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Revenue Recognition | 9 Months Ended
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Jun. 30, 2021
Sales And Revenue Recognition [Abstract] |
Revenue Recognition |
3. | Revenue Recognition
The Defense segment recognizes revenue on its performance obligations that are satisfied over time by measuring progress using the cost-to-cost method of percentage-of-completion because it best depicts the transfer of control to the customer. Under the cost-to-cost method of percentage-of-completion, the Defense segment measures progress based on the ratio of costs incurred to date to total estimated costs for the performance obligation. The Company recognizes changes in estimated sales or costs and the resulting profit or loss on a cumulative basis. Cumulative estimate-at-completion 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 the Defense segment as follows (in millions, except for per share amounts):
|  | Three Months Ended June 30, |  |  | Nine Months Ended June 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Net sales |  | $ | 5.1 |  |  | $ | 4.5 |  |  | $ | 17.3 |  |  | $ | 28.2 |
Operating income |  |  | 3.2 |  |  |  | 1.6 |  |  |  | 14.1 |  |  |  | 15.2 |
Net income |  |  | 2.5 |  |  |  | 1.2 |  |  |  | 10.8 |  |  |  | 11.6 |
Diluted earnings per share |  | $ | 0.04 |  |  | $ | 0.02 |  |  | $ | 0.16 |  |  | $ | 0.17 |
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 $29.2 million at June 30, 2021 are included in “Other long-term assets” within the Company’s Condensed Balance Sheet, of which $6.5 million related to costs for anticipated contracts, $20.8 million related to engineering costs, $0.9 million related to setup costs and $1.0 million related to tooling. Disaggregation of Revenue The table below presents consolidated net sales disaggregated by segment and timing of revenue recognition (in millions):
|  | Three Months Ended June 30, 2021 |
|  | Access Equipment |  |  | Defense |  |  | Fire & Emergency |  |  | Commercial |  |  | Corporate and Intersegment Eliminations |  |  | Total |
Point in time |  | $ | 907.1 |  |  | $ | 10.1 |  |  | $ | 297.8 |  |  | $ | 155.7 |  |  | $ | (6.4 | ) |  | $ | 1,364.3 |
Over time |  |  | 17.2 |  |  |  | 700.3 |  |  |  | 4.7 |  |  |  | 122.4 |  |  |  | (0.1 | ) |  |  | 844.5 |
|  | $ | 924.3 |  |  | $ | 710.4 |  |  | $ | 302.5 |  |  | $ | 278.1 |  |  | $ | (6.5 | ) |  | $ | 2,208.8 |
|  | Three Months Ended June 30, 2020 |
|  | Access Equipment |  |  | Defense (a) |  |  | Fire & Emergency (a) |  |  | Commercial |  |  | Corporate and Intersegment Eliminations (a) |  |  | Total |
Point in time |  | $ | 472.1 |  |  | $ | 5.7 |  |  | $ | 296.0 |  |  | $ | 153.5 |  |  | $ | (15.8 | ) |  | $ | 911.5 |
Over time |  |  | 15.9 |  |  |  | 555.5 |  |  |  | 3.6 |  |  |  | 94.2 |  |  |  | 0.1 |  |  |  | 669.3 |
|  | $ | 488.0 |  |  | $ | 561.2 |  |  | $ | 299.6 |  |  | $ | 247.7 |  |  | $ | (15.7 | ) |  | $ | 1,580.8 |
|  | Nine Months Ended June 30, 2021 |
|  | Access Equipment |  |  | Defense |  |  | Fire & Emergency |  |  | Commercial |  |  | Corporate and Intersegment Eliminations |  |  | Total |
Point in time |  | $ | 2,176.3 |  |  | $ | 40.0 |  |  | $ | 874.3 |  |  | $ | 397.0 |  |  | $ | (20.6 | ) |  | $ | 3,467.0 |
Over time |  |  | 49.9 |  |  |  | 1,835.4 |  |  |  | 14.6 |  |  |  | 306.8 |  |  |  | 0.6 |  |  |  | 2,207.3 |
|  | $ | 2,226.2 |  |  | $ | 1,875.4 |  |  | $ | 888.9 |  |  | $ | 703.8 |  |  | $ | (20.0 | ) |  | $ | 5,674.3 |
|  | Nine Months Ended June 30, 2020 |
|  | Access Equipment |  |  | Defense (a) |  |  | Fire & Emergency (a) |  |  | Commercial |  |  | Corporate and Intersegment Eliminations (a) |  |  | Total |
Point in time |  | $ | 1,838.2 |  |  | $ | 18.7 |  |  | $ | 783.3 |  |  | $ | 391.0 |  |  | $ | (27.7 | ) |  | $ | 3,003.5 |
Over time |  |  | 60.7 |  |  |  | 1,673.9 |  |  |  | 15.5 |  |  |  | 317.6 |  |  |  | 1.4 |  |  |  | 2,069.1 |
|  | $ | 1,898.9 |  |  | $ | 1,692.6 |  |  | $ | 798.8 |  |  | $ | 708.6 |  |  | $ | (26.3 | ) |  | $ | 5,072.6 |
(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 20 of the Notes to Condensed Consolidated Financial Statements for further disaggregated sales information. Contract Assets and Contract Liabilities The Company is generally entitled to bill its customers upon satisfaction of its performance obligations, with the exception of its long-term contracts in the Defense segment which typically allow for billing upon acceptance of the finished good, payments from customers primarily within the Fire & Emergency segment and extended warranties that are usually billed in advance of the warranty coverage period. Customer payment is usually received shortly after billing and payment terms generally do not exceed one year. With the exception of the Fire & Emergency segment, the Company’s contracts typically do not contain a significant financing component. In the Fire & Emergency segment, customers earn interest on customer advances at a rate determined in a separate financing transaction between the Fire & Emergency segment and the customer at contract inception. Interest charges of $4.4 million and $12.8 million were recorded in “Interest expense” in the Condensed Consolidated Statements of Income for the three and nine months ended June 30, 2021, respectively, and $4.5 million and $11.7 million for the three and nine months ended June 30, 2020, respectively, for amounts due on customer advances. 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 reduces contract liabilities when revenue is recognized. Contract liabilities consisted of the following (in millions).
|  | June 30, |  |  | September 30, |
|  | 2021 |  |  | 2020 |
Customer advances |  | $ | 623.3 |  |  | $ | 491.4 |
Other current liabilities |  |  | 82.6 |  |  |  | 59.5 |
Other long-term liabilities |  |  | 77.9 |  |  |  | 53.7 |
Total contract liabilities |  | $ | 783.8 |  |  | $ | 604.6 |
|  | Three Months Ended June 30, |  |  | Nine Months Ended June 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Beginning liabilities recognized in revenue |  | $ | 158.2 |  |  | $ | 102.2 |  |  | $ | 476.1 |  |  | $ | 392.8 |
In instances where the Company recognizes revenue prior to having an unconditional right to payment, the Company records a contract asset within “Unbilled receivables, net” in the Condensed Consolidated Balance Sheets. 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 the three and nine months ended June 30, 2021 or 2020. 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):
|  | Nine Months Ended June 30, |
|  | 2021 |  |  | 2020 |
Balance at beginning of period |  | $ | 64.4 |  |  | $ | 68.2 |
Deferred revenue for new service warranties |  |  | 19.2 |  |  |  | 17.3 |
Amortization of deferred revenue |  |  | (19.4 | ) |  |  | (21.1 | )
Foreign currency translation |  |  | 0.3 |  |  |  | 0.3 |
Balance at end of period |  | $ | 64.5 |  |  | $ | 64.7 |
Classification of service-type warranties in the Condensed Consolidated Balance Sheets consisted of the following (in millions):
|  | June 30, |  |  | September 30, |
|  | 2021 |  |  | 2020 |
Other current liabilities |  | $ | 23.9 |  |  | $ | 24.7 |
Other long-term liabilities |  |  | 40.6 |  |  |  | 39.7 |
|  | $ | 64.5 |  |  | $ | 64.4 |
Remaining Performance Obligations As of June 30, 2021, the Company had unsatisfied performance obligations for contracts with an original duration greater than one year totaling $5.08 billion, of which $1.00 billion is expected to be satisfied and revenue recognized in the remaining three months of fiscal 2021, $3.10 billion is expected to be satisfied and revenue recognized in fiscal 2022 and $982.6 million is expected to be satisfied and revenue recognized beyond fiscal 2022. The Company has elected the practical expedient to not disclose unsatisfied performance obligations with an original contract duration of one year or less.

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130551-203045 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 13 -Subparagraph (b)(2) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130556-203045 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130550-203045 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (e) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130558-203045 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 + Details
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