# Oshkosh Corp: Form 10-Q for the period ended Jun 30, 2024

- Company: [Oshkosh Corp](/companies/osk.md) (CIK 775158)
- Form: 10-Q
- Filed: 2024-07-31
- Accepted by EDGAR: Jul 31, 2024, 15:06 ET
- Period: 2024-06-30
- Accession: 0000950170-24-088482
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/775158/000095017024088482/osk-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/775158/000095017024088482/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $2.85bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $5.39bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-04-01 to 2024-06-30 | $2.30bn | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2024-01-01 to 2024-06-30 | $4.37bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-04-01 to 2024-06-30 | $546.1m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2024-01-01 to 2024-06-30 | $1.02bn | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-04-01 to 2024-06-30 | $220.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2024-01-01 to 2024-06-30 | $416.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | $260.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | $520.6m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $53.5m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $108.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | $168.6m | us-gaap:ProfitLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | $348.0m | us-gaap:ProfitLoss |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 65,889,777 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 66,008,715 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | −$566.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $139.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2024-01-01 to 2024-06-30 | $60.2m | us-gaap:PaymentsOfDividends |
| Share repurchases | 6 months, 2024-01-01 to 2024-06-30 | $54.6m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-06-30 | $141.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $5.04bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $9.72bn | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $3.49bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2024-06-30 | $599.1m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-06-30 | $1.04bn | us-gaap:DebtCurrent |
| Shareholders' equity | at 2024-06-30 | $3.92bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 44,089 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, 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, are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “project” or “plan” or the negative thereof or variations thereon or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond the Company’s control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include the cyclical nature of the Company’s access equipment, fire apparatus, refuse collection and air transportation equipment 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 impact of orders and costs on the U.S. Postal Service contract; the impact of severe weather, war, natural disasters or pandemics that may affect the Company, its suppliers or its customers; the Company’s ability to increase prices 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 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; budget uncertainty for the U.S. federal government, including risks of future budget cuts, the impact of continuing resolution funding mechanisms and the potential for shutdowns; the impact of any U.S. Department of Defense solicitation for competition for future contracts to produce military vehicles; risks related to the collectability of receivables, particularly for those businesses with exposure to construction markets; the cost of any warranty campaigns related to the Company’s products; risks associated with international operations and sales, including compliance with the Foreign Corrupt Practices Act; 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 SEC filings, including, but not limited to, the Company’s Current Report on Form 8-K filed with the SEC on July 31, 2024 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. Access customers include equipment rental companies, construction contractors, manufacturing companies and home improvement centers, as well as carriers and wreckers sold to 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 United States Postal Service (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; aviation ground support products, gate equipment and airport services provided to commercial airlines, airports, air-freight carriers, ground handling customers and the military; 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 strong quarter, with solid revenue growth and an increase in operating income despite $51.6 million of impairment charges in the Defense segment. Diluted earnings per share was $2.56, including an after-tax charge of $0.60 related to the impairment of intangible assets. This compares to diluted earnings per share of $2.67 in the second quarter of 2023.

Consolidated net sales in the second quarter of 2024 increased $433.8 million, or 18.0%, to $2.85 billion compared to the second quarter of 2023 primarily due to improved organic sales volume in all three segments, sales related to the AeroTech acquisition of $192.0 million and improved pricing.

Consolidated operating income increased 11.1% to $260.9 million, or 9.2% of sales, in the second quarter of 2024 compared to $234.9 million, or 9.7% of sales, in the second quarter of 2023. The increase in operating income was primarily due to improved price/cost dynamics and the impact of higher gross margin associated with the higher organic sales volume, offset in part by the intangible asset impairments in the Defense segment, higher new product development spending and higher operating costs to support the higher sales levels.

Unfavorable market conditions for mobility and motorsports led to reductions in anticipated cash flows for the Pratt Miller reporting unit in the Defense segment. As a result, the Company recorded Intangible asset impairments in the second quarter of 2024 of $51.6 million. With lower than previously anticipated third-party work, in July 2024 the Company moved reporting responsibility of Pratt Miller from the Defense segment to the Company's Chief Technology and Strategic Sourcing Officer to better utilize Pratt Miller's expertise and capabilities to benefit all Oshkosh businesses. With this change, Pratt Miller results will be combined and reported with Corporate beginning in the third quarter of 2024. The Company's guidance included herein reflects this change.

As expected, orders in the Access segment continued to normalize, leading to lower orders in the second quarter of 2024 compared to the second quarter of 2023. As the Access segment is largely booked for new machine sales for 2024, the Company continues to expect that the majority of 2025 orders will not be booked until the fourth quarter of 2024 and into 2025.

In April 2024, the Company reached a significant milestone in its partnership with the USPS as the Company began shipping its Next Generation Delivery Vehicle (NGDV). The Company expects to increase NGDV production throughout 2024 and 2025 and be at full rate production by the start of 2026. The Company expects the NGDV program will be a meaningful contributor to profitable growth for the remainder of the decade.

The Company is in the process of transitioning its refuse collection vehicle business from factory direct sales and service to a dealer network. The Company believes that a dealer network will provide broader and more comprehensive parts and service coverage for the wide array of customers across North America. There are several strong dealerships already operating under this model and the Company expects to have complete dealer coverage across North America by the end of the year.

The Company lowered its 2024 earnings per share estimate to be in the range of $10.45 compared to its previous estimate of approximately $10.55 as a result of the impairment charges recorded in the second quarter. The revised earnings per share estimate is based on the Company's expectations that it will generate operating income of $1.025 billion on consolidated sales of $10.7 billion. The revised earnings per share estimate includes after-tax charges of $0.60 per share related to the intangible asset impairments and $0.70 per share related to amortization of purchased intangibles. Excluding these items, the Company increased its 2024 adjusted earnings per share estimate by $0.50 to be in the range of $11.75.

The Company expects Access segment sales and operating margin in 2024 to be in the range of $5.3 billion and 16.25%, respectively, compared to the Company’s previous expectations of $5.4 billion and 15.25%, respectively. The reduced revenue expectation is a result of lower expected sales outside of North America while the expected improved margins are the result of expected favorable sales mix. Compared to the first six months of 2024, the Company expects customer mix to moderate and new product development spending to increase for the second half of 2024.

The Company expects Defense segment sales and operating margin in 2024 to be in the range of $2.1 billion and 2.25%, respectively. The Company's expectation of $2.1 billion in sales for the Defense segment represents an increase of $100 million as a result of expected improved volume compared to its previous expectation, offset by the removal of the Pratt Miller business from the segment. Defense continues to work through extensions of its existing contracts to reflect the inflation that it has experienced the past several years. To that end, the Company is nearing completion of a 5-year contract extension for the Family of Heavy Tactical Vehicles (FHTV) program and expects to complete a Family of Medium Tactical Vehicles (FMTV) contract extension in the first half of 2025. These contract extensions are expected to have significantly higher pricing to reflect current material costs and more robust economic price adjustment clauses to protect the Company if it experiences rapid inflation in the future.

The Company continues to expect Vocational segment sales to be in the range of $3.2 billion in 2024. Expected operating margin in 2024 has increased to 11.25% compared to the previous expectation of 10% largely as a result of expected favorable price/cost dynamics and manufacturing efficiencies. Backlog for Pierce fire trucks continues to grow. Increasing capacity to meet this demand represents a significant opportunity to drive long-term growth in the Vocational segment. In the near term, the Company is focused on achieving incremental gains in throughput in its existing facilities. In the longer term, the Company expects to make additional investments to increase production capacity.

Corporate and other, including Pratt Miller, is expected to have an operating loss of approximately $250 million in 2024, including the Pratt Miller intangible asset impairment charges recognized in the second quarter.

