# Oshkosh Corp: Form 10-Q for the period ended Mar 31, 2023

- Company: [Oshkosh Corp](/companies/osk.md) (CIK 775158)
- Form: 10-Q
- Filed: 2023-04-27
- Accepted by EDGAR: Apr 27, 2023, 14:12 ET
- Period: 2023-03-31
- Accession: 0000950170-23-015169
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/775158/000095017023015169/osk-20230331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/775158/000095017023015169/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $2.27bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-01-01 to 2023-03-31 | $1.93bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-01-01 to 2023-03-31 | $333.8m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-01-01 to 2023-03-31 | $199.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | $130.8m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | $34.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | $88.5m | us-gaap:ProfitLoss |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 65,830,985 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | $79.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $111.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2023-01-01 to 2023-03-31 | $26.8m | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2023-01-01 to 2023-03-31 | $15.2m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-03-31 | $538.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-31 | $4.41bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $7.92bn | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $2.46bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2023-03-31 | $595.2m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-03-31 | $2.1m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-03-31 | $3.25bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 33,479 characters.

### Cautionary Statement About Forward-Looking Statements

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Quarterly Report on Form 10-Q contain statements that the Company believes to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q, including, without limitation, statements regarding the Company’s future financial position, business strategy, targets, projected sales, costs, earnings, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations, including those under the caption “Overview” are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “project” or “plan” or the negative thereof or variations thereon or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond the Company’s control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include the extent of supply chain and logistics disruptions; the Company’s ability to increase prices or impose surcharges to raise margins or to offset higher input costs, including increased raw material, labor, freight and overhead costs; the Company’s ability to accurately predict future input costs associated with Defense contracts; the Company’s ability to attract and retain production labor in a timely manner; the cyclical nature of the Company’s access equipment, fire apparatus and refuse collection markets, which are particularly impacted by the strength of U.S. and European economies and construction seasons; the Company’s estimates of access equipment demand which, among other factors, is influenced by historical customer buying patterns and rental company fleet replacement strategies; the strength of the U.S. dollar and its impact on Company exports, translation of foreign sales and the cost of purchased materials; the Company’s ability to predict the level and timing of orders for indefinite delivery/indefinite quantity contracts with the U.S. federal government; the impact of any U.S. Department of Defense (DoD) solicitation for competition for future contracts to produce military vehicles; the impacts of orders from the U.S. Postal Service (USPS); the impact of severe weather, war, natural disasters or pandemics that may affect the Company, its suppliers or its customers; risks related to the collectability of receivables, particularly for those businesses with exposure to construction markets; the cost of any warranty campaigns related to the Company’s products; risks associated with international operations and sales, including compliance with the Foreign Corrupt Practices Act; risks that a trade war and related tariffs could reduce the competitiveness of the Company’s products; the Company’s ability to comply with complex laws and regulations applicable to U.S. government contractors; cybersecurity risks and costs of defending against, mitigating and responding to data security threats and breaches impacting the Company; the Company’s ability to successfully identify, complete and integrate acquisitions and to realize the anticipated benefits associated with the same; and risks related to the Company’s ability to successfully execute on its strategic road map and meet its long-term financial goals. Additional information concerning these and other factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company’s U.S. Securities and Exchange Commission (SEC) filings, including, but not limited to, the Company’s Current Report on Form 8-K filed with the SEC on April 27, 2023 and Item 1A. of Part II of this Quarterly Report on Form 10-Q.

All forward-looking statements, including those under the caption “Overview,” speak only as of the date the Company files this Quarterly Report on Form 10-Q with the SEC. The Company assumes no obligation, and disclaims any obligation, to update information contained in this Quarterly Report on Form 10-Q. Investors should be aware that the Company may not update such information until the Company’s next quarterly earnings conference call, if at all.

All references herein to earnings per share refer to earnings per share assuming dilution.

### General

Major products manufactured and marketed by each of the Company’s business segments are as follows:

*Access —* aerial work platforms and telehandlers used in a wide variety of construction, industrial, institutional and general maintenance applications to position workers and materials at elevated heights, as well as carriers and wreckers. Access customers include equipment rental companies, construction contractors, manufacturing companies, home improvement centers and towing companies.

*Defense —* tactical vehicles, trailers, weapons system integration and parts sold to the U.S. military and to other militaries around the world, delivery vehicles for the USPS, and snow removal vehicles for military and civilian airports.

