Greetings, and welcome to Oshkosh Corporation Reports Fiscal 2019 Third Quarter Results. [Operator Instructions] As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Patrick Davidson, Senior Vice President 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 third quarter 2019 results. Copy of the release is available on our website at oshkoshcorporation.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. All references on this call to a quarter or a year are to a fiscal quarter or fiscal year, unless stated otherwise. Our presenters today include Wilson Jones, President and Chief Executive Officer; and Dave Sagehorn, Executive Vice President and Chief Financial Officer. Please turn to Slide 3, and I'll turn it over to you, Wilson.

Thank you, Pat. Good morning, everyone. Before we get started, I want to point out our new Oshkosh logo. You're seeing it on our slides and now available on our website. We've made the update to a more current logo that reflects strength, advancement and the commitment to success that customers, team members and shareholders that come to expect from the Oshkosh Corporation. Along with this, we're pleased to announce strong third quarter results highlighted by revenue growth of 10%, adjusted operating income growth of 12% and adjusted earnings-per-share growth of nearly 24% compared to the prior year. I'm proud of the overall execution by our Oshkosh team members, which allowed us to report these strong results today. It's clear that the benefits of our people-first culture, MOVE Strategy and simplification initiatives have contributed to our success and will continue to do so going forward. Looking more broadly, we see some mixed economic signals. The economy is still growing, but U.S. PMI and industrial production are below previous levels. And although residential construction is down, non-residential construction, which is a more important business driver for us, has remained solid. We've continued to have a positive long-term outlook for our businesses, and we are staying close to our customers to understand how they are thinking about their businesses and outlook for capital expenditures in 2020. Strong backlogs and stable outlooks for our fire & emergency and defense segments continued to provide stability to our consolidated outlook. As a result of our strong execution and improved margin expectations, we are raising our adjusted earnings per share outlook for 2019 to a range of $7.90 to $8.10. Dave will discuss our updated 2019 expectations in more detail. Please turn to Slide 4 to begin a discussion for each of our business segments. I'll…

Thanks, Wilson, and good morning, everyone. Please turn to Slide 8. Overall, the team delivered strong results again this quarter. Consolidated net sales for the third quarter were $2.39 billion, a 10% increase over the prior year, with sales up in all segments. The new recognition standard ASC 606 positively impacted sales by approximately $26 million compared to the prior year. We've again included an updated rev rec standard chart on Slide 9 of the presentation. Consolidated operating income for the third quarter was $257.8 million or 10.8% of sales compared to adjusted operating income of $230.1 million or 10.6% of sales in the prior year. Operating income margin increases of 170 and 200 basis points at access equipment and fire & emergency more than offset the expected margin decline in defense and lower margin in commercial. Excluding the impact of ASC 606, operating income and operating income margin in the third quarter of this year would have been $270 million and 11.4%. Similar to last quarter, the biggest driver of the positive results at access equipment were the impact of the higher sales volume. Improved manufacturing performance and price cost also contributed to the better results. Due to the timing lag of steel price changes flowing through the income statement, access equipment did not benefit significantly in the quarter from the recent lower steel prices. The 2 largest drivers of lower defense segment earnings were the switch in accounting to the new revenue recognition standard and a higher mix of JLTVs as volumes under that program continued to ramp up. As we noted on the last call, we expected lower operating income margins in the second half of the year largely due to the quarter-to-quarter volatility introduced by ASC 606. Excluding the impact of ASC 606, defense operating margin…

Thanks, Dave. We're pleased to announce another strong quarter and the ability to raise our expectations for the year as a result of the team's overall strong execution. We're going to stay close to our customers to ensure we're in the best position to stay aligned with market conditions. We'll also continue to execute our MOVE Strategy to drive value for all stakeholders. I'll turn it back over to Pat to get the Q&A started.

Thanks, Wilson. [Operator Instructions] Operator, please begin the question-and-answer period of this call. [Operator Instructions] Our first question comes from the line of Stanley Elliott with Stifel. Please proceed with your question.

Good morning Wilson Dave. Thank you for the time. Congratulations. Wilson, starting off, could you expand a little bit more on your comments around the customer expectations on the access side into 2020. I mean do you think that what we're seeing here is maybe more disciplined in the rental channel? Or is there something in the tea leaves that maybe leaves them a little more cautious? And then kind of as a follow-on to that, within the framework that you've provided, I'm assuming that the APAC adoption is going to remain pretty strong.

Yes, Stanley. I'll answer that one -- that quick one is Asia Pacific continues to look very promising as we're rolling, as we mentioned, double-digit year-over-year. I think we see more positive signs there with rental company growth, leading to, again, more adoption of our products. So exciting times there in Asia Pacific. From a customer expectation, what I would share is, why we're saying we don't believe our customers are going to be as aggressive with their CapEx, some of the orders we know were affected due to weather, they weren't able to get some of their equipment into service. And so that either delayed or maybe stalled some of the orders in the quarter. But more importantly, if you look at the last couple of years, Stanley, pretty significant fleet expansion in this market. And so I think there's a little bit of taking a breath and getting that -- all those machines into service. I think when you look at some of the macroeconomic indicators out there, there are some changes there, residential construction, few others that are showing some downward motion and then you add in some of the trade policy uncertainties, I think it's just going to lead to not near the aggressive expansion that we've seen. I'll say that, Stanley, and also say we have to keep in mind this market is at a level it's ever been before. And so if it does moderate a little bit, and we're not calling too many yet, but we believe this is going to be the case as we work through this next quarter, but if it moderates a little bit, it's still a good neighborhood. And as you've probably heard the rental companies' commentary, business conditions are good. It's a healthy market. So we believe that their business will be good in '20, and we do see the need for some replacement in '20. We think the bigger year will be '21 with replacement, but if you go back to 2012, that's when expansion started kind of coming out of the recession, significant expansion. '13 was bigger, and then '14 was previous peak. If you add that upcoming into 2021, both machines should be in the replacement cycle. So we believe that's going to be some opportunity for us to help '20, but probably a little more significant in '21.

Perfect. And then switching gears to the fire & emergency business, that's been a fantastic transformation over the past couple of years. How much of this is mix refill products? How much is the price cost? And then the restructuring and simplification has had a big impact. But it would seem to be that the improvements that we have seen thus far would suggest these are more structural changes that were just operating at a new and higher baseline.

Well, I think that's a pretty good call, Stanley. And I have to say this, too, thanks for asking the question about our fire & emergency business. We'd like to talk about it. And what a great story. Market that used to be 5,500 trucks, it's now 4,500. That team hasn't settled in and let market conditions to determine where they go. Great playbook with platform team, simplification, really good disciplined pricing, greater distribution channel. Structure of that business is different today than it was five years ago and real credit to Jim Johnson and his team. And really, the playbook that they have their works well. You're seeing it kick in at commercial. Had we not had the roof collapse, Dave mentioned that would have been a 9% quarter for commercial. Same thing going on at JLG. Look at their margin. So really good story, and it's nice to see our fire & emergency team get the credit for that.

Perfect thank you. Appreciate it.

Our next question comes from the line of Jamie Cook with Credit Suisse. Please proceed with your question.

Hi good morning. Nice quarter. I was impressed in the quarter by the aerial margins as I'm sure everyone else is. So I guess, Wilson, assuming, let's say, the market is sort of flat next year versus growth, are there opportunities for you to still improve your margin? Or assuming a modest sales decline, how do we think about the decremental margins given some of the improvements we've seen just in the operating cost structure of that business? And then my second question, could you just comment on your comfort level with inventories or where you are producing relative to retail demand and just channel inventory as well?

Sure. And thanks, Jamie, for the compliment. We appreciate that. Aerial margins, we're pleased with what JLG has done. Good internal and external execution there, and it obviously shows in their margins. What you do know is that we had some pricing erosion over the years with emissions, with the oil and gas contagion and most recently with the material increases in steel. So those are the headwinds that we're still calling back to get back to some of those previous peak margins. The JLG team would tell you that there's still a lot of internal opportunities on our optimizing cost and capital initiatives that run our MOVE Strategy. So we believe with some of the structural things that they've done in the business and going forward, much like fire & emergency, they do have margin enhancement opportunities. Obviously, we've got to execute those initiatives, but we're not going to rest on where we are. We'll continue to work on that and move forward. It will depend on what the market does, which at this point we don't see a big dip in the market or big change there. So we think we've got opportunities to continue to improve those margins over the cycle, I would say. With regard to our inventory, we're very comfortable. I think the JLG team called it properly in terms of their inventory. It's on a good pace. We believe it fits with the current market structure. Obviously, you always watch your inventory and guard it, but where they are today is a place where, I would say, myself and Dave are very comfortable.

Okay thanks. I'll let someone else ask a question.

Thanks.

Our next question comes from the line of Steve Volkmann with Jefferies. Please proceed with your question.

Analyst Hey good morning guys.I'm just going to tag team with Jamie here a little bit and drill in a little more, if we could. And I guess what I'm trying to think about on the access margin is how much of what they're doing is kind of in process improvement, etc. In other words, could we have a flat or even slightly improved margin despite a slightly lower revenue line in 2020?

Steve, good morning. It's Dave. So I think a lot of what you saw in the third quarter year-over-year out of access really is a reflection of where we were last year, and I think Wilson touched on this. And we were ramping up, new team members getting them assimilate it. We're continuing to have supply chain challenges. We see what we saw this year is a supply chain that was in a much better position in terms of on-time deliveries, less expedited freight, less disruptions to the production line. So we like where we are from that standpoint. And as you think about going into next year, I think the team is already challenged to look for ways to improve their operations, improve efficiencies, improve margins. If I think about flat environment next year from a top line, I think you've got to look at what incrementally we can do there. I'm not going to -- we're not here today to give you what '20 looks like, but we're certainly going to strive to improve those efficiencies and margins in this segment. And on a downside, if we do end up in a little bit of a down environment next year, what we always talk about is are we -- we strive to be in a better place from an overall execution and margin standpoint than we were the last time we were at this given level, whatever that would be. So we'll continue to strive, but we're not here today to give you full out guidance for '20 yet.

I think what I would add to that, Steve, is where we are today from, say, a couple of years ago, we're much stronger operationally across all four of our segments. We are in a good position operationally to handle things. And we'll continue to handle the things we can control. With regards to your question, top of mix that's available to us in the market will be an issue that we'll be working around. But the simplification that we're putting into these businesses, the teams are doing a nice job of building this platform team concept. It's driving end-to-end accountability. So I think all of the things that we can control, you're going to see continued good performance there. And then we've got to just determine what the market is going to be and what's available to us. That will certainly play into this too. But we like our position really with all 4 segments and where they are operationally.

And just for my follow-up, Wilson, since you've kind of made some comments about access into 2020, what are you hearing from your customers in the other segments relative -- I mean in fire & emergency, you should probably have some pretty decent visibility, maybe not so much in commercial and defense probably locked in, I don't know. Any sort of qualitative thoughts around the other three segments as we go into 2020? And I'll leave it there.

Yes, Steve, I have to say that's a great question because we really -- if you look, you hear us talk a lot about being a different integrated global industrial. And obviously, we talk a lot about access and we should. It's a really big component and an important component of our business. But when you look at our portfolio today, fire & emergency, really strong backlog, good market outlook, not growing great, but positive on the municipal side. And then look at their margin performance. You look at refuse collection vehicles, basically an all-time high backlog there in our commercial segment. A lot of that municipal spending should bode well for us into the future. Same for the defense. You see a runway there, not only domestically, but now with the JLTV, international defense opportunities. So we're positive on the long-term outlook here. We know we've got to work through some of the questions around access into '20. But we think because of the balance we have with these other three segments, we're in a really good spot.

Our next question comes from the line of Mig Dobre with Robert W. Baird. Please proceed with your question.

Good morning gentlemen and congrats on very, very good margins on what looks to me to be relatively weak mix in your access segment. So well done there. I'm just trying to clarify some things based on your comments, Wilson. So if I look at your orders in access equipment year-to-date, right, we're seeing that these orders were down maybe about 11%. And you're talking about 2020, potentially the market, right, your customer demand being down versus your fiscal '19. So I'm kind of trying to triangulate what your market outlook would actually imply for your own revenues, right, because as I understand it, you're expecting orders to potentially be a little bit weaker in '20 than they've been in '19. So can you maybe help us at a high level understand what that would mean for your business?

Well, I'll go down this path, Mig, and Dave can jump in with me. I think, obviously, we're not calling '20 today, but what we're sharing with you is the information that we have available to us. When you look at the backlog, I think you'd made a comment about concern about our backlog. If you look at where we are today from a backlog, take out last year, the outlier with all those large 4 orders in there, this would be our largest backlog amount this quarter in 10 years. So we have a healthy backlog in access. I think what I'd also shared with you is last quarter, I talked a little bit about how the order patterns were changing. We didn't expect to see these big forward orders like we did last year coming into focus here in the near future, and that's what we're seeing. I think the order patterns are going to go back. If you remember a couple of years ago, with capacity available, most of our customers would order a product and take delivery sometimes in the same quarter. So I think that's a little bit of what's going on here. I think we're going to come up with a more detailed information after we get into discussions with our rental companies in the fall and call '20. But again, if you listen to their comments, good environment, good fundamentals, so I expect their business to be in a good place next year. And we do know there is some replacement needed next year, probably not as significant as '21. So it's -- we've probably got used to a little bit false sense of security here with a big backlog and all those forward orders. If you look to the history, that trend chart, you can see that was really an anomaly. And what it does is, it causes this kind of conversation with yields or built up tough comps.

Right. And just for the record, I misspoke earlier the orders being down 11%, they're actually down more than that. And I am sort of wondering here, if this order dynamic that I'm describing is accurate into fiscal '20, given where your current production volumes are and revenue recognition is, right, that does create a headwind. Is it now fair for us to expect some kind of restructuring program as you're managing your production volumes going forward? At what point in time should we be thinking about that? And I'm done.

Well. You're probably thinking a little more severe than we are, Mig. Right now, with our conversations on where we are, we adjust production weekly, and it's real time. We know cyclical businesses. We've been in this for a long time. We have to be nimble, and so we manage those production levels as we go. And with our current backlog there, we're in a good spot. Now we have to see how this plays out this quarter and into the first quarter from an order standpoint. But we're not seeing that panic button at this point. Now you probably know us well enough that we always plan different scenarios, and we do plan deeper scenarios. But at this stage, we don't see that that's going to come into play at least in the near future.

Our next question comes from the line of Jerry Revich with Goldman Sachs. Please proceed with your question.

I'm wondering if you could talk about the level of interest for foreign JLTV orders now. Can you give us an update of how many countries are looking at the product? And what the anticipated timing and magnitude could be if we're sitting here 2 years from now? How big could the international JLTV program be compared to what we're shipping domestically?

Yes, Jerry. We haven't really spiced that as far as total dollars or total units. Where we are today, Slovenia has got a letter of agreement in now with FMS case with our government for 38 JLTVs. I think in the past, we've talked about Lithuania is in working on FMS case. We've talked about the U.K. and a potential order up just south of 3,000 units. They had 2 units, now that they have, out in test. Those are the 3 countries that we can talk about. We've talked in the past both of several others that we've done trials with and we expect some success with, but we haven't called the timing of that. I think you know international orders especially going through the FMS cases can take some time, and it's kind of hard to call exactly when you're going to get the orders, delivery dates, etc. So where we stand today, I would expect that we are going to continue to see some of these orders come in into '20. Don't know if we'll be able to get them built and delivered in '20. It may be early '21 or into '21. But we still are very positive about our opportunities for the JLTV on the international front. And I should add now that the Middle East is -- we've got some customers there that have shown some heavy interest in the JLTV too.

Jerry, I'd just add. I know your question is about international, but domestically, just a reminder that our JLTV production for the U.S. Department of Defense is going to continue to increase over the next several years as that program continues to ramp as well.

Sure. That's clear. And then in fire & emergency, really interesting comments about the growing location count. Can you just ballpark that for us in terms of the percentage location growth that we're looking for in '19 versus '18 or '20 versus '18, however you want to frame that for your dealer network just so we can understand the magnitude of opportunity from a share standpoint?

Well. If you think, I'm not going to put a share target on it for you, Jerry, but if you think about fire & emergency segment fire & emergency business, a big part of it is sort of after the sale. And our distribution channel really gets that, and they focus on total cost of ownership model. So if you think about 36 dealers or so around the U.S. and a one-third of them are expanding, I think that tells you that their footprint is going to be more significant and give them more opportunities to service. And again, the service usually leads to selling the second, third and fourth fire trucks.

We'll put the share target on for you, but in terms of.

I figured you would. That's your job.

Appreciate it. Thank you.

Thanks.

Our next question comes from the line of Seth Weber with RBC Capital Markets. Please proceed with your question.

Hey guys good morning. Hey I wanted to ask about the defense margin. I think the implied margin here for the fourth quarter is something like a 7.5% or so to kind of get to your midpoint of the guide, which is still kind of well below where you were running last year and then the first half of this year. So is there are there still some kind of transitory issues here from ramp-up costs or mix issue or something that's weighing that's going to continue to weigh on the fourth quarter defense margin? And how should we think about 2020-ish kind of run rate?

Seth, it's Dave. So I'm going to continue to beat the drum here that we would encourage investors to look at the full year margin guide for defense. As we've talked about for a few quarters now, the adoption of the new revenue recognition standard has introduced a lot of accounting volatility into our defense results. It's not -- we're not thrilled with that. In our opinion, we were better off under the old accounting standard as it relates to defense. But what you're seeing is really just the timing of recognition of largely non-truck production contract costs from one quarter to another. And why that gets magnified under the new revenue recognition standard is, you may recall, we're only allowed to project the margin for a given program out over the quantities of orders that we actually have in hand. So for example, the JLTV, the overall contract was for about 17,000 vehicles. We have orders on hand for 11,000. We can only project those costs over that smaller quantity, which drives variability from a quarter to quarter. So -- and I'm kind of droning on here, but really want to emphasize, full year, we expect the high single-digit margin. Our outlook for the segment is unchanged. We did expect to see lower margins in the third and fourth quarter. It's not surprising that we see third quarter being lower than fourth or fourth quarter being lower than third under this new revenue recognition standard. And as it relates to our outlook for the future years, I think we're still comfortable saying that we view this business as a high single-digit operating income margin business.

And then maybe if I could just take another whack at the access margin outlook, it looks like you're guiding to margin kind of flat in the fourth quarter year-over-year for access even though revenue is going to be down, which is great. And I think you said you're really not seeing the steel price decline tailwinds yet. And I guess is it possible maybe -- Wilson, I mean, do you think that the mix -- the customer mix gets a little better next year or maybe more the IRCs versus the nationals? Is there anything that you're seeing there from kind of just a customer perspective that the nationals kind of go bigger this year? Or just trying to continue to think through the margin on access kind of going forward.

Seth, I'll take this one. As it relates from a customer mix, actually, what we're seeing -- have largely seen throughout all of fiscal '19 is a higher than traditional mix of independent rental companies versus the nationals. And there's probably a number of reasons for that. But it's still early for fiscal '20. We've got -- our rental customers are largely focused on finishing out their fiscal '19. Our team at access will get heavily engaged with them about 2020 in the coming months. So it's probably premature to predict what the customer mix is going to look like in '20 versus what we saw in '19.

Okay. Then -- but just -- and then steel, does that start to help you in the fourth quarter? Or is that more of a 2020 issue?

We should see incrementally versus the third quarter a little bit of positive impact from that. But I guess I just want to -- on the whole topic of steel and pricing on that, we've referenced improved cost or price cost in the quarter. And the emphasis there is on improved. If you look at our non-defense segments overall, we are -- in the third quarter, we are barely covering the cost increases that we had experienced. So there's been a lot of inflation out there that we've absorbed, continue to absorb. Yes, steel has gone down. We do expect to see some of that come through. But we're also hearing about steel mills out there putting out price increases. We'll have to see if it sticks. But they're trying to get the price back up. You've got the executive order requiring 95% U.S. steel content on all federal infrastructure projects. That's probably going to be a little bit of an impetus to potentially higher steel prices as we go forward. So while we think we're going to see a little bit of benefit in fiscal Q4 from what we've seen over the last number of months, I think we have to continue to watch that market in the steel environment and really other material cost environment over the next quarter or two to see how we think that really is going to impact us in fiscal '20.

I think you've got another moving piece there with the anci costs. The anci standards are going to draw some costs in there too, Seth. So all of this will be crawled up in talking with our customers during the fall assuring all that information with the normal pricing discussions. And then obviously, we'll talk to them first and then be announcing really where we're going on the price side for next year.

Okay guys I appreciate it. Thank you.

Our next question comes from the line of Courtney Yakavonis with Morgan Stanley. Please proceed with your question.

Hi. Thanks for the question. Just wanted to follow up a little bit on the pricing discussion and steel. I think you guys had previously talked about having the surcharge that you're expecting to roll off. So is it the case that that's not expected to roll off any time soon just given some of the pricing pressures that you're talking about? And then secondly, given the strength that we have seen in telehandlers versus AWP, how is the mix for that in the backlog right now? And when you talked about some moderation in 2020, does that apply to both AWP and telehandlers?

I'll start off, Courtney, and if Wilson wants to chime in, he's certainly welcome. But just we'll go through our annual pricing discussions with our customers through the course of the fall here. So we follow the same process we always do. As we just mentioned on the last question, there's a number of factors that we take into consideration with that. But there certainly will be a lot of focus and attention placed on that as we determine where the right place to land for our pricing guide for '20 is. That will involve, obviously, a lot of discussions with our customers as well. In terms of mix, as we look at the fourth quarter, I think we're going to see a little bit of heavier telehandler mix again compared to the fourth quarter of '18, and also a little bit heavier telehandler mix than we saw in the third quarter. Third quarter, we actually saw AWP mix tick up versus what we'd seen in the last few quarters, but we think we're going to see a little bit reversion back to a little bit heavier telehandler in the fourth quarter.

So is it fair to say that in the fourth quarter, given that your sales are implied to be down, it's predominantly in AWP and telehandlers would still be up?

I haven't looked at it that way, but I think in general that makes sense. And if we see something different, we'll let you know.

Yes. I believe that's the mix simply.

And then just more generally, why do you think that we're seeing this divergence between the 2 product categories?

Well, for us, Courtney, if you go back to last year, we've made decision to consolidate our telehandler business. We were in 2 facilities, consolidated to 1. About the time we did that, the market jumped, jumped with all the forward ordering that we've mentioned. And we're bringing on 600 new people. So we definitely lost some momentum with our telehandler business last year. And what you're seeing in this year is a good new story is we've been able to catch that back up and rebound. Our JLG telehandlers and SkyTrak brands are well received and very popular in the construction industry. And so that's what you're seeing, and there's a little rebound of that business and getting back to our original share position.

Thanks.

Thanks.

[Operator Instructions]. Our next question comes from the line of Chad Dillard with Deutsche Bank. Please proceed with your question.

This is Kevin on for Chad. I just had a quick question on when did you start to see orders in access weaken? Was it evenly spread throughout the quarter or more back-end loaded?

We haven't seen any kind of what I would say out of the ordinary order pattern, Kevin. I think it's just been kind of moderating at, I would say, more of an even pace. Nothing really that I would call out of the ordinary.

Okay perfect. That was it. Thanks guys.

Our next question comes from the line of Steve Barger with KeyBanc Capital Markets. Please proceed with your question.

You're talking about AWP may be flattening or rolling a bit. At the same time, you have really good free cash flow visibility, a lot of balance sheet capacity. So are you spending more time on M&A conversations at this point?

I would say, Steve, we've probably talked in the past, we keep it always on the list. That's something that we want to be balanced with our capital allocation strategy. I think that list is similar to what it would be you would have seen a year ago. Conversations are continuing. You know this, as we do, where we are from a valuation standpoint today, we look at ourselves as a better buy. But obviously, if there was something strategic that came along that was that good fit with our core value proposition, we're going to take a look. And to your point, our balance sheet is in probably the best shape it's been at least in my 14 years with the Company. So we certainly have opportunities there to be opportunistic. That's the word that Dave uses a lot. We want to be opportunistic and make sure we make the right moves, not just a move to buy something. But it is something that we are vigilant about, we take a look at. There are certain things we're studying, but nothing that I would say is imminent to talk to you about today.

Just philosophically, is there a comfort zone for deal size that you kind of limit yourself to or think about?

Well, what we've said in the past, Steve, is probably nothing transformational. Remember back JLG, that was pretty transformational for us, and the leverage that we had to work through there was not a lot of fun. Thank goodness we've worked through it and look at where we're today with JLG. But I don't think you'll see us looking at anything transformational.

Okay. And just one more quick one. With AWP kind of at peak revenue here, can you tell us where you are on capacity utilization, how many ships you're running and have you done anything to proactively adjust production levels at this point relative to how you're thinking about the next few quarters?

We -- Dave mentioned it, we always work internally to make sure that we can deliver better results compared to prior cycles when we do have some ups and downs in the market. And so we're constantly adjusting production rates. I can tell you today, we've got capacity available to us if we needed to ramp up at JLG. Most of their plants are running two shifts. If you look around our company, you'd see a lot of two-shift operations. We have a couple of fab operations that are running 3 shifts. But all in all, we're comfortable with where we are from a capacity standpoint. And then we've also been working on some outsource opportunities. In case markets were to jump even further, we could have some opportunities there to outsource some work. But today, I would tell you we're in a really good place from a capacity standpoint. And as I commented, all four segments have really been focused on operational efficiencies, and it's showing in their performance.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Wilson Jones for closing remarks.

Thank you, operator, and thank you all for joining us today. I look back at the last three quarters, and I can't say enough how pleased I am with this team's performance. You're seeing the team manage very well the things they control with good disciplined execution both internally and externally. Again, we appreciate your interest in the Oshkosh Corporation and look forward to speaking with you at a conference or on our next earnings call. Have a good day, everyone.

This concludes today's conference. You may disconnect your lines at this time Thank you for your participation.