Greetings, and welcome to the Oshkosh Corporation Reports Fiscal 2020 Fourth Quarter and Full Year Results. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, 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 fourth quarter and full year 2020 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 so 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 year are to a fiscal quarter or fiscal year, unless otherwise stated. Our presenters today include Wilson Jones, Chief Executive Officer; John Pfeifer, President and Chief Operating Officer; and Mike Pack, Executive Vice President and Chief Financial Officer. Please turn to Slide 3 and I'll turn it over to you, Wilson.

Thanks, Pat. Good morning, everyone. I continue to be very proud of the hard work and disciplined execution of Oshkosh team members as we continue to work through the challenges brought on by the COVID-19 pandemic. We've talked about it before but it bears repeating, our people-first culture has been a key driver for our strong results in the face of adversity. Proud Oshkosh team members and their commitment to our strong culture allowed us to overcome significant headwinds this past year, including uncertain customer demand, supplier delivery interruptions, workforce availability issues and many others. A big shout-out to all 15,000 of our team members and our dedicated suppliers that have worked hard and stepped up during this difficult period to continue meeting our customers' needs. As a reminder, our fourth quarter call is always a little different from our other quarterly calls as I'll review both the quarterly highlights and the full year results before turning it over to John and Mike. For the fourth quarter, we delivered sales of nearly $1.8 billion and adjusted earnings per share of $1.30. Much like I said regarding our third quarter performance, we've controlled what we can control while responding quickly to challenges outside of our control. This is important as we were able to grow adjusted operating income in our defense, fire & emergency and commercial segments over the prior year while achieving consolidated adjusted decremental margins of 19%. In our largest segment, access equipment, we delivered 23% adjusted decremental margins during the quarter where revenues were down nearly 40%. John will go into more specifics on the segments, but the access equipment markets in North America and Europe remain soft and the timing of recovery remains uncertain. We are encouraged by utilization data that is approaching pre-pandemic levels and believe the market is stabilizing. We'll be paying close attention to rental industry metrics as well as engaging in annual purchase discussions with our customers over the next few months. Finally, we are announcing a 10% increase to our quarterly cash dividend to $0.33 per share. This is our seventh consecutive annual increase and reflects the confidence we have in our business model and the longer-term outlook. Please turn to Slide 4 for a discussion of the full year. There's no doubt that 2020 has been one of the most memorable years in recent history as the global pandemic has created disruptions of significant proportions, and I'm proud of the efforts and results that our people were able to deliver. For example, our access equipment segment overcame a nearly $1.6 billion year-over-year sales decline to deliver an impressive 8.5% full year adjusted operating margin. Our fire & emergency segment delivered 2 consecutive quarters of record adjusted operating margin percentages to end the year. Our commercial segment posted a decade-plus high full year adjusted operating income margin of 7.5%. And defense successfully executed our ramp-up of the JLTV program despite a host of headwinds brought on by the global pandemic. All of these represent significant accomplishments in the midst of the pandemic and demonstrate our strengths as a different integrated global industrial. We ended the year on a high note with solid performance in the fourth quarter. During the year, we executed a combination of company-wide temporary and permanent cost reductions. And Mike will talk about how these actions will impact our cost structure in 2021 in his section. I also want to call out some of the great work our teams have been doing regarding corporate responsibility with a focus on ESG. We don't typically talk about ESG metrics on earnings calls, but our efforts to reduce greenhouse gas emissions and energy usage, along with our team member engagement and safety performance, are among many areas that we believe help differentiate Oshkosh from other companies. We continue to earn recognition from agencies that track and evaluate company performance for these important nonfinancial measures, and we believe they further underscore our commitment to excellence, long-term value and sustainability. Before I turn it over to John, I wanted to highlight that our balance sheet and liquidity remain strong, and we believe we will have opportunities to use our balance sheet to grow shareholder value in the future. Please turn to Slide 5 and I'll pass it over to John.

Thanks, Wilson, and good morning, everybody. Wilson mentioned the pandemic, and I'd like to provide an update since several of our facilities, including our headquarters, are located in the region of Wisconsin that is currently experiencing some of the highest rates of COVID-19 spread in the nation. Across the company, we've been focused on maintaining the safety of our team members and preventing the spread of the virus, and we have a good track record in doing that. However, the recent resurgence is creating some workforce availability and supplier delivery challenges. It's important -- it's as important as ever that we maintain strong safety procedures that meet or exceed CDC guidelines. Of course, this is challenging as many of us are experiencing pandemic fatigue. But like Wilson, I'm proud of our team members and our ability to stay focused and effective. Let's kick off our segment discussions with access equipment. We've been closely managing our access equipment business during a time of significant double-digit sales declines while still delivering strong adjusted decremental margins and impressive overall adjusted operating margins. In fact, we've been able to set a new benchmark for financial performance during an industry downturn. We appreciate the efforts and performance our team members have delivered during these times. Our positive fourth quarter results are significant, considering the low demand for access equipment, which has resulted primarily from lower equipment utilization, leading to lower CapEx spending by rental company customers in North America and Europe. Sales for the quarter were down nearly 40%, and we're therefore continuing to operate our facilities on reduced schedules. We've taken both temporary and permanent cost reduction actions in the business as we weather the storm. We believe this is a responsible approach. It's important to emphasize that we have continued to invest in the business as JLG is the innovation leader in the industry, and we remain confident in the long-term outlook for this business. We look forward to future product innovation releases as a result of our continuing investment. We're carefully balancing our cost reductions with the ability to ramp up when the market recovers. Through the first quarter, we'll keep production lower by operating our U.S. facilities for approximately 50% of the available production weeks. We will make decisions for the remainder of 2021 as conditions evolve and our customers share their plans. We are keeping our workforce engaged to be able to meet demand when the market returns. We are also staying in close communication with our suppliers as they are key to our ability to ramp up when the market comes back. We know that fleets in North America are aging with the aerials in the 55-month average age range according to the latest data, and we believe this elevated figure bodes well for future demand. The bottom line for North America is that we are confident in the recovery for the access equipment market, but the specific timing of the recovery remains uncertain. For the first half of the year, we expect lower year-over-year sales. We are early in our discussions with our rental company customers, and we expect to gain more clarity on the second half of the year before our next earnings call. Finally, just as we discussed last quarter, China's economy continues to recover, which we believe offers an opportunity for double-digit sales growth in the region for the foreseeable future. Please turn to Slide 6 and I'll discuss our defense segment. Our defense segment performed well in the quarter but has been dealing with workforce availability issues that I mentioned earlier as the pandemic is having a notable effect on our ability to schedule people and production. Despite these challenges, which we experienced more intensively late in the fourth quarter and continued to experience earlier this month, our operations teams have delivered solid results for our U.S. government customer and grew revenues in the year by more than 11%. Our successful ramp-up of the JLTV program throughout the year led the way and provides a strong foundation as part of our large backlog in the segment. Our team was happy to receive an expected order for 322 JLTVs from the Belgian Ministry of Defense in October. The contract with our NATO ally valued at more than EUR 115 million further demonstrates the success we are having with the world's best light protected tactical wheeled vehicle. We expect to begin shipping the vehicles in 2023, and we expect to announce more international JLTV orders in 2021. We competed against an incumbent competitor to win this order, and we believe it demonstrates the superior cost and performance characteristics of the JLTV product. I want to comment on the recently enacted Continuing Resolution, or CR. It used to be rare that the government required a CR to fund spending, but over the last 10 to 12 years, CRs have become the norm. Our programs of record remain funded under the CR so it does not present an issue for 2021. Let's turn to Slide 7 for a discussion of the fire & emergency segment. Fire & emergency delivered an all-time record for quarterly adjusted operating income of 16.4% in the fourth quarter. Our team's performance at F&E has been nothing short of phenomenal as they have navigated through supplier issues, customer travel restrictions and other operational challenges, many of which were brought on by COVID-19. The simplification philosophy that F&E adopted several years ago, along with state-of-the-art product innovation, provides the framework for the team to run its business at such a high level. We are exiting the year with a strong backlog, supported by a record order year of nearly $1.3 billion despite the negative impacts of COVID-19. Aged fire truck fleets, combined with the availability of new technologies, underpin our favorable long-term outlook for the F&E market. That said, tight municipal budgets may constrain demand in the near term. Fire & emergency is ready for the challenge with a market-leading lineup of high-quality, custom and commercial fire trucks and RF units. And we continue to invest in new technologies, such as our Fotokite Situational Awareness System in alternative powertrain options that you'll hear more about in future quarters. Please turn to Slide 8 and we'll talk about our commercial segment. Our commercial segment has continued to drive improvement throughout the year despite headwinds caused by the pandemic. The team delivered strong margins and higher year-over-year adjusted earnings in the fourth quarter despite lower revenues. Our commercial team posted its highest full year adjusted operating income margin in more than a decade. This is particularly impressive, given the market impacts from COVID when construction was halted in many areas of the country and shelter-in-place restrictions temporarily reduced demand for waste collection at businesses earlier in the year. Much of our recent success stems from simplification efforts and disciplined cost management as well as the ramp-up of our new S-Series 2.0 Front Discharge Concrete Mixer, which is driving a lot of excitement and helping us win new customers. On our last call, we announced restructuring plans to transfer rear discharge concrete mixer production from Minnesota to Ontario, Canada as the team simplifies the business with a focused factory approach. I'm pleased to report that the transition is progressing according to schedule, and we anticipate a successful completion over the next several months. We believe this will put us in a prime position to drive sustained margin improvements. Before I leave this segment, I want to mention our commitment to electrification as a way to reduce greenhouse gas emissions and provide our customers with options as they plan their fleets. Early in the fourth quarter, there were numerous announcements of plans for electric RCVs in the U.S. market by some companies. We are proud to be working on electrification solutions across all of our businesses at Oshkosh. This is particularly true for RCVs as we are partnering with a chassis OEM to deliver 5 electric RCV units to be used in Boise, Idaho in the summer of 2021. I'd like to close with a comment about the culture and positive mindset we see from the team at commercial. They have been working very hard driving business and operational improvements, and their efforts and dedication to task are second to none and we can see it in our results. This wraps it up for our business segments. I'm going to turn it over to Mike to discuss our fourth quarter results and some additional comments on current business conditions.

