Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 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 the 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 U.S. Department of 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 or a prolonged federal government shutdown; 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; 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 October 29, 2025 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 segments are as follows:

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 and home improvement centers. The Access segment also manufactures carriers and wreckers sold to towing companies.

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

Transport- tactical vehicles, trailers 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).

Overview

The Company reported earnings per share of $3.04 in the third quarter of 2025, up from earnings per share of $2.75 in the third quarter of 2024. Results in the third quarter of 2025 included a benefit related to the resolution of a multi-year federal income tax audit of $19.1 million, or $0.30 per share.

Consolidated sales in the third quarter of 2025 decreased $53 million, or 2%, to $2.69 billion compared to the third quarter of 2024. While the Company has benefited from the ramp-up of Next Generation Delivery Vehicle (NGDV) production for the USPS and continued to increase production in the Vocational segment to fulfill orders in backlog, we believe the macroeconomic environment in North America has caused customers in select markets to be cautious about ordering new equipment. Access segment sales were down $254 million, or 19%, in the third quarter of 2025 versus the third quarter of 2024.

Consolidated operating income decreased 2% to $260 million, or 9.7% of sales, in the third quarter of 2025 compared to $266 million, or 9.7% of sales, in the third quarter of 2024. Results reflect solid performance across each of the segments. Operating income margin of 9.7% reflected continued strong performance in the Vocational segment, improved operating income margins in the Transport segment and double-digit operating income margins in the Access segment. Operating income included $25 million from the one-time license of Joint Light Tactical Vehicle (JLTV)-related intellectual property to the U.S. government.

The Company continued to repurchase shares of its Common Stock throughout the quarter, repurchasing 666,359 shares for nearly $91 million, bringing share repurchases for the first nine months of 2025 to nearly $160 million. Share repurchases during the previous twelve months benefited earnings per share by $0.05 in the third quarter of 2025 compared to the third quarter of 2024.

The international trade environment remains dynamic and difficult to predict. Since the Company released its most recent guidance, the Company has experienced the expansion of tariffs, including section 232 steel and aluminum derivative tariffs and medium- and heavy-duty truck chassis tariffs. This continuously changing environment contributes to economic uncertainties and the Company is seeing some customers be judicious on spending for new equipment.

The Company now expects its 2025 diluted earnings per share to be between $9.75 and $10.25 on sales between $10.3 billion and $10.4 billion, compared to the Company's most recent estimates of diluted earnings per share of approximately $10.25 on sales of approximately $10.6 billion. The updated earnings per share guidance primarily reflects the impact of lower projected sales volume offset in part by a lower effective income tax rate. The earnings per share estimate includes after-tax charges of $0.68 per share related to amortization of purchased intangibles and $0.07 per share related to intangible asset impairments. Excluding these items, the Company's 2025 adjusted earnings per share estimate is between $10.50 and $11.00.

The Company expects Access segment sales and operating income margin in 2025 to be approximately $4.3 billion and 11.0%, respectively, compared to the Company's most recent estimates of $4.4 billion and 11.5%, respectively, reflecting weaker market conditions for access equipment in North America. Operating income margin includes approximately 50 basis points of intangible asset amortization.

The Company continues to expect Vocational segment sales in 2025 to be approximately $3.8 billion and operating income margin to be 15.0%. Operating income margin includes approximately 100 basis points of intangible asset amortization.

The Company expects Transport segment sales and operating income margin in 2025 to be approximately $2.1 billion and 4.0%, respectively, compared to the Company's most recent estimates of $2.3 billion and 4.5%, respectively. The revised expectations reflect the Company's latest expectations for NGDV production as well as higher warranty costs.

The Company expects Corporate and other to have an operating loss of approximately $194 million in 2025, including approximately $3 million related to amortization and $6 million related to impairment of intangible assets.

RESULTS OF OPERATIONS

CONSOLIDATED RESULTS

The following table presents consolidated results (in millions):

Third Quarter 2025 Compared to 2024

Consolidated net sales decreased primarily due to lower sales volume in the Access ($225 million) segment, offset in part by higher sales volume in the Vocational ($107 million) and Transport ($41 million) segments. Improved pricing ($21 million) also benefited sales in the third quarter of 2025.

The decrease in consolidated gross margin was primarily due to higher labor and overhead costs (140 basis points) and higher warranty expense (70 basis points), offset in part by improved pricing (60 basis points) and lower material costs (50 basis points).

Consolidated selling, general and administrative expenses decreased due to lower spending on consultants and services ($13 million) and lower incentive compensation accruals ($12 million).

The decrease in consolidated operating income was primarily due to higher labor and overhead costs ($36 million), the impact of lower gross margin associated with lower sales volume ($21 million) and higher warranty expense ($20 million), offset in part by lower selling, general and administrative expenses ($30 million), improved pricing ($21 million) and lower material costs ($14 million).

First Nine Months 2025 Compared to 2024

Consolidated net sales decreased primarily due to lower organic sales volume in the Access ($698 million) and Transport ($117 million) segments, offset in part by higher sales volume in the Vocational segment ($235 million) and sales related to the September 2024 acquisition of AUSACORP S.L. (AUSA) ($91 million). Improved pricing ($76 million) also benefited sales in the first nine months of 2025.

The decrease in consolidated gross margin was primarily due to higher labor and overhead costs (120 basis points) and higher warranty expense (40 basis points), offset in part by improved pricing (70 basis points).

Consolidated selling, general and administrative expenses decreased primarily due to lower incentive compensation accruals ($21 million) and lower spending on consultants and services ($17 million), offset in part by incremental operating costs related to the September 2024 acquisition of AUSA ($9 million).

During the second quarter of 2024, the Company recorded impairment charges related to Pratt Miller goodwill and intangibles ($52 million) as a result of unfavorable performance compared to forecast and adverse market conditions related to mobility and motorsports. During the second quarter of 2025, the Company impaired the remaining Pratt Miller goodwill ($6 million) as a reduction in royalties expected on defense contracts led to a further decline in the Company's expectations.

The decrease in consolidated operating income was primarily due to the impact of lower gross margin associated with lower sales volume ($127 million), higher labor and overhead costs ($79 million) and higher warranty expense ($28 million), offset in part by improved pricing ($76 million), lower intangible asset impairments ($46 million), favorable sales mix ($25 million), lower selling, general and administrative expenses ($23 million) and lower material costs ($12 million).

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

Third Quarter 2025 Compared to 2024

The effective tax rate in the third quarter of 2025 included net discrete tax benefits of $21.5 million, including $19.1 million related to the release of uncertain tax positions on the resolution of the multi-year federal income tax audit during the quarter.

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted in the United States. The OBBBA includes provisions to expense previously deferred domestic research and development costs, increase bonus depreciation and modify the international tax framework. The Company's annual effective tax rate increased approximately 40 basis points as a result of the enactment of the OBBBA.

First Nine Months 2025 Compared to 2024

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 nine months of 2025 included gains related to investments of $7 million and income related to the non-service portion of the Company's pension plans of $5 million.

The effective tax rate in the first nine months of 2025 included net discrete tax benefits of $20.1 million, including $19.1 million related to the release of uncertain tax positions on the resolution of the multi-year federal income tax audit during the third quarter of 2025. The effective tax rate in the first nine months of 2024 included net discrete tax benefits of $5.7 million.

Losses of unconsolidated affiliates included an impairment of an equity method investment of $7 million in the first nine months of 2024.

SEGMENT RESULTS

Access

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

Third Quarter 2025 Compared to 2024

Access segment net sales decreased primarily due to lower sales volumes in North America ($198 million) due to the expiration of the agreement to produce Caterpillar-branded telehandlers and softer market conditions. Higher sales discounts ($34 million) also contributed to the decline in sales in the quarter.

The decrease in gross margin in the Access segment was primarily due to higher labor and overhead costs (270 basis points) due in part to lower absorption of fixed costs as a result of lower production, higher sales discounts (220 basis points) and adverse sales mix (50 basis points), offset in part by lower material costs (150 basis points).

The decrease in selling, general and administrative expenses in the Access segment was primarily due to lower spending on consultants and services ($7 million) and lower incentive compensation accruals ($6 million).

The decrease in operating income in the Access segment was primarily due to the impact of lower gross margin associated with lower sales volume ($66 million), higher sales discounts ($34 million) and higher labor and overhead costs ($23 million), offset in part by lower material costs ($19 million) and lower selling, general and administrative expenses ($15 million).

First Nine Months 2025 Compared to 2024

Access segment net sales decreased primarily as a result of lower organic sales volume ($698 million) as a result of softer market conditions and the expiration of the agreement to produce Caterpillar-branded telehandlers, as well as higher sales discounts ($85 million), offset in part by incremental sales in 2025 related to the September 2024 acquisition of AUSA ($91 million).