*Vocational —* custom and commercial firefighting vehicles and equipment, aircraft rescue and firefighting (ARFF) vehicles, simulators, mobile command and control vehicles and other emergency vehicles primarily sold to fire departments, airports and other governmental units. Refuse collection vehicles sold to commercial and municipal waste haulers, front-discharge concrete mixers sold to ready-mix companies and field service vehicles and truck-mounted cranes sold to mining, construction and other companies.

### Overview

The Company reported earnings per share of $1.34 in the first quarter of fiscal 2023, which significantly exceed earnings per share of $0.00 in the first quarter of fiscal 2022. The strong results in the first quarter of fiscal 2023 were led by double-digit revenue gains in the Access segment. The higher sales volume, along with improved price/cost dynamics led to higher consolidated operating income and operating income margin. Results for the first quarter of fiscal 2023 included an after-tax loss on the sale of the Company’s rear discharge mixer business of $11.0 million, or $0.17 per share, a charge for the impairment of an equity method investment associated with the rear discharge mixer business of $5.9 million, or $0.09 per share, after-tax restructuring charges of $2.8 million, or $0.04 per share, and an after-tax gain on a settlement of a claim with the Company’s pension advisor of $3.6 million, or $0.05 per share. Results for the first quarter of fiscal 2022 included a charge of $18.1 million, or $0.27 per share, associated with taxes on previous income as the Company revised its interpretation of certain foreign anti-hybrid tax legislation based upon comments from the corresponding taxing authorities of the applicable jurisdiction.

Consolidated net sales in the first quarter of fiscal 2023 increased $322.4 million, or 16.6%, to $2.27 billion compared to the first quarter of fiscal 2022 due to improved supply chain dynamics and the realization of price increases implemented to offset the rise in costs over the last several years. While still off historical norms, supply chain conditions continue to improve, allowing the Company to increase its output to meet demand. During the first quarter of fiscal 2023, the Company also completed its acquisition of Hinowa, an Italian manufacture of compact crawler booms and tracked equipment for $186.9 million. The acquisition, which is part of the Access segment, contributed sales of $14.6 million in the first quarter of fiscal 2023.

Access segment orders exceeded $1.2 billion for the first quarter of fiscal 2023, reflecting ongoing strong demand for access equipment. Strong access equipment demand coupled with a $591 million order for Next Generation Delivery Vehicles (NGDV) from the USPS led to record backlog of $14.8 billion at March 31, 2023, of which approximately 42% is expected to be delivered in fiscal 2023. Although improved, supply chain challenges are expected to remain a significant constraint to production in fiscal 2023.

Consolidated operating income increased 311.3% to $130.8 million, or 5.8% of sales, in the first quarter of fiscal 2023 compared to $31.8 million, or 1.6% of sales, in the first quarter of fiscal 2022. Improved price/cost dynamics and increased volume were the primary contributors to the improvement in consolidated operating income. First quarter fiscal 2023 results also included a pre-tax loss of $13.3 million on the sale of the Company’s rear discharge mixer business. The Company will continue to be a distributor of parts for the buyer for a transition period of between nine and twelve months. The rear discharge mixer business, which was included in the Vocational segment, had sales of $25.9 million and $33.7 million in the first quarter of fiscal 2023 and 2022, respectively.

As a result of the positive start to fiscal 2023, the Company increased its fiscal 2023 earnings per share estimate from a range of $5.50 to a range of $5.75 on estimated operating income of $553 million and estimated consolidated sales of $8.65 billion. The revised earnings per share estimate includes a combined $0.25 per share charge related to the loss on the sale of the rear discharge mixer business, the impairment of an equity method investment, restructuring charges and the gain realized on the settlement of a claim. Excluding these net charges, the Company increased its fiscal 2023 adjusted earnings per share estimate to be in the range of $6.00.

The Company expects Access segment sales and operating margin in fiscal 2023 to be in the range of $4.4 billion and 11.5% compared to the Company’s previous expectation of $4.2 billion and 11.0%, respectively, largely as a result of stronger first quarter volume.

In February 2022, the U.S. Army released a request for proposal for the re-compete of the production contract for the Joint Light Tactical Vehicle (JLTV). The DoD conducted a competition for the follow-on production of the JLTV in which Oshkosh Defense participated. In February 2023, the DoD awarded the JLTV follow on contract to another company. On March 2023, the Company filed a protest regarding the award with the U.S. Government Accountability Office, although there is no assurance that the protest will be successful. The JLTV contract is expected to account for approximately $1 billion in sales for the Company in fiscal 2023. The Company can take orders under the current contract through the fourth quarter of fiscal 2023, with deliveries through fiscal 2024. The Company expects Defense segment sales in fiscal 2023 to be in the range of $2.1 billion, up modestly from the Company’s previous expectations. The Company now expects Defense segment operating margin to be approximately 3.25%, modestly lower than the Company’s previous expectation of approximately 4.0% due to the impacts of higher steel and other component inflation as well as costs associated with the JLTV follow-on protest.

