensive income (loss) and accumulated other comprehensive income (loss), which encompasses net income (loss), cumulative translation adjustments, employee pension and postretirement benefits, and unrealized gains (losses) on derivatives in the Consolidated Statements of Equity.

 

The components of accumulated other comprehensive income (loss) are as follows (in millions):

 

 

 

 

 

Employee

 

 

 

 

 

 

 

 

 

Pension and

 

 

 

Accumulated

 

 

 

Cumulative

 

Postretirement

 

Gains (Losses)

 

Other

 

 

 

Translation

 

Benefits, Net

 

on Derivatives,

 

Comprehensive

 

 

 

Adjustments

 

of Tax

 

Net of Tax

 

Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2007

 

$

176.1

 

$

(35.1

)

$

(12.0

)

$

129.0

 

Fiscal year change

 

(40.6

)

(17.4

)

(15.3

)

(73.3

)

Balance at September 30, 2008

 

135.5

 

(52.5

)

(27.3

)

55.7

 

Fiscal year change

 

(94.3

)

(31.8

)

(4.3

)

(130.4

)

Balance at September 30, 2009

 

41.2

 

(84.3

)

(31.6

)

(74.7

)

Fiscal year change

 

(26.9

)

(12.6

)

21.0

 

(18.5

)

Balance at September 30, 2010

 

$

14.3

 

$

(96.9

)

$

(10.6

)

$

(93.2

)

 

Foreign Currency Translation — All balance sheet accounts have been translated into U.S. dollars using the exchange rates in effect at the balance sheet date.  Income statement amounts have been translated using the average exchange rate during the period in which the transactions occurred.  Resulting translation adjustments are included in “Accumulated other comprehensive income (loss).”  Foreign currency transactions gains or losses are included in “Miscellaneous, net” in the Consolidated Statements of Operations.  The Company recorded net foreign currency transaction gains (losses) related to continuing operations of $1.4 million, $5.6 million and $(9.3) million in fiscal 2010, 2009 and 2008, respectively.

 

Derivative Financial Instruments — The Company recognizes all derivative financial instruments, such as foreign exchange contracts, in the consolidated financial statements at fair value regardless of the purpose or intent for holding the instrument.  Changes in the fair value of derivative financial instruments are either recognized periodically in income or in equity as a component of comprehensive income depending on whether the derivative financial instrument qualifies for hedge accounting, and if so, whether it qualifies as a fair value hedge or cash flow hedge.  Generally, changes in fair values of derivatives accounted for as fair value hedges are recorded in income along with the portions of the changes in the fair values of the hedged items that relate to the hedged risks.  Changes in fair values of derivatives accounted for as cash flow hedges, to the extent they are effective as hedges, are recorded in other comprehensive income, net of deferred income taxes.  Changes in fair value of derivatives not qualifying as hedges are reported in income.  Cash flows from derivatives that are accounted for as cash flow or fair value hedges are included in the Consolidated Statements of Cash Flows in the same category as the item being hedged.

 

Subsequent Events — The Company evaluated subsequent events after the balance sheet date for appropriate accounting and disclosure through the date the Company filed this Annual Report on Form 10-K.

 

Recent Accounting Pronouncements — In September 2007, the FASB issued a new standard on fair value measurements, which defined fair value, established a framework for measuring fair value and expanded disclosures about fair value measurements.  The fair value standard clarified the definition of exchange price as the price between market participants in an orderly transaction to sell an asset or transfer a liability in the market in which the reporting entity would transact business for the asset or liability, that is, the principal or most advantageous market for the asset or liability.  Effective October 1, 2008, the Company partially adopted the fair value standard, but did not adopt it for non-financial assets and liabilities which are not recognized or disclosed at fair value on a recurring basis.  Effective October 1, 2009, the Company adopted the fair value standard for non-financial assets and liabilities which are not recognized or disclosed at fair value on a recurring basis.  The adoption of the remaining provisions of the fair value standard did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.  See Note 14 of the Notes to Consolidated Financial Statements for additional information regarding fair value measurement disclosures.

 

In December 2007, the FASB issued a new standard on business combinations, which requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, at their fair values as of that date.  Acquisition-related transaction and restructuring costs are expensed rather than treated as acquisition costs and included in the amount recorded for assets acquired.  The new business combination standard became effective for the Company on a prospective basis for all business combinations for which the acquisition date is on or after October 1, 2009.  The new business combination standard also amends FASB ASC Topic 740, Income Taxes, such that adjustments made to valuation allowances on deferred taxes and acquired tax contingencies associated with acquisitions that closed prior to October 1, 2009 would also apply the provision of the new business combination standard.  At September 30, 2009, the Company had $20.1 million of tax contingencies associated with acquisitions that closed prior to October 1, 2009.  During fiscal 2010, the Company settled a number of income tax audits which resulted in $11.5 million of acquisition tax contingencies being reversed to the “Provision for (benefit from) income taxes” in the Consolidated Statements of Operations.  Under the previous standard, these adjustments would have been recorded as adjustments to goodwill.  See Note 19 of the Notes to Consolidated Financial Statements for additional information regarding adjustments to the tax contingencies reserves.

 

In December 2007, the FASB issued a new standard on noncontrolling interests in consolidated financial statements, which clarified that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements.  The Company adopted the new noncontrolling interests standard as of October 1, 2009.  The adoption of the new noncontrolling interests standard did not have a material impact on the Company’s financial condition, results of operations or cash flows.

 

In June 2009, the FASB issued a new standard to address the elimination of the concept of a qualifying special purpose entity.  The new variable interest standard also replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity and the obligation to absorb losses of the entity or the right to receive benefits from the entity.  Additionally, the new variable interest standard provides more timely and useful information about an enterprise’s involvement with a variable interest entity.  The Company will be required to adopt the new variable interest standard as of October 1, 2010.  The new variable interest standard is not expected to have a material impact on the Company’s financial condition, results of operations or cash flows.

 

In July 2010, the FASB issued amended ASC Topic 310, Receivables, which requires more robust and disaggregated disclosures about the credit quality of an entity’s financing receivables and its allowances for credit losses.  The new disclosures will require additional information for nonaccrual and past due accounts, the allowance for credit losses, impaired loans, credit quality and account modifications.  The Company will be required to adopt the new disclosure requirements as of October 1, 2010 and the reporting period activity disclosures as of January 1, 2011.  The adoption of the revised standard is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

 

Discontinued Operations
Discontinued Operations

3.    Discontinued Operations

 

In July 2009, the Company sold Geesink to a third party for nominal cash consideration.  Following reclassification of $92.0 million of cumulative translation adjustments out of equity, the Company recorded a pretax gain on the sale of $33.8 million, which was recognized in the fourth quarter of fiscal 2009.  As a result of the sale, the historical results of Geesink, which were previously included in the Company’s commercial segment, have been reclassified and are now included in discontinued operations in the Company’s Consolidated Statements of Operations.

 

Due to rationalization of manufacturing facilities, inefficiencies associated with the relocation and start-up of production of Norba-branded products from Sweden to The Netherlands and increased material costs and product warranties, the Company’s European refuse collection vehicle business, Geesink, sustained a loss related to its operations of $27.5 million in the first nine months of fiscal 2008.  The loss was significantly more than estimated in the Company’s financial projections supporting its fiscal 2007 fourth quarter impairment test.

 

The Company had taken steps during fiscal 2007 and the first six months of fiscal 2008 to turn around the Geesink business, including selling an unprofitable facility in The Netherlands during the first quarter of fiscal 2008, reaching an agreement with the Works Council in Sweden regarding rationalizing a facility in that country in order to consolidate Norba-branded production in The Netherlands, reducing its work force, installing new executive leadership, integrating operations with JLG, implementing lean manufacturing practices, introducing new products and outsourcing components to lower cost manufacturing sites.  In June 2008, it became evident that synergies related to Geesink’s facility rationalization program would be lower than expected and costs to execute the rationalization would be higher than anticipated.  The resulting slower than expected and more difficult return to profitability of Geesink’s business, further escalation of raw material costs, a softening of economies in Western Europe and a reduction in fabrication volume for the Company’s access equipment segment at Geesink’s Romania facility due to a slowdown in the European access equipment market led the Company to the conclusion that a charge for impairment was required.  During the third quarter of fiscal 2008, the Company took these factors into account in developing its fiscal 2009 and long-term forecast for this business.  With the assistance of a third-party valuation firm, the Company determined that Geesink goodwill and non-amortizable intangible assets were impaired and the Company recorded non-cash, pre-tax impairment charges of $174.2 million in the third quarter of fiscal 2008.  The evaluation was based upon a discounted cash flow analysis of the historical and forecasted operating results of this business.

 

In October 2009, the Company sold its 75% ownership interest in BAI to BAI’s management team for nominal cash consideration.  Following reclassification of $0.8 million of cumulative translation adjustments out of equity, the Company recorded a small after tax loss on the sale, which was recognized in the first quarter of fiscal 2010.  BAI, a European fire apparatus manufacturer, was previously included in the Company’s fire & emergency segment.

 

The following amounts related to the operations of Geesink and BAI were derived from historical financial information and have been segregated from continuing operations and reported as discontinued operations in the Consolidated Statements of Operations (in millions):

 

 

 

 Fiscal Year Ended September 30,

 

 

 

2010

 

2009

 

2008

 

 

 

 

 

 

 

 

 

Net sales

 

$

 

$

180.2

 

$

260.6

 

Cost of sales

 

 

169.4

 

247.3

 

Gross income

 

 

10.8

 

13.3

 

Operating expenses:

 

 

 

 

 

 

 

Selling, general and administrative

 

 

27.5

 

49.6

 

Amortization of purchased intangibles

 

 

0.4

 

0.6

 

Intangible assets impairment charges

 

 

9.6

 

174.2

 

Total operating expenses

 

 

37.5

 

224.4

 

Operating loss

 

 

(26.7

)

(211.1

)

Other expense

 

 

(1.4

)

(2.3

)

Loss before income taxes

 

 

(28.1

)

(213.4

)

Benefit from income taxes

 

 

(61.6

)

(3.1

)

Income (loss) from operations, net of tax

 

 

33.5

 

(210.3

)

Gain (loss) on sale of discontinued operations

 

(2.9

)

33.8

 

 

Income (loss) from discontinued operations, net of tax

 

$

(2.9

)

$

67.3

 

$

(210.3

)

 

The fiscal 2009 benefit from income taxes includes $61.0 million related to a worthless stock/bad debt deduction claimed by the Company related to discontinued operations.  See Note 19 of Notes to Consolidated Financial Statements.  Cumulative currency translation adjustments of $92.0 million were reclassified out of equity against the Company’s recorded interest in the book value of the net assets of Geesink upon its sale, giving rise to a $33.8 million gain on sale in the fourth quarter of fiscal 2009.

 

The Company has elected not to reclassify BAI balances in the Consolidated Balance Sheets.  The following is a summary of the assets and liabilities of BAI’s operations as of September 30, 2009.  The amounts presented below were derived from historical financial information and adjusted to exclude intercompany receivables and payables between BAI and the Company (in millions):

 

Receivables, net

 

$

17.3

 

Inventories, net

 

20.0

 

Deferred income taxes

 

0.9

 

Other current assets

 

0.3

 

Total current assets

 

38.5

 

 

 

 

 

Property, plant and equipment, net

 

6.1

 

Purchased intangible assets, net

 

0.5

 

Other long-term assets

 

2.5

 

Total non-current assets

 

9.1

 

 

 

 

 

Revolving credit facility and current maturities of long-term debt

 

(14.1

)

Accounts payable

 

(16.8

)

Accrued and other current liabilities

 

(8.3

)

Total current liabilities

 

(39.2

)

 

 

 

 

Long-term debt, less current maturities

 

(0.8

)

Deferred income taxes

 

(0.6

)

Other long-term liabilities

 

(0.4

)

Total non-current liabilities

 

(1.8

)

Net assets

 

$

6.6

 

 

Accumulated other comprehensive income (loss) included $0.8 million of cumulative currency translation adjustments at September 30, 2009 related to BAI.  Cumulative currency translation adjustments were reclassified out of equity against the Company’s recorded interest in the book value of the net assets of BAI upon its sale in the first quarter of fiscal 2010.

 

Receivables
Receivables

4.    Receivables

 

Receivables consisted of the following (in millions):

 

 

 

September 30,

 

 

 

2010

 

2009

 

U.S. government:

 

 

 

 

 

Amounts billed

 

$

380.1

 

$

243.1

 

Cost and profits not billed

 

75.2

 

5.9

 

 

 

455.3

 

249.0

 

Other trade receivables

 

401.8

 

289.9

 

Finance receivables

 

65.6

 

46.7

 

Notes receivables

 

52.1

 

66.5

 

Other receivables

 

19.5

 

26.9

 

 

 

994.3

 

679.0

 

Less allowance for doubtful accounts

 

(42.0

)

(42.0

)

 

 

$

952.3

 

$

637.0

 

 

 

 

September 30,

 

 

 

2010

 

2009

 

 

 

 

 

 

 

Current receivables

 

$

889.5

 

$

563.8

 

Long-term receivables

 

62.8

 

73.2

 

 

 

$

952.3

 

$

637.0

 

 

The Company recorded provisions for credit losses of $16.6 million, $25.7 million and $2.3 million in fiscal 2010, 2009 and 2008, respectively.

 

Costs and profits not billed at September 30, 2010 primarily result from undefinitized change orders on existing long-term contracts and “not-to-exceed” undefinitized contracts whereby the Company cannot fully invoice the customer until the change order or contracts are definitized even though the products have been delivered.  The definitization process commences upon receipt of a change order or the award of a sole source contract, whereby the U.S. government customer undertakes a detailed review of the Company’s costs related to the contract, with the change order or contract price subject to negotiation.  The Company recognizes revenue on undefinitized contracts only when it can reliably estimate the final contract price and collectability is reasonably assured.  The Company’s experience has been that historically negotiated price differentials have been immaterial and accordingly, it does not anticipate any significant adjustments to revenue.

 

Finance receivables represent sales-type leases resulting from the sale of the Company’s products.  Finance receivables generally include a residual value component.  Residual values are determined based on the expectation that the underlying equipment will have a minimum fair market value at the end of the lease term.  This residual value accrues to the Company at the end of the lease.  The Company uses its experience and knowledge as an original equipment manufacturer and participant in end markets for the related products along with third-party studies to estimate residual values.  The Company monitors these values for impairment on a periodic basis and reflects any resulting reductions in value in current earnings.  As of September 30, 2010, approximately 35% of the finance receivables were due from one party.  Finance receivables consisted of the following (in millions):

 

 

 

September 30,

 

 

 

2010

 

2009

 

 

 

 

 

 

 

Finance receivables

 

$

74.7

 

$

52.0

 

Estimated residual value

 

2.1

 

2.1

 

Less unearned income

 

(11.2

)

(7.4

)

Net finance receivables

 

65.6

 

46.7

 

Less allowance for doubtful accounts

 

(20.9

)

(11.8

)

 

 

$

44.7

 

$

34.9

 

 

The contractual maturities of the Company’s finance receivables at September 30, 2010 were as follows: 2011 - $23.2 million; 2012 - $15.6 million; 2013 - $16.2 million; 2014 - $12.0 million; 2015 - $7.5 million; and thereafter - $0.2 million.  Historically, finance receivables have been paid off prior to their contractual due dates, although that may change in the current economic environment.  As a result, contractual maturities are not to be regarded as a forecast of future cash flows.  Provisions for losses on finance receivables are charged to income in amounts sufficient to maintain the allowance at a level considered adequate to cover losses in the existing receivable portfolio.

 

Notes receivable include refinancing of trade accounts and finance receivables.  As of September 30, 2010, approximately 83% of the notes receivable were due from two parties.  The Company routinely evaluates the creditworthiness of its customers and establishes reserves if required under the circumstances.  Certain notes receivable are collateralized by a security interest in the underlying assets and/or other assets owned by the debtor.  The Company may incur losses in excess of recorded reserves if the financial condition of its customers were to deteriorate or the full amount of any anticipated proceeds from the sale of the collateral supporting its customers’ financial obligations is not realized.

 

Inventories
Inventories

5.    Inventories

 

Inventories consisted of the following (in millions):

 

 

 

September 30,

 

 

 

2010

 

2009

 

 

 

 

 

 

 

Raw materials

 

$

658.6

 

$

513.4

 

Partially finished products

 

332.2

 

326.3

 

Finished products

 

227.3

 

325.2

 

Inventories at FIFO cost

 

1,218.1

 

1,164.9

 

Less:

Progress/performance-based payments on U.S. government contracts

 

(308.7

)

(317.3

)

 

Excess of FIFO cost over LIFO cost

 

(60.8

)

(57.9

)

 

 

$

848.6

 

$

789.7

 

 

Title to all inventories related to government contracts, which provide for progress or performance-based payments, vests with the government to the extent of unliquidated progress or performance-based payments.