Thanks, John, and good morning, everyone. Please turn to Slide 9. Strong execution allowed us to deliver 19% adjusted decremental margins on a consolidated basis and 23% adjusted decremental margins at access equipment in the fourth quarter. Consolidated net sales for the quarter were $1.8 billion, down 18.7% from the prior year quarter. A 39% decrease in access equipment segment sales was the primary driver of the decrease. Access equipment sales were negatively impacted by lower customer demand, primarily as a result of COVID-19. As John mentioned, our customers remain cautious with equipment purchases in light of uncertainty surrounding the pandemic and associated softness in nonresidential construction activity. Consolidated adjusted operating income for the fourth quarter was $124.1 million or 7% of sales compared to $203.1 million or 9.2% of sales in the prior year quarter. Access equipment segment adjusted operating income declined on lower sales and unfavorable manufacturing absorption as a result of planned shutdowns during the quarter, offset in part by the benefit of COVID-19-related temporary cost reduction actions. Defense segment adjusted operating income increased as a result of improved product mix and higher sales volume, partially offset by less favorable cumulative contract adjustments and higher engineering and proposal spending in the current year quarter. Fire & emergency segment operating income increased in the current year quarter as a result of improved price cost dynamics and improved absorption, offset in part by lower sales volume. And commercial segment fourth quarter adjusted operating income increased due to lower spending in response to the COVID-19 pandemic and favorable material costs, offset in part by adverse product mix and lower sales volume. Adjusted earnings per share for the quarter was $1.30 compared to EPS of $2.17 in the fourth quarter of 2019. Fourth quarter results benefited by $0.02 per share from share repurchases completed in the prior 12 months. Finally, we generated strong free cash flow during the quarter to drive full year free cash flow of $238 million. This is a solid accomplishment during a year where we saw rapid declines in customer demand, which put pressure on working capital. Please turn to Slide 10 for a discussion on 2021. The COVID-19 pandemic has continued to drive uncertainty in the cadence of customer demand in both our access equipment and commercial segments. Conversely, strong backlogs in our defense and fire & emergency segments provide good visibility well into 2021. However, as John mentioned earlier, recent spikes in COVID-19 infection rates are creating workforce availability and supply chain issues, particularly in Wisconsin, where a significant portion of the production occurs for our defense and fire & emergency segments. The situation is causing production and labor efficiency risks for these 2 segments and is also likely to impact final truck inspections by customers in the fire & emergency segment. Taking these factors into account, including the ongoing uncertainty of the pandemic, we're not in a position to provide quantitative expectations for 2021 at this time. We are actively engaged in discussions with our key customers in the access equipment and commercial segments to understand the requirements for 2021, but we do expect softer year-over-year demand in the first half of 2021 compared to 2020. Demand for access equipment remains uncertain for the second half of the year, but we expect to have better clarity during the first quarter earnings call as we gain further insight into the trajectory of the pandemic and our customer requirements for 2021. At access equipment, we are implementing 2-week production shutdowns per month in the United States in the first quarter of 2021 to better align production with customer requirements. In the second quarter of 2020, we implemented decisive actions which reduced our 2020 pretax cost by approximately $120 million. The reductions were evenly split between 3 areas: first, salary reductions and furloughs; second, incentive compensation; and third, project travel and other discretionary spending. As we previously discussed, these cost reductions were largely temporary in nature, and we expect them to return to our expense run rate in 2021. Additionally, we discussed permanent cost reduction actions during our last earnings call in the access equipment and commercial segments totaling $30 million to $35 million once complete. We expect these actions will benefit 2021 by approximately $20 million. Recently, we implemented additional permanent cost reductions totaling $15 million for 2021, which reduced corporate and segment operating expenses. So we expect to benefit from a total of $35 million of permanent cost reductions in 2021, growing to $45 million to $50 million by 2022. Return of costs that drove the temporary cost reductions in 2020 will be a headwind to margins in 2021. However, we are continuing to manage our business in a disciplined manner and will respond to the ongoing uncertainty with our playbooks. Our balance sheet remains strong with available liquidity of approximately $1.4 billion, consisting of cash of approximately $600 million and availability under our revolving line of credit of approximately $800 million. We expect a modest increase in capital expenditures to approximately $120 million in 2021. While we are not providing quantitative financial expectations today, we expect to provide them later in the year. With that, I'll turn it back over to Wilson now for some closing comments.

