Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide information that is supplemental to, and should be read together with, the condensed consolidated financial statements and the accompanying notes contained in this Form 10-Q, as well as the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. Information in MD&A is intended to provide an analysis of our financial condition and results of operations from management’s perspective and assist the reader in obtaining an understanding of (i) the condensed consolidated financial statements, (ii) the Company’s business segments and how the results of those segments impact the Company’s results of operations and financial condition as a whole, and (iii) how certain accounting principles affect the Company’s condensed consolidated financial statements, and to provide discussion of material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be indicative of future operating results or future financial condition. The Company’s results for interim periods should not be regarded as necessarily indicative of results that may be expected for the entire year, which may differ materially due to, among other things, the risk factors described under Part I, Item 1A, Risk Factors, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC on February 25, 2026.
Executive Summary
The Company is a leading global manufacturer and supplier of (i) vehicles and equipment for maintenance and infrastructure end-markets, including vacuum trucks (i.e., sewer cleaners, vacuum- and hydro-excavation (“safe-digging”) trucks, and industrial vacuum loaders), dump truck bodies and trailers, and other specialty equipment (i.e., street sweepers, waterblasting equipment, refuse collection vehicles, road-marking and line-removal equipment, metal extraction support equipment, and multi-purpose maintenance vehicles), and (ii) public safety equipment, such as vehicle lightbars and sirens, industrial signaling equipment, public warning systems, and general alarm/public address systems. Product offerings also include certain products manufactured by other companies. In addition to vehicle and equipment sales, the Company engages in the sale of parts, service and repair, equipment rentals, and training as part of a comprehensive aftermarket offering to its customers. The Company operates 21 principal manufacturing facilities in the U.S., three in Canada, two in Europe, and one in South Africa and provides products and integrated solutions to municipal, governmental, industrial, and commercial customers in all regions of the world.
As described in Note 12 – Segment Information to the accompanying condensed consolidated financial statements, the Company’s business units are organized in two reportable segments: the Environmental Solutions Group and the Safety and Security Systems Group.
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Operating Results
Net sales for the three months ended June 30, 2026 increased by $105.6 million, or 19%, compared to the prior-year quarter, primarily due to the effects of acquisitions, and pricing actions. Our Environmental Solutions Group reported a net sales increase of $97.2 million, or 20%, due to increases in sales of other specialty equipment of $47.7 million, aftermarket offerings of $28.4 million, vacuum trucks of $10.7 million, and dump truck bodies and trailers of $10.5 million. Within our Safety and Security Systems Group, net sales increased by $8.4 million, or 10%, primarily due to improvements in sales of public safety equipment of $7.5 million and industrial signaling equipment of $0.9 million.
Net sales for the six months ended June 30, 2026 increased by $267.4 million, or 26%, compared to the prior-year period, primarily due to higher sales volumes, inclusive of the effects of acquisitions, and pricing actions. Our Environmental Solutions Group reported a net sales increase of $242.5 million, or 28%, due to increases in sales of other specialty equipment of $153.9 million, aftermarket offerings of $45.6 million, vacuum trucks of $21.0 million, dump truck bodies and trailers of $19.1 million, as well as a $2.9 million favorable foreign currency translation impact. Within our Safety and Security Systems Group, net sales increased by $24.9 million, or 16%, primarily due to improvements in sales of public safety equipment of $20.5 million and industrial signaling equipment of $2.3 million, as well as a $2.4 million favorable foreign currency translation impact.
Operating income for the three months ended June 30, 2026 increased by $20.5 million, or 21%, compared to the prior-year quarter, primarily driven by a $34.2 million improvement in gross profit, partially offset by an $11.4 million increase in Selling, Engineering, General and Administrative (“SEG&A”) expenses, a $2.1 million increase in amortization expense, and a $0.2 million increase in acquisition and integration-related expenses, net. Consolidated operating margin for the three months ended June 30, 2026 was 17.6%, compared to 17.3% in the prior-year quarter.
Operating income for the six months ended June 30, 2026 increased by $54.5 million, or 33%, compared to the prior-year period, primarily driven by an $82.8 million improvement in gross profit, partially offset by a $23.2 million increase in SEG&A expenses, a $4.3 million increase in amortization expense, and a $0.8 million increase in acquisition and integration-related expenses, net. Consolidated operating margin for the six months ended June 30, 2026 was 16.8%, compared to 15.9% in the prior-year period.
Income before income taxes for the three months ended June 30, 2026 increased by $18.0 million, or 19%, compared to the prior-year quarter. The increase resulted from the higher operating income, partially offset by a $2.5 million increase in interest expense, net.
Income before income taxes for the six months ended June 30, 2026 increased by $48.2 million, or 31%, compared to the prior-year period. The increase resulted from the higher operating income and a $0.1 million reduction in other expense, partially offset by a $6.4 million increase in interest expense, net.
Net income for the three months ended June 30, 2026 increased by $14.7 million compared to the prior-year quarter, largely due to the aforementioned increase in income before taxes, partially offset by a $3.3 million increase in income tax expense.
Net income for the six months ended June 30, 2026 increased by $38.8 million compared to the prior-year period, largely due to the aforementioned increase in income before taxes, partially offset by a $9.4 million increase in income tax expense.
Total orders for the three months ended June 30, 2026 were $637 million, an increase of $97 million, or 18%, compared to the prior-year quarter. Our Environmental Solutions Group reported total orders of $548 million in the three months ended June 30, 2026, an increase of $107 million, or 24%, in comparison to the prior-year quarter. Orders in the three months ended June 30, 2026 within our Safety and Security Systems Group were $89 million, a reduction of $10 million, or 10%, compared to the prior-year quarter.
Total orders for the six months ended June 30, 2026 were $1.26 billion, an increase of $152 million, or 14%, compared to the prior-year period. Our Environmental Solutions Group reported total orders of $1.08 billion in the six months ended June 30, 2026, an increase of $161 million, or 17%, in comparison to the prior-year period. Orders in the six months ended June 30, 2026 within our Safety and Security Systems Group were $177 million, a reduction of $9 million, or 5%, compared to the prior-year period.
Our consolidated backlog at June 30, 2026 was $1.00 billion, compared to $1.08 billion at June 30, 2025.
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Results of Operations
The following table summarizes our Condensed Consolidated Statements of Operations and illustrates key financial indicators used to assess our consolidated financial results:
Three Months Ended June 30, Six Months Ended June 30,
($ in millions, except per share data) 2026 2025 Change 2026 2025 Change
Net sales $ 670.2 $ 564.6 $ 105.6 $ 1,295.8 $ 1,028.4 $ 267.4
Cost of sales 466.4 395.0 71.4 912.6 728.0 184.6
Gross profit 203.8 169.6 34.2 383.2 300.4 82.8
Selling, engineering, general and administrative expenses 78.3 66.9 11.4 150.3 127.1 23.2
Amortization expense 6.6 4.5 2.1 13.1 8.8 4.3
Acquisition and integration-related expenses, net 0.7 0.5 0.2 1.9 1.1 0.8
Operating income 118.2 97.7 20.5 217.9 163.4 54.5
Interest expense, net 6.0 3.5 2.5 12.9 6.5 6.4
Other expense, net 0.8 0.8 — 1.4 1.5 (0.1)
Income before income taxes 111.4 93.4 18.0 203.6 155.4 48.2
Income tax expense 25.3 22.0 3.3 47.1 37.7 9.4
Net income $ 86.1 $ 71.4 $ 14.7 $ 156.5 $ 117.7 $ 38.8
Operating data:
Operating margin 17.6 % 17.3 % 0.3 % 16.8 % 15.9 % 0.9 %
Diluted earnings per share $ 1.40 $ 1.16 $ 0.24 $ 2.54 $ 1.91 $ 0.63
Total orders 636.7 539.7 97.0 1,259.5 1,107.6 151.9
Backlog 1,002.1 1,083.5 (81.4) 1,002.1 1,083.5 (81.4)
Depreciation and amortization 24.6 19.9 4.7 48.4 38.6 9.8
Net sales
Net sales for the three months ended June 30, 2026 increased by $105.6 million, or 19%, compared to the prior-year quarter, primarily due to the effects of acquisitions and pricing actions. The Environmental Solutions Group reported a net sales increase of $97.2 million, or 20%, due to increases in sales of other specialty equipment of $47.7 million, aftermarket offerings of $28.4 million, vacuum trucks of $10.7 million, and dump truck bodies and trailers of $10.5 million. Within the Safety and Security Systems Group, net sales increased by $8.4 million, or 10%, primarily due to improvements in sales of public safety equipment of $7.5 million and industrial signaling equipment of $0.9 million.
Net sales for the six months ended June 30, 2026 increased by $267.4 million, or 26%, compared to the prior-year period, primarily due to higher sales volumes, inclusive of the effects of acquisitions, and pricing actions. The Environmental Solutions Group reported a net sales increase of $242.5 million, or 28%, due to increases in sales of other specialty equipment of $153.9 million, aftermarket offerings of $45.6 million, vacuum trucks of $21.0 million, dump truck bodies and trailers of $19.1 million, as well as a $2.9 million favorable foreign currency translation impact. Within the Safety and Security Systems Group, net sales increased by $24.9 million, or 16%, primarily due to improvements in sales of public safety equipment of $20.5 million and industrial signaling equipment of $2.3 million, as well as a $2.4 million favorable foreign currency translation impact.
Cost of sales
Cost of sales increased by $71.4 million, or 18%, for the three months ended June 30, 2026 compared to the prior-year quarter, largely due to an increase of $65.3 million, or 19%, within the Environmental Solutions Group, primarily related to the addition of cost of sales from recent acquisitions and higher material costs. Within the Safety and Security Systems Group, cost of sales increased by $6.1 million, or 13%, primarily related to higher sales volumes and increased material costs.
Cost of sales increased by $184.6 million, or 25%, for the six months ended June 30, 2026 compared to the prior-year period, largely due to an increase of $170.7 million, or 27%, within the Environmental Solutions Group, primarily related to the addition of cost of sales from recent acquisitions as well as higher material costs and sales volumes. Within the Safety and Security Systems Group, cost of sales increased by $13.9 million, or 15%, primarily related to higher sales volumes and increased material costs.
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Gross profit
Gross profit increased by $34.2 million, or 20%, for the three months ended June 30, 2026 compared to the prior-year quarter, primarily due to a $31.9 million improvement within the Environmental Solutions Group and a $2.3 million improvement within the Safety and Security Systems Group. Gross profit as a percentage of revenues (“gross profit margin”) for the three months ended June 30, 2026 was 30.4%, compared to 30.0% in the prior-year quarter, primarily due to a 90 basis point improvement within the Environmental Solutions Group, partially offset by a 160 basis point reduction within the Safety and Security Systems Group.
Gross profit increased by $82.8 million, or 28%, for the six months ended June 30, 2026 compared to the prior-year period, primarily due to a $71.8 million improvement within the Environmental Solutions Group and an $11.0 million improvement within the Safety and Security Systems Group. Gross profit margin for the six months ended June 30, 2026 was 29.6%, compared to 29.2% in the prior-year period, primarily due to a 70 basis point improvement within the Environmental Solutions Group and a 20 basis point improvement within the Safety and Security Systems Group.
SEG&A expenses
SEG&A expenses for the three months ended June 30, 2026 increased by $11.4 million, or 17%, compared to the prior-year quarter, primarily due to a $7.7 million increase within the Environmental Solutions Group, a $1.7 million increase within the Safety and Security Systems Group, and a $2.0 million increase in Corporate SEG&A expenses. As a percentage of net sales, SEG&A expenses were 11.7% in the current-year quarter, compared to 11.8% in the prior-year quarter.
SEG&A expenses for the six months ended June 30, 2026 increased by $23.2 million, or 18%, compared to the prior-year period, primarily due to a $16.1 million increase within the Environmental Solutions Group, a $2.6 million increase within the Safety and Security Systems Group, and a $4.5 million increase in Corporate SEG&A expenses. As a percentage of net sales, SEG&A expenses were 11.6% in the current-year period, compared to 12.4% in the prior-year period.
Operating income
Operating income for the three months ended June 30, 2026 increased by $20.5 million, or 21%, compared to the prior-year quarter, primarily driven by a $34.2 million improvement in gross profit, partially offset by an $11.4 million increase in SEG&A expenses, a $2.1 million increase in amortization expense, and a $0.2 million increase in acquisition and integration-related expenses, net. Consolidated operating margin for the three months ended June 30, 2026 was 17.6%, compared to 17.3% in the prior-year quarter.
Operating income for the six months ended June 30, 2026 increased by $54.5 million, or 33%, compared to the prior-year period, primarily driven by an $82.8 million improvement in gross profit, partially offset by a $23.2 million increase in SEG&A expenses, a $4.3 million increase in amortization expense, and a $0.8 million increase in acquisition and integration-related expenses, net. Consolidated operating margin for the six months ended June 30, 2026 was 16.8%, compared to 15.9% in the prior-year period.
Interest expense, net
Interest expense, net, for the three months ended June 30, 2026 increased by $2.5 million compared to the prior-year quarter, largely due to higher average debt levels.
Interest expense, net, for the six months ended June 30, 2026 increased by $6.4 million compared to the prior-year period, largely due to higher average debt levels.
Other expense, net
Other expense, net, for the three months ended June 30, 2026 was flat as compared to the prior-year quarter.
Other expense, net, for the six months ended June 30, 2026 decreased by $0.1 million compared to the prior-year period.
Income tax expense
The Company recognized income tax expense of $25.3 million for the three months ended June 30, 2026, compared to $22.0 million in the three months ended June 30, 2025, with the increase primarily due to the effects of higher pre-tax income levels, partially offset by a $1.1 million increase in excess tax benefits associated with stock-based compensation activity. The Company’s effective tax rate for the three months ended June 30, 2026 was 22.7%, compared to 23.6% in the prior-year quarter.
The Company recognized income tax expense of $47.1 million for the six months ended June 30, 2026, compared to $37.7
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million in the six months ended June 30, 2025, with the increase primarily due to the effects of higher pre-tax income levels, partially offset by a $2.2 million increase in excess tax benefits associated with stock-based compensation activity. The Company’s effective tax rate for the six months ended June 30, 2026 was 23.1%, compared to 24.3% in the prior-year period.
Net income
Net income for the three months ended June 30, 2026 increased by $14.7 million compared to the prior-year quarter, largely due to the $20.5 million increase in operating income, partially offset by a $3.3 million increase in income tax expense and a $2.5 million increase in interest expense, net.
Net income for the six months ended June 30, 2026 increased by $38.8 million compared to the prior-year period, largely due to the $54.5 million increase in operating income and the $0.1 million reduction in other expense, net, partially offset by a $9.4 million increase in income tax expense and a $6.4 million increase in interest expense, net.
Environmental Solutions
The following table summarizes the Environmental Solutions Group’s operating results as of and for the three and six months ended June 30, 2026 and 2025:
Three Months Ended June 30, Six Months Ended June 30,
($ in millions) 2026 2025 Change 2026 2025 Change
Net sales $ 577.7 $ 480.5 $ 97.2 $ 1,110.4 $ 867.9 $ 242.5
Operating income 113.9 91.9 22.0 203.0 151.6 51.4
Operating data:
Operating margin 19.7 % 19.1 % 0.6 % 18.3 % 17.5 % 0.8 %
Total orders $ 547.8 $ 441.1 $ 106.7 $ 1,082.1 $ 921.2 $ 160.9
Backlog 934.8 1,000.3 (65.5) 934.8 1,000.3 (65.5)
Depreciation and amortization 23.3 18.7 4.6 45.9 36.3 9.6
Three months ended June 30, 2026 vs. three months ended June 30, 2025
Total orders for the three months ended June 30, 2026 increased by $106.7 million, or 24%, compared to the prior-year quarter, inclusive of the effects of acquisitions. U.S. orders increased by $82.0 million, primarily due to improvements in orders for other specialty equipment of $35.6 million, inclusive of higher refuse truck orders associated with the New Way acquisition and higher metal extraction support equipment orders partially due to the Mega acquisition, as well as increases in orders for dump truck bodies and trailers of $17.2 million, aftermarket offerings of $16.5 million, and vacuum trucks of $12.7 million. Non-U.S. orders increased by $24.7 million, largely due to improvements in orders for other specialty equipment of $8.9 million, aftermarket offerings of $7.8 million, vacuum trucks of $4.9 million, and dump truck bodies and trailers of $3.1 million.