The Company continues to expect Vocational segment fiscal 2023 sales to be approximately $2.2 billion. The Company expected Vocational segment fiscal 2023 operating income margin in the range of 7.3%, down from the previous expectation of 7.5% as the loss on the sale of the rear discharge mixer business is expected to only be partially offset by improved price/cost dynamics.

The Company’s estimates for corporate expenses for fiscal 2023 increased modestly to $180 million on expected higher incentive compensation costs.

The Company expects earnings per share in the second quarter of fiscal 2023 to be approximately $1.60 per share reflecting similar supply chain dynamics to those it experienced during the first quarter of fiscal 2023. Typical seasonality trends are not expected to apply in this period of very strong demand and supply chain constraints.

### RESULTS OF OPERATIONS

### CONSOLIDATED RESULTS

The following table presents consolidated results (in millions):

|  | First Quarter Fiscal 2023 | 2022 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $2,268.1 | $1,945.7 | $322.4 | 16.6% |
| Cost of sales | 1,934.3 | 1,741.9 | 192.4 | 11.0% |
| Gross income | 333.8 | 203.8 | 130.0 | 63.8% |
| % of sales | 14.7% | 10.5% | 420 bps |  |
| SG&A expenses | 199.1 | 169.2 | 29.9 | 17.7% |
| Amortization | 3.9 | 2.8 | 1.1 | 39.3% |
| Operating income | 130.8 | 31.8 | 99.0 | 311.3% |
| % of sales | 5.8% | 1.6% |  |  |

27

The following table presents net sales by geographic region based on product shipment destination (in millions):

|  | First Quarter Fiscal 2023 | 2022 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| North America | $1,928.7 | $1,769.6 | $159.1 | 9.0% |
| Europe, Africa and Middle East | 223.7 | 92.9 | 130.8 | 140.8% |
| Rest of the World | 115.7 | 83.2 | 32.5 | 39.1% |
|  | $2,268.1 | $1,945.7 | $322.4 | 16.6% |

#### First Quarter Fiscal 2023 Compared to 2022

Consolidated net sales increased as a result of higher Access segment sales volume ($193 million) and higher pricing in response to higher input costs ($147 million).

The improvement in consolidated gross margin was due to improved pricing (520 basis points) offset by higher material & logistics costs (110 basis points).

The increase in consolidated selling, general and administrative expenses was due to a loss on the sale of the rear discharge mixer business ($13 million), higher incentive compensation costs ($10 million) and higher restructuring costs ($3 million).

The increase in consolidated operating income was primarily due to improved pricing ($147 million) and the impact of higher gross margin associated with higher sales volume ($39 million), offset in part by higher material & logistics costs ($26 million), higher incentive compensation costs ($16 million), higher production costs ($17 million), the loss on the sale of the rear discharge mixer business ($13 million), unfavorable cumulative catch-up adjustments on contracts in the Defense segment ($5 million) and higher restructuring costs ($4 million).

The following table presents consolidated non-operating changes (in millions):

|  | First Quarter Fiscal 2023 | 2022 | Change |
| --- | ---: | ---: | ---: |
| Interest expense, net of interest income | $(7.2) | $(11.6) | $4.4 |
| Miscellaneous income (expense) | 5.8 | 1.1 | 4.7 |
| Provision for income taxes | 34.2 | 20.8 | 13.4 |
| Effective tax rate | 26.4% | 97.7% |  |
| Gains (losses) of unconsolidated affiliates | $(6.7) | $(0.7) | $(6.0) |

#### First Quarter Fiscal 2023 Compared to 2022

Interest expense net of interest income decreased due to the benefit of higher interest rates on the Company’s cash holdings.

Other miscellaneous income (expense) primarily related to gains and losses on investments, foreign currency transaction gains and losses, and non-service costs of the Company’s pension plans. Miscellaneous income in the first quarter of fiscal 2023 primarily related to a $4.7 million gain on the mediation settlement with the Company’s pension advisor.

The provision for income taxes for the first quarter of fiscal 2022 included a charge of $18.1 million related to taxes on income generated in prior periods as the Company revised its interpretation of certain foreign anti-hybrid tax legislation based upon comments from the corresponding taxing authorities in the quarter.

Losses of unconsolidated affiliates primarily represented changes in the Company’s equity method investments. During the first quarter of fiscal 2023, the Company wrote down its investment in the Company equity interest in a commercial entity in Mexico by $5.9 million based on the estimated fair market value of the entity.

### SEGMENT RESULTS

### Access

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

|  | First Quarter Fiscal 2023 | 2022 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $1,193.2 | $883.1 | $310.1 | 35.1% |
| Cost of sales | 988.4 | 819.1 | 169.3 | 20.7% |
| Gross income | 204.8 | 64.0 | 140.8 | 220.0% |
| % of sales | 17.2% | 7.2% | 1000 bps |  |
| SG&A expenses | 68.8 | 58.2 | 10.6 | 18.2% |
| Amortization | 1.0 | 0.1 | 0.9 | 900.0% |
| Operating income | 135.0 | 5.7 | 129.3 | 2268.4% |
| % of sales | 11.3% | 0.6% |  |  |

#### First Quarter Fiscal 2023 Compared to 2022

Access segment net sales increased as a result of improved sales volume in all regions ($193 million), higher pricing in response to higher input costs ($112 million) and the inclusion of sales from Hinowa ($15 million). Access segment sales in the first quarter of fiscal 2023 were unfavorably impacted by $10 million from changes in foreign currency exchange rates.

The improved gross margin in the Access segment was primarily due to improved pricing (730 basis points) and favorable product mix (120 basis points).

The increase in operating income in the Access segment was primarily due to improved pricing ($112 million) and the impact of higher gross margin associated with higher sales volume ($45 million), offset in part by higher incentive compensation ($8 million), increased operating expenses ($7 million) and higher material & logistics costs ($3 million).

### Defense

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

|  | First Quarter Fiscal 2023 | 2022 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $513.1 | $535.6 | $(22.5) | -4.2% |
| Cost of sales | 474.8 | 483.1 | (8.3) | -1.7% |
| Gross income | 38.3 | 52.5 | (14.2) | -27.0% |
| % of sales | 7.5% | 9.8% | -230 bps |  |
| SG&A expenses | 35.0 | 31.5 | 3.5 | 11.1% |
| Amortization | 1.6 | 1.6 | — | 0.0% |
| Operating income | 1.7 | 19.4 | (17.7) | -91.2% |
| % of sales | 0.3% | 3.6% |  |  |

#### First Quarter Fiscal 2023 Compared to 2022

Defense segment net sales decreased due to lower Joint Light Tactical Vehicle (JLTV) program volume ($73 million) offset in part by higher Family of Medium Tactical Vehicle sales volume ($37 million).

The decrease in gross margin in the Defense segment was due to unfavorable cumulative catch-up adjustments on contracts (70 basis points), higher inventory reserves (70 basis points) and adverse product mix (60 basis points).

The decrease in operating income in the Defense segment was primarily a result of the unfavorable cumulative catch-up adjustments on contracts ($5 million), higher inventory reserves ($3 million), adverse product mix ($3 million), the impact of lower gross margin associated with lower sales volume ($3 million) and higher operating expenses ($2 million). Changes in estimates on contracts accounted for under the cost-to-cost method resulted in the cumulative catch-up adjustments on contract margins that decreased Defense segment operating income by $13.4 million in the first quarter of fiscal 2023 primarily as a result of higher than anticipated material costs. Changes in estimates on contracts accounted for under the cost-to-cost method decreased Defense segment operating income by $8.2 million in the first quarter of fiscal 2022.

### Vocational

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

|  | First Quarter Fiscal 2023 | 2022 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $562.7 | $529.3 | $33.4 | 6.3% |
| Cost of sales | 469.5 | 439.2 | 30.3 | 6.9% |
| Gross income | 93.2 | 90.1 | 3.1 | 3.4% |
| % of sales | 16.6% | 17.0% | -40 bps |  |
| SG&A expenses | 63.8 | 48.0 | 15.8 | 32.9% |
| Amortization | 1.3 | 1.1 | 0.2 | 18.2% |
| Operating income | 28.1 | 41.0 | (12.9) | -31.5% |
| % of sales | 5.0% | 7.7% |  |  |

#### First Quarter Fiscal 2023 Compared to 2022

Vocational segment net sales increased due to higher pricing in response to higher input costs ($35 million).

