Greetings, and welcome to the Oshkosh Corporation Reports Fiscal 2022 Second Quarter Results. As a reminder, this conference is being recorded. I would now like to hand the call over to Pat Davidson, Senior VP of Investor Relations for Oshkosh Corporation. Thank you, Mr. Davidson. You may begin.

Good morning, and thanks for joining us. Earlier today, we published our second quarter 2022 results. A copy of the release is available on our website at oshkoshcorp.com. Today's call is being webcast and is accompanied by a slide presentation, which includes a reconciliation of GAAP to non-GAAP financial measures that we will use during this call and is also available on our website. The audio replay and slide presentation will be available on our website for approximately 12 months. Please refer now to Slide 2 of that presentation. Our remarks that follow, including answers to your questions, contain statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks that could cause actual results to be materially different from those expressed or implied by such forward-looking statements. These risks include, among others, matters that we have described in our Form 8-K filed with the SEC this morning and other filings we make with the SEC. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all. As a reminder, we changed our fiscal year to align with a calendar year effective January 1, 2022, and all comparisons during this call to the prior year quarter are to the quarter ended June 30, 2021. Our presenters today include John Pfeifer, President and Chief Executive Officer; and Mike Pack, Executive Vice President and Chief Financial Officer. Please turn to Slide 3, and I'll turn it over to you, John.

