UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction |
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(I.R.S. Employer |
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(Address of principal executive offices) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes
As of April 18, 2024,
OSHKOSH CORPORATION
FORM 10-Q INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OSHKOSH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share amounts; unaudited)
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Three Months Ended |
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2024 |
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2023 |
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Net sales |
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$ |
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$ |
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Cost of sales |
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Gross income |
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Operating expenses: |
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Selling, general and administrative |
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Amortization of purchased intangibles |
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Total operating expenses |
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Operating income |
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Other income (expense): |
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Interest expense |
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Interest income |
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Miscellaneous, net |
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Income before income taxes and losses of unconsolidated affiliates |
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Provision for income taxes |
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Income before losses of unconsolidated affiliates |
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Losses of unconsolidated affiliates |
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Net income |
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$ |
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$ |
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Earnings per share: |
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Basic |
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$ |
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$ |
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Diluted |
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Cash dividends declared per share on Common Stock |
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$ |
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$ |
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The accompanying notes are an integral part of these financial statements.
3
OSHKOSH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in millions; unaudited)
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Three Months Ended |
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2024 |
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2023 |
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Net income |
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$ |
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$ |
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Other comprehensive income (loss), net of tax: |
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Employee pension and postretirement benefits |
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Currency translation adjustments |
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Change in fair value of derivative instruments |
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Total other comprehensive income (loss), net of tax |
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Comprehensive income |
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$ |
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$ |
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The accompanying notes are an integral part of these financial statements.
4
OSHKOSH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except share and per share amounts; unaudited)
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March 31, |
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December 31, |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Receivables, net |
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Unbilled receivables, net |
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Inventories |
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Income taxes receivable |
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Other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Goodwill |
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Purchased intangible assets, net |
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Deferred income taxes |
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Deferred contract costs |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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Liabilities and Shareholders’ Equity |
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Current liabilities: |
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Revolving credit facilities |
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$ |
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$ |
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Accounts payable |
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Customer advances |
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Payroll-related obligations |
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Income taxes payable |
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Other current liabilities |
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Total current liabilities |
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Long-term debt, less current maturities |
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Non-current customer advances |
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Deferred income taxes |
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Other non-current liabilities |
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Shareholders’ equity: |
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Preferred Stock ($ |
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Common Stock ($ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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Common Stock in treasury, at cost ( |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these financial statements.
5
OSHKOSH CORPORATION
(Dollars in millions, except per share amounts; unaudited)
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Three Months Ended March 31, 2024 |
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Common |
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Additional |
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Retained |
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Accumulated Other |
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Common |
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Total |
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Balance at December 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net income |
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Employee pension and postretirement benefits, net of tax of $ |
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Currency translation adjustments |
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Derivative instruments, net of tax |
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Cash dividends ($ |
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Repurchases of Common Stock |
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Exercise of stock options |
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Stock-based compensation expense |
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Payment of stock-based restricted and performance shares |
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Shares tendered for taxes on stock-based compensation |
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Other |
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Balance at March 31, 2024 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Three Months Ended March 31, 2023 |
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Common |
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Additional |
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Retained |
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Accumulated Other |
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Common |
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Total |
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Balance at December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net income |
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Employee pension and postretirement benefits, net of tax of $ |
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Currency translation adjustments |
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Derivative instruments, net of tax |
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Cash dividends ($ |
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( |
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Repurchases of Common Stock |
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Exercise of stock options |
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Stock-based compensation expense |
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Payment of stock-based restricted and performance shares |
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Shares tendered for taxes on stock-based compensation |
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Other |
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Balance at March 31, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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The accompanying notes are an integral part of these financial statements.
6
OSHKOSH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions; unaudited)
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Three Months Ended |
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2024 |
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2023 |
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Operating activities: |
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Net income |
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$ |
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$ |
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Depreciation and amortization |
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Stock-based incentive compensation |
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Loss on sale of business, net of tax |
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Deferred income taxes |
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Other non-cash adjustments |
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Changes in operating assets and liabilities |
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Net cash provided by (used in) operating activities |
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Investing activities: |
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Additions to property, plant and equipment |
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Acquisition of business, net of cash acquired |
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Proceeds from sale of business, net of cash sold |
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Other investing activities |
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( |
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Net cash used in investing activities |
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Financing activities: |
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Proceeds from revolving credit facilities |
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Repayments of revolving credit facilities |
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Repayments of debt |
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Dividends paid |
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( |
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Repurchases of Common Stock |
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( |
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Other financing activities |
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( |
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Net cash provided by (used in) financing activities |
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Effect of exchange rate changes on cash and cash equivalents |
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Decrease in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental disclosures: |
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Cash paid for interest |
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$ |
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$ |
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Cash paid for income taxes, net of refunds |
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Cash paid for operating lease liabilities |
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Operating right-of-use assets obtained |
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Finance right-of-use assets obtained |
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Property, plant and equipment additions - noncash |
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The accompanying notes are an integral part of these financial statements.
7
OSHKOSH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments (which include normal recurring adjustments, unless otherwise noted) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). These Condensed Consolidated Financial Statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K of Oshkosh Corporation for the year ended December 31, 2023. The interim results are not necessarily indicative of results for any other interim period or for 2024. Certain reclassifications have been made to the prior period financial statements to conform to the presentation as of and for the three months ended March 31, 2024.
2. New Accounting Standards
Standards not yet adopted
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The standard improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The Company will be required to adopt ASU 2023-07 for its Annual Report on Form 10-K for the year ended December 31, 2024. The Company does not expect the adoption of ASU 2023-07 will have a material impact on the Company’s consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. The standard requires that public business entities (1) disclose specific categories in the income tax rate reconciliation and (2) provide additional information for reconciling items if the effect of those reconciling items is equal to or greater than
3. Acquisitions and Divestitures
Acquisition of AeroTech
On August 1, 2023, the Company acquired
The results of AeroTech have been included in the Company’s Condensed Consolidated Statements of Income from the date of acquisition. AeroTech had sales of $
8
The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed as of the date of acquisition (in millions):
Assets Acquired: |
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Cash and cash equivalents |
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$ |
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Accounts receivable |
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$ |
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Unbilled receivables |
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Inventories |
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Other current assets |
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Property, plant and equipment |
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Goodwill |
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Purchased intangible assets |
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Other non-current assets |
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Total assets, excluding cash and cash equivalents |
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$ |
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Liabilities Assumed: |
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Accounts payable |
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$ |
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Customer advances |
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Payroll-related obligations |
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Other current liabilities |
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Deferred income taxes |
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Non-current liabilities |
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Total liabilities |
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$ |
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Net assets acquired |
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$ |
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The purchase price, net of cash acquired, was allocated based on the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition with the excess purchase price recorded as goodwill, all of which was allocated to the Vocational segment. The majority of the goodwill is deductible for income tax purposes. The purchase price allocations are preliminary at March 31, 2024 and may be subsequently adjusted to reflect the finalization of liabilities related to income taxes.
Unaudited pro forma financial information
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Three Months Ended |
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Net sales |
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$ |
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Net income |
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9
Acquisition of Hinowa
On January 31, 2023, the Company acquired Hinowa S.p.A. (Hinowa), an Italian manufacturer of compact crawler booms and tracked equipment, for €
Divestitures
On March 1, 2023, the Company completed the sale of its rear-discharge concrete mixer business for $
On July 24, 2023, the Company completed the sale of its snow removal apparatus business for $
4. Revenue Recognition
The Company utilizes the cost-to-cost method of percentage-of-completion to recognize revenue on its performance obligations that are satisfied over time because it best depicts the transfer of control to the customer. Under the cost-to-cost method of percentage-of-completion, the Company measures progress based on the ratio of costs incurred to date to total estimated costs for the performance obligation. The Company recognizes changes in estimated sales or costs and the resulting profit or loss on a cumulative basis. Contract adjustments represent the cumulative effect of the changes on prior periods. If a loss is expected on a performance obligation, the complete estimated loss is recorded in the period in which the loss is identified.
