OSHKOSH CORP

Previous wording

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 captions “Overview,” “Results of Operations,” “Liquidity and Capital Resources” and “Non-GAAP Financial Measures” 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 includethe 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 (USPS) 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 me…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Quarterly Report on Form 10-Q contain statements that the Company believes to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q, including, without limitation, statements regarding the Company’s future financial position, business strategy, targets, projected sales, costs, earnings, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations, including those under the caption “Overview,” are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “project” or “plan” or the negative thereof or variations thereon or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond the Company’s control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include the cyclical nature of the Company’s access equipment, fire apparatus, refuse and recycling collection and air transportation equipment markets, which are particularly impacted by the strength of U.S. and European economies and construction 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; risks that a trade war and related tariffs could reduce the demand for or competitiveness of the Company’s products or cause inefficiencies in the Company's supply chain; the Company’s ability to increase prices to raise margins or to offset higher input costs; the Company's ability to 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 realize the anticipated benefits associated with the AeroTech acquisition; the strength of the U.S. dollar and its impact on Company exports, translation of foreign sales and the cost of purchased materials; the impact of severe weather, war, natural disasters or pandemics that may affect the Company, its suppliers or its customers; 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 potent…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

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. The Access segment also manufacturers carriers and wreckers sold to towing companies.

Current wording

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

Previous wording

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.

Current wording

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

Previous wording

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.

Current wording

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).

Previous wording

In July 2024, the Company moved the reporting responsibility for Pratt Miller from its Defense segment to the Chief Technology and Strategic Sourcing Officer to better utilize Pratt Miller’s expertise across the entire Oshkosh Corporation enterprise. Pratt Miller results are now reported within "Corporate and other" and historical information has been recast to reflect the change.

Current wording

In July 2024, the Company moved the reporting responsibility for Pratt Miller from its Defense segment to the Chief Technology and Strategic Sourcing Officer to better utilize Pratt Miller’s expertise across the entire Oshkosh Corporation enterprise. Pratt Miller results are now reported within "Corporate and other." All historical information has been recast to reflect this change.

Previous wording

The decrease in consolidated gross margin was largely due to increases in material costs (130 basis points), higher engineering spending (40 basis points) and unfavorable cumulative catch-up adjustments on contracts in the Defense segment (40 basis points), offset in part by improved pricing (130 basis points) and favorable production variances (60 basis points).

Current wording

The decrease in consolidated gross margin was largely due to higher production costs (90 basis points), higher new product development spending (50 basis points), higher material costs (30 basis points) and unfavorable cumulative catch-up adjustments on contracts in the Defense segment (30 basis points), offset in part by improved pricing (80 basis points).

Previous wording

Interest expense, net of interest income increased due to increased borrowings on the Revolving Credit Facility primarily to fund acquisitions.

Current wording

Interest expense, net of interest income increased due to a higher average interest rate on customer advances in the Vocational segment as well as higher borrowings under the Revolving Credit Facility. Borrowings were higher due in part to the acquisition of AUSA in the third quarter of 2024.

Previous wording

The improved gross margin in the Access segment was primarily due to improved sales mix (90 basis points), favorable absorption (40 basis points), improved pricing (30 basis points) and improved material costs (30 basis points).

Current wording

The decrease in gross margin in the Access segment was primarily due to higher production costs (150 basis points), higher new product development spending (120 basis points) and higher sales discounts (110 basis points), offset in part by improved sales mix (90 basis points).

Previous wording

The increase in gross margin in the Vocational segment was primarily attributable to improved pricing.

Current wording

The increase in gross margin in the Vocational segment was primarily attributable to improved pricing (350 basis points), offset in part by higher material (50 basis points) and production costs (30 basis points).

Previous wording

The increase in operating income in the Vocational segment was largely a result of improved pricing ($116 million), the impact of higher gross margin associated with higher sales volume ($21 million) and improved product mix ($19 million), offset in part by higher material costs ($18 million).

Current wording

The increase in operating income in the Vocational segment was largely a result of improved pricing ($42 million) and the impact of higher gross margin associated with higher sales volume ($15 million), offset in part by higher production costs ($6 million), higher selling, general and administrative expenses ($5 million), higher material costs ($4 million) and higher warranty costs ($4 million).

Previous wording

The decrease in gross margin in the Defense segment was primarily due to unfavorable cumulative catch-up adjustments on contracts in the third quarter of 2024 (210 basis points) and higher engineering costs (50 basis points), offset in part by lower charges related to inventory (140 basis points).