The decrease in gross margin in the Vocational segment was primarily attributable to higher material & logistics costs (390 basis points) and higher new product development costs (60 basis points), offset in part by higher pricing (460 basis points).

The decrease in operating income in the Vocational segment was largely a result of the loss on the sale of the rear discharge concrete mixer business of $13.3 million. Higher pricing ($35 million) helped offset higher material & logistics costs ($22 million), higher new product development spending ($4 million) and adverse product mix ($3 million).

### Corporate and Intersegment Eliminations

The following table presents the corporate costs and intersegment eliminations (in millions):

|  | First Quarter Fiscal 2023 | 2022 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $(0.9) | $(2.3) | $1.4 | -60.9% |
| Cost of sales | 1.6 | 0.5 | 1.1 | 220.0% |
| Gross income | (2.5) | (2.8) | 0.3 | -10.7% |
| Operating expenses | 31.5 | 31.5 | — | 0.0% |
| Operating income | (34.0) | (34.3) | 0.3 | -0.9% |

#### First Quarter Fiscal 2023 Compared to 2022

Corporate operating expenses decreased due to the timing of healthcare charges between Corporate and the segments ($3 million) and lower project spend ($3 million), offset in part by higher incentive compensation costs ($4 million).

### Liquidity and Capital Resources

The Company generates significant capital resources from operating activities, which is the expected primary source of funding for the Company. In addition to cash generated from operations, the Company had other sources of liquidity available at March 31, 2023, including $538.7 million of cash and cash equivalents and $1.09 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 with the financial covenant at March 31, 2023 and expects to remain in compliance with the financial covenant contained in the Credit Agreement for the foreseeable future.

The Company continues to actively monitor its liquidity position and working capital needs and prioritizes capital expenditures related to capacity and strategic investments. The Company remains in a stable overall capital resources and liquidity position that the Company believes is adequate to meet its projected needs. During the first quarter of fiscal 2023, the Company repurchased $15.2 million in shares of its Common Stock. As of March 31, 2023, the Company had approximately 11.4 million shares of Common Stock remaining under its repurchase authorization.

### Financial Condition at March 31, 2023

The Company’s capitalization was as follows (in millions):

|  | March 31, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Cash and cash equivalents | $538.7 | $805.9 |
| Total debt | 597.3 | 604.7 |
| Total shareholders’ equity | 3,247.2 | 3,185.7 |
| Total capitalization (debt plus equity) | 3,844.5 | 3,790.4 |
| Debt to total capitalization | 15.5% | 16.0% |

The Company’s ratio of debt to total capitalization of 15.5% at March 31, 2023 remained within its targeted range. The Company’s goal is to maintain an investment-grade credit rating. The rating agencies periodically update the Company’s credit ratings as events or changes in economic conditions occur. At March 31, 2023, the long-term credit ratings assigned to the Company’s senior debt securities by the credit rating agencies engaged by the Company were as follows:

| Rating Agency | Rating |
| --- | --- |
| Fitch Ratings | BBB |
| Moody’s Investor Services, Inc. | Baa3 |
| Standards & Poor’s | BBB |

Consolidated days sales outstanding (defined as “Trade Receivables” at quarter end divided by “Net Sales” for the most recent quarter multiplied by 90 days) increased from 45 days at December 31, 2022 to 49 days at March 31, 2023. Days sales outstanding for segments other than the Defense segment increased from 49 days at December 31, 2022 to 54 days at March 31, 2023 due to the timing of sales within the Access segment. Consolidated inventory turns (defined as “Cost of Sales” on an annualized basis, divided by the average “Inventory” at the past five quarter end periods) was 4.1 times at both December 31, 2022 and March 31, 2023. Consolidated days payable outstanding (defined as “Accounts Payable” at quarter end divided by material costs of sales for the most recent quarter multiplied by 90 days) was 67 days at March 31, 2023, up from 66 days at December 31, 2022.

### Cash Flows

#### Operating Cash Flows

Operating activities generated $79.8 million of cash in the first three months of fiscal 2023 compared to $328.9 million during the first three months of fiscal 2022. Higher net income during the first three months of fiscal 2023 was offset by higher working capital as a result of lower customer advances and a decrease in days payable outstanding. The Company expects to generate approximately $650 million of cash flows from operations in fiscal 2023.