Thank you, Pat, and good morning, everyone. Oshkosh has a strong long-term outlook, healthy order rates, and a robust backlog. Like many companies across the globe, we are facing near-term supply chain constraints and inflation challenges. We remain laser-focused on mitigating these impacts and have continued to raise prices in the current inflationary environment. We believe these increases will become more impactful in the second half of 2022. While these challenges have lingered longer than expected, we remain confident that they will subside over time. Our strong outlook is driven by robust demand across our end markets. New technology and innovation, aged fleets across our non-defense segments, and new contract wins are notable along with other drivers that underpin solid demand. And we believe we are in an outstanding position to leverage this solid demand to drive accelerated growth over the next several years as we highlighted at our recent Investor Day. Access equipment orders were strong, and we have the highest backlog in the history of JLG. This is driven by aged fleets, high utilization rates, and many large construction projects in the planning and execution stages. And keep in mind, infrastructure spending tied to the Infrastructure Investment and Jobs Act, which we expect to be a further demand catalyst for access equipment, has not yet begun at scale. In our defense business, we have two key contracts that drive growth into the future with NGDV and Stryker MCWS. We expect to begin shipping NGDV late next year. The USPS contract is expected to contribute over $1 billion of revenue annually when we achieve full rate production. And as you may have recently heard, USPS will increase the ratio of NGDV BEVs to 50% on the initial order of 50,000 units. This is great news for all parties. North American demand for fire trucks has returned to well over 5,000 units annually, the highest industry level since prior to the Great Recession, and our Pierce brand remains the market leader. The fire truck market is supported by strong municipal funding and aged fleets that we expect will be refreshed over the next several years. In our Commercial segment, refuse collection vehicles are in high demand as our customers have returned to higher CapEx spending levels following a pause in capital spending during the height of the pandemic. And finally, we are in the midst of a significant technology investment cycle, and we expect customers will be transitioning to our many electrified product offerings in the coming years as well as deploying autonomous functionality. In early May, we introduced our 2025 revenue and EPS goals, and we believe we have a solid path forward to achieve these goals. Of course, we need to execute through the near-term challenges, which we believe we will. Oshkosh team members continue to persevere to deliver our purpose-built vehicles and aftermarket parts and services. For the quarter, we reported a year-over-year sales decline of 6.5% with earnings per share of $0.41, both of which are below our expectations. We have strong backlogs. So the decline in sales versus our expectations was driven solely by supply chain challenges as parts scarcity limited our ability to efficiently complete and ship units, particularly in the Fire & Emergency segment. We also experienced unfavorable cumulative catch-up adjustments in the Defense segment and recognized an unfavorable non-cash mark-to-market adjustment in our long-term investment in Microvast during the quarter. Sequentially, we made significant progress to overcome elevated input costs through our pricing actions. In light of these constraints in the second quarter as well as ongoing supply chain challenges and inflationary pressures, we are updating our full year outlook for revenue and earnings per share. We now believe that 2022 revenue and adjusted EPS will be in the range of $8.3 billion and $3.50, respectively. Before we discuss our segments in more detail, I want to highlight our recently announced commitment to establish enterprise-wide science-based targets to reduce greenhouse gas emissions. We are committed to developing a plan that will be constructive for our company, our customers, and our communities around the globe. We take this responsibility very seriously. Please turn to Slide 4, and we'll get started on our segment updates with access equipment. Our access equipment team delivered meaningful performance improvement during the second quarter compared to the first quarter. Sequentially, we grew revenue by over 10%, and we achieved a 630 basis point improvement in operating margin despite inflationary pressures and on-time delivery metrics that remain well off historical norms. I'm proud of the efforts of our people as they work to secure materials and find alternative supply sources to allow us to keep our production lines running. We are continuing to work towards delivering higher volumes in the second half of the year and are taking necessary actions to increase our production capacity, including adding new production lines in Pennsylvania and Tennessee as well as onboarding additional suppliers. As mentioned in my opening remarks, demand for access equipment remains very high as reflected in our robust backlog of just under $4 billion. Orders were strong once again at nearly $1 billion in the quarter. We already have meaningful backlog for 2023 and have good visibility to customer requirements beyond the orders and backlog based on customer discussions over the past quarter. As a reminder, prices are not fixed for 2023 deliveries, so we will continue to monitor inflation dynamics and adjust pricing as necessary. To that end, we recently announced an additional 5% surcharge that takes effect for all shipments in North America beginning September 1; the additional surcharge is necessary as a result of persistent inflation. Please turn to Slide 5, and I’ll review our Defense segment. Revenue for the Defense segment were lower in the quarter versus the prior year due to lower tactical wheeled vehicle volumes resulting from reduced Department of Defense budgets that we’ve been expecting for the last couple of years. Margins were lower than our expectations as a result of unfavorable cumulative catch-up adjustments driven by changes in inflationary projections. Mike will provide further color on the cumulative catch-up adjustments in his section. Moving to the JLTV recompete, the Army recently pushed the bid submission date to mid-August 2022. As a result, we expect the final decision in early 2023. We remain highly focused on submitting a winning bid for this key program and will highlight our strengths in manufacturing and technology to our customer. We also remain active on a number of additional program competitions, such as OMFV, CATV, and EHET, and believe we are well positioned to win multiple adjacent programs to bolster our already strong business. The strength of our key programs was evident this past quarter as we received orders for the JLTV Stryker MCWS and FHTV programs. We are also receiving elevated inquiries from Eastern European nations for our tactical wheeled vehicles as the war in Ukraine continues. There is a growing interest from numerous countries as they increase their defense spending. Any new foreign military sales to these countries will likely begin in late 2023 or 2024. And finally, significant progress continues on our United States Postal Service, NGDV program. We were delighted to host a contingent of USPS professionals including postal carriers in June for a program review and test drive. We are pleased with our progress, and we remain on track to begin delivering vehicles in the fourth quarter of 2023. Let's turn to Slide 6 for a discussion of the Fire & Emergency segment. Demand remains very strong in the Fire & Emergency segment, but supply chain disruptions negatively impacted our ability to efficiently produce and deliver trucks during the quarter. This led to a nearly 9% sales decrease compared to the prior year. Operating margins were down as a result of lower volume and manufacturing inefficiencies tied to these supply chain disruptions and labor availability. Supply chain on-time delivery metrics weakened over the course of the quarter, making it clear that volume will be impacted for the year, which was not our expectation. This is reflected in our revised guidance. Orders remained strong and were up 125% compared to the prior year, highlighting excellent demand for our products. As a reminder, we are in the midst of a capacity expansion for custom fire trucks in Appleton, Wisconsin, and we expect to benefit from this additional capacity in 2023. During the quarter, we announced our acquisition of Canadian fire truck manufacturer, MAXIMETAL, an organization known for quality, reliability, and outstanding customer service and support. We expect to benefit from MAXIMETAL's experience and leadership as we grow our presence in Canada. Their culture and customer focus align exceptionally well with Fire & Emergency and our dealer network. Finally, on our last quarterly call, we highlighted plans to take our Volterra electric ARFF unit to several airports around Europe for customer demonstrations. The response has been overwhelmingly positive as multiple airport authorities have expressed strong interest in ordering our innovative electric ARFF. We are not yet accepting orders for the Volterra ARFF but expect we will begin doing so shortly. Please turn to Slide 7, and we'll talk about our Commercial segment. In the Commercial segment, revenue was up sequentially and flat year-over-year. As a reminder, commercial is our biggest consumer of third-party chassis and availability remains constrained. In addition, we have been impacted by several other components that have further limited our ability to produce. Nonetheless, I am pleased with the efforts of our team at commercial to manage through the supply chain variability and keep our production lines running. Demand for RCVs continues to be strong. During the pandemic, many customers paused RCV purchases leading to elevated fleet ages. We are also seeing strong market fundamentals in the broader environmental services space. We believe both of these factors are contributing to strong demand for our innovative products. We are working closely with our customers on requirements and have partially opened our order book for 2023 as we continue to monitor input costs and inflationary dynamics. In May, we experienced strong attendee enthusiasm for our vehicles at both the Advanced Clean Transportation Expo and Waste Expo. We displayed our electric front discharge concrete mixer at the Advanced Clean Transportation Expo, while we showed our recently acquired CartSeeker Autonomous technology at Waste Expo. We believe our technology-enhanced new products will continue to strengthen our position as the industry leader. With that, I'm going to turn it over to Mike to discuss our results in more detail and our updated expectations for 2022.

