Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 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 vehicle and air transportation equipment markets, which are particularly impacted by the strength of U.S. and European economies and construction outlooks; 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 Company's ability to predict the level and timing of orders and costs on the U.S. Postal Service contract; the Company's ability to increase production rates in its municipal fire apparatus and delivery vehicle businesses; risks that trade wars and related tariffs could further reduce 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 achieve its projected material and manufacturing efficiency savings; 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 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; 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 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, those described in the Company's most recent Annual Report on Form 10-K 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 fire apparatus 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 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 the Next Generation Delivery Vehicle (NGDV) for the United States Postal Service (USPS).

Overview

Consolidated sales in the third quarter of 2026 increased $153 million, or 5.7%, compared to the third quarter of 2025. The increase was primarily the result of higher Access segment sales volume and improved pricing in all three segments, offset in part by lower sales volume in the Vocational segment due to production challenges associated with municipal fire apparatus. Municipal fire apparatus production was significantly below our expectations, reflecting near-term challenges associated with initiatives to modernize manufacturing processes at Pierce.

Consolidated operating income in the third quarter of 2026 was $197 million, or 6.9% of sales, compared to $260 million, or 9.7% of sales, in the third quarter of 2025. The decrease in consolidated operating income was primarily the result of unfavorable sales mix and higher selling, general and administrative expenses, offset in part by the impact of higher gross margin associated with higher sales volume and improved price/cost dynamics.

The Company continued to repurchase shares of its Common Stock, repurchasing 556,138 shares during the third quarter of 2026 for $82 million, bringing share repurchases for the first nine months of 2026 to $221 million. Share repurchases during the previous twelve months benefited earnings per share during the third quarter of 2026 by $0.08 compared to the third quarter of 2025.

Orders in the Access segment in the third quarter of 2026 of $2.0 billion were robust, resulting in a book-to-bill ratio of 1.5. Orders in the third quarter of 2026 included receipt of 2027 annual purchase orders from select national rental companies. Orders brought Access segment backlog to $2.7 billion at September 30, 2026.

The Vocational segment continued initiatives to modernize municipal fire apparatus manufacturing processes and increase production capacity to better serve customer demand and address elevated backlog. However, these initiatives resulted in manufacturing challenges during the quarter and lower production and shipment volume. The Company is actively addressing these issues by improving material tracking for internally fabricated parts and "point-of-use" delivery, stabilizing the processes that support its manufacturing improvements and adding experienced manufacturing leadership to support the transformation. Once fully implemented, the Company expects the high-flow production lines to support production volumes that are 25% to 30% higher than they were in 2025.

The Company now expects its 2026 earnings per share to be between $8.00 and $9.00, down between $1.50 and $2.50 from the Company's previous guidance. The Company expects net sales to be approximately $11.0 billion, compared to the Company's most recent estimate of $11.2 billion. The revised expectations reflect lower municipal fire apparatus and delivery vehicle production, offset in part by higher sales volume in the Access segment. The low-end of the range reflects the possibility that the Company does not receive an additional NGDV order in 2026, which could impact earnings by up to $0.50 per share.

The earnings per share estimate includes after-tax charges of $0.70 per share related to amortization of purchased intangible assets and $0.07 per share related to a reserve on a note receivable associated with a prior divestiture, partially offset by a $0.27 per share benefit resulting from the expiration of a foreign anti-hybrid tax matter. Excluding these items, the Company now expects 2026 adjusted earnings per share to be between $8.50 and $9.50.

The Company now expects Access segment 2026 sales to be approximately $4.8 billion and operating income margin to be approximately 9.4% compared to the Company's initial estimate of $4.2 billion and 9.7%, respectively.

The Company now expects Vocational segment 2026 sales to be approximately $3.7 billion and operating income margin to be approximately 11.4% compared to the Company's initial estimate of $4.2 billion and 16.1%, respectively.

The Company now expects Transport segment 2026 sales to be approximately $2.3 billion compared to the Company's initial estimate of $2.5 billion. The Company continues to expect Transport segment 2026 operating income margin of approximately 4.0%.

Net operating costs for Corporate and other are expected to be approximately $178 million in 2026, including approximately $3 million of intangible asset amortization.

RESULTS OF OPERATIONS

CONSOLIDATED RESULTS

The following table presents consolidated results (in millions):

Third Quarter 2026 Compared to 2025

Consolidated net sales increased primarily due to higher sales volume in the Access segment ($199 million) and improved pricing in all three segments ($74 million), offset by lower sales volume in the Vocational segment ($98 million).

The decrease in consolidated gross margin was primarily due to adverse sales mix (240 basis points) and higher material costs (210 basis points), including higher tariff and freight costs, offset in part by improved pricing (190 basis points) and lower warranty costs (40 basis points).

The increase in consolidated selling, general and administrative expenses was primarily the result of higher employee compensation ($14 million), including the impact of higher healthcare costs, increased bad debt expense ($10 million), which primarily related to a reserve on a note receivable associated with a prior divestiture, and increased legal and professional fees ($4 million).

The decrease in consolidated operating income was primarily due to adverse sales mix ($68 million), higher material costs ($57 million) and higher selling, general and administrative expenses ($33 million), offset in part by improved pricing ($74 million) and the impact of higher gross income associated with higher sales volume ($22 million).

First Nine Months 2026 Compared to 2025

Consolidated net sales increased primarily due to higher sales volume in the Access segment ($257 million), improved pricing across all three segments ($174 million), higher sales volume in the Transport segment ($52 million) and favorable currency impacts ($23 million), offset in part by lower sales volume in the Vocational segment ($211 million).

The decrease in consolidated gross margin was primarily due to adverse sales mix (200 basis points), increased material costs (140 basis points), including higher tariff and freight costs, and higher manufacturing overhead costs (80 basis points), offset in part by improved pricing (160 basis points).

The increase in consolidated selling, general and administrative expenses was primarily the result of higher employee compensation ($29 million), increased bad debt expense ($10 million), which primarily related to the reserve on the note receivable associated with a prior divestiture, and increased legal and professional fees ($7 million).

The Company recorded an intangible asset impairment related to Pratt Miller of $6 million during the second quarter of 2025.

The decrease in consolidated operating income was primarily due to adverse sales mix ($164 million), increased material costs ($146 million), higher manufacturing overhead costs ($62 million) and higher selling, general and administrative expenses ($47 million), offset in part by improved pricing ($174 million) and the impact of higher gross income associated with higher sales volume ($36 million).

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

Third Quarter 2026 Compared to 2025

Miscellaneous, net primarily relates 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 third quarter of 2026 included an indemnification recovery of $5 million arising from the original purchase of a federal income tax credit upon the recapture of the credit in the quarter and income related to the non-service portion of the Company's pension plans of $2 million. Results for the third quarter of 2025 included unrealized gains related to investments of $3 million and income related to the non-service portion of the Company's pension plans of $2 million.

The effective tax rate in the third quarter of 2026 included a net discrete tax charge of $1 million, including a $5 million charge related to the recapture in the quarter of the purchased federal income tax credit, offset in part by a $4 million benefit related to the expiration of the statute of limitations for a foreign anti-hybrid tax matter. The effective tax rate in the third quarter of 2025 included net discrete tax benefits of $22 million, including $19 million related to the release of uncertain tax positions on the resolution of a multi-year federal income tax audit.

First Nine Months 2026 Compared to 2025

Miscellaneous, net primarily relates 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 2026 included income related to the non-service portion of the Company's pension plans of $6 million and the federal income tax credit indemnification recovery of $5

million, partially offset by a $5 million unrealized loss on investments. Results for the first nine months of 2025 included unrealized 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 2026 included net discrete tax benefits of $18 million, primarily related to $21 million of benefits related to the foreign anti-hybrid tax matter, partially offset by the $5 million charge related to the recapture of the purchased federal income tax credit. The effective tax rate in the first nine months of 2025 included net discrete tax benefits of $20 million, including $19 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.