 

Inventory includes costs which are amortized to expense as sales are recognized under certain contracts.  At September 30, 2010 and 2009, unamortized costs related to long-term contracts of $4.1 million and $3.5 million, respectively, were included in inventory.

 

During fiscal 2010 and 2009, reductions in FIFO inventory levels resulted in liquidations of LIFO inventory layers carried at lower costs prevailing in prior years as compared with the cost of current-year purchases.  The effect of the LIFO inventory liquidations on fiscal 2010 and 2009 results was to decrease costs of goods sold by $5.6 million and $6.0 million, respectively, and increase earnings from continuing operations by $3.4 million ($0.04 per share) and $3.7 million ($0.05 per share), respectively.  The Company recognized pre-tax expense (income) from continuing operations of $2.9 million, $(15.2) million and $26.7 million as a result of LIFO inventory adjustments in fiscal 2010, 2009 and 2008, respectively.

 

Investments in Unconsolidated Affiliates
Investments in Unconsolidated Affiliates

6.    Investments in Unconsolidated Affiliates

 

Investments in unconsolidated affiliates are accounted for under the equity method, and consisted of the following (in millions):

 

 

 

Percent-

 

September 30,

 

 

 

owned

 

2010

 

2009

 

 

 

 

 

 

 

 

 

OMFSP (U.S.)

 

50%

 

$

12.9

 

$

14.7

 

RiRent (The Netherlands)

 

50%

 

11.1

 

15.7

 

Mezcladoras (Mexico)

 

49%

 

6.4

 

6.9

 

 

 

 

 

$

30.4

 

$

37.3

 

 

The investment generally represents the Company’s maximum exposure to loss as a result of the Company’s ownership interest.  Earnings or losses are reflected in “Equity in earnings (losses) of unconsolidated affiliates” in the Consolidated Statements of Operations.

 

In February 1998, concurrent with the Company’s acquisition of McNeilus, the Company and an unaffiliated third-party, BA Leasing & Capital Corporation, formed OMFSP, a general partnership, for the purpose of offering lease financing to certain customers of the Company.  Each partner contributed existing lease assets (and, in the case of the Company, related notes payable to third-party lenders, which were secured by such leases) to capitalize the partnership.  Leases and related notes payable contributed by the Company were originally acquired in connection with the McNeilus acquisition.

 

OMFSP manages the contributed assets and liabilities and engages in new vendor lease business providing financing to certain customers of the Company.  The Company sells vehicles, vehicle bodies and concrete batch plants to OMFSP for lease to user-customers.  The Company’s sales to OMFSP were $9.5 million, $14.7 million and $39.7 million in fiscal 2010, 2009 and 2008, respectively.  Banks and other financial institutions lend to OMFSP a portion of the purchase price, with recourse solely to OMFSP, secured by a pledge of lease payments due from the user-lessees.  Each partner funds one-half of the approximate 4.0% to 8.0% equity portion of the cost of new equipment purchases.  Customers typically provide a 2.0% to 6.0% down payment.  Each partner is allocated its proportionate share of OMFSP’s cash flow and taxable income in accordance with the partnership agreement.  Indebtedness of OMFSP is secured by the underlying leases and assets of, and is with recourse solely to, OMFSP.  All such OMFSP indebtedness is non-recourse to the Company and its partner.  Each of the two general partners has identical voting, participating and protective rights and responsibilities, and each general partner materially participates in the activities of OMFSP.  For these and other reasons, the Company has determined that OMFSP is a voting interest entity.  Accordingly, the Company accounts for its equity interest in OMFSP under the equity method.  The Company received cash distributions from OMFSP of $5.5 million in fiscal 2008.  No cash distributions were received from OMFSP in fiscal 2010 or 2009.

 

The Company and an unaffiliated third-party are joint venture partners in RiRent.  RiRent maintains a fleet of access equipment for short-term lease to rental companies throughout most of Europe.  The re-rental fleet provides rental companies with equipment to support requirements on short notice.  RiRent does not provide services directly to end users.  The Company’s sales to RiRent were $4.2 million, $4.4 million and $49.3 million in fiscal 2010, 2009 and 2008, respectively.  The Company recognizes income on sales to RiRent at the time of shipment in proportion to the outside third-party interest in RiRent and recognizes the remaining income ratably over the estimated useful life of the equipment, which is generally five years.  Indebtedness of RiRent is secured by the underlying leases and assets of RiRent.  All such RiRent indebtedness is non-recourse to the Company and its partner.  Under RiRent’s €30.0 million bank credit facility, the partners of RiRent have committed to maintain an overall equity to asset ratio of at least 30.0% (45.9% as of September 30, 2010).

 

Property, Plant and Equipment
Property, Plant and Equipment

7.    Property, Plant and Equipment

 

Property, plant and equipment consisted of the following (in millions):

 

 

 

September 30,

 

 

 

2010

 

2009

 

 

 

 

 

 

 

Land and land improvements

 

$

46.7

 

$

44.2

 

Buildings

 

237.2

 

210.4

 

Machinery and equipment

 

490.2

 

442.3

 

Equipment on operating lease to others

 

46.0

 

56.8

 

Construction in progress

 

0.9

 

9.7

 

 

 

821.0

 

763.4

 

Less accumulated depreciation

 

(417.4

)

(353.2

)

 

 

$

403.6

 

$

410.2

 

 

Depreciation expense recorded in continuing operations was $83.8 million, $75.1 million and $72.8 million in fiscal 2010, 2009 and 2008, respectively.  Included in depreciation expense from continuing operations in fiscal 2010 and 2009 were charges of $8.9 million and $2.7 million, respectively, related to the impairment of long-lived assets.  To better align the Company’s costs structure with global market conditions, the Company has announced several plant closures during the past two fiscal years.  Impairment of long-lived assets associated with the plant closures was determined using fair value based on a discounted cash flow analysis or appraisals.

 

Capitalized interest was insignificant for all reported periods.  Equipment on operating lease to others represents the cost of equipment sold 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 September 30, 2010 and 2009 was $25.2 million and $38.7 million, respectively.

 

Goodwill and Purchased Intangible Assets
Goodwill and Purchased Intangible Assets

8.    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.

 

In February 2009, given a sustained decline in the price of the Company’s Common Stock subsequent to the Company’s fiscal 2008 year end when its share price approximated book value, depressed order rates during the second fiscal quarter which historically has been a strong period for orders in advance of the North American construction season, as well as further deterioration in credit markets and the macro-economic environment, the Company determined that the appropriate triggers had been reached to perform additional impairment testing on goodwill and its long-lived intangible assets.  To derive the fair value of its reporting units, the Company performed extensive valuation analyses with the assistance of a third-party valuation advisor, utilizing both income and market approaches.  Under the income approach, the Company determined fair value based on estimated future cash flows discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent risk of a reporting unit and the rate of return an outside investor would expect to earn.  Estimated future cash flows were based on the Company’s internal projection models, industry projections and other assumptions deemed reasonable by management.  The sum of the fair values of the reporting units was reconciled to the Company’s market capitalization as of February 28, 2009 plus an estimated control premium.  For the second quarter of fiscal 2009 impairment analysis, the Company used a weighted-average cost of capital of 14.5% and a terminal growth rate of 3%.  This resulted in a control premium of 67%, based upon the relatively low price of the Company’s Common Stock on February 28, 2009 of $6.26 per share.  Under the market approach, the Company derived the fair value of its reporting units based on revenue multiples of comparable publicly-traded companies.  As a result of this analysis, $1,159.7 million of goodwill and $24.3 million of other long-lived intangible assets related to continuing operations were considered impaired and were written off during the second quarter of fiscal 2009.  These impairment charges were driven by projections and valuation assumptions that reflected the Company’s belief that the economic downturn would be deeper and longer than previously expected, that credit markets would remain tight and that costs of capital had risen significantly since the Company last performed its annual impairment testing.  Changes in estimates or the application of alternative assumptions could have produced significantly different results.

 

During the fourth quarter of fiscal 2009, the Company performed it annual impairment review relative to goodwill and indefinite-lived intangible assets (principally trade names) utilizing a discounted cash flow model that employed a 14.5% weighted-average cost of capital and a terminal growth rate of 3%.  As a result of this testing, the Company recorded impairment charges of $1.4 million and $0.6 million for goodwill and trade names, respectively, within the access equipment segment.  In addition, based on this analysis, the Company concluded that impairment charges were not required for any other reporting units.  Changes in estimates or the application of alternative assumptions could have produced significantly different results.

 

In the first quarter of fiscal 2010, the Company’s OSV reporting unit experienced a significant decline in sales, operating income and orders for future sales.  The decline was primarily attributable to concerns of OSV’s mobile medical trailer customers regarding current and future levels of Medicare reimbursement for services performed by these customers.  As a result of the significant declines in actual and expected order rates, the reporting unit revised its forecast to incorporate these reductions which resulted in a significant decline in projected fiscal 2010 sales and operating income.  The severity of the decline in the updated forecast, the then current Medicare reimbursement environment and the uncertainty at that time regarding the potential for passage of a health care reform bill resulted in an interim indicator of impairment of the reporting unit that required the Company to perform additional impairment testing of goodwill and long-lived intangible assets at this reporting unit in the first quarter of fiscal 2010.  To derive the fair value of OSV, the Company utilized both the income and market approaches.  Under the income approach, the Company determined fair value based on estimated future cash flows discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent risk of the reporting unit and the rate of return an outside investor would expect to earn.  Estimated future cash flows were based on the Company’s internal projection models, industry projections and other assumptions as determined by management.  For the OSV impairment analysis, the Company used a weighted-average cost of capital of 14.5% and a terminal growth rate of 3%.  Under the market approach, the Company derived the fair value of the reporting unit based on revenue multiples of comparable publicly-traded companies.  As a result of this analysis, $16.8 million of goodwill and $6.5 million of other long-lived intangible assets were considered impaired and were written off during the first quarter of fiscal 2010.  Assumptions utilized in the impairment analysis are highly judgmental.  Changes in estimates or the application of alternative assumptions could have produced significantly different results.

 

During the fourth quarter of fiscal 2010, the Company performed its annual impairment review relative to goodwill and indefinite-lived intangible assets (principally trade names).  The Company performed the valuation analyses with the assistance of a third-party valuation advisor.  To derive the fair value of its reporting units, the Company utilized both the income and market approaches.  For the annual impairment testing in the fourth quarter of fiscal 2010, the Company used a weighted-average cost of capital of 12.5% and a terminal growth rate of 3%.  Under the market approach, the Company derived the fair value of its reporting units based on revenue multiples of comparable publicly-traded companies.  The sum of the fair values of the reporting units was reconciled to the Company’s market capitalization as of July 1, 2010 plus an estimated control premium.  The Company’s analysis resulted in a control premium of 10%, based on the price of the Company’s Common Stock on July 1, 2010 of $30.44 per share.  To derive the fair value of its trade names, the Company utilized the “relief from royalty” approach.  As a result of this testing, the Company recorded an impairment charge of $2.3 million of trade names within the commercial segment.  Based on the Company’s annual impairment review, the Company concluded that no other goodwill or indefinite-lived intangible asset impairment charges were required.  Assumptions utilized in the impairment analysis are highly judgmental, especially given the severity and global scale of the current economic weakness.  Changes in estimates or the application of alternative assumptions could have produced significantly different results.

 

At July 1, 2010, approximately 86% of the Company’s recorded goodwill and purchased intangibles were concentrated within the JLG reporting unit in the access equipment segment.  The estimated fair value of JLG calculated in the fourth quarter of fiscal 2010 impairment analysis exceeded JLG’s net book value by approximately 19%, or $400 million.  The impairment model assumes that the U.S. economy and construction spending (and hence access equipment demand) will show marked improvement beginning in fiscal 2012 along with continued growth in JLG’s sales in emerging markets.  Assumptions utilized in the impairment analysis are highly judgmental, especially given the severity and global scale of the current economic weakness.  Changes in estimates or the application of alternative assumptions could have produced significantly different results.  For each additional 50 basis point increase in the discount rate, the fair value of JLG would decrease by approximately $150 million.  Events and conditions that could result in the impairment of intangibles at JLG include a further decline in economic conditions, a slower or weaker economic recovery than currently estimated by the Company or other factors leading to reductions in expected long-term sales or profitability at JLG.

 

The following two tables present the changes in goodwill during fiscal 2010 and 2009 allocated to the reportable segments (in millions):

 

 

 

Access

 

Fire &

 

 

 

 

 

 

 

equipment

 

emergency

 

Commercial

 

Total

 

Balance at September 30, 2008:

 

 

 

 

 

 

 

 

 

Goodwill

 

$

1,885.5

 

$

191.4

 

$

364.6

 

$

2,441.5

 

Accumulated impairment losses

 

 

 

(167.4

)

(167.4

)

 

 

1,885.5

 

191.4

 

197.2

 

2,274.1

 

Fiscal 2009 Activity

 

 

 

 

 

 

 

 

 

Impairment losses

 

(932.1

)

(61.2

)

(175.9

)

(1,169.2

)

Translation

 

(13.1

)

(3.2

)

 

(16.3

)

Acquisition

 

(11.3

)

 

 

(11.3

)

Balance at September 30, 2009

 

$

929.0

 

$

127.0

 

$

21.3

 

$

1,077.3

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2009:

 

 

 

 

 

 

 

 

 

Goodwill

 

$

1,861.1

 

$

188.2

 

$

197.2

 

$

2,246.5

 

Accumulated impairment losses

 

(932.1

)

(61.2

)

(175.9

)

(1,169.2

)

 

 

$

929.0

 

$

127.0

 

$

21.3

 

$

1,077.3

 

 

In fiscal 2009, the settlement of pre-acquisition tax contingencies and other items resulted in a decrease in the goodwill of the access equipment segment.

 

OSHKOSH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

Access

 

Fire &

 

 

 

 

 

 

 

equipment

 

emergency

 

Commercial

 

Total

 

Balance at September 30, 2009:

 

 

 

 

 

 

 

 

 

Goodwill

 

$

1,861.1

 

$

188.2

 

$

197.2

 

$

2,246.5

 

Accumulated impairment losses

 

(932.1

)

(61.2

)

(175.9

)

(1,169.2

)

 

 

929.0

 

127.0

 

21.3

 

1,077.3

 

Fiscal 2010 Activity

 

 

 

 

 

 

 

 

 

Impairment losses

 

 

(16.8

)

 

(16.8

)

Translation

 

(13.0

)

0.1

 

0.1

 

(12.8

)

Other

 

 

1.9

 

 

1.9

 

Balance at September 30, 2010

 

$

916.0

 

$

112.2

 

$

21.4

 

$

1,049.6

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2010:

 

 

 

 

 

 

 

 

 

Goodwill

 

$

1,848.1

 

$

 182.1

 

$

197.3

 

$

 2,227.5

 

Accumulated impairment losses

 

(932.1

)

(69.9

)

(175.9

)

(1,177.9

)

 

 

$

916.0

 

$

112.2

 

$

21.4

 

$

1,049.6

 

 

The following two tables present the changes in gross purchased intangible assets during fiscal 2010 and 2009 (in millions):

 

 

 

September 30,

 

 

 

 

 

 

 

 

 

September 30,

 

 

 

2009

 

Disposition

 

Impairment

 

Translation

 

Other

 

2010

 

Amortizable intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution network

 

$

55.4

 

$

 

$

 

$

 

$

 

$

55.4

 

Non-compete

 

57.0

 

(0.7

)

 

 

 

56.3

 

Technology-related

 

104.4

 

 

(0.3

)

(0.1

)

 

104.0

 

Customer relationships

 

588.2

 

(0.6

)

(5.3

)

(6.6

)

1.5

 

577.2

 

Other

 

14.0

 

 

 

 

1.7

 

15.7

 

 

 

819.0

 

(1.3

)

(5.6

)

(6.7

)

3.2

 

808.6

 

Non-amortizable trade names

 

400.6

 

 

(3.2

)

(0.1

)

 

397.3

 

Total

 

$

1,219.6

 

$

(1.3

)

$

(8.8

)

$

(6.8

)

$

3.2

 

$

1,205.9

 

 

 

 

September 30,

 

 

 

 

 

 

 

 

 

September 30,

 

 

 

2008

 

Disposition

 

Impairment

 

Translation

 

Other

 

2009

 

Amortizable intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution network

 

$

55.4

 

$

 

$

 

$

 

$

 

$

55.4

 

Non-compete

 

57.2

 

(0.2

)

 

 

 

57.0

 

Technology-related

 

113.1

 

(6.2

)

(2.4

)

(0.1

)

 

104.4

 

Customer relationships

 

595.3

 

 

(8.8

)

1.7

 

 

588.2

 

Other

 

16.7

 

 

(2.7

)

 

 

14.0

 

 

 

837.7

 

(6.4

)

(13.9

)

1.6

 

 

819.0

 

Non-amortizable trade names

 

413.4

 

 

(12.5

)

(0.3

)

 

400.6

 

Total

 

$

1,251.1

 

$

(6.4

)

$

(26.4

)

$

1.3

 

$

 

$

1,219.6

 

 

Details of the Company’s total purchased intangible assets were as follows (in millions):

 

 

 

September 30, 2010

 

 

 

Weighted-

 

 

 

 

 

 

 

 

 

Average

 

 

 

Accumulated

 

 

 

 

 

Life

 

Gross

 

Amortization

 

Net

 

Amortizable intangible assets:

 

 

 

 

 

 

 

 

 

Distribution network

 

39.1

 

$

55.4

 

$

(19.3

)

$

36.1

 

Non-compete

 

10.5

 

56.3

 

(50.6

)

5.7

 

Technology-related

 

11.8

 

104.0

 

(44.6

)

59.4

 

Customer relationships

 

12.7

 

577.2

 

(183.8

)

393.4

 

Other

 

16.6

 

15.7

 

(11.3

)

4.4

 

 

 

14.3

 

808.6

 

(309.6

)

499.0

 

Non-amortizable trade names

 

 

 

397.3

 

 

397.3

 

Total

 

 

 

$

1,205.9

 

$

(309.6

)

$

896.3

 

 

 

 

September 30, 2009

 

 

 

Weighted-

 

 

 

 

 

 

 

 

 

Average

 

 

 

Accumulated

 

 

 

 

 

Life

 

Gross

 

Amortization

 

Net

 

Amortizable intangible assets:

 

 

 

 

 

 

 

 

 

Distribution network

 

39.1

 

$

55.4

 

$

(17.9

)

$

37.5

 

Non-compete

 

10.5

 

57.0

 

(49.0

)

8.0

 

Technology-related

 

11.8

 

104.4

 

(35.9

)

68.5

 

Customer relationships

 

12.6

 

588.2

 

(138.9

)

449.3

 

Other

 

12.4

 

14.0

 

(10.1

)

3.9

 

 

 

14.2

 

819.0

 

(251.8

)

567.2

 

Non-amortizable trade names

 

 

 

400.6

 

 

400.6

 

Total

 

 

 

$

1,219.6

 

$

(251.8

)

$

967.8

 

 

When determining the value of customer relationships for purposes of allocating the purchase price of an acquisition, the Company looks at existing customer contracts of the acquired business to determine if they represent a reliable future source of income and hence, a valuable intangible asset for the Company.  The Company determines the fair value of the customer relationships based on the estimated future benefits the Company expects from the acquired customer contracts.  In performing its evaluation and estimation of the useful lives of customer relationships, the Company looks to the historical growth rate of revenue of the acquired company’s existing customers as well as the historical attrition rates.

