OSK 10-K & 10-Q changes, risk factors and insider trading

The access equipment market is highly cyclical and impacted (i) by the strength of economies in general and customers’ perceptions concerning the timing of economic cycles, (ii) by residential and non-residential construction spending, (iii) by the ability of rental companies to obtain third-party financing to purchase revenue generating assets, (iv) by capital expenditures of rental companies in general, including the rate at which they replace aged rental equipment, (v) by the timing of regulatory standard changes, and (vi) by other factors, including oil and gas related activity and government spending. Municipal fire apparatus markets are cyclical later in an economic cycle and are impacted by the economy generally and by municipal tax receipts. Refuse and recycling collection vehicle markets are also cyclical and impacted by the strength of economies in general, by municipal tax receipts and by the size and timing of capital expenditures, including replacement demand, by large waste haulers. Airport products markets are also cyclical and impacted by global demand for air transportation services. If demand for our products is lower than what we or the market expect, due to a recession or other factors, then there could be an adverse effect on our net sales, financial condition, profitability and/or cash flows. In addition, those impacts could be more than we anticipate.

Our performance under theour United States Postal Service (USPS) contract may not be what we expect.

In 2021, the USPS selected us to build itsOur Next Generation Delivery Vehicle (NGDV). The indefinite delivery, indefinite quantity (IDIQ) contract allows for the USPS to purchase of up to 165,000 units over 10 years. ThroughAs of December 31, 2024,2025, we have received orders for 51,500 vehicles. As of December 31, 2024, we have recorded an asset for deferred contract costs of $842.6 million that primarily relates to the NGDV program. Contract costs are amortized over the anticipated production volume of the related contract. The USPS contract and our performance under the contract are subject to the following risks, among others, that could have a material adverse effect on our results of operations, financial condition, and/or cash flows:

The USPS ordering fewer units than we expect which could result in an impairment of our deferred contract asset. We estimate that deferred contract costs exceed future profits on existing orders by approximately $135 million at December 31, 2025.

If additional orders are received, the mix of internal combustion engine and battery electric vehicles could be different from our expectations, which could reduce revenues that we expect under the contract and negatively affect anticipated margins.expectations.

We purchase, directly and indirectly through component purchases, significant amounts of steel, aluminumaluminum, copper and other commodities. Steel, aluminumaluminum, copper and other commodity prices have historically been highly volatile. Costs for these items may increase in the future due to a variety of factors, including: the leveloutbreaks of tariffs that the U.S. imposes on imported steel, aluminum and other commodities; an outbreak of conflictsconflict in regions of the world that produce the commodities or the raw materials that go into the commodities or through which the commodities are transported; or a weakening U.S. dollar.

In addition, the cost of parts, materials, components or final assemblies has increased and may continue to increase for reasons other than changes in commodity prices. Factors such as the imposition of duties and tariffs and other trade barriers, supply and demand, the level of imports, freight costs, availability of transportation, the cost of manufacturing labor,or availability of manufacturing labor, inventory levels and general economic conditions may affect the priceprices ofwe ourpay for parts, materials, components or final assembly purchases. While the Company seeks to mitigate increases in the price of materials and other inputs through cost reduction initiatives, there can be no assurance that these efforts will be successful or sufficient to offset such cost increases.

Increases in parts, materials, components or final assemblies costs negativelycould impactreduce the profitability of orders in backlog as those sales prices onhave thosealready ordersbeen are generally less flexible.negotiated. If we are not able to recover cost increases through price increases to our customers, then such increases willwould have an adverse effect on our financial condition, profitability and/or cash flows. Furthermore, price increases may not be accepted by our customers,customers resultingand may result in them choosing to order from our competitors instead of us.competitors. Any significant decrease in orders could have an adverse effect on our net sales, financial condition, profitability and/or cash flows. Additionally, if costs decrease and we are unable to negotiate timely component cost decreases commensurate with any decrease in costs, then our higher component costs could put us at a material disadvantage as compared to our competition which could have a material adverse effect on our net sales, financial condition, profitability and/or cash flows.

We have experienced, and in the future are likely to experience, significant disruption of the supply of some of our parts, materials, components and final assemblies that we obtain from suppliers or subcontractors. Delays in obtaining parts, materials, components and final assemblies may result from a number of factors affecting our suppliers including shipping disruptions, capacity constraints, labor constraints, supplier product quality issues, decisions by suppliers to discontinue or modify components or parts, including to meet changing regulatory requirements, suppliers’ impaired financial conditioncondition, interruptions in suppliers' information technology systems and suppliers’ allocations to other purchasers. Such disruptions have resulted and could further result in higher manufacturing costs caused by an inefficient parts flow to our production lines or the need to procure parts from higher cost suppliers, could delay production and/or sales and could result in a material adverse effect on our results of operations, financial condition, and/or cash flows.

We are dependent on our suppliers of engines, chassis, axles, batteries and other power sourcescomponents to continue to timely deliver such components that meet applicable emissions regulations and customer preferences. If we fail to have adequate relationships with suppliers that will supply appropriate engines, chassis, axles, batteries and other power sourcescomponents to us or fail to timely receive appropriate components from our suppliers, that could result in us being placed in an uncompetitive position or without finished product when needed.