SEGMENT RESULTS

Access

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

Third Quarter 2026 Compared to 2025

Access segment net sales increased primarily due to higher sales volumes in North America ($207 million) and improved pricing ($31 million).

The decrease in gross margin in the Access segment was primarily due to higher material costs (210 basis points), including higher tariff and freight costs, and adverse customer sales mix (150 basis points), offset by lower manufacturing overhead costs (150 basis points) due in part to higher absorption of fixed costs as a result of higher production, and improved pricing (170 basis points).

The increase in selling, general and administrative expenses in the Access segment was primarily due to higher incentive compensation accruals ($6 million).

The increase in operating income in the Access segment was primarily due to the impact of higher gross income associated with higher sales volume ($54 million) and improved pricing ($31 million), offset in part by higher material costs ($32 million), adverse customer sales mix ($19 million) and higher incentive compensation accruals ($12 million).

First Nine Months 2026 Compared to 2025

Access segment net sales increased primarily as a result of higher sales volume in North America ($253 million), improved pricing ($54 million) and favorable currency impacts ($23 million).

The decrease in gross margin in the Access segment was primarily due to higher material costs (230 basis points), including higher tariff and freight costs, and adverse customer and product sales mix (200 basis points), offset in part by improved pricing (110 basis points).

The increase in selling, general and administrative expenses in the Access segment was primarily due to higher incentive compensation accruals ($7 million) and higher employee compensation ($7 million).

The decrease in operating income in the Access segment was primarily due to higher material costs ($86 million), adverse customer and product sales mix ($75 million), higher selling, general and administrative expenses ($16 million) and higher litigation costs ($10 million), offset in part by the impact of higher gross income associated with higher sales volume ($72 million) and improved pricing ($54 million).

Vocational

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

Third Quarter 2026 Compared to 2025

Vocational segment net sales decreased due to lower sales volume ($98 million) offset in part by improved pricing ($30 million). Municipal fire apparatus sales volume was down $75 million compared to the third quarter of 2025 as Pierce experienced production challenges associated with initiatives to modernize manufacturing processes. Refuse and recycling collection vehicle sales volume was down $23 million, consistent with softer market conditions experienced earlier in the year.

The decrease in gross margin in the Vocational segment was primarily attributable to overhead costs related to the Company's municipal fire apparatus production initiatives (120 basis points) and adverse sales mix (80 basis points).

The increase in selling, general and administrative expenses in the Vocational segment was primarily due to increased bad debt expense ($9 million), which primarily related to the reserve on the note receivable associated with a prior divestiture, and increased legal and professional fees ($5 million).

The decrease in operating income in the Vocational segment was primarily due to the impact of lower gross income associated with lower sales volume ($30 million), higher material costs ($24 million), higher selling, general and administrative expenses ($15 million) and overhead costs related to the Company's municipal fire apparatus production initiatives ($11 million), offset in part by improved pricing ($30 million).

First Nine Months 2026 Compared to 2025

Vocational segment net sales decreased due to lower sales volume ($211 million) offset in part by improved pricing ($98 million). The decrease in sales volume was primarily a result of lower refuse and recycling collection vehicle sales volume ($122 million) consistent with softer market conditions experienced earlier in the year and lower municipal fire apparatus sales volume ($100 million) reflecting production challenges associated with the initiatives to modernize manufacturing.

The decrease in gross margin in the Vocational segment was primarily attributable to higher material costs (210 basis points), adverse sales mix (130 basis points), including unfavorable product sales mix as well as the transition to a dealer network for non-fleet sales of refuse and recycling collection vehicles, overhead costs related to the Company's municipal fire apparatus production initiatives (120 basis points) and higher manufacturing overhead costs (70 basis points), due in part to lower absorption of fixed costs as a result of lower production, offset in part by improved pricing (250 basis points).

The increase in selling, general and administrative expenses in the Vocational segment was primarily due to increased bad debt expense ($9 million), which primarily related to the reserve on the note receivable associated with a prior divestiture, and increased legal and professional fees ($7 million).

The decrease in operating income in the Vocational segment was primarily a result of the impact of lower gross income associated with lower sales volume ($64 million), higher material costs ($55 million), overhead costs related to the Company's municipal fire apparatus production initiatives ($32 million), adverse sales mix ($30 million), higher selling, general and administrative expenses ($22 million) and higher manufacturing overhead costs ($16 million), offset in part by improved pricing ($98 million).

Transport

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

Third Quarter 2026 Compared to 2025

Transport segment net sales decreased primarily due to the absence of a license of Joint Light Tactical Vehicle (JLTV) intellectual property to the U.S. government that occurred in the third quarter of 2025 ($25 million).

The decrease in gross margin in the Transport segment was primarily due to the absence of the JLTV license (360 basis points), adverse product sales mix (330 basis points), reflecting a lower mix of defense vehicles, and higher manufacturing overhead (140 basis points), due in part to increased training costs and lower absorption of fixed costs as a result of lower production, partially offset by improved pricing (190 basis points) as the Company transitions defense vehicle production to newer contracts with more favorable pricing, and lower warranty expense (180 basis points).

The decrease in operating income in the Transport segment was primarily due to the absence of the JLTV license ($25 million), adverse product sales mix ($19 million) and higher manufacturing overhead costs ($7 million), partially offset by improved pricing ($13 million) and lower warranty expense ($11 million).

First Nine Months 2026 Compared to 2025

Transport segment net sales increased due to higher NGDV sales volume ($431 million) and improved pricing as the Company transitions to newer contracts with more favorable pricing ($22 million), offset in part by lower defense sales volume ($379 million).

The decrease in gross margin in the Transport segment was primarily due to adverse product sales mix (150 basis points), reflecting a lower mix of defense vehicles, and higher manufacturing overhead (130 basis points), driven by increased training and workforce transition costs as well as lower absorption of fixed costs as a result of lower production and the absence of the JLTV license (130 basis points), partially offset by lower unfavorable cumulative catch-up adjustments on contracts (110 basis points) and improved pricing (110 basis points).

The decrease in operating income in the Transport segment was primarily due to adverse product sales mix ($25 million), the absence of the JLTV license ($25 million) and higher manufacturing overhead costs ($22 million), offset in part by improved

pricing ($22 million), lower unfavorable cumulative catch-up adjustments on contracts ($18 million) and the impact of higher gross income associated with higher sales volume ($13 million).

Corporate and Other

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

Third Quarter 2026 Compared to 2025

Net operating costs for corporate and other increased primarily due to the timing of healthcare charges between Corporate and the segments.

First Nine Months 2026 Compared to 2025

Net operating costs for corporate and other decreased primarily due to improved operating results at Pratt Miller ($7 million) and the non-recurrence of an intangible asset impairment ($6 million), partially offset by the timing of healthcare charges between Corporate and the segments ($11 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, 2026, including $558.0 million of cash and cash equivalents and $1.58 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, 2026 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 capital resources and liquidity position that the Company believes is adequate to meet its projected needs.

Financial Condition

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

The Company's ratio of debt to total capitalization of 19.5% at September 30, 2026 remained within its targeted range.

The Company's goal is to maintain an investment-grade credit rating. The rating agencies periodically update the Company's credit ratings as events or changes in economic conditions occur. At September 30, 2026, 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:

Subsequent to September 30, 2026, Moody's Investors Service, Inc. upgraded the Company's credit rating to Baa2.

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 43 days at December 31, 2025 to 48 days at September 30, 2026. Days sales outstanding for segments other than the Transport segment increased from 51 days at December 31, 2025 to 56 days at September 30, 2026 primarily due to the mix of segment sales. Consolidated inventory turns (defined as "Cost of Sales" on an annualized basis, divided by the average "Inventory" at the past five quarter end periods) increased from 3.6 times at December 31, 2025 to 3.8 times at September 30, 2026 due to better inventory management in the Access segment. 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, 2025 to 58 days at September 30, 2026 primarily due to more timely invoice processing outside of the year-end holidays.

Cash Flows

Operating Cash Flows

Operating activities provided cash of $533.2 million in the first nine months of 2026 compared to $183.3 million during the first nine months of 2025. The improvement in operating cash flow reflected more disciplined working capital management related to lower inventory levels and higher customer advances. The Company now expects cash flow from operations to be between $780 million and $880 million in 2026.

Investing Cash Flows

Investing activities used cash of $80.0 million in the first nine months of 2026 compared to $136.3 million during the first nine months of 2025. Investing cash flows included higher proceeds from the sale of equipment held for rental, which increased by $40.4 million compared to the first nine months of 2025. Through the first nine months of 2026, the Company used $100.0 million for capital expenditures, a decrease of $5.6 million compared to the first nine months of 2025. The Company expects that it will invest $180 million on capital expenditures in 2026.

Financing Cash Flows

Financing activities used cash of $371.9 million in the first nine months of 2026 compared to $51.6 million during the first nine months of 2025. 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. In the first nine months of 2026, the Company repurchased 1,526,888 shares of its Common Stock at an aggregate cost of $221.3 million. As of September 30, 2026, the Company had approximately 6.4 million shares of Common Stock remaining under its repurchase authorization. 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.

Liquidity

Credit Agreements

On March 16, 2026, the Company entered into a Fourth Amended and Restated Credit Agreement with various lenders (the "Credit Agreement"). The Credit Agreement provides for an unsecured revolving credit facility (the "Revolving Credit Facility")

with a maximum aggregate availability of $1.60 billion that matures in March 2031. At September 30, 2026, there were no borrowings under the Revolving Credit Facility and specified outstanding letters of credit of $17.3 million reduced available capacity under the Revolving Credit Facility to $1.58 billion.

Under the Credit Agreement, the Company is obligated to pay (i) an unused commitment fee ranging from 0.080% to 0.200% 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.

In March 2025, the Company entered into a credit agreement with various lenders to borrow funds under a $500 million unsecured term loan (as amended, the "Term Loan") that matures in March 2027. In March 2026, the Company executed a First Amendment to the Term Loan credit agreement to conform certain defined terms of the Term Loan to those contained in the Credit Agreement.

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, 2026 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 million of 4.60% unsecured senior notes due May 15, 2028 (the "2028 Senior Notes"). In February 2020, the Company issued $300 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 12 of the Notes to Condensed Consolidated Financial Statements for additional information regarding the Company's debt as of September 30, 2026.

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, 2025 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 13% of the Company's net sales in the first nine months of 2026. 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, 2026 increased 10.6% to $15.1 billion compared to $13.7 billion at September 30, 2025. Access segment backlog increased 268.2% to $2.7 billion at September 30, 2026 compared to $721 million at September 30, 2025 due in part to the receipt of 2027 orders from select national rental companies, which the Company believes is coming from strong demand for construction equipment to support data centers and megaprojects. Vocational segment backlog increased 5.3% to $6.7 billion at September 30, 2026 compared to $6.4 billion at September 30, 2025 due to improved demand

for airport products. Unit backlog for municipal fire apparatus as of September 30, 2026 was down 0.7% compared to September 30, 2025. Unit backlog for refuse and recycling collection vehicles as of September 30, 2026 was down 10.3% compared to September 30, 2025. Transport segment backlog decreased 12.8% to $5.6 billion at September 30, 2026 compared to $6.5 billion at September 30, 2025, primarily reflecting NGDV production.

Backlog represents the dollar amount of revenues that the Company anticipates from customer contracts that have been awarded. 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. Approximately 84% of the Company's September 30, 2026 backlog is not expected to be filled in 2026.

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, 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: