# Oshkosh Corp: Form 10-Q for the period ended Jun 30, 2023

- Company: [Oshkosh Corp](/companies/osk.md) (CIK 775158)
- Form: 10-Q
- Filed: 2023-08-01
- Accepted by EDGAR: Aug 1, 2023, 13:48 ET
- Period: 2023-06-30
- Accession: 0000950170-23-036332
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/775158/000095017023036332/osk-20230630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/775158/000095017023036332/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $2.41bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2023-01-01 to 2023-06-30 | $4.68bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-04-01 to 2023-06-30 | $1.99bn | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2023-01-01 to 2023-06-30 | $3.92bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-04-01 to 2023-06-30 | $424.5m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2023-01-01 to 2023-06-30 | $758.3m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-04-01 to 2023-06-30 | $185.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2023-01-01 to 2023-06-30 | $384.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | $234.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-01-01 to 2023-06-30 | $365.7m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | $56.3m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-01-01 to 2023-06-30 | $90.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | $175.0m | us-gaap:ProfitLoss |
| Net income | 6 months, 2023-01-01 to 2023-06-30 | $263.5m | us-gaap:ProfitLoss |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 65,662,522 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-01-01 to 2023-06-30 | 65,746,390 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2023-01-01 to 2023-06-30 | −$46.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2023-01-01 to 2023-06-30 | $129.8m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2023-01-01 to 2023-06-30 | $53.6m | us-gaap:PaymentsOfDividends |
| Share repurchases | 6 months, 2023-01-01 to 2023-06-30 | $22.6m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-06-30 | $355.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-06-30 | $4.39bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $8.04bn | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $2.42bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2023-06-30 | $597.3m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2023-06-30 | $3.40bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 40,262 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 Company's ability to successfully integrate the AeroTech acquisition and to realize the anticipated benefits associated with the same; 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 solicitation for competition for future contracts to produce military vehicles; the impact 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 other 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 August 1, 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 and delivery vehicles for the USPS.

*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 another quarter of very strong results in the second quarter of fiscal 2023 with significant growth in revenues, operating income and earnings per share compared to the second quarter of fiscal 2022. These results were notably higher than the Company’s previous expectations as a result of improved supply chain conditions and the benefit of actions implemented over the past several quarters to improve production resiliency in a constrained supply chain environment.

Consolidated net sales in the second quarter of fiscal 2023 increased $347.1 million, or 16.8%, to $2.41 billion compared to the second 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 of historical norms, supply chain conditions continued to improve, allowing the Company to increase its output to meet demand.

Consolidated operating income increased 207.9% to $234.9 million, or 9.7% of sales, in the second quarter of fiscal 2023 compared to $76.3 million, or 3.7% of sales, in the second quarter of fiscal 2022. Improved pricing, increased volume and improved mix were the primary contributors to the improvement in consolidated operating income.

Access segment orders exceeded $1.3 billion for the second quarter of fiscal 2023, reflecting strong demand for access equipment. The Company believes this demand is supported by strong non-residential construction metrics, infrastructure spending, mega projects and solid municipal budgets. Access equipment demand coupled with strong fire truck demand led to backlog of $15.0 billion at June 30, 2023, of which approximately 30% is expected to be delivered in fiscal 2023.

On August 1, 2023, the Company completed its acquisition of the AeroTech business (AeroTech) from JBT Corporation. AeroTech is a leading provider of aviation ground support products, gate equipment and airport services. AeroTech products serve approximately 75% of air travelers at U.S. airports and load approximately 70% of the world’s overnight express packages. AeroTech also operates a strong aftermarket parts and service business with recurring revenues comprising approximately 40% of total revenues on an annual basis. The Company believes AeroTech is poised to benefit from numerous secular tailwinds for air transportation, which is in the early stages of an investment cycle. Global passenger traffic is expected to grow in the high single digits over the next several years and infrastructure spending is expected to accelerate with legislation and aging infrastructure. AeroTech had sales of $576 million in fiscal 2022.