Thanks, John, and good morning, everyone. Please turn to Slide 8. As John discussed, our results did not meet our expectations for the quarter. There are three principal factors that drove the shortfall. First, revised third-party cost projections are indicating persistent inflation and therefore, higher cost expectations to complete our large defense tactical wheeled vehicle backlogs. This change in expectations yielded large unfavorable cumulative catch-up adjustments in the Defense segment of approximately $25 million in the quarter to adjust our life-to-date margins for our tactical wheeled vehicle contracts. While these adjustments had a large impact in the quarter, our estimated contract margins are only 30 basis points lower than prior expectations. Second, as previously mentioned, Fire & Emergency has been negatively impacted by supply chain delivery challenges for key components, notably axles and other powertrain components. This drove lower revenues in the second quarter in addition to labor inefficiencies, resulting in a $15 million operating income shortfall versus our expectations for the segment. Finally, with public equity markets down significantly and technology stocks even more, we recognized an unfavorable non-cash mark-to-market adjustment of $11 million for investment in Microvast during the quarter. Importantly, we expect to benefit from our joint development agreement with Microvast on key electrification projects. Conversely, access equipment and commercial outperformed our prior operating income expectations despite lower-than-expected sales. We delivered strong sequential improvement in the second quarter at access equipment with revenue growth of 10.6% and a 630 basis point improvement in operating margin versus the first quarter, largely driven by increased price realization and volume. Moving to a comparison versus the prior year, consolidated sales for the quarter were $2.07 billion or $143 million lower than the prior year quarter, representing a 6.5% decrease. The consolidated sales decline was largely driven by a $171 million decline in Defense segment sales due to lower tactical wheeled vehicle volumes and lower Fire & Emergency sales volume as a result of the supply chain disruptions we are facing, partially offset by the benefit of increased pricing. Consolidated operating income for the second quarter was $69.4 million or 3.4% of sales compared to adjusted operating income of $205.1 million or 9.3% of sales in the prior year quarter. Consolidated operating income decreased due to the higher material and freight costs, lower sales volume, decreased manufacturing efficiencies caused by part shortages, unfavorable cumulative catch-up adjustments in defense, and this was offset in part by increased pricing and lower incentive compensation costs. Our consolidated price cost headwind in the quarter came in slightly higher than our expectations at $75 million, which impacted earnings per share by $0.83. EPS for the quarter was $0.41 compared to adjusted EPS of $2.09 in the prior year quarter. EPS was impacted versus the prior year by lower operating income and the Microvast mark-to-market adjustment. We repurchased approximately 757,000 shares of common stock for a total cost of $70 million during the quarter, consistent with our disciplined capital allocation approach. Please turn to Slide 9 for a discussion of our updated expectations for 2022. We're encouraged by robust demand for our products as evidenced by a record $13 billion backlog and are confident in our long-term outlook we shared at our Investor Day in May. In the near term, our April earnings guidance called for a significant ramp-up in revenue and earnings in the second half of the year. This was dependent upon inflation moderating and supply chain constraints stabilizing, which has not been the case. While we continue to realize the benefits of pricing, inflation has been higher than prior expectations in our non-defense segments. We're able to price for inflation, but there is a timing lag in realizing the benefit. Furthermore, significant supply chain disruptions continue despite relentless engagement with our supply base. These disruptions are reducing sales volume and increasing manufacturing inefficiencies, both of which are impacting our expectations for 2022. As a result of these factors, we do not expect to achieve our previous adjusted EPS range of $5 to $6 per share for the year. We now believe that revenues and EPS will be in the range of $8.3 billion and $3.50 per share, respectively. Our EPS could be lower if supply chain and inflation conditions worsen or higher if conditions improve. We're continuing to monitor the factors contributing to our revised outlook for the year, and we'll provide an update on our next earnings call. I'll turn it back over now to John for some closing comments.