Our production, or the production of our suppliers, could be disrupted by labor issues including availability of skilled workforce in locations in which we and our suppliers operate due to competition, absenteeism, public health issues, strikes or other factors. In addition, our production schedules assume the availability of a sufficient workforce in areas in which our facilities operate at anticipated labor rates. If a sufficient workforce is not available or rates are higher than we anticipate, it could have an adverse effect on our net sales, financial condition, profitability and/or cash flows.

Our dependency on contracts with U.S. and foreign government agencies subjects us to a variety of risks that could materially reduce our revenues or profits.profits or impact our capital allocation strategy.

We are dependent on U.S. and foreign government contracts for a substantialsignificant portion of our business. Approximately 20% of our net sales in 20242025 were to the U.S. government. That business is subject to the following risks, among others, that could have a material adverse effect on our operating performance:

The Weapon Systems Acquisition Reform Act and the Competition in Contracting Act require competition for U.S. defense programs in most circumstances. Competition for U.S. Department of Defense (DoD) programs that we currently have has resulted and could in the future result in the U.S. government awarding future contracts to another manufacturer or could result in the U.S. government awarding the contracts to us at lower prices and operating margins than we experience under the current contracts. As an example, in February 2023, the DoD awarded the Joint Light Tactical Vehicles (JLTV) Family of Vehicles follow on contract to another company based on, at least in part, a lower price.

Competitions for U.S. government contracts are intense, and we cannot provide any assurance that we will be successful in current or future procurement competitions in which we participate, as evidenced by the award of the JLTV follow on contract to another company.participate. In addition, the U.S. government has become more aggressive in seeking to acquire the design rights to the Company’sour current and potential future programs to facilitate competition for manufacturing our vehicles.

We must spend significant sums on product development and testing, bid and proposal activities, and pre-contract engineering, tooling and design activities in competitions to have the opportunity to be awarded these contracts. Despite our investments, we may not receive the contracts that we expect.

Our DefenseTransport segment results may fluctuate significantly from time to time as a result of the start and completion of existing and new domestic and international contract awards that we may receive. A majority of our contracts in the DefenseTransport segment are large in size and require significant personnel and production resources, and when our government customers allow such contracts to expire or significantly reduce their vehicle requirements under such contracts, we must make adjustments to personnel and production resources. Production on the domestic JLTV contract is expected to conclude early 2025. We may incur costs in connection with the completion and wind down of that program. In addition, while we expect NGDV sales to offset the reduction in JLTV sales, we may not be able to increase NGDV production to fully offset the decline in JLTV sales and operating income.

Our business is susceptible to changes in the annual U.S. defense budget. Such changes may reduce revenues that we expect in our Defense segment,expect, especially in light of federal budget pressures, lower levels of U.S. ground troops deployed in foreign conflicts and the level of defense funding that will be allocated to the DoD’s tactical wheeled vehicle strategy generally.

Certain of our U.S. government contracts could be delayed or terminated, and all such contracts expire in the future and may not be replaced, which could reduce revenues that we expect under the contracts and negatively affect margins in our Defense segment.margins.

The funding of DoD programs is subject to an annual congressional budget authorization and appropriations process. In years when the U.S. government has not completed its budget process before the end of its fiscal year, which is currently the case for the U.S. government's fiscal 2025 budget, government operations are typically funded pursuant to a “continuing resolution,” which allows federal government agencies to operate at spending levels approved in the previous budget cycle but does not authorize new spending initiatives. When the U.S. government operates under a continuing resolution, delays can occur in the procurement of the products, services and solutions that we provide and may result in new initiatives being delayed or canceled, or funds could be reprogrammed away from our programs to pay for higher priority operational needs. The current continuing resolution funding the U.S. government expires on March 14, 2025. Furthermore, in years when the U.S. government fails to complete its budget process or to provide for a continuing resolution, a federal government shutdown may result. ThisA government shutdown could in turn result in the delay or cancellation of key programs, which could have a negative effect on our cash flows and adversely affect our future results. In addition, payments to contractors for services performed during a federal government shutdown may be delayed, which would have a negative effect on our cash flows.

Defense tactical wheeled vehicles contract awards that we receive may be subject to protests or lawsuits by competing bidders, which protests or lawsuits, if successful, could result in the U.S. government customer revoking part or all of any defense tactical wheeled vehicle contracts it awards to us and our inability to recover amounts we have expended in anticipation of initiating production under any such contract.

Although we sell the majority of our products directly to the end user, we market, sell and service products through a network of independent dealers in the Vocational segment and in a limited number of markets in the Access segment. As a result, our business with respect to these products is influenced by our ability to establish and manage new and existing relationships with dealers. While we have relatively low turnover of dealers, from time to time, weWe or a dealer may choose to terminate the relationship as a result of difficulties that our independent dealers experience in operating their businesses due to economic conditions or other factors or as a result of an alleged failure by us or an independent dealer to comply with the terms of our dealer agreement. We do not believe our business is dependent on any single dealer, the loss of which would have a sustained material adverse effect upon our business. However, disruption of dealer coverage within a specific state or other geographic market could cause difficulties in marketing, selling or servicing our products and have an adverse effect on our net sales, financial condition, results of operations and/or cash flows.

The markets in which we operate are highly competitive. We compete worldwide with a number of other manufacturers that produce and sell similar products. Our products primarily compete on the basis of brand awareness, product innovation, performance, quality, reliability, availability, price, service and support, ability to meet customer specifications and the extent to which a company offers single-source customer solutions. Certain of our competitors have greater financial, marketing, manufacturing, distribution and governmental affairs resources than we do, which may put us at a competitive disadvantage. We also face pricing pressure from international competitors that attempt to gain domestic market share through importing and selling products at below market prices, particularly in the Access segment. If competition in our industryindustries intensifies or if our current competitors lower their prices for competing products, we may lose sales or be required to lower the prices we charge for our products. We cannot provide any assurance that our products will continue to compete effectively with the products of competitors or that we will be able to retain our customer base or improve or maintain our profit margins on sales to our customers.

We are continuously evaluating potential acquisitions to support our business strategy. As part of this evaluation process, we perform due diligence to identify potential risks associated with the potential transaction. We also make assumptions regarding future performance of the acquired business. We cannot provide any assurance we will be able to successfully achieve the benefits of any business acquisition due to a variety of risks, including the following:

Expanding international operations and sales is a part of our growth strategy. International operations and sales are subject to various risks, including political, religious and economic instability, the imposition of foreign tariffs upon our products (which include tariffs in response to tariffs that the U.S. imposes) and other trade barriers, the impact of foreign government regulations and the effects of income and withholding taxes, sporadic order patterns, governmental expropriation, uncertainties or delays in collection of accounts receivable and differences in business practices. Changes in international trade policies could result in changes to our international operations and/or international growth strategy. We may incur increased costs, including increased supply chain costs, and experience delays or disruptions in production schedules, product deliveries or payments in connection with international manufacturing and sales that could cause loss of revenues and earnings. Among other things, there are additional logistical requirements associated with international sales, which increase the amount of time between the completion of production and our ability to recognize related revenue. In addition, expansion into foreign markets requires the establishment of distribution networks and may require modification of products to meet local requirements or preferences. Establishment of distribution networks or modification to the design of our products to meet local requirements and preferences may take longer or be more costly than we anticipate and could have a material adverse effect on our ability to achieve international sales growth. In addition, our entry into certain markets that we wish to enter may require us to establish a joint venture or face competition from foreign state-backed competitors. Identifying an appropriate joint venture partner and creating a joint venture could be more time consuming, more costly and more difficult than we anticipate. Local government policy and influence can also impact international competition, such as in China where a state-controlled economy favors local market participants.

We account for substantially all long-term contracts in the DefenseTransport segment utilizing the cost-to-cost method of percentage-of-completion accounting. This accounting requires judgment relative to assessing risks, estimating revenues and costs and making assumptions regarding the timing of receipt of delivery orders from our government customers and technical issues.customers. Due to the size and nature of these contracts, the estimate of costs is complicatedcomplex and subject to many variables. We must make assumptions regarding expected increases in material costs, wages and employee benefits, engineering hours, productivity and availability of labor and allocated fixed costs. Changes to production costs, overhead rates, learning curves and/or supplier performance can also impact these estimates. For example, cumulative catch-up adjustments on contracts in the DefenseTransport segment negatively impacted operating income by $47approximately $35 million in 2024.2025. Furthermore, under the revenue recognition accounting rules, we can only include units in our estimates of overall contract profitability after we have received a firm delivery order for those units. Because new orders have the potential to significantly change the overall profitability of cumulative orders received to date, the period in which we receive those orders from the government will impact the estimated life-to-date contract profitability. Changes in underlying assumptions, circumstances or estimates could have a material adverse effect on our net sales, financial condition and/or profitability.

As of December 31, 2024,2025, we had consolidated gross receivables of $1.3$1.5 billion. In addition, we were subject to obligations to guarantee customer indebtedness to third parties of $596$559 million, under which we estimate our maximum exposure to be $96$93 million. We evaluate the collectability of receivables and our guarantees of indebtedness of others based on a combination of factors and establish reserves based on our estimates of potential current and future losses. In circumstances where we believe it is probable that a specific customer will have difficulty meeting its financial obligations, a specific reserve is recorded to reduce the net recognized receivable to the amount we expect to collect, and/or we recognize a liability for a guarantee we expect to pay, taking into account any amounts that we would anticipate realizing if we are forced to repossess the equipment that supports the customer’s financial obligations to us. We also establish additional reserves based upon our perception of the quality of the current receivables, the current financial position of our customers, past collections experience, and existing and expected future market conditions. Prolonged or more severe economic weakness may result in additional requirements for reserves. During periods of economic weakness, the collateral underlying our guarantees of indebtedness of customers or receivables can decline sharply, thereby increasing our exposure to losses. We also face a concentration of credit risk as the Access segment’s ten largest debtors at December 31, 20242025 represented approximately 22%27% of our consolidated gross receivables. Some of these customers are highly leveraged. We may incur losses in excess of our recorded reserves if the financial condition of our customers were to deteriorate or the full amount of any anticipated proceeds from the sale of the collateral supporting our customers’ financial obligations is not realized. Our cash flows and overall liquidity may be materially adversely affected if any of the financial institutions that finance our customer receivables become unable or unwilling, due to unfavorable economic conditions, a weakening of our or their financial position or otherwise, to continue providing such credit.

We have a substantial amount of goodwill and other indefinite-lived intangible assets on our balance sheet as a result of acquisitions we have completed. At December 31, 2024,2025, approximately 77%78% of these intangibles were concentrated inwithin the Access segment.JLG. We evaluate goodwill and indefinite-lived intangible assets for impairment annually, or more frequently if potential interim indicators exist that could result in impairment. Events and conditions that could result in impairment include a prolonged period of global economic weakness, a decline in economic conditions or a slow, weak economic recovery, a sustained decline in the price of our common stock, adverse changes in the regulatory environment, adverse changes in the market share of our products, adverse changes in interest rates, or other factors leading to reductions in the long-term net sales or profitability that we expect. For example, in the second quarter of 2024, we identified interim indicators of impairment for the Pratt Miller reporting unit as a result of unfavorable performance compared to forecast and adverse market conditions leading to a decline in the Company's expectations for future performance of Pratt Miller. Our subsequent testing indicated that intangible asset impairments of $51.6 million were required. Determination of the fair value of a reporting unit includes developing estimates which are highly subjective and incorporate calculations that are sensitive to minor changes in underlying assumptions. Management’s assumptions change as more information becomes available. Changes in these events and conditions or other assumptions could result in an impairment charge in the future, which could have a significant adverse impact on our reported earnings.

Our access to debt financing at competitive risk-based interest rates is partly a function of our credit ratings. A downgrade to our credit ratings could increase our interest rates, could limit our access to public debt markets, could limit the institutions willing to provide us credit facilities, and could make any future credit facilities or credit facility amendments more costly and/or difficult to obtain. In addition, our revolving credit facilityfacilities isare subject to variable interest rates. An increase in general interest rates would also increase our cost of borrowing under our credit agreement.agreements.

Our credit agreementagreements containscontain financial and restrictive covenants which, among other things, require us to maintain a leverage ratio. Our ability to meet the leverage ratio may be affected by a number of risks or events, including the risks described in this Annual Report on Form 10-K and events beyond our control. The indentures governing our senior notes also contain restrictive covenants. Any failure by us to comply with these restrictive covenants or the financial and restrictive covenants in our credit agreementagreements could have a material adverse effect on our financial condition, results of operations and debt service capability.

We are subject to income taxes in the U.S. and various non-U.S. jurisdictions. Our domestic and international tax liabilities are dependent upon the location of earnings among these different jurisdictions. Changes in our effective tax rate as a result of changes in tax laws or regulations and judicial or regulatory interpretations of those laws or regulations, the mix of earnings in countries with differing statutory tax rates, changes in overall profitability, changes in U.S. generally accepted accounting principles, or changes in the valuation of deferred tax assets could adversely affect our future results of operations. In addition, certain tax policy efforts, including any tax law changes resulting from the Organization for Economic Cooperation and Development and the G20's inclusive framework on Base Erosion and Profit Sharing, could adversely impact our tax rate and subsequent tax expense. In addition, the amount of income taxes that thewe Company payspay is subject to ongoing audits by U.S. federal, state and local tax authorities and by non-U.S. tax authorities. If these audits result in assessments different from amounts that thewe Company hashave reserved for potential tax liabilities, future financial results may include unfavorable adjustments to the Company’sour tax liabilities, which could have a material adverse effect on the Company’sour results of operations.

Access — aerial work platforms and telehandlers used in a wide variety of construction, industrial, agricultural, vegetation management and maintenance applications to position workers and materials at elevated heights. Access customers include equipment rental companies, construction contractors, manufacturing companiescontractors and home improvement centers. The Access segment also manufactures carriers and wreckers sold to towing companies.

Vocational — custom and commercial firefighting vehicles and equipment sold to municipal fire departments; aviation ground support products, gate equipment and airport services providedsold to commercial airlines, airports, air-freight carriers, ground handling customers and the military; aircraft rescue and firefighting (ARFF) vehicles sold to airports and the U.S. military; refuse and recycling collection vehicles sold to commercial and municipal waste haulers; field service vehicles and truck-mounted cranes sold to mining, construction and otherequipment rental companies; simulators, mobile command and control vehicles and other emergency vehicles primarily sold to fire departments, airportsdepartments and other governmental units; and front-discharge concrete mixers sold to ready-mix companies.

DefenseTransport — tactical vehicles, trailers, weapons system integrationtrailers and parts sold to the U.S. military and to other militaries around the world and delivery vehicles for the United States Postal Service (USPS).

The Company announced an increase in its quarterly dividend rate of 10.9%,11.8%, to $0.51$0.57 per share, beginning in the first quarter of 2025.2026. This was the Company’sCompany's eleventhtwelfth straight year of a double-digit percentage increase toin its dividend rate.

The Company estimates consolidated sales will be approximately $10.6$11.0 billion in 2025,2026, compared to $10.7$10.4 billion in 2024.2025. The Company expects consolidated operating income in 2026 will be approximately $990$1.06 million,billion, resulting in diluted earnings per share of approximately $10.30.$10.90. Included in the Company's expectations is amortization of intangible assets of approximately $60$55 million, or $0.70$0.60 per share. Excluding amortization of intangible assets, the Company expects adjusted diluted earnings per share in 2026 to be approximately $11.00.$11.50. The Company's estimates assume that present levels of tariff rates,rates rawcontinue. materialThe pricesCompany andestimates supplytariffs chainwill performancetotal continueapproximately into$200 2025million withoutin significant2026, disruption.which is an increase of approximately $165 million from 2025.

The Company expects Access segment sales will be approximately $4.4$4.2 billion in 2025,2026, a decrease of approximately 15%7.0% compared to 20242025 sales reflectingas marketnon-residential conditionsconstruction activity is expected to be relatively consistent with 2025. The Company expects that Access segment sales in Norththe Americafirst and Europe and conclusionquarter of 2026 will be lower than the agreementfirst quarter of 2025 due to produceits Caterpillar-brandedstrong telehandlers.sales in the fourth quarter of 2025, which the Company believes were a result of strong customer purchases in advance of announced 2026 pricing actions. The Company expects operating income margin in the Access segment in 20252026 will be approximately 12.5%,9.7%, down from 15.6%11.2% in 20242025 asdue a result of adverse sales mix andto the impact of fixed costs relative to lower expected sales levels on fixed costs.levels.

The Company expects Vocational segment sales of approximately $3.8$4.2 billion in 2025,2026, an increase of approximately 15%13.0% compared to 20242025 sales reflecting expected increases in production volume from improved throughput and pricing.improvements in pricing in municipal fire apparatus as the Vocational segment delivers its backlog. The Company expects Vocational segment operating income margin in 20252026 will be approximately 14.0%,16.1%, compared to 12.0%14.7% in 2024.2025. The segment's operating income margin is expected to increase in 20252026 as a result of expected continued favorable price/cost dynamics.dynamics Customerand ordersimproved inproduction backlog for delivery in 2025 were booked at significantly higher prices.throughput.

The Company expects DefenseTransport segment sales will be approximately $2.3$2.5 billion in 2025,2026, an increase of approximately 7%19% compared to 20242025 sales. The Company's estimatesestimate reflectreflects improved pricing under recent contracts and a progressive increase in production under the expectedCompany's ramp-upNext ofGeneration NGDV production, offset in part by the completion of production on the domestic Joint Light TacticalDelivery Vehicle (JLTVNGDV) contract in early 2025.contract. The Company expects DefenseTransport segment operating margin will be approximately 4.0% in 2025,2026, compared to 2.4%3.7% in 2024,2025, asreflecting athe resultelimination of lower adverse cumulative catch-up adjustments experienced in 2025 and the ramp-upexpected receipt of a follow-on delivery order from the USPS are expected to be offset in part by higher engineering spending and the non-recurrence in 2026 of the impact of a sale of a license of Joint Light Tactical Vehicles (JLTV)-related intellectual property to the U.S. government for $25 million. The Company's expectations contemplate a receipt of a follow-on NGDV production.delivery order from the USPS, which the Company expects would result in a favorable cumulative catch-up adjustment at the time the order is received.

The Company estimates corporate and other costs in 20252026 will be approximately $185 million. The Company estimates net interest expense will be approximately $120$105 million in 2025,2026, compared to $112$109 million in 2024.2025. The Company estimates the tax rate for 20252026 will be approximately 23.5%24.5% and the average share count will be approximately 65.063 million shares.

The Company expects earnings per share in the first quarter of 20252026 will be approximately $1.75,$0.85, reflecting the Company'simpact expectationsof fortariffs, softnessexpected continued softer market conditions and seasonality in the access equipment markets.markets and the Company's expectation that its strong Access segment sales in the fourth quarter of 2025 ahead of 2026 pricing actions will result in lower first quarter 2026 sales volume.

The increase in consolidatedConsolidated selling, general and administrative expenses wasdecreased primarily a result of operating costs relateddue to acquired businesses ($52 million), offset in part by lower incentive compensation costsaccruals ($14$30 million).

IntangibleDuring asset2024, the Company recorded impairment charges relaterelated to the impairments of intangible assets at Pratt Miller recognizedgoodwill inand theintangibles second($52 quarter of 2024million) as a result of unfavorable performance compared to forecast and adverse market conditions related to mobility and motorsportsmotorsports. leadingDuring 2025, the Company impaired the remaining Pratt Miller goodwill ($6 million) as a reduction in royalties expected on defense contracts led to a further decline in the Company's expectations of future performance.performance of the reporting unit.