There is significant judgment involved in estimating sales and costs, most notably within the Defense segment. Each contract is evaluated at contract inception to identify risks and estimate revenue and costs. In performing this evaluation, the Company considers risks of contract performance such as technical requirements, schedule, duration and key contract dependencies. These considerations are then factored into the Company’s estimated revenue and costs. Preliminary contract estimates are subject to change throughout the duration of the contract as additional information becomes available that impacts risks and estimated revenue and costs. In addition, as contract modifications (e.g., new orders) are received, the additional units are factored into the overall contract estimate of costs and transaction price.
Net contract adjustments impacted the Company’s results as follows (in millions, except per share amounts):
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net sales |
|
$ |
( |
) |
|
$ |
( |
) |
Operating income |
|
|
( |
) |
|
|
( |
) |
Net income |
|
|
( |
) |
|
|
( |
) |
Diluted earnings per share |
|
$ |
( |
) |
|
$ |
( |
) |
The Defense segment incurs pre-production engineering, factory setup and other contract fulfillment costs related to products produced for its customers under long-term contracts. An asset is recognized for costs incurred to fulfill an existing contract or highly-probable anticipated contract if such costs generate or enhance resources that will be used in satisfying performance obligations in the future and the costs are expected to be recovered. Costs related to customer-owned tooling that will be used in production and for which the customer has provided a non-cancelable right to use the tooling to perform
10
during the contract term are also recognized as an asset. Under the Next Generation Delivery Vehicles (NGDV) contract with the United States Postal Service (USPS), the Company has determined that it does not transfer control of any goods or services to the USPS until the construction of the production vehicles. Deferred contract costs will be amortized over the anticipated production volume of the NGDV contract. The Company periodically assesses its contract fulfillment and customer-owned tooling for impairment. The Company did
Deferred contract costs, the majority of which are related to the NGDV contract, consisted of the following (in millions):
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Costs for anticipated contracts |
|
$ |
|
|
$ |
|
||
Engineering costs |
|
|
|
|
|
|
||
Factory setup costs |
|
|
|
|
|
|
||
Customer-owned tooling |
|
|
|
|
|
|
||
Deferred contract costs |
|
$ |
|
|
$ |
|
||
Disaggregation of Revenue
Consolidated net sales disaggregated by segment and timing of revenue recognition are as follows (in millions):
|
|
Three Months Ended March 31, 2024 |
|
|||||||||||||||||
|
|
Access |
|
|
Defense |
|
|
Vocational |
|
|
Eliminations |
|
|
Total |
|
|||||
Point in time |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Over time |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
Three Months Ended March 31, 2023 |
|
|||||||||||||||||
|
|
Access |
|
|
Defense |
|
|
Vocational |
|
|
Eliminations |
|
|
Total |
|
|||||
Point in time |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Over time |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
See Note 20 for further disaggregated sales information.
Contract Assets and Contract Liabilities
In instances where the Company recognizes revenue prior to having an unconditional right to payment, the Company records a contract asset. The Company reduces contract assets when the Company has an unconditional right to payment. The Company periodically assesses its contract assets for impairment. The Company did
The Company is generally entitled to bill its customers upon satisfaction of its performance obligations, except for its long-term contracts in the Defense segment which typically allow for billing upon acceptance of the finished goods, payments received from customers in advance of performance and extended warranties that are billed in advance of the warranty coverage period. Customer payment terms generally do not exceed one year. See Note 9 for additional information on the Company’s receivables balances.
11
With the exception of Pierce Manufacturing Inc. (Pierce) in the Vocational segment, the Company’s contracts typically do not contain a significant financing component. Pierce customers earn interest on customer advances at a rate determined in a separate financing transaction between Pierce and the customer at contract inception. Interest charges for amounts due on customer advances are recorded in “Interest expense” in the Condensed Consolidated Statements of Income and were $
The timing of billing does not always match the timing of revenue recognition. In instances where a customer pays consideration in advance or when the Company is entitled to bill a customer in advance of recognizing the related revenue, the Company records a contract liability. The Company reduces contract liabilities when the Company transfers control of the promised goods and services. Contract assets and liabilities are determined on a net basis for each contract.
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Customer advances |
|
$ |
|
|
$ |
|
||
Other current liabilities |
|
|
|
|
|
|
||
Non-current customer advances |
|
|
|
|
|
|
||
Other non-current liabilities |
|
|
|
|
|
|
||
Total contract liabilities |
|
$ |
|
|
$ |
|
||
Revenue recognized during the period from beginning contract liabilities was as follows (in millions):
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Beginning liabilities recognized in revenue |
|
$ |
|
|
$ |
|
||
The Company offers a variety of service-type warranties, including optionally priced extended warranty programs. Outstanding balances related to service-type warranties are included within contract liabilities. Revenue related to service-type warranties is deferred until after the expiration of the standard warranty period. The revenue is then recognized over the term of the service-type warranty period in proportion to the costs that are expected to be incurred.
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Balance at beginning of period |
|
$ |
|
|
$ |
|
||
Deferred revenue for new service warranties |
|
|
|
|
|
|
||
Amortization of deferred revenue |
|
|
( |
) |
|
|
( |
) |
Foreign currency translation |
|
|
( |
) |
|
|
|
|
Balance at end of period |
|
$ |
|
|
$ |
|
||
Classification of service-type warranties in the Condensed Consolidated Balance Sheets consisted of the following (in millions):
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Other current liabilities |
|
$ |
|
|
$ |
|
||
Other non-current liabilities |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
12
Remaining Performance Obligations
As of March 31, 2024, the Company had unsatisfied performance obligations for contracts with an original duration greater than one year totaling $
5. Stock-Based Compensation
In February 2017, the Company’s shareholders approved the 2017 Incentive Stock and Awards Plan (the “2017 Stock Plan”). At March 31, 2024, the Company had reserved
The Company recognizes stock-based compensation expense over the requisite service period for vesting of an award, or to an employee’s eligible retirement date, if earlier and applicable. Total stock-based compensation expense, including cash-settled liability awards, was $
6. Employee Benefit Plans
Components of net periodic pension benefit cost were as follows (in millions):
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Components of net periodic benefit cost |
|
|
|
|
|
|
||
Service cost |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|||
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|||
|
|
( |
) |
|
|
( |
) |
|
Expenses paid |
|
|
|
|
|
|
||
Net periodic benefit cost |
|
$ |
|
|
$ |
|
||
Components of net periodic other post-employment benefit cost were as follows (in millions):
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Components of net periodic benefit cost |
|
|
|
|
|
|
||
Service cost |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|||
|
|
( |
) |
|
|
( |
) |
|
Net periodic benefit cost |
|
$ |
|
|
$ |
|
||
Components of net periodic benefit cost other than “Service cost” and “Expenses paid” are included in “Miscellaneous, net” in the Condensed Consolidated Statements of Income.