While we are facing near-term supply chain challenges, the fundamentals in our end markets remain strong. We've taken numerous pricing and surcharge actions seeking to recover margins. Additionally, we have updated our production plans to better match the current environment and believe we have a realistic outlook for the back half of 2022. We expect to exit 2022 in a stronger position as we head into 2023. Okay, Pat, back to you.

Operator, please start the question-and-answer session of this call.

Our first questions come from Tami Zakaria with JPMorgan.

So my first question is, can you talk about what kind of pricing you realized in the second quarter? I think you mentioned 15% to 20% pricing in the last 12 months or so the last time we spoke. So what was it in the second quarter? And what's your expectation for the rest of the year?

Sure. In our non-Defense businesses, it was about 9% in the quarter. Sequentially, if you look at price cost, price cost improved by about $50 million. For the full year, we believe our prior expectation was price cost would be about $190 million at the midpoint. Now we now believe that's about $250 million that really the change is attributable to the cumulative catch-up adjustment we had in the quarter as well as some expectations of higher LIFO reserves at the end of the year with the more persistent inflation that we've seen.

Got it. And I'm sorry if I missed it. But besides commercial, have you started filling orders for next year for any other segment? And also, how are you approaching pricing for next year?

Yes, that’s a great question. Our order rates are very strong across all segments. In most areas, we're taking orders well into 2023, and in our Fire & Emergency segment, we're even taking orders for 2024. However, we haven't fully opened the order books for 2023 and 2024 yet, so our order numbers may appear somewhat artificially low. This is because we are being very cautious in how we structure and take orders for 2023. Nevertheless, we have a significant number of orders for 2023 across the access business, the Fire & Emergency business, and even the commercial business.

Our next question is come from the line of Seth Weber with Wells Fargo.

I wanted to inquire about the defense margin. I appreciate the insights on the $25 million catch-up. However, I'm trying to ensure I fully understand this. Do you anticipate that margins in the latter half of 2022 and moving forward will continue to return to the 6% to 7% range? Is that the correct way to view it? Or is there something else to consider? It seems that some of the volumes are a bit lower, and I'm trying to gauge what a normalized defense margin will look like in the future.