Thanks, Mike. We just completed the year in which we delivered nearly $5 of adjusted earnings per share in the midst of a global pandemic, and we believe we are in a great position moving into 2021 with our strong balance sheet and cash position. Our defense and fire & emergency backlogs provide visibility well into 2021, and we took aggressive actions early during the pandemic to lower our costs. Our culture at Oshkosh is strong, and we have an outstanding group of leaders and team members who have effectively managed production and supply chain disruptions and kept Oshkosh on a positive path since the pandemic began. We can't let up as the threat is still with us, but I'm reassured by the strength and resilience of our people and believe we will deliver solid sales and earnings performance over the long term. I'll turn it back over to Pat to get the Q&A started.

Thanks, Wilson. [Operator Instructions]. Operator, let's please begin the question-and-answer period of this call.

[Operator Instructions]. The first question is from Nicole DeBlase, Deutsche Bank.

So maybe just starting with a follow-up on the temporary cost, structural cost discussion. That was helpful color. But I guess how do we think about that with respect to cadence throughout the year? Because if we have a situation where revenues are down in the first half and then maybe we have the potential to turn positive in the second half? Is that so easy? Does that mean that those temporary cost actions don't really start coming back until the second half of the year? Just trying to think through that.

Nicole, this is Mike. So I'll walk you through that. So in total, the temporary costs are $120 million. Really, those 3 buckets that I talked about in the prepared remarks, you have really 2/3 of it is compensation-related items. Those come back. That last bucket, which is about 1/3 of it is more your discretionary spend type items. We expected in our -- in the fourth quarter that, that third bucket, the discretionary items would be a bit higher in the fourth quarter. Indeed, we did see that. So largely, we could see some benefit in that -- sort of that third bucket early in the year with the pandemic still weighing on us. But -- so that those will be -- those costs will be coming back right away at the beginning of the year. I guess the -- we started benefiting from the $120 million just from a cadence perspective. About 1/4 of the benefit was in our second quarter. We had about 25% of it also in our fourth quarter, leaving about 50% of the benefit was in our third fiscal quarter. So that's a bit of a cadence of the $120 million. Just as we look at Q1, we do have a few headwinds for Q1. We mentioned in the prepared remarks that access is shutting down production about half of the available weeks in North America. That's going to create an absorption headwind for us when you compare to last year. If you look back at our earnings call last year in Q1 as well, we had a pretty sizable price benefit on to price-protected backlog and access as well, so that will be a headwind in Q1. But again, the net headwind with the cadence of the permanent and temporary reductions is about $85 million.

And this is John. Just a little bit more color on the temporary to permanent. So you might ask, well, why wouldn't we convert all the temporary to permanent cost reductions and take more permanent costs out? And the simple answer is, we believe the market is coming back, and we have to balance how much cost we take out with what we expect to happen in the foreseeable future. And we want to make sure that we're ready for that market to come back.

Okay, got it. That's really helpful color. And then for my follow-up, totally understand the lack of visibility in a lot of your businesses next year, particularly access. But defense is traditionally a business where you do have a little bit more visibility on the next year outlook. So maybe you could characterize expectations for defense in 2021, if possible?

Yes. With defense, you see the strong backlog. That gives you a view. Now some of that would be deliverable in future years, '22 and beyond, but it gives you an idea of the opportunity and the customer requirements for the next year. That's going to give you -- that backlog can give you a pretty good idea of what the top line opportunity is there. Go ahead.

I'm just going to say, Mike. We've always talked about run rate in defense, Nicole, of around $2 billion. And so I mean, we're public about that. So to your point, yes, it is one of the -- nothing's easy, right, during this time, but that's an easier one to see from a visibility standpoint, that it's at least a $2 billion run rate.

What we're just managing through in that business is with COVID, if the cadence of that becomes a bit uncertain just with the supplier challenges and workforce availability that we're managing through.

We have a question from Mig Dobre, Robert W. Baird.

Hopefully, you're all healthy here in Wisconsin. I guess my question, I'm looking to clarify your comment on cost. Are you essentially saying that the 2/3 that is compensation-related resets back to that pre cost-cutting run rate as early as Q1 of fiscal '21?

That's correct, Mig.

Okay. So the discretionary spend that almost by definition, you can control and maybe you can tweak as the year progresses?

Certainly, we're going to continue to watch the pandemic, and it's that third bucket. Certainly, there's some things in there that could be managed. Again, what we saw in the fourth quarter though, the benefit in that third bucket was lesser than it was in the third quarter. And that's -- we had signaled that in the last call. We were anticipating that with -- as economic activity started picking up, we did have more of that spending. And 1 important point is, particularly in the fourth quarter, we've continued to spend on new product development, so that's been -- that's certainly been an area of focus as well. And that's an area that we certainly don't want to cut as we're managing through this.

Mig, I would just add that you've followed us for years. And I think you're seeing -- we certainly believe that we've set a new benchmark for performance. But along with that, we know we have to be realistic and manage the business for the recovery. And if we don't get that recovery, then obviously, our playbook, we have other levers that we can pull in that playbook. But we still -- I think Mike talks a lot about cautiously optimistic and we are. And again, we're cautiously optimistic but in a positive way because there's a lot of positives going on with our defense backlog, our fire & emergency backlog. Refuse is always a good base for us to work through. So adding all that, and then we're still investing in the business. We're actually increasing NPD, on new product development, in '21. You know our balance sheet. So we're cautiously optimistic but we're very positive and really think we're well positioned for the recovery when it does come.

Absolutely. And I would agree. I think your fiscal '20 performance has been excellent. I guess my follow-up question has to do with the balance sheet, just kind of looking through inventory. I'm kind of curious here. Inventory is still, I would say, pretty robust. How are you thinking about working capital and inventory specifically going forward? And what sort of progress do we need to see in access equipment specifically over the next, call it, couple of quarters?

Thanks, Mig. Yes. On inventory, 1 thing out of the gate, inventory is up year-over-year. That is definitely not all access and I think that may be an assumption there. Access is up somewhat. We're continuing to balance that production with customer requirements so that will continue to merge over the course of the year. The other big piece of it is, is we've made some conscious decisions with the pandemic to invest in safety stock to keep our lines running. And this is -- when I say safety stock, this is stuff that's going to imminently be used in our production of our trucks to keep our lines running. And I think in a lot of regards, it's been helpful as we've navigated through that. So that certainly is a meaningful component of the increase. So we feel good where we're sitting from an inventory perspective right now.

Can you give us a sense, though, for any sort of expectation for fiscal '21 in terms of this line item? I'm presuming it will come down at a point in time.

Yes. I mean, overall, we're -- it will continue to decline. It would be our expectation over the course of the year -- by the end of the year, I should say. So obviously, you get into timing with -- as we see orders and so on and whether stuff shifts in the third quarter or fourth quarters, there could be some timing aspects. But over the course of the year, we'd expect that inventory to continue to come down.

We have a question from Ross Gilardi, Bank of America.

I mean, I was just wondering if you could talk a little bit more about decremental margin expectations for the overall company, particularly in access for the first half, just given -- going through all these puts and takes and your shutdowns and the movement on costs, et cetera. I mean, can you actually sustain a 20% to 25% decremental as you -- particularly as you try to eat into some of that inventory in the first half?

Sure. Certainly, we strive, as we've talked about, to deliver responsible decremental margins, and we target that mid-20s over the longer term. We are going to have some headwinds in the first quarter, in particular, when you look at access. And that's again a couple of things that are driving that. We had a, with the lower production absorption, a meaningful impact there as well as that price benefit that I mentioned when Nicole asked the question. We had some price-protected backlog that's not -- that we benefited from last year that's not recurring. So those are a couple of headwinds just early in the year. And what we did say is, particularly in the first half of the year, we do expect the volume to be down as a company but also that certainly applies to access. So that's what I'd say at this point. Again, our decremental margins remain a very strong focus, and we're going to strive to deliver responsible margins.

And just the conversations with some of your larger rental customers, this is 1 for you, Wilson. But is the tone shifting at all? I'd certainly understand that they're being very tight on CapEx and being very careful? [Indiscernible] took up CapEx marginally for the year, it seemed like more of a year-end adjustment. H&E is talking about pickup in warm starts into next year. I'm just wondering if the tone is shifting at all. Or does it just still feel like these guys are going to be as absolutely as frugal as possible in the next year?

This is John. I'll try to give you some color on that because we talk to our customers, both the big national rental companies and all the independents on a regular basis, and we're just in the early stages of our annual negotiations with them. The -- what we're seeing and what we're hearing is that utilization has come back up so that's a really good sign. And we also see that in our telematics data that utilization has come up. We're also seeing that there's been a little bit of trimming of fleets, a little defleeting depending on the segment that they're serving. But for the most part, fleets have stayed pretty good in terms of the size. That's a very positive sign. I think that what we've all been dealing with is this continuing pandemic, which is creating uncertainty in terms of when we're going to start seeing enough positive signs of stabilization, where we start to see some CapEx be released. I think that we would expect that they are carefully monitoring the fleets. They're doing what they should be doing in terms of prudent management of fleets. But we also know that the average age of a boom right now in the market in the U.S. is 55 months. And there's an aging amount of fleet that's going to need to be replaced, and we see that as something that's going to be a catalyst to demand. And the question is not if, it's really a question of exactly what quarter that's going to happen. And we believe the first 1 to 2 quarters of the year will continue to be a little bit weak, and we'll start to see some positive signs probably in the back half of the year. We just can't pin it down quarter-by-quarter, which is one of the reasons we're not providing guidance.

The only color I would add, John, that's spot on, is the conversations I've been around, Ross, the good news is most of our big customers agree that the market is stabilizing. And I think that's a good first step. Obviously, we are concerned about that if there's going to be a second COVID wave, again, we're monitoring that very closely. But what I think worries them a little bit is their fleet age and it's getting -- it's aging. And so I agree with what John said. It's not a matter of if, it's when. And right now, we're learning that, that would be in the back half of this fiscal year for us.

Next question is from Seth Weber, RBC.

This is Brendan on for Seth. I'd like to ask about access. Was there any change in kind of the competitive landscape in the quarter, given the lower demand, competitors maybe giving pricing concessions to drive market share? Or just anything sort of out of the normal for how the competitive landscape shaped up?

Thanks for the question. This is John. So on the pricing front, we've maintained a positive price/cost equation for the year. We're very careful and very disciplined in how we manage our pricing. We are the market leader and we'll stay disciplined. We have not had a problem staying disciplined as we've gone throughout this significant downturn. So we think that, that's a very positive thing. Of course, we got a strong balance sheet. Mike talked about that. We -- all the inventory that we have is good current inventory. We're not in any kind of a forced selling position. So we expect to continue to manage this in the same way going forward.