The increasedecrease in consolidated operating income was primarily due to improved pricing ($166 million), the impact of higherlower gross margin associated with higherlower sales volume ($134$107 million), higher labor and overhead costs ($90 million) and improvedhigher saleswarranty mixexpense ($63$37 million), partially offset in part by improved pricing ($69 million), lower intangible asset impairments ($52$46 million), thelower impactselling, ofgeneral and administrative expenses ($34 million) and lower adverse changes in cumulative catch-up adjustments on contracts ($50 million), higher engineering costs ($47 million) and higher production costs ($43$12 million).

Miscellaneous, net includes gains and losses on investments, net foreign currency transaction gains and losses, and non-service costs of the Company’s pension plans. MiscellaneousResults income,for net2025 decreasedincluded primarilyincome duerelated to changes in foreign currency transactions ($8 million) and the recognitionnon-service portion of a gain on a settlement with the Company's pension advisorplans inof 2023 ($5$7 million). and gains related to investments of $4 million.

The lowereffective tax rate in 2025 included net discrete tax benefits of $17 million primarily related to the release of uncertain tax positions on the resolution of a multi-year federal income tax audit. The effective tax rate in 2024 asincluded comparednet todiscrete 2023tax is the resultbenefits of a$2 higher foreign-derived intangible income deduction due to higher export sales.million. See Note 7 of the Notes to Consolidated Financial Statements for a reconciliation of the effective tax rate compared to the U.S. statutory tax rate.

Losses of unconsolidated affiliates primarily represented changes in the Company’s equity method investments. During 2024, the Company recorded an impairment of an equity method investment of $7 million. During 2023, the Company wrote down its investment in an equity interest in an entity in Mexico by $6 million based on the estimated fair market value of the entity and subsequently completed the sale of its interest in the entity, resulting in an additional loss of $2 million.

The increasedecrease in Access segment selling, general and administrative expenses was generally a result of higher spending on outside services ($16 million), higher salaries ($11 million) andin the inclusionAccess ofsegment operatingwas costsprimarily relateddue to AUSA ($4 million), offset in part by lower incentive compensation costsaccruals ($8$10 million).

The increasedecrease in operating income in the Access segment operating income was primarily due to improved sales mix ($48 million), the impact of higherlower gross margin associated with higherlower sales volume ($33$192 million), favorablehigher absorptionsales discounts ($15$118 million) and lowerhigher litigationlabor and overhead costs ($10$40 million), offset in part by higherlower selling,incentive generalcompensation and administrative expenses to support higher sales volumeaccruals ($24 million) and higher engineering costs ($21 million).

The increase in gross margin in the Vocational segment was primarily attributable to improved pricing.pricing (300 basis points), offset in part by higher material costs (90 basis points) and higher labor and overhead costs (60 basis points).

The increase in operating income in the Vocational segment was primarilylargely duea toresult of improved pricing ($160$157 million), and the impact of higher gross margin associated with higher sales volume ($55 million), improved product mix ($31 million), the absence of the loss on the sale of the rear-discharge concrete mixer business ($13 million) and the absence of acquisition costs related to AeroTech ($13$76 million), offset in part by higher labor and overhead costs ($45 million), higher material costs ($25 million) and adversehigher productionwarranty variancesexpense ($25$16 million).

The following table presents the DefenseTransport segment results (in millions):

The decreaseincrease in gross margin in the DefenseTransport segment was primarily due to changesimproved in cumulative catch-up adjustments on contractspricing (200120 basis points), improved sales mix (80 basis points) and adverselower productionunfavorable variancescumulative catch-up adjustments (6040 basis points), offset in part by higher warranty expense (110 basis points).

Selling,The decrease in selling, general and administrative expenses in the DefenseTransport segment remainedwas relativelyprimarily flat in 2024 compareddue to 2023.lower incentive compensation accruals ($2 million).

Net operating costs for corporate and other increaseddecreased primarily due to thelower intangible asset impairments in($46 million) at the second quarter of 2024 atCompany's Pratt Miller ($52business million),unit higherand share-basedlower incentive compensation expensesaccruals ($6 million), lower operating results at Pratt Miller ($6 million) and higher new product development investments ($5$17 million).

The Company generates significant capital resources from operating activities, which is the expected primary source of funding for the Company. The Company expects cash flow from operations to be between $550$750 million and $650$850 million in 2025.2026. In addition to cash generated from operations, the Company had other sources of liquidity available at December 31, 2024,2025, including $204.9$479.8 million of cash and cash equivalents and $1.16$1.51 billion 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 as of December 31, 2025 and expects to remain in compliance with the financial covenantcovenants contained in the Credit Agreement.

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 believesremains thatin itsa stable overall capital resources and liquidity position that the Company believes is adequate to meet its projected needs. ToIn March 2025, to provide additional flexibility for working capital needs, organic and inorganic investments as well as share repurchases,liquidity, the Company amendedentered into a credit agreement with various lenders to borrow funds under a $500 million unsecured term loan, which matures in March 2027. The Company used the Creditproceeds Agreementfrom inthe Aprilterm 2024loan to increaserepay a portion of the maximumborrowings aggregatethat amountwere of availabilityoutstanding under the Revolving Credit Facility by $450 million to $1.55 billion.Facility.

The Company’s cash and cash equivalents and capitalization waswere as follows (in millions):

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 and recycling collection and air transportation equipment markets, which are particularly impacted by the strength of U.S. and European economies and construction outlooks; 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 Company's ability to predict the level and timing of orders and costs on the U.S. Postal Service contract; the Company's ability to increase production rates in its municipal fire apparatus and delivery businesses; risks that trade wars and related tariffs could further reduce demand for or competitiveness of the Company’s products or cause inefficiencies in the Company's supply chain; the Company’s ability to increase prices to raise margins or to offset higher input costs; the Company's ability to achieve its projected material and manufacturing efficiency savings; the Company's ability to accurately predict future input costs associated with U.S. Department of Defense contracts; the Company’s ability to attract and retain production labor in a timely manner; the Company's ability to increase production rates in its municipal fire apparatus and delivery businesses; the strength of the U.S. dollar and its impact on Company exports, translation of foreign sales and the cost of purchased materials; the impact of severe weather, war, natural disasters or pandemics that may affect the Company, its suppliers or its customers; budget uncertainty for the U.S. federal government, including risks of future budget cuts, the impact of continuing resolution funding mechanisms or a prolonged federal government shutdown; 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; 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 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, those described in the Company’s most recent Annual Report on Form 10-K and Item 1A. of Part II of this Quarterly Report on Form 10-Q.

Transport — tactical vehicles, trailers and parts sold to the U.S. military and to other militaries around the world and deliverythe vehiclesNext Generation Delivery Vehicle (NGDV) for the United States Postal Service (USPS).

The Company continued to repurchase shares of its Common Stock, repurchasing 303,592667,158 shares during the firstsecond quarter of 2026 for approximately$92 $47million, bringing share repurchases for the first six months of 2026 to $139 million. Share repurchases during the previous twelve months benefited earnings per share during the firstsecond quarter of 2026 by $0.02$0.09 compared to the firstsecond quarter of 2025.

The decrease in consolidated gross margin was primarily due to unfavorable sales mix (210200 basis points), higher material costs (140170 basis points), largelyprimarily related to higher tariff costscosts, and higher manufacturing overhead costs (14080 basis points), offset in part by improved pricing (110170 basis points).

The increase in consolidated selling, general and administrative expenses was primarily the result of higher employee compensation ($9$7 million), offset in part by a favorable resolution of a sales and useincreased taxlegal auditand inprofessional Wisconsinfees ($3$4 million).

The decrease in consolidated operating income was primarily due to higher material costs ($55 million), unfavorable sales mix ($47$52 million), higher material costs ($33 million) largely related to higher tariff costs, higher manufacturing overhead costs ($33$25 million) and thehigher impactwarranty of lower gross margin associated with lower sales volumecosts ($16$10 million), offset in part by improved pricing ($36$68 million) and the impact of higher gross margin associated with higher sales volume ($23 million).

Miscellaneous, net primarily relates to gains and losses on investments, foreign currency transaction gains and losses and non-service costs of the Company’s pension plans. Results for the firstsecond three monthsquarter of 2026 included lossesforeign relatedcurrency totransaction investmentsgains of $3$1 million. Results for the second quarter of 2025 included a $6 million andgain incomeon relatedan toinvestment, thepartially non-serviceoffset portionby offoreign thecurrency Company'stransaction pension planslosses of $2 million.

The effective tax rate in the firstsecond quarter of 2026 included net discrete tax benefits of $3$16 million, largelyprimarily related to excessthe expiration of the statute of limitations for a foreign anti-hybrid tax deductions on share-based compensation. The effective tax rate in the first quarter of 2025 included net discrete tax expense of $1 million, largely related to interest on uncertain tax positions.matter.

Access segment net sales decreasedincreased primarily due to lowerhigher sales volume ($34$91 million), offsetand inimproved part by favorable currencypricing ($18$21 million).

The decrease in gross margin in the Access segment was primarily due to adverse sales mix (270 basis points) and higher material costs (250230 basis points), largelyprimarily related to higher tariff costs.costs, and adverse sales mix (210 basis points), offset in part by improved pricing (110 basis points).

The decrease in operating income in the Access segment was primarily due to higher material costs ($33 million), adverse sales mix ($26$29 million), higher materiallitigation costsreserves ($23$5 million), higher selling, general and administrative expenses ($5 million) largelyand relatednew toproduct higherdevelopment tariffspending costs($3 andmillion), offset in part by the impact of lowerhigher gross margin associated with lowerhigher sales volume ($10$25 million) and improved pricing ($21 million).

The decrease in gross margin in the Vocational segment was primarily attributable to adverse sales mix (220 basis points), higher manufacturing overhead costs (280 basis points), adverse sales mix (120220 basis points) and higher material costs (110200 basis points), offset in part by improved pricing (260300 basis points) and lower incentive compensation accruals (70 basis points).

The decrease in operating income in the Vocational segment was largelyprimarily adue resultto ofadverse sales mix ($22 million), higher manufacturing overhead costs ($21 million), higher material costs ($19 million) and the impact of lower gross margin associated with lower sales volume ($22 million), higher manufacturing overhead costs ($22 million), adverse sales mix ($10 million) and higher material costs ($9$15 million), offset in part by improved pricing ($30$42 million) and lower incentive compensation accruals ($11 million).

Transport segment net sales increased due to higher NGDV sales volume ($163$133 million) and the impact of cumulative catch-up adjustments ($10 million), offset in part by lower Joint Light Tactical Vehicle sales volume to the Department of Defense ($81 million), lower Family of Heavy Tactical Vehicles sales volume ($24 million) and lower aftermarket sales volume ($22$99 million).

The decrease in gross margin in the Transport segment was primarily due to higheradverse manufacturingsales overhead costsmix (160220 basis points), adversehigher saleswarranty mixexpense associated with a defense vehicle program (130100 basis points) and higher materialmanufacturing costsoverhead (3090 basis points), largely related to higher tariff costs,partially offset in part by lowerthe unfavorableimpact cumulativeof catch-upan adjustmentsNGDV performance obligation associated with aftermarket rights (310260 basis points).

The increasedecrease in operating income in the Transport segment was primarily due to loweradverse unfavorablesales cumulative catch-up adjustmentsmix ($16$11 million), higher warranty expenses ($6 million) and the impact of higher grossmanufacturing margin associated with higher sales volumeoverhead ($5 million), partially offset in part by higherthe manufacturingNGDV overheadaftermarket costsrights performance obligation ($9 million) and adverse sales mix ($6$17 million).

Net operating costs for corporate and other decreased primarily due to improvedthe operatingnon-recurrence resultsof an intangible asset impairment ($6 million) at the Company's Pratt Miller business unit ($5 million).unit.

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 MarchJune 31,30, 2026, including $250.3$403.6 million of cash and cash equivalents and $1.54$1.58 billion 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 the financial covenants contained in the Credit Agreement (as defined in “Liquidity”). The Company was in compliance as of MarchJune 31,30, 2026 and expects to remain in compliance with the financial covenants contained in the Credit Agreement.

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.

The Company’s ratio of debt to total capitalization of 20.4%19.6% at MarchJune 31,30, 2026 remained within its targeted range.

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 MarchJune 31,30, 2026, 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:

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 43 days at December 31, 2025 to 5348 days at MarchJune 31,30, 2026. Days sales outstanding for segments other than the Transport segment increased from 51 days at December 31, 2025 to 6053 days at MarchJune 31,30, 2026 primarily due to extendedthe paymenttiming termsof sales in the AccessVocational segment on sales during the fourth quarter of 2025.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) decreasedincreased from 3.6 times at December 31, 2025 to 3.23.7 times at MarchJune 31,30, 2026 due to increases in inventory levels in the Access and Vocational segments.2026. 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) decreased from 65 days at December 31, 2025 to 6453 days at MarchJune 31,30, 2026.2026 primarily due to more timely invoice processing.

Operating activities usedprovided cash of $161.0$213.3 million in the first threesix months of 2026 compared to $394.9using $305.7 million during the first threesix months of 2025. The improvement in operating cash used for operating activitiesflow reflected more disciplined working capital management asrelated theto Company builtlower inventory forlevels the summer season, as well asand higher customer advances. The Company continues to expect cash flow from operations to be between $750 million and $850 million in 2026.

Investing activities providedused cash of $1.1$42.1 million in the first threesix months of 2026 compared to using $43.1$99.1 million of cash during the first threesix months of 2025. Through the first threesix months of 2026, the Company used $28.1$54.8 million for capital expenditures, a decrease of $12.2$26.1 million compared to the first threesix months of 2025. The Company continues to expect that it will invest $200 million on capital expenditures in 2026.

Financing activities used cash of $68.5$245.6 million in the first threesix months of 2026 compared to providing $438.1 millioncash of cash$379.4 million during the first threesix months of 2025 primarily due to lower net borrowings.borrowings and higher repurchases of common stock. In March 2025, to provide additional liquidity, the Company entered into a credit agreement with various lenders to borrow funds under a $500 million unsecured term loan, which matures in March 2027.loan. In the first threesix months of 2026, the Company repurchased 303,592970,750 shares of its Common Stock at an aggregate cost of $47.3$138.9 million. As of MarchJune 31,30, 2026, the Company had approximately 7.67.0 million shares of Common Stock remaining under its repurchase authorization. In the first threesix months of 2025, the Company repurchased 287,552702,307 shares of its Common Stock at an aggregate cost of $28.7$68.7 million.

On March 16, 2026, the Company entered into a Fourth 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”) with a maximum aggregate availability of $1.60 billion that matures in March 2031. At MarchJune 31,30, 2026, there were no borrowings under the Revolving Credit Facility of $44.0 million and specified outstanding letters of credit of $18.5$15.9 million reduced available capacity under the Revolving Credit Facility to $1.54$1.58 billion.

The Term Loan and the Credit Agreement contain 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 covenants as of MarchJune 31,30, 2026 and expects to be able to meet the financial covenants contained in its credit agreements over the next twelve months.