The Company expects earnings per share in the third quarter of 2024 will be in the range of $2.85, reflecting continued strong demand and similar supply chain dynamics to those the Company experienced during the first six months of 2024. Estimated earnings per share for the third quarter of 2024 includes an expected $0.15 per share charge related to amortization of purchased intangibles. The Company expects an increase in net sales of approximately 10% compared to the third quarter of 2023, largely due to the acquisition of AeroTech, which occurred in August 2023.

### RESULTS OF OPERATIONS

### CONSOLIDATED RESULTS

The following table presents consolidated results (in millions):

|  | Second Quarter 2024 | 2023 | Change | % Change | First Six Months 2024 | 2023 | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $2,846.9 | $2,413.1 | $433.8 | 18.0% | $5,390.7 | $4,681.2 | $709.5 | 15.2% |
| Cost of sales | 2,300.8 | 1,988.6 | 312.2 | 15.7% | 4,374.6 | 3,922.9 | 451.7 | 11.5% |
| Gross income | 546.1 | 424.5 | 121.6 | 28.6% | 1,016.1 | 758.3 | 257.8 | 34.0% |
| % of sales | 19.2% | 17.6% | 160 bps |  | 18.8% | 16.2% | 260 bps |  |
| Selling, general and administrative | 220.0 | 185.4 | 34.6 | 18.7% | 416.8 | 384.5 | 32.3 | 8.4% |
| Amortization of purchased intangibles | 13.6 | 4.2 | 9.4 | 223.8% | 27.1 | 8.1 | 19.0 | 234.6% |
| Intangible asset impairments | 51.6 | — | 51.6 | - | 51.6 | — | 51.6 | - |
| Operating income | $260.9 | $234.9 | $26.0 | 11.1% | $520.6 | $365.7 | $154.9 | 42.4% |
| % of sales | 9.2% | 9.7% | -50 bps |  | 9.7% | 7.8% | 190 bps |  |

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

|  | Second Quarter 2024 | 2023 | Change | % Change | First Six Months 2024 | 2023 | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | $2,522.0 | $2,055.8 | $466.2 | 22.7% | $4,765.9 | $3,984.5 | $781.4 | 19.6% |
| Europe, Africa and Middle East | 214.0 | 231.3 | (17.3) | -7.5% | 406.0 | 455.0 | (49.0) | -10.8% |
| Rest of the World | 110.9 | 126.0 | (15.1) | -12.0% | 218.8 | 241.7 | (22.9) | -9.5% |
| Consolidated | $2,846.9 | $2,413.1 | $433.8 | 18.0% | $5,390.7 | $4,681.2 | $709.5 | 15.2% |

#### Second Quarter 2024 Compared to 2023

Consolidated net sales increased primarily due to improved organic sales volume in all three segments ($202 million), the inclusion of sales related to the AeroTech acquisition ($192 million) and improved pricing ($44 million).

The improvement in consolidated gross margin was primarily due to improved pricing (120 basis points) and lower material costs (30 basis points).

Consolidated selling, general and administrative expenses increased due to the addition of AeroTech ($23 million) as well as higher salaries ($7 million).

Amortization of purchased intangible assets increased primarily due to the acquisition of AeroTech ($9 million).

Intangible asset impairments in the second quarter of 2024 related to the impairment of intangible assets at Pratt Miller within the Defense segment as market conditions for mobility and motorsports led to a downward revision of anticipated cash flows.

The increase in consolidated operating income was primarily due to the impact of higher gross margin associated with higher organic sales volume ($49 million), improved pricing ($44 million) and lower material costs ($8 million), offset in part by the intangible asset impairments ($52 million), higher new product development investments ($13 million) and higher operating costs to support higher sales volumes ($11 million).

#### First Six Months 2024 Compared to 2023

Consolidated net sales increased primarily due to the inclusion of sales related to the AeroTech acquisition ($368 million), higher organic sales volume in all three segments ($269 million) and higher pricing ($83 million), offset in part by the impact of the sale of the rear-discharge concrete mixer business ($10 million).