The decrease in gross margin in the Access segment was primarily due to higher sales discounts (180 basis points) and higher labor and overhead costs (180 basis points) due in part to lower absorption of fixed costs as a result of lower production, offset in part by lower material costs (70 basis points).

The decrease in selling, general and administrative expenses in the Access segment was primarily due to lower incentive compensation accruals ($9 million) and lower advertising spending ($4 million), offset in part by incremental operating costs related to the September 2024 acquisition of AUSA ($9 million).

The decrease in operating income in the Access segment was primarily due to the impact of lower gross margin associated with lower sales volume ($207 million), higher sales discounts ($85 million) and higher labor and overhead costs ($40 million), offset in part by lower material costs ($29 million), lower incentive compensation accruals ($19 million) and favorable mix ($9 million).

Vocational

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

Third Quarter 2025 Compared to 2024

Vocational segment net sales increased due to higher sales volume ($107 million), largely as a result of increased production rates, and improved pricing ($47 million).

The increase in gross margin in the Vocational segment was primarily attributable to improved pricing (350 basis points), offset in part by higher labor and overhead costs (130 basis points), higher material costs (60 basis points) and higher warranty expense (40 basis points).

The increase in operating income in the Vocational segment was largely a result of improved pricing ($47 million) and the impact of higher gross margin associated with higher sales volume ($31 million), offset in part by higher labor and overhead costs ($19 million), higher material costs ($6 million), higher warranty costs ($5 million) and unfavorable sales mix ($4 million).

First Nine Months 2025 Compared to 2024

Vocational segment net sales increased due to higher sales volume ($235 million), largely as a result of increased production rates, and improved pricing ($140 million).

The increase in gross margin in the Vocational segment was primarily attributable to improved pricing (360 basis points), offset in part by higher material costs (80 basis points), higher labor and overhead costs (70 basis points) and higher warranty expense (30 basis points).

The increase in operating income in the Vocational segment was largely a result of improved pricing ($140 million) and the impact of higher gross margin associated with higher sales volume ($68 million), offset in part by higher labor and overhead costs ($39 million), higher material costs ($18 million), higher warranty expense ($12 million), higher engineering costs ($7 million) and higher incentive compensation accruals ($7 million).

Transport

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

Third Quarter 2025 Compared to 2024

Transport segment net sales increased due to the ramp up of NGDV production ($114 million), higher international tactical wheeled vehicle sales volume ($67 million) and the one-time license of JLTV intellectual property to the U.S. government ($25 million), offset in part by lower JLTV sales volume to the Department of Defense (DoD) ($163 million).

The increase in gross margin in the Transport segment was primarily due to improved sales mix (410 basis points) and improved pricing (120 basis points) on recently signed contracts, offset in part by higher warranty expense (220 basis points).

The increase in operating income in the Transport segment was primarily due to the one-time license of JLTV-related intellectual property ($25 million) and improved pricing ($8 million), offset in part by higher warranty expense ($13 million).

First Nine Months 2025 Compared to 2024

Transport segment net sales decreased primarily due to lower JLTV sales volume to the DoD ($504 million), offset in part by the ramp up of NGDV production ($235 million), higher international tactical wheeled vehicle sales volumes ($63 million), higher Family of Heavy Tactical Vehicles sales volume and the license of JLTV-related intellectual property to the U.S. government ($25 million).

The increase in gross margin in the Transport segment was primarily due to improved sales mix (130 basis points) and improved pricing (110 basis points), offset in part by higher warranty expense (120 basis points).

The increase in operating income in the Transport segment was largely a result of the license of intellectual property to the U.S. government ($25 million), improved pricing under recent contracts ($20 million) and lower unfavorable cumulative catch-up adjustments ($4 million), offset in part by the impact of lower gross margin associated with lower sales volume ($19 million) and higher warranty expense ($17 million).

Corporate and other

The following table presents corporate and other results (in millions):

Third Quarter 2025 Compared to 2024

Net operating costs for corporate and other decreased primarily due to the timing of healthcare charges between Corporate and the segments ($10 million) and lower incentive compensation accruals ($4 million).

First Nine Months 2025 Compared to 2024

Net operating costs for corporate and other decreased primarily due to lower intangible asset impairments ($46 million) at the Company's Pratt Miller business unit, lower incentive compensation accruals ($8 million) and lower spending related to consultants ($8 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 September 30, 2025, including $211.8 million of cash and cash equivalents and $1.41 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 September 30, 2025 and expects to remain in compliance with the financial covenants contained in the Credit Agreement.

The Company continues to actively monitor its liquidity position and working capital needs and prioritizes capital expenditures related to capacity and strategic investments. The Company remains in a stable overall capital resources and liquidity position that the Company believes is adequate to meet its projected needs. 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.

Financial Condition at September 30, 2025

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

The Company's ratio of debt to total capitalization of 21.0% at September 30, 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.

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 September 30, 2025, 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:

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 45 days at September 30, 2025. Days sales outstanding for segments other than the Transport segment increased from 44 days at December 31, 2024 to 51 days at September 30, 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 3.5 times at September 30, 2025 due to increases in inventory levels in all 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) decreased from 65 days at December 31, 2024 to 56 days at September 30, 2025 due to timing of payments.

Cash Flows

Operating Cash Flows

Operating activities provided $183.3 million of cash in the first nine months of 2025 compared to using $240.7 million of cash during the first nine months of 2024. The increase in cash provided by operating activities was primarily due to lower tax payments, investments in the NGDV program in the first nine months of 2024 and an increase in customer advances. The first nine months of 2025 included net cash tax payments of $151.8 million, which was down $213.1 million compared to the first nine months of 2024 primarily due to higher taxable income in 2023 as a result of the timing of customer advances. The Company continues to expect cash flow from operations to be between $650 million and $750 million in 2025.

Investing Cash Flows

Investing activities used cash of $136.3 million in the first nine months of 2025 compared to $309.6 million during the first nine months of 2024. During the first nine months of 2024, the Company used $112.9 million to fund the acquisition of AUSA. Through the first nine months of 2025, the Company used $105.6 million for capital expenditures, a decrease of $87.9 million compared to the first nine months of 2024 as the Company was investing in new facilities in South Carolina and Tennessee in 2024. The Company expects that it will invest $200 million on capital expenditures in 2025, down from $250 million previously expected as the Company continues to maintain rigorous spending controls.

Financing Cash Flows

Financing activities used cash of $51.6 million in the first nine months of 2025 compared to providing $585.7 million during the first nine months of 2024 primarily due to lower net borrowings. In the first nine months of 2025, the Company repurchased 1,368,666 shares of its Common Stock at an aggregate cost of $159.3 million. 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. The Company plans to modestly increase its repurchase of shares in the fourth quarter of 2025 versus the third quarter of 2025. As of September 30, 2025, the Company had approximately 8.9 million shares of Common Stock remaining under its repurchase authorization.

Liquidity

Credit Agreements

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 September 30, 2025, borrowings under the Revolving Credit Facility of $105.0 million and specified outstanding letters of credit of $31.8 million reduced available capacity under the Revolving Credit Facility to $1.41 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 0.438% 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.

On March 31, 2025, the Company entered into a credit agreement with various lenders to borrow funds under a $500 million unsecured term loan (the "Term Loan") that 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.

Covenant Compliance

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 September 30, 2025 and expects to be able to meet the financial covenants contained in its credit agreements 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 the 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 September 30, 2025.

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, 2024 have not materially changed since that report was filed.

New Accounting Pronouncements

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

Customers and Backlog

Sales to the U.S. government comprised approximately 19% of the Company's net sales in the first nine 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.

The Company's backlog at September 30, 2025 decreased 4.4% to $13.7 billion compared to $14.3 billion at September 30, 2024. Access segment backlog decreased 66.2% to $721 million at September 30, 2025 compared to $2.1 billion at September 30, 2024. The Company believes the decrease in backlog is primarily the result of slowing demand in North America due to the uncertain macro environment and the normalization of orders in connection with improved product availability. Vocational segment backlog increased 8.3% to $6.4 billion at September 30, 2025 compared to $5.9 billion at September 30, 2024 due to strong demand for municipal fire apparatus and higher pricing on future deliveries. Unit backlog for municipal fire apparatus as of September 30, 2025 was up 2.9% compared to September 30, 2024. Unit backlog for refuse and recycling collection vehicles as of September 30, 2025 was down 32.5% compared to September 30, 2024 as the Company believes customers have been cautious in the uncertain macroeconomic environment. Transport segment backlog increased 4.2% to $6.5 billion at September 30, 2025 compared to $6.2 billion at September 30, 2024, due to the NGDV order received in the fourth quarter of 2024, offset in part by the completion of production under the Company's domestic JLTV contract.

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 84% of the Company's September 30, 2025 backlog is not expected to be filled in 2025.

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: