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Revenue Recognition | 12 Months Ended
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Sep. 30, 2021
Sales And Revenue Recognition [Abstract] |
Revenue Recognition | 3. Revenue Recognition The Company recognizes revenue in accordance with ASC 606. Accordingly, revenue is recognized when control of the goods or services promised under a contract are transferred to the customer either at a point in time (e.g., upon delivery) or over time (e.g., as the Company performs under the contract) in an amount that reflects the consideration to which the Company expects to be entitled in exchange for the goods or services. The Company accounts for a contract when it has approval and commitment from both parties, the rights and payment terms of the parties are identified, the contract has commercial substance and collectability of consideration is probable. If collectability is not probable, the sale is deferred until collection becomes probable or payment is received. Contracts are reviewed to determine whether there is one or multiple performance obligations. A performance obligation is a promise to transfer a distinct good or service to a customer and represents the unit of accounting for revenue recognition. For contracts with multiple performance obligations, the expected consideration (e.g., the transaction price) is allocated to each performance obligation identified in the contract based on the relative standalone selling price of each performance obligation, which is determinable based on observable standalone selling prices or is estimated using an expected cost plus a margin approach. Revenue is then recognized for the transaction price allocated to the performance obligation when control of the promised goods or services underlying the performance obligation is transferred. When the amount of consideration allocated to a performance obligation through this process differs from the invoiced amount, it results in a contract asset or liability. The identification of performance obligations within a contract requires significant judgment. The following is a description of the primary activities from which the Company generates revenue. Access Equipment, Fire & Emergency and Commercial segments revenue The Company derives revenue in the Access Equipment, Fire & Emergency and Commercial segments (non-defense segments) through the sale of machinery, vehicles and related aftermarket parts and services. Customers include distributors, equipment rental providers and end-users. Contracts with customers generally exist upon the approval of a quote and/or purchase order by the Company and customer. Each contract is also assessed at inception to determine whether it is necessary to combine the contract with other contracts. The Company’s non-defense segments offer various customer incentives within contracts, such as sales and marketing rebates, volume discounts and interest subsidies, some of which are variable and therefore must be estimated by the Company. Transaction prices may also be impacted by rights of return, primarily within the aftermarket parts business, which requires the Company to record a liability and asset representing its rights and obligations in the event a return occurs. The estimated return liability is based on historical experience rates. Revenue for performance obligations consisting of machinery, vehicle and aftermarket parts (together, “product”) is recognized when the customer obtains control of the product, which typically occurs at a point in time, based on the shipping terms within the contract. In the Commercial segment, refuse collection and concrete mixer products are sold on both Company owned chassis and customer owned chassis. When performing work on a customer owned chassis, revenue is recognized over time based on the cost-to-cost method, as the Company is enhancing a customer owned asset. All non-defense segments offer aftermarket services related to their respective products such as repair, refurbishment and maintenance (together, “services”). The Company generally recognizes revenue on service performance obligations over time using the method that results in the most faithful depiction of transfer of control to the customer. Non-defense segments also offer extended warranty coverage as an option on most products. The Company considers extended warranties to be service-type warranties and therefore a performance obligation. Service-type warranties differ from the Company’s standard, or assurance-type warranties, as they are generally separately priced and negotiated as part of the contract and/or provide additional coverage beyond what the customer or customer group that purchases the product would receive under an assurance-type warranty. The Company has concluded that its extended warranties are stand-ready obligations to perform and therefore recognizes revenue ratably over the coverage period. The Company also provides a standard warranty on its products and services at no additional cost to its customers in most instances. See Note 16 of the Notes to Consolidated Financial Statements for further discussion on product assurance warranties. Defense segment revenue The majority of the Company’s Defense segment sales are derived through long-term contracts with the U.S. government to design, develop, manufacture or modify defense products. These contracts, which also include those under the U.S. Government-sponsored Foreign Military Sales (FMS) program, accounted for approximately 95% of Defense segment revenue in fiscal 2021. Contracts with Defense segment customers are generally fixed-price or cost-reimbursement type contracts. Under fixed-price contracts, the price paid to the Company is generally not adjusted to reflect the Company’s actual costs except for costs incurred as a result of contract modifications. Certain fixed-price contracts include an incentive component under which the price paid to the Company is subject to adjustment based on the actual costs incurred. Under cost-reimbursement contracts, the price paid to the Company is determined based on the allowable costs incurred to perform plus a fee. The fee component of cost-reimbursement contracts can be fixed based on negotiations at contract inception or can vary based on performance against target costs established at the time of contract inception. The Company also designs, develops, manufactures or modifies defense products for international customers through Direct Commercial Sale contracts. The Defense segment supports its products through the sale of aftermarket parts and services. Aftermarket contracts can range from long-term supply agreements to ad hoc purchase orders for replacement parts. The Company evaluates Defense segment contracts at inception to identify performance obligations. The goods and services in Defense segment contracts are typically not distinct from one another as they are generally customized and have complex inter-relationships and the Company is responsible for overall management of the contract. As a result, Defense segment contracts are typically accounted for as a single performance obligation. The Defense segment provides standard warranties for its products for periods that typically range from one to two years. These assurance-type warranties typically cannot be purchased separately and do not meet the criteria to be considered a performance obligation. See Note 16 of the Notes to Consolidated Financial Statements for further discussion on product assurance warranties. The Company determines the transaction price for each contract at inception based on the consideration that it expects to receive for the goods and services promised under the contract. This determination is made based on the Company’s current rights, excluding the impact of any subsequent contract modifications (including unexercised options) until they become legally enforceable. Contract modifications frequently occur within the Defense segment. The Company evaluates each modification to identify changes that impact price or scope of its contracts, which are then assessed to determine if the modification should be accounted for as an adjustment to an existing contract or as a separate contract. Contract modifications within the Defense segment are generally accounted for as a cumulative effect adjustment to existing contracts as they are not distinct from the goods and services within the existing contract. For Defense segment contracts that include a variable component of the sale price, the Company estimates variable consideration. Variable consideration is included within the contract’s transaction price to the extent it is probable that a significant reversal of revenue will not occur. The Company evaluates its estimates of variable consideration on an ongoing basis and any adjustments are accounted for as changes in estimates in the period identified. Common forms of variable consideration within Defense segment contracts include cost reimbursement contracts that contain incentives, customer reimbursement rights and regulatory or customer negotiated penalties tied to contract performance. The Company recognizes revenue on Defense segment contracts as performance obligations are satisfied and control of the underlying goods and services is transferred to the customer. In making this evaluation, the Defense segment considers contract terms, payment terms and whether there is an alternative future use for the good or service. Through this process the Company has concluded that substantially all of the Defense segment’s performance obligations, including a majority of performance obligations for aftermarket goods and services, transfer control to the customer over time. For U.S. government and FMS program contracts, this determination is supported by the inclusion of clauses within contracts that allow the customer to terminate a contract at its convenience. When the clause is present, the Company is entitled to compensation for the work performed through the date of notification at a price that reflects actual costs plus a reasonable margin in exchange for transferring its work in process to the customer. For contracts that do not contain termination for convenience provisions, the Company is generally able to support the over time transfer of control determination as a result of the customized nature of its goods and services, which create assets without an alternative use and contractual rights. When control is not determined to be continuous over the term of the contract, the Company initially defers contract costs that relate to the contract or anticipated contract, generate or enhance assets that will be utilized in satisfying future performance obligations and are expected to be recovered. Deferred contract costs are subsequently amortized on a systematic basis consistent with the pattern of the transfer of the goods and services to which it relates. The Defense segment recognizes revenue on its performance obligations that are satisfied over time by measuring progress using the cost-to-cost method of percentage-of-completion because it best depicts the transfer of control to the customer. Under the cost-to-cost method of percentage-of-completion, the Defense segment measures progress based on the ratio of costs incurred to date to total estimated costs for the performance obligation. The Company recognizes changes in estimated sales or costs and the resulting profit or loss on a cumulative basis. Cumulative estimate-at-completion adjustments represent the cumulative effect of the changes on prior periods. If a loss is expected on a performance obligation, the complete estimated loss is recorded in the period in which the loss is identified. There is significant judgment involved in estimating sales and costs within the Defense segment. Each contract is evaluated at contract inception to identify risks and estimate revenue and costs. In performing this evaluation, the Defense segment considers risks of contract performance such as technical requirements, schedule, duration and key contract dependencies. These considerations are then factored into the Company’s estimated revenue and costs. Preliminary contract estimates are subject to change throughout the duration of the contract as additional information becomes available that impacts risks and estimated revenue and costs. In addition, as contract modifications (e.g., new orders) are received, the additional units are factored into the overall contract estimate of costs and transaction price. Contract adjustments resulted in changes within Defense segment results as follows (in millions, except for per share amounts):
|  | Fiscal Year Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Net sales |  | $ | 13.1 |  |  | $ | 31.2 |  |  | $ | 63.9 |
Operating income |  |  | 19.4 |  |  |  | 16.2 |  |  |  | 44.7 |
Net income |  |  | 14.9 |  |  |  | 12.4 |  |  |  | 34.5 |
Diluted earnings per share |  |  | 0.21 |  |  |  | 0.18 |  |  |  | 0.49 |
Disaggregation of Revenue The table below presents consolidated net sales disaggregated by segment and timing of revenue recognition (in millions):
|  | Fiscal Year Ended September 30, 2021 |
|  | Access Equipment |  |  | Defense |  |  | Fire & Emergency |  |  | Commercial |  |  | Corporate and Intersegment Eliminations |  |  | Total |
Point in time |  | $ | 3,006.9 |  |  | $ | 43.5 |  |  | $ | 1,205.9 |  |  | $ | 532.8 |  |  | $ | (25.1 | ) |  | $ | 4,764.0 |
Over time |  |  | 65.2 |  |  |  | 2,482.1 |  |  |  | 20.7 |  |  |  | 404.8 |  |  |  | 0.5 |  |  |  | 2,973.3 |
|  | $ | 3,072.1 |  |  | $ | 2,525.6 |  |  | $ | 1,226.6 |  |  | $ | 937.6 |  |  | $ | (24.6 | ) |  | $ | 7,737.3 |
|  | Fiscal Year Ended September 30, 2020 |
|  | Access Equipment |  |  | Defense (a) |  |  | Fire & Emergency (a) |  |  | Commercial |  |  | Corporate and Intersegment Eliminations (a) |  |  | Total |
Point in time |  | $ | 2,437.5 |  |  | $ | 34.8 |  |  | $ | 1,085.1 |  |  | $ | 556.7 |  |  | $ | (36.0 | ) |  | $ | 4,078.1 |
Over time |  |  | 77.6 |  |  |  | 2,276.7 |  |  |  | 21.9 |  |  |  | 401.1 |  |  |  | 1.4 |  |  |  | 2,778.7 |
|  | $ | 2,515.1 |  |  | $ | 2,311.5 |  |  | $ | 1,107.0 |  |  | $ | 957.8 |  |  | $ | (34.6 | ) |  | $ | 6,856.8 |
|  | Fiscal Year Ended September 30, 2019 |
|  | Access Equipment |  |  | Defense (a) |  |  | Fire & Emergency (a) |  |  | Commercial |  |  | Corporate and Intersegment Eliminations (a) |  |  | Total |
Point in time |  | $ | 4,001.6 |  |  | $ | 45.4 |  |  | $ | 1,192.5 |  |  | $ | 591.7 |  |  | $ | (30.1 | ) |  | $ | 5,801.1 |
Over time |  |  | 78.1 |  |  |  | 2,052.1 |  |  |  | 18.2 |  |  |  | 430.5 |  |  |  | 2.0 |  |  |  | 2,580.9 |
|  | $ | 4,079.7 |  |  | $ | 2,097.5 |  |  | $ | 1,210.7 |  |  | $ | 1,022.2 |  |  | $ | (28.1 | ) |  | $ | 8,382.0 |
(a) | Results have been reclassified to reflect the move of the airport snow removal vehicle business from the Fire & Emergency segment to the Defense segment.
See Note 24 of the Notes to Consolidated Financial Statements for further disaggregated sales information. Contract Assets and Contract Liabilities The Company is generally entitled to bill its customers upon satisfaction of its performance obligations, with the exception of its long-term contracts in the Defense segment which typically allow for billing upon acceptance of the finished good, payments received from customers received in advance of performance and extended warranties that are billed in advance of the warranty coverage period. Customer payment is usually received shortly after billing and payment terms generally do not exceed one year. See Note 8 of the Notes to Consolidated Financial Statements for additional information on the Company’s receivable balances. With the exception of the Fire & Emergency segment, the Company’s contracts typically do not contain a significant financing component. In the Fire & Emergency segment, customers earn interest on customer advances at a rate determined in a separate financing transaction between the Fire & Emergency segment and the customer at contract inception. Interest charges of $17.2 million, $15.6 million and $14.5 million were recorded in “Interest expense” in the Consolidated Statements of Income for fiscal 2021, 2020 and 2019, respectively. The timing of billing does not always match the timing of revenue recognition. In instances where a customer pays consideration in advance or when the Company is entitled to bill a customer in advance of recognizing the related revenue, the Company records a contract liability within “Customer advances” in the Consolidated Balance Sheet. The Company reduces contract liabilities when the Company transfers control of promised goods and services. Contract liabilities consisted of the following (in millions):
|  | September 30, |
|  | 2021 |  |  | 2020 |
Customer advances |  | $ | 654.3 |  |  | $ | 491.4 |
Other current liabilities |  |  | 82.0 |  |  |  | 59.5 |
Other long-term liabilities |  |  | 175.2 |  |  |  | 53.7 |
Total contract liabilities |  | $ | 911.5 |  |  | $ | 604.6 |
|  | Fiscal Year Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Beginning liabilities recognized in revenue |  | $ | 521.7 |  |  | $ | 441.0 |  |  | $ | 530.9 |
In instances where the Company recognizes revenue prior to having an unconditional right to payment, the Company records a contract asset within “Unbilled receivables, net” in the Consolidated Balance Sheet. The Company reduces contract assets when the Company has an unconditional right to payment. The Company periodically assesses its contract assets for impairment. Contract assets and liabilities are determined on a net basis for each contract. The Company did not record any impairment losses on contract assets during fiscal 2021, 2020 or 2019. The Defense segment recognizes an asset for costs incurred on existing and highly probable anticipated contracts prior to the transfer of control of goods or services to the customer. Deferred contract related costs of $50.6 million at September 30, 2021 are included in “Other long-term assets” within the Company’s Consolidated Balance Sheet, of which $4.8 million related to costs for anticipated contracts, $42.3 million related to engineering costs, $2.2 million related to setup costs and $1.3 million related to tooling. The Company offers a variety of service-type warranties, including optionally priced extended warranty programs. Outstanding balances related to service-type warranties are included within contract liabilities disclosed above. Revenue related to service-type warranties is deferred until after the expiration of the standard warranty period. The revenue is then recognized in income over the term of the extended warranty period in proportion to the costs that are expected to be incurred. Changes in the Company’s service-type warranties were as follows (in millions):
|  | Fiscal Year Ended September 30, |
|  | 2021 |  |  | 2020 |
Balance at beginning of period |  | $ | 64.4 |  |  | $ | 68.2 |
Deferred revenue for new service-type warranties |  |  | 26.2 |  |  |  | 23.6 |
Amortization of deferred revenue |  |  | (25.0 | ) |  |  | (27.9 | )
Foreign currency translation |  |  | 0.2 |  |  |  | 0.5 |
Balance at end of period |  | $ | 65.8 |  |  | $ | 64.4 |
Classification of service-type warranties in the Consolidated Balance Sheets consisted of the following (in millions):
|  | September 30, |
|  | 2021 |  |  | 2020 |
Other current liabilities |  | $ | 21.8 |  |  | $ | 24.7 |
Other long-term liabilities |  |  | 44.0 |  |  |  | 39.7 |
|  | $ | 65.8 |  |  | $ | 64.4 |
Remaining Performance Obligations As of September 30, 2021, the Company had unsatisfied performance obligations for contracts with an original duration greater than one year totaling $5.3 billion, of which $3.5 billion is expected to be satisfied and revenue recognized in fiscal 2022, $1.6 billion is expected to be satisfied and revenue recognized in fiscal 2023 and $235.3 million is expected to be satisfied and revenue recognized beyond fiscal 2023.

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