 

In connection with the valuation of intangible assets, a 40-year life was assigned to the value of the Pierce distribution network ($53.0 million).  The Company believes Pierce maintains the largest North American fire apparatus distribution network.  Pierce has exclusive contracts with each distributor related to the fire apparatus product offerings manufactured by Pierce.  The useful life of the Pierce distribution network was based on a historical turnover analysis.  Non-compete intangible asset lives are based on terms of the applicable agreements.

 

Total amortization expense recorded in continuing operations was $60.5 million, $62.3 million and $68.7 million in fiscal 2010, 2009 and 2008, respectively.  The estimated future amortization expense of purchased intangible assets for the five years succeeding September 30, 2010 are as follows: 2011 - $59.8 million; 2012 - $58.3 million; 2013 - $56.3 million; 2014 - $54.9 million and 2015 - $54.2 million.

 

Other Long-Term Assets
Other Long-Term Assets

9.    Other Long-Term Assets

 

Other long-term assets consisted of the following (in millions):

 

 

 

September 30,

 

 

 

2010

 

2009

 

 

 

 

 

 

 

Customer notes receivable and other investments

 

$

32.4

 

$

48.9

 

Deferred finance costs

 

26.9

 

29.0

 

Long-term finance receivables, less current portion

 

34.4

 

31.2

 

Other

 

23.1

 

30.0

 

 

 

116.8

 

139.1

 

Less allowance for doubtful notes receivable

 

(4.0

)

(6.9

)

 

 

$

112.8

 

$

132.2

 

 

Deferred financing costs are amortized using the interest method over the term of the debt.  Amortization expense was $28.6 million (including $20.4 million of amortization related to early debt retirement), $13.4 million (including $5.0 million of amortization related to early debt retirement) and $7.2 million (including $0.9 million of amortization related to early debt retirement) in fiscal 2010, 2009 and 2008, respectively.

 

Leases
Leases

10.    Leases

 

Certain administrative and production facilities and equipment are leased under long-term agreements.  Most leases contain renewal options for varying periods, and certain leases include options to purchase the leased property during or at the end of the lease term.  Leases generally require the Company to pay for insurance, taxes and maintenance of the property.  Leased capital assets included in net property, plant and equipment, which consist primarily of buildings and improvements, were $2.5 million and $2.8 million at September 30, 2010 and 2009, respectively.

 

Other facilities and equipment are leased under arrangements that are accounted for as noncancelable operating leases.  Total rental expense for property, plant and equipment charged to continuing operations under noncancelable operating leases was $41.1 million, $34.8 million and $34.2 million in fiscal 2010, 2009 and 2008, respectively.  In addition, included in cost of sales in fiscal 2010 were charges of $2.9 million related to the idling of a leased facility at JerrDan.

 

Future minimum operating and capital lease payments due under operating leases and the related present value of minimum capital lease payments at September 30, 2010 were as follows (in millions):

 

 

 

Capital

 

Operating

 

 

 

 

 

Leases

 

Leases

 

Total

 

 

 

 

 

 

 

 

 

2011

 

$

0.7

 

$

28.2

 

$

28.9

 

2012

 

0.5

 

20.9

 

21.4

 

2013

 

0.4

 

15.4

 

15.8

 

2014

 

0.7

 

11.2

 

11.9

 

2015

 

 

9.4

 

9.4

 

Thereafter

 

 

21.2

 

21.2

 

Total minimum lease payments

 

2.3

 

$

106.3

 

$

108.6

 

Interest

 

(0.2

)

 

 

 

 

Present value of net minimum lease payments

 

$

2.1

 

 

 

 

 

 

Minimum rental payments include $1.2 million due annually under variable-rate leases.

 

Credit Agreements
Credit Agreements

11.    Credit Agreements

 

The Company was obligated under the following debt instruments (in millions):

 

 

 

September 30,

 

 

 

2010

 

2009

 

Senior secured facility:

 

 

 

 

 

Term loan

 

$

650.0

 

$

 

Term loan A

 

 

117.7

 

Term loan B

 

 

1,902.6

 

8 1/4% Senior notes due March 2017

 

250.0

 

 

8 1/2% Senior notes due March 2020

 

250.0

 

 

Other long-term facilities

 

2.1

 

4.0

 

 

 

1,152.1

 

2,024.3

 

Less current portion

 

(65.7

)

(1.1

)

 

 

$

1,086.4

 

$

2,023.2

 

 

 

 

 

 

 

Revolving line of credit

 

$

150.0

 

$

 

Current portion of long-term debt

 

65.7

 

1.1

 

Other short-term facilities

 

0.2

 

13.9

 

 

 

$

215.9

 

$

15.0

 

 

In March 2010, the Company issued $250.0 million of 8¼% unsecured senior notes due March 1, 2017 and $250.0 million of 8½% unsecured senior notes due March 1, 2020 (collectively, the “Senior Notes”).  The Senior Notes were issued pursuant to an indenture (the “Indenture”) among the Company, the subsidiary guarantors named therein and a trustee.  The Indenture contains customary affirmative and negative covenants.  The Company may redeem the Senior Notes due 2017 and Senior Notes due 2020 for a premium after March 1, 2014 and March 1, 2015, respectively.  Certain of the Company’s subsidiaries fully, unconditionally, jointly and severally guarantee the Company’s obligations under the Senior Notes.  See Note 22 of the Notes to Consolidated Financial Statements for separate financial information of the subsidiary guarantors.

 

On September 27, 2010, the Company replaced its existing credit agreement with a new senior secured credit agreement with various lenders (the “Credit Agreement”).  The Credit Agreement provides for (i) a revolving credit facility (“Revolving Credit Facility”) that matures in October 2015 with an initial maximum aggregate amount of availability of $550 million and (ii) a $650 million term loan (“Term Loan”) facility due in quarterly principal installments of $16.25 million commencing December 31, 2010 with a balloon payment of $341.25 million due at maturity in October 2015.

 

The Company’s obligations under the Credit Agreement are guaranteed by certain of its domestic subsidiaries, and the Company will guarantee the obligations of certain of its subsidiaries under the Credit Agreement to the extent such subsidiaries borrow directly under the Credit Agreement.  Subject to certain exceptions, the Credit Agreement is secured by (i) a first-priority perfected lien and security interests in substantially all of the personal property of the Company, each material subsidiary of the Company and each subsidiary guarantor, (ii) mortgages upon certain real property of the Company and certain of its domestic subsidiaries and (iii) a pledge of the equity of each material subsidiary and each subsidiary guarantor.

 

The Company must pay (1) an unused commitment fee ranging from 0.40% to 0.50% per annum of the average daily unused portion of the aggregate revolving credit commitments under the Credit Agreement and (2) a fee ranging from 1.125% to 3.50% 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 September 30, 2010, the interest spread on the Revolving Credit Facility and Term Loan was 300 basis points.  The weighted-average interest rate on borrowings outstanding at September 30, 2010, prior to consideration of the interest rate swap, was 3.26% for the Revolving Credit Facility and 3.29% for the Term Loan.  At September 30, 2010, borrowings of $150.0 million and outstanding letters of credit of $36.2 million reduced available capacity under the Revolving Credit Facility to $363.8 million.

 

The fair value of the long-term debt is estimated based upon the market rate of the Company’s debt.  At September 30, 2010, the fair value of the Senior Notes was estimated to be $538 million and the fair value of the Term Loan approximated book value.

 

To manage a portion of the Company’s exposure to changes in LIBOR-based interest rates on its variable-rate debt, the Company entered into an amortizing interest rate swap agreement in 2007 that effectively fixes the interest payments on a portion of the Company’s variable-rate debt.  The swap, which has a termination date of December 6, 2011, effectively fixes the LIBOR-based interest rate on the debt in the amount of the notional amount of the swap at 5.105% plus the applicable spread based on the terms of the Credit Agreement (8.105% at September 30, 2010).  The notional amount of the swap at September 30, 2010 was $750 million and reduces to $250 million on December 6, 2010.

 

The swap has been designated as a cash flow hedge of 3-month LIBOR-based interest payments. The effective portion of the change in fair value of the derivative has been recorded in “Accumulated other comprehensive income (loss),” with any ineffective portion recorded as an adjustment to interest expense.  At September 30, 2010, a loss of $17.5 million ($11.4 million net of tax) was recorded in “Accumulated other comprehensive income (loss).”  The differential paid or received on the interest rate swap will be recognized as an adjustment to interest expense when the hedged, forecasted interest is recorded.  Net losses related to hedge ineffectiveness on the interest rate swap were $0.9 million in fiscal 2010.  No ineffectiveness was recorded in fiscal 2009 and 2008.

 

Under this swap agreement, the Company will pay the counterparty interest on the notional amount at a fixed rate of 5.105% and the counterparty will pay the Company interest on the notional amount at a variable rate equal to 3-month LIBOR.  The 3-month LIBOR rate applicable to this agreement was 0.29% at September 30, 2010.  The notional amounts do not represent amounts exchanged by the parties, and thus are not a measure of exposure of the Company.  The amounts exchanged are normally based on the notional amounts and other terms of the swaps.  The variable rates are subject to change over time as 3-month LIBOR fluctuates.  Neither the Company nor the counterparty is required to collateralize its obligations under these swaps.  The Company is exposed to loss if the counterparty defaults.  However, the counterparty is a large Aa1 rated global financial institution as of the date of this filing, and the Company believes that the risk of default is remote.

 

The Credit Agreement contains various restrictions and covenants, including requirements that the Company maintain certain financial ratios at prescribed levels and restrictions on the ability of the Company and certain of its subsidiaries to consolidate or merge, create liens, incur additional indebtedness, 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 the last day of any fiscal quarter of 4.50 to 1.0.

 

·                  Interest Coverage Ratio: A minimum interest coverage ratio (defined as, with certain adjustments, the ratio of the Company’s EBITDA to the Company’s consolidated cash interest expense) as of the last day of any fiscal quarter of 2.50 to 1.0.

 

·                  Senior Secured Leverage Ratio: A maximum senior secured leverage ratio (defined as, with certain adjustments, the ratio of the Company’s consolidated secured indebtedness to the Company’s EBITDA) of the following:

 

Fiscal Quarter Ending

 

September 30, 2010 through September 30, 2011

 

3.25 to 1.0

December 31, 2011 through September 30, 2012

 

3.00 to 1.0

Thereafter

 

2.75 to 1.0

 

Based on the Company’s current outlook for fiscal 2011, the Company expects to be able to meet the financial covenants contained in the Credit Agreement over the next twelve months.

 

Additionally, with certain exceptions, the Credit Agreement limits the ability of the Company to pay dividends and other distributions.  However, so long as no event of default exists under the Credit Agreement or would result from such payment, the Company may pay dividends and other distributions in an aggregate amount not exceeding the sum of:

 

(i)

$50 million during any fiscal year; plus

(ii)

the excess of (a) 25% of the cumulative net income of the Company and its consolidated subsidiaries for all fiscal quarters ending after September 27, 2010, over (b) the cumulative amount of all such dividends and other distributions made in any fiscal year ending after such date that exceed $50 million; plus

(iii)

for each of the first four fiscal quarters ending after September 27, 2010, $25 million per fiscal quarter, in each case provided that the leverage ratio (as defined) as of the last day of the most recently ended fiscal quarter was less than 2.0 to 1.0; plus

(iv)

for the period of four fiscal quarters ending September 30, 2011 and for each period of four fiscal quarters ending thereafter, $100 million during such period, in each case provided that the leverage ratio (as defined) as of the last day of the most recently ended fiscal quarter was less than 2.0 to 1.0.

Warranty and Guarantee Arrangements
Warranty and Guarantee Arrangements

12.    Warranty and Guarantee Arrangements

 

The Company’s products generally carry explicit warranties that extend from six months to five years, based on terms that are generally accepted in the marketplace.  Selected components (such as engines, transmissions, tires, etc.) included in the Company’s end products may include manufacturers’ warranties.  These manufacturers’ warranties are generally passed on to the end customer of the Company’s products, and the customer would generally deal directly with the component manufacturer.  Warranty costs recorded in continuing operations were $83.8 million, $47.5 million and $58.3 million in fiscal 2010, 2009 and 2008, respectively.

 

Changes in the Company’s warranty liability were as follows (in millions):

 

 

 

Fiscal Year Ended

 

 

 

September 30,

 

 

 

2010

 

2009

 

 

 

 

 

 

 

Balance at beginning of year

 

$

72.8

 

$

88.3

 

Warranty provisions

 

83.8

 

48.3

 

Settlements made

 

(68.2

)

(55.4

)

Changes in liability for pre-existing warranties, net

 

3.6

 

0.1

 

Dispositions

 

(1.6

)

(8.5

)

Foreign currency translation adjustment

 

0.1

 

 

Balance at end of year

 

$

90.5

 

$

72.8

 

 

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.  For example, accelerated programs to design, test, manufacture and deploy products such as the M-ATV in war-time conditions carry with them an increased level of inherent risk of product or component failure.  It is reasonably possible that additional warranty and other related claims could arise from disputes or other matters in excess of amounts accrued; however any such amounts, while not determinable, would not be expected to have a material adverse effect on the Company’s financial condition, result of operations or cash flows.

 

In the fire & emergency segment, the Company provides guarantees of certain customers’ obligations under deferred payment contracts and lease payment agreements to third parties.  Guarantees provided prior to February 1, 2008 are limited to $1.0 million per year in total.  In January 2008, the Company entered into a new guarantee arrangement.  Under this arrangement, guarantees are limited to $3.0 million per year for contracts signed after February 1, 2008.  These guarantees are mutually exclusive and, until the portfolio under the $1.0 million guarantee is repaid, the Company has exposure of up to $4.0 million per year.  Both guarantees are supported by the residual value of the underlying equipment.  The Company’s actual losses under these guarantees over the last ten years have been negligible.  In accordance with FASB ASC Topic 460, Guarantees, the Company has recorded the fair value of all such guarantees issued after January 1, 2003 as a liability and a reduction of the initial revenue recognized on the sale of equipment.  Liabilities accrued for guarantees for all periods presented were insignificant.