I think the only thing I would add there is we have seen some irrational pricing internationally. And -- but I think in North America, it's always a competitive environment. It always has been. If there has been some irrational behavior, it's really been more on the international front.

Okay. And then you noted tight municipal budgets might constrain short term at F&E. Is there anything additional that you could give there? Any more color for what you're hearing on those budgets?

So I'll give you a little color on it. First of all, F&E has got a really strong backlog. 2020 was an all-time record order year for F&E, which has led to that really strong backlog. So we feel really good about our position there. There's also an aging fleet and has been for a little while now in the F&E market, which certainly bodes well for the future of the market. Now what's going to happen with municipal spending? We think that state budgets are probably a little bit more stressed than municipal budgets. There are property tax, we're seeing the biggest driver to municipal budgets, and there has not been a significant property valuation problem in the marketplace. There's a little stress cost hospitality, tax receipts and things, of course. So I think that we're watching that. We -- for the long term, we feel great about this market. Could that put a little bit of pressure on 2022? Maybe. It will be the aged fleets and our strong position in the market against some potential squeeze on municipal budgets. But remember, fire & emergency equipment is a nice priority for municipalities. It's not something that they like to cut when they have -- when they are forced to trim their spending. So that's a color I'll give you on that.

The next question is from David Raso, Evercore.

Just so we can help quantify it a little bit the first half of the year being down in access. Should we think of normal sequential trends from here for the next 6 months as your customers get a better feel for how they really want to proceed for their calendar '21? If that's the case, the first half of the year, access sales are down roughly 20% to 25%. And the follow-up would be the type of conversations you're having. While there's a lot of variability, no doubt, looking out into the June and September quarters, are they at least giving you a framework that could allow the full year to feel like an up year? And again, I know it could change but the June quarter has a very easy year-over-year comp. So again, just trying to level set that first half decline and what you're hearing. Can we pull back out of that hole in the second half of the year to be up for the full year?

David, this is Mike. I'll start and then we'll -- John will talk about just the ongoing outlook. I think right now, we -- again, we expect the first half of the year to be down in that column, the exact percentage right now at this point. I would point to, as Wilson mentioned, and we had both in his prepared remarks and a few minutes ago, we do see our markets stabilizing. We saw that -- we saw some stabilization in year-over-year changes from Q3 to Q4. We expect some stabilization but we expect it to be down. And that's -- and I think there's a range of scenarios in there. So we're continuing to manage and stay close to the customers. In terms of the cadence towards the back end, I'll turn it over to John on that.

Yes. David, I think what we're going to see is the -- in terms of the quarterly year-over-year decline, it's going to continue to moderate near term. When I say near term, the next 1 to 2 quarters, it will continue to moderate from where it's been the last quarters. Can we see the back half come back to where we see full year-over-year growth? It's possible. I wish I can give you -- we had more -- a level of confidence where we could give you guidance on that, but it's certainly within the realm of possibility that, that will happen. And we're paying close attention to that. And if we get to a point 1 quarter from where we can provide guidance, that will be the best case scenario because it will mean things supplies enough where we can really give you the clear outlook on the year within the realm of possibility.

Yes. I think just to add a little bit more on the conversations I've had, David, is the -- there are projects out there. We need some confidence in construction. And I think the -- if you look at the projects that are pent-up, Dodge momentum, ABI, those are trending up a little bit. We're watching those very closely. But I think what everyone is doing, I'm sure you are, too, is cheering for an infrastructure bill. An infrastructure bill, I think, creates a lot of comments, even though it might not have total our initial impact in the back half of our year, it's going to give people confidence that there's going to be projects available, and I think that creates some momentum in projects that are more related to infrastructure spending. So I know most of our big customers are certainly [indiscernible] for that. And then they're also the way we are, that seasonally, when spring there should be a lot of construction opportunities out there, will we be passive in the pandemic is the big question.

Yes. Yes. Recently, we've seen the Architectural Billing Index go from 40 to 47 so that's a nice jump. A positive jump. 47 is still not a great number so we kind of need to see where it trends from here.

