# Oshkosh Corp: Form 10-K for the period ended Dec 31, 2022 - Company: [Oshkosh Corp](/companies/osk.md) (CIK 775158) - Form: 10-K - Filed: 2023-02-21 - Accepted by EDGAR: Feb 21, 2023, 17:23 ET - Period: 2022-12-31 - Accession: 0000950170-23-003473 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/775158/000095017023003473/osk-20221231.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/775158/000095017023003473/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2022-12-31. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 3 months, 2022-10-01 to 2022-12-31 | $2.20bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax | | Revenue | 12 months, 2022-01-01 to 2022-12-31 | $8.28bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax | | Cost of revenue | 12 months, 2022-01-01 to 2022-12-31 | $7.23bn | us-gaap:CostOfGoodsAndServicesSold | | Gross profit | 3 months, 2022-10-01 to 2022-12-31 | $315.0m | us-gaap:GrossProfit | | Gross profit | 12 months, 2022-01-01 to 2022-12-31 | $1.05bn | us-gaap:GrossProfit | | Research and development | 12 months, 2022-01-01 to 2022-12-31 | $113.4m | us-gaap:ResearchAndDevelopmentExpense | | Selling, general and administrative | 12 months, 2022-01-01 to 2022-12-31 | $662.8m | us-gaap:SellingGeneralAndAdministrativeExpense | | Operating income | 3 months, 2022-10-01 to 2022-12-31 | $147.0m | us-gaap:OperatingIncomeLoss | | Operating income | 12 months, 2022-01-01 to 2022-12-31 | $372.3m | us-gaap:OperatingIncomeLoss | | Income tax | 12 months, 2022-01-01 to 2022-12-31 | $97.5m | us-gaap:IncomeTaxExpenseBenefit | | Net income | 3 months, 2022-10-01 to 2022-12-31 | $75.1m | us-gaap:ProfitLoss | | Net income | 12 months, 2022-01-01 to 2022-12-31 | $173.9m | us-gaap:ProfitLoss | | Diluted EPS | 3 months, 2022-10-01 to 2022-12-31 | $1.14 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 3 months, 2022-10-01 to 2022-12-31 | $1.15 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 12 months, 2022-01-01 to 2022-12-31 | 66,134,818 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 12 months, 2022-01-01 to 2022-12-31 | $601.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 12 months, 2022-01-01 to 2022-12-31 | $269.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | | Dividends paid | 12 months, 2022-01-01 to 2022-12-31 | $97.3m | us-gaap:PaymentsOfDividends | | Share repurchases | 12 months, 2022-01-01 to 2022-12-31 | $155.0m | us-gaap:PaymentsForRepurchaseOfCommonStock | | Cash and equivalents | at 2022-12-31 | $805.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2022-12-31 | $4.53bn | us-gaap:AssetsCurrent | | Total assets | at 2022-12-31 | $7.73bn | us-gaap:Assets | | Current liabilities | at 2022-12-31 | $2.43bn | us-gaap:LiabilitiesCurrent | | Long-term debt | at 2022-12-31 | $595.0m | us-gaap:LongTermDebtNoncurrent | | Shareholders' equity | at 2022-12-31 | $3.19bn | us-gaap:StockholdersEquity | ## Business As filed, 69,653 characters. In October 2021, the Company changed its fiscal year end from September 30 to December 31. Accordingly, the Company reported a transition quarter that ran from October 1, 2021 through December 31, 2021. Fiscal 2020 and Fiscal 2021 relate to the years ended September 30, 2020 and September 30, 2021, respectively. Fiscal 2022 relates to the year ended December 31, 2022. Effective January 31, 2023, the Company formed a new reporting segment called Vocational. The Vocational segment was created by combining the Fire & Emergency segment and Commercial segment businesses, which all design, develop and manufacture purpose-built vocational vehicles for people in communities around the world who do tough work. The discussions below speak to the Company’s segments as of December 31, 2022 unless noted otherwise. ### The Company Oshkosh Corporation is an industrial technology company and manufacturer that innovates purpose-built vehicles and equipment for the access, defense, fire & emergency, refuse collection and concrete placement markets. Each of our products and technologies is designed with the customer in mind, from the four-wheel drive system that the Company patented in 1917 to advances in electrification, autonomy, active safety and intelligent and connected products. The Company is comprised of 12 industry-leading brands across four reportable segments for financial reporting purposes: Access Equipment, Defense, Fire & Emergency and Commercial, which comprised 48%, 26%, 13% and 13%, respectively, of the Company’s consolidated net sales in fiscal 2022. Oshkosh’s leading brands include a wide range of purpose-built vehicles and equipment to serve a diverse group of industries. This allows Oshkosh to leverage innovations and efficiencies across the enterprise, including supply chain, materials integration, manufacturing processes and facilities to create a leading industrial technology company in its end markets. The Company made approximately 25%, 33% and 35% of its net sales for fiscal 2022, 2021 and 2020, respectively, to the U.S. government, a substantial majority of which were under multi-year contracts and programs in the defense vehicle market. See Note 23 of the Notes to Consolidated Financial Statements for financial information related to the Company’s business segments. JLG is a designer and manufacturer of access and material handling equipment for use in a wide range of construction, industrial and maintenance applications to safely position workers and materials at height. JLG’s customer base includes equipment rental companies, construction contractors, manufacturing companies and home improvement centers. The Access Equipment segment also includes Jerr-Dan towing and recovery vehicles (wreckers and carriers). The Defense segment designs, produces and sustains best-in-class specialty vehicles and mobility systems. In 1981, Oshkosh Defense was awarded the first Heavy Expanded Mobility Tactical Truck (HEMTT) contract for the DoD, and thereafter, it developed into the U.S. Department of Defense’s (DoD) leading supplier of severe-duty, heavy-payload tactical trucks, manufacturing vehicles that perform a variety of demanding tasks such as hauling tanks, missile systems, ammunition, fuel, troops and cargo for combat units. In 2009, Oshkosh Defense became the DoD’s sole producer of the Family of Medium Tactical Vehicles (FMTV). In 2018, after successful completion of the original five-year requirements contract and several contract extensions, the DoD awarded Oshkosh Defense the FMTV A2 contract for the design, development, production and support of the next generation of FMTV. The Company is currently nearing completion of the production verification testing phase of the FMTV A2 contract and will begin operational testing of the vehicle in 2024. In 2015, Oshkosh Defense extended its position into the light-payload tactical wheeled vehicle category by capturing the DoD’s Joint Light Tactical Vehicle (JLTV) program. Oshkosh Defense can accept vehicle orders on the JLTV contract through the first quarter of fiscal 2024, with deliveries into 2025. The DoD conducted a full and open competition for follow-on JLTV production in which Oshkosh Defense participated. In February 2023, the DoD awarded the JLTV follow on contract to another company. JLTV accounted for sales of $1.33 billion in fiscal 2022. In February 2021, the U.S. Postal Service (USPS) awarded Oshkosh Defense an indefinite delivery, indefinite quantity (IDIQ) contract to produce the Next Generation Delivery Vehicle (NGDV), the USPS’s first large-scale fleet procurement in three decades. The competitively awarded contract allows for the delivery of up to 165,000 vehicles over a 10-year period. In June 2021, the U.S. Army awarded Oshkosh Defense a six-year contract to integrate a Medium Caliber Weapons System onto Stryker Double V Hull Infantry Carrier Vehicles. In addition, the Defense segment offers engineering and product development services to customers in the motorsports and multiple ground vehicle markets through Pratt Miller. The Defense segment also designs and manufactures snow removal equipment for airports. The Fire & Emergency segment includes the Pierce and Maxi-Metal brands, leading manufacturers of custom and commercial firefighting vehicles and equipment in North America. The segment also includes Oshkosh Airport Products aircraft rescue and firefighting (ARFF) vehicles, as well as Frontline Communications branded simulators, command vehicles and other communication vehicles. Primary customers include fire departments, airports, municipalities, broadcasters and television stations. The Commercial segment designs and manufactures refuse collection, rear- and front-discharge concrete placement vehicles, field service vehicles and truck mounted cranes under the McNeilus, London Machinery and IMT brands. Customers include municipalities, and private refuse companies, as well as ready-mix, mining and construction businesses. ### Competitive Strengths The following competitive strengths support the Company’s business strategy: *Strong Market Positions.* The Company has developed strong market positions and brand recognition in its core businesses, which it attributes to its reputation for quality products, advanced engineering, market leading innovation, vehicle and equipment performance, reliability, customer service and low total cost of ownership. The Company maintains leading market shares in nearly all of its businesses and is the sole-source supplier of a number of vehicles to the DoD. *Diversified Product Portfolios.* The Company believes its broad product portfolios and end markets serve to diversify its sources of revenues, mitigate the impact of economic cyclicality and provide multiple platforms for both organic and inorganic growth. The Company’s product portfolios provide extensive opportunities to bundle products for sale to customers, co-locate manufacturing, leverage purchasing power and share innovation and technology within and between segments. For each of its target markets, the Company has developed or acquired a broad product line in an effort to become a single-source provider of purpose-built vehicles and equipment, parts and service and related products to its customers. In addition, the Company has established an extensive domestic and international distribution network for purpose-built vehicles and equipment tailored to each market. *Quality Products and Customer Service.* The Company has developed strong brand recognition for its products as a result of its commitment to meet the stringent product quality and reliability requirements of its customers in the purpose-built vehicle and equipment markets it serves. The Company frequently achieves premium pricing due to the quality, durability and low total cost of ownership of its products and its commitment to providing high quality lifecycle support through extensive parts and service support programs. *Innovative and Proprietary Components.* The Company’s advanced design and engineering capabilities have contributed to the development of innovative and/or proprietary, severe-duty components that enhance vehicle performance, reduce manufacturing costs and strengthen customer relationships. The Company’s advanced design and engineering capabilities have also allowed it to integrate many of these components across various segments and product lines, which enhances its ability to compete for new business and reduces its costs to manufacture its products compared to manufacturers who simply assemble purchased components. The Company has been a supplier of electric-powered products for more than 20 years and recently launched several new products that leverage zero emissions electrification for mobility across all segments. *Flexible and Efficient Manufacturing.* The Company believes it has competitive advantages over larger vehicle manufacturers in its purpose-built vehicle and equipment markets due to its product quality, manufacturing flexibility, purchasing power and distribution networks. The Company also believes it has competitive advantages over smaller vehicle and equipment manufacturers due to volumes that offer purchasing power, technology and manufacturing sharing opportunities across product lines. *Strong Management Team.* The Company is led by President and Chief Executive Officer John C. Pfeifer. Mr. Pfeifer is complemented by an experienced senior management team that has been assembled through internal promotions and external hires. The Company’s Board of Directors maintains a robust succession planning process for its executive officers to ensure strong business continuity. ### Business Strategy The Company has evolved its business strategy to focus on its most important priorities. The strategy is grounded in its purpose of making a difference in people’s lives. The strategy is reflected in three simple words: Innovate. Serve. Advance. ***I****nnovate.* The Company innovates customer solutions by combining leading technology and operational strength to empower and protect the everyday hero. The Company is developing and integrating advanced technologies to fulfill its purpose in areas such as electrification, autonomy and active safety as well as intelligent and connected products. ***S****erve.* The Company serves and supports customers with a relentless focus throughout the product lifecycle. The Company believes that lifecycle services provide a robust growth opportunity while offering stability throughout business cycles. ***A****dvance.* The Company advances by expanding into new markets and geographies to make a difference around the world. The Company expects to continue to grow across the world and expand into new categories both organically, as with the USPS program win in the last mile delivery vehicle market, and inorganically through investments and acquisitions. ### Products Oshkosh Corporation is focused on the following core segments of the purpose-built vehicle and equipment markets: *Access Equipment segment.* JLG is a leading designer and manufacturer of aerial work platforms and telehandlers used in a wide variety of construction, industrial and maintenance applications to safely position workers and materials at height. In addition, through a long-term license with Caterpillar Inc. that extends to 2025, JLG produces Caterpillar-branded telehandlers for distribution through the worldwide Caterpillar Inc. dealer network. JLG also offers a broad range of parts and accessories, including technical support and training, and reconditioning services. Access Equipment customers include equipment rental companies, construction contractors, manufacturing companies and home improvement centers. JLG’s products are marketed worldwide through independent rental companies and distributors that purchase these products and then rent or sell them and provide service support, as well as through other sales and service branches or organizations. JLG also arranges equipment financing and leasing solutions for its customers, primarily through third-party funding arrangements with independent financial companies, and occasionally provides credit support in connection with these financing and leasing arrangements. Financing arrangements that JLG offers or arranges through this segment include various types of rental fleet loans and leases, as well as floor plan and retail financing. Terms of these arrangements vary depending on the type of transaction, but typically range from 36 to 72 months and generally require the customer to be responsible for maintenance of the equipment and to bear the risk of damage to or loss of the equipment. The Company, through its Jerr-Dan brand, is a leading designer, manufacturer and marketer of towing and recovery equipment in the U.S. The Company believes Jerr-Dan is recognized as an industry leader in quality and innovation. Jerr-Dan offers a broad line of carriers, wreckers and rotators. In addition to manufacturing equipment, Jerr-Dan provides its customers with one-stop service support and generates revenue from the installation of equipment, as well as the sale of chassis and service parts. *Defense segment.* Oshkosh Defense has designed and sold products to the DoD for over 100 years and also exports tactical wheeled vehicles to approved foreign customers. By successfully responding to the DoD’s changing vehicle requirements, Oshkosh Defense has become the leading manufacturer of heavy, medium, and light tactical wheeled vehicles and related sustainment services for the DoD. Oshkosh Defense designs and manufactures vehicles that perform a variety of demanding tasks such as hauling tanks, missile systems, ammunition, fuel, troops and cargo for a broad range of missions. Oshkosh Defense’s proprietary product line of military heavy-payload tactical wheeled vehicles includes the Heavy Expanded Mobility Tactical Truck (HEMTT), the Heavy Equipment Transporter (HET), the Palletized Load System (PLS), and the Logistic Vehicle System Replacement (LVSR). Oshkosh Defense’s proprietary medium-payload military tactical wheeled vehicles include the Medium Tactical Vehicle Replacement (MTVR). Oshkosh Defense’s light-payload military tactical wheeled vehicles include the Mine Resistant Ambush Protected-All Terrain Vehicle (M-ATV), which was specifically designed with superior survivability as well as extreme off-road mobility, and the JLTV, the Company’s newest and most technologically advanced member of the light-payload vehicle category designed to protect, sustain and provide mobility for personnel and payloads across the full spectrum of military operations. In 2009, the DoD awarded Oshkosh Defense a contract to be the sole producer of FMTVs under the U.S. Army’s FMTV Rebuy program. Originally a five-year requirements contract, the DoD extended the FMTV Rebuy program several times to allow for the delivery of vehicles and trailers through fiscal 2021. In February 2018, the DoD awarded Oshkosh Defense the FMTV A2 contract for the design, development, production and support of a fleet of future generation FMTVs. The FMTV A2 contract is a firm-fixed price requirements contract that initially covers a five-year delivery period starting in 2021, with a customer option for two additional years. The Company is currently nearing completion of the production verification testing phase of the FMTV A2 contract and will begin operational testing of the vehicle in 2024. In 2015, the DoD awarded Oshkosh Defense a new Family of Heavy Tactical Vehicles (FHTV) contract for the recapitalization of HEMTT, HET and PLS vehicles as well as associated logistics and configuration management support. The contract was a five-year requirements contract for the continued remanufacturing of FHTVs. In April 2021, the DoD awarded Oshkosh Defense an FHTV extension contract. The contract is a three-year requirements contract for FHTVs. This extension contract could extend FHTV deliveries into 2025. In 2015, Oshkosh Defense extended its position into the light-payload tactical wheeled vehicle category when the DoD awarded Oshkosh Defense an eight-year, fixed price JLTV contract valued at $6.7 billion for production and delivery of 16,901 of these technologically enhanced vehicles and related sustainment services. The Company delivered its first production JLTVs to the U.S. Army in September 2016. The program achieved the full rate production milestone decision in fiscal 2019. In fiscal 2021, the Army authorized an increase to the contract ceiling from 16,901 vehicles to 23,163. Under the current JLTV contract, Oshkosh Defense can accept vehicle orders through the first quarter of 2024 with deliveries into 2025. The U.S. Army, which purchased Government Purpose Rights to the Oshkosh JLTV design, conducted a full and open competition for follow-on JLTV production in which Oshkosh Defense participated. In February 2023, the DoD awarded the JLTV follow on contract to another company. JLTV accounted for sales of $1.33 billion in fiscal 2022. In February 2021, the Company was notified that the USPS selected Oshkosh Defense to build the NGDV. The IDIQ contract allows the USPS to purchase up to 165,000 units over ten years. The NGDV provides the USPS the ability to significantly modernize its delivery fleet with improved safety, reliability, sustainability and cost-efficiency while providing a much better working experience for the nation’s postal carriers. The Company’s offering provides the USPS with both zero-emission battery electric vehicles (BEV) and fuel efficient, low emission internal combustion engine (ICE) vehicles. The vehicle design also provides the USPS with the flexibility of converting ICE units to BEV in the future. The initial award for $482 million provided for engineering to finalize the production vehicle design and tooling and factory build-out activities that are necessary prior to vehicle production. In March 2022, the USPS placed its first vehicle order for 50,000 NGDVs, valued at nearly $3.0 billion, including a minimum of 10,019 BEVs. The contract allows the flexibility, when funding is provided, to increase the percentage of BEVs to be produced even after an order is placed. In December 2022, the USPS announced that it anticipates increasing the quantity of vehicles on the initial award to 60,000, of which at least 45,000 will be BEVs. The Company expects to begin delivering production vehicles in 2024. In June 2021, the U.S. Army awarded Oshkosh Defense a six-year contract worth up to $943 million to integrate the Medium Caliber Weapons System onto Stryker Double V Hull Infantry Carrier Vehicles. This contract award represents the Defense segment’s entrance into the adjacent combat vehicles market. The Defense segment also designs and manufactures snow removal vehicles. The Company’s specially designed airport snow removal vehicles are used by some of the largest airports in the world and military bases in the United States. The Company believes that the reliability of its high-performance snow removal vehicles and the speed with which they clear airport runways contribute to its strong position in this market. Through Pratt Miller, the Company offers advanced engineering, product development and innovation services to the motorsport and multiple ground vehicle markets. *Fire & Emergency segment.