 

In the access equipment segment, the Company is party to multiple agreements whereby it guarantees an aggregate of $252.9 million in indebtedness of others, including $237.7 million under loss pool agreements.  The Company estimates that its maximum loss exposure under these contracts was $103.2 million at September 30, 2010.  Under the terms of these and various related agreements and upon the occurrence of certain events, the Company generally has the ability, among other things, to take possession of the underlying collateral.  The Company recorded provisions for losses on customer guarantees of $3.3 million, $24.4 million and $0.9 million in fiscal 2010, 2009 and 2008, respectively.  At September 30, 2010 and 2009, the Company had recorded liabilities related to these agreements of $24.0 million and $26.7 million, respectively.  If the financial condition of the customers were to deteriorate and result in their inability to make payments, then additional accruals may be required.  While the Company does not expect to experience losses under these agreements that are materially in excess of the amounts reserved, it cannot provide any assurance that the financial condition of the third parties will not deteriorate resulting in the customers’ inability to meet their obligations.  In the event that occurs, the Company cannot guarantee that the collateral underlying the agreements will be sufficient to avoid losses materially in excess of the amounts reserved.  Any losses under these guarantees would generally be mitigated by the value of any underlying collateral, including financed equipment, and are generally subject to the finance company’s ability to provide the Company clear title to foreclosed equipment and other conditions.  During periods of economic weakness, collateral values generally decline and can contribute to higher exposure to losses.

 

Derivative Financial Instruments and Hedging Activities
Derivative Financial Instruments and Hedging Activities

13.    Derivative Financial Instruments and Hedging Activities

 

The Company has used forward foreign currency exchange contracts (“derivatives”) to reduce the exchange rate risk of specific foreign currency denominated transactions.  These derivatives typically require the exchange of a foreign currency for U.S. dollars at a fixed rate at a future date.  At times, the Company has designated these hedges as either cash flow hedges or fair value hedges under FASB ASC Topic 815, Derivatives and Hedging, as follows:

 

Fair Value Hedging Strategy — The Company enters into forward foreign exchange contracts to hedge certain firm commitments denominated in foreign currencies, primarily the Euro.  The purpose of the Company’s foreign currency hedging activities is to protect the Company from risk that the eventual U.S. dollar-equivalent cash flows from the sale of products to international customers will be adversely affected by changes in the exchange rates.

 

Cash Flow Hedging Strategy — To protect against an increase in the cost of forecasted purchases of foreign-sourced component parts payable in Euro, the Company has a foreign currency cash flow hedging program.  The Company hedges portions of its forecasted purchases denominated in Euro with forward contracts. When the U.S. dollar weakens against the Euro, increased foreign currency payments are offset by gains in the value of the forward contracts.  Conversely, when the U.S. dollar strengthens against the Euro, reduced foreign currency payments are offset by losses in the value of the forward contracts.

 

At September 30, 2010, the Company had no forward foreign exchange contracts designated as hedges.

 

To manage a portion of the Company’s exposure to changes in LIBOR-based interest rates on its variable-rate debt, the Company entered into an amortizing interest rate swap agreement that effectively fixes the interest payments on a portion of the Company’s variable-rate debt.  The swap has been designated as a cash flow hedge of 3-month LIBOR-based interest payments and, accordingly, derivative gains or losses are reflected as a component of accumulated other comprehensive income (loss) and are amortized to interest expense over the respective lives of the borrowings.  During fiscal 2010, 2009 and 2008, $41.6 million, $48.3 million and $23.3 million of expense, respectively, was recorded in the Consolidated Statements of Operations as amortization of interest rate derivative gains and losses.  At September 30, 2010, $17.5 million of net unrealized losses remained deferred in “Accumulated other comprehensive income (loss).”  See Note 11 of the Notes to Consolidated Financial Statements for information regarding the interest rate swap.

 

The Company has entered into forward foreign currency exchange contracts to create an economic hedge to manage foreign exchange risk exposure associated with non-functional currency denominated payables resulting from global sourcing activities.  The Company has not designated these derivative contracts as hedge transactions under ASC Topic 815, and accordingly, the mark-to-market impact of these derivatives is recorded each period in current earnings.  The fair value of foreign currency related derivatives is included in the Consolidated Balance Sheets in “Other current assets” and “Other current liabilities.”  At September 30, 2010, the U.S. dollar equivalent of these outstanding forward foreign exchange contracts totaled $98.6 million in notional amounts, including $53.7 million in contracts to sell Euro, $17.0 million in contracts to sell Australian dollars, $13.5 million in contracts to sell U.K. pounds sterling and buy Euro with the remaining contracts covering a variety of foreign currencies.

 

Fair Market Value of Financial Instruments — The fair values of all open derivative instruments in the Consolidated Balance Sheets were as follows (in millions):

 

 

 

September 30, 2010

 

September 30, 2009

 

 

 

Other

 

Other

 

Other

 

Other

 

Other

 

Other

 

 

 

Current

 

Current

 

Long-term

 

Current

 

Current

 

Long-term

 

 

 

Assets

 

Liabilities

 

Liabilities

 

Assets

 

Liabilities

 

Liabilities

 

Designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

$

—  

 

$

15.6

 

$

2.8

 

$

—  

 

$

36.6

 

$

14.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

0.3

 

0.8

 

 

0.1

 

0.3

 

 

Total derivatives

 

$

0.3

 

$

16.4

 

$

2.8

 

$

0.1

 

$

36.9

 

$

14.3

 

 

The pre-tax effects of derivative instruments on the Consolidated Statements of Operations consisted of the following (in millions):

 

 

 

Classification of

 

Fiscal Year Ended
September 30,

 

 

 

Gains (Losses)

 

2010

 

2009

 

Cash flow hedges:

 

 

 

 

 

 

 

Reclassified from other comprehensive income (effective portion):

 

 

 

 

 

 

 

Interest rate contracts

 

Interest expense

 

$

(40.7

)

$

(48.3

)

 

 

 

 

 

 

 

 

Reclassified from other comprehensive income (effective portion):

 

 

 

 

 

 

 

Foreign exchange contracts

 

Cost of sales

 

(0.3

)

(0.5

)

 

 

 

 

 

 

 

 

Recognized directly in income (ineffective portion):

 

 

 

 

 

 

 

Foreign exchange contracts

 

Miscellaneous, net

 

 

(0.7

)

 

 

 

 

 

 

 

 

Not designated as hedges:

 

 

 

 

 

 

 

Interest rate contracts

 

Interest expense

 

(0.9

)

 

Foreign exchange contracts

 

Miscellaneous, net

 

2.8

 

16.9

 

Total

 

 

 

$

(39.1

)

$

(32.6

)

 

Fair Value Measurement
Fair Value Measurement

14.    Fair Value Measurement

 

FASB ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e., exit price) in an orderly transaction between market participants at the measurement date.

 

FASB ASC Topic 820 requires disclosures that categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation. Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. The three levels are defined as follows:

 

Level 1:                Unadjusted quoted prices in active markets for identical assets or liabilities.

 

Level 2:                Observable inputs other than quoted prices other than those included in Level 1, 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.

 

As of September 30, 2010, the fair values of the Company’s financial assets and liabilities were as follows (in millions):

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

Foreign currency exchange derivatives (a) 

 

$

 

$

0.3

 

$

 

$

0.3

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

Foreign currency exchange derivatives (a) 

 

$

 

$

0.8

 

$

 

$

0.8

 

Interest rate swaps (b)

 

 

18.4

 

 

18.4

 

Total liabilities at fair value

 

$

 

$

19.2

 

$

 

$

19.2

 

 

(a)          Based on observable market transactions of forward currency prices.

(b)         Based on observable market transactions of forward LIBOR rates.

 

Items Measured at Fair Value on a Nonrecurring Basis

 

In addition to items that are measured at fair value on a recurring basis, the Company also has assets and liabilities in its balance sheet that are measured at fair value on a nonrecurring basis.  As these assets and liabilities are not measured at fair value on a recurring basis, they are not included in the tables above.  Assets and liabilities that are measured at fair value on a nonrecurring basis include long-lived assets, including investments in affiliates, which are written down to fair value as a result of impairment (see Note 7 for impairments of long-lived assets and Note 8 for impairments of intangible assets).  The Company has determined that the fair value measurements included in each of these assets rely primarily on Company-specific inputs and the Company’s assumptions about the use of the assets, as observable inputs are not available.  As such, the Company has determined that each of these fair value measurements reside within Level 3 of the fair value hierarchy.

 

Oshkosh Corporation Shareholders' Equity
Oshkosh Corporation Shareholders' Equity

15.    Oshkosh Corporation Shareholders’ Equity

 

On August 12, 2009, the Company completed a public equity offering of 14,950,000 shares of Common Stock, which included the exercise of the underwriters’ over-allotment option for 1,950,000 shares of Common Stock, at a price of $25.00 per share.  The Company paid $15.1 million in underwriting discounts and commissions and approximately $0.6 million of offering expenses.  The Company used the net proceeds from the offering of approximately $358.1 million to repay debt.

 

In July 1995, the Company authorized the buyback of up to 6,000,000 shares of the Company’s Common Stock.  As of September 30, 2010 and 2009, the Company had purchased 2,769,210 shares of its Common Stock at an aggregate cost of $6.6 million.  The Company is restricted by its Credit Agreement from buying back shares in certain situations.  See Note 11 of the Notes to Consolidated Financial Statements for information regarding these restrictions.  The Company does not expect to buy back any shares under this authorization in fiscal 2011.

 

Stock Options, Nonvested Stock, Performance Shares and Common Stock Reserved
Stock Options, Nonvested Stock, Performance Shares and Common Stock Reserved

16.    Stock Options, Nonvested Stock, Performance Shares and Common Stock Reserved

 

In February 2009, the Company’s shareholders approved the 2009 Incentive Stock and Awards Plan (the “2009 Stock Plan”).  The 2009 Stock Plan replaced the 2004 Incentive Stock and Awards Plan, as amended (the “2004 Stock Plan”) and 1990 Incentive Stock Plan, as amended (the “1990 Stock Plan”).  While no new awards will be granted under the 2004 Stock Plan and 1990 Stock Plan, awards previously made under these two plans that remained outstanding as of the approval date of the 2009 Stock Plan will remain outstanding and continue to be governed by the provisions of those plans.

 

Under the 2009 Stock Plan, officers, directors, including non-employee directors, and employees of the Company may be granted stock options, stock appreciation rights, performance shares, performance units, shares of Common Stock, restricted stock, restricted stock units or other stock-based awards.  The 2009 Stock Plan provides for the granting of options to purchase shares of the Company’s Common Stock at not less than the fair market value of such shares on the date of grant.  Stock options granted under the 2009 Stock Plan become exercisable in equal installments over a three-year period, beginning with the first anniversary of the date of grant of the option, unless a shorter or longer duration is established by the Human Resources Committee of the Board of Directors at the time of the option grant.  Stock options terminate not more than seven years from the date of grant.  Except for performance shares and performance units, vesting is based solely on continued service as an employee of the Company and generally vest upon retirement.  The maximum number of shares of stock reserved for all awards under the 2009 Stock Plan is 4,000,000.  At September 30, 2010, the Company had reserved 7,261,640 shares of Common Stock 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 2009 Stock Plan.

 

The Company recognizes compensation expense for stock option, nonvested stock and performance share awards over the requisite service period for vesting of the award, or to an employee’s eligible retirement date, if earlier and applicable.  Total stock-based compensation expense included in the Company’s Consolidated Statements of Operations for fiscal 2010, 2009 and 2008 was $14.7 million ($9.3 million net of tax), $10.9 million ($6.9 million net of tax) and $15.0 million ($9.7 million net of tax), respectively.

 

Information related to the Company’s equity-based compensation plans in effect as of September 30, 2010 is as follows:

 

 

 

Number of Securities

 

 

 

Number of

 

 

 

to be Issued Upon

 

Weighted-Average

 

Securities Remaining

 

 

 

Exercise of Outstanding

 

Exercise Price of

 

Available for Future

 

 

 

Options or Vesting of

 

Outstanding

 

Issuance Under Equity

 

Plan Category

 

Performance Share Awards

 

Options

 

Compensation Plans

 

 

 

 

 

 

 

 

 

Equity compensation plans approved by security holders

 

5,659,570

 

 

$

30.32

 

 

1,602,070

 

Equity compensation plans not approved by security holders

 

 

 

n/a

 

 

 

Total

 

5,659,570

 

 

$

30.32

 

 

1,602,070

 

 

Stock Options — For fiscal 2010, 2009 and 2008, the Company recorded $12.4 million, $10.0 million and $11.8 million, respectively, of stock-based compensation expense in selling, general and administrative expense in the accompanying Consolidated Statements of Operations associated with outstanding stock options.

 

A summary of the Company’s stock option activity for the fiscal years ended September 30, 2010, 2009 and 2008 is as follows:

 

 

 

Fiscal Year Ended September 30,

 

 

 

2010

 

2009

 

2008

 

 

 

 

 

Weighted-

 

 

 

Weighted-

 

 

 

Weighted-

 

 

 

 

 

Average

 

 

 

Average

 

 

 

Average

 

 

 

 

 

Exercise

 

 

 

Exercise

 

 

 

Exercise

 

 

 

Options

 

Price

 

Options

 

Price

 

Options

 

Price

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options outstanding, beginning of the year

 

5,330,109

 

$

28.03

 

4,324,372

 

$

26.90

 

3,141,994

 

$

32.71

 

Options granted

 

954,350

 

28.96

 

1,200,000

 

30.82

 

1,565,450

 

12.75

 

Options forfeited

 

(39,836

)

27.46

 

(138,934

)

23.59

 

(37,734

)

52.06

 

Options expired

 

(9,499

)

54.12

 

 

 

 

 

Options exercised

 

(1,076,754

)

17.66

 

(55,329

)

11.25

 

(345,338

)

12.88

 

Options outstanding, end of the year

 

5,158,370

 

$

30.32

 

5,330,109

 

$

28.03

 

4,324,372

 

$

26.90

 

Options exercisable, end of the year

 

2,955,909

 

$

33.49

 

2,930,946

 

$

30.46

 

2,234,658

 

$

30.56

 

 

The Company uses the Black-Scholes valuation model to value stock options utilizing the following weighted-average assumptions:

 

 

 

Fiscal Year Ended September 30,

 

Options Granted During

 

2010

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

 

Assumptions:

 

 

 

 

 

 

 

 

 

 

Risk-free interest rate

 

1.45

%

 

2.34

%

 

2.64

%

 

Expected volatility

 

61.98

%

 

61.19

%

 

43.85

%

 

Expected dividend yield

 

0.00

%

 

0.02

%

 

1.77

%

 

Expected term (in years)

 

5.28

 

 

5.23

 

 

5.46

 

 

 

The Company used its historical stock prices as the basis for the Company’s volatility assumption.  The assumed risk-free interest rates were based on U.S. Treasury rates in effect at the time of grant.  The expected option term represents the period of time that the options granted are expected to be outstanding and was based on historical experience.  The weighted-average per share fair values for stock option grants during fiscal 2010, 2009 and 2008 were $15.69, $16.67 and $4.64, respectively.

 

As of September 30, 2010, the Company had $18.8 million of unrecognized compensation expense related to outstanding stock options, which will be recognized over a weighted-average period of 2.6 years.

 

Stock options outstanding as of September 30, 2010 were as follows (in millions, except share and per share amounts): 

 

 

 

 

 

Weighted-Average

 

 

 

 

 

 

 

 

 

Remaining

 

 

 

Aggregate

 

 

 

Number

 

Contractual

 

Weighted-Average

 

Intrinsic

 

Price Range

 

Outstanding

 

Life (in years)

 

Exercise Price

 

Value

 

 

 

 

 

 

 

 

 

 

 

$

 5.19

-

$

 7.95

 

58,400

 

8.4

 

$

6.95

 

$

1.2

 

$

 11.00

-

$

 19.75

 

1,459,049

 

6.7

 

12.99

 

21.2

 

$

 28.27

-

$

 38.93

 

2,263,816

 

6.2

 

30.54

 

 

$

 39.91

-

$

 54.63

 

1,377,105

 

6.1

 

49.33

 

 

 

 

 

 

5,158,370

 

6.3

 

30.32

 

$

22.4

 

 

Stock options exercisable as of September 30, 2010 were as follows (in millions, except share and per share amounts):

 

 

 

 

 

Weighted-Average

 

 

 

 

 

 

 

 

 

Remaining

 

 

 

Aggregate

 

 

 

Number

 

Contractual

 

Weighted-Average

 

Intrinsic

 

Price Range

 

Exercisable

 

Life (in years)

 

Exercise Price

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 5.19

-

$

 7.95

 

19,460

 

8.4

 

$

6.95

 

$

0.4

 

$

 11.00

-

$

 19.75

 

989,505

 

6.1

 

13.44

 

13.9

 

$

 28.27

-

$

 38.93

 

580,759

 

5.1

 

31.17

 

 

$

 39.91

-

$

 54.63

 

1,366,185

 

6.1

 

49.39

 

 

 

 

 

 

2,955,909

 

5.9

 

33.49

 

$

14.3

 

 

The aggregate intrinsic values in the tables above represent the total pre-tax intrinsic value (difference between the Company’s closing stock price on the last trading day of fiscal 2010 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on September 30, 2010. This amount changes based on the fair market value of the Company’s Common Stock.  Total intrinsic value of options exercised for fiscal 2010, 2009 and 2008 was $22.8 million, $0.7 million and $9.0 million, respectively.