The improvement in consolidated gross margin was primarily due to improved pricing (120 basis points), improved sales mix (70 basis points) and lower material costs (60 basis points).

Consolidated selling, general and administrative expenses increased due to the addition of AeroTech ($42 million) as well as higher salaries ($7 million), offset in part by the absence of a loss on the sale of the rear-discharge concrete mixer business ($13 million) and lower incentive compensation accruals ($4 million).

Amortization of purchased intangible assets increased primarily due to the acquisition of AeroTech ($19 million).

Intangible asset impairments in the first six months of 2024 relate to the impairment charges at Pratt Miller.

The increase in consolidated operating income was primarily due to improved pricing ($83 million), the impact of higher gross margin associated with higher organic sales volume ($64 million), favorable sales mix ($56 million) and improved material costs ($30 million), offset in part by the intangible asset impairments ($52 million) and higher new product development spending ($18 million).

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

|  | Second Quarter 2024 | 2023 | Change | % Change | First Six Months 2024 | 2023 | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest expense, net of interest income | $(30.3) | $(8.1) | $(22.2) | 274.1% | $(51.1) | $(15.3) | $(35.8) | 234.0% |
| Miscellaneous, net | (1.5) | 4.8 | (6.3) | -131.3% | (3.5) | 10.6 | (14.1) | -133.0% |
| Provision for income taxes | 53.5 | 56.3 | (2.8) | -5.0% | 108.2 | 90.5 | 17.7 | 19.6% |
| Effective tax rate | 23.4% | 24.3% |  |  | 23.2% | 25.1% |  |  |
| Losses of unconsolidated affiliates | $(7.0) | $(0.3) | $(6.7) | 2233.3% | $(9.8) | $(7.0) | $(2.8) | 40.0% |

#### Second Quarter 2024 Compared to 2023

Interest expense, net of interest income increased due to increased borrowings on the Revolving Credit Facility (as defined in "Liquidity") and lower cash holdings following the acquisition of AeroTech in the third quarter of 2023.

Miscellaneous, net 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 2024 included foreign currency transactions losses of $1 million, whereas the results for the second quarter of 2023 included foreign currency transactions gains of $3 million.

The effective tax rate in the second quarter of 2024 included discrete tax benefits of $2.0 million, including a $1.9 million benefit on the purchase of discounted federal tax credits. The effective tax rate in the second quarter of 2023 included discrete tax charges of $1.2 million, including a $2.5 million charge related to a valuation allowance recorded with respect to unrealizable foreign tax credits.

Losses of unconsolidated affiliates in the second quarter of 2024 included an impairment of an equity method investment of $6.7 million.

#### First Six Months 2024 Compared to 2023

Interest expense, net of interest income increased due to increased borrowings on the Revolving Credit Facility and lower cash holdings following the acquisition of AeroTech in the third quarter of 2023.

Miscellaneous, net 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 first six months of 2024 included foreign currency transactions losses of $4 million. Results for the first six months of 2023 included foreign currency transactions gains of $3 million and a gain on a settlement with the Company's pension advisor of $5 million.

The effective tax rate in the first six months of 2024 included discrete tax benefits of $4.2 million, including a $3.1 million benefit on the purchase of discounted federal tax credits. The effective tax rate in the first six months of 2023 included discrete tax charges of $4.2 million, including a $2.5 million charge related to a valuation allowance recorded with respect to unrealizable foreign tax credits.

Losses of unconsolidated affiliates included an impairment of an equity method investment of $6.7 million in the first six months of 2024 compared to a write-down of an investment in an equity interest in an entity in Mexico of $5.9 million in the first six months of 2023.

### SEGMENT RESULTS

### Access

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

|  | Second Quarter 2024 | 2023 | Change | % Change | First Six Months 2024 | 2023 | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $1,406.9 | $1,328.3 | $78.6 | 5.9% | $2,644.4 | $2,521.5 | $122.9 | 4.9% |
| Cost of sales | 1,080.9 | 1,049.0 | 31.9 | 3.0% | 2,039.8 | 2,037.4 | 2.4 | 0.1% |
| Gross income | 326.0 | 279.3 | 46.7 | 16.7% | 604.6 | 484.1 | 120.5 | 24.9% |
| % of sales | 23.2% | 21.0% | 220 bps |  | 22.9% | 19.2% | 370 bps |  |
| Selling, general and administrative | 77.2 | 65.3 | 11.9 | 18.2% | 145.4 | 134.1 | 11.3 | 8.4% |
| Amortization of purchased intangibles | 2.3 | 2.3 | — | 0.0% | 4.6 | 3.3 | 1.3 | 39.4% |
| Operating income | $246.5 | $211.7 | $34.8 | 16.4% | $454.6 | $346.7 | $107.9 | 31.1% |
| % of sales | 17.5% | 15.9% | 160 bps |  | 17.2% | 13.7% | 350 bps |  |

#### Second Quarter 2024 Compared to 2023

Access segment net sales increased primarily as a result of improved sales volume in North America.

The improved gross margin in the Access segment was primarily due to lower material costs (90 basis points), favorable absorption (70 basis points) and improved sales mix (50 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 ($20 million), improved material costs ($11 million), improved sales mix ($8 million) and improved pricing ($7 million), offset in part by higher selling, general and administrative expenses to support higher sales volume ($12 million).

#### First Six Months 2024 Compared to 2023

Access segment net sales increased primarily as a result of improved sales volume in North America.

The improved gross margin in the Access segment was primarily due to lower material costs (160 basis points), improved sales mix (120 basis points) and favorable absorption (60 basis points).

The increase in operating income in the Access segment was primarily due to improved material costs ($41 million), improved sales mix ($32 million), the impact of higher gross margin associated with higher sales volume ($29 million) and improved pricing ($13 million), offset in part by higher selling, general and administrative expenses to support higher sales volume ($11 million).

### Defense

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

|  | Second Quarter 2024 | 2023 | Change | % Change | First Six Months 2024 | 2023 | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $598.7 | $498.1 | $100.6 | 20.2% | $1,135.6 | $1,011.2 | $124.4 | 12.3% |
| Cost of sales | 554.2 | 454.9 | 99.3 | 21.8% | 1,044.6 | 929.7 | 114.9 | 12.4% |
| Gross income | 44.5 | 43.2 | 1.3 | 3.0% | 91.0 | 81.5 | 9.5 | 11.7% |
| % of sales | 7.4% | 8.7% | -130 bps |  | 8.0% | 8.1% | -10 bps |  |
| Selling, general and administrative | 31.4 | 35.7 | (4.3) | -12.0% | 65.3 | 70.7 | (5.4) | -7.6% |
| Amortization of purchased intangibles | 1.4 | 1.2 | 0.2 | 16.7% | 2.7 | 2.8 | (0.1) | -3.6% |
| Intangible asset impairments | 51.6 | — | 51.6 | - | 51.6 | — | 51.6 | - |
| Operating income (loss) | $(39.9) | $6.3 | $(46.2) | -733.3% | $(28.6) | $8.0 | $(36.6) | -457.5% |
| % of sales | -6.7% | 1.3% | -800 bps |  | -2.5% | 0.8% | -330 bps |  |

#### Second Quarter 2024 Compared to 2023

Defense segment net sales increased primarily due to higher FMTV sales volume, the commencement of production of the NGDV for the USPS and higher aftermarket parts volume.

The decrease in gross margin in the Defense segment was primarily due to start-up costs on the NGDV program (100 basis points), adverse production variances (80 basis points) and adverse sales mix (70 basis points), offset in part by lower unfavorable cumulative catch-up adjustments on contracts (110 basis points).

Intangible asset impairments in the second quarter of 2024 relate to the impairment charges at Pratt Miller.

The operating results in the Defense segment declined as a result of the intangible asset impairments at Pratt Miller ($52 million), start-up costs on the NGDV program ($6 million) and adverse production variances ($4 million), offset in part by the impact of higher gross margin associated with higher sales volume ($15 million).

#### First Six Months 2024 Compared to 2023

Defense segment net sales increased primarily due to higher aftermarket parts volume, higher FMTV sales volume, and the commencement of production of delivery vehicles for the USPS in the second quarter of 2024, offset in part by lower Joint Light Tactical Vehicle (JLTV) program volume. JLTV production under the Company's domestic JLTV contract is expected to conclude in early 2025 as the domestic follow-on contract was awarded to another company. The domestic JLTV contract accounted for $461 million of sales in the first six months of 2024. An increase in NGDV revenues is expected to exceed the loss of JLTV revenues in 2025.

The gross margin in the Defense segment remained relatively flat in the first six months of 2024 compared to the first six months of 2023 as start-up costs on the NGDV program (60 basis points) and adverse production variances (40 basis points) were offset by lower unfavorable cumulative catch-up adjustments on contracts (60 basis points) and favorable mix (40 basis points).

Intangible asset impairments in the first six months of 2024 relate to the impairment charges at Pratt Miller.

The operating results in the Defense segment declined as a result of the intangible asset impairments at Pratt Miller ($52 million) offset in part by the impact of higher gross margin associated with higher sales volume ($18 million).

### Vocational

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

|  | Second Quarter 2024 | 2023 | Change | % Change | First Six Months 2024 | 2023 | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $843.1 | $587.5 | $255.6 | 43.5% | $1,615.5 | $1,150.2 | $465.3 | 40.5% |
| Cost of sales | 660.7 | 482.9 | 177.8 | 36.8% | 1,282.6 | 952.4 | 330.2 | 34.7% |
| Gross income | 182.4 | 104.6 | 77.8 | 74.4% | 332.9 | 197.8 | 135.1 | 68.3% |
| % of sales | 21.6% | 17.8% | 380 bps |  | 20.6% | 17.2% | 340 bps |  |
| Selling, general and administrative | 66.0 | 43.4 | 22.6 | 52.1% | 126.5 | 107.2 | 19.3 | 18.0% |
| Amortization of purchased intangibles | 9.9 | 0.7 | 9.2 | 1314.3% | 19.8 | 2.0 | 17.8 | 890.0% |
| Operating income | $106.5 | $60.5 | $46.0 | 76.0% | $186.6 | $88.6 | $98.0 | 110.6% |
| % of sales | 12.6% | 10.3% | 230 bps |  | 11.6% | 7.7% | 390 bps |  |

#### Second Quarter 2024 Compared to 2023

Vocational segment net sales increased due to the inclusion of AeroTech sales ($192 million), improved pricing in response to higher input costs ($37 million) and improved organic sales volume ($30 million).

The increase in gross margin in the Vocational segment was primarily attributable to improved pricing (330 basis points).

The increase in amortization of purchased intangibles was due to the acquisition of AeroTech ($9 million).

The increase in operating income in the Vocational segment was largely a result of improved pricing ($37 million) and the impact of higher gross margin associated with the improved organic sales volume ($7 million).

#### First Six Months 2024 Compared to 2023

Vocational segment net sales increased due to the inclusion of AeroTech sales ($368 million), improved pricing in response to higher input costs ($70 million) and improved organic sales volume ($37 million), offset in part by the impact of the sale of the rear-discharge concrete mixer business in the first quarter of 2023 ($10 million).

The increase in gross margin in the Vocational segment was primarily attributable to improved pricing (330 basis points).

The increase in operating income in the Vocational segment was largely a result of improved pricing ($70 million), improved product mix ($28 million) and the absence of the loss on the sale of the rear-discharge concrete mixer business ($13 million), offset in part by higher material costs ($12 million).

### Corporate and Intersegment Eliminations

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

|  | Second Quarter 2024 | 2023 | Change | % Change | Six Months Ended June 30, 2024 | 2023 | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $(1.8) | $(0.8) | $(1.0) | 125.0% | $(4.8) | $(1.7) | $(3.1) | 182.4% |
| Cost of sales | 5.0 | 1.8 | 3.2 | 177.8% | 7.6 | 3.4 | 4.2 | 123.5% |
| Gross income | (6.8) | (2.6) | (4.2) | 161.5% | (12.4) | (5.1) | (7.3) | 143.1% |
| Operating expenses | 45.4 | 41.0 | 4.4 | 10.7% | 79.6 | 72.5 | 7.1 | 9.8% |
| Operating income | $(52.2) | $(43.6) | $(8.6) | 19.7% | $(92.0) | $(77.6) | $(14.4) | 18.6% |

36

#### Second Quarter 2024 Compared to 2023

Corporate costs increased primarily due to higher new product development investments ($4 million) and higher compensation expenses ($3 million).

#### First Six Months 2024 Compared to 2023

Corporate costs increased primarily due to higher new product development investments ($8 million) and higher share-based compensation expenses ($5 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, 2024, including $141.4 million of cash and cash equivalents and $501.6 million of unused available capacity under the Revolving Credit Facility. 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, 2024 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. To provide additional flexibility for working capital needs, organic and inorganic investments as well as share repurchases, the Company amended the Credit Agreement in April 2024 to increase the maximum aggregate amount of availability under the Revolving Credit Facility by $450 million to $1.55 billion.

### Financial Condition at June 30, 2024

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

|  | June 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Cash and cash equivalents | $141.4 | $125.4 |
| Total debt | 1,635.6 | 772.5 |
| Total shareholders’ equity | 3,924.9 | 3,705.3 |
| Total capitalization (debt plus equity) | 5,560.5 | 4,477.8 |
| Debt to total capitalization | 29.4% | 17.3% |

The Company’s ratio of debt to total capitalization of 29.4% at June 30, 2024 remained within its targeted range. The increase in the debt to total capitalization ratio compared to December 31, 2023 was primarily due to borrowings under the Revolving Credit Facility primarily related to working capital and capital expenditures.

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, 2024, 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 44 days at December 31, 2023 to 47 days at June 30, 2024 due to increases in non-Defense segments. Days sales outstanding for segments other than the Defense segment increased from 49 days at December 31, 2023 to 53 days at June 30, 2024 due to longer collection times at AeroTech. Consolidated inventory turns

(defined as “Cost of Sales” on an annualized basis, divided by the average “Inventory” at the past five quarter end periods) were 4.2 times at December 31, 2023 and June 30, 2024. 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 55 days at June 30, 2024, down from 72 days at December 31, 2023 due to more timely invoice processing.

### Cash Flows

#### Operating Cash Flows

Operating activities used $566.8 million of cash in the first six months of 2024 compared to $46.6 million during the first six months of 2023. Higher net income and non-cash adjustments during the first six months of 2024 compared to the first six months of 2023 were more than offset by increases in working capital. Cash used in operations in the first six months of 2024 included cash paid for income taxes, net of refunds of $326 million, which increased by $219 million compared to the first six months of 2023 primarily due to the Company's generation of significantly higher pre-tax income in 2023 compared to 2022. Cash used in operations during the first six months of 2024 included the payment of 2023 incentive compensation ($111 million), which was higher than 2022 incentive compensation due to the Company's improved performance. Other changes in working capital also impacted cash used in operations, including increases in receivables and unbilled receivables due to higher net sales levels and delayed timing of invoicing in the Defense segment, increases in inventory in the Access and Vocational segments, lower customer advances and the normalization of accounts payable due to more timely invoice processing. The Company expects to generate approximately $675 million of cash flows from operations in 2024.

#### Investing Cash Flows

Investing activities used cash of $149.3 million in the first six months of 2024 compared to $295.4 million during the first six months of 2023. The Company used $187.9 million to fund the acquisition of Hinowa S.p.A. during the first six months of 2023. Through the first six months of 2024, the Company used $139.6 million for capital expenditures. The Company continues to anticipate that it will invest $300 million on capital expenditures in 2024 as the Company completes its facilities in Tennessee and South Carolina.

#### Financing Cash Flows

Financing activities provided cash of $732.8 million in the first six months of 2024 compared to the use of $109.1 million during the first six months of 2023. During the first six months of 2024, the Company borrowed under the Revolving Credit Facility to fund working capital and capital expenditures. In the first six months of 2024, the Company repurchased 464,193 shares of its Common Stock at an aggregate cost of $54.6 million. As of June 30, 2024, the Company had approximately 10.8 million shares of Common Stock remaining under its repurchase authorization. In the first six months of 2023, the Company repurchased 265,795 shares of its Common Stock at an aggregate cost of $22.6 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. On April 3, 2024, the Company amended the Credit Agreement to increase the maximum aggregate amount of availability under the Revolving Credit Facility by $450 million to $1.55 billion. At June 30, 2024, borrowings under the Revolving Credit Facility of $1.04 billion and outstanding letters of credit of $11.9 million reduced available capacity under the Revolving Credit Facility to $501.6 million.

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 0.438% 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, 2024 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 4.60% unsecured senior notes due May 15, 2028 (the “2028 Senior Notes”). In February 2020, the Company issued $300.0 million of 3.10% 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 13 of the Notes to Condensed Consolidated Financial Statements for additional information regarding the Company’s debt as of June 30, 2024.

### 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, 2023.

### 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, 2023 have not materially changed since that report was filed.

### New Accounting Standards

See Note 2 of the Notes to Condensed Consolidated Financial Statements for a discussion of the impact of new accounting standards.

### Customers and Backlog

Sales to the U.S. government comprised approximately 20% of the Company’s net sales in the first six months of 2024. 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, 2024 increased 2.7% to $15.37 billion compared to $14.97 billion at June 30, 2023. Access segment backlog decreased 25.4% to $3.26 billion at June 30, 2024 compared to $4.37 billion at June 30, 2023. The decrease in backlog was expected and believed to be the result of the normalization of orders in connection with improved product availability. Defense segment backlog decreased 4.7% to $6.43 billion at June 30, 2024 compared to $6.75 billion at June 30, 2023 primarily as a result of the wind-down of production under the Company's domestic JLTV contract. Vocational segment backlog increased 47.5% to $5.68 billion at June 30, 2024 compared to $3.85 billion at June 30, 2023 due to strong demand for fire apparatus and rising prices as well as the inclusion of AeroTech backlog of $780 million.

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 69% of the Company’s June 30, 2024 backlog is not expected to be filled in 2024.

### 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. However, while forecasted adjusted earnings per share excludes amortization of purchased intangibles and intangible asset impairments, revenue and earnings of acquired companies are reflected in forecasted adjusted earnings per share and intangible assets contribute to the generation of revenue and earnings. 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:

|  | 2024 Expectations |
| --- | ---: |
| Earnings per share-diluted (GAAP) | $10.45 |
| Amortization of purchased intangibles, net of tax | 0.70 |
| Intangible asset impairments, net of tax | 0.60 |
| Adjusted earnings per share-diluted (non-GAAP) | $11.75 |

## Market risk

As filed, 328 characters.

The Company’s quantitative and qualitative disclosures about market risk for changes in interest rates, commodity prices and foreign currency, which are incorporated by reference to Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, have not materially changed since that report was filed.

## Controls and procedures

As filed, 1,645 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, 2024. 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, 2024 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, 2024 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, 2023, which have not materially changed.

Filed Jul 31, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-088482. Last ingested by Listed: Oct 29, 2026, 11:20 ET. No prices; not investment advice.