Yes. Maybe just to provide a little color, we have cumulative catch-up adjustments every quarter. It just so happened it was larger this quarter with the more persistent inflation. In other words, we're expecting sort of low single-digit incremental cost to complete our $3 billion backlog. So we end up recognizing on margin over the entire all of our contracts. We're about 80% complete. So we only see our margins actually being about 30 basis points lower than our prior expectation that when you have to catch up those contracts that are 80% complete, you can have a bigger impact in a quarter. So that's really what happened. So going forward. And again, one of the things we need to continue to watch is we're always looking at third-party forecasts to understand what we're seeing from an inflation perspective. And obviously, those have trended upward over time. But assuming no major movements in those third party or the outlook for inflation, versus where we're at today, we would expect that our margins would be within about 30 basis points of what they previously were. So we're not expecting a large margin impact going forward.

Okay, that's helpful. As a follow-up, could you share your thoughts on the recent news article regarding the U.S. Postal Service and the NGDV? I'm interested in your perspective on their appetite for orders and whether you see another opportunity for a new supplier to enter the mix. How are you interpreting the current situation?

Yes. Seth, this is John. I'll take that question. Everything that's happening with U.S. Postal Service is positive for us; everything that's happening is positive. I think what you saw recently, you saw a couple of bits of news. One of them had to do with what they call COTS, which is commercial off-the-shelf vehicles. That’s a standard off-the-shelf vehicle. Think of a Sprinter van. The Postal Service has always had a program for buying those off-the-shelf vehicles, and it's just part of what they do. This has nothing to do with the long-term plan for NGDV, the vehicle that we're contracted on. There are two separate programs. The other piece of news that they had recently was that they're going to go to 50% battery electric vehicles on the initial 50,000-unit order. That's really good news for everybody. All parties involved want to see more electric faster with postal last-mile delivery in the NGDV, and we're seeing that really start to happen. So the more electric faster is really good. But the fact that they're buying off-the-shelf vehicles, that's what they always do. It's part of their program. It doesn't have any relation to our NGDV program.

Our next questions come from the line of Jamie Cook with Credit Suisse. Unfortunately, it looks like we lost Jamie. I'm going to bring through David Raso of Evercore ISI.

So the second half guide versus the first half, it looks like you're assuming sales were up about 7% sequentially and the operating margins go from 2.5% to over 6%. And if you adjust for the defense catch up, let's call it, first half was 3% margins, having to go to 6%. And I'm just trying to get a sense of on price cost, I guess, first on the revenue sequentially, the up 7% or so. How much of that do you feel you already have in pricing that will flow through, including that 5% for September 1? So just trying to get a sense of how much volume do we need to get to 7%. And then on the margin, how much is price cost and your math swinging positive to account for that extra 300 bps?

Sure. Sorry, I cut you off right at the end, I thought you were done. Are you good?

Go ahead. I'm done.

Okay. So I guess, first of all, from a pricing standpoint, it's about $200 million of the revenue increase is price. So that's obviously a big meaningful component of it. From a price/cost perspective, that improves by about a, call it, $1.70 to $1.75 in the first half versus second half of the year. So price cost, obviously a big driver of that EPS improvement in the back half of the year.

That's interesting. You believe that around 75% of the revenue increase sequentially comes from price. However, the price cost figure of $1.75 suggests greater than 300 basis points of margin improvement. I know it’s uncertain and it’s been challenging. I'm not suggesting it will be easy, but regarding the price cost, how well do you understand your costs now compared to the surprises experienced last quarter? I'm trying to gauge our level of comfort, especially considering the inefficiencies, such as the chassis that didn’t arrive and the rush for airfreight. This quarter clearly posed challenges.

Sure. First of all, I should just clarify that the cost price is about $150 million in the second half of the year. So EPS conversion is $1.70 to $1.75. But I think it may be helpful, David, to just break down. If you kind of look at our prior midpoint to approximately 350 or the neighborhood of 350 we're talking about. About 40% of its volume mix, about 35% of that is inflationary impacts, which inflation as we're looking at that, the two biggest pieces of it, it's really the cumulative catch-up adjustment and it's LIFO. And then the last piece is manufacturing inefficiencies, which is about 25% of it. I think from a visibility to cost perspective, obviously, we're getting further in the year, we have better visibility to our cost now a quarter further into the year. What we're really watching is, of course, if we see upward inflation pressure or it extended, obviously, that can impact. We include cumulative catch-up adjustments in that cost price. So that's one area we're watching closely as well as our LIFO reserves with LIFO; it's sort of the last thing you're receiving in the year that, obviously, we hadn't necessarily placed the orders for those yet or there's still some movement there that can impact LIFO. So it's not sort of the core FIFO cost that we do have a bit better visibility to right now.

Our next question has come from the line of Nicole DeBlase at Deutsche Bank.

I just wanted to kind of ask about what you're thinking for the cadence of earnings in 3Q versus 4Q, kind of like embedding normal seasonality there? Or any help you can provide with respect to how you're thinking about volumes as well as operating margins in the 2 remaining quarters of the year?

I would definitely say there will be a steady improvement. Specifically regarding price, you can expect to see a progression from the third to the fourth quarter. We saw around a $50 million price cost improvement from the first to the second quarter. We anticipate similar progress from the second to the third quarter and from the third to the fourth quarter. So I expect a gradual improvement as we approach the end of the year.

Okay, got it. That's helpful. And then just kind of maybe fast forward into 2023. I mean it feels to me like we could be setting up for actually a pretty nice margin year because theoretically, the pricing is sticky. Can you give us a sense of like the potential carryover pricing into 2023 that we're looking out based on the actions you guys have taken so far? And I mean, is the conclusion right that as input costs have come down recently, that should benefit the cost piece of the equation probably into the first half of '23?

Starting with the cost aspect, while hot rolled coil prices have decreased, input costs remain significantly higher. We're experiencing widespread inflation across various sectors, including engineered components like axles and engines, as well as electronics, not just limited to steel. Aluminum prices have also stayed high. We're closely monitoring these input costs and have already raised our prices, with increases of over 20% in our non-defense sectors. We will keep an eye on these inflation trends. Additionally, we need to observe the progress of the supply chain, which we anticipate will improve in the latter half of the year. However, we did not see improvements this quarter; in fact, conditions worsened in the Fire & Emergency sector. These are the key factors as we approach 2023. Nevertheless, we are concluding the year with a much better price-cost balance than we began with.

Nicole, we have learned a lot and taken significant actions on how to manage the company amid inflation. As we approach 2023, we believe the measures we have implemented will mostly be in place, putting us in a much stronger position moving into the new year.

Our next questions come from the line of Steven Fisher with UBS.

I appreciate the information you've shared about the assumptions for the remainder of the year, but I would like to take a step back and discuss this topic more broadly. After several consecutive quarters of reducing guidance, I'm interested in how your strategy for this quarter and the rest of the year may differ, if at all. Have you considered adding a bit more flexibility into your guidance or implemented any new strategies?

We have not changed our approach. What has really changed over the last quarter is our expectation that inflation would moderate to some extent. While we can see it with hot-rolled coil, it hasn't decreased as quickly or as soon as we anticipated. Additionally, we expected that the supply chain would begin to improve. We didn't need the supply chain to be perfect by the end of the year, and we mentioned that frequently, but we did need some progress. Unfortunately, we experienced a significant deterioration in the supply chain, particularly in fire and emergency services. Our on-time delivery metrics in access equipment have remained relatively stable from quarter to quarter. Those are the two areas we are monitoring closely. Therefore, our forecast is genuinely a reflection of the current conditions we are observing, influenced by inflation dynamics and supplier performance, which in turn is impacting our production facilities and causing some absorption challenges and labor inefficiencies.

Our next question has come from the line of Dillon Cumming with Morgan Stanley.

Maybe just the first one on the defense top line. Just curious how material some of the FMS inquiries from Eastern Europe are I'd imagine there was a pretty recent development. So I guess just curious, first of all, that would kind of represent upside of the '25 targets you gave at the Investor Day last month.

So talking about the Eastern European inquiries that we've had. We've had a lot of them. We certainly expect to be taking orders and more orders from Eastern European countries as a result of what's happened recently in Europe. And I'll just remind you that when we talk about orders in the U.S. with the Department of Defense, you talk about orders in terms of how many thousands of units are going to be ordered. When you talk about orders in Eastern Europe, it's typically in the neighborhood of dozens to maybe a big order would be 100 units. So they're at a smaller scale. I would say that it's clearly a positive for future years and could be as early as '23 but probably '24, '25 deliveries. But this is not a number that's similar to what you see us do with the Department of Defense. So just keeping it in perspective.

Yes, that makes sense. And then maybe just one more on the bed mix increase. And you mentioned that was going up to 50% on the initial USPS contract. I was just curious if that was more of an upper bound from your battery supplier? Or I guess, do you feel like you would have taken that another leg higher as the USPS kind of wanted to request it?

Yes. For NGDV, revenue recognition will occur over time, but we won't start until the program begins, which will be in late 2023. This is similar to our other large programs, where we aim to lock in a significant portion of the supply base when possible. We're also considering economic price adjustments. It's important to note that even though we faced a larger margin or dollar impact this quarter due to cumulative catch-up adjustments, our defense margin expectations on these major programs are within 30 basis points of our previous expectations. Therefore, this isn't a significant change. That's why, with large contracts, it's essential to assess margins over time rather than on a quarterly basis.

I'm not in a position to discuss the details of our suppliers for specific programs, but we have an excellent plan for the U.S. Postal Service regarding supply.

Our final questions a big day will come from the line of Felix Boeschen with Raymond James.

I just had a quick one on the Fire & Emergency segment. It seems like the backlog is stretching into 2024 already. I'm just curious, and I think that's before even taking the electric orders maybe out of Europe. But I'm curious if you could talk about how you're thinking about managing orders in that business. And just kind of if you talk about your ability to reprice that backlog should input costs over the next 1.5 years or so? That's all I have. I appreciate it.

Thank you, Felix. I'll begin, and Mike might want to add to this. In the Fire & Emergency segment, we have not yet received any orders for the electric vehicles, which will be available for sale soon. However, we currently have the largest backlog we've ever experienced in Fire & Emergency, indicating significant demand for our products. You're right that this extends into 2024. What we are doing now is increasing our capacity for Pierce, as we believe this is essential for long-term growth due to the strong order rates we are observing, which we anticipate will continue. There is considerable demand for our products now and looking ahead. However, the only thing holding us back in Fire & Emergency at this time is supply chain disruption. Our production is currently affected by these supply chain challenges, which are causing inefficiencies in our manufacturing plants. We will address these issues in the short term and then start seeing the benefits of our capacity improvements. Mike, do you have anything to add?

Yes. I would say for ARFF from a backlog perspective, our backlog is longer for municipal fire trucks versus ARFF. And so we're very excited to be able to start taking those Volterra ARFF orders over time here.

We are carefully managing the margins of our products for 2023 and 2024. We lead the market in pricing for fire and emergency services, and this is possible because we offer the best product and hold the market leader position. Additionally, we have a very strong cost forecast. We are confident in our ability to maintain our status as a leading margin generator in fire and emergency services. We will address the supply chain challenges and feel optimistic about growth in this area. I want to thank everyone for joining us today. We are fully committed to achieving long-term and profitable growth. We will continue to innovate and advance our company as we move forward. Stay safe, stay healthy, and we look forward to speaking with you all very soon.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.