Current wording

The decrease in gross margin in the Defense segment was primarily due to higher unfavorable cumulative catch-up adjustments on contracts (140 basis points), unfavorable warranty costs (60 basis points) and ramp-up costs associated with the NGDV program (50 basis points).

Previous wording

Net operating costs for corporate and other increased primarily due to lower operating income at the Company's Pratt Miller business unit ($3 million) and higher new product development investments ($3 million).

Current wording

Net operating costs for corporate and other increased primarily due to lower operating results at the Company's Pratt Miller business unit.

Previous wording

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 September 30, 2024, including $160.9 million of cash and cash equivalents and $591.0 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 September 30, 2024 and expects to remain in compliance with the financial covenant contained in the Credit Agreement for the foreseeable future.

Current wording

The Company generates significant capital resources from operating activities, which is the expected primary source of funding for the Company. In addition to cash generated from operations, the Company had other sources of liquidity available at March 31, 2025, including $210.3 million of cash and cash equivalents and $1.15 billion of unused available capacity under the Revolving Credit Facility (as defined in "Liquidity"). Borrowings under the Revolving Credit Facility could, as discussed below, be limited by the financial covenants contained in the Credit Agreement (as defined in “Liquidity”). The Company was in compliance as of March 31, 2025 and expects to remain in compliance with the financial covenants contained in the Credit Agreement.

Previous wording

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.

Current wording

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. In March 2025, to provide additional liquidity, the Company entered into a credit agreement with various lenders to borrow funds under a $500 million unsecured term loan, which matures in March 2027. The Company used the proceeds from the term loan to repay a portion of outstanding borrowings under the Revolving Credit Facility.

Previous wording

The Company’s ratio of debt to total capitalization of 27.3% at September 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 the funding of working capital to facilitate sales growth.

Current wording

The Company’s ratio of debt to total capitalization of 25.9% at March 31, 2025 remained within its targeted range. The increase in the debt to total capitalization ratio compared to December 31, 2024 was due to higher borrowings to fund seasonal working capital needs.

Previous wording

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 September 30, 2024. Days sales outstanding for segments other than the Defense segment increased from 49 days at December 31, 2023 to 52 days at September 30, 2024. Consolidated inventory turns (defined as “Cost of Sales” on an annualized basis, divided by the average “Inventory” at the past five quarter end periods) decreased from 4.2 times at December 31, 2023 to 4.0 times at September 30, 2024 primarily due to increases in inventory levels in the Vocational and Access segments. 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 57 days at September 30, 2024, down from 72 days at December 31, 2023 due to more timely invoice processing.

Current wording

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 40 days at December 31, 2024 to 51 days at March 31, 2025. Days sales outstanding for segments other than the Defense segment increased from 44 days at December 31, 2024 to 53 days at March 31, 2025 primarily due to timing of cash receipts from customers in the Access segment at December 31, 2024. Consolidated inventory turns (defined as “Cost of Sales” on an annualized basis, divided by the average “Inventory” at the past five quarter end periods) decreased from 3.9 times at December 31, 2024 to 3.2 times at March 31, 2025 primarily due to increases in inventory levels in the Access and Vocational segments. 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 66 days at March 31, 2025, up slightly from 65 days at December 31, 2024.

Previous wording

Investing activities used cash of $309.6 million in the first nine months of 2024 compared to $1.19 billion during the first nine months of 2023. The Company used $112.9 million to fund the acquisition of AUSA during the first nine months of 2024 compared to $995.8 million to fund the acquisitions of AeroTech and Hinowa during the first nine months of 2023. Through the first nine months of 2024, the Company used $193.5 million for capital expenditures. The Company expects it will now invest $275 million on capital expenditures in 2024 as the Company completes its facilities in Tennessee and South Carolina, down from its most recent estimate of $300 million.

Current wording

Investing activities used cash of $43.1 million in the first three months of 2025 compared to $111.2 million during the first three months of 2024. Through the first three months of 2025, the Company used $40.3 million for capital expenditures, a decrease of $59.8 million compared to the first quarter of 2024 as the Company was investing in new facilities in South Carolina and Tennessee in the first quarter of 2024. The Company continues to expect that it will invest $250 million on capital expenditures in 2025 due to efforts to expand production capacity in the Vocational segment.

Previous wording

Financing activities provided cash of $585.7 million in the first nine months of 2024 compared to $371.3 million during the first nine months of 2023. During the first nine months of 2024, the Company borrowed under the Revolving Credit Facility to fund working capital, capital expenditures and the acquisition of AUSA, compared to borrowing approximately $575 million to fund the acquisition of AeroTech in the third quarter of 2023. In the first nine months of 2024, the Company repurchased 564,405 shares of its Common Stock at an aggregate cost of $65.6 million. As of September 30, 2024, the Company had approximately 10.7 million shares of Common Stock remaining under its repurchase authorization. In the first nine months of 2023, the Company repurchased 265,795 shares of its Common Stock at an aggregate cost of $22.6 million.

Current wording

Financing activities provided cash of $438.1 million in the first three months of 2025 compared to $412.5 million during the first three months of 2024. In the first three months of 2025, the Company repurchased 287,552 shares of its Common Stock at an aggregate cost of $28.7 million. As of March 31, 2025, the Company had approximately 9.9 million shares of Common Stock remaining under its repurchase authorization. In the first three months of 2024, the Company repurchased 129,494 shares of its Common Stock at an aggregate cost of $15.1 million.

Previous wording

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 September 30, 2024, borrowings under the Revolving Credit Facility of $934.5 million and specified outstanding letters of credit of $24.5 million reduced available capacity under the Revolving Credit Facility to $591.0 million.

Current wording

In March 2022, the Company entered into a Third Amended and Restated Credit Agreement with various lenders (the “Credit Agreement”). The Credit Agreement, as amended, provides for an unsecured revolving credit facility (the “Revolving Credit Facility”) with a maximum aggregate availability of$1.55 billion that matures in March 2027. At March 31, 2025, borrowings under the Revolving Credit Facility of $376.0 million and specified outstanding letters of credit of $28.0 million reduced available capacity under the Revolving Credit Facility to $1.15 billion.

Previous wording

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 September 30, 2024 and expects to be able to meet the financial covenant contained in the Credit Agreement over the next twelve months.

Current wording

The Term Loan and the Credit Agreement contain various restrictions and covenants, including a requirement that the Company maintain a leverage ratio at certain levels, subject to certain exceptions, restrictions on the ability of the Company and certain of its subsidiaries to consolidate or merge, create liens, incur additional subsidiary indebtedness and consummate acquisitions and a restriction on the disposition of all or substantially all of the assets of the Company and its subsidiaries taken as a whole. The Company was in compliance with the financial covenants as of March 31, 2025 and expects to be able to meet the financial covenants contained in its credit agreements over the next twelve months.

Previous wording

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.

Current wording

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 and 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 and 2030 Senior Notes at any time for a premium.

Previous wording

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

Current wording

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

Previous wording

Sales to the U.S. government comprised approximately 20% of the Company’s net sales in the first nine 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.

Current wording

Sales to the U.S. government comprised approximately 17% of the Company’s net sales in the first three months of 2025. 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.

Previous wording

The Company’s backlog at September 30, 2024 decreased 9.0% to $14.32 billion compared to $15.73 billion at September 30, 2023. Access segment backlog decreased 46.4% to $2.13 billion at September 30, 2024 compared to $3.98 billion at September 30, 2023. The decrease in backlog is believed to primarily be the result of the normalization of orders in connection with improved product availability and slowing demand in North America. Vocational segment backlog increased 18.2% to $5.91 billion at September 30, 2024 compared to $5.00 billion at September 30, 2023 due to strong demand for fire apparatus and price increases. Defense segment backlog decreased 7.3% to $6.21 billion at September 30, 2024 compared to $6.70 billion at September 30, 2023 primarily as a result of the wind-down of production under the Company's domestic JLTV contract.

Current wording

The Company’s backlog at March 31, 2025 decreased 10.6% to $14.62 billion compared to $16.35 billion at March 31, 2024. Access segment backlog decreased 57.3% to $1.80 billion at March 31, 2025 compared to $4.23 billion at March 31, 2024. The Company believes the decrease in backlog is primarily the result of slowing demand in North America and the normalization of orders in connection with improved product availability. Vocational segment backlog increased 11.8% to $6.34 billion at March 31, 2025 compared to $5.67 billion at March 31, 2024 due to strong demand for municipal fire apparatus and price increases. Unit backlog for municipal fire apparatus as of March 31, 2025 was up 5.8% compared to March 31, 2024. Unit backlog for refuse and recycling collection vehicles as of March 31, 2025 was down 10.7% compared to March 31, 2024. Defense segment backlog increased 0.1% to $6.40 billion at March 31, 2025 compared to $6.39 billion at March 31, 2024, as orders received in the fourth quarter of 2024 for NGDVs were almost completely offset by the completion of production under the Company's domestic JLTV contract.

Previous wording

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 84% of the Company’s September 30, 2024 backlog is not expected to be filled in 2024.

Current wording

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, 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. Approximately 58% of the Company’s March 31, 2025 backlog is not expected to be filled in 2025.