Over the past few quarters, the Company has reiterated that demand has been strong, but the Company’s financial results were limited by supply chain conditions. While the Company’s prior guidance assumed modest improvements during fiscal 2023, the Company noted that if supply chain conditions and production throughput improved at a faster pace, the Company could deliver meaningfully higher financial performance. This occurred in the second quarter of fiscal 2023 and the Company expects this to continue into the second half of fiscal 2023, yielding a substantially better outlook than its prior expectations. As a result, the Company increased its fiscal 2023 earnings per share estimate from a range of $5.75 to a range of $7.65 on estimated operating income of $725 million and estimated consolidated sales of $9.5 billion. The revised earnings per share estimate includes a combined $0.35 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, acquisition costs and a 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 $8.00.

The Company expects Access segment sales and operating margin in fiscal 2023 to be in the range of $4.9 billion and 14.0% compared to the Company’s previous expectation of $4.4 billion and 11.5%, respectively, largely as a result of improved production throughput.

The Company continues to expect Defense segment sales in fiscal 2023 to be in the range of $2.1 billion. The Company now expects Defense segment operating margin to be approximately 3.0%, modestly lower than the Company’s previous expectation of approximately 3.25% due to the impacts of higher steel and other component inflation. The Company expects FMTV and JLTV orders to drive improved results in the second half of fiscal 2023 as compared to the first half of fiscal 2023.

The Company expects Vocational segment fiscal 2023 sales to be approximately $2.5 billion, compared to the Company’s previous expectation of $2.2 billion due to the inclusion of an expected $300 million of sales of AeroTech following its acquisition. The Company expects Vocational segment fiscal 2023 operating income margin in the range of 6.3%, down from the previous expectation of 7.3%. The reduction in estimated operating income margin is a result of the expected initial purchase accounting related to the AeroTech acquisition.

The Company continues to expect corporate expenses for fiscal 2023 to be $180 million.

The Company expects earnings per share in the third quarter of fiscal 2023 to be approximately $2.07 per share reflecting similar supply chain dynamics to those it experienced during the second quarter of fiscal 2023, increased interest expense on the Company’s revolving line of credit facility associated with funding for the AeroTech acquisition, lower interest income as a result of lower cash balances, and lower miscellaneous income. Expected earnings in the third quarter of Fiscal 2023 include approximately $0.08 of acquisition costs related to the AeroTech acquisition.

### RESULTS OF OPERATIONS

### CONSOLIDATED RESULTS

The following table presents consolidated results (in millions):

|  | Second Quarter Fiscal 2023 | 2022 | Change | % Change | First Six Months Fiscal 2023 | 2022 | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $2,413.1 | $2,066.0 | $347.1 | 16.8% | $4,681.2 | $4,011.7 | $669.5 | 16.7% |
| Cost of sales | 1,988.6 | 1,819.0 | 169.6 | 9.3% | 3,922.9 | 3,560.9 | 362.0 | 10.2% |
| Gross income | 424.5 | 247.0 | 177.5 | 71.9% | 758.3 | 450.8 | 307.5 | 68.2% |
| % of sales | 17.6% | 12.0% | 560 bps |  | 16.2% | 11.2% | 500 bps |  |
| SG&A expenses | 185.4 | 167.9 | 17.5 | 10.4% | 384.5 | 337.1 | 47.4 | 14.1% |
| Amortization | 4.2 | 2.8 | 1.4 | 50.0% | 8.1 | 5.6 | 2.5 | 44.6% |
| Operating income | 234.9 | 76.3 | 158.6 | 207.9% | 365.7 | 108.1 | 257.6 | 238.3% |
| % of sales | 9.7% | 3.7% |  |  | 7.8% | 2.7% |  |  |

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

|  | Second Quarter Fiscal 2023 | 2022 | Change | % Change | First Six Months Fiscal 2023 | 2022 | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | $2,055.8 | $1,896.0 | $159.8 | 8.4% | $3,984.5 | $3,665.6 | $318.9 | 8.7% |
| Europe, Africa and Middle East | 231.3 | 91.1 | 140.2 | 153.9% | 455.0 | 184.0 | 271.0 | 147.3% |
| Rest of the World | 126.0 | 78.9 | 47.1 | 59.7% | 241.7 | 162.1 | 79.6 | 49.1% |
|  | $2,413.1 | $2,066.0 | $347.1 | 16.8% | $4,681.2 | $4,011.7 | $669.5 | 16.7% |

31

#### Second Quarter Fiscal 2023 Compared to 2022

Consolidated net sales increased as a result of higher sales volume ($224 million), primarily in the Access segment, and higher pricing in response to higher input costs ($110 million).