13
7. Income Taxes
The Company recorded income tax expense of $
The Company’s liability for gross unrecognized tax benefits, excluding related interest and penalties, was $
The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits in the “Provision for income taxes” in the Condensed Consolidated Statements of Income. During the three months ended March 31, 2024 and 2023, the Company recognized expense of $
Cash paid for income taxes, net of refunds disclosed on the Condensed Consolidated Statements of Cash Flows includes cash paid for the purchase of transferable tax credits during the three months ended March 31, 2024 and 2023 of $
8. Earnings Per Share
The reconciliation of basic weighted-average shares outstanding to diluted weighted-average shares outstanding was as follows:
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Basic weighted-average common shares outstanding |
|
|
|
|
|
|
||
Dilutive stock options and other equity-based compensation awards |
|
|
|
|
|
|
||
Diluted weighted-average common shares outstanding |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
There were
14
9. Receivables
Receivables consisted of the following (in millions):
|
|
March 31, |
|
|
December 31, |
|
||
Trade receivables - U.S. government |
|
$ |
|
|
$ |
|
||
Trade receivables - other |
|
|
|
|
|
|
||
Finance receivables |
|
|
|
|
|
|
||
Notes receivable |
|
|
|
|
|
|
||
Other receivables |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less allowance for doubtful accounts |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
$ |
|
||
Classification of receivables in the Condensed Consolidated Balance Sheets consisted of the following (in millions):
|
|
March 31, |
|
|
December 31, |
|
||
Current receivables |
|
$ |
|
|
$ |
|
||
Non-current receivables |
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
||
Changes in the Company’s allowance for doubtful accounts by type of receivable were as follows (in millions):
|
|
Three Months Ended March 31, 2024 |
|
|
Three Months Ended March 31, 2023 |
|
||||||||||||||||||
|
|
Trade and |
|
|
Finance |
|
|
Total |
|
|
Trade and |
|
|
Finance |
|
|
Total |
|
||||||
Allowance at beginning of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Provision for doubtful accounts, net of recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Charge-off of accounts |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||
Allowance at end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
10. Inventories
Inventories consisted of the following (in millions):
|
|
March 31, |
|
|
December 31, |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Partially finished products |
|
|
|
|
|
|
||
Finished products |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
15
11. Property, Plant and Equipment
Property, plant and equipment consisted of the following (in millions):
|
|
March 31, |
|
|
December 31, |
|
||
Land and land improvements |
|
$ |
|
|
$ |
|
||
Buildings |
|
|
|
|
|
|
||
Machinery and equipment |
|
|
|
|
|
|
||
Software and related costs |
|
|
|
|
|
|
||
Equipment on operating lease to others |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
$ |
|
||
Depreciation expense was $
Equipment on operating lease to others represents the cost of equipment shipped to customers for whom the Company has guaranteed the residual value of 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 to
12. 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.
The following table presents changes in goodwill during the three months ended March 31, 2024 (in millions):
|
|
Access |
|
|
Defense |
|
|
Vocational |
|
|
Total |
|
||||
Net goodwill at December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Foreign currency translation |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Net goodwill at March 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table presents details of the Company’s goodwill allocated to the reportable segments (in millions):
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||||||||||||||||||
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
||||||
Access |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Defense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Vocational |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
16
Details of the Company’s total purchased intangible assets are as follows (in millions):
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||||||||||||||||||
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
||||||
Amortizable intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Customer relationships |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Trade names |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Technology-related |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Distribution network |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Other |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Non-amortizable trade names |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Amortization of purchased intangible assets was $
13. Debt
The Company was obligated under the following debt instruments (in millions):
|
|
March 31, 2024 |
|
|||||||||
|
|
Principal |
|
|
Debt Issuance Costs |
|
|
Debt, Net |
|
|||
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
( |
) |
|
|
|
|||
Other long-term debt |
|
|
|
|
|
|
|
|
|
|||
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|||
Revolving credit facilities |
|
|
|
|
|
|
|
$ |
|
|||
|
|
December 31, 2023 |
|
|||||||||
|
|
Principal |
|
|
Debt Issuance Costs |
|
|
Debt, Net |
|
|||
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
( |
) |
|
|
|
|||
Other long-term debt |
|
|
|
|
|
|
|
|
|
|||
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|||
Revolving credit facilities |
|
|
|
|
|
|
|
$ |
|
|||
On March 23, 2022, the Company entered into a Third Amended and Restated Credit Agreement with various lenders (the “Credit Agreement”). The Credit Agreement provides for an unsecured revolving credit facility (the “Revolving Credit Facility”) that matures in
17
Under the Credit Agreement, the Company is obligated to pay (i) an unused commitment fee ranging from
Borrowings under the Credit Agreement bear interest for dollar-denominated loans at a variable rate equal to (i) Term SOFR (the forward-looking secured overnight financing rate) plus a specified margin, which may be adjusted upward or downward depending on whether certain criteria are satisfied, or (ii) the base rate (which is the highest of (x) Bank of America, N.A.’s prime rate, (y) the federal funds rate plus
The Credit Agreement contains various restrictions and covenants, including a requirement that the Company maintain a leverage ratio at certain levels, subject to certain exceptions, restrictions on the ability of the Company and certain of its subsidiaries to consolidate or merge, create liens, incur additional subsidiary indebtedness and consummate acquisitions and a restriction on the disposition of all or substantially all of the assets of the Company and its subsidiaries taken as a whole.
The Credit Agreement requires the Company to maintain a maximum leverage ratio (defined as, with certain adjustments, the ratio of the Company’s consolidated indebtedness to the Company’s consolidated net income for the previous four quarters before interest, taxes, depreciation, amortization, non-cash charges and certain other items (EBITDA)) as of the last day of any quarter of
In conjunction with the Hinowa acquisition on January 31, 2023, the Company assumed €
In March 2022, the Company entered into an uncommitted line of credit to provide short-term finance support to operations in China. The agreement expired on March 14, 2024 and was not renewed. The line of credit carried a maximum availability of
In September 2019, the Company entered into an uncommitted line of credit to provide short-term finance support to operations in China. The line of credit carries a maximum availability of
In May 2018, the Company issued $
The fair value of the long-term debt is estimated based upon Level 2 inputs to reflect the market rate of the Company’s debt. At March 31, 2024, the fair value of the 2028 Senior Notes and the 2030 Senior Notes was estimated to be $
18
14. Warranties
The Company’s products generally carry explicit warranties that extend from
Provisions for estimated warranty and other related costs are recorded at the time of sale and are periodically adjusted to reflect actual experience. Certain warranty and other related claims involve matters of dispute that ultimately are resolved by negotiation, arbitration or litigation. At times, warranty issues arise that are beyond the scope of the Company’s historical experience. It is reasonably possible that additional warranty and other related claims could arise from disputes or other matters in excess of amounts accrued; however, the Company does not expect that any such amounts, while not determinable, would have a material effect on the Company’s consolidated financial condition, results of operations or cash flows.
Changes in the Company’s assurance-type warranty liabilities were as follows (in millions):
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Balance at beginning of period |
|
$ |
|
|
$ |
|
||
Warranty provisions |
|
|
|
|
|
|
||
Settlements made |
|
|
( |
) |
|
|
( |
) |
Changes in liability for pre-existing warranties, net |
|
|
( |
) |
|
|
( |
) |
Foreign currency translation |
|
|
( |
) |
|
|
|
|
Disposition of business |
|
|
|
|
|
( |
) |
|
Acquisition of business |
|
|
|
|
|
|
||
Balance at end of period |
|
$ |
|
|
$ |
|
||
15. Guarantee Arrangements
Customers of the Company, from time to time, may fund purchases from the Company through third-party finance companies. In certain instances, the Company may be requested to provide support for these arrangements through credit or residual value guarantees, by which the Company agrees to make payments to the finance companies in certain circumstances as further described below.
Credit Guarantees: The Company is party to multiple agreements whereby at March 31, 2024 the Company guaranteed an aggregate of $
19
Residual Value Guarantees: The Company is party to multiple agreements whereby at March 31, 2024 the Company guaranteed to support an aggregate of $
Changes in the Company’s stand ready obligations (non-contingent) to perform under guarantees were as follows (in millions):
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Balance at beginning of period |
|
$ |
|
|
$ |
|
||
Provision for new credit guarantees |
|
|
|
|
|
|
||
Changes for pre-existing guarantees, net |
|
|
( |
) |
|
|
|
|
Amortization of previous guarantees |
|
|
( |
) |
|
|
( |
) |
Balance at end of period |
|
$ |
|
|
$ |
|
||
The contingent portion of the guarantee liabilities that relates to current expected credit losses is recognized separately and is recorded within “Other current liabilities” and “Other non-current liabilities” in the Company’s Condensed Consolidated Balance Sheets.
Changes in the Company’s off-balance sheet credit loss exposure (contingent) related to its guarantees were as follows (in millions):
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Balance at beginning of period |
|
$ |
|
|
$ |
|
||
Provision for new credit guarantees |
|
|
|
|
|
|
||
Changes for pre-existing guarantees, net |
|
|
( |
) |
|
|
( |
) |
Foreign currency translation |
|
|
|
|
|
|
||
Balance at end of period |
|
$ |
|
|
$ |
|
||
16. Contingencies
Personal Injury Actions and Other - Product and general liability claims are made against the Company from time to time in the ordinary course of business. The Company is generally self-insured for claims up to $
20
Market Risks - The Company was contingently liable under bid, performance and specialty bonds totaling $
Other Matters - The Company is subject to environmental matters and legal proceedings and claims, including patent, antitrust, product liability, warranty and state dealership regulation compliance proceedings, that arise in the ordinary course of business. Although the final results of such matters and claims cannot be predicted with certainty, management believes that the ultimate resolution will not have a material effect on the Company’s financial condition, results of operations or cash flows. Actual results could vary, among other things, due to the uncertainties involved in litigation.
Major contracts for military systems are performed over extended periods of time and are subject to changes in scope of work and delivery schedules. Pricing negotiations on changes and settlement of claims often extend over prolonged periods of time. The Company’s ultimate profitability on such contracts may depend on the eventual outcome of an equitable settlement of contractual issues with the Company’s customers.
17. Shareholders’ Equity
In May 2019, the Company’s Board of Directors approved a Common Stock repurchase authorization for which there was remaining authority to repurchase
C
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Outstanding at beginning of period |
|
|
|
|
|
|
||
Repurchases of Common Stock |
|
|
( |
) |
|
|
( |
) |
Exercise of stock options |
|
|
|
|
|
|
||
Payment of stock-based restricted and performance shares |
|
|
|
|
|
|
||
Shares tendered for taxes on stock-based compensation |
|
|
( |
) |
|
|
( |
) |
Other |
|
|
|
|
|
|
||
Outstanding at end of period |
|
|
|
|
|
|
||
21
18. Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) by component were as follows (in millions):
|
|
Three Months Ended March 31, 2024 |
|
|||||||||||||
|
|
Employee Pension and |
|
|
Cumulative |
|
|
Derivative |
|
|
Accumulated Other |
|
||||
Balance at beginning of period |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Other comprehensive income (loss) before reclassifications |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Amounts reclassified from accumulated other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net current period other comprehensive income (loss) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance at end of period |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
Three Months Ended March 31, 2023 |
|
|||||||||||||
|
|
Employee Pension and |
|
|
Cumulative |
|
|
Derivative |
|
|
Accumulated Other |
|
||||
Balance at beginning of period |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Other comprehensive income (loss) before reclassifications |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amounts reclassified from accumulated other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net current period other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Balance at end of period |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Reclassifications out of accumulated other comprehensive income (loss) included in the computation of net periodic pension and postretirement benefit cost (See Note 6 for additional details regarding employee benefit plans) were as follows (in millions):
|
|
Classification of |
|
Three Months Ended |
|
|||||
|
|
|
|
2024 |
|
|
2023 |
|
||
Amortization of employee pension and postretirement benefits items |
|
|
|
|
|
|
|
|
||
Prior service cost |
|
Miscellaneous, net |
|
$ |
|
|
$ |
|
||
Actuarial gains |
|
Miscellaneous, net |
|
|
( |
) |
|
|
( |
) |
Total before tax |
|
|
|
|
( |
) |
|
|
( |
) |
Tax expense |
|
|
|
|
|
|
|
|
||
Net of tax |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
19. Fair Value Measurement
FASB ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e., exit price) in an orderly transaction between market participants at the measurement date. FASB ASC Topic 820 requires disclosures that categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation. Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment.
22
The three levels are defined as follows:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Observable inputs other than quoted prices in active markets for identical assets or liabilities, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.
Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.
The fair values of the Company’s financial assets and liabilities were as follows (in millions):
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
March 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
SERP plan assets (a) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Investment in equity securities (b) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency exchange derivatives (c) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency exchange derivatives (c) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
SERP plan assets (a) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Investment in equity securities (b) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency exchange derivatives (c) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency exchange derivatives (c) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
20. Business Segment Information
The Company is organized into
Access: This segment consists of JLG and JerrDan. JLG designs and manufactures aerial work platforms and telehandlers that are sold worldwide for use in a wide variety of construction, industrial, institutional and general maintenance applications to position workers and materials at elevated heights. JerrDan designs and manufactures towing and recovery equipment. Access customers include equipment rental companies, construction contractors, manufacturing companies, home improvement centers and towing companies.
Defense: This segment consists of Oshkosh Defense and Pratt Miller. Oshkosh Defense designs and manufactures tactical wheeled vehicles and supplies parts and services for the U.S. military and other militaries around the world and delivery vehicles for the USPS. Pratt Miller provides engineering and product development services primarily to customers in the motorsports and multiple ground vehicle markets.
23
Vocational: This segment includes Pierce, Airport Products, Maxi-Metal, McNeilus, Oshkosh AeroTech, IMT and Oshkosh Commercial. Pierce, Airport Products and Maxi-Metal design and manufacture commercial and custom fire apparatus and emergency vehicles primarily for fire departments, airports and other governmental units. McNeilus designs and manufactures refuse collection vehicles and components. Oshkosh AeroTech designs and manufactures aviation ground support products and gate equipment and provides airport services to commercial airlines, airports, air-freight carriers, ground handling customers and the military. IMT designs and manufactures field service vehicles and truck-mounted cranes for niche markets. Oshkosh Commercial designs and manufactures front-discharge concrete mixer vehicles and components.
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, certain new product development costs, stock-based compensation, costs of certain business initiatives and shared services or operations benefiting multiple segments and results of insignificant operations. Intersegment sales generally include amounts invoiced by a segment for work performed for another segment. Amounts are based on actual work performed and agreed-upon pricing, which is intended to be reflective of the contribution made by the supplying business segment.
Selected financial information relating to the Company’s reportable segments and product lines is as follows (in millions):
|
|
Three Months Ended March 31, |
|
|||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
||||||||||||||||||
|
|
External |
|
|
Inter- |
|
|
Net |
|
|
External |
|
|
Inter- |
|
|
Net |
|
||||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Access |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Aerial work platforms |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Telehandlers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Access |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Defense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Vocational |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fire apparatus |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Refuse collection |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Vocational |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Eliminations |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Consolidated |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Operating income (loss): |
|
|
|
|
|
|
||
Access |
|
$ |
|
|
$ |
|
||
Defense |
|
|
|
|
|
|
||
Vocational |
|
|
|
|
|
|
||
Corporate and intersegment eliminations |
|
|
( |
) |
|
|
( |
) |
Consolidated |
|
|
|
|
|
|
||
Interest expense, net of interest income |
|
|
( |
) |
|
|
( |
) |
Miscellaneous income (expense), net |
|
|
( |
) |
|
|
|
|
Income before income taxes and losses of unconsolidated affiliates |
|
$ |
|
|
$ |
|
||
24
The following table presents net sales by geographic region based on product shipment destination (in millions):
|
|
Three Months Ended March 31, 2024 |
|
|||||||||||||||||
|
|
Access |
|
|
Defense |
|
|
Vocational |
|
|
Eliminations |
|
|
Total |
|
|||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
North America |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Europe, Africa and Middle East |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Rest of the World |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Consolidated |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
Three Months Ended March 31, 2023 |
|
|||||||||||||||||
|
|
Access |
|
|
Defense |
|
|
Vocational |
|
|
Eliminations |
|
|
Total |
|
|||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
North America |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Europe, Africa and Middle East |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Rest of the World |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Consolidated |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
25
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement About Forward-Looking Statements
This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Quarterly Report on Form 10-Q contain statements that the Company believes to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q, including, without limitation, statements regarding the Company’s future financial position, business strategy, targets, projected sales, costs, earnings, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations, including those under the caption “Overview” are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “project” or “plan” or the negative thereof or variations thereon or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond the Company’s control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include the cyclical nature of the Company’s access equipment, fire apparatus, refuse collection and air transportation equipment markets, which are particularly impacted by the strength of U.S. and European economies and construction seasons; the Company’s estimates of access equipment demand which, among other factors, is influenced by historical customer buying patterns and rental company fleet replacement strategies; the impact of orders and costs on the U.S. Postal Service (USPS) contract; the impact of severe weather, war, natural disasters or pandemics that may affect the Company, its suppliers or its customers; the Company’s ability to increase prices or impose surcharges to raise margins or to offset higher input costs, including increased raw material, labor, freight and overhead costs; the Company's ability to accurately predict future input costs associated with Defense contracts; the Company’s ability to attract and retain production labor in a timely manner; the Company's ability to successfully integrate the AeroTech acquisition and to realize the anticipated benefits associated with the same; the strength of the U.S. dollar and its impact on Company exports, translation of foreign sales and the cost of purchased materials; the Company’s ability to predict the level and timing of orders for indefinite delivery/indefinite quantity contracts with the U.S. federal government; budget uncertainty for the U.S. federal government, including risks of future budget cuts, the impact of continuing resolution funding mechanisms and the potential for shutdowns; the impact of any U.S. Department of Defense solicitation for competition for future contracts to produce military vehicles; risks related to the collectability of receivables, particularly for those businesses with exposure to construction markets; the cost of any warranty campaigns related to the Company’s products; risks associated with international operations and sales, including compliance with the Foreign Corrupt Practices Act; risks that a trade war and related tariffs could reduce the competitiveness of the Company’s products; the Company’s ability to comply with complex laws and regulations applicable to U.S. government contractors; cybersecurity risks and costs of defending against, mitigating and responding to data security threats and breaches impacting the Company; the Company’s ability to successfully identify, complete and integrate other acquisitions and to realize the anticipated benefits associated with the same; and risks related to the Company’s ability to successfully execute on its strategic road map and meet its long-term financial goals. Additional information concerning these and other factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company’s SEC filings, including, but not limited to, the Company’s Current Report on Form 8-K filed with the SEC on April 25, 2024 and Item 1A. of Part II of this Quarterly Report on Form 10-Q.
All forward-looking statements, including those under the caption “Overview,” speak only as of the date the Company files this Quarterly Report on Form 10-Q with the SEC. The Company assumes no obligation, and disclaims any obligation, to update information contained in this Quarterly Report on Form 10-Q. Investors should be aware that the Company may not update such information until the Company’s next quarterly earnings conference call, if at all.
All references herein to earnings per share refer to earnings per share assuming dilution.
26
General
Major products manufactured and marketed by each of the Company’s business segments are as follows:
Access — 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, as well as carriers and wreckers. Access customers include equipment rental companies, construction contractors, manufacturing companies, home improvement centers and towing companies.
Defense — tactical vehicles, trailers, weapons system integration and parts sold to the U.S. military and to other militaries around the world and delivery vehicles for the USPS.
Vocational — custom and commercial firefighting vehicles and equipment, aircraft rescue and firefighting (ARFF) vehicles, simulators, mobile command and control vehicles and other emergency vehicles primarily sold to fire departments, airports and other governmental units; refuse collection vehicles sold to commercial and municipal waste haulers; aviation ground support products, gate equipment and airport services provided to commercial airlines, airports, air-freight carriers, ground handling customers and the military; front-discharge concrete mixers sold to ready-mix companies; and field service vehicles and truck-mounted cranes sold to mining, construction and other companies.
Overview
The Company reported earnings per share of $2.71 in the first quarter of 2024, which more than doubled earnings per share of $1.34 in the first quarter of 2023. The strong results in the first quarter of 2024 were primarily the result of improved price/cost dynamics as well as favorable product and customer mix. As expected, orders in the Access segment began to normalize in the first quarter of 2024, leading to lower orders in the quarter compared to the first quarter of 2023. As the Access segment is largely booked for 2024, the Company continues to expect that the majority of 2025 orders will be booked in the second half of 2024, particularly in the fourth quarter.
The Company continues to make investments in technologies that it expects will drive demand for the next decade. In April, the Company began production of its Next Generation Delivery Vehicle (NGDV) for the USPS. The Company expects to increase NGDV production throughout 2024 and 2025 and be at full rate production by the start of 2026. This production is expected to offset the loss of the domestic Joint Light Tactical Vehicle (JLTV) program.
Consolidated net sales in the first quarter of 2024 increased $275.7 million, or 12.2%, to $2.54 billion compared to the first quarter of 2023 primarily due to the impact of sales from the acquisition of AeroTech, improved organic volume and improved pricing, offset in part by the impact of the sale of the rear-discharge concrete mixer business.
Consolidated operating income increased 98.5% to $259.7 million, or 10.2% of sales, in the first quarter of 2024 compared to $130.8 million, or 5.8% of sales, in the first quarter of 2023. The increase in operating income was primarily due to improved price/cost dynamics, favorable mix, higher organic sales volume and the absence of a loss on the sale of a business.
As a result of the positive start of 2024, solid execution and healthy demand, the Company increased its 2024 earnings per share estimate from in the range of $9.45 to in the range of $10.55 on estimated operating income of $1.0 billion and estimated consolidated sales of $10.7 billion. The revised earnings per share estimate includes a $0.70 per share charge related to amortization of purchased intangibles. Excluding amortization of purchased intangibles, the Company increased its 2024 adjusted earnings per share estimate to be in the range of $11.25.
The Company expects Access segment sales and operating margin in 2024 to be in the range of $5.4 billion and 15.25% compared to the Company’s previous expectation of $5.2 billion and 14.8%, respectively, largely as a result of expected improved production throughput and improved sales mix. Compared to the first quarter of 2024, the Company expects customer mix to moderate and new product development spending to increase for the remaining quarters of 2024.
The Company continues to expect Defense segment sales and operating margin in 2024 to be in the range of $2.1 billion and 2.25%, respectively.
27
The Company expects Vocational segment sales and operating margin in 2024 to be in the range of $3.2 billion and 10% compared to the Company's previous expectation of $3.1 billion and 9.4%, respectively, largely as a result of expected increased chassis availability and improved price/cost dynamics.
The Company expects corporate expenses for 2024 to be $190 million compared to its previous expectation of $180 million as a result of higher expected incentive and stock-based compensation expense.
The Company expects earnings per share in the second quarter of 2024 will be in the range of $2.82, reflecting continued strong demand and similar supply chain dynamics to those the Company experienced during the first quarter of 2024. Estimated earnings per share for the second quarter of 2024 includes an $0.18 per share charge related to amortization of purchased intangibles. The Company expects an increase in net sales of approximately 15% compared to the second quarter of 2023, largely due to the acquisition of AeroTech.
RESULTS OF OPERATIONS
CONSOLIDATED RESULTS
The following table presents consolidated results (in millions):
|
|
First Quarter |
|
|||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
% Change |
|
||||
Net sales |
|
$ |
2,543.8 |
|
|
$ |
2,268.1 |
|
|
$ |
275.7 |
|
|
|
12.2 |
% |
Cost of sales |
|
|
2,073.8 |
|
|
|
1,934.3 |
|
|
|
139.5 |
|
|
|
7.2 |
% |
Gross income |
|
|
470.0 |
|
|
|
333.8 |
|
|
|
136.2 |
|
|
|
40.8 |
% |
% of sales |
|
|
18.5 |
% |
|
|
14.7 |
% |
|
380 bps |
|
|
|
|
||
Selling, general and administrative |
|
|
196.8 |
|
|
|
199.1 |
|
|
|
(2.3 |
) |
|
|
-1.2 |
% |
Amortization of purchased intangibles |
|
|
13.5 |
|
|
|
3.9 |
|
|
|
9.6 |
|
|
|
246.2 |
% |
Operating income |
|
$ |
259.7 |
|
|
$ |
130.8 |
|
|
$ |
128.9 |
|
|
|
98.5 |
% |
% of sales |
|
|
10.2 |
% |
|
|
5.8 |
% |
|
440 bps |
|
|
|
|
||
The following table presents net sales by geographic region based on product shipment destination (in millions):
|
|
First Quarter |
|
|||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
% Change |
|
||||
North America |
|
$ |
2,243.9 |
|
|
$ |
1,928.7 |
|
|
$ |
315.2 |
|
|
|
16.3 |
% |
Europe, Africa and Middle East |
|
|
192.0 |
|
|
|
223.7 |
|
|
|
(31.7 |
) |
|
|
-14.2 |
% |
Rest of the World |
|
|
107.9 |
|
|
|
115.7 |
|
|
|
(7.8 |
) |
|
|
-6.7 |
% |
Consolidated |
|
$ |
2,543.8 |
|
|
$ |
2,268.1 |
|
|
$ |
275.7 |
|
|
|
12.2 |
% |
First Quarter 2024 Compared to 2023
Consolidated net sales increased primarily due to the inclusion of sales related to the AeroTech acquisition ($176 million), higher sales volume ($77 million), and higher pricing in response to higher input costs ($40 million), offset in part by the impact of the sale of the rear-discharge concrete mixer business ($14 million).
The improvement in consolidated gross margin was primarily due lower material & logistics costs (140 basis points), improved pricing (120 basis points) and improved sales mix (80 basis points).
Consolidated selling, general and administrative expenses were relatively flat with the prior year as the addition of selling, general and administrative expenses for AeroTech ($20 million) were offset by the absence of a loss on the sale of the rear-discharge concrete mixer business ($13 million) and a reduction of selling, general and administrative expenses related to the divested business ($5 million).
Amortization of purchased intangible assets increased primarily due to the acquisition of AeroTech ($9 million).
28
The increase in consolidated operating income was primarily due to improved material & logistics costs ($35 million), improved pricing ($40 million), favorable sales mix ($29 million), the impact of higher gross margin associated with higher organic sales volume ($18 million) and the absence of a loss on the sale of a business ($13 million).
The following table presents consolidated non-operating changes (in millions):
|
|
First Quarter |
|
|||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
% Change |
|
||||
Interest expense, net of interest income |
|
$ |
(20.8 |
) |
|
$ |
(7.2 |
) |
|
$ |
(13.6 |
) |
|
|
188.9 |
% |
Miscellaneous, net |
|
|
(2.0 |
) |
|
|
5.8 |
|
|
|
(7.8 |
) |
|
|
-134.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Provision for income taxes |
|
|
54.7 |
|
|
|
34.2 |
|
|
|
20.5 |
|
|
|
59.9 |
% |
Effective tax rate |
|
|
23.1 |
% |
|
|
26.4 |
% |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Losses of unconsolidated affiliates |
|
$ |
(2.8 |
) |
|
$ |
(6.7 |
) |
|
$ |
3.9 |
|
|
|
-58.2 |
% |
First Quarter 2024 Compared to 2023
Interest expense, net of interest income increased due to increased borrowings on the Company's Revolving Credit Facility and lower cash holdings as a result of the acquisition of AeroTech in the third quarter of 2023.
Miscellaneous, net included a gain on a settlement with the Company's pension advisor of $5 million in the first quarter of 2023.
The effective tax rate in the first quarter of 2024 included discrete tax benefits of $2 million. The effective tax rate in the first quarter of 2023 included discrete tax charges of $3 million, including a $2 million charge related to a valuation allowance recorded with respect to a deferred tax asset on marketable securities.
Losses of unconsolidated affiliates included a write-down of an investment in an equity interest in an entity in Mexico of $6 million in the first quarter of 2023.
SEGMENT RESULTS
Access
The following table presents the Access segment results (in millions):
|
|
First Quarter |
|
|||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
% Change |
|
||||
Net sales |
|
$ |
1,237.5 |
|
|
$ |
1,193.2 |
|
|
$ |
44.3 |
|
|
|
3.7 |
% |
Cost of sales |
|
|
958.9 |
|
|
|
988.4 |
|
|
|
(29.5 |
) |
|
|
-3.0 |
% |
Gross income |
|
|
278.6 |
|
|
|
204.8 |
|
|
|
73.8 |
|
|
|
36.0 |
% |
% of sales |
|
|
22.5 |
% |
|
|
17.2 |
% |
|
530 bps |
|
|
|
|
||
Selling, general and administrative |
|
|
68.2 |
|
|
|
68.8 |
|
|
|
(0.6 |
) |
|
|
-0.9 |
% |
Amortization of purchased intangibles |
|
|
2.3 |
|
|
|
1.0 |
|
|
|
1.3 |
|
|
|
130.0 |
% |
Operating income |
|
$ |
208.1 |
|
|
$ |
135.0 |
|
|
$ |
73.1 |
|
|
|
54.1 |
% |
% of sales |
|
|
16.8 |
% |
|
|
11.3 |
% |
|
550 bps |
|
|
|
|
||
First Quarter 2024 Compared to 2023
Access segment net sales increased primarily as a result of improved sales volume in North America offset in part by lower sales volume in Europe.
The improved gross margin in the Access segment was primarily due to lower material & logistics costs (320 basis points), improved customer mix (130 basis points) and improved pricing (40 basis points).
29
The increase in operating income in the Access segment was primarily due to improved material & logistics costs ($38 million), improved customer mix ($16 million), the impact of higher gross margin associated with higher sales volume ($10 million) and improved pricing ($7 million).
Defense
The following table presents the Defense segment results (in millions):
|
|
First Quarter |
|
|||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
% Change |
|
||||
Net sales |
|
$ |
536.9 |
|
|
$ |
513.1 |
|
|
$ |
23.8 |
|
|
|
4.6 |
% |
Cost of sales |
|
|
490.4 |
|
|
|
474.8 |
|
|
|
15.6 |
|
|
|
3.3 |
% |
Gross income |
|
|
46.5 |
|
|
|
38.3 |
|
|
|
8.2 |
|
|
|
21.4 |
% |
% of sales |
|
|
8.7 |
% |
|
|
7.5 |
% |
|
. 120 bps |
|
|
|
|
||
Selling, general and administrative |
|
|
33.9 |
|
|
|
35.0 |
|
|
|
(1.1 |
) |
|
|
-3.1 |
% |
Amortization of purchased intangibles |
|
|
1.3 |
|
|
|
1.6 |
|
|
|
(0.3 |
) |
|
|
-18.8 |
% |
Operating income |
|
$ |
11.3 |
|
|
$ |
1.7 |
|
|
$ |
9.6 |
|
|
|
564.7 |
% |
% of sales |
|
|
2.1 |
% |
|
|
0.3 |
% |
|
. 180 bps |
|
|
|
|
||
First Quarter 2024 Compared to 2023
Defense segment net sales increased primarily due to higher aftermarket parts and Family of Medium Tactical Vehicle sales volume, offset in part by lower JLTV program volume. JLTV production under the Company's domestic JLTV contract is expected to conclude early in 2025 as the domestic follow-on contract was awarded to another company. The domestic JLTV contract accounted for $229 million of sales in the first quarter of 2024.
The increase in gross margin in the Defense segment was due to improved product mix (90 basis points) as a result of the higher mix of aftermarket parts sales.
The increase in operating income in the Defense segment was primarily a result of improved product mix ($5 million) and the impact of higher gross margin associated with higher sales volume ($4 million).
Vocational
The following table presents the Vocational segment results (in millions):
|
|
First Quarter |
|
|||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
% Change |
|
||||
Net sales |
|
$ |
772.4 |
|
|
$ |
562.7 |
|
|
$ |
209.7 |
|
|
|
37.3 |
% |
Cost of sales |
|
|
621.9 |
|
|
|
469.5 |
|
|
|
152.4 |
|
|
|
32.5 |
% |
Gross income |
|
|
150.5 |
|
|
|
93.2 |
|
|
|
57.3 |
|
|
|
61.5 |
% |
% of sales |
|
|
19.5 |
% |
|
|
16.6 |
% |
|
. 290 bps |
|
|
|
|
||
Selling, general and administrative |
|
|
60.5 |
|
|
|
63.8 |
|
|
|
(3.3 |
) |
|
|
-5.2 |
% |
Amortization of purchased intangibles |
|
|
9.9 |
|
|
|
1.3 |
|
|
|
8.6 |
|
|
|
661.5 |
% |
Operating income |
|
$ |
80.1 |
|
|
$ |
28.1 |
|
|
$ |
52.0 |
|
|
|
185.1 |
% |
% of sales |
|
|
10.4 |
% |
|
|
5.0 |
% |
|
. 540 bps |
|
|
|
|
||
First Quarter 2024 Compared to 2023
Vocational segment net sales increased due to the inclusion of AeroTech sales ($176 million) and higher pricing in response to higher input costs ($34 million).
The increase in gross margin in the Vocational segment was primarily attributable to improved pricing (330 basis points).
The increase in operating income in the Vocational segment was largely a result of improved pricing ($34 million), the absence of a loss on the sale of the rear-discharge concrete mixer business ($13 million) and improved product mix ($9 million).
30
Corporate and Intersegment Eliminations
The following table presents the corporate costs and intersegment eliminations (in millions):
|
|
First Quarter |
|
|||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
% Change |
|
||||
Net sales |
|
$ |
(3.0 |
) |
|
$ |
(0.9 |
) |
|
$ |
(2.1 |
) |
|
|
233.3 |
% |
Cost of sales |
|
|
2.6 |
|
|
|
1.6 |
|
|
|
1.0 |
|
|
|
62.5 |
% |
Gross income |
|
|
(5.6 |
) |
|
|
(2.5 |
) |
|
|
(3.1 |
) |
|
|
124.0 |
% |
Operating expenses |
|
|
34.2 |
|
|
|
31.5 |
|
|
|
2.7 |
|
|
|
8.6 |
% |
Operating income |
|
$ |
(39.8 |
) |
|
$ |
(34.0 |
) |
|
$ |
(5.8 |
) |
|
|
17.1 |
% |
First Quarter 2024 Compared to 2023
Corporate operating expenses increased primarily due to higher new product development investments ($3 million) and higher share-based compensation expenses ($3 million).
Liquidity and Capital Resources
The Company generates significant capital resources from operating activities, which is the expected primary source of funding for the Company. In addition to cash generated from operations, the Company had other sources of liquidity available at March 31, 2024, including $69.9 million of cash and cash equivalents and $444.3 million of unused available capacity under the Revolving Credit Facility (as defined in “Liquidity”). Borrowings under the Revolving Credit Facility could, as discussed below, be limited by a financial covenant contained in the Credit Agreement (as defined in “Liquidity”). The Company was in compliance with the financial covenant at March 31, 2024 and expects to remain in compliance with the financial covenant contained in the Credit Agreement for the foreseeable future.
The Company continues to actively monitor its liquidity position and working capital needs and prioritizes capital expenditures related to capacity and strategic investments. The Company remains in a stable overall capital resources and liquidity position that the Company believes is adequate to meet its projected needs. To provide additional flexibility for working capital needs, organic and inorganic investments as well as share repurchases, the Company amended the Credit Agreement in April 2024 to increase the maximum aggregate amount of availability under the Revolving Credit Facility by $0.45 billion.
Financial Condition at March 31, 2024
The Company’s cash and cash equivalents and capitalization were as follows (in millions):
|
|
March 31, |
|
|
December 31, |
|
||
Cash and cash equivalents |
|
$ |
69.9 |
|
|
$ |
125.4 |
|
Total debt |
|
|
1,239.9 |
|
|
|
772.5 |
|
Total shareholders’ equity |
|
|
3,826.0 |
|
|
|
3,705.3 |
|
Total capitalization (debt plus equity) |
|
|
5,065.9 |
|
|
|
4,477.8 |
|
Debt to total capitalization |
|
|
24.5 |
% |
|
|
17.3 |
% |
The Company’s ratio of debt to total capitalization of 24.5% at March 31, 2024 remained within its targeted range. The increase in the debt to total capitalization ratio compared to December 31, 2023 was primarily due to borrowings under the Revolving Credit Facility primarily related to working capital and capital expenditures. The increase in working capital was primarily the result of a seasonal build in working capital in the Access segment, the payment of 2023 incentive compensation, a reduction in customer advances as the rate of customer advances has been lower on new orders and the normalization of accounts payable due to more timely invoice processing.
31
The Company’s goal is to maintain an investment-grade credit rating. The rating agencies periodically update the Company’s credit ratings as events or changes in economic conditions occur. At March 31, 2024, the long-term credit ratings assigned to the Company’s senior debt securities by the credit rating agencies engaged by the Company were as follows:
Rating Agency |
|
Rating |
Fitch Ratings |
|
BBB |
Moody’s Investor Services, Inc. |
|
Baa3 |
Standards & Poor’s |
|
BBB |
Consolidated days sales outstanding (defined as “Trade Receivables” at quarter end divided by “Net Sales” for the most recent quarter multiplied by 90 days) increased from 44 days at December 31, 2023 to 50 days at March 31, 2024. Days sales outstanding for segments other than the Defense segment increased from 49 days at December 31, 2023 to 56 days at March 31, 2024 due to timing of sales and receipt of cash from customers primarily within the Access segment. Consolidated inventory turns (defined as “Cost of Sales” on an annualized basis, divided by the average “Inventory” at the past five quarter end periods) decreased from 4.2 times at December 31, 2023 to 4.1 times at March 31, 2024. Consolidated days payable outstanding (defined as “Accounts Payable” at quarter end divided by material costs of sales for the most recent quarter multiplied by 90 days) was 62 days at March 31, 2024, down from 72 days at December 31, 2023 due to more timely invoice processing.
Cash Flows
Operating Cash Flows
Operating activities used $355.8 million of cash in the first three months of 2024 compared to providing $79.8 million during the first three months of 2023. Higher net income during the first three months of 2024 was offset by a larger increase in working capital. The increase in working capital was primarily the result of a seasonal build in working capital, primarily in the Access segment ($134 million), the payment of 2023 incentive compensation ($111 million), a reduction in customer advances as the rate of customer advances has been lower on new orders ($96 million) and the normalization of accounts payable due to more timely invoice processing ($88 million). The Company continues to expect to generate approximately $725 million of cash flows from operations in 2024.
Investing Cash Flows
Investing activities used cash of $111.2 million in the first three months of 2024 compared to $277.1 million during the first three months of 2023. The Company used $187.9 million to fund the acquisition of Hinowa S.p.A. during the first three months of 2023. Through March 31, 2024, the Company used $100.1 million for capital expenditures. The Company continues to anticipate that it will invest $300 million on capital expenditures in 2024 as the Company completes its three facilities in Tennessee and South Carolina.
Financing Cash Flows
Financing activities provided cash of $412.5 million in the first three months of 2024 compared to the use of $71.1 million during the first three months of 2023. During the first three months of 2024, the Company used borrowings under the Revolving Credit Facility to fund working capital and capital expenditures. In the first three months of 2024, the Company repurchased 129,494 shares of its Common Stock at an aggregate cost of $15.1 million. As of March 31, 2024, the Company had approximately 11.2 million shares of Common Stock remaining under its repurchase authorization. In the first three months of 2023, the Company repurchased 173,169 shares of its Common Stock at an aggregate cost of $15.2 million.
Liquidity
Senior Credit Agreement
On March 23, 2022, the Company entered into a Third Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement provides for an unsecured revolving credit facility (the “Revolving Credit Facility”) that matures in March 2027 with an initial maximum aggregate amount of availability of $1.1 billion. At March 31, 2024, borrowings under the Revolving Credit Facility of $641.0 million and outstanding letters of credit of $14.7 million reduced available capacity under the
32
Revolving Credit Facility to $444.3 million. On April 3, 2024, the Company amended the Credit Agreement to increase the maximum aggregate amount of availability under the Revolving Credit Facility by $0.45 billion. Following the amendment, the maximum aggregate amount of availability under the Revolving Credit Facility is $1.55 billion.
Under the Credit Agreement, the Company is obligated to pay (i) an unused commitment fee ranging from 0.080% to 0.225% per annum of the average daily unused portion of the aggregate revolving credit commitments under the Credit Agreement and (ii) a fee ranging from 0.438% to 1.500% per annum of the maximum amount available to be drawn for each letter of credit issued and outstanding under the Credit Agreement.
Covenant Compliance
The Credit Agreement contains various restrictions and covenants, including a requirement that the Company maintain a leverage ratio at certain levels, subject to certain exceptions, restrictions on the ability of the Company and certain of its subsidiaries to consolidate or merge, create liens, incur additional subsidiary indebtedness and consummate acquisitions and a restriction on the disposition of all or substantially all of the assets of the Company and its subsidiaries taken as a whole. The Company was in compliance with the financial covenant contained in the Credit Agreement as of March 31, 2024 and expects to be able to meet the financial covenant contained in the Credit Agreement over the next twelve months.
Senior Notes
In May 2018, the Company issued $300.0 million of 4.60% unsecured senior notes due May 15, 2028 (the “2028 Senior Notes”). In February 2020, the Company issued $300.0 million of 3.10% unsecured senior notes due March 1, 2030 (the “2030 Senior Notes”). The 2028 Senior Notes and the 2030 Senior Notes were issued pursuant to an indenture (the “Indenture”) between the Company and a trustee. The Indenture contains customary affirmative and negative covenants. The Company has the option to redeem the 2028 Senior Notes and 2030 Senior Notes at any time for a premium.
Refer to Note 13 of the Notes to Condensed Consolidated Financial Statements for additional information regarding the Company’s debt as of March 31, 2024.
Application of Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires the Company to make judgments, assumptions and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. The accounting policies that the Company believes are most critical to the portrayal of its financial condition and results of operations are reported in Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Critical Accounting Estimates
The Company’s disclosures of critical accounting estimates in its Annual Report on Form 10-K for the year ended December 31, 2023 have not materially changed since that report was filed.
New Accounting Standards
See Note 2 of the Notes to Condensed Consolidated Financial Statements for a discussion of the impact of new accounting standards.
Customers and Backlog
Sales to the U.S. government comprised approximately 20% of the Company’s net sales in the first three months of 2024. No other single customer accounted for more than 10% of the Company’s net sales for this period. A substantial majority of the Company’s net sales are derived from the fulfillment of customer orders that are received prior to commencing production.
33
The Company’s backlog at March 31, 2024 increased 10.2% to $16.35 billion compared to $14.84 billion at March 31, 2023. Access segment backlog decreased 3.3% to $4.23 billion at March 31, 2024 compared to $4.38 billion at March 31, 2023 which the Company believes is due to the normalizing of orders in connection with improved product availability. Defense segment backlog decreased 5.7% to $6.45 billion at March 31, 2024 compared to $6.83 billion at March 31, 2023 primarily as a result of the wind-down of production under the Company's domestic JLTV contract. Vocational segment backlog increased 56.1% to $5.67 billion at March 31, 2024 compared to $3.63 billion at March 31, 2023 due to strong demand for fire apparatus and rising prices as well as the inclusion of AeroTech backlog of $0.83 billion.
Backlog represents the dollar amount of revenues that the Company anticipates from customer contracts that have been awarded and/or are in progress. Reported backlog includes the original contract amount and any contract modifications that have been agreed upon. Reported backlog excludes purchase options, announced orders for which definitive contracts have not been executed and any potential future contract modifications. Backlog is comprised of fixed and variable priced contracts that may be canceled, modified or otherwise changed in the future. As a result, backlog may not be indicative of future operating results. Backlog information and comparisons thereof as of different dates may not be accurate indicators of future sales or the ratio of the Company’s future sales to the DoD versus its sales to other customers. Approximately 57% of the Company’s March 31, 2024 backlog is not expected to be filled in 2024.
Non-GAAP Financial Measures
The Company is forecasting earnings per share excluding items that affect comparability. When the Company forecasts earnings per share, excluding items, this is considered a non-GAAP financial measure. The Company believes excluding the impact of these items is useful to investors to allow a more accurate comparison of the Company’s operating performance to prior year results. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s results or forecasts prepared in accordance with GAAP. The table below presents a reconciliation of the Company’s presented non-GAAP measure to the most directly comparable GAAP measure:
|
|
2024 Expectations |
|
|
Earnings per share-diluted (GAAP) |
|
$ |
10.55 |
|
Amortization of purchased intangibles |
|
|
0.70 |
|
Adjusted earnings per share-diluted (non-GAAP) |
|
$ |
11.25 |
|
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company’s quantitative and qualitative disclosures about market risk for changes in interest rates, commodity prices and foreign currency, which are incorporated by reference to Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, have not materially changed since that report was filed.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. In accordance with Rule 13a-15(b) of the Exchange Act, the Company’s management evaluated, with the participation of the Company’s President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of March 31, 2024. Based upon their evaluation of these disclosure controls and procedures, the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of March 31, 2024 to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission rules and forms, and to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
34
Changes in Internal Control over Financial Reporting. On August 1, 2023, the Company completed the acquisition of AeroTech. The Company continues to evaluate AeroTech’s systems and controls and to integrate them into the Company's existing control structure. Except as it relates to the integration of the AeroTech business, there were no changes in the Company’s internal control over financial reporting that occurred during the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
35
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
The Company’s financial position, results of operations and cash flows are subject to various risks, many of which are not exclusively within the Company’s control, which may cause actual performance to differ materially from historical or projected future performance. In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2023, which have not materially changed.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Common Stock Repurchases
The following table sets forth information with respect to purchases of Common Stock made by the Company or on the Company’s behalf during the three months ended March 31, 2024:
Period |
|
Total Number of Shares |
|
|
Average Price |
|
|
Total Number of Shares |
|
|
Maximum Number of |
|
||||
January 1 - January 31 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
|
11,284,882 |
|
February 1 - February 29 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
11,284,882 |
|
March 1 - March 31 |
|
|
129,494 |
|
|
|
115.83 |
|
|
|
129,494 |
|
|
|
11,155,388 |
|
Total |
|
|
129,494 |
|
|
|
|
|
|
129,494 |
|
|
|
11,155,388 |
|
|
The Company intends to declare and pay dividends on a regular basis. However, the payment of future dividends is at the discretion of the Company’s Board of Directors and will depend upon, among other things, future earnings and cash flows, capital requirements, the Company’s general financial condition, general business conditions and other factors.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
(c) During the three months ended March 31, 2024, no director or Section 16 officer of the Company
36
ITEM 6. EXHIBITS
Exhibit No. |
Description |
4.1 |
|
|
|
31.1 |
|
|
|
31.2 |
|
|
|
32.1 |
|
|
|
32.2 |
|
|
|
101.INS |
The instance document does not appear in the interactive data file because its XBRL (Extensible Business Reporting Language) tags are embedded within the Inline XBRL document. |
|
|
101.SCH |
Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents |
|
|
104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document). |
* Denotes a management contract or compensatory plan or arrangement.
37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
OSHKOSH CORPORATION |
|
|
|
|
|
|
April 25, 2024 |
By |
/s/ John C. Pfeifer |
|
|
John C. Pfeifer, President and Chief Executive Officer |
|
|
|
|
|
|
April 25, 2024 |
By |
/s/ Michael E. Pack |
|
|
Michael E. Pack, Executive Vice President and Chief Financial Officer |
|
|
|
|
|
|
April 25, 2024 |
By |
/s/ James C. Freeders |
|
|
James C. Freeders, Senior Vice President Finance and Controller |
38