* Through Pierce, the Company is the leading domestic designer and manufacturer of fire apparatus assembled on custom chassis, designed and manufactured to meet the demanding requirements of firefighters. Pierce also designs and manufactures fire apparatus assembled on commercially available chassis, which are produced for multiple end-customer applications. Pierce’s engineering expertise allows it to design its vehicles to meet stringent industry guidelines and government regulations for safety and effectiveness. Pierce primarily serves domestic municipal customers, but also sells fire apparatus to the DoD, airports, universities and large industrial companies, and in international markets. Pierce’s history of innovation, research and development in consultation with firefighters has resulted in a broad product line that features a wide range of innovative, high-quality custom and commercial firefighting equipment with advanced fire suppression capabilities. In an effort to be a single-source supplier for its customers, Pierce offers a full line of custom and commercial fire apparatus and emergency vehicles, including pumpers, aerial platform, ladder and tiller trucks, tankers, light-, medium- and heavy-duty rescue vehicles, wildland rough terrain response vehicles, mobile command and control centers, bomb squad vehicles, hazardous materials control vehicles and other emergency response vehicles. Through Maxi-Metal, acquired in June 2022, the Company is a designer and manufacturer of fire apparatus and utility vehicles for the Canadian market. The Company, through Oshkosh Airport Products, is a leader in the design and sale of ARFF vehicles to domestic and international airports. These highly-specialized vehicles are required to be in service at most airports worldwide to support commercial airlines in the event of an emergency. Many of the largest airports in the United States, including LaGuardia International Airport, John F. Kennedy International Airport, O’Hare International Airport, Denver International Airport, Baltimore-Washington International Airport, Dallas/Fort Worth International Airport, Tampa International Airport, Philadelphia International Airport and San Francisco International Airport, are served by the Company’s ARFF vehicles. The U.S. government also maintains a fleet of ARFF vehicles that are used to support military operations throughout the world. Internationally, the Company’s vehicles serve, among others, Beijing, China and more than fifty other airports in China; Singapore; Indonesia; Quebec, Canada; Abu Dhabi, UAE; and Birmingham, Cardiff, Manchester and Liverpool, United Kingdom. In addition, the Company has recently delivered ARFF vehicles to airports in Mexico, Japan, Romania, Canada, Ghana and the Cayman Islands. The Company believes that the performance and reliability of its ARFF vehicles contribute to the Company’s strong position in this market. The Company, through its Frontline Communications brand, is a leading manufacturer, system designer and integrator of broadcast vehicles, including electronic field production trailers, satellite news gathering and electronic news gathering vehicles for broadcasters and command trucks for local and federal governments along with being a leading supplier of military simulator shelters and trailers under the Oshkosh Specialty Vehicles (OSV) brand. The Company’s broadcast vehicles have been used worldwide to televise the NFL Super Bowl, the FIFA World Cup and the Olympics. Its command vehicles have supported the disaster relief efforts for FEMA and everyday incident response for federal and local law enforcement, emergency management agencies and fire departments. The Company offers two- to fifteen-year municipal lease financing programs to its Fire & Emergency segment customers in the U.S. through the Pierce Financial Solutions program, provided by PNC Equipment Finance. Programs include competitive lease financing rates, creative and flexible finance arrangements and the ease of one-stop shopping for customers’ equipment and financing. The Company typically provides credit support in connection with these financing and leasing arrangements. *Commercial segment.* Through McNeilus, the Company is a leading designer and manufacturer of refuse collection vehicles for the waste services industry throughout the Americas. Through Oshkosh Commercial, McNeilus and London, the Company is a leading designer and manufacturer of front- and rear-discharge concrete mixers for the concrete ready-mix industry throughout the Americas. On January 31, 2023, the Company announced the planned divestiture of the rear-discharge concrete mixer business, which it expects to close in the first quarter of 2023. Through IMT, the Company is a leading North American designer and manufacturer of field service vehicles and truck-mounted cranes for the construction, equipment dealer, building supply, utility, tire service, railroad and mining industries. The Company believes its Commercial segment vehicles and equipment have a reputation for market leading innovation, which drives enhanced safety and reliability, lowering total cost of ownership. The Company also arranges equipment financing and leasing solutions for its customers, primarily through third-party funding arrangements with independent financial companies, and occasionally provides credit support in connection with these financing and leasing arrangements. ### Marketing, Sales, Distribution and Service The Company believes it differentiates itself from many of its competitors by tailoring its distribution to the needs of its purpose-built vehicle and equipment markets and with its national and global sales and lifecycle service capabilities. Distribution personnel demonstrate to customers how to use the Company’s products properly. In addition, the Company’s flexible distribution is focused on meeting customers on their terms, whether on a job site, in an evening public meeting or at a municipality’s office, compared to the showroom sales approach of the typical dealer of large vehicle manufacturers. The Company backs all products with same-day parts shipment, and its service technicians are available in person or by telephone to domestic customers 365 days a year. The Company believes its dedication to keeping its products in-service in demanding conditions worldwide has contributed to customer loyalty. The Company provides its salespeople, representatives and distributors with product and sales training on the operation and specifications of its products. The Company’s engineers, along with its product managers, develop operating manuals and provide field support at vehicle delivery. U.S. dealers and representatives enter into agreements with the Company that allow for termination by either party generally upon 90 days’ notice, subject to applicable laws. Dealers and representatives, except for those utilized by JLG and IMT, are generally not permitted to market and sell competitive products. *Access Equipment segment.* JLG’s products are marketed across six continents through independent rental companies and distributors that purchase JLG products and then rent or sell them and provide service support, as well as through other Company owned sales and service branches. JLG maintains a broad worldwide internal sales force. Sales employees are dedicated to specific major customers, channels or geographic regions. JLG’s international sales employees are spread among international sales and service offices throughout the world. The Company markets its Jerr-Dan-branded carriers, wreckers and rotators through its extensive network of independent distributors. *Defense segment.* While Oshkosh Defense sells a substantial portion of its domestic defense products directly to principal branches of the DoD, it also sells defense products to numerous international militaries around the globe and has expanded into adjacent markets. Oshkosh Defense maintains a liaison office in Washington, D.C. to represent its interests with the U.S. Congress, the offices of the Executive Branch of the U.S. government, the Pentagon, as well as international embassies and government agencies. Oshkosh Defense locates its business development, consultants and engineering professionals near its customers’ principal commands, both domestically and internationally. Oshkosh Defense sells and services defense products to approved international governments as Direct Commercial Sales or Foreign Military Sales via U.S. government channels. Oshkosh Defense supports international sales through international sales offices, as well as through dealers, distributors and representatives. In addition to marketing its current tactical wheeled vehicle offerings and competing for new contracts, Oshkosh Defense actively works with its customers to develop new applications for its vehicles and expand its services. Logistics services are increasingly important to Oshkosh Defense. The Company believes that its proven worldwide logistics capabilities, invoicing and electronic payment systems have significantly contributed to the expansion of its defense parts and service business. Oshkosh Defense maintains a large parts distribution warehouse in Milwaukee, Wisconsin to fulfill stringent parts delivery schedule requirements, as well as satellite facilities near DoD bases in the U.S., Europe, Asia and the Middle East. The Company’s snow removal business uses a combination of internal sales and service representatives and distributor locations to focus on the sale of snow removal vehicles, principally to airports, but also to municipalities, counties and other governmental entities in the U.S. and Canada. In addition, the Company maintains offices in Dubai, UAE; Beijing, China; and Singapore to support airport product vehicle sales and aftermarket sales and support in Europe, the Middle East, China and Southeast Asia. *Fire & Emergency segment.* The Company believes the geographic breadth, size and quality of its Pierce fire apparatus sales and service organization are competitive advantages in a market characterized by a few large manufacturers and numerous small, regional competitors. Pierce’s fire apparatus are sold through an extensive network of independent sales and service organizations with hundreds of sales representatives in the U.S. and Canada, which combine broad geographical reach with high frequency of contact with fire departments and municipal government officials. These sales and service organizations are supported by product and marketing support professionals and contract administrators at Pierce. The Company believes high frequency of contact and local presence are important to cultivate major, and typically infrequent, purchases involving the city or town council, fire department, purchasing, finance and mayoral offices, among others, that may participate in a fire apparatus bid and selection process. After the sale, Pierce’s nationwide local parts and service capability is available to help municipalities maintain peak readiness for this vital municipal service. Pierce also sells directly to the DoD and other U.S. government agencies. Many of the Pierce fire apparatus sold to the DoD are placed in service at U.S. military bases, camps and stations overseas. Additionally, Pierce sells fire apparatus to international municipal and industrial fire departments through a network of international dealers. The Company markets its Maxi-Metal vehicles through a combination of direct sales representatives and a network of distributors. Certain of these representatives and distributors also handle Pierce products. The Company markets its Frontline Communications-branded broadcast vehicles and OSV branded shelters through sales representatives and its Frontline Communications-branded command vehicles through both sales representatives and dealer organizations that are directed at government and commercial customers. The Company markets its Oshkosh-branded ARFF vehicles through a combination of direct sales representatives domestically and an extensive network of representatives and distributors in international markets. Certain of these international representatives and distributors also handle Pierce products. *Commercial segment.* The Company believes its network of representatives and dealers is a competitive advantage in refuse collection vehicle and concrete placement markets, particularly in the U.S. waste services industry where principal competitors distribute through dealers and to a lesser extent in the ready-mix concrete industry, where several competitors in part use dealers. The Company believes its distribution model allows for a more tailored distribution approach in the U.S. refuse collection vehicle and concrete mixer markets, whereas dealers frequently offer a broad and mixed product line, and accordingly, the time dealers tend to devote to refuse collection vehicle and concrete mixer sales activities is limited. The Company has also established an extensive network of representatives and dealers throughout the Americas for the sale of McNeilus-branded refuse collection vehicles and Oshkosh-, McNeilus- and London-branded concrete mixers to international customers. The Company coordinates among its various businesses to respond to large international sales tenders with its most appropriate product offering for the tender. The Company utilizes an extensive network of representatives and dealers supported by hundreds of internal and external sales and service representatives in North America to sell and service refuse collection vehicles and front- and rear-discharge concrete mixers. The Company also performs sales and service activities at the Company’s manufacturing facilities. Service centers located throughout the U.S. provide sales, service and parts distribution to customers in their geographic regions. The Company believes this network represents one of the largest refuse collection vehicle and concrete mixer distribution networks in the U.S. IMT distributes its products through a wide network of dealers in over one hundred locations worldwide. International dealers are primarily located in Central and South America, Australia and Asia and are primarily focused on mining and construction markets. ### Manufacturing The Company manufactures its products at 29 manufacturing facilities. To reduce production costs, the Company maintains a continuing emphasis on the development of proprietary components, self-sufficiency in fabrication, just-in-time inventory management, improvement in production flows and interchangeability of components among product lines, creation of jigs and fixtures to ensure repeatability of quality processes, utilization of robotics, and performance measurement to assure progress toward cost reduction targets. The Company encourages employee involvement to improve production processes and product quality. The Company uses a common Quality Management System globally to support the delivery of consistent, high-quality products and services to customers. The Company requires employees at all levels to understand customer and supplier requirements, measure performance, develop systems and procedures to prevent product nonconformance and continually improve all work processes. The Company educates and trains all employees at its facilities in quality principles. The Company utilizes quality gates in its manufacturing facilities to identify issues early in the process and to analyze root cause at the source, resulting in fewer defects and less rework. The Company’s Quality Management System is based on ISO 9001, a set of internationally-accepted requirements established by the International Organization for Standardization. ISO 9001 certification indicates that a company has established and follows a rigorous set of standards aimed at achieving customer satisfaction by following a process-based approach to identify and control the quality needs of suppliers, inputs, critical processes and outputs. The Quality Management System helps ensure that the Company is continually improving and sharing successful practices across the organization. The following brands are ISO 9001 certified: JLG, Oshkosh Defense, Pierce, McNeilus, Frontline, Jerr-Dan and Oshkosh Airport Products. The Company has a team of employees dedicated to leading the implementation of the Company’s simplification initiatives. The team is comprised of members with diverse backgrounds in quality, lean, data analytics, product and process engineering, and culture change management. Simplification includes lean tools to eliminate waste and to provide better value for customers. It also guides customer satisfaction assessments to help identify opportunities to improve the customer experience with the Company. Within the Company’s facilities, simplification projects have contributed to manufacturing efficiency gains, materials management improvements, quality enhancements and reduced lead times. Simplification projects have also freed up manufacturing capacity to support production increases. ### Engineering, Research and Development The Company believes its extensive engineering, research and development capabilities have been key drivers of its marketplace success. The Company maintains multiple facilities for new product development and testing with a staff of approximately 1,600 engineers and technicians who are dedicated to improving existing products, development and testing of new vehicles, equipment and components and sustaining its production activities. The Company prepares multi-year new product development and technology plans for each of its markets and measures progress against those plans each month. Virtually all of the Company’s sales of fire apparatus and broadcast vehicles require some level of custom engineering to meet customer specifications and changing industry standards. Engineering is also a critical factor in defense vehicle markets due to the severe operating conditions under which the Company’s vehicles are utilized, new customer requirements and stringent government documentation requirements. Product innovation is highly important to meeting customers’ changing requirements. Accordingly, in addition to new product development engineers and technicians, the Company maintains an additional permanent staff of engineers and engineering technicians to sustain its production activities. Recent examples of the Company’s product innovation include the DaVinci lift, an all-electric scissor lift that leverages highly sophisticated technology including linear actuators in place of traditional hydraulic cylinders in an elegant design to bring industry defining productivity and serviceability to both rental companies and end users in the access equipment market. The Company’s Fire & Emergency segment introduced the revolutionary Volterra platform of electric vehicles to meet the critical needs of fire departments while providing the operational performance customers expect from Pierce fire apparatus. The Volterra platform offers zero emissions, reduced noise, an electro-mechanical infinitely variable transmission (EMIVT), integrated onboard batteries and industry-leading operational range for full-shift operation. The Volterra is available as both a customer pumper for municipal applications and an ARFF vehicle. ### Competition In all of the Company’s segments, competitors include smaller, specialized manufacturers as well as large, mass producers. The Company believes that, in its purpose-built vehicle and equipment markets, it has been able to effectively compete against large, mass producers due to its product quality, manufacturing flexibility, purchasing power and distribution networks. In addition, the Company believes it has competitive advantages over smaller vehicle and equipment manufacturers due to volumes that offer purchasing power, technology and manufacturing sharing opportunities across product lines. The Company believes that its competitive cost structure, strategic global purchasing capabilities, engineering expertise, product quality and global distribution and service systems have enabled it to compete effectively. Certain of the Company’s competitors have greater financial, marketing, manufacturing, distribution and governmental affairs resources than the Company. There can be no assurance that the Company’s products will continue to compete effectively with the products of competitors or that the Company will be able to retain its customer base or improve or maintain its profit margins on sales to its customers, all of which could have a material adverse effect on the Company’s financial condition, results of operations and cash flows. *Access Equipment segment.* JLG operates in the global construction, maintenance and industrial equipment markets. JLG’s competitors range from some of the world’s largest multi-national construction equipment manufacturers to small single-product niche manufacturers. Within this global market, competition for sales of aerial work platform equipment includes Genie Industries, Inc. (a subsidiary of Terex Corporation), Skyjack Inc. (a subsidiary of Linamar Corporation), Haulotte Group, Xuzhou Construction Machinery Group Co., Ltd. (XCMG), Zhejiang Dingli Machinery Co., Ltd. and numerous other manufacturers. Global competition for sales of telehandler equipment includes J C Bamford Excavators Ltd., the Manitou Group, Merlo SpA, Genie Industries, Inc., Haulotte Group, Skyjack Inc. and numerous other manufacturers. In addition, JLG faces competition from numerous manufacturers of other niche products such as boom vehicles, cherry pickers, skid steer loaders, mast climbers, straight mast and vehicle-mounted fork-lifts, rough-terrain and all-terrain cranes, vehicle-mounted cranes, portable material lifts, various types of material handling equipment, scaffolding and the common ladder that offer functionality that is similar to or overlaps that of JLG’s products. Principal methods of competition include brand awareness, product innovation and performance, price, quality, service and support, product availability and the extent to which a company offers single-source customer solutions. The Company believes its competitive strengths include: premium brand names; broad and single-source product offerings; product quality; product residual values that are generally higher than competitors’ units; worldwide distribution; safety record; service and support network; global procurement scale; and extensive manufacturing capabilities. The principal competitor for Jerr-Dan-branded products is Miller Industries, Inc. Principal methods of competition for carriers, wreckers and rotators include product quality and innovation, product performance, price and service. The Company believes its competitive strengths in this market include its high quality, innovative and high-performance product line and its cost competitive manufacturing capabilities. *Defense segment.* Oshkosh Defense produces heavy- and medium-payload, Mine Resistant Ambush Protected (MRAP) and light-payload tactical wheeled vehicles for the military and security forces around the world and postal delivery vehicles for the USPS. Competition for sales of these vehicles includes, among others, Navistar Defense LLC (a subsidiary of Cerberus Capital Management, LP), General Dynamics Corporation, AM General LLC (a subsidiary of KPS Capital Partners, LP), BAE Systems plc, General Motors Defense, Utilimaster (a subsidiary of The Shyft Group), Morgan Olson (a subsidiary of JB Poindexter & Co., Inc.), Workhorse Group and Rivian. The principal method of competition in the Defense segment involves a competitive bid process that takes into account factors as determined by the customer, such as price, product performance, product lifecycle costs, small and disadvantaged business participation, product quality, adherence to bid specifications, production capability, project management capability, past performance and product support. Usually, the Company’s vehicle systems must also pass extensive testing. The Company believes that its competitive strengths include: strategic global purchasing capabilities; extensive pricing/costing and defense contracting expertise; a significant installed base of vehicles currently in use throughout the world; flexible and high-efficiency vertically-integrated manufacturing capabilities; patented and/or proprietary vehicle components such as the TAK-4 family of independent suspension systems, Oshkosh power transfer cases and Command Zone integrated vehicle diagnostics; weapons and communications integration; ability to develop new and improved product capabilities responsive to the needs of its customers; product quality; and aftermarket parts sales and service capabilities. The Weapon Systems Acquisition Reform Act requires competition for defense programs in certain circumstances. Accordingly, it is possible that the U.S. Army and U.S. Marine Corps will conduct competitions for programs for which the Company currently has contracts upon the expiration of the existing contracts. Competition for these and other domestic programs could result in future contracts being awarded based upon different competitive factors than those described above and would primarily include price, production capability and past performance. The U.S. government has become more aggressive in seeking to acquire the design rights to the Company’s current and potential future programs to facilitate competition for manufacturing our vehicles. The willingness of the bidders to license their design rights to the DoD was an evaluation factor in the JLTV and FMTV A2 contract competitions. Certain of the Company’s contracts with the DoD, including the JLTV and FMTV A2 contracts, require that the Company effectively transfer the “technical know-how” necessary to produce and support the vehicles and/or other deliverables within the contract to the customer. The Competition in Contracting Act requires competition for U.S. defense programs in most circumstances. Competition for DoD programs currently supplied by the Company could result in the U.S. government awarding future contracts to another manufacturer or the U.S. government awarding the contracts to the Company at lower prices and operating margins than the Company experiences under current contracts. The Company’s principal competitors for snow removal vehicle sales are M-B Companies, Inc. (owned by Aebi Schmidt Holding AG), Wausau-Everest LP (owned by Alamo Group, Inc.) and Overaasen AS. Principal methods of competition are product performance, price, service, product quality and innovation. The Company believes its competitive strengths in these airport markets include its high-quality, innovative products and a strong service support network. *Fire & Emergency segment.* The Company produces and sells custom and commercial firefighting vehicles in the U.S. and abroad under the Pierce and Maxi-Metal brands and broadcast and command vehicles in the U.S. and abroad under the Frontline brand. Competitors for firefighting vehicles include Rosenbauer International AG; E-One, Inc., Ferrara Fire Apparatus, Inc., Spartan ER, and Kovatch Mobile Equipment Corp. (all four owned by REV Group, Inc.); and numerous smaller, regional manufacturers. Principal methods of competition include brand awareness, ability to meet or exceed customer specifications, price, the extent to which a company offers single-source customer solutions, product innovation, product quality, dealer distribution, and service and support. The Company believes that its competitive strengths include: recognized, premium brand name; nationwide network of independent Pierce dealers; extensive, high-quality and innovative product offerings, which include single-source customer solutions for aerials, pumpers and rescue units; large-scale and high-efficiency custom manufacturing capabilities; and proprietary technologies such as the PUC vehicle configuration, TAK-4 independent suspension system, Hercules and Husky foam systems, Command Zone electronics, Volterra parallel-electric drivetrain and the Ascendant family of aerial fire trucks. The main competitor for broadcast vehicles is Accelerated Media Technologies. The principal competition for command vehicles is LDV, Inc., MBF Industries, Inc., Nomad Global Communication Solutions, Incorporated, Farber Specialty Vehicles, Inc. and Matthews Specialty Vehicles, Inc. Airport Products manufactures ARFF vehicles for sale in the U.S. and abroad. Oshkosh’s competitors for ARFF vehicle sales are Rosenbauer International AG and E-One, Inc. *Commercial segment.* McNeilus produces refuse collection vehicles for North America and international markets. Competitors include The Heil Company (a subsidiary of Dover Corporation), New Way Trucks, Labrie Enviroquip Group (owned by Wynnchurch Capital) and other regional competitors. The principal methods of competition are product quality, product performance, service and price. The Company competes for municipal business and large commercial business in the Americas, which is generally based on lowest qualified bid. The Company believes its competitive strengths in the Americas refuse collection vehicle markets include: strong brand recognition; innovative and comprehensive product offerings; a reputation for high-quality products; ability to offer factory-installed compressed natural gas fuel systems; ability to integrate refuse collection bodies with electric chassis; large-scale and high-efficiency manufacturing; and an extensive network of sales and service centers located throughout the U.S. The Company also produces front- and rear-discharge concrete mixers for the Americas under the Oshkosh, McNeilus and London brands. Competition for concrete mixer sales includes Beck Industrial, Con-Tech Manufacturing, Inc., Terex Corporation and other regional competitors. Principal methods of competition are price, service, product features, product quality and product availability. The Company believes its competitive strengths include: strong brand recognition; large-scale and high-efficiency manufacturing; extensive product offerings; high product quality; innovative control systems; ability to offer factory-installed compressed natural gas fuel systems; a significant installed base of concrete mixers in use in the marketplace; and its nationwide network of sales and service centers. IMT is a manufacturer of field service vehicles and truck-mounted cranes for the construction, equipment dealer, building supply, utility, tire service, railroad and mining industries. IMT’s principal field service vehicle competition is from Auto Crane Company (owned by Ramsey Industries, Inc.), Stellar Industries, Inc., Maintainer Corporation of Iowa, Inc., the Knapheide Manufacturing Company and other regional companies. Competition in truck-mounted cranes comes primarily from European companies including Palfinger AG, Cargotec Corporation and Fassi Group SpA. Principal methods of competition are product quality, price and service. The Company believes its competitive strengths include its high-quality products, global distribution network and low-cost manufacturing capabilities. ### Government Contracts Approximately 25% of the Company’s net sales for fiscal 2022 were made to the U.S. government, a substantial majority of which were under multi-year contracts and programs in the defense vehicle market. Accordingly, a significant portion of the Company’s sales are subject to risks specific to doing business with the U.S. government, including uncertainty of economic conditions, changes in government policies and requirements that may reflect rapidly changing military and political developments, the availability of funds and the ability to meet specified performance thresholds. Multi-year contracts may be conditioned upon continued availability of congressional appropriations and are impacted by uncertainty regarding federal budget pressures. Variances between anticipated budget and congressional appropriations may result in a delay, reduction or termination of these contracts. Oshkosh Defense’s sales are substantially dependent upon periodic awards of new contracts, the purchase of base vehicle quantities and the exercise of options under existing contracts. The funding of U.S. government programs is subject to an annual congressional budget authorization and appropriation process. In years when the U.S. government has not completed its budget process before the end of its fiscal year, 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 Oshkosh Defense provides and may result in new initiatives being delayed or canceled, or funds could be reprogrammed away from Oshkosh Defense’s programs to pay for higher priority operational needs. 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. This could in turn result in the delay or cancellation of key programs, which could have a negative effect on the Company’s cash flows and adversely affect the Company’s 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 the Company’s cash flows. Contract awards that Oshkosh Defense receives may be subject to protests by competing bidders. These protests, if successful, could result in the customer revoking part or all of any defense contract it awards to Oshkosh Defense and an inability on the part of Oshkosh Defense to recover amounts it has expended during the protest period in anticipation of initiating work under any such contract. Under firm, fixed-price contracts with the U.S. government, the price paid to the Company is generally not subject to adjustment to reflect the Company’s actual costs, except costs incurred as a result of contract changes ordered by the U.S. government. The Company generally attempts to negotiate with the U.S. government the amount of increased compensation to which the Company is entitled for government-ordered changes that result in higher costs. If the Company is unable to negotiate a satisfactory agreement to provide such increased compensation, then the Company may file an appeal with the Armed Services Board of Contract Appeals or the U.S. Claims Court. The Company has no such appeals pending. The Company seeks to mitigate risks with respect to fixed-price contracts by executing firm, fixed-price contracts where possible with its suppliers of significant components for the duration of the Company’s contracts. U.S. government contracts generally permit the government to terminate a contract, in whole or part, at the government’s convenience. If the U.S. government exercises its rights under this clause the contractor is entitled to payment for the allowable costs incurred and a reasonable profit on the work performed to date. The U.S. government can also terminate a contract for default. If a contract is terminated for default, the contractor is generally entitled to payment for work that has been accepted by the U.S. government. Termination for default may expose the Company to loss on work not yet accepted by the government and have a negative impact on the Company’s ability to obtain future orders and contracts. The U.S. government’s right to terminate its contracts has not had a material effect on the operations or financial condition of the Company. The Company, as a U.S. government contractor, is subject to financial audits and other reviews by the U.S. government relating to the performance of, and the accounting and general practices relating to, U.S. government contracts. Like most large government contractors, the Company is audited and reviewed by the government on a continual basis. Costs and prices under such contracts may be subject to adjustment based upon the results of such audits and reviews. Additionally, such audits and reviews can lead to civil, criminal or administrative proceedings. Such proceedings could involve claims by the government for fines, penalties, compensatory and treble damages, restitution and/or forfeitures. Under government regulations, a company or one or more of its subsidiaries can also be suspended or debarred from government contracts, or lose its export privileges based on the results of such proceedings. The Company believes that the outcome of all such audits and reviews that are now pending will not have a material effect on its financial condition, results of operations or cash flows. ### Suppliers The Company is dependent on its suppliers and subcontractors to meet commitments to its customers, and many components are procured or subcontracted on a sole-source basis with a number of domestic and foreign companies. Components for the Company’s products are generally available from a number of suppliers, although the transition to a new supplier may require several months to conclude. The Company purchases chassis components, such as vehicle frames, engines, transmissions, radiators, axles, tires, drive motors, bearings and hydraulic components and vehicle body options, such as cranes, cargo bodies and trailers, from third-party suppliers. These body options may be manufactured specific to the Company’s requirements; however, most of the body options could be manufactured by other suppliers or the Company itself. Through reliance on this supply network for the purchase of certain components, the Company is able to reduce many of the pre-production and fixed costs associated with the manufacture of these components and vehicle body options. The Company purchases a large amount of fabrications and outsources certain manufacturing services, each generally from small companies located near its facilities. While providing low-cost services and product surge capability, such companies often require additional management attention during difficult economic conditions or contract start-up. The Company also purchases complete vehicle chassis from truck chassis suppliers in its Commercial segment and, to a lesser extent, in its Fire & Emergency and Access Equipment segments. Increasingly, the Company is sourcing components globally, which may involve additional inventory requirements and introduces additional foreign currency exposures. The Company maintains an extensive qualification, on-site inspection, assistance and performance measurement system to attempt to control risks associated with reliance on suppliers. The Company occasionally experiences problems with supplier and subcontractor performance and component, chassis and body availability and must identify alternate sources of supply and/or address related warranty claims from customers. While the Company purchases many costly components such as chassis, engines and transmissions, it manufactures certain proprietary components and systems. These components include front drive steer axles, transfer cases, transaxles, cabs, the TAK-4 independent suspension system, Hercules and Husky compressed air foam systems, the Command Zone vehicle control system, body structures and many smaller parts that add uniqueness and value to the Company’s products. The Company believes controlling the production of these components provides a significant competitive advantage and also serves to reduce the production costs of the Company’s products. ### Intellectual Property Patents and licenses are important in the operation of the Company’s business. One of management’s objectives is developing proprietary components to provide the Company’s customers with advanced technological solutions at attractive prices. The Company believes patents for the TAK-4 and TAK-4i independent suspension systems provide the Company with a competitive advantage in the Defense and Fire & Emergency segments due to its performance and cost. In the Defense segment, the TAK-4 or TAK-4i independent suspension systems have been incorporated into the U.S. Marine Corps’ MTVR and LVSR programs, the U.S. Army’s PLS A1 program, the MRAP-Joint Program Office M-ATV program, the JLTV program and the FMTV A2 program. In the Fire & Emergency segment, TAK-4 independent suspension systems are standard on many Pierce custom fire trucks and Global Striker ARFF vehicles. As part of the Company’s long-term alliance with Caterpillar Inc., the Company acquired a non-exclusive, non-transferable worldwide license to use certain Caterpillar Inc. intellectual property through 2024 in connection with the design and manufacture of Caterpillar Inc.’s current telehandler products. Additionally, Caterpillar Inc. assigned to JLG certain patents and patent applications relating to the Caterpillar-branded telehandler products. The Company holds trademarks for “Oshkosh,” “Oshkosh Defense,” “TAK-4,” “ProPulse,” “JLG,” “SkyTrak,” “Pierce,” “Maxi-Metal,” “McNeilus,” “Jerr-Dan,” “London,” “IMT,” “Pratt Miller,” “DaVinci” and “Volterra” among others. These trademarks are considered to be important to the future success of the Company’s business. ### Environmental Matters The Company is subject to a wide variety of local, state, and federal environmental laws in the U.S., as well as in other countries where the Company conducts business. Our facilities, operations and products are subject to increasingly stringent environmental laws and regulations globally, including laws and regulations governing air emissions, noise, releases to soil and discharges to water and the generation, handling, storage, transportation, treatment, and disposal of non-hazardous and hazardous waste materials. Some environmental laws impose strict, retroactive, and joint and several liability for the release of hazardous substances, even for conduct that was lawful at the time it occurred, or for the conduct of, or conditions caused by prior operators, predecessors or other third parties. With respect to acquired properties and businesses, the Company conducts due diligence into potential exposure to environmental liabilities but cannot be certain that it has identified or will identify all adverse environmental conditions. We believe that our policies, practices, and procedures are properly designed to prevent unreasonable risk of environmental damage and the consequent financial liability to the Company. Nevertheless, we could incur substantial costs as a result of non-compliance with or liability for cleanup or other costs or damages under environmental laws. Also, we may be subject to other more stringent environmental laws in the future. If more stringent environmental laws are enacted in the future, these laws could have a material adverse impact on our business, results of operations, and financial condition. ### Human Capital Management As of December 31, 2022, the Company had approximately 15,000 employees, approximately 9,000 of whom are production employees. The Company tracks its human capital management performance by measuring numerous relevant elements relating to its employees, including but not limited to, safety and diversity and inclusion. The United Auto Workers (UAW) Union represented approximately 1,425 production employees at the Company’s Oshkosh, Wisconsin facilities; the Boilermakers, Iron Shipbuilders, Blacksmiths and Forgers Union (Boilermakers) represented approximately 175 employees at the Company’s Kewaunee, Wisconsin facility; and the International Brotherhood of Teamsters Union (Teamsters) represented approximately 120 employees at the Company’s Garner, Iowa facility. The Company’s agreement with the UAW expires in September 2027. The Company’s five-year agreement with the Boilermakers expires in May 2027. The Company’s three-year agreement with the Teamsters extends through October 2023. In addition, approximately 60% of the Company’s 2,300 employees located outside of the U.S. are represented by separate works councils or unions. *People First Culture.* The Company maintains a People First culture that includes investing in team members’ safety, engagement, wellbeing, and personal and professional development, as well as diversity and inclusion. The Company believes its People First culture is a strength, and the Company intends to continue building upon that culture to drive long-term, sustainable performance across the business. In 2022, 64% of global production and office team members participated in the Company’s Global Engagement Survey. Engagement across the enterprise was 7.3 out of 10. The Company expects all team members to adhere to the highest ethical standards every day. The Company’s Code of Ethics & Conduct, also known as The Oshkosh Way, lays out the Company’s core values and standards for ethical behavior. The Company’s connections to its communities through charitable giving, leadership and volunteering efforts have long been an important part of the Company’s culture and team member engagement. The Company’s teams creatively identified opportunities to volunteer in 2022 donating over 18,000 hours to the communities in which they live and work. For the last nine years, the Company has held the Oshkosh Excellence Awards (OEAs), an annual competition and recognition event that invites team members to submit innovative ideas to foster improvements for its culture, operations, products and customers. Over 500 nominations were submitted in 2022, with 36% focused on Cheers to Peers, our peer recognition program, highlighting the Company’s team members’ commitment to putting people first. *Talent and Learning.* The Company’s business strategy is enabled by its ability to attract, develop and retain world-class talent. In 2022, the Company returned to in person leadership development, relaunching Lens of Leadership, its signature development program for team members at the director level and above. The Company continued a series of executive leadership development events and expanded virtual learning opportunities to all managers on topics of engagement, performance, diversity, equity and inclusion. Team members of the Company logged over 74,000 learning hours in 2022. The Company recently upgraded its enterprise Learning Management System to enable all team members to access learning content on its technology platform. Strategic succession planning, future leader pipelines and critical role depth were reviewed and updated during 2022. All leaders are expected to complete regular check-ins to provide feedback, review annual goal progress and hold career development conversations with team members to help ensure alignment, drive engagement and facilitate strong business outcomes. *Health and Safety.* The Company focuses on protecting the health and safety of its team members. The Company takes a proactive approach to managing safety, is committed to achieving zero workplace injuries and has consistently improved its safety performance over the past few years. Safety Management System maturity, OSHA VPP Star progression, ergonomic advancements and strong safety collaboration have led to year over year improvements in risk mitigation and injury rate reductions. The Company offers a competitive, inclusive and empowering benefit platform to help ensure that no matter where team members are in their wellbeing journey, they are supported in their physical, financial and emotional goals. In 2022, the Company cared for over 24,000 team members and their families on its medical plan. The Company introduced expanded fertility and family planning benefits to support team members as they grow their families. In addition, the Company supported team members’ return to health care post-COVID pandemic by providing a financial incentive to complete an annual preventive exam. The Company has set several goals and benchmarks for Diversity, Equity and Inclusion (DEI) performance, using both internal goals and federal standards. The Company’s diversity representation is published in its 2022 Sustainability Report and the Company is driving proactive programs to improve its diverse employee representation. The Company measures diverse hires for full-time U.S. non-production positions and has a goal that 50% of such hires be diverse in any given year. Diverse hires include ethnicity, gender, veteran and disability status. In 2022, 49% of the Company’s hires for full-time U.S. non-production positions were diverse. ### Seasonal Nature of Business In the Company’s Access Equipment and Commercial segments, business tends to be seasonal with an increase in sales occurring in the spring and summer months that constitute the traditional construction season in the northern hemisphere. In addition, sales are generally lower in the three months ended December 31 in all segments due to the relatively high number of holidays in the United States, which reduce available production and shipping days. ### Available Information The Company maintains a website with the address www.oshkoshcorp.com. The Company is not including the information contained on the Company’s website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K. The Company makes available free of charge (other than an investor’s own Internet access charges) through its website its Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after the Company electronically files such materials with, or furnishes such materials to, the Securities and Exchange Commission (SEC). ## Risk factors As filed, 46,000 characters. 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. Investors should carefully consider information in this Annual Report on Form 10-K in light of the risk factors described below. ### Business and Operational Risks ***We are dependent upon third-party suppliers, making us vulnerable to supply shortages and price increases.*** We have experienced, and in the future are likely to experience, significant disruption or termination of the supply of some of our parts, materials, components and final assemblies that we obtain from suppliers or subcontractors. For example, the rapid increase in demand in the U.S. economy and periodic localized lockdowns in parts of the world resulting from spikes in novel coronavirus (COVID-19) infection rates has caused, and is expected to continue to cause, significant stress on global supply chains. In addition, the war in Ukraine has caused and is likely to cause further strains in the global supply chain. Delays in obtaining parts, materials, components and final assemblies may result from a number of factors affecting our suppliers including capacity constraints, supplier product quality issues, suppliers’ impaired financial condition and suppliers’ allocations to other purchasers. Such disruptions have resulted and could further result in manufacturing inefficiencies caused by us having to wait for parts to arrive on production lines, could delay 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 and other power sources 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 and powertrain components to us or fail to timely receive appropriate components from our suppliers, that could result in our being placed in an uncompetitive position or without finished product when needed. ***Fluctuations in prices of raw materials and other inputs may adversely impact our results.*** We purchase, directly and indirectly through component purchases, significant amounts of steel, aluminum and other commodities. Steel, aluminum, and other commodity prices have historically been highly volatile. Costs for these items may continue to increase and/or remain elevated in the future due to one or more of the following: a sustained economic recovery, the level of tariffs that the U.S. imposes on imported steel and aluminum, the outbreak of war or other hostilities in regions of the world that produce the commodities or raw materials that go into the commodities or a weakening U.S. dollar. In addition, the cost of parts, materials, components or final assemblies has increased and may continue to significantly increase for reasons other than changes in commodity prices, including the significant inflation that we are currently experiencing. Factors such as supply and demand, freight costs, availability of transportation, availability of labor, inventory levels, the level of imports, the imposition of duties and tariffs and other trade barriers and general economic conditions may affect the price of our parts, materials, components or final assembly purchases. Increases in parts, materials, components or final assemblies costs negatively impact the profitability of orders in backlog as prices on a portion of those orders are fixed. If we are not able to recover cost increases through surcharges or permanent price increases to our customers, then such increases will have an adverse effect on our financial condition, profitability and/or cash flows. Furthermore, surcharges and permanent price increases may not be accepted by our customers, resulting in them choosing to order from our competitors instead of us or delaying orders to us. Any significant decrease in orders could have an adverse effect on our 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. ***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.*** We are dependent on U.S. and foreign government contracts for a substantial portion of our business. Approximately 25% of our sales in fiscal 2022 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 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 2022, the U.S. Army released a request for proposal for the re-compete of the production contract for the JLTV Family of Vehicles. The DoD conducted a full and open competition for the follow-on production in which Oshkosh Defense participated. In February 2023, the DoD awarded the JLTV follow on contract to another company. JLTV accounted for sales of $1.33 billion in fiscal 2022. - 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 recent award of the JLTV follow on contract to another company. In addition, the U.S. government has become more aggressive in seeking to acquire the design rights to the Company’s current and potential future programs to facilitate competition for manufacturing our vehicles. The willingness of bidders to license their design rights to the DoD was an evaluation factor in the JLTV and FMTV A2 competitions. - Most of our contracts with the DoD are multi-year firm, fixed-price contracts. These contracts typically contain annual sales price increases. Under the current JLTV contract, we bear the risk of material, labor and overhead cost escalation for the full duration of the contract, which is longer than our historical defense contracts. We attempt to limit the risk related to raw material price fluctuations on prices for major defense components by obtaining firm pricing from suppliers at the time a contract is awarded. However, if these suppliers do not honor their contracts, then we could face margin pressure. Furthermore, if our actual costs on any of these contracts exceed our projected costs, it could result in profits lower than historically realized or than we anticipate or net losses under these contracts. - 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, 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. - The U.S. government may not budget for or appropriate funding that we expect for our U.S. government contracts, which may prevent us from realizing revenues under current contracts or receiving additional orders that we anticipate we will receive. The DoD could also seek to reprogram certain funds originally planned for the purchase of vehicles we manufacture under the current defense budget allocations. The U.S. Army has identified its top modernization and readiness priorities and has re-programmed funds away from the Company’s JLTV program to support its modernization and readiness priorities and may re-program additional funds in the future. - 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, 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. 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. This 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. - 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. - 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. - 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. - As a U.S. government contractor, our DoD contracts and systems are subject to audit and review by the Defense Contract Audit Agency and the Defense Contract Management Agency. These agencies review our performance under our U.S. government contracts, our cost structure and our compliance with laws and regulations applicable to U.S. government contractors. Systems that are subject to review include, but are not limited to, our accounting systems, estimating systems, material management systems, earned value management systems, purchasing systems and government property systems. If improper or illegal activities, errors or system inadequacies come to the attention of the U.S. government, as a result of an audit or otherwise, then we may be subject to civil and criminal penalties, contract adjustments and/or agreements to upgrade existing systems as well as administrative sanctions that may include the termination of our U.S. government contracts, forfeiture of profits, suspension of payments, fines and, under certain circumstances, suspension or debarment from future U.S. government contracts for a period of time. Whether or not illegal activities are alleged and regardless of materiality, the U.S. government also has the ability to decrease or withhold certain payments when it deems systems subject to its review to be inadequate. These laws and regulations affect how we do business with our customers and, in many instances, impose added costs on our business. - Our Defense 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 Defense 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. - We periodically experience difficulties with sourcing sufficient vehicle carcasses from the U.S. military to maintain our defense tactical wheeled vehicles remanufacturing schedule, which can create uncertainty and inefficiencies for this area of our business. ***Our markets are highly cyclical. Declines in these markets could have a material adverse effect on our operating performance.*** 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, which is impacted in part by historical purchase levels, (v) by the timing of regulatory standard changes, and (vi) by other factors, including oil and gas related activity. Refuse 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. The ready-mix concrete market that we serve is highly cyclical and impacted by the strength of the economy generally, by the number of housing starts and by other factors that may have an effect on the level of concrete placement activity, either regionally or nationally. Fire & emergency markets are cyclical later in an economic cycle and are impacted by the economy generally and by municipal tax receipts and capital expenditures. 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. ### Labor issues may adversely impact our results. Our production could be disrupted by labor issues including, absenteeism, public health issues (e.g., COVID-19), stay-at-home orders, availability of skilled workforce in locations we operate due to competition or other factors. In addition, our production schedules assume the availability of sufficient workforce in areas that our facilities operate at anticipated labor rates. If sufficient workforce is not available or rates are higher than we anticipate, it could have an adverse effect on our sales, financial condition, profitability and/or cash flow. ### The USPS may not purchase quantities from us that we expect. In February 2021, the USPS notified us that it selected us to build its NGDV. The IDIQ contract allows for the purchase of up to 165,000 units over 10 years. To date, we have received orders for the engineering to finalize the production vehicle design, for tooling and factory build-out activities that are necessary prior to vehicle production and for the first 50,000 vehicles. 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 operating performance: - Budget constraints facing the USPS and continuously changing demands for postal services may result in the USPS ordering fewer units than we expect the USPS to award to us under the contract. - Engineering time to finalize the production vehicle design may be greater than we anticipate. - Tooling and factory build-out activities that we must complete prior to production may be greater than we anticipate. - Costs and other challenges associated with recruiting and training a new workforce may be greater than we anticipate. ***Our results could be adversely affected by severe weather, natural disasters, and other events in the locations in which we or our customers or suppliers operate.*** We have manufacturing and other operations in locations prone to severe weather and natural disasters, including earthquakes, floods, hurricanes or tsunamis that could disrupt our operations. Our suppliers and customers also have operations in such locations. Epidemics and pandemics, such as COVID-19, could also affect our operations or those of our suppliers or customers, which could disrupt our operations. Severe weather, a natural disaster or other conditions or events that result in a prolonged disruption to our operations, or the operations of our customers or suppliers could delay delivery of parts, materials or components to us or sales to our customers and could have a material adverse effect on our net sales, financial condition, results of operations and/or cash flows. ### Disruptions within our dealer network could adversely affect our business. 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 Fire & Emergency segment and in a limited number of markets for the Access Equipment and Commercial segments. 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, we 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, in which the loss 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. In addition, our ability to terminate our relationship with a dealer is limited due to state dealer laws, which generally provide that a manufacturer may not terminate or refuse to renew a dealer agreement unless it has first provided the dealer with required notices. Under many state laws, dealers may protest termination notices or petition for relief from termination actions. Responding to these protests and petitions may cause us to incur costs and, in some instances, could lead to litigation resulting in lost opportunities with other dealers or lost sales opportunities, which may have an adverse effect on our net sales, financial condition, results of operations and/or cash flows. ***Consolidation within our customer and dealer bases may impact our strategy, pricing and product margins.*** Significant consolidation in our customer and dealer bases could enhance the influence of customers and dealers over our business strategy. Intensified consolidation in the industries we serve may provide our customers and dealers with additional leverage in negotiations around our product and service offerings. For example, the Access Equipment segment’s largest customers are rental companies that serve the end user equipment rental markets. Should larger access equipment customers continue to grow through the acquisition of smaller rental companies, their buying influence may grow and may impact the competitive environment within the industry. Similarly, the Fire & Emergency segment’s distribution channel is comprised of a relatively small number of dealers that if they were to consolidate may create additional pricing pressure, as well as concentrated credit exposures, as our reliance on a smaller group of larger individual dealerships increases. If that trend in customer and dealer consolidation continues, it could have an unfavorable impact on our pricing and product margins. ### Competition and Strategy Risks ### We face significant competition in the markets we serve. 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 Equipment segment. If competition in our industry 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. ***If we are unable to continue to enhance existing products and develop new products that respond to customer needs and preferences, we may experience a decrease in demand for our products and our business could suffer.*** One of our growth strategies is emphasizing our new product development as we seek to expand sales and margins by leading our core markets in the introduction of new or improved products and technologies. Our ability to match product improvements and new product offerings to diverse global customers’ anticipated needs for different types of products and various product features and functions, at acceptable prices, is critical to our success. We may not be able to compete as effectively, and ultimately satisfy the needs and preferences of our customers, unless we can continue to improve existing products and develop new innovative products in the global markets in which we compete. While we spent $113 million, $103 million and $104 million for research and development in fiscal 2022, 2021 and 2020, respectively, we cannot provide any assurance that this level of investment in research and development will be sufficient to maintain our competitive strength in product innovation, which could cause our business to suffer. Product improvements and new product introductions also require significant planning, design, development and testing at the technological, product and manufacturing process levels, and we may not be able to timely develop product improvements or new products. Our competitors’ new products may arrive in the market before our products arrive and be more attractive with more features and functions and/or lower prices than our products. If we are unable to provide continued technological improvements in our products that meet our customers’ or the industry’s expectations, then the demand for our products could be adversely affected. In response to changes in customer preferences concerning global climate changes and related changes in regulations, we face greater pressure to develop products that generate less greenhouse gas emissions. Many manufacturers foresee sales of electric-powered vehicles and mobile equipment becoming increasingly important to their businesses, and we may not have the expertise or resources to successfully address these pressures on a cost-effective basis. While we are developing and offering more propulsion choices in our products, such as electric-powered vehicles or mobile equipment, with lower emissions, this will continue to require us to spend additional funds on product research and development and implementation costs and subject us to the risk that our competitors may respond to these pressures in a manner that gives them a competitive advantage. If we do not accurately predict, prepare for and respond to new kinds of technological innovations with respect to electric-powered vehicles or mobile equipment and other technologies that minimize emissions, competition from others could make our specialty vehicles or mobile equipment less desirable in the marketplace. ***We are subject to fluctuations in exchange rates associated with our non-U.S. operations that could adversely affect our results of operations and may significantly affect the comparability of our results between financial periods.*** Approximately 12% of our net sales in fiscal 2022 were attributable to products sold outside of the United States, of which approximately 49% involved export sales from the United States. The majority of export sales are denominated in U.S. dollars. Sales that originate outside the United States are typically transacted in the local currencies of those countries. Fluctuations in foreign currency can have an adverse impact on our sales and profits as amounts that are measured in foreign currency are translated back to U.S. dollars. We have sales of inventory denominated in U.S. dollars to certain of our subsidiaries that have functional currencies other than the U.S. dollar. The exchange rates between many of these currencies and the U.S. dollar have fluctuated significantly in recent years and may fluctuate significantly in the future. Such fluctuations, in particular those with respect to the Euro, the Chinese renminbi, the Canadian dollar, the Mexican peso, the Australian dollar and the British pound sterling, may have a material effect on our net sales, financial condition, profitability and/or cash flows and may significantly affect the comparability of our results between financial periods. In addition, any further appreciation in the value of the U.S. dollar in relation to the value of the local currency of those countries where our products are sold will continue to increase our costs of goods in our foreign operations, to the extent such costs are payable in U.S. dollars, and impact the competitiveness of our product offerings in international markets. ***We may not be able to expand international operations or increase sales and profitability consistent with our growth targets.*** 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, local labor market conditions, 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. 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 vehicle 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 national 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 state-controlled economy favors local market participants. ### We may not be able to execute on our business strategy. The Company’s strategy is grounded in its purpose of making a difference in the lives of those who build, serve, and protect communities around the world. The strategy is reflected in three simple words: Innovate. Serve. Advance. We cannot provide any assurance we will be able to successfully execute our business strategy due to a variety of risks, including our inability to design new products that meet our customers’ requirements and bring them to market; higher costs than anticipated to launch new products or delays in new product launches; our inability to expand our aftermarket parts and services availability; and slow adoption of our products in emerging markets and/or our inability to successfully expand into new markets. ### We may not realize all of the anticipated benefits of our acquisitions. 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: - Our ability to identify acquisition targets and close deals; - Our failure to achieve the acquisition’s assumed future financial performance or realize assumed efficiencies or assumed cost reductions; - There may be a cultural mismatch that exists between us and the acquired business; - We may incur unforeseen expenses or liabilities or may be subject to other unanticipated regulatory or government actions related to the acquired business; and - We may incur higher transaction costs than expected. ### Financial Risks ### We are subject to changes in contract estimates. We account for substantially all long-term contracts in the Defense 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 customer and technical issues. Due to the size and nature of these contracts, the estimation of total revenues and costs is complicated 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 instance, cumulative catch-up adjustments on contracts in the Defense segment negatively impacted operating income by $44.9 million in fiscal 2022, primarily as a result of higher anticipated material and logistics costs. 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, particularly early in the contract when fewer overall units are on order, 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. ***We may experience losses in excess of our recorded reserves for doubtful accounts, finance receivables, notes receivable and guarantees of indebtedness of others.*** As of December 31, 2022, we had consolidated gross receivables of $1.18 billion. In addition, we were subject to obligations to guarantee customer indebtedness to third parties of $731.1 million, under which we estimate our maximum exposure to be $121.6 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 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 Equipment segment’s ten largest debtors at December 31, 2022 represented approximately 33% 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. ***An impairment in the carrying value of goodwill and other indefinite-lived intangible assets could negatively affect our operating results.*** 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, 2022, approximately 86% of these intangibles were concentrated in the Access Equipment segment. We evaluate goodwill and indefinite-lived intangible assets for impairment at least 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 sales or profitability that we expect. 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. ***Financing costs and restrictive covenants in our current debt facilities could limit our flexibility in managing our business and increase our vulnerability to general adverse economic and industry conditions.*** Our credit agreement contains 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 agreement could have a material adverse effect on our financial condition, results of operations and debt service capability. 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, a portion of our debt is subject to variable interest rates. An increase in general interest rates, as has occurred during the last year, would also increase our cost of borrowing under our credit agreement. ***Additional liabilities relating to changes in tax rates or exposure to additional income tax liabilities could adversely impact our financial condition and cash flow.*** 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, the amount of income taxes that the Company pays 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 the Company has reserved for potential tax liabilities, future financial results may include unfavorable adjustments to the Company’s tax liabilities, which could have a material adverse effect on the Company’s results of operations. ### Cybersecurity Risks ***Increased cybersecurity threats and more sophisticated computer crime pose a risk to our systems, networks, products and services.