#### Investing Cash Flows

Investing activities used cash of $277.1 million in the first three months of fiscal 2023 compared to $40.1 million during the first three months of fiscal 2022. The Company used available cash to fund the acquisition of Hinowa S.p.A. for $187.9 million during the three months ended March 31, 2023. Through March 31, 2023, the Company utilized $111.5 million for capital expenditures. The Company anticipates that it will spend $350 million on capital expenditures in fiscal 2023. The expected increase in capital spending in fiscal 2023 compared to other recent fiscal years is primarily a result of investments in the NGDV facility in South Carolina as well as manufacturing capacity expansions in the Access and Vocational segments.

#### Financing Cash Flows

Financing activities used cash of $71.1 million in the first three months of fiscal 2023 compared to $337.9 million during the first three months of fiscal 2022. The decrease in cash utilized for financing activities was due to the repayment of the Company’s $225 million term loan in the first quarter of fiscal 2022 and a decrease in Common Stock repurchases under authorizations approved by the Company’s Board of Directors. In the first three months of fiscal 2023, the Company repurchased 173,169 shares of its Common Stock at an aggregate cost of $15.2 million. In the first three months of fiscal 2022, the Company repurchased 751,309 shares of its Common Stock at an aggregate cost of $85.0 million.

### Liquidity

#### Senior Credit Agreement

On March 23, 2022, the Company entered into a Third Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement provides for an unsecured revolving credit facility (the “Revolving Credit Facility”) that matures in March 2027 with an initial maximum aggregate amount of availability of $1.1 billion.

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 March 31, 2023 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 11 to Condensed Consolidated Financial Statements for additional information regarding the Company’s debt as of March 31, 2023.

### Application of Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires the Company to make judgments, assumptions and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. The accounting policies that the Company believes are most critical to the portrayal of its financial condition and results of operations are reported in Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

### Critical Accounting Estimates

The Company’s disclosures of critical accounting estimates in its Annual Report on Form 10-K for the year ended December 31, 2022 have not materially changed since that report was filed.

### New Accounting Standards

There are no significant impacts of new accounting standards on the Company’s Condensed Consolidated Financial Statements.

### Customers and Backlog

Sales to the U.S. government comprised approximately 21% of the Company’s net sales in the first three months of fiscal 2023. 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 at March 31, 2023 increased 16.9% to $14.8 billion compared to $12.7 billion at March 31, 2022. Access segment backlog increased 10.5% to $4.4 billion at March 31, 2023 compared to $4.0 billion at March 31, 2022. Demand for access equipment remains high as customer fleet utilization remains high and fleet ages remain elevated. Defense segment backlog increased 10.5% to $6.8 billion at March 31, 2023 compared to $6.2 billion at March 31, 2022 primarily due to a change in mix on the initial vehicle order from the USPS for the NGDV program. Vocational segment backlog increased 42.2% to $3.6 billion at March 31, 2023 compared to $2.6 billion at March 31, 2022 due to strong demand for fire apparatus coming out of the COVID-19 pandemic. Global supply chain challenges and the associated delays in production are also leading to higher backlogs in the Access and Vocational 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 58% of the Company’s March 31, 2023 backlog is not expected to be filled in fiscal 2023.

### Non-GAAP Financial Measures

The Company is forecasting earnings per share excluding items that affect comparability. When the Company forecasts earnings per share, excluding items, this is considered a non-GAAP financial measure. The Company believes excluding the impact of these items is useful to investors to allow a more accurate comparison of the Company’s operating performance to prior year results. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s results or forecasts prepared in accordance with GAAP. The table below presents a reconciliation of the Company’s presented non-GAAP measure to the most directly comparable GAAP measure:

|  | Fiscal 2023 Expectations |
| --- | ---: |
| Earnings per share-diluted (GAAP) | 5.75 |
| Loss on sale of a business, net of tax | 0.17 |
| Impairment of equity method investment | 0.09 |
| Pension advisor settlement, net of tax | (0.05) |
| Restructuring costs, net of tax | 0.04 |
| Adjusted earnings per share-diluted (non-GAAP) | 6.00 |

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## Market risk

As filed, 308 characters.

The Company’s quantitative and qualitative disclosures about market risk for changes in interest rates and commodity risk, which are incorporated by reference to Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, have not materially changed since that report was filed.

## Controls and procedures

As filed, 1,647 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 March 31, 2023. Based upon their evaluation of these disclosure controls and procedures, the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of March 31, 2023 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.

*Changes in Internal Control over Financial Reporting.* There were no changes in the Company’s internal control over financial reporting that occurred during the three months ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 508 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. In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2022, which have not materially changed.

Filed Apr 27, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-015169. Last ingested by Listed: Oct 29, 2026, 11:20 ET. No prices; not investment advice.