Oshkosh (OSK) Risk Analysis

We are dependent on U.S. and foreign government contracts for a significant portion of our business. Approximately 20% of our net sales in 2025 were to the U.S. government. That business is subject to the following risks, among others, that could have a material adverse effect on our operating performance: - The Weapon Systems Acquisition Reform Act and the Competition in Contracting Act require competition for U.S. defense programs in most circumstances. Competition for U.S. Department of Defense (DoD) programs that we currently have has resulted and could in the future result in the U.S. government awarding future contracts to another manufacturer or could result in the U.S. government awarding the contracts to us at lower prices and operating margins than we experience under the current contracts. - Competitions for U.S. government contracts are intense, and we cannot provide any assurance that we will be successful in current or future procurement competitions in which we participate. In addition, the U.S. government has become more aggressive in seeking to acquire the design rights to our current and potential future programs to facilitate competition for manufacturing our vehicles. - Most of our contracts with the DoD are multi-year firm, fixed-price contracts. These contracts typically contain annual sales price increases. We attempt to limit the risk related to raw material price fluctuations for major defense components by obtaining firm pricing from suppliers at the time a contract is awarded. However, if these suppliers do not honor their contracts, then we could face profit margin pressure. Furthermore, if our actual costs on any of these contracts exceed our projected costs, it could result in profits lower than historically realized or than we anticipate. - We must spend significant sums on product development and testing, bid and proposal activities, and pre-contract engineering, tooling and design activities in competitions to have the opportunity to be awarded these contracts. Despite our investments, we may not receive the contracts that we expect. - Our Transport segment results may fluctuate significantly from time to time as a result of the start and completion of existing and new domestic and international contract awards that we may receive. A majority of our contracts in the Transport segment are large in size and require significant personnel and production resources, and when our government customers allow such contracts to expire or significantly reduce their vehicle requirements under such contracts, we must make adjustments to personnel and production resources. - Our business is susceptible to changes in the annual U.S. defense budget. Such changes may reduce revenues that we expect, especially in light of federal budget pressures, lower levels of U.S. ground troops deployed in foreign conflicts and the level of defense funding that will be allocated to the DoD's tactical wheeled vehicle strategy generally. - Certain of our U.S. government contracts could be delayed or terminated, and all such contracts expire in the future and may not be replaced, which could reduce revenues that we expect under the contracts and negatively affect margins. - The funding of DoD programs is subject to an annual congressional budget authorization and appropriations process. In years when the U.S. government has not completed its budget process before the end of its fiscal year, government operations are typically funded pursuant to a "continuing resolution," which allows federal government agencies to operate at spending levels approved in the previous budget cycle but does not authorize new spending initiatives. When the U.S. government operates under a continuing resolution, delays can occur in the procurement of the products, services and solutions that we provide and may result in new initiatives being delayed or canceled, or funds could be reprogrammed away from our programs to pay for higher priority operational needs. Furthermore, in years when the U.S. government fails to complete its budget process or to provide for a continuing resolution, a federal government shutdown may result. A government shutdown could result in the delay or cancellation of key programs, which could have a negative effect on our cash flows and adversely affect our future results. In addition, payments to contractors for services performed during a federal government shutdown may be delayed, which would have a negative effect on our cash flows. - As a U.S. government contractor, our DoD contracts and systems are subject to audit and review by the Defense Contract Audit Agency and the Defense Contract Management Agency. These agencies review our performance under our U.S. government contracts, our cost structure and our compliance with laws and regulations applicable to U.S. government contractors. Systems that are subject to review include, but are not limited to, our accounting systems, estimating systems, material management systems, earned value management systems, purchasing systems and government property systems. If improper or illegal activities, errors or system inadequacies come to the attention of the U.S. government, as a result of an audit or otherwise, then we may be subject to civil and criminal penalties, contract adjustments and/or agreements to upgrade existing systems as well as administrative sanctions that may include the termination of our U.S. government contracts, forfeiture of profits, suspension of payments, fines and, under certain circumstances, suspension or debarment from future U.S. government contracts for a period of time. Whether or not illegal activities are alleged and regardless of materiality, the U.S. government also has the ability to decrease or withhold certain payments when it deems systems subject to its review to be inadequate. These laws and regulations affect how we do business with our customers and, in many instances, impose added costs on our business. - Defense contract awards that we receive may be subject to protests or lawsuits by competing bidders, which protests or lawsuits, if successful, could result in the U.S. government customer revoking part or all of any contracts it awards to us and our inability to recover amounts we have expended in anticipation of initiating production under any such contract. - Although we believe there is demand from international customers for our tactical wheeled vehicles, there is no assurance that additional orders will materialize. - In January 2026, the U.S. President issued an executive order directing the DoD and other defense-related agencies to prioritize the warfighter in procurement decisions, including increased emphasis on speed of delivery, affordability, domestic sourcing and operational readiness. While intended to enhance military effectiveness, this directive could result in changes to acquisition strategies, contract structures, technical requirements, pricing expectations or supplier selection criteria. Such changes could increase competition, reduce margins, accelerate delivery schedules or require additional capital investments, which could in turn have a material adverse effect on our net sales, financial condition, results of operations and/or cash flows. Under the executive order, the DoD could also impose conditions or otherwise create disincentives that could limit our ability to repurchase shares of our Common Stock or to pay dividends to our shareholders.

Significant consolidation in our customer and dealer bases could enhance the influence of customers and dealers over our business strategy. Intensified consolidation in the industries we serve may provide our customers and dealers with additional leverage in negotiations around our product and service offerings. For example, the Access segment's largest customers are rental companies that serve the end user equipment rental markets. Should access equipment customers consolidate through mergers and acquisitions, or should larger access equipment customers continue to grow through the acquisition of smaller rental companies, the buying influence of access equipment customers may grow and may impact the competitive environment within the industry. Similarly, the municipal fire apparatus market distribution channel is comprised of a relatively small number of dealers that, if they were to consolidate, may create additional pricing pressure, as well as concentrated credit exposures, as our reliance on a smaller group of larger individual dealerships increases. If that trend in customer and dealer consolidation continues, it could have an unfavorable impact on our pricing and product margins.

Expanding international operations and sales is a part of our growth strategy. International operations and sales are subject to various risks, including political, religious and economic instability, the imposition of foreign tariffs upon our products (which include tariffs in response to tariffs that the U.S. imposes) and other trade barriers, the impact of foreign government regulations and the effects of income and withholding taxes, sporadic order patterns, governmental expropriation, uncertainties or delays in collection of accounts receivable and differences in business practices. Among other things, there are additional logistical requirements associated with international sales, which increase the amount of time between the completion of production and our ability to recognize related revenue. In addition, expansion into foreign markets requires the establishment of distribution networks and may require modification of products to meet local requirements or preferences. Establishment of distribution networks or modification to the design of our products to meet local requirements and preferences may take longer or be more costly than we anticipate and could have a material adverse effect on our ability to achieve international sales growth. In addition, our entry into certain markets that we wish to enter may require us to establish a joint venture or face competition from foreign state-backed competitors. Identifying an appropriate joint venture partner and creating a joint venture could be more time consuming, more costly and more difficult than we anticipate. Local government policy and influence can also impact international competition, such as in China where a state-controlled economy favors local market participants.

The United States has announced changes to U.S. trade policies, including increasing tariffs on imports and potentially renegotiating or terminating existing trade agreements. The exact scope and duration of any such tariffs that have been or will ultimately be implemented, or retaliatory tariffs that have been or could be implemented by other countries on U.S. exports, is not known, and the impacts on our business are uncertain. Tariffs implemented by the U.S. during 2025 cost us approximately $35 million in 2025, and we estimate that will increase to approximately $200 million in 2026. Geopolitical tensions and trade wars can disrupt supply chains and increase the cost of our products, which could cause our products to be more expensive for customers. Countries have adopted restrictive trade measures such as tariffs, taxation, foreign exchange controls, capital controls and controls on imports or exports of goods, technology or data, any of which could adversely affect our operations and supply chain or limit our ability to offer our products and services as intended. Countries may implement additional restrictive trade actions, including tariffs, export controls, sanctions, legislation favoring domestic investment and other actions impacting the import and export of goods in jurisdictions in which we or our suppliers operate. These kinds of restrictions could be adopted with little to no advance notice and could escalate in response to tariffs or restrictions imposed by the U.S. or other countries, and we may not be able to effectively mitigate any adverse impacts from such measures. Changes in laws or regulations governing foreign trade, particularly in countries where we manufacture products or from which we import products or raw materials, either directly or through our suppliers, including materials subject to China's export control requirements such as rare earth minerals, could have a material adverse effect on our competitive position, results of operations, financial condition, and/or cash flows. Uncertainty surrounding trade or other international disputes has adversely impacted, and could continue to adversely impact, customer confidence, inflation, interest rates and the level of investments by our customers and on the economy in general. Any of these events could increase the cost of our products, reduce demand for our products, create disruptions to supply chains or impair our ability to effectively operate and compete in countries where we do business.

Although we sell the majority of our products directly to the end user, we market, sell and service products through a network of independent dealers in the Vocational segment and in a limited number of markets in the Access segment. As a result, our business with respect to these products is influenced by our ability to establish and manage new and existing relationships with dealers. We or a dealer may choose to terminate the relationship as a result of difficulties that our independent dealers experience in operating their businesses due to economic conditions or other factors or as a result of an alleged failure by us or an independent dealer to comply with the terms of our dealer agreement. We do not believe our business is dependent on any single dealer, the loss of which would have a sustained material adverse effect upon our business. However, disruption of dealer coverage within a specific state or other geographic market could cause difficulties in marketing, selling or servicing our products and have an adverse effect on our net sales, financial condition, results of operations and/or cash flows. In 2024, we transitioned our non-fleet refuse and recycling collection vehicle business from factory direct sales to a dealer network. There is no assurance that the dealers will be successful in selling refuse and recycling collection vehicles. If the transition of our refuse and recycling collection vehicle business is not as successful as we anticipate, it could have an adverse effect on our net sales, financial condition, results of operations and/or cash flows. In addition, our ability to terminate our relationship with a dealer is limited due to state dealer laws, which generally provide that a manufacturer may not terminate or refuse to renew a dealer agreement unless it has first provided the dealer with required notices. Under many state laws, dealers may protest termination notices or petition for relief from termination actions. Responding to these protests and petitions may cause us to incur costs and, in some instances, could lead to litigation resulting in lost opportunities with other dealers or lost sales opportunities, which may have an adverse effect on our net sales, financial condition, results of operations and/or cash flows.