Net sales for the three months ended June 30, 2026 increased by $97.2 million, or 20%, compared to the prior-year quarter, primarily due to the effects of acquisitions and pricing actions. For the three months ended June 30, 2026, U.S. sales increased by $98.9 million due to increases in sales of other specialty equipment of $58.1 million, primarily driven by higher sales of refuse trucks due to the New Way acquisition and higher sales of metal extraction support equipment partially due to the Mega acquisition, as well as increases in sales of aftermarket offerings of $22.7 million, dump truck bodies and trailers of $10.4 million, and vacuum trucks of $7.7 million. Non-U.S. sales decreased by $1.7 million, primarily due to a $10.4 million reduction in sales of other specialty equipment, partially offset by increases in sales of aftermarket offerings of $5.7 million and vacuum trucks of $3.0 million.
Cost of sales for the three months ended June 30, 2026 increased by $65.3 million, or 19%, compared to the prior-year quarter, primarily related to the addition of cost of sales from recent acquisitions, higher material costs, and a $0.7 million increase in purchase accounting expense effects. Gross profit margin for the three months ended June 30, 2026 was 28.4%, compared to 27.5% in the prior-year quarter, with the increase primarily due to favorable sales mix, production efficiencies, and benefits from pricing actions.
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SEG&A expenses for the three months ended June 30, 2026 increased by $7.7 million, or 22%, compared to the prior-year quarter, primarily due to the addition of SEG&A expenses from recent acquisitions, higher employee-related costs, and higher marketing expenses. As a percentage of net sales, SEG&A expenses were 7.5% in the current-year quarter, compared to 7.4% in the prior-year quarter.
Operating income for the three months ended June 30, 2026 increased by $22.0 million, or 24%, compared to the prior-year quarter, largely due to a $31.9 million improvement in gross profit, partially offset by the $7.7 million increase in SEG&A expenses, a $2.1 million increase in amortization expense, and a $0.1 million increase in acquisition and integration-related expenses, net.
Six months ended June 30, 2026 vs. six months ended June 30, 2025
Total orders for the six months ended June 30, 2026 increased by $160.9 million, or 17%, compared to the prior-year period, inclusive of the effects of acquisitions. U.S. orders increased by $151.2 million, primarily due to improvements in orders for other specialty equipment of $102.7 million, inclusive of higher refuse truck orders associated with the New Way acquisition and higher metal extraction support equipment orders partially due to the Mega acquisition, as well as a $29.4 million increase in orders for aftermarket offerings, dump truck bodies and trailers of $15.0 million, and vacuum trucks of $4.1 million. Non-U.S. orders increased by $9.7 million, largely due to improvements in orders for aftermarket offerings of $10.3, dump truck bodies and trailers of $4.9 million, vacuum trucks of $2.3 million, and a $2.3 million favorable foreign currency translation impact. Partially offsetting these reductions was a decrease in orders for other specialty equipment of $10.1 million.
Net sales for the six months ended June 30, 2026 increased by $242.5 million, or 28%, compared to the prior-year period, primarily due to higher sales volumes, inclusive of the effects of acquisitions, and pricing actions. For the six months ended June 30, 2026, U.S. sales increased by $222.1 million due to increases in sales of other specialty equipment of $150.9 million, primarily driven by higher sales of refuse trucks due to the New Way acquisition and higher sales of metal extraction support equipment due to the Mega acquisition, as well as increases in sales of aftermarket offerings of $35.6 million, dump truck bodies and trailers of $19.2 million, and vacuum trucks of $16.4 million. Non-U.S. sales increased by $20.4 million, primarily due to increases in sales of aftermarket offerings of $10.0 million, vacuum trucks of $4.6 million, other specialty equipment of $3.0 million, and a $2.9 million favorable foreign currency translation impact.
Cost of sales for the six months ended June 30, 2026 increased by $170.7 million, or 27%, compared to the prior-year period, primarily related to the addition of cost of sales from recent acquisitions, higher material costs, higher sales volumes, and a $2.2 million increase in purchase accounting expense effects. Gross profit margin for the six months ended June 30, 2026 was 27.3%, compared to 26.6% in the prior-year period, with the increase primarily due to operating leverage from higher sales volumes, benefits from pricing actions, and favorable sales mix.
SEG&A expenses for the six months ended June 30, 2026 increased by $16.1 million, or 23%, compared to the prior-year period, primarily due to the addition of SEG&A expenses from recent acquisitions, higher employee-related costs, and higher marketing expenses. As a percentage of net sales, SEG&A expenses were 7.8% in the current-year period, compared to 8.1% in the prior-year period.
Operating income for the six months ended June 30, 2026 increased by $51.4 million, or 34%, compared to the prior-year period, largely due to a $71.8 million improvement in gross profit, partially offset by the $16.1 million increase in SEG&A expenses and a $4.3 million increase in amortization expense.
Backlog was $935 million at June 30, 2026, compared to $1.00 billion at June 30, 2025.
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Safety and Security Systems
The following table summarizes the Safety and Security Systems Group’s operating results as of and for the three and six months ended June 30, 2026 and 2025:
Three Months Ended June 30, Six Months Ended June 30,
($ in millions) 2026 2025 Change 2026 2025 Change
Net sales $ 92.5 $ 84.1 $ 8.4 $ 185.4 $ 160.5 $ 24.9
Operating income 22.1 21.5 0.6 45.7 37.3 8.4
Operating data:
Operating margin 23.9 % 25.6 % (1.7) % 24.6 % 23.2 % 1.4 %
Total orders $ 88.9 $ 98.6 $ (9.7) $ 177.4 $ 186.4 $ (9.0)
Backlog 67.3 83.2 (15.9) 67.3 83.2 (15.9)
Depreciation and amortization 1.1 1.1 — 2.2 2.1 0.1
Three months ended June 30, 2026 vs. three months ended June 30, 2025
Total orders for the three months ended June 30, 2026 decreased by $9.7 million, or 10%, compared to the prior-year quarter. U.S. orders decreased by $5.4 million, primarily due to reductions in orders for public safety equipment. Non-U.S. orders decreased by $4.3 million, primarily due to a $6.5 million reduction in orders for public safety equipment, partially offset by increases in orders for industrial signaling equipment of $0.8 million and warning systems of $0.8 million, as well as a $0.6 million favorable foreign currency translation impact.
Net sales for the three months ended June 30, 2026 increased by $8.4 million, or 10%, compared to the prior-year quarter, inclusive of the effects of higher sales volumes and pricing actions. U.S. sales increased by $11.1 million, primarily driven by increases in sales of public safety equipment of $8.1 million and warning systems of $3.0 million. Non-U.S. sales decreased by $2.7 million, primarily due to reductions in warning systems of $3.5 million and public safety equipment of $0.6 million, partially offset by a $0.9 million increase in sales of industrial signaling equipment and a $0.5 million favorable foreign currency translation impact.
Cost of sales for the three months ended June 30, 2026 increased by $6.1 million, or 13%, compared to the prior-year quarter, primarily related to higher sales volumes and increased material costs. Gross profit margin for the three months ended June 30, 2026 was 43.1%, compared to 44.7% in the prior-year quarter, with the decrease primarily attributable to unfavorable sales mix and higher material costs, partially offset by operating leverage from higher sales volumes and benefits from pricing actions.
SEG&A expenses for the three months ended June 30, 2026 increased by $1.7 million, or 11%, compared to the prior-year quarter, primarily due to higher employee-related costs and marketing expenses. As a percentage of net sales, SEG&A expenses were 19.2% in the current-year quarter, compared to 19.1% in the prior-year quarter.
Operating income for the three months ended June 30, 2026 increased by $0.6 million, or 3%, compared to the prior-year quarter, primarily due to a $2.3 million improvement in gross profit, partially offset by the $1.7 million increase in SEG&A expenses.
Six months ended June 30, 2026 vs. six months ended June 30, 2025
Total orders for the six months ended June 30, 2026 decreased by $9.0 million, or 5%, compared to the prior-year period. U.S. orders increased by $1.0 million, primarily due to improvements in orders for warning systems of $3.2 million and industrial signaling equipment of $1.3 million, partially offset by a $3.5 million reduction in orders for public safety equipment. Non-U.S. orders decreased by $10.0 million, primarily due to decreases in orders for public safety equipment of $12.7 million and warning systems of $0.6 million, partially offset by a $1.4 million increase in orders for industrial signaling equipment and a $1.9 million favorable foreign currency translation impact.
Net sales for the six months ended June 30, 2026 increased by $24.9 million, or 16%, compared to the prior-year period, inclusive of the effects of higher sales volumes and pricing actions. U.S. sales increased by $24.9 million, primarily driven by increases in sales of public safety equipment of $21.3 million and warning systems of $3.6 million. Non-U.S. sales were flat as compared to the prior-year period, primarily due to reductions in sales of warning systems of $3.9 million and public safety equipment of $0.8 million, offset by a $2.3 million increase in sales of industrial signaling equipment and a $2.4 million favorable foreign currency translation impact.
Cost of sales for the six months ended June 30, 2026 increased by $13.9 million, or 15%, compared to the prior-year period, primarily related to higher sales volumes and increased material costs, as well as a $1.9 million unfavorable foreign currency
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translation impact. Gross profit margin for the six months ended June 30, 2026 was 43.4%, compared to 43.2% in the prior-year period, with the improvement primarily attributable to improved operating leverage from higher sales volumes and benefits from pricing actions.
SEG&A expenses for the six months ended June 30, 2026 increased by $2.6 million, or 8%, compared to the prior-year period, primarily due to higher employee-related costs and marketing expenses. As a percentage of net sales, SEG&A expenses were 18.7% in the current-year period, compared to 20.0% in the prior-year period.
Operating income for the six months ended June 30, 2026 increased by $8.4 million, or 23%, compared to the prior-year period, primarily due to a $11.0 million improvement in gross profit, partially offset by the $2.6 million increase in SEG&A expenses.
Backlog was $67 million at June 30, 2026, compared to $83 million at June 30, 2025.
Corporate Expenses
Corporate operating expenses for the three months ended June 30, 2026 were $17.8 million, compared to $15.7 million in the prior-year quarter, with the increase primarily due to higher post-retirement expenses and medical costs, partially offset by lower stock compensation costs.
Corporate operating expenses for the six months ended June 30, 2026 were $30.8 million, compared to $25.5 million in the prior-year period, with the increase primarily due to higher post-retirement expenses and legal costs, a $0.8 million increase in acquisition and integration-related expenses, net, as well as increased medical costs.
Seasonality of Company’s Business
Certain of the Company’s businesses are susceptible to the influences of seasonal factors, including buying patterns, delivery patterns, and productivity influences from holiday periods and weather. In general, the Company tends to have lower equipment sales in the first calendar quarter of each year compared to other quarters as a result of these factors. In addition, rental income and parts sales are generally higher in the second and third quarters of the year, because many of the Company’s products are used for maintenance activities in North America, where usage is typically lower during periods of harsher weather conditions.
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Financial Condition, Liquidity and Capital Resources
The Company uses its cash flow from operations to fund growth and to make capital investments that sustain its operations, reduce costs, or both. Beyond these uses, remaining cash is used to pay down debt, repurchase shares, fund dividend payments, and make pension contributions. The Company may also choose to invest in the acquisition of businesses. In the absence of significant unanticipated cash demands, we believe that the Company’s existing cash balances, cash flow from operations, and borrowings available under the 2025 Credit Agreement will provide funds sufficient for these purposes. The net cash flows associated with the Company’s rental equipment transactions are included in cash flow from operating activities.
As of June 30, 2026, there was $52.7 million of cash drawn under the revolving credit facility, $400.0 million outstanding under the term loan facility, and $10.7 million of undrawn letters of credit under the 2025 Credit Agreement, with $1.04 billion of availability for borrowings.
The Company’s cash and cash equivalents totaled $62.8 million as of June 30, 2026 and $63.7 million as of December 31, 2025. As of June 30, 2026, $14.9 million of cash and cash equivalents was held by foreign subsidiaries. Cash and cash equivalents held by subsidiaries outside the U.S. typically are held in the currency of the country in which it is located. The Company uses this cash to fund the operating activities of its foreign subsidiaries and for further investment in foreign operations. Generally, the Company has considered such cash to be permanently reinvested in its foreign operations and the Company’s current plans do not demonstrate a need to repatriate such cash to fund U.S. operations. However, in the event that these funds are needed to fund U.S. operations or to satisfy U.S. obligations, they generally could be repatriated. The repatriation of these funds may cause the Company to incur additional tax expense, dependent on income tax laws and other circumstances at the time any such amounts are repatriated.
Net cash of $214.2 million was provided by operating activities in the six months ended June 30, 2026, compared to $96.4 million in the prior-year period, with the year-over-year increase primarily due to higher net income, inclusive of the effects of acquisitions, and favorable changes in net working capital.
Net cash of $62.1 million was used for investing activities in the six months ended June 30, 2026, compared to $94.3 million in the prior-year period. During the six months ended June 30, 2026, the Company funded $18.6 million of capital expenditures and made an initial payment of $44.9 million to acquire Mega, net of cash acquired. During the six months ended June 30, 2025, the Company funded $12.9 million of capital expenditures and made an initial payment of $82.1 million to acquire Hog.
Net cash of $152.9 million was used for financing activities in the six months ended June 30, 2026, compared to $29.8 million in the prior year period. In the six months ended June 30, 2026, the Company paid down $109.8 million of borrowings under its revolving credit facility, funded cash dividends of $18.3 million, and redeemed $13.5 million of stock in order to remit funds to tax authorities to satisfy employees’ tax withholdings following the vesting of stock-based compensation and the exercise of stock options. Additionally, the Company funded payments of $11.5 million relating to the Hog acquisition. In the six months ended June 30, 2025, the Company increased net borrowings under its revolving credit facility by $55.0 million, paid down $1.6 million under its previous term loan facility, funded $4.3 million of acquisition-related payments, paid $11.5 million to acquire a previously-leased manufacturing facility, funded cash dividends of $17.1 million and share repurchases of $39.7 million, and redeemed $11.4 million of stock in order to remit funds to tax authorities to satisfy employees’ tax withholdings following the vesting of stock-based compensation and the exercise of stock options.
On October 29, 2025, the Company entered into the 2025 Credit Agreement, which amended and restated the 2022 Credit Agreement. The 2025 Credit Agreement increased the Company’s revolving credit facility from up to $675 million to up to $1.1 billion and includes a delayed draw term loan facility in an amount of up to $400 million. In addition, the Company may expand its borrowing capacity under the 2025 Credit Agreement by an aggregate amount of up to the sum of (x) the greater of (i) $500 million and (ii) 100% of Consolidated EBITDA for the applicable four-quarter period preceding such expansion, and (y) the amount of additional indebtedness (if any) that could be incurred without causing the Consolidated Total Net Leverage Ratio for the applicable four-quarter period preceding such expansion, on a pro forma basis, to exceed 2.75 to 1.00, subject to the approval of the applicable lenders providing such additional borrowings.
The Company is subject to certain net leverage ratio and interest coverage ratio financial covenants under the 2025 Credit Agreement that are to be measured at each fiscal quarter-end for the most recently ended four-quarter period. The Company was in compliance with all such covenants as of June 30, 2026.
The Company anticipates that capital expenditures for 2026 will be in the range of $45 million to $55 million.
The Company believes that its financial resources and major sources of liquidity, including cash flow from operations and borrowing capacity, will be adequate to meet its operating needs, capital needs, and financial commitments.
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Contractual Obligations and Off-Balance Sheet Arrangements
During the six months ended June 30, 2026, there have been no material changes in the Company’s contractual obligations and off-balance sheet arrangements as described in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
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