*** As a defense contractor, we face many cyber and security threats that can range from attacks common to most industries, which could have financial or reputational consequences, to advanced persistent threats on our defense programs, which could involve information that is considered a matter of national security. We rely extensively on information technology systems and networks, some of which third parties manage, supporting a variety of business activities. Operating these information technology systems and networks and processing and maintaining related data in a secure manner is critical to our business operations and strategy. Information technology security threats, from user error to cybersecurity attacks designed to gain unauthorized access to our systems, networks and data, are increasing in frequency and sophistication. Cybersecurity attacks may range from random attempts to coordinated and targeted attacks, including sophisticated computer crime and advanced persistent threats. These threats pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. Cybersecurity attacks could also include attacks targeting the security, integrity and/or reliability of the hardware and software that we have installed in our products. It is possible that our information technology systems and networks, or those that third-parties manage or provide, could have vulnerabilities, which could go unnoticed for a period of time. While we have utilized and continue to utilize various procedures and controls to mitigate such risks, we cannot assure that the actions and controls we have implemented and are implementing, or that we cause or have caused third-party service providers to implement, will be sufficient to protect our systems, information or other property. We have experienced cyber security threats and vulnerabilities in our systems and those of our third-party providers, and we have experienced viruses and attacks targeting our information technology systems and networks. Such prior events, to date, have not had a material impact on our financial condition, results of operations or liquidity. However, the potential consequences of a future material cybersecurity attack include reputational damage, litigation with third-parties, government enforcement actions, penalties, disruption to systems, unauthorized release of confidential or otherwise protected information, corruption of data, diminution in the value of our investment in research, development and engineering, and increased cybersecurity protection and remediation costs, which in turn could adversely affect our competitiveness, results of operations and financial condition. ### Legal and Regulatory Risks ***Our international sales and operations subject us to risks that may have a material adverse effect on our business.*** As a result of our international operations and sales, we are subject to the Foreign Corrupt Practices Act (FCPA) and other laws that prohibit improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business. Our international activities create the risk of unauthorized payments or offers of payments in violation of the FCPA by one of our employees, consultants, sales agents or distributors, because these parties are not always subject to our control. Any violations of the FCPA could result in significant fines, criminal sanctions against us or our employees, and prohibitions on the conduct of our business, including our business with the U.S. government. We are also increasingly subject to export control regulations, including, without limitation, the United States Export Administration Regulations and the International Traffic in Arms Regulations. Unfavorable changes in the political, regulatory or business climate could have a material adverse effect on our net sales, financial condition, profitability and/or cash flows. ***We may be required to make material expenditures or incur additional liabilities to comply with changes in environmental laws, climate change regulations or to meet the increasing societal expectations on companies to address climate change.*** Both our products and the operation of our manufacturing facilities are subject to statutory and regulatory requirements. These include environmental requirements applicable to manufacturing and vehicle emissions, government contracting regulations, regulations impacting our supply chain and domestic and international trade regulations. A significant change to these regulatory requirements could substantially increase manufacturing costs, which could make our business results more variable. Climate change attributed to increased levels of greenhouse gases, including carbon dioxide, has led to significant legislative, regulatory and societal efforts to limit greenhouse gas emissions. These considerations may lead to new international, national, regional, or local legislation or regulatory response. The legislation of greenhouse gases could result in unfavorable financial impact through various forms including taxation, emission allowances, fines, requirements for facilities improvement investment and higher energy costs. The impact of any future greenhouse gas legislation, regulatory, or product standard requirements is unknown, and therefore, we are uncertain of the potential impact that future changes may have. Our global facilities, operations and products are subject to increasingly stringent environmental laws and regulations, including laws and regulations governing air emissions, noise, releases to soil and discharges to water and the generation, handling, storage, transportation, treatment, and disposal of non-hazardous and hazardous waste materials. Certain environmental laws impose strict, retroactive, and joint and several liability for the release of hazardous substances, even for conduct that was lawful at the time it occurred, or for the conduct of, or conditions caused by, prior operators, predecessors or other third parties. We could be subject to fines, cleanup costs or other costs or damages under environmental laws if we are not in compliance with environmental regulations. We may be subject to other more stringent environmental laws in the future that could have a material adverse impact on our business, results of operation, and financial condition. ## Properties As filed, 2,366 characters. The Company believes its equipment and buildings are well maintained and adequate for its present and anticipated needs. As of December 31, 2022, the Company operated in 29 manufacturing facilities. The locations of the Company’s manufacturing facilities are provided in the table below: | Segment | Location (# of facilities) | Segment | Location (# of facilities) | | --- | --- | --- | --- | | **Access Equipment** | McConnellsburg, Pennsylvania (3) (a) | **Fire & Emergency** | Appleton, Wisconsin (2) | | | Shippensburg, Pennsylvania (1) | | Bradenton, Florida (1) | | | Greencastle, Pennsylvania (1) | | Kewaunee, Wisconsin (1) | | | Tianjin, China (2) (c) | | Clearwater, Florida (1) (b) | | | Tonneins, France (1) (b) | | Neenah, Wisconsin (1) (b) | | | Port Macquarie, Australia (1) | | Saint-Georges, Quebec, Canada (1) | | | Leicester, United Kingdom (1) | | | | | Bedford, Pennsylvania (1) | **Commercial** | Dodge Center, Minnesota (1) | | | Leon, Mexico (1) | | Garner, Iowa (1) | | | | | Riceville, Iowa (1) | | **Defense** | Oshkosh, Wisconsin (4) | | London, Canada (1) (b) | | | Jefferson City, Tennessee (1) (b) | | | | | Spartanburg, South Carolina (1) (b) | | | (a) Two facilities are owned and the other is leased. (b) These facilities are leased. (c) One facility is owned and the other is leased. The Company’s manufacturing facilities generally operate five days per week on one or two shifts, except for seasonal shutdowns for one- to three-week periods. The Company believes its manufacturing capacity could be significantly increased with limited capital spending by operating an additional shift at each facility. The Company also performs contract maintenance services out of multiple warehousing and service facilities owned and/or operated by the U.S. government and third parties, including locations in the U.S., Japan and multiple other countries in Europe and the Middle East. In addition to sales and service activities at the Company’s manufacturing facilities, the Company maintains a network of sales and service centers in the U.S. The Company uses these facilities primarily for sales and service of refuse collection vehicles and concrete mixers. The Access Equipment segment also leases a number of small distribution, engineering, administration or service facilities throughout the world. ## Legal proceedings As filed, 1,142 characters. 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 all such matters and claims cannot be predicted with certainty, the Company believes that the ultimate resolution of all such matters and claims will not have a material effect on the Company’s financial condition, results of operations or cash flows. *Personal injury actions and other.* At December 31, 2022, the estimated net liabilities for product and general liability claims totaled $41.2 million. Although the final results of all such matters and claims cannot be predicted with certainty, the Company believes that the ultimate resolution of all such matters and claims, after considering the liabilities accrued with respect to all such matters and claims, 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. ## Management's discussion and analysis As filed, 59,491 characters. ### GENERAL The Company is an industrial technology company and manufacturer that innovates purpose-built vehicles and equipment for the access, defense, fire & emergency, refuse collection and concrete placement markets. The Company is a leading global designer and manufacturer of aerial work platforms under the “JLG” brand name. The Company is among the worldwide leaders in the design and manufacturing of telehandlers under the “JLG” and “SkyTrak” brand names. Under the “Jerr-Dan” brand name, the Company is a leading domestic designer and manufacturer and marketer of towing and recovery equipment. The Company manufactures defense trucks under the “Oshkosh” brand name and is a leading designer and manufacturer of severe-duty, tactical wheeled vehicles for the U.S. Department of Defense (DoD). The Company also designs and manufactures delivery vehicles for the United States Postal Service (USPS) and airport snow removal vehicles under the “Oshkosh” brand name. Under the “Pierce” and "Maxi-Metal" brand names, the Company is among the leading global designers and manufacturers of fire trucks assembled on both custom and commercial chassis. Under the “Frontline” brand name, the Company is a leading domestic designer, manufacturer and marketer of broadcast and command vehicles. The Company designs and manufactures Aircraft Rescue and Firefighting (ARFF) vehicles under the “Oshkosh” brand name. Under the “McNeilus” brand name, the Company designs and manufactures a wide range of automated, rear, front, side and top loading refuse collection vehicles. Under the “McNeilus,” “Oshkosh,” and “London” brand names, the Company designs and manufactures rear- and front-discharge concrete mixers. Under the “IMT” brand name, the Company is a leading domestic designer and manufacturer of field service vehicles and truck-mounted cranes. Major products manufactured and marketed by each of the Company’s business segments are as follows: *Access Equipment —* 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 Equipment 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, delivery vehicles for the USPS, and snow removal vehicles for military and civilian airports. *Fire & Emergency —* custom and commercial firefighting vehicles and equipment, ARFF vehicles, simulators, mobile command and control vehicles and other emergency vehicles primarily sold to fire departments, airports and other governmental units, as well as broadcast vehicles sold to broadcasters and TV stations. *Commercial —* refuse collection vehicles sold to commercial and municipal waste haulers, concrete mixers sold to ready-mix companies and field service vehicles and truck-mounted cranes sold to mining, construction and other companies. All estimates referred to in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” refer to the Company’s estimates as of February 21, 2023. ### BASIS OF PRESENTATION In October 2021, the Company’s changed its fiscal year end from September 30 to December 31. Accordingly, the Company reported a transition quarter that ran from October 1, 2021 through December 31, 2021. Fiscal 2020 and Fiscal 2021 relate to the years ended September 30, 2020 and September 30, 2021, respectively. Fiscal 2022 relates to the year ended December 31, 2022. The Company has presented the unaudited Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Cash Flows for the year ended December 31, 2021 at the end of the “Results of Operations” section below for reference in the comparisons to fiscal 2022. The Company has presented the year ended December 31, 2021 as a comparison to its results for fiscal 2022 as it believes this comparison is more meaningful to a reader’s understanding of its fiscal 2022 results of operations than a comparison to fiscal 2021. Effective October 1, 2022, the Company changed its method of accounting for certain inventory in the United States from the Last-in, First-Out (LIFO) method to the First-In, First-Out (FIFO) method. The FIFO method of accounting for inventory is preferable because it more accurately reflects the current value and physical flow of inventory, it improves comparability with the Company’s peers and it harmonizes the accounting method for all of the Company’s inventories. The effects of the change in accounting method from LIFO to FIFO have been retrospectively applied to all periods presented in this Annual Report, including Management’s Discussion and Analysis. Refer to Note 2 of the consolidated financial statements in Part II Item 8 of this Annual Report on Form 10-K for further information related to the change in accounting method. ### OVERVIEW The Company entered 2021 in the midst of the COVID-19 pandemic, which negatively impacted its sales at the start of 2021, particularly in the Access Equipment segment. Higher COVID-19 infection rates also resulted in production challenges in both the Defense and Fire & Emergency segments in the first quarter of 2021. Toward the end of the first quarter of 2021, positive vaccination progress, and the confidence that brought to the marketplace, caused the U.S. economy to begin to rebound. As a result, the Company experienced a strong return in demand for many of its products. This rapid rebound coincided with significant supply chain and logistics disruptions across the globe, which in turn led to labor inefficiencies within the Company’s production facilities and higher freight costs to expedite parts. The rapid increase in business activity also caused the Company to experience significant inflation in materials, freight and labor costs. These global supply chain bottlenecks and inflationary conditions continued throughout fiscal 2022. The Company increased prices multiple times in its non-Defense segments in an effort to offset the higher input costs, but the realization of the price increases was not immediate due to existing backlog at the time the price increases were implemented. The difference in the timing of the realization of our price increases as compared to the impact of cost increases adversely impacted price/cost dynamics of the Company, particularly during the first half of fiscal 2022. Realized price increases largely caught up to cost increases in the back half of fiscal 2022, particularly in the Access Equipment and Commercial segments. The time to achieve price-cost neutrality in the Fire & Emergency segment is longer due to the nature of bonded orders for municipal customers. The Company grew revenues 4.1% in fiscal 2022 compared to the year ended December 31, 2021, resulting in diluted earnings per share of $2.63. Earnings per share were lower than earnings per share of $6.68 for the year ended December 31, 2021 largely due to manufacturing inefficiencies associated with supply chain disruptions, the absence of a carryback of a U.S. net operating loss to previous tax years, unfavorable cumulative catch-up adjustments in the Defense segment, a loss on the settlement of a frozen pension plan and higher new product development spending. Fiscal 2022 results included an after-tax charge of $25.7 million for the settlement of a frozen pension plan, a charge of $18.1 million associated with foreign anti-hybrid tax legislation, an after-tax charge $6.4 million for the impairment of intangible assets and an after-tax charge of $4.6 million for the release of cumulative translation adjustment losses. In aggregate, these items accounted for a net $54.8 million, or $0.83 per share, charge in fiscal 2022. Results for the year ended December 31, 2021 included a $75.3 million tax benefit associated with the carryback of a U.S. net operating loss to prior years and an $11.7 million tax benefit associated with the release of a valuation allowance on deferred tax assets in Europe, offset in part by an after-tax charge of $3.9 million associated with restructuring actions in the Access Equipment segment and an after-tax charge of $0.2 million associated with business acquisition costs in the Defense segment. In aggregate, these items accounted for a net $82.9 million, $1.20 per share, benefit for the year ended December 31, 2021. The Company announced an increase in its quarterly dividend rate of 10.8%, to $0.41 per share, beginning in February 2023. This was the Company’s ninth straight year of a double-digit percentage increase to its dividend rate. Effective January 31, 2023, the Company combined its Fire & Emergency and Commercial segment businesses into a new reporting segment called Vocational as all of the businesses design, develop and manufacture purpose-built vocational vehicles for people in communities around the world who do tough work. By combining these segments, the Company expects to drive enhanced efficiencies across the board, while better leveraging its scale in technology development at an accelerated pace. The Company believes the Vocational segment also serves as a platform for further organic and inorganic growth opportunities in several important end markets. The Company expects that the Vocational segment will initially generate annual revenues of over $2 billion with the opportunity to grow organically at a high single digit compound annual growth rate to nearly $3 billion with 12% plus operating margins over the next few years. The Company has also announced that it has entered into a definitive agreement to sell its rear discharge concrete mixer business, which is expected to occur by the end of the first quarter of fiscal 2023. The Company expects this will enable it to focus on attractive end markets that value technology and innovation that it believes will drive higher margins. ### FISCAL 2023 OUTLOOK The Company estimates consolidated net sales will be in the range of $8.4 billion in fiscal 2023, compared to $8.3 billion in fiscal 2022. The Company expects consolidated operating income will be in the range of $530 million, resulting in diluted earnings per share in the range of $5.50. The fiscal 2023 estimate assumes an average share count of 65.7 million shares. Included in the Company’s expectations is the adverse impact of approximately $0.80 per share related to incentive compensation costs returning to typical levels and increased new product development investments of approximately $0.30 per share. Demand remains strong as indicated by order intake of $3.3 billion in the fourth quarter of fiscal 2022, leading to the Company’s record backlog of $14.1 billion on December 31, 2022. The Company’s guidance reflects modest supply chain improvements in fiscal 2023, but the Company expects that supply chain impacts will continue to limit the Company’s revenues and contribute to production inefficiencies in fiscal 2023. The Company believes Access segment net sales will be in the range of $4.2 billion in fiscal 2023, a 6% increase compared to fiscal 2022 net sales. The Company’s estimates reflect expectations of improved pricing and a modest volume increase. Supply chain dynamics are expected to remain the limiting factor for more significant revenue growth as demand remains very robust. The Company expects operating margin in the Access segment in fiscal 2023 will be in the range of 11%. The Company expects the 310 basis point improvement in operating margin compared to fiscal 2022 will be driven by the full year benefit of improved pricing and improved absorption. The Company expects Defense segment net sales will be in the range of $2.0 billion in fiscal 2023, approximately $140 million lower than fiscal 2022. The Company expects that revenue will begin to grow in fiscal 2024 as the USPS NGDV production begins to ramp up. The Company expects Defense segment operating margin will be in the range of 4% in fiscal 2023. The Company expects unfavorable product mix and NGDV-related pre-production operating expenses to account for the mid-single digit operating margin. The Company expects margins will improve as new programs ramp up in fiscal 2024. The Company expects Vocational segment net sales will be in the range of $2.2 billion in fiscal 2023, roughly flat to the fiscal 2022 combined revenue for the Fire & Emergency and Commercial segments. The Company’s guidance for the Vocational segment reflects modest volume increases, offset in part by the impact of the planned divestiture of the rear discharge concrete mixer business which is expected to occur during the first quarter of fiscal 2023. Similar to the Access segment, demand remains very strong, but the Company’s revenues are expected to be constrained in fiscal 2023 by supply chain dynamics. The Company expects operating margin in the Vocational segment will be in the range of 7.5%, reflecting the impact of constrained output and manufacturing inefficiencies due to supply chain dynamics and the impact of price-protected orders. Vocational segment operating income margins are expected to grow beyond fiscal 2023 as municipal customer orders in backlog for delivery in fiscal 2024 were booked at significantly higher prices and the Company expects margin benefit over time from the integration of the two segments. The Company estimates corporate expenses in fiscal 2023 will be approximately $170 million, approximately $29 million higher than fiscal 2022 driven by a return of incentive compensation to typical levels and increased investments in growth initiatives and new product development. The Company estimates the tax rate for fiscal 2023 will be approximately 25%. The Company expects consolidated net sales in the first quarter of fiscal 2023 to be in the range of $2.1 billion, down approximately $100 million versus the fourth quarter of fiscal 2022. The Company expects the lower revenue to be driven by the timing of deliveries in the Access and Vocational segments as well as lower sales in the Defense segment. The Company expects earnings per share in the first quarter of fiscal 2023 will be in the range of $1.00, reflecting the lower sales, unfavorable order mix in the Defense segment and the return of incentive compensation costs to typical levels. Based on these factors, the Company expects that the first quarter will be the lowest quarter of fiscal 2023 for diluted earnings per share. ### RESULTS OF OPERATIONS ### CONSOLIDATED RESULTS - YEAR ENDED DECEMBER 31, 2022 The following table presents consolidated results (in millions): | | Year Ended December 31, 2022 | 2021 | Change | % Change | | --- | ---: | ---: | ---: | ---: | | Net sales | $8,282.0 | $7,952.5 | $329.5 | 4.1% | | Cost of sales | 7,227.6 | 6,734.8 | 492.8 | 7.3% | | Gross income | 1,054.4 | 1,217.7 | (163.3) | -13.4% | | % of sales | 12.7% | 15.3% | -260 bps | | | SG&A expenses | 662.8 | 672.0 | (9.2) | -1.4% | | Amortization | 11.6 | 11.1 | 0.5 | 4.5% | | Impairment charge | 7.7 | — | 7.7 | 100.0% | | Operating income | 372.3 | 534.6 | (162.3) | -30.4% | | % of sales | 4.5% | 6.7% | -220 bps | | The following table presents net sales by geographic region based on product shipment destination (in millions): | | Year Ended December 31, 2022 | 2021 | Change | % Change | | --- | ---: | ---: | ---: | ---: | | North America | $7,468.2 | $7,019.9 | $448.3 | 6.4% | | Europe, Africa and Middle East | 455.2 | 460.9 | (5.7) | -1.2% | | Rest of the world | 358.6 | 471.7 | (113.1) | -24.0% | | | $8,282.0 | $7,952.5 | $329.5 | 4.1% | #### Fiscal 2022 Compared to Year Ended December 31, 2021 (unaudited) Consolidated net sales increased as a result of improved pricing ($467 million), offset in part by the unfavorable impact of foreign currency exchange rates ($57 million), lower consolidated volume ($52 million) and unfavorable cumulative catch-up adjustments on contracts in the Defense segment ($27 million). The decrease in consolidated gross margin was due to higher material & logistics costs (580 basis points) and higher manufacturing costs (130 basis points) largely as a result of supply chain disruptions, offset in part by improved pricing (430 basis points). The decrease in consolidated selling, general and administrative expenses was generally a result of lower incentive compensation costs ($46 million), offset in part by higher salaries ($11 million), higher reserves for credit losses ($10 million), higher software costs ($9 million) and increased travel ($5 million). The decrease in consolidated operating income was primarily due to unfavorable material & logistics costs ($482 million), manufacturing inefficiencies ($119 million) associated with supply chain disruptions, unfavorable cumulative catch-up adjustments on contracts in the Defense segment ($42 million), higher engineering and new product development spending ($32 million) and higher operating expenses ($28 million), offset in part by improved pricing ($467 million) and lower incentive compensation costs ($58 million). The following table presents consolidated non-operating changes (in millions): | | Year Ended December 31, 2022 | 2021 | Change | | --- | ---: | ---: | ---: | | Interest expense, net of interest income | $(43.9) | $(45.2) | $1.3 | | Miscellaneous income (expense) | (52.8) | (6.2) | (46.6) | | Provision for income taxes | 97.5 | 23.7 | 73.8 | | Effective tax rate | 35.4% | 4.9% | | | Gains (losses) of unconsolidated affiliates | $(4.2) | $1.5 | $(5.7) | #### Fiscal 2022 Compared to Year Ended December 31, 2021 (unaudited) Other miscellaneous income (expense) primarily related to gains and losses on investments, net foreign currency transaction gains and losses, and non-service costs of the Company’s pension plans. Fiscal 2022 results included a charge of $33.6 million for the settlement of a frozen pension plan. Foreign currency transactions resulted in losses of $6.9 million in fiscal 2022 and gains of $4.9 million for the year ended December 31, 2021. Results included an unrealized loss on an investment of $10.3 million in fiscal 2022 and $10.8 million for the year ended December 31, 2021. Income tax expense in fiscal 2022 included a charge of $31.3 million as the Company revised its interpretation of certain foreign anti-hybrid tax legislation based upon comments from the corresponding taxing authorities. Results for the year ended December 31, 2021 included discrete tax benefits of $91.3 million, primarily related to the carryback of the net operating loss to previous tax years with higher federal statutory tax rates ($75.3 million) and the reversal of a tax valuation allowance recorded against certain foreign net deferred tax assets in Europe ($11.7 million). See Note 6 of the Notes to Consolidated Financial Statements for a reconciliation of the effective tax rate compared to the U.S. statutory tax rate. Gains and losses of unconsolidated affiliates primarily represented changes in the Company’s equity method investments. ### SEGMENT RESULTS ### Access Equipment The following table presents the Access Equipment segment results (in millions): | | Year Ended December 31, 2022 | 2021 | Change | % Change | | --- | ---: | ---: | ---: | ---: | | Net sales | $3,972.1 | $3,341.9 | $630.2 | 18.9% | | Cost of sales | 3,432.2 | 2,828.4 | 603.8 | 21.3% | | Gross income | 539.9 | 513.5 | 26.4 | 5.1% | | % of sales | 13.6% | 15.4% | -180 bps | | | SG&A expenses | 226.3 | 221.9 | 4.4 | 2.0% | | Amortization | 0.4 | 0.4 | — | 0.0% | | Operating income | 313.2 | 291.2 | 22.0 | 7.6% | | % of sales | 7.9% | 8.7% | -80 bps | | #### Fiscal 2022 Compared to Year Ended December 31, 2021 (unaudited) Access Equipment segment net sales increased as a result of higher pricing ($348 million) in response to higher input costs and increased volume ($337 million). Access Equipment sales for fiscal 2022 were unfavorably impacted by $53 million from changes in foreign currency exchange rates. The decrease in Access Equipment segment gross margin was due to higher material & logistics costs (900 basis points), offset in part by improved pricing (650 basis points) and lower product liability costs (40 basis points). The increase in Access Equipment segment operating income was primarily due to improved pricing ($348 million), the impact of higher gross margin associated with higher sales volume ($84 million) and lower incentive compensation costs ($27 million), offset in part by higher material & logistics costs ($372 million) and higher manufacturing costs ($63 million). ### Defense The following table presents the Defense segment results (in millions): | | Year Ended December 31, 2022 | 2021 | Change | % Change | | --- | ---: | ---: | ---: | ---: | | Net sales | $2,141.3 | $2,506.8 | $(365.5) | -14.6% | | Cost of sales | 1,951.5 | 2,208.1 | (256.6) | -11.6% | | Gross income | 189.8 | 298.7 | (108.9) | -36.5% | | % of sales | 8.9% | 11.9% | -300 bps | | | SG&A expenses | 131.9 | 129.3 | 2.6 | 2.0% | | Amortization | 6.1 | 5.9 | 0.2 | 3.4% | | Impairment charge | 5.6 | — | 5.6 | 100.0% | | Operating income | 46.2 | 163.5 | (117.3) | -71.7% | | % of sales | 2.2% | 6.5% | -430 bps | | #### Fiscal 2022 Compared to Year Ended December 31, 2021 (unaudited) Defense segment net sales decreased as U.S. Government funding for the Company’s tactical wheeled vehicle programs has decreased in recent years. The decrease in gross margin in the Defense segment was due to unfavorable cumulative catch-up adjustments on contracts (180 basis points) and unfavorable product mix (120 basis points). The decrease in operating income in the Defense segment was primarily a result of the impact of lower gross margin associated with lower sales volume ($54 million), unfavorable cumulative catch-up adjustments on contracts ($42 million) and unfavorable product mix ($26 million), offset in part by lower warranty costs ($14 million). Changes in estimates on contracts accounted for under the cost-to-cost method resulted in cumulative catch-up adjustments on contract margins that decreased Defense segment operating income by $44.9 million in fiscal 2022 primarily as a result of higher material and logistics costs. Changes in estimates on contracts accounted for under the cost-to-cost method decreased Defense segment operating income by $3.3 million in the year ended December 31, 2021. ### Fire & Emergency The following table presents the Fire & Emergency segment results (in millions): | | Year Ended December 31, 2022 | 2021 | Change | % Change | | --- | ---: | ---: | ---: | ---: | | Net sales | $1,111.6 | $1,171.3 | $(59.7) | -5.1% | | Cost of sales | 929.8 | 920.6 | 9.2 | 1.0% | | Gross income | 181.8 | 250.7 | (68.9) | -27.5% | | % of sales | 16.4% | 21.4% | -500 bps | | | SG&A expenses | 85.3 | 90.4 | (5.1) | -5.6% | | Amortization | 1.6 | 1.3 | 0.3 | 23.1% | | Operating income | 94.9 | 159.0 | (64.1) | -40.3% | | % of sales | 8.5% | 13.6% | -510 bps | | #### Fiscal 2022 Compared to Year Ended December 31, 2021 (unaudited) Fire & Emergency segment net sales decreased due to lower ARFF vehicle volume ($53 million) and lower fire truck volume ($41 million) as a result of supply chain disruptions, offset in part by improved pricing ($32 million). The decrease in gross margin in the Fire & Emergency segment was primarily attributable to higher material & logistics costs (320 basis points), manufacturing inefficiencies (270 basis points) largely associated with parts shortages and labor availability and adverse product mix (100 basis points), offset in part by improved pricing (210 basis points). The decrease in operating income in the Fire & Emergency segment was largely a result of higher material & logistics costs ($36 million), higher manufacturing inefficiencies ($29 million), the impact of lower gross margin associated with lower sales volume ($25 million) and adverse product mix ($11 million), offset in part by improved pricing ($32 million) and lower incentive compensation costs ($6 million). ### Commercial The following table presents the Commercial segment results (in millions): | | Year Ended December 31, 2022 | 2021 | Change | % Change | | --- | ---: | ---: | ---: | ---: | | Net sales | $1,064.1 | $952.5 | $111.6 | 11.7% | | Cost of sales | 912.4 | 796.2 | 116.2 | 14.6% | | Gross income | 151.7 | 156.3 | (4.6) | -2.9% | | % of sales | 14.3% | 16.4% | -210 bps | | | SG&A expenses | 86.6 | 82.4 | 4.2 | 5.1% | | Amortization | 3.5 | 3.5 | — | 0.0% | | Impairment charge | 2.1 | — | 2.1 | 100.0% | | Operating income | 59.5 | 70.4 | (10.9) | -15.5% | | % of sales | 5.6% | 7.4% | -180 bps | | #### Fiscal 2022 Compared to Year Ended December 31, 2021 (unaudited) Commercial segment net sales increased as a result of higher pricing ($87 million) in response to higher input costs and favorable product mix primarily due to a greater percentage of sales that included a third-party chassis ($37 million). The decrease in gross margin in the Commercial segment was primarily attributable to unfavorable material & logistics costs (680 basis points) and higher manufacturing costs (150 basis points), offset in part by improved pricing (600 basis points). The decrease in operating income in the Commercial segment was primarily due to higher material & logistics costs ($72 million), higher manufacturing costs ($24 million), higher engineering and new product development spending ($10 million) and higher warranty costs ($4 million), offset in part by improved pricing ($87 million) and favorable product mix ($14 million). ### Corporate and Intersegment eliminations The following table presents the corporate costs and intersegment eliminations (in millions): | | Year Ended December 31, 2022 | 2021 | Change | % Change | | --- | ---: | ---: | ---: | ---: | | Net sales | $(7.1) | $(20.0) | $12.9 | 64.5% | | Cost of sales | 1.7 | (18.5) | 20.2 | 109.2% | | Gross income | (8.8) | (1.5) | (7.3) | -486.7% | | Operating expenses | 132.7 | 148.0 | (15.3) | 10.3% | | Operating income | (141.5) | (149.5) | 8.0 | 5.4% | #### Fiscal 2022 Compared to Year Ended December 31, 2021 (unaudited) Corporate operating expenses decreased as a result of lower incentive compensation costs ($16 million), offset in part by higher engineering and new product development spending ($7 million). ### THREE MONTHS ENDED DECEMBER 31, 2021 COMPARED WITH THE THREE MONTHS ENDED DECEMBER 31, 2020 The comparison of the results for the three months ended December 31, 2021 with the results for the three months ended December 31, 2020 can be found in the “Management’s Discussion and Analysis” section in the Company’s Transition Report on Form 10-Q for the transition period from October 1, 2021 to December 31, 2021. ### FISCAL 2021 COMPARED WITH FISCAL 2020 The comparison of the fiscal 2021 results with the fiscal 2020 results can be found in the “Management’s Discussion and Analysis” section in the Company’s fiscal 2021 Annual Report on Form 10-K. ### PRO-FORMA FINANCIAL STATEMENTS The Condensed Consolidated Statement of Income for fiscal 2022 is presented below for reference in comparison to the year ended December 31, 2021 (in millions): | | Year Ended December 31, 2022 | 2021 (unaudited) | | --- | ---: | ---: | | Net sales | $8,282.0 | $7,952.5 | | Cost of sales | 7,227.6 | 6,734.8 | | Gross income | 1,054.4 | 1,217.7 | | Operating expenses: | | | | Selling, general and administrative | 662.8 | 672.0 | | Amortization of purchased intangibles | 11.6 | 11.1 | | Intangible asset impairment charge | 7.7 | — | | Total operating expenses | 682.1 | 683.1 | | Operating income | 372.3 | 534.6 | | Other income (expense): | | | | Interest expense | (53.4) | (48.7) | | Interest income | 9.5 | 3.6 | | Miscellaneous, net | (52.8) | (6.2) | | Income before income taxes and earnings (losses) of unconsolidated affiliates | 275.6 | 483.3 | | Provision for income taxes | 97.5 | 23.7 | | Income before earnings (losses) of unconsolidated affiliates | 178.1 | 459.6 | | Equity in earnings (losses) of unconsolidated affiliates | (4.2) | 1.5 | | Net income | $173.9 | $461.1 | | Earnings per share: | | | | Basic | $2.65 | $6.76 | | Diluted | 2.63 | 6.68 | | Basic weighted-average shares outstanding | 65,699,693 | 68,258,241 | | Dilutive equity-based compensation awards | 435,125 | 730,661 | | Diluted weighted-average shares outstanding | 66,134,818 | 68,988,902 | 37 The Condensed Consolidated Statement of Cash Flows for fiscal 2022 is presented below for reference in comparison to the year ended December 31, 2021 (in millions): | Operating activities: | Year Ended December 31, 2022 | 2021 (unaudited) | | --- | ---: | ---: | | Net income | $173.9 | $461.1 | | Depreciation and amortization | 107.6 | 104.4 | | Intangible asset impairment charge | 7.7 | — | | Stock-based incentive compensation | 28.6 | 24.8 | | Deferred income taxes | (53.5) | (80.6) | | Gain on sale of assets | (3.8) | (11.9) | | Unrealized loss on investments | 12.6 | 6.2 | | Foreign currency transaction (gains) losses | 6.9 | (4.5) | | Other non-cash adjustments | 4.3 | — | | Changes in operating assets and liabilities | 317.0 | 190.9 | | Net cash provided by operating activities | 601.3 | 690.4 | | **Investing activities:** | | | | Additions to property, plant and equipment | (269.5) | (122.2) | | Additions to equipment held for rental | (10.2) | (12.3) | | Acquisition of business, net of cash acquired | (19.5) | (110.6) | | Proceeds from sale of equipment held for rental | 13.0 | 28.5 | | Acquisition of equity securities | (17.4) | (41.8) | | Other investing activities | 3.2 | 7.4 | | Net cash used in investing activities | (300.4) | (251.0) | | **Financing activities:** | | | | Proceeds from debt | 10.4 | — | | Repayments of debt | (225.0) | — | | Repurchases of Common Stock | (155.0) | (257.8) | | Dividends paid | (97.3) | (92.8) | | Proceeds from exercise of stock options | 3.1 | 40.9 | | Other financing activities | (21.2) | (24.7) | | Net cash used in financing activities | (485.0) | (334.4) | | Effect of exchange rate changes on cash and cash equivalents | (5.7) | (7.9) | | Increase (decrease) in cash and cash equivalents | (189.8) | 97.1 | | Cash and cash equivalents at beginning of period | 995.7 | 898.6 | | Cash and cash equivalents at end of period | $805.9 | $995.7 | 38 ### LIQUIDITY AND CAPITAL RESOURCES 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 of approximately $650 million in fiscal 2023. In addition to cash generated from operations, the Company had other sources of liquidity available at December 31, 2022, including $805.9 million of cash and cash equivalents and $1.08 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 and expects to remain in compliance with the financial covenant 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. Other uses of cash include the repayment of debt and the repurchase of the Company’s Common Stock. In fiscal 2022, the Company used available cash to repay $225.0 million of debt and repurchase $155.0 million of its Common Stock. ### Financial Condition at December 31, 2022 The Company’s capitalization was as follows (in millions): | | December 31, 2022 | December 31, 2021 | September 30, 2021 | | --- | ---: | ---: | ---: | | Cash and cash equivalents | $805.9 | $995.7 | $1,375.8 | | Total debt | 604.7 | 819.0 | 818.8 | | Total shareholders’ equity | 3,185.7 | 3,204.3 | 3,357.7 | | Total capitalization (debt plus equity) | 3,790.4 | 4,023.3 | 4,176.5 | | Debt to total capitalization | 16.0% | 20.4% | 19.6% | The Company’s ratio of debt to total capitalization of 16.0% at December 31, 2022 remained within its targeted range. Debt to total capitalization decreased in fiscal 2022 due to the repayment of remaining amounts due under the Company's term loan during the year. 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 December 31, 2022, 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) was 45 days at December 31, 2022, down slightly from 46 days at December 31, 2021. Days sales outstanding for segments other than the Defense segment was 49 days at December 31, 2022, down from 53 days at December 31, 2021 on quicker cash collections at the Access Equipment 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 4.3 times at December 31, 2021 to 4.1 times at December 31, 2022 primarily as a result of higher inventory levels in the Defense segment. Consolidated days payables outstanding (defined as “Accounts Payable” at quarter end divided by material costs of sales for the most recent quarter multiplied by 90 days) was 66 days, up from 55 days at December 31, 2021 due to the timing of payments near year end and significant non-inventory payables related to construction projects. ### Operating Cash Flows Operating activities provided $601.3 million of cash in fiscal 2022 compared to $690.4 million during the year ended December 31, 2021. The decrease in cash provided by operating activities in fiscal 2022 compared to the year ended December 31, 2021 was due to the lower net income generated during the year, a significant increase in inventory due to global supply chain challenges that have delayed the Company’s ability to complete units and lower incentive compensation accruals, offset in part by higher customer advances in the Fire & Emergency and Defense segments. ### Investing Cash Flows Investing activities used cash of $300.4 million in fiscal 2022 compared to $251.0 million during the year ended December 31, 2021. Additions to property, plant and equipment of $269.5 million in fiscal 2022 increased $147.3 million from the year ended December 31, 2021 driven by capital spending to set up the NGDV manufacturing plant in Spartanburg, SC. The Company anticipates that it will spend $350 million on capital expenditures in fiscal 2023 as the Company completes the NGDV facility in South Carolina and invests in manufacturing capacity in the Access and Vocational segments. During the first quarter of fiscal 2023, the Company utilized approximately $200 million of cash to fund the acquisition of Hinowa S.p.A., an Italian manufacturer of compact crawler booms and other tracked equipment. ### Financing Cash Flows Financing activities used cash of $485.0 million in fiscal 2022 compared to $334.4 million during the year ended December 31, 2021. The increase in cash utilized for financing activities was due to the repayment of the Company’s $225 million term loan, offset in part by a decrease in Common Stock repurchases under authorizations approved by the Company’s Board of Directors. In fiscal 2022, the Company repurchased 1,508,467 shares of its Common Stock at an aggregate cost of $155.0 million. During the year ended December 31, 2021, the Company repurchased 2,290,765 shares of its Common Stock at an aggregate cost of $257.8 million. The Company’s Board of Directors increased the Company’s repurchase authorization to 12 million shares on May 3, 2022. As of December 31, 2022, the Company had approximately 11.6 million shares of Common Stock remaining under its repurchase authorization. ### 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. 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 0.4375% 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 December 31, 2022 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 4.600% unsecured senior notes due May 15, 2028 (the “2028 Senior Notes”). In February 2020, the Company issued $300.0 million of 3.100% 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 15 of the Notes to Consolidated Financial Statements for additional information regarding the Company’s debt as of December 31, 2022. ### Contractual Obligations The total amount of gross unrecognized tax benefits, including interest, for uncertain tax positions was $103.8 million as of December 31, 2022. Payment of these obligations would result from settlements with tax authorities. Due to the difficulty in determining the timing of the settlement, these obligations are not included in the summary of the Company’s fixed contractual obligations. See Note 6 of the Notes to Consolidated Financial Statements for additional information regarding the Company’s unrecognized tax benefits as of December 31, 2022. Following is a summary of the Company’s contractual obligations and payments due by period following December 31, 2022 (in millions): | | Payments Due by Period Total | Less Than 1 Year | 1-3 Years | 3-5 Years | More Than 5 Years | | --- | ---: | ---: | ---: | ---: | ---: | | Long-term debt (including interest)(1) | $740.7 | $23.1 | $46.2 | $46.2 | $625.2 | | Lease obligations | 286.4 | 63.8 | 75.0 | 48.5 | 99.1 | | Purchase obligations(2) | 2,406.0 | 2,252.6 | 152.9 | 0.4 | 0.1 | | Other long-term liabilities(3) | 441.3 | 44.3 | 68.8 | 46.4 | 281.8 | | | $3,874.4 | $2,383.8 | $342.9 | $141.5 | $1,006.2 | (1) Interest was calculated based upon the interest rate in effect on December 31, 2022. (2) The amounts for purchase obligations included above represent all obligations to purchase goods or services under agreements that are enforceable and legally binding and that specify all significant terms. (3) Represents other long-term liabilities on the Company’s Consolidated Balance Sheet, including the current portion of these liabilities. The projected timing of cash flows associated with these obligations is based on management’s estimates, which are based largely on historical experience. This amount also includes all liabilities under the Company’s pension and other postretirement benefit plans. See Note 5 of the Notes to Consolidated Financial Statements for information regarding these liabilities and the plan assets available to satisfy them. ### CRITICAL ACCOUNTING POLICIES The Company’s significant accounting policies are described in Note 2 of the Notes to Consolidated Financial Statements. The Company considers the following policy to be the most critical in understanding the judgments that are involved in the preparation of the Company’s consolidated financial statements and the uncertainties that could impact the Company’s financial condition, results of operations and cash flows. *Revenue Recognition.* The Company recognizes revenue in accordance with Accounting Standards Codification 606, *Revenue from Contracts with Customers*. Accordingly, revenue is recognized when control of the goods or services promised under a contract is 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. In fiscal 2022, approximately 30% of the Company’s revenues were recognized under the percentage-of-completion accounting method. 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 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, vehicles 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, concrete mixer and refuse collection 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 the Company’s standard 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. #### Defense segment revenue The majority of the Company’s Defense segment net sales are derived through long-term contracts with the U.S. government to design, develop, manufacture or modify defense and other specialty vehicles. 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 2022. 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 the promised goods and services within 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. 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 the 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 catch-up 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 transfer of 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, as they generate or enhance assets that will be utilized to satisfy performance obligations in the future and are expected to be recovered. Deferred contract costs are subsequently amortized on a systematic basis consistent with the pattern of transfer of the goods and services to which they relate. Unlike the JLTV and FMTV A2 contracts, for which the Company has concluded control of the performance obligations transfers continuously over the contract terms, the Company has concluded that control of the performance obligation for the USPS contract transfers during the production phase of the contract. As a result, the Company has recognized $387.4 million of deferred contract costs related to the USPS contract at December 31, 2022 consisting of engineering costs, setup costs and tooling costs. The Company anticipates the production phase of the contract will begin in 2024. The USPS contract contains milestone billings provisions, under which the Company received $342 million of advance payments from the customer as of December 31, 2022. ### CRITICAL ACCOUNTING ESTIMATES “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based on the Company’s Consolidated Financial Statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and judgments that affect reported amounts and related disclosures. On an ongoing basis, management evaluates and updates its estimates. Management employs judgment in making its estimates but they are based on historical experience and currently available information and various other assumptions that the Company believes to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results could differ from those estimates. Management believes that its judgment is applied consistently and produces financial information that fairly depicts the results of operations for all periods presented. *Estimate-at-Completion (EAC).* The Company has concluded that control of substantially all of the Defense segment’s performance obligations transfers to the customer continuously and therefore revenue is recognized over time. 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 obligations. Due to the size and nature of these contracts, the estimation of total revenues and costs is highly complicated and judgmental. The Company must make assumptions regarding expected increases in wages and employee benefits, productivity and availability of labor, material costs and allocated fixed costs. 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. If a loss is expected on a performance obligation, the complete estimated loss is recorded in the period in which the loss is identified. 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. Changes to production costs, overhead rates, learning curve and/or supplier performance can also impact these estimates. These estimates are highly judgmental, particularly the non-production costs on the JLTV and FMTV A2 contracts. The Company recognizes changes in estimated sales or costs and the resulting profit or loss on a cumulative basis. In addition, as contract modifications (e.g., new orders) are received, they are evaluated to determine if they represent a separate contract or the impact on the existing contract. As of December 31, 2022, the estimated remaining costs on the JLTV and FMTV A2 contracts represent the majority of the total estimated costs to complete in the Defense segment. Changes in estimates on contracts accounted for under the cost-to-cost method decreased Defense segment operating income by $44.9 million in fiscal 2022. ### NEW ACCOUNTING STANDARDS See Note 2 of the Notes to Consolidated Financial Statements regarding the impact or potential impact of recent accounting pronouncements on the Company’s consolidated financial statements. ### CUSTOMERS AND BACKLOG Sales to the U.S. government comprised approximately 25% of the Company’s net sales in fiscal 2022. 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. The Company’s backlog as of December 31, 2022 increased 52.3% to $14.1 billion compared to $9.3 billion at December 31, 2021. Access Equipment segment backlog increased 22.1% to $4.4 billion at December 31, 2022 compared to $3.6 billion at December 31, 2021 as the re-opening of economies coming out of the pandemic and elevated customer fleet ages drove higher demand. Defense segment backlog increased 78.1% to $6.3 billion at December 31, 2022 compared to $3.5 billion at December 31, 2021 primarily due to the initial order from the USPS for the NGDV program. Fire & Emergency segment backlog increased 85.4% to $2.9 billion at December 31, 2022 compared to $1.5 billion at December 31, 2021 due to strong demand for fire trucks coming out of the COVID-19 pandemic. Commercial segment backlog decreased 4.3% to $581.2 million at December 31, 2022 compared to $607.0 million at December 31, 2021 due to management of the order book for mixers to finalize orders closer to the delivery date, offset in part by improved market demand for refuse collection vehicles as demand rebounded following the re-opening of economies. Global supply chain challenges and the associated delays in production are also contributing to higher backlogs in all segments. 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 49% of the Company’s December 31, 2022 backlog is not expected to be filled in fiscal 2023. ## Market risk As filed, 3,338 characters. The Company is exposed to market risk from changes in interest rates, certain commodity prices and foreign currency exchange rates. To reduce the risk from changes in foreign currency exchange and interest rates, the Company selectively uses financial instruments. All hedging transactions are authorized and executed pursuant to clearly defined policies and procedures, which strictly prohibit the use of financial instruments for speculative purposes. *Interest Rate Risk.* The Company’s earnings exposure related to adverse movements in interest rates is primarily derived from outstanding floating rate debt instruments that are indexed to short-term market interest rates. In this regard, changes in U.S. and off-shore interest rates affect interest payable on the Company’s borrowings under its Credit Agreement. The Company had no variable rate-based debt outstanding at December 31, 2022. *Commodity Price Risk.* The Company is a purchaser of certain commodities, including steel, aluminum and composites. In addition, the Company is a purchaser of components and parts containing various commodities, including steel, aluminum, rubber and others which are integrated into the Company’s end products. The Company generally buys these commodities and components based upon market prices that are established with the vendor as part of the purchase process. The Company does not use commodity financial instruments to hedge commodity prices. The Company generally obtains firm quotations from its significant components’ suppliers for its orders under firm, fixed-price contracts in its Defense segment when possible. In the Company’s Access Equipment, Fire & Emergency and Commercial segments, the Company generally attempts to obtain firm pricing from most of its suppliers, consistent with backlog requirements and/or forecasted annual sales. To the extent that commodity prices increase and the Company does not have firm pricing from its suppliers, or its suppliers are not able to honor such prices, then the Company may experience margin declines to the extent it is not able to increase selling prices of its products. *Foreign Currency Risk.* The Company’s operations consist of manufacturing in the U.S., Mexico, Canada, France, Australia, the United Kingdom and China and sales and limited vehicle body mounting activities on five continents. International sales comprised approximately 12% of overall net sales in fiscal 2022, of which approximately 49% involved exports from the U.S. The majority of export sales in fiscal 2022 were denominated in U.S. dollars. As a result of the manufacture and sale of the Company’s products in foreign markets, the Company’s earnings are affected by fluctuations in the value of foreign currencies in which certain of the Company’s transactions are denominated as compared to the value of the U.S. dollar. The Company’s operating results are principally exposed to changes in exchange rates between the U.S. dollar and the European currencies, primarily the Euro and the U.K. pound sterling, changes between the U.S. dollar and the Australian dollar, changes between the U.S. dollar and the Brazilian real, changes between the U.S. dollar and the Mexican peso, changes between the U.S. dollar and the Chinese renminbi and changes between the U.S. dollar and the Canadian dollar. ## Controls and procedures As filed, 3,646 characters. *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 December 31, 2022. 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 December 31, 2022 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. *Management’s Report on Internal Control Over Financial Reporting.* The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of published financial statements in accordance with generally accepted accounting principles. The Company’s management, with the participation of the Company’s President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, has assessed the effectiveness of the Company’s internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, the Company’s management has concluded that, as of December 31, 2022, the Company’s internal controls over financial reporting were effective based on that framework. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Deloitte & Touche LLP, the Company’s independent registered public accounting firm, issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, which is included herein. *Attestation Report of Independent Registered Public Accounting Firm.* The attestation report required under this Item 9A is contained in Item 8 of Part II of this Annual Report on Form 10-K under the heading “Report of Independent Registered Public Accounting Firm.” *Changes in Internal Control over Financial Reporting.* There were no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Filed Feb 21, 2023. Source: SEC EDGAR, the filing index for accession 0000950170-23-003473. Last ingested by Listed: Oct 29, 2026, 11:20 ET. 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