The improvement in consolidated gross margin was due to improved pricing (360 basis points) and favorable product mix (150 basis points).

The increase in consolidated selling, general and administrative expenses was due to higher incentive compensation expense ($14 million) as a result of improved performance and higher stock-based compensation expense ($3 million).

The increase in consolidated operating income was primarily due to improved pricing ($110 million), the impact of higher gross margin associated with higher sales volume ($47 million) and improved sales mix ($41 million), offset in part by higher incentive compensation costs ($26 million).

#### First Six Months Fiscal 2023 Compared to 2022

Consolidated net sales increased as a result of higher Access segment sales volume ($455 million) and higher pricing in response to higher input costs ($258 million).

The improvement in consolidated gross margin was due to improved pricing (440 basis points) and improved product mix (130 basis points), offset by higher material & logistics costs (80 basis points).

The increase in consolidated selling, general and administrative expenses was due to higher incentive compensation expense ($25 million) as a result of improved performance, a loss on the sale of the rear discharge mixer business ($13 million), restructuring costs ($4 million) and higher stock-based compensation expense ($3 million).

The increase in consolidated operating income was primarily due to improved pricing ($258 million), the impact of higher gross margin associated with higher sales volume ($85 million) and improved sales mix ($60 million), offset in part by higher material & logistics costs ($44 million), higher incentive compensation costs ($42 million), the loss on the sale of the rear discharge mixer business ($13 million) and higher operating expenses ($10 million).

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

|  | Second Quarter Fiscal 2023 | 2022 | Change | First Six Months Fiscal 2023 | 2022 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest expense, net of interest income | $(8.1) | $(11.9) | $3.8 | $(15.3) | $(23.5) | $8.2 |
| Miscellaneous income (expense) | 4.8 | (15.1) | 19.9 | 10.6 | (14.0) | 24.6 |
| Provision for income taxes | 56.3 | 15.4 | 40.9 | 90.5 | 36.2 | 54.3 |
| Effective tax rate | 24.3% | 31.2% |  | 25.1% | 51.3% |  |
| Losses of unconsolidated affiliates | $(0.3) | $(1.8) | $1.5 | $(7.0) | $(2.5) | $(4.5) |

#### Second 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. Results for the second quarter of fiscal 2022 included an unrealized loss of $11.2 million on an investment.

Losses of unconsolidated affiliates primarily represented changes in the Company’s equity method investments.

#### First Six Months 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 six months of fiscal 2023 included a $4.7 million gain on a mediation settlement with the Company’s pension advisor. Miscellaneous expense in the first six months of fiscal 2022 include an unrealized loss of $8.6 million on an investment.

The provision for income taxes for the first six months 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 first quarter of fiscal 2022.

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 an 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):

|  | Second Quarter Fiscal 2023 | 2022 | Change | % Change | First Six Months Fiscal 2023 | 2022 | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $1,328.3 | $977.1 | $351.2 | 35.9% | $2,521.5 | $1,860.2 | $661.3 | 35.5% |
| Cost of sales | 1,049.0 | 848.9 | 200.1 | 23.6% | 2,037.4 | 1,668.0 | 369.4 | 22.1% |
| Gross income | 279.3 | 128.2 | 151.1 | 117.9% | 484.1 | 192.2 | 291.9 | 151.9% |
| % of sales | 21.0% | 13.1% | 790 bps |  | 19.2% | 10.3% | 890 bps |  |
| SG&A expenses | 65.3 | 55.4 | 9.9 | 17.9% | 134.1 | 113.6 | 20.5 | 18.0% |
| Amortization | 2.3 | 0.1 | 2.2 | 2200.0% | 3.3 | 0.2 | 3.1 | 1550.0% |
| Operating income | 211.7 | 72.7 | 139.0 | 191.2% | 346.7 | 78.4 | 268.3 | 342.2% |
| % of sales | 15.9% | 7.4% |  |  | 13.7% | 4.2% |  |  |

#### Second Quarter Fiscal 2023 Compared to 2022

Access segment net sales increased as a result of improved sales volume in all regions ($262 million), higher pricing in response to higher input costs ($68 million) and the inclusion of sales from the Hinowa acquisition ($23 million).

The improved gross margin in the Access segment was primarily due to higher pricing (380 basis points), improved logistics costs (210 basis points) and favorable product mix (140 basis points).

The increase in operating income in the Access segment was primarily due to the impact of higher gross margin associated with higher sales volume ($72 million), improved pricing ($68 million) and favorable product mix ($18 million), offset in part by higher incentive compensation expense ($12 million).

#### First Six Months Fiscal 2023 Compared to 2022

Access segment net sales increased as a result of improved sales volume in all regions ($455 million), higher pricing in response to higher input costs ($180 million) and the inclusion of sales from the Hinowa acquisition ($38 million). Access segment sales in the first six months of fiscal 2023 were unfavorably impacted by $11 million from changes in foreign currency exchange rates compared to the first six months of fiscal 2022.

The improved gross margin in the Access segment was primarily due to higher pricing (540 basis points), improved material & logistics costs (200 basis points) and favorable product mix (130 basis points).

The increase in operating income in the Access segment was primarily due to improved pricing ($180 million), the impact of higher gross margin associated with higher sales volume ($116 million) and favorable product mix ($33 million), offset in part by higher incentive compensation ($20 million), higher manufacturing costs ($18 million) and increased operating expenses ($10 million).

### Defense

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

|  | Second Quarter Fiscal 2023 | 2022 | Change | % Change | First Six Months Fiscal 2023 | 2022 | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $498.1 | $539.3 | $(41.2) | -7.6% | $1,011.2 | $1,074.9 | $(63.7) | -5.9% |
| Cost of sales | 454.9 | 500.2 | (45.3) | -9.1% | 929.7 | 983.3 | (53.6) | -5.5% |
| Gross income | 43.2 | 39.1 | 4.1 | 10.5% | 81.5 | 91.6 | (10.1) | -11.0% |
| % of sales | 8.7% | 7.3% | 140 bps |  | 8.1% | 8.5% | -40 bps |  |
| SG&A expenses | 35.7 | 33.8 | 1.9 | 5.6% | 70.7 | 65.3 | 5.4 | 8.3% |
| Amortization | 1.2 | 1.5 | (0.3) | -20.0% | 2.8 | 3.1 | (0.3) | -9.7% |
| Operating income | 6.3 | 3.8 | 2.5 | 65.8% | 8.0 | 23.2 | (15.2) | -65.5% |
| % of sales | 1.3% | 0.7% |  |  | 0.8% | 2.2% |  |  |

#### Second Quarter Fiscal 2023 Compared to 2022

Defense segment net sales decreased due to lower Joint Light Tactical Vehicle (JLTV) program volume ($117 million) offset in part by higher Family of Medium Tactical Vehicle sales volume ($44 million). In June 2023, the Company learned that its protest of the award of the JLTV follow on contract to another company was denied by the Government Accountability Office. The Company expects to continue to build JLTVs through the end of fiscal 2024 under the current contract. The JLTV program accounted for $238.8 million of sales in the second quarter of fiscal 2023.

The increase in gross margin in the Defense segment was due to lower unfavorable cumulative catch-up adjustments on contracts (170 basis points).

The increase in operating income in the Defense segment was primarily a result of the lower unfavorable cumulative catch-up adjustments on contracts ($12 million), offset in part by the impact of lower gross margin associated with lower sales volume ($6 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 $11.3 million in the second 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 $23.0 million in the second quarter of fiscal 2022.

#### First Six Months Fiscal 2023 Compared to 2022

Defense segment net sales decreased due to lower JLTV program volume ($198 million) offset in part by higher Family of Medium Tactical Vehicle sales volume ($73 million). The JLTV program accounted for $505.0 million of sales in the first six months of fiscal 2023.

The decrease in gross margin in the Defense segment was due to higher inventory reserves (50 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 ($9 million), higher inventory reserves ($5 million) and higher operating expenses ($5 million).

### Vocational

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

|  | Second Quarter Fiscal 2023 | 2022 | Change | % Change | First Six Months Fiscal 2023 | 2022 | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $587.5 | $551.8 | $35.7 | 6.5% | $1,150.2 | $1,081.1 | $69.1 | 6.4% |
| Cost of sales | 482.9 | 468.6 | 14.3 | 3.1% | 952.4 | 907.8 | 44.6 | 4.9% |
| Gross income | 104.6 | 83.2 | 21.4 | 25.7% | 197.8 | 173.3 | 24.5 | 14.1% |
| % of sales | 17.8% | 15.1% | 270 bps |  | 17.2% | 16.0% | 120 bps |  |
| SG&A expenses | 43.4 | 42.2 | 1.2 | 2.8% | 107.2 | 90.2 | 17.0 | 18.8% |
| Amortization | 0.7 | 1.2 | (0.5) | -41.7% | 2.0 | 2.3 | (0.3) | -13.0% |
| Operating income | 60.5 | 39.8 | 20.7 | 52.0% | 88.6 | 80.8 | 7.8 | 9.7% |
| % of sales | 10.3% | 7.2% |  |  | 7.7% | 7.5% |  |  |

#### Second Quarter Fiscal 2023 Compared to 2022

Vocational segment net sales increased due to higher pricing in response to higher input costs ($41 million) and improved sales volume ($21 million), offset in part by the impact of the sale of the rear discharge mixer business ($33 million).

The increase in gross margin in the Vocational segment was primarily attributable to higher pricing (540 basis points) and improved product mix (80 basis points), offset in part by higher material & logistics costs (370 basis points).

The increase in operating income in the Vocational segment was largely a result of higher pricing ($41 million) and improved product mix ($9 million), offset in part by higher material & logistics costs ($22 million) and higher incentive compensation ($5 million).

#### First Six Months Fiscal 2023 Compared to 2022

Vocational segment net sales increased due to higher pricing in response to higher input costs ($78 million).

The increase in gross margin in the Vocational segment was primarily attributable to higher pricing (510 basis points) and improved product mix (80 basis points), offset in part by higher material & logistics costs (480 basis points).

The increase in operating income in the Vocational segment was largely a result of higher pricing ($78 million), offset in part by higher material & logistics costs ($55 million) and the loss on the sale of the rear discharge concrete mixer business of $13.3 million.

### Corporate and Intersegment Eliminations

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

|  | Second Quarter Fiscal 2023 | 2022 | Change | % Change | First Six Months Fiscal 2023 | 2022 | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $(0.8) | $(2.2) | $1.4 | -63.6% | $(1.7) | $(4.5) | $2.8 | -62.2% |
| Cost of sales | 1.8 | 1.3 | 0.5 | 38.5% | 3.4 | 1.8 | 1.6 | 88.9% |
| Gross income | (2.6) | (3.5) | 0.9 | -25.7% | (5.1) | (6.3) | 1.2 | -19.0% |
| Operating expenses | 41.0 | 36.5 | 4.5 | 12.3% | 72.5 | 68.0 | 4.5 | 6.6% |
| Operating income | (43.6) | (40.0) | (3.6) | 9.0% | (77.6) | (74.3) | (3.3) | 4.4% |

#### Second Quarter Fiscal 2023 Compared to 2022

Corporate operating expenses increased due to higher incentive compensation costs ($8 million) offset in part by lower project spending ($4 million).

#### First Six Months Fiscal 2023 Compared to 2022

Corporate operating expenses increased due to higher incentive compensation costs ($12 million) offset in part by the lower project spending ($7 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 June 30, 2023, including $355.5 million of cash and cash equivalents and $1.09 billion of unused available capacity under the Revolving Credit Facility (as defined in “Liquidity”). The Company used available cash and approximately $575 million of borrowings under the Revolving Credit Facility to fund its acquisition of AeroTech on August 1, 2023. 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 June 30, 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 six months of fiscal 2023, the Company repurchased $22.6 million in shares of its Common Stock. As of June 30, 2023, the Company had approximately 11.3 million shares of Common Stock remaining under its repurchase authorization.

### Financial Condition at June 30, 2023

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

|  | June 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Cash and cash equivalents | $355.5 | $805.9 |
| Total debt | 597.3 | 604.7 |
| Total shareholders’ equity | 3,396.8 | 3,185.7 |
| Total capitalization (debt plus equity) | 3,994.1 | 3,790.4 |
| Debt to total capitalization | 15.0% | 16.0% |

The Company’s ratio of debt to total capitalization of 15.0% at June 30, 2023 remained within its targeted range. Subsequent to the acquisition of AeroTech, it is expected the debt to total capitalization ratio will increase to approximately 25% for a short period of time.

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 June 30, 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 |

The Company does not anticipate that the acquisition of AeroTech will have a negative impact on the Company's long-term credit ratings.

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 48 days at June 30, 2023. Days sales outstanding for segments other than the Defense segment increased from 49 days at December 31, 2022 to 53 days at June 30, 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 June 30, 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 63 days at June 30, 2023, down from 66 days at December 31, 2022 due to invoice processing timing.

### Cash Flows

#### Operating Cash Flows

Operating activities used $46.6 million of cash in the first six months of fiscal 2023 compared to $22.9 million during the first six months of fiscal 2022. Higher net income during the first six 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 $550 million of cash flows from operations in fiscal 2023 as compared to its previous estimate of $650 million of cash flows from operations. The reduction in estimated cash flows from operations is a result of a combination of higher anticipated accounts receivables related to the higher sales levels and higher NGDV start-up investments.

#### Investing Cash Flows

Investing activities used cash of $295.4 million in the first six months of fiscal 2023 compared to $139.2 million during the first six months of fiscal 2022. The Company used available cash to fund the acquisition of Hinowa S.p.A. for $187.9 million during the first quarter of fiscal 2023. Through June 30, 2023, the Company utilized $129.8 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 $109.1 million in the first six months of fiscal 2023 compared to $425.4 million during the first six 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 second quarter of fiscal 2022 and a decrease in Common Stock repurchases under authorizations approved by the Company’s Board of Directors. In the first six months of fiscal 2023, the Company repurchased 265,795 shares of its Common Stock at an aggregate cost of $22.6 million. In the first six months of fiscal 2022, the Company repurchased 1,508,467 shares of its Common Stock at an aggregate cost of $155.0 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 June 30, 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 June 30, 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 19% of the Company’s net sales in the first six 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 June 30, 2023 increased 14.9% to $15.0 billion compared to $13.0 billion at June 30, 2022. Access segment backlog increased 9.9% to $4.4 billion at June 30, 2023 compared to $4.0 billion at June 30, 2022. Demand for access equipment has remained high due to demand from customers to support mega projects, infrastructure spending, non-residential construction and aged fleets. Defense segment backlog increased 7.7% to $6.7 billion at June 30, 2023 compared to $6.3 billion at June 30, 2022 primarily due to a change in mix to a higher percentage of battery electric vehicles on the initial vehicle order from the USPS for the NGDV program. Vocational segment backlog increased 38.0% to $3.9 billion at June 30, 2023 compared to $2.8 billion at June 30, 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 have also led 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 70% of the Company’s June 30, 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) | 7.65 |
| Loss on sale of a business, net of tax | 0.17 |
| Acquisition costs, net of tax | 0.09 |
| Impairment of equity method investment | 0.09 |
| Pension advisor settlement, net of tax | (0.05) |
| Restructuring costs, net of tax | 0.05 |
| Adjusted earnings per share-diluted (non-GAAP) | 8.00 |

## 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, 1,644 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 June 30, 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 June 30, 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 June 30, 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 Aug 1, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-036332. Last ingested by Listed: Oct 29, 2026, 11:20 ET. No prices; not investment advice.