 

Net cash proceeds from the exercise of stock options were $19.0 million, $0.6 million and $4.4 million for fiscal 2010, 2009 and 2008, respectively. The actual income tax benefit realized totaled $8.4 million, $0.3 million and $3.5 million, for those same periods.

 

Nonvested Stock Awards — Compensation expense related to nonvested stock awards of $0.9 million, $0.3 million and $2.6 million in fiscal 2010, 2009 and 2008, respectively, was recorded in selling, general and administrative expense in the accompanying Consolidated Statements of Operations.

 

A summary of the Company’s nonvested stock activity for the three years ended September 30, 2010 is as follows:

 

 

 

Fiscal Year Ended September 30,

 

 

 

2010

 

2009

 

2008

 

 

 

 

 

Weighted-

 

 

 

Weighted-

 

 

 

Weighted-

 

 

 

Number

 

Average

 

Number

 

Average

 

Number

 

Average

 

 

 

of

 

Grant Date

 

of

 

Grant Date

 

of

 

Grant Date

 

 

 

Shares

 

Fair Value

 

Shares

 

Fair Value

 

Shares

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonvested, beginning of the year

 

2,935

 

$

53.40

 

63,816

 

$

51.91

 

407,210

 

$

25.78

 

Granted

 

141,682

 

30.93

 

11,000

 

7.95

 

11,825

 

41.47

 

Forfeited

 

 

 

(542

)

54.85

 

(16,035

)

54.30

 

Vested

 

(15,710

)

40.91

 

(71,339

)

45.04

 

(339,184

)

20.06

 

Nonvested, end of the year

 

128,907

 

$

30.22

 

2,935

 

$

53.40

 

63,816

 

$

51.91

 

 

The total fair value of shares vested during fiscal 2010, 2009 and 2008 was $0.6 million, 1.0 million and $4.7 million, respectively.

 

Performance Share Awards — In fiscal 2010, 2009 and 2008, the Company granted certain executives awards for an aggregate of 75,000, 134,500 and 50,100 performance shares, respectively, that vest at the end of the third fiscal year following the grant date.  Executives earn performance shares only if the Company’s total shareholder return over the three years compares favorably to that of a comparator group of companies.  Potential payouts range from zero to 200 percent of the target awards.

 

The grant date fair values of performance share awards were estimated using a Monte Carlo simulation model utilizing the following weighted-average assumptions:

 

 

 

Fiscal Year Ended September 30,

 

Performance Shares Granted During

 

2010

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

Assumptions:

 

 

 

 

 

 

 

 

Risk-free interest rate

 

0.73

%

 

1.48

%

 

2.08

%

 

Expected volatility

 

79.86

%

 

77.70

%

 

35.53

%

 

Expected term (in years)

 

3.00

 

 

3.00

 

 

3.00

 

 

 

The Company used its historical stock prices as the basis for the Company’s volatility assumption.  The assumed risk-free rates were based on U.S. Treasury rates in effect at the time of grant.  The expected term is based on the vesting period.  The weighted-average fair value for performance share awards granted during fiscal 2010, 2009 and 2008 was $13.88, $17.26 and $7.04 per award, respectively.  Compensation expense of $1.4 million, $0.6 million and $0.6 million related to performance share awards was recorded in fiscal 2010, 2009 and 2008, respectively, in selling, general and administrative expense in the accompanying Consolidated Statements of Operations.

 

Earnings (Loss) Per Share
Earnings (Loss) Per Share

17.    Earnings (Loss) Per Share

 

The following table sets forth the computation of basic and diluted weighted-average shares used in the denominator of the per share calculations:

 

 

 

Fiscal Year Ended September 30,

 

 

 

2010

 

2009

 

2008

 

 

 

 

 

 

 

 

 

Basic weighted-average shares outstanding

 

89,947,873

 

76,473,930

 

74,007,989

 

Effect of dilutive stock options and equity-based compensation awards

 

1,006,868

 

 

828,207

 

Diluted weighted-average shares outstanding

 

90,954,741

 

76,473,930

 

74,836,196

 

 

Options to purchase 1,425,155 and 1,446,598 shares of Common Stock were outstanding in fiscal 2010 and 2008, respectively, but were not included in the computation of diluted earnings (loss) per share attributable to Oshkosh Corporation common shareholders because the exercise price of the options was greater than the average market price of the shares of Common Stock and therefore would have been anti-dilutive.  Options to purchase 4,327,116 shares of Common Stock and 190,175 nonvested shares were outstanding during fiscal 2009, but were excluded from the computation of diluted earnings (loss) per share attributable to Oshkosh Corporation common shareholders because the net loss for the period caused all potentially dilutive shares to be anti-dilutive.

 

Income (loss) attributable to Oshkosh Corporation common shareholders was as follows (in millions):

 

 

 

Fiscal Year Ended September 30,

 

 

 

2010

 

2009

 

2008

 

Amounts attributable to Oshkosh Corporation common shareholders:

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of tax

 

$

792.9

 

$

(1,167.0

)

$

288.9

 

Discontinued operations, net of tax

 

(2.9

)

68.2

 

(209.6

)

Net income (loss)

 

$

790.0

 

$

(1,098.8

)

$

79.3

 

 

Employee Benefit Plans
Employee Benefit Plans

18.    Employee Benefit Plans

 

Pension Plans — Oshkosh and certain of its subsidiaries sponsor multiple defined benefit pension plans covering certain Oshkosh, JLG and Pierce employees.  The benefits provided are based primarily on average compensation, years of service and date of birth.  Hourly plans are generally based upon years of service and a benefit dollar multiplier.  The Company periodically amends the hourly plans, changing the benefit dollar multipliers.

 

Postretirement Plans — Oshkosh and certain of its subsidiaries sponsor multiple postretirement benefit plans covering Oshkosh, JLG and Kewaunee retirees and their spouses.  The plans generally provide health benefits based on years of service and date of birth.  These plans are unfunded.

 

The change in benefit obligations and plan assets as well as the funded status of the Company’s defined benefit pension plans and postretirement benefit plans were as follows (in millions):

 

 

 

Pension Benefits

 

Postretirement

 

 

 

U.S. Plans

 

Non-U.S. Plans

 

Health and Other

 

 

 

2010

 

2009

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated Benefit Obligation

 

$

246.2

 

$

204.5

 

$

13.8

 

$

11.7

 

$

64.8

 

$

55.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in benefit obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefit obligation at October 1

 

$

227.3

 

$

189.4

 

$

11.7

 

$

20.3

 

$

55.0

 

$

36.7

 

Disposition

 

 

 

 

(9.6

)

 

(0.4

)

Service cost

 

13.0

 

10.3

 

0.6

 

0.7

 

4.1

 

2.0

 

Interest cost

 

11.8

 

11.1

 

0.6

 

1.0

 

2.8

 

2.2

 

Actuarial loss

 

18.7

 

21.8

 

1.4

 

2.9

 

3.9

 

15.9

 

Participant contributions

 

 

 

0.1

 

0.1

 

 

 

Plan amendments

 

3.0

 

3.3

 

 

 

 

 

Curtailments

 

0.6

 

0.9

 

 

 

 

 

Benefits paid

 

(4.7

)

(9.5

)

(0.4

)

(0.2

)

(1.0

)

(1.4

)

Currency translation adjustments

 

 

 

(0.1

)

(3.5

)

 

 

Benefit obligation at September 30

 

$

269.7

 

$

227.3

 

$

13.9

 

$

11.7

 

$

64.8

 

$

55.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in plan assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of plan assets at October 1

 

$

137.5

 

$

129.5

 

$

10.3

 

$

20.4

 

$

 

$

 

Disposition

 

 

 

 

(9.0

)

 

 

Actual return on plan assets

 

13.5

 

1.7

 

1.2

 

0.9

 

 

 

Company contributions

 

30.4

 

15.8

 

4.3

 

1.6

 

1.0

 

1.4

 

Participant contributions

 

 

 

0.1

 

0.1

 

 

 

Benefits paid

 

(4.7

)

(9.5

)

(0.4

)

(0.2

)

(1.0

)

(1.4

)

Currency translation adjustments

 

 

 

(0.1

)

(3.5

)

 

 

Fair value of plan assets at September 30

 

$

176.7

 

$

137.5

 

$

15.4

 

$

10.3

 

$

 

$

 

Funded status of plan - (under) over funded

 

$

(93.0

)

$

(89.8

)

$

1.5

 

$

(1.4

)

$

(64.8

)

$

(55.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recognized in consolidated balance sheet at September 30

 

 

 

 

 

 

 

 

 

 

 

 

 

Prepaid benefit cost (long-term asset)

 

$

 

$

 

$

1.5

 

$

 

$

 

$

 

Accrued benefit liability (current liability)

 

(0.4

)

(0.5

)

 

 

(2.4

)

(2.0

)

Accrued benefit liability (long-term liability)

 

(92.6

)

(89.3

)

 

(1.4

)

(62.4

)

(53.0

)

 

 

$

(93.0

)

$

(89.8

)

$

1.5

 

$

(1.4

)

$

(64.8

)

$

(55.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recognized in accumulated other comprehensive income (loss) as of September 30 (net of taxes)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net actuarial loss (gain)

 

$

71.0

 

$

62.7

 

$

0.3

 

$

(0.4

)

$

15.1

 

$

12.8

 

Prior service cost

 

10.5

 

9.2

 

 

 

 

 

 

 

$

81.5

 

$

71.9

 

$

 0.3

 

$

(0.4

)

$

 15.1

 

$

12.8

 

 

 

 

Pension Benefits

 

Postretirement

 

 

 

U.S. Plans

 

Non-U.S. Plans

 

Health and Other

 

 

 

2010

 

2009

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average assumptions as of September 30

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount rate

 

4.75

%

5.25

%

5.10

%

5.50

%

4.75

%

5.25

%

Expected return on plan assets

 

7.75

%

7.75

%

6.50

%

6.50

%

n/a

 

n/a

 

Rate of compensation increase

 

3.81

%

4.12

%

4.20

%

4.30

%

n/a

 

n/a

 

 

Pension benefit plans with accumulated benefit obligations in excess of plan assets consisted of the following (in millions):

 

 

 

September 30,

 

 

 

U.S. Plans

 

Non-U.S. Plans

 

 

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

Projected benefit obligation

 

$

269.7

 

$

227.3

 

$

 

$

11.7

 

Accumulated benefit obligation

 

246.2

 

204.5

 

 

11.7

 

Fair value of plan assets

 

176.7

 

137.5

 

 

10.3

 

 

The components of net periodic benefit cost for fiscal years ended September 30 were as follows (in millions):

 

 

 

Pension Benefits

 

Postretirement

 

 

 

U.S. Plans

 

Non-U.S. Plans

 

Health and Other

 

 

 

2010

 

2009

 

2008

 

2010

 

2009

 

2008

 

2010

 

2009

 

2008

 

Components of net periodic benefit cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

15.4

 

$

10.3

 

$

11.1

 

$

0.6

 

$

0.4

 

$

0.9

 

$

4.1

 

$

2.0

 

$

1.9

 

Interest cost

 

11.8

 

11.1

 

10.1

 

0.6

 

0.5

 

0.7

 

2.8

 

2.2

 

1.8

 

Expected return on plan assets

 

(12.3

)

(11.2

)

(12.0

)

(0.7

)

(0.5

)

(0.6

)

 

 

 

Amortization of prior service cost

 

2.1

 

1.3

 

1.3

 

 

 

 

 

 

 

Curtailment

 

0.6

 

0.9

 

4.0

 

 

 

 

 

 

 

Amortization of net actuarial loss (gain)

 

4.1

 

2.5

 

2.0

 

 

(0.1

)

(0.1

)

0.9

 

 

3.8

 

Net periodic benefit cost

 

$

21.7

 

$

14.9

 

$

16.5

 

$

0.5

 

$

0.3

 

$

0.9

 

$

7.8

 

$

4.2

 

$

7.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other changes in plan assets and benefit obligation recognized in other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net actuarial loss (gain)

 

$

15.6

 

$

32.3

 

$

20.0

 

$

1.0

 

$

2.1

 

$

(0.3

)

$

3.9

 

$

15.9

 

$

 

Prior service cost

 

3.0

 

3.3

 

1.1

 

 

 

 

 

 

 

Amortization of prior service cost

 

(2.0

)

(1.3

)

(1.3

)

 

 

 

 

 

 

Amortization of net actuarial (gain) loss

 

(4.7

)

(2.5

)

(2.0

)

 

0.1

 

0.2

 

(0.9

)

(0.1

)

(0.3

)

 

 

$

11.9

 

$

31.8

 

$

17.8

 

$

1.0

 

$

2.2

 

$

(0.1

)

$

3.0

 

$

15.8

 

$

(0.3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average assumptions as of September 30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount rate

 

5.25

%

6.00

%

6.00

%

5.50

%

7.00

%

5.90

%

5.25

%

6.00

%

6.00

%

Expected return on plan assets

 

7.75

%

7.75

%

8.00

%

6.50

%

6.00

%

6.20

%

n/a

 

n/a

 

n/a

 

Rate of compensation increase

 

4.29

%

4.20

%

4.39

%

4.30

%

4.40

%

4.20

%

n/a

 

n/a

 

n/a

 

 

Included in accumulated other comprehensive income (loss) at September 30, 2010 are prior service costs of $1.9 million ($1.2 million net of tax) and unrecognized net actuarial losses of $5.7 million ($3.6 million net of tax) expected to be recognized in pension and Supplemental Employee Retirement Plan (“SERP”) net periodic benefit costs during the fiscal year ended September 30, 2011.

 

The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation for the Company was 8.5% in fiscal 2010, declining to 5.5% in fiscal 2016.  If the health care cost trend rate was increased by 1%, the accumulated postretirement benefit obligation at September 30, 2010 would increase by $8.5 million and net periodic postretirement benefit cost for fiscal 2010 would increase by $1.3 million.  A corresponding decrease of 1% would decrease the accumulated postretirement benefit obligation at September 30, 2010 by $7.1 million and net periodic postretirement benefit cost for fiscal 2010 would decrease by $1.1 million.

 

The Company’s Board of Directors has appointed an Investment Committee (“Committee”) to manage the investment of the Company’s pension plan assets.  The Committee has established and operates under an Investment Policy.  The Committee determines the asset allocation and target ranges based upon periodic asset/liability studies and capital market projections.  The Committee retains external investment managers to invest the assets and an advisor to monitor the performance of the investment managers.  The Investment Policy prohibits certain investment transactions, such as commodity contracts, margin transactions, short selling and investments in Company securities, unless the Committee gives prior approval.

 

The weighted-average of the Company’s pension plan asset allocations and target allocations at September 30, 2010 and 2009, by asset category, were as follows:

 

U.S. Plans

 

 

Non-U.S. Plans

 

 

 

Target %

 

2010

 

2009

 

 

 

 

Target %

 

2010

 

2009

 

Asset Category

 

 

 

 

 

 

 

 

Asset Category

 

 

 

 

 

 

 

Fixed income

 

30% - 40%

 

46%

 

47%

 

 

UK equities

 

25%

 

40%

 

39%

 

Large-cap growth

 

25% - 35%

 

26%

 

25%

 

 

Non-UK equities

 

25%

 

42%

 

42%

 

Large-cap value

 

5% - 15%

 

8%

 

8%

 

 

Government bonds

 

35%

 

10%

 

10%

 

Mid-cap value

 

5% - 15%

 

10%

 

10%

 

 

Corporate bonds

 

15%

 

8%

 

9%

 

Small-cap value

 

5% - 15%

 

10%

 

10%

 

 

 

 

 

 

100%

 

100%

 

Venture capital

 

0% - 5%

 

0%

 

0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100%

 

100%

 

 

 

 

 

 

 

 

 

 

 

The plans’ investment strategy is based on an expectation that, over time, equity securities will provide higher total returns than debt securities.  The plans primarily minimize the risk of large losses through diversification of investments by asset class, by investing in different styles of investment management within the classes and by using a number of different investment managers.  The Committee monitors the asset allocation and investment performance monthly, with a more comprehensive quarterly review with its advisor and annual reviews with each investment manager.

 

The plans’ expected return on assets is based on management’s and the Committee’s expectations of long-term average rates of return to be achieved by the plans’ investments.  These expectations are based on the plans’ historical returns and expected returns for the asset classes in which the plans are invested.

 

The fair value of plan assets by major category and level within the fair value hierarchy as of September 30, 2010 was as follows (in millions):

 

 

 

Quoted Prices in

 

Significant

 

 

 

 

 

 

 

Active Markets

 

Other

 

Significant

 

 

 

 

 

for Identical

 

Observable

 

Unobservable

 

 

 

 

 

Assets

 

Inputs

 

Inputs

 

 

 

 

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Total

 

Common stocks

 

 

 

 

 

 

 

 

 

U.S. companies

 

$

90.5

 

$

 

$

 

$

90.5

 

International companies

 

 

15.1

 

 

15.1

 

Government and agency bonds

 

13.1

 

18.7

 

 

31.8

 

Municipal bonds

 

 

0.1

 

 

0.1

 

Corporate bonds and notes

 

 

25.8

 

 

25.8

 

Money market funds

 

28.7

 

 

 

28.7

 

Venture capital closely held limited partnership

 

 

 

0.1

 

0.1

 

Total assets — at fair value

 

$

132.3

 

$

59.7

 

$

0.1

 

$

192.1

 

 

The change in the fair value of the Master Pension Trust’s Level 3 investment assets during fiscal 2010 was not significant.

 

The Company’s policy is to fund the pension plans in amounts that comply with contribution limits imposed by law.  The Company expects to contribute approximately $25.0 million to its pension plans and an additional $3.0 million to its postretirement benefit plans in fiscal 2011.  However, based on returns on the plans’ investments and the Company’s cash flows, the Company may contribute more than these ranges in fiscal 2011 to reduce the underfunded status of certain plans.

 

The Company’s estimated future benefit payments under Company sponsored plans were as follows (in millions):

 

 

 

 

 

 

 

 

 

Other

 

Fiscal Year Ending

 

Pension Benefits

 

Postretirement

 

September 30,

 

U.S. Plans

 

Non-U.S. Plans

 

Non-Qualified

 

Benefits

 

 

 

 

 

 

 

 

 

 

 

2011

 

$

5.7

 

$

0.1

 

$

0.3

 

$

2.4

 

2012

 

6.4

 

0.2

 

3.7

 

2.7

 

2013

 

7.2

 

0.2

 

0.4

 

2.7

 

2014

 

8.0

 

0.2

 

0.5

 

2.9

 

2015

 

8.9

 

0.2

 

0.5

 

3.0

 

2016-2020

 

63.1

 

2.8

 

2.9

 

23.7

 

 

401(k) Plans - The Company has defined contribution 401(k) plans covering substantially all domestic employees.  The plans allow employees to defer 2% to 19% of their income on a pre-tax basis.  Each employee who elects to participate is eligible to receive Company matching contributions which are based on employee contributions to the plans, subject to certain limitations.  Amounts expensed for Company matching and discretionary contributions were $5.1 million and $18.8 million in fiscal 2010 and 2008, respectively.  The Company recognized income of $1.0 million in fiscal 2009 as actual payments under the discretionary portion of the plan were less than amounts accrued in the previous year and as a result of the Company’s discontinuation of matching contributions in March 2009 for most employees.  In April 2010, the Company once again started making matching contributions for most employees.

 

Income Taxes
Income Taxes

19.    Income Taxes

 

Pre-tax income (loss) from continuing operations was taxed in the following jurisdictions (in millions):

 

 

 

Fiscal Year Ended September 30,

 

 

 

2010

 

2009

 

2008

 

 

 

 

 

 

 

 

 

Domestic

 

$

1,252.7

 

$

(925.3

)

$

274.0

 

Foreign

 

(41.2

)

(252.9

)

129.8

 

 

 

$

1,211.5

 

$

(1,178.2

)

$

403.8

 

 

Significant components of the provision for (benefit from) income taxes were as follows (in millions):

 

 

 

Fiscal Year Ended September 30,

 

 

 

2010

 

2009

 

2008

 

Allocated to Income (Loss) From Continuing Operations Before Equity in Earnings (Losses) of Unconsolidated Affiliates

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

Federal

 

$

463.4

 

$

37.8

 

$

104.3

 

Foreign

 

7.8

 

1.9

 

18.1

 

State

 

13.8

 

1.7

 

6.1

 

Total current

 

485.0

 

41.4

 

128.5

 

Deferred:

 

 

 

 

 

 

 

Federal

 

(59.5

)

(40.0

)

(1.7

)

Foreign

 

(9.4

)

(12.2

)

(5.5

)

State

 

(1.8

)

(1.8

)

(0.1

)

Total deferred

 

(70.7

)

(54.0

)

(7.3

)

 

 

$

414.3

 

$

(12.6

)

$

121.2

 

 

 

 

 

 

 

 

 

Allocated to Other Comprehensive Income (Loss)

 

 

 

 

 

 

 

Deferred federal, state and foreign

 

$

10.5

 

$

(21.9

)

$

(21.2

)

 

The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax expense was:

 

 

 

Fiscal Year Ended September 30,

 

 

 

2010

 

2009

 

2008

 

Effective Rate Reconciliation

 

 

 

 

 

 

 

U.S. federal tax / benefit rate

 

35.0

%

35.0

%

35.0

%

Non-deductible intangible assets impairment charges

 

0.3

 

(33.1

)

 

State income taxes, net

 

1.0

 

(0.3

)

1.5

 

Foreign taxes

 

(0.1

)

(0.4

)

(1.0

)

Tax audit settlements

 

(1.3

)

 

 

European tax incentive

 

0.6

 

(1.5

)

(5.2

)

Worthless stock deduction

 

 

0.9

 

 

Valuation allowance

 

0.3

 

(0.2

)

0.3

 

Tax credits

 

(0.1

)

0.3

 

(0.1

)

Manufacturing deduction

 

(2.0

)

0.2

 

(1.3

)

Other, net

 

0.5

 

0.2

 

0.8

 

 

 

34.2

%

1.1

%

30.0

%

 

The Company is party to a tax incentive agreement (“incentive”) covering certain of its European operations.  The incentive provides for a reduction in the Company’s effective income tax rate through allowable deductions that are subject to recapture to the extent that certain conditions are not met, including a requirement to have minimum cumulative operating income over a multiple-year period ending in fiscal 2013.  The Company recorded (income recapture) tax deductions under the incentive of €(15.9) million, €(38.7) million and €40.2 million in fiscal 2010, 2009 and 2008, respectively, which resulted in additional (tax) benefit of $(7.3) million, $(17.3) million and $20.9 million in fiscal 2010, 2009 and 2008, respectively.  Life-to-date, the Company has recorded €2.2 million of cumulative net deductions which are subject to recapture provisions should certain minimum income and other requirements not be met.  Should the Company reach the maximum level of cumulative operating income under the incentive, aggregate additional unbenefitted deductions of €111.3 million would be available to offset the Company’s future taxable income, although the amount of deductions allowed in any particular tax year are limited by the incentive.

 

In fiscal 2009, the Company made an election with the U.S. Internal Revenue Service to treat Windmill Ventures, the Company’s European holding company parent of Geesink, as a disregarded entity for U.S. federal income tax purposes.  As a result of this election, the Company recorded a $71.5 million worthless stock/bad debt income tax benefit, of which $10.5 million related to Windmill Ventures continuing operations and $61.0 million related to Geesink and BAI and has been included in discontinued operations.

 

Deferred income tax assets and liabilities were comprised of the following (in millions):

 

 

 

September 30,

 

 

 

2010

 

2009

 

Deferred Tax Assets and Liabilities

 

 

 

 

 

Deferred tax assets:

 

 

 

 

 

Other long-term liabilities

 

$

86.6

 

$

78.6

 

Net operating losses

 

63.6

 

57.3

 

Accrued warranty

 

28.2

 

21.8

 

Other current liabilities

 

28.9

 

34.7

 

Other long-term assets

 

8.2

 

10.6

 

Payroll-related obligations

 

19.5

 

12.1

 

Receivables

 

16.2

 

12.0

 

Other

 

0.4

 

0.5

 

Gross deferred tax assets

 

251.6

 

227.6

 

Less valuation allowance

 

(36.4

)

(37.7

)

Deferred tax assets

 

215.2

 

189.9

 

Deferred tax liabilities:

 

 

 

 

 

Intangible assets

 

259.1

 

301.5

 

Investment in unconsolidated partnership

 

9.1

 

14.3

 

Property, plant and equipment

 

44.2

 

33.7

 

Other

 

5.7

 

4.5

 

Deferred tax liabilities

 

318.1

 

354.0

 

Net deferred tax liability

 

$

(102.9

)

$

(164.1

)

 

The net deferred tax liability is classified in the Consolidated Balance Sheets as follows (in millions):

 

 

 

September 30,

 

 

 

2010

 

2009

 

 

 

 

 

 

 

Current net deferred tax asset

 

$

86.7

 

$

75.5

 

Non-current net deferred tax liability

 

(189.6

)

(239.6

)

 

 

$

(102.9

)

$

(164.1

)

 

As of September 30, 2010, the Company had $188.6 million of net operating loss carryforwards available to reduce future taxable income of certain foreign subsidiaries that are primarily from countries with carryforward periods ranging from five years to an unlimited period.  In addition, the Company had $201.1 million of state net operating loss carryforwards, which are subject to expiration from 2011 to 2031.  The deferred tax assets for foreign and state net operating loss carryforwards were $51.9 million and $11.7 million, respectively, and are reviewed for recoverability based on historical taxable income, the expected reversals of existing temporary differences, tax-planning strategies and projections of future taxable income.  As a result of this analysis, the Company carries a valuation allowance as of September 30, 2010 against the foreign and state deferred tax assets of $31.6 million and $4.8 million, respectively.

 

The Company does not provide for U.S. income taxes on undistributed earnings of its foreign operations that are intended to be permanently reinvested.  At September 30, 2010, these earnings amounted to $129.4 million.  If these earnings were repatriated to the United States, the Company would be required to accrue and pay U.S. federal income taxes and foreign withholding taxes, as adjusted for foreign tax credits.  Determination of the amount of any unrecognized deferred income tax liability on these earnings is not practicable.

 

The Company adopted the provisions regarding unrecognized tax benefits of FASB ASC Topic 740, Income Taxes, on October 1, 2007.  The adoption of ASC Topic 740 resulted in a $2.9 million charge to retained earnings as of October 1, 2007 and the reclassification of $30.0 million in liabilities related to uncertain tax positions in the Company’s Consolidated Balance Sheet from income taxes payable to other long-term assets and long-term liabilities of $6.2 million and $36.2 million, respectively.  As of September 30, 2010, the Company’s liability for gross unrecognized tax benefits, excluding related interest and penalties, was $53.4 million.  Excluding interest and penalties, net unrecognized tax benefits of $44.0 million would affect the Company’s net income if recognized, $23.9 million of which would impact net income from continuing operations.  A reconciliation of the beginning and ending amount of unrecognized tax benefits during fiscal 2010 and fiscal 2009 were as follows (in millions):

 

 

 

Fiscal Year Ended

 

 

 

September 30,

 

 

 

2010

 

2009

 

 

 

 

 

 

 

Balance at beginning of year

 

$

63.8

 

$

48.8

 

Additions for tax positions related to current year

 

5.1

 

20.3

 

Additions for tax positions related to prior years

 

11.5

 

2.7

 

Reductions for tax positions of prior years

 

(2.8

)

(3.2

)

Settlements

 

(19.7

)

(2.4

)

Lapse of statute of limitations

 

(5.8

)

(2.4

)

Balance at end of year

 

$

52.1

 

$

63.8

 

 

The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits in the provision for (benefit from) income taxes in the Company’s Consolidated Statements of Operations.  During the fiscal years ended September 30, 2010, 2009 and 2008, the Company recognized $(0.9) million, $2.4 million and $2.7 million in interest and penalties, respectively.  At September 30, 2010 and 2009, the Company had accruals for the payment of interest and penalties of $12.0 million and $12.9 million, respectively.  During the next twelve months, it is reasonably possible that federal, state and foreign tax audit resolutions could reduce unrecognized tax benefits by approximately $5.3 million, either because the Company’s tax positions are sustained on audit, because the Company agrees to their disallowance or the statute of limitations closes.

 

The Company files federal income tax returns, as well as multiple state, local and non-U.S. jurisdiction tax returns.  The Company is regularly audited by federal, state and foreign tax authorities.  During fiscal 2010, the Company was under audit by the U.S. Internal Revenue Service for the taxable years ended September 30, 2006 and 2007 and pre-acquisition periods of JLG, including taxable periods ending July 31, 2005 and 2006 and the period from August 1, 2006 to December 6, 2006 (date of acquisition of JLG by the Company).  During the third quarter of fiscal 2010, the Company reached a settlement regarding these tax audits, which resulted in a $19.7 million reduction of unrecognized tax benefit reserves, of which $15.4 million was recorded as a current period benefit as a reduction of income tax expense.  As of September 30, 2010, tax years open for examination under applicable statutes were as follows:

 

Tax Jurisdiction

 

Open Tax Years

 

Australia

 

2006 – 2010

 

Belgium

 

2008 – 2010

 

Brazil

 

2004 – 2010

 

Canada

 

2006 – 2010

 

The Netherlands

 

2005 – 2010

 

United States (federal)

 

2008 – 2010

 

United States (state and local)

 

2002 – 2010

 

 

Contingencies, Significant Estimates and Concentrations
Contingencies, Significant Estimates and Concentrations

20.    Contingencies, Significant Estimates and Concentrations

 

Environmental - As part of its routine business operations, the Company disposes of and recycles or reclaims certain industrial waste materials, chemicals and solvents at third-party disposal and recycling facilities, which are licensed by appropriate governmental agencies.  In some instances, these facilities have been and may be designated by the United States Environmental Protection Agency (“EPA”) or a state environmental agency for remediation.  Under the Comprehensive Environmental Response, Compensation, and Liability Act and similar state laws, each potentially responsible party (“PRP”) that contributed hazardous substances may be jointly and severally liable for the costs associated with cleaning up these sites.  Typically, PRPs negotiate a resolution with the EPA and/or the state environmental agencies.  PRPs also negotiate with each other regarding allocation of the cleanup costs.

 

The Company had reserves of $1.9 million and $2.1 million for losses related to environmental matters that were probable and estimable at September 30, 2010 and September 30, 2009, respectively.  The amount recorded for identified contingent liabilities is based on estimates.  Amounts recorded are reviewed periodically and adjusted to reflect additional technical and legal information that becomes available.  Actual costs to be incurred in future periods may vary from the estimates, given the inherent uncertainties in evaluating certain exposures.  Subject to the imprecision in estimating future contingent liability costs, the Company does not expect that any sum it may have to pay in connection with these matters in excess of the amounts recorded will have a materially adverse effect on the Company’s financial position, results of operations or cash flows.

 

Personal Injury Actions and Other - Product and general liability claims arise against the Company from time to time in the ordinary course of business.  The Company is generally self-insured for future claims up to $3.0 million per claim.  Accordingly, a reserve is maintained for the estimated costs of such claims.  At September 30, 2010 and 2009, the reserve for product and general liability claims was $44.4 million and $46.8 million, respectively, based on available information. There is inherent uncertainty as to the eventual resolution of unsettled claims.  Management, however, believes that any losses in excess of established reserves will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

 

Market Risks - The Company was contingently liable under bid, performance and specialty bonds totaling $187.4 million and open standby letters of credit issued by the Company’s banks in favor of third parties totaling $36.2 million at September 30, 2010.

 

Other Matters - The Company is subject to other environmental matters and legal proceedings and claims, including patent, antitrust, product liability, warranty and state dealership regulation compliance proceedings that arise in the ordinary course of business.  Although the final results of all such matters and claims cannot be predicted with certainty, management believes that the ultimate resolution of all such matters and claims will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.  Actual results could vary, among other things, due to the uncertainties involved in litigation.

 

At September 30, 2010, approximately 28% of the Company’s workforce was covered under collective bargaining agreements, the largest of which expires in September 2011.

 

The Company derived a significant portion of its revenue from the DoD, as follows (in millions):

 

 

 

Fiscal Year Ended September 30,

 

 

 

2010

 

2009

 

2008

 

 

 

 

 

 

 

 

 

DoD

 

$

7,054.7

 

$

2,738.9

 

$

2,051.3

 

Foreign military sales

 

28.3

 

26.8

 

17.5

 

Total DoD sales

 

$

7,083.0

 

$

2,765.7

 

$

2,068.8

 

 

No other customer represented more than 10% of sales for fiscal 2010, 2009 and 2008.

 

Certain risks are inherent in doing business with the DoD, including technological changes and changes in levels of defense spending.  All DoD contracts contain a provision that they may be terminated at any time at the convenience of the government.  In such an event, the Company is entitled to recover allowable costs plus a reasonable profit earned to the date of termination.

 

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.

 

Because the Company is a relatively large defense contractor, the Company’s government contract operations are subject to extensive annual audit processes and to U.S. government investigations of business practices and cost classifications from which legal or administrative proceedings can result. Based on government procurement regulations, under certain circumstances the Company could be fined, as well as suspended or debarred from government contracting.  In that event, the Company would also be prohibited from selling equipment or services to customers that depend on loans or financial commitments from the Export Import Bank, Overseas Private Investment Corporation and similar government agencies during a suspension or debarment.

 

Business Segment Information
Business Segment Information

21.    Business Segment Information

 

The Company is organized into four reportable segments based on the internal organization used by management for making operating decisions and measuring performance and based on the similarity of customers served, common management, common use of facilities and economic results attained.  During fiscal 2010, in conjunction with the appointment of a new segment president, the Company transferred operational responsibility of JerrDan from the fire & emergency segment to the access equipment segment.  As a result, JerrDan has been included with the access equipment segment for financial reporting purposes.  Historical information has been reclassified to include JerrDan in the access equipment segment for all periods presented.  The Company’s segments are as follows:

 

Defense:  This segment consists of a division of Oshkosh that manufactures tactical trucks and supply parts and services for the U.S. military and for other militaries around the world.  Sales to the DoD accounted for 96.9%, 96.9% and 96.0% of the segment’s sales for the years ended September 30, 2010, 2009 and 2008, respectively.

 

Access Equipment:  This segment consists of JLG and JerrDan.  JLG manufactures aerial work platforms and telehandlers used in a wide variety of construction, industrial, institutional and general maintenance applications to position workers and materials at elevated heights for sale worldwide.  Access equipment customers include equipment rental companies, construction contractors, manufacturing companies, home improvement centers and the U.S. military.  JerrDan manufactures and markets towing and recovery equipment in the U.S. and abroad.

 

Fire & Emergency:  This segment includes Pierce, the aircraft rescue and firefighting and snow removal divisions of Oshkosh, Medtec, Kewaunee and OSV.  These units manufacture and market commercial and custom fire vehicles, broadcast vehicles and emergency vehicles primarily for fire departments, airports, other governmental units, hospitals and other care providers and broadcast stations in the U.S. and abroad.

 

Commercial:  This segment includes McNeilus, CON-E-CO, London, IMT and the commercial division of Oshkosh.  McNeilus, CON-E-CO, London and Oshkosh manufacture, market and distribute concrete mixers, portable concrete batch plants and vehicle and vehicle body components.  McNeilus manufactures, markets and distributes refuse collection vehicles and components.  IMT is a manufacturer of field service vehicles and truck-mounted cranes for niche markets.  Sales are made primarily to commercial and municipal customers in the Americas and Europe.

 

In accordance with FASB ASC Topic 280, Segment Reporting, for purposes of business segment performance measurement, the Company does not allocate to individual business segments costs or items that are of a non-operating nature or organizational or functional expenses of a corporate nature.  The caption “Corporate” includes corporate office expenses, including share-based compensation and results of insignificant operations.  Identifiable assets of the business segments exclude general corporate assets, which principally consist of cash and cash equivalents, certain property, plant and equipment and certain other assets pertaining to corporate activities.  Intersegment sales generally include amounts invoiced by a segment for work performed for another segment.  Amounts are based on actual work performed and agreed-upon pricing which is intended to be reflective of the contribution made by the supplying business segment.  The accounting policies of the reportable segments are the same as those described in Note 2 of the Notes to Consolidated Financial Statements.

 

Selected financial information concerning the Company’s product lines and reportable segments is as follows (in millions):

 

 

 

Fiscal Year Ended September 30,

 

 

 

2010

 

2009

 

2008

 

 

 

External

 

Inter-

 

Net

 

External

 

Inter-

 

Net

 

External

 

Inter-

 

Net

 

 

 

Customers

 

segment

 

Sales

 

Customers

 

segment

 

Sales

 

Customers

 

segment

 

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Defense

 

$

7,151.3

 

$

10.4

 

$

7,161.7

 

$

2,585.9

 

$

8.9

 

$

2,594.8

 

$

1,882.2

 

$

9.7

 

$

1,891.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Access equipment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerial work platforms

 

561.1

 

 

561.1

 

470.2

 

 

470.2

 

1,997.9

 

 

1,997.9

 

Telehandlers

 

342.8

 

 

342.8

 

289.8

 

 

289.8

 

747.0

 

 

747.0

 

Other (a)

 

362.9

 

1,745.1

 

2,108.0

 

371.6

 

93.9

 

465.5

 

466.3

 

1.4

 

467.7

 

Total access equipment

 

1,266.8

 

1,745.1

 

3,011.9

 

1,131.6

 

93.9

 

1,225.5

 

3,211.2

 

1.4

 

3,212.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fire & emergency

 

892.9

 

23.1

 

916.0

 

1,017.0

 

25.3

 

1,042.3

 

962.5

 

46.9

 

1,009.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Concrete placement

 

174.1

 

 

174.1

 

144.9

 

1.1

 

146.0

 

367.2

 

1.4

 

368.6

 

Refuse collection

 

305.7

 

 

305.7

 

317.6

 

9.0

 

326.6

 

374.3

 

10.1

 

384.4

 

Other

 

51.6

 

90.7

 

142.3

 

56.1

 

61.3

 

117.4

 

80.3

 

1.8

 

82.1

 

Total commercial

 

531.4

 

90.7

 

622.1

 

518.6

 

71.4

 

590.0

 

821.8

 

13.3

 

835.1

 

Intersegment eliminations

 

 

(1,869.3

)

(1,869.3

)

 

(199.5

)

(199.5

)

 

(71.3

)

(71.3

)

Consolidated

 

$

9,842.4

 

$

 

$

9,842.4

 

$

5,253.1

 

$

 

$

5,253.1

 

$

6,877.7

 

$

 

$

6,877.7

 

 

(a)          Access equipment intersegment sales are comprised of assembly of M-ATV crew capsules and complete vehicles for the defense segment.  The access equipment segment invoices the defense segment for work under this contract, which was initiated in the fourth quarter of fiscal 2009.  These sales are eliminated in consolidation.

 

 

 

Fiscal Year Ended September 30,

 

 

 

2010

 

2009

 

2008

 

Operating income (loss) from continuing operations:

 

 

 

 

 

 

 

Defense

 

$

1,320.7

 

$

403.3

 

$

265.2

 

Access equipment (a)

 

97.3

 

(1,159.1

)

363.1

 

Fire & emergency (b)

 

57.6

 

51.2

 

93.4

 

Commercial (c)

 

19.4

 

(183.7

)

4.7

 

Corporate

 

(99.0

)

(89.6

)

(108.5

)

Intersegment eliminations

 

(1.9

)

(1.6

)

(0.5

)

Consolidated

 

1,394.1

 

(979.5

)

617.4

 

Interest expense net of interest income

 

(183.6

)

(207.5

)

(204.6

)

Miscellaneous other income (expense)

 

1.0

 

8.8

 

(9.0

)

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes and equity in earnings (losses) of unconsolidated affiliates

 

$

1,211.5

 

$

(1,178.2

)

$

403.8

 

 

(a)          Fiscal 2009 results include non-cash goodwill and long-lived asset impairment charges of $941.7 million.

(b)         Fiscal 2010 and 2009 results include non-cash goodwill and long-lived asset impairment charges of $23.3 million and $64.2 million, respectively.

(c)          Fiscal 2010, 2009 and 2008 results include non-cash goodwill and long-lived asset impairment charges of $2.3 million, $184.3 million and $1.0 million, respectively.

 

 

 

Fiscal Year Ended September 30,

 

 

 

2010

 

2009

 

2008

 

Depreciation and amortization: (a)

 

 

 

 

 

 

 

Defense

 

$

17.6

 

$

12.5

 

$

10.2

 

Access equipment

 

95.4

 

91.7

 

93.7

 

Fire & emergency

 

16.2

 

14.4

 

16.3

 

Commercial

 

15.1

 

19.9

 

25.3

 

Corporate and other (b)

 

28.6

 

13.5

 

7.4

 

Consolidated

 

$

172.9

 

$

152.0

 

$

152.9

 

 

 

 

 

 

 

 

 

Capital expenditures:

 

 

 

 

 

 

 

Defense

 

$

48.0

 

$

13.0

 

$

18.9

 

Access equipment (c)

 

24.7

 

36.7

 

65.2

 

Fire & emergency

 

10.0

 

6.5

 

8.0

 

Commercial

 

6.8

 

5.4

 

26.2

 

Consolidated

 

$

89.5

 

$

61.6

 

$

118.3

 

 

(a)          Includes $1.2 million and $4.3 million in fiscal 2009 and 2008, respectively, related to discontinued operations.

(b)         Includes $20.4 million, $5.0 million and $0.9 million in fiscal 2010, 2009 and 2008, respectively, related to the write-off of deferred financing fees due to the early extinguishment of the related debt.

(c)          Capital expenditures include both the purchase of property, plant and equipment and equipment held for rental.

 

 

 

September 30,

 

 

 

2010

 

2009 (d)

 

2008

 

Identifiable assets:

 

 

 

 

 

 

 

Defense - U.S.

 

$

876.4

 

$

527.5

 

$

299.0

 

Access equipment:

 

 

 

 

 

 

 

U.S.

 

1,766.5

 

2,035.4

 

2,883.7

 

Europe (a)

 

794.0

 

764.9

 

1,108.4

 

Rest of the world

 

186.7

 

131.9

 

123.0

 

Total access equipment

 

2,747.2

 

2,932.2

 

4,115.1

 

Fire & emergency:

 

 

 

 

 

 

 

U.S.

 

529.9

 

541.2

 

629.9

 

Europe

 

15.6

 

82.4

 

123.8

 

Total fire & emergency

 

545.5

 

623.6

 

753.7

 

Commercial:

 

 

 

 

 

 

 

U.S.

 

316.4

 

334.5

 

631.2

 

Other North America (a)

 

38.7

 

34.0

 

32.5

 

Europe (b)

 

 

 

170.0

 

Total Commercial

 

355.1

 

368.5

 

833.7

 

Corporate and other - U.S. (c)

 

184.4

 

316.2

 

80.0

 

Consolidated

 

$

4,708.6

 

$

4,768.0

 

$

6,081.5

 

 

(a)          Includes investment in unconsolidated affiliates.

(b)         September 30, 2009 balances reflect the sale of Geesink.  September 30, 2008 assets reflect the June 2008 goodwill impairment charge of $167.4 million and long-lived asset impairment charges of $7.8 million.  See Note 3 of the Notes to Consolidated Financial Statements for a discussion of the charges.

(c)          Primarily includes cash and short-term investments.

(d)         September 30, 2009 assets reflect the 2009 goodwill impairment charges of $1,169.2 million and long-lived asset impairment charges of $30.6 million.  See Note 8 of the Notes to Consolidated Financial Statements for a discussion of the charges.

 

The following table presents net sales by geographic region based on product shipment destination (in millions):

 

 

 

Fiscal Year Ended September 30,

 

 

 

2010

 

2009

 

2008

 

Net sales:

 

 

 

 

 

 

 

United States

 

$

8,882.6

 

$

4,487.1

 

$

4,997.2

 

Other North America

 

111.0

 

89.7

 

180.6

 

Europe, Africa and Middle East

 

508.6

 

468.6

 

1,283.5

 

Rest of the world

 

340.2

 

207.7

 

416.4

 

Consolidated

 

$

9,842.4

 

$

5,253.1

 

$

6,877.7

 

 

Separate Financial Information of Subsidiary Guarantors of Indebtedness
Separate Financial Information of Subsidiary Guarantors of Indebtedness

22.    Separate Financial Information of Subsidiary Guarantors of Indebtedness

 

The Senior Notes are jointly, severally and unconditionally guaranteed on a senior unsecured basis by all of Oshkosh Corporation’s existing and future subsidiaries that from time to time guarantee obligations under Oshkosh Corporation’s senior credit facility, with certain exceptions (the “Guarantors”).  The following condensed supplemental consolidating financial information reflects the summarized financial information of Oshkosh Corporation, the Guarantors on a combined basis and Oshkosh Corporation’s non-guarantor subsidiaries on a combined basis (in millions):

 

Condensed Consolidating Statement of Operations

For the Year Ended September 30, 2010

 

 

 

Oshkosh

 

Guarantor

 

Non-Guarantor

 

 

 

 

 

 

 

Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

7,341.9

 

$

3,559.1

 

$

835.6

 

$

(1,894.2

)

$

9,842.4

 

Cost of sales

 

5,892.1

 

3,119.5

 

753.0

 

(1,892.2

)

7,872.4

 

Gross income

 

1,449.8

 

439.6

 

82.6

 

(2.0

)

1,970.0

 

Selling, general and administrative expenses

 

196.9

 

164.4

 

128.5

 

 

489.8

 

Amortization of purchased intangibles

 

 

40.2

 

20.3

 

 

60.5

 

Intangible assets impairment charges

 

 

 

25.6

 

 

25.6

 

Operating income (loss)

 

1,252.9

 

235.0

 

(91.8

)

(2.0

)

1,394.1

 

Interest expense

 

(276.4

)

(170.6

)

(2.5

)

262.4

 

(187.1

)

Interest income

 

2.4

 

18.6

 

244.9

 

(262.4

)

3.5

 

Miscellaneous, net

 

12.7

 

(94.9

)

83.2

 

 

1.0

 

Income (loss) from continuing operations before income taxes

 

991.6

 

(11.9

)

233.8

 

(2.0

)

1,211.5

 

Provision for (benefit from) income taxes

 

328.4

 

(1.5

)

88.1

 

(0.7

)

414.3

 

Income (loss) from continuing operations before equity in earnings (losses) of affiliates

 

663.2

 

(10.4

)

145.7

 

(1.3

)

797.2

 

Equity in earnings (losses) of consolidated subsidiaries

 

125.4

 

(1.9

)

0.2

 

(123.7

)

 

Equity in earnings (losses) of unconsolidated affiliates

 

 

 

(4.3

)

 

(4.3

)

Income (loss) from continuing operations

 

788.6

 

(12.3

)

141.6

 

(125.0

)

792.9

 

Discontinued operations, net of tax

 

1.4

 

 

(4.3

)

 

(2.9

)

Net income (loss)

 

790.0

 

(12.3

)

137.3

 

(125.0

)

790.0

 

Net loss attributable to the noncontrolling interest

 

 

 

 

 

 

Net income (loss) attributable to Oshkosh Corporation

 

$

790.0

 

$

(12.3

)

$

137.3

 

$

(125.0

)

$

790.0

 

 

Condensed Consolidating Statement of Operations

For the Year Ended September 30, 2009

 

 

 

Oshkosh

 

Guarantor

 

Non-Guarantor

 

 

 

 

 

 

 

Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

2,796.5

 

$

1,811.1

 

$

836.3

 

$

(190.8

)

$

5,253.1

 

Cost of sales

 

2,304.2

 

1,629.3

 

805.3

 

(189.0

)

4,549.8

 

Gross income

 

492.3

 

181.8

 

31.0

 

(1.8

)

703.3

 

Selling, general and administrative expenses

 

141.5

 

136.3

 

152.5

 

 

430.3

 

Amortization of purchased intangibles

 

 

40.8

 

21.5

 

 

62.3

 

Intangible assets impairment charges

 

 

702.1

 

488.1

 

 

1,190.2

 

Operating income (loss)

 

350.8

 

(697.4

)

(631.1

)

(1.8

)

(979.5

)

Interest expense

 

(289.5

)

(153.5

)

(5.5

)

237.1

 

(211.4

)

Interest income

 

4.4

 

28.2

 

208.4

 

(237.1

)

3.9

 

Miscellaneous, net

 

12.9

 

(78.8

)

74.7

 

 

8.8

 

Income (loss) from continuing operations before income taxes

 

78.6

 

(901.5

)

(353.5

)

(1.8

)

(1,178.2

)

Provision for (benefit from) income taxes

 

17.4

 

(32.1

)

2.8

 

(0.7

)

(12.6

)

Income (loss) from continuing operations before equity in earnings (losses) of affiliates

 

61.2

 

(869.4

)

(356.3

)

(1.1

)

(1,165.6

)

Equity in earnings (losses) of consolidated subsidiaries

 

(1,257.3

)

(239.7

)

0.2

 

1,496.8

 

 

Equity in earnings (losses) of unconsolidated affiliates

 

 

 

(1.4

)

 

(1.4

)

Income (loss) from continuing operations

 

(1,196.1

)

(1,109.1

)

(357.5

)

1,495.7

 

(1,167.0

)

Discontinued operations, net of tax

 

97.3

 

 

(30.0

)

 

67.3

 

Net income (loss)

 

(1,098.8

)

(1,109.1

)

(387.5

)

1,495.7

 

(1,099.7

)

Net loss attributable to the noncontrolling interest

 

 

 

0.9

 

 

0.9

 

Net income (loss) attributable to Oshkosh Corporation

 

$

(1,098.8

)

$

(1,109.1

)

$

(386.6

)

$

1,495.7

 

$

(1,098.8

)

 

Condensed Consolidating Statement of Operations

For the Year Ended September 30, 2008

 

 

 

Oshkosh

 

Guarantor

 

Non-Guarantor

 

 

 

 

 

 

 

Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

2,145.1

 

$

2,967.9

 

$

1,853.9

 

$

(89.2

)

$

6,877.7

 

Cost of sales

 

1,796.0

 

2,438.0

 

1,562.6

 

(88.9

)

5,707.7

 

Gross income

 

349.1

 

529.9

 

291.3

 

(0.3

)

1,170.0

 

Selling, general and administrative expenses

 

164.8

 

176.6

 

141.5

 

 

482.9

 

Amortization of purchased intangibles

 

 

43.6

 

25.1

 

 

68.7

 

Intangible assets impairment charges

 

 

1.0

 

 

 

1.0

 

Operating income (loss)

 

184.3

 

308.7

 

124.7

 

(0.3

)

617.4

 

Interest expense

 

(260.6

)

(153.7

)

(13.0

)

217.1

 

(210.2

)

Interest income

 

7.5

 

17.0

 

198.2

 

(217.1

)

5.6

 

Miscellaneous, net

 

23.5

 

(159.0

)

126.5

 

 

(9.0

)

Income (loss) from continuing operations before income taxes

 

(45.3

)

13.0

 

436.4

 

(0.3

)

403.8

 

Provision for (benefit from) income taxes

 

(16.8

)

5.6

 

132.5

 

(0.1

)

121.2

 

Income (loss) from continuing operations before equity in earnings (losses) of affiliates

 

(28.5

)

7.4

 

303.9

 

(0.2

)

282.6

 

Equity in earnings (losses) of consolidated subsidiaries

 

107.8

 

205.8

 

0.4

 

(314.0

)

 

Equity in earnings (losses) of unconsolidated affiliates

 

 

 

6.3

 

 

6.3

 

Income (loss) from continuing operations

 

79.3

 

213.2

 

310.6

 

(314.2

)

288.9

 

Discontinued operations, net of tax

 

 

 

(210.3

)

 

(210.3

)

Net income (loss)

 

79.3

 

213.2

 

100.3

 

(314.2

)

78.6

 

Net loss attributable to the noncontrolling interest

 

 

 

0.7

 

 

0.7

 

Net income (loss) attributable to Oshkosh Corporation

 

$

79.3

 

$

213.2

 

$

101.0

 

$

(314.2

)

$

79.3

 

 

Condensed Consolidating Balance Sheet

As of September 30, 2010

 

 

 

Oshkosh

 

Guarantor

 

Non-Guarantor

 

 

 

 

 

 

 

Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

202.2

 

$

2.5

 

$

134.3

 

$

 

$

339.0

 

Receivables, net

 

481.8

 

364.1

 

147.4

 

(103.8

)

889.5

 

Inventories, net

 

348.4

 

257.2

 

244.8

 

(1.8

)

848.6

 

Other current assets

 

78.8

 

31.0

 

29.0

 

 

138.8

 

Total current assets

 

1,111.2

 

654.8

 

555.5

 

(105.6

)

2,215.9

 

Investment in consolidated subsidiaries

 

4,070.3

 

683.3

 

16.7

 

(4,770.3

)

 

Intercompany

 

(1,468.0

)

(2,050.4

)

3,518.4

 

 

 

Intangible assets, net

 

 

1,170.9

 

775.0

 

 

1,945.9

 

Other long-term assets

 

168.0

 

163.1

 

215.7

 

 

546.8

 

Total assets

 

$

3,881.5

 

$

621.7

 

$

5,081.3

 

$

(4,875.9

)

$

4,708.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

588.6

 

$

144.7

 

$

85.3

 

$

(100.9

)

$

717.7

 

Customer advances

 

251.5

 

106.7

 

15.0

 

 

373.2

 

Other current liabilities

 

468.3

 

141.7

 

115.8

 

(4.7

)

721.1

 

Total current liabilities

 

1,308.4

 

393.1

 

216.1

 

(105.6

)

1,812.0

 

Long-term debt, less current maturities

 

1,086.4

 

 

 

 

1,086.4

 

Other long-term liabilities

 

159.9

 

179.2

 

144.3

 

 

483.4

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

Oshkosh Corporation shareholders’ equity

 

1,326.8

 

49.4

 

4,720.7

 

(4,770.3

)

1,326.6

 

Noncontrolling interest

 

 

 

0.2

 

 

0.2

 

Total equity

 

1,326.8

 

49.4

 

4,720.9

 

(4,770.3

)

1,326.8

 

Total liabilities and equity

 

$

3,881.5

 

$

621.7

 

$

5,081.3

 

$

(4,875.9

)

$

4,708.6

 

 

Condensed Consolidating Balance Sheet

As of September 30, 2009

 

 

 

Oshkosh

 

Guarantor

 

Non-Guarantor

 

 

 

 

 

 

 

Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

340.6

 

$

5.6

 

$

184.2

 

$

 

$

530.4

 

Receivables, net

 

246.8

 

350.6

 

128.1

 

(161.7

)

563.8

 

Inventories, net

 

179.6

 

296.7

 

315.1

 

(1.7

)

789.7

 

Other current assets

 

204.0

 

23.5

 

31.8

 

 

259.3

 

Total current assets

 

971.0

 

676.4

 

659.2

 

(163.4

)

2,143.2

 

Investment in consolidated subsidiaries

 

3,913.9

 

713.1

 

16.6

 

(4,643.6

)

 

Intercompany

 

(1,137.1

)

(2,137.2

)

3,274.3

 

 

 

Intangible assets, net

 

 

1,215.5

 

829.6

 

 

2,045.1

 

Other long-term assets

 

128.3

 

199.3

 

252.1

 

 

579.7

 

Total assets

 

$

3,876.1

 

$

667.1

 

$

5,031.8

 

$

(4,807.0

)

$

4,768.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

403.1

 

$

225.6

 

$

87.2

 

$

(160.1

)

$

555.8

 

Customer advances

 

600.7

 

119.3

 

11.9

 

 

731.9

 

Other current liabilities

 

149.7

 

96.7

 

127.8

 

(3.3

)

370.9

 

Total current liabilities

 

1,153.5

 

441.6

 

226.9

 

(163.4

)

1,658.6

 

Long-term debt, less current maturities

 

2,020.3

 

0.4

 

2.5

 

 

2,023.2

 

Other long-term liabilities

 

186.0

 

204.7

 

179.2

 

 

569.9

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

Oshkosh Corporation shareholders’ equity

 

516.3

 

20.4

 

4,621.0

 

(4,643.6

)

514.1

 

Noncontrolling interest

 

 

 

2.2

 

 

2.2

 

Total equity

 

516.3

 

20.4

 

4,623.2

 

(4,643.6

)

516.3

 

Total liabilities and equity

 

$

3,876.1

 

$

667.1

 

$

5,031.8

 

$

(4,807.0

)

$

4,768.0

 

 

Condensed Consolidating Statement of Cash Flows

For the Year Ended September 30, 2010

 

 

 

Oshkosh

 

Guarantor

 

Non-Guarantor

 

 

 

 

 

 

 

Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided (used) by operating activities

 

$

379.2

 

$

17.9

 

$

222.6

 

$

 

$

619.7

 

 

 

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

(56.5

)

(6.7

)

(20.0

)

 

(83.2

)

Additions to equipment held for rental

 

 

 

(6.3

)

 

(6.3

)

Intercompany investing

 

262.2

 

39.8

 

(253.9

)

(48.1

)

 

Other investing activities

 

 

(7.8

)

13.4

 

 

5.6

 

Net cash provided (used) by investing activities

 

205.7

 

25.3

 

(266.8

)

(48.1

)

(83.9

)

 

 

 

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

 

 

 

Repayment of long-term debt

 

(2,020.4

)

(0.3

)

(0.2

)

 

(2,020.9

)

Net borrowings (repayments) under revolving credit facilities

 

150.0

 

 

 

 

150.0

 

Proceeds from issuance of long term debt

 

1,150.0

 

 

 

 

1,150.0

 

Debt issuance/amendment costs

 

(26.3

)

 

 

 

(26.3

)

Intercompany financing

 

(1.3

)

(46.0

)

(0.8

)

48.1

 

 

Other financing activities

 

24.7

 

 

 

 

24.7

 

Net cash provided (used) by financing activities

 

(723.3

)

(46.3

)

(1.0

)

48.1

 

(722.5

)

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

 

(4.7

)

 

(4.7

)

Increase (decrease) in cash and cash equivalents

 

(138.4

)

(3.1

)

(49.9

)

 

(191.4

)

Cash and cash equivalents at beginning of year

 

340.6

 

5.6

 

184.2

 

 

530.4

 

Cash and cash equivalents at end of year

 

$

202.2

 

$

2.5

 

$

134.3

 

$

 

$

339.0

 

 

Condensed Consolidating Statement of Cash Flows

For the Year Ended September 30, 2009

 

 

 

Oshkosh

 

Guarantor

 

Non-Guarantor

 

 

 

 

 

 

 

Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided (used) by operating activities

 

$

591.7

 

$

(91.7

)

$

398.9

 

$

 

$

898.9

 

 

 

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

(16.2

)

(12.9

)

(17.1

)

 

(46.2

)

Additions to equipment held for rental

 

 

(2.8

)

(12.6

)

 

(15.4

)

Intercompany investing

 

144.7

 

154.6

 

(263.5

)

(35.8

)

 

Other investing activities

 

 

0.7

 

4.8

 

 

5.5

 

Net cash provided (used) by investing activities

 

128.5

 

139.6

 

(288.4

)

(35.8

)

(56.1

)

 

 

 

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

 

 

 

Repayment of long-term debt

 

(681.2

)

(0.3

)

(0.7

)

 

(682.2

)

Net borrowings (repayments) under revolving credit facilities

 

(47.3

)

 

(2.1

)

 

(49.4

)

Proceeds from issuance of Common Stock, net

 

358.1

 

 

 

 

358.1

 

Intercompany financing

 

(1.3

)

(46.0

)

11.5

 

35.8

 

 

Other financing activities

 

(34.6

)

 

 

 

(34.6

)

Net cash provided (used) by financing activities

 

(406.3

)

(46.3

)

8.7

 

35.8

 

(408.1

)

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

1.1

 

6.4

 

 

7.5

 

Increase (decrease) in cash and cash equivalents

 

313.9

 

2.7

 

125.6

 

 

442.2

 

Cash and cash equivalents at beginning of year

 

26.7

 

2.9

 

58.6

 

 

88.2

 

Cash and cash equivalents at end of year

 

$

340.6

 

$

5.6

 

$

184.2

 

$

 

$

530.4

 

 

Condensed Consolidating Statement of Cash Flows

For the Year Ended September 30, 2008

 

 

 

Oshkosh

 

Guarantor

 

Non-Guarantor

 

 

 

 

 

 

 

Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided (used) by operating activities

 

$

(65.8

)

$

134.8

 

$

321.4

 

$

 

$

390.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

(26.8

)

(10.5

)

(38.5

)

 

(75.8

)

Additions to equipment held for rental

 

 

(8.5

)

(34.0

)

 

(42.5

)

Intercompany investing

 

373.3

 

(76.9

)

(274.0

)

(22.4

)

 

Other investing activities

 

 

0.4

 

17.7

 

 

18.1

 

Net cash provided (used) by investing activities

 

346.5

 

(95.5

)

(328.8

)

(22.4

)

(100.2

)

 

 

 

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

 

 

 

Repayment of long-term debt

 

(303.5

)

 

(1.2

)

 

(304.7

)

Net borrowings (repayments) under revolving credit facilities

 

47.3

 

 

7.4

 

 

54.7

 

Intercompany financing

 

(1.3

)

(46.0

)

24.9

 

22.4

 

 

Dividends paid

 

(29.8

)

 

 

 

(29.8

)

Other financing activities

 

6.2

 

 

 

 

6.2

 

Net cash provided (used) by financing activities

 

(281.1

)

(46.0

)

31.1

 

22.4

 

(273.6

)

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

0.1

 

(3.7

)

 

(3.6

)

Increase (decrease) in cash and cash equivalents

 

(0.4

)

(6.6

)

20.0

 

 

13.0

 

Cash and cash equivalents at beginning of year

 

27.1

 

9.5

 

38.6

 

 

75.2

 

Cash and cash equivalents at end of year

 

$

26.7

 

$

2.9

 

$

58.6

 

$

 

$

88.2

 

 

Unaudited Quarterly Results (in millions, except per share amounts)
Unaudited Quarterly Results (in millions, except per share amounts)

23.    Unaudited Quarterly Results (in millions, except per share amounts)

 

 

 

Fiscal Year Ended September 30, 2010

 

Fiscal Year Ended September 30, 2009

 

 

 

4th Quarter

 

3rd Quarter

 

2nd Quarter

 

1st Quarter

 

4th Quarter(a)

 

3rd Quarter

 

2nd Quarter (b)

 

1st Quarter

 

Net sales

 

$

2,105.1

 

$

2,439.0

 

$

2,864.2

 

$

2,434.1

 

$

1,472.1

 

$

1,215.0

 

$

1,237.3

 

$

1,328.7

 

Gross income

 

381.4

 

481.6

 

627.8

 

479.2

 

240.8

 

175.9

 

137.0

 

149.6

 

Operating income (loss)

 

233.6

 

340.5

 

494.3

 

325.7

 

118.2

 

39.3

 

(1,162.6

)

25.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts attributable to Oshkosh Corporation common shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

116.6

 

$

211.2

 

$

292.6

 

$

172.5

 

$

45.7

 

$

(21.2

)

$

(1,179.7

)

$

(11.7

)

Income (loss) from discontinued operations

 

 

 

 

(2.9

)

94.6

 

(5.4

)

(12.2

)

(8.9

)

Net income (loss)

 

$

116.6

 

$

211.2

 

$

292.6

 

$

169.6

 

$

140.3

 

$

(26.6

)

$

(1,191.9

)

$

(20.6

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share attributable to Oshkosh Corporation common shareholders-basic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From continuing operations

 

$

1.29

 

$

2.34

 

$

3.27

 

$

1.93

 

$

0.55

 

$

(0.28

)

$

(15.86

)

$

(0.16

)

From discontinued operations

 

 

 

 

(0.03

)

1.15

 

(0.08

)

(0.16

)

(0.12

)

 

 

$

1.29

 

$

2.34

 

$

3.27

 

$

1.90

 

$

1.70

 

$

(0.36

)

$

(16.02

)

$

(0.28

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share attributable to Oshkosh Corporation common shareholders-diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From continuing operations

 

$

1.28

 

$

2.31

 

$

3.22

 

$

1.90

 

$

0.55

 

$

(0.28

)

$

(15.86

)

$

(0.16

)

From discontinued operations

 

 

 

 

(0.03

)

1.13

 

(0.08

)

(0.16

)

(0.12

)

 

 

$

1.28

 

$

2.31

 

$

3.22

 

$

1.87

 

$

1.68

 

$

(0.36

)

$

(16.02

)

$

(0.28

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock per share dividends

 

$

 

$

 

$

 

$

 

$

 

$

 

$

0.10

 

$

0.10

 

 

(a)          Included within discontinued operations for the fourth quarter of fiscal 2009 was a pre-tax, noncash gain of $33.8 million on the sale of Geesink.  See Note 3 of the Notes to Consolidated Financial Statements for additional details.

(b)         Results for the second quarter of fiscal 2009 include goodwill impairment charges of $1,167.8 million and long-lived asset impairment charges of $30.0 million of which $8.1 million of goodwill and $1.5 million of long-lived asset impairment charges are included within discontinued operations.  See Note 8 of the Notes to Consolidated Financial Statements for a discussion of the charges.

VALUATION AND QUALIFYING ACCOUNTS
VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE II

 

OSHKOSH CORPORATION

VALUATION AND QUALIFYING ACCOUNTS

 

Allowance for Doubtful Accounts

Years Ended September 30, 2010, 2009 and 2008

(In millions)

 

Fiscal
Year

 

Balance at
Beginning of
Year

 

Acquisitions
of
Businesses

 

Additions
Charged to
Expense

 

Reductions*

 

Balance at
End of Year

 

 

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

31.0

 

$

(4.0

)

$

2.3

 

$

(4.5

)

$

24.8

 

 

 

 

 

 

 

 

 

 

 

 

 

2009

 

$

24.8

 

$

 

$

25.7

 

$

(8.5

)

$

42.0

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

42.0

 

$

 

$

16.6

 

$

(16.6

)

$

42.0

 

 

*      Represents amounts written off to the reserve, net of recoveries and foreign currency translation adjustments.  Fiscal 2009 also includes a $3.2 million reduction related to the disposition of Geesink.  Fiscal 2010 also includes a $1.9 million reduction related to the disposition of BAI.

 

Document and Entity Information
Year Ended
Sep. 30, 2010
Nov. 15, 2010
Mar. 31, 2010
Document and Entity Information
 
 
 
Entity Registrant Name
Oshkosh Corporation 
 
 
Entity Central Index Key
0000775158 
 
 
Document Type
10-K 
 
 
Document Period End Date
2010-09-30 
 
 
Amendment Flag
FALSE 
 
 
Current Fiscal Year End Date
09/30 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Public Float
 
 
3,617,485,910 
Entity Common Stock, Shares Outstanding
 
90,717,689 
 
Document Fiscal Year Focus
2010 
 
 
Document Fiscal Period Focus
FY