And if we don't get a bill, just to make sure we level set a bit on where the replacement demand is greatest when it comes to mix because with an infrastructure bill, I think it's obviously a little bit easier to see the growth next year pretty comfortably. But let's say, we just get a middling kind of market, when you speak to the age of the fleet, do you see the greatest replacement on the bigger booms? Is it the scissors? Is it a bread and butter 60-footer? I'm just trying to get a sense of if we can assume a big top line, what kind of mix just serving replacement?

Well, so I'll tell you, I won't go product line by product line or side by side. But certainly, booms is in -- is the product line that we talk about most when we talk about the positive dynamics in terms of fleet age. Booms are aged in the market. Replacement is needed in the near future. And that's the primary [indiscernible] David.

We have a question from Courtney Yakavonis, Morgan Stanley.

A follow-up on the conversation on inventory levels in access. I think you mentioned they were up slightly year-over-year. But can you just help us kind of gauge where your access inventory levels are versus the last trough in 2016 so we can kind of get a better sense of how much more you might underproduce?

I guess we don't necessarily break down access. Our inventory levels are up year-over-year certainly, and obviously, we had a very rapid decline in demand. So -- and obviously, we're -- we have a greater international presence than we have if you looked to China and so on. So that probably puts some general upward pressure on inventory. But overall, from an inventory perspective, again, I think it's up somewhat from last year. I think we're comfortable with where it's at. We're not in the fore selling position with it. The inventory is current items that we're selling that is good inventory. So we're comfortable with our continued management of our production schedules in Q1, and we have optionality getting further into the year as well. So we're going to continue to manage it, but we're comfortable over the course of the year that our inventory is going to come down.

Yes. And Courtney, I'd even say that the inventory that we have in access, not only is it current inventory, it's there by intent. We know that we need some inventory to meet the market as it rebounds when that happens. And that's one of the primary reasons is there.

Got you. And I think you mentioned that utilization trends had improved to -- from -- I think previously, you said that they were down high single digits. Can you just give us a sense of what you're seeing from your telematics data in terms of where utilization is and the maybe monthly sequential performance?

Yes. Our utilization in terms of the -- so we look at it year-over-year because there is seasonality in the business, and so we want to see what's utilization now versus where it was a year ago. We think that in terms of our telematics data, that utilization is very close to where it was last year, so that means adjusted for seasonality. Now you have certain end markets that are different from others, right? So you wouldn't say that in oil and gas but you would say that in other end segments. For the most part, our rental customers tell us that they're seeing nice improvement in utilization data. And I think what they want to see is that it's sustained and that it really is continuing to stabilize because we're still in the middle of the pandemic. And I think that, that's the dark cloud that causes everyone to say, "Hey, we got to really make sure this is stabilized before we make big CapEx moves."

Got you. And then just lastly, appreciating that you mentioned defense sales tend to run that run rate of $2 billion a year. I think there were a couple of headlines that the Army was planning to buying more JLTVs than currently contracted. Can you just help us kind of make sense of how big that could be and sort of what that means for the next couple of years?

Yes. Some really nice things happening with JLTV. Specifically, we got -- first of all, we got the order from Belgium, that was for 322 units, about $120 million, $130 million order. That's a big order because we took it away from an incumbent, and that's not a region, that Benelux region where we have been historically strong. So that just really does showcase that this is a -- from a cost and a performance standpoint, it's the new benchmark. And we believe it's a sign, and there'll be more orders to come from international countries in 2021 that we'll be happy to tell you about when they happen. With regard to the U.S. Army, they initially contracted us with 16,901 units. There was a -- what they call a J&A, which is justification and approval process that approved over 6,200 units being added to that. So that brings our contract to 23,163 units, and that's certainly -- and now I'll tell you, we were expecting that, that would happen. That was not necessarily a surprise, but it's just a continuing positive indicator that this JLTV program is a strong, strong program for the U.S. Army, the Marines and many of our allies around the world.

We have a question from Felix Boeschen, Raymond James.

I'm curious if you could maybe flush out demand in the international markets for your access segment a bit more. We've talked about the U.S., and I think you mentioned China was still relatively strong. But just curious if you can maybe flesh that China comment out a bit more and how you're thinking about Europe/the rest of the world just with COVID cases on the rise.

Yes. So China is now over 5% of our revenue in terms of its size. It is continuing to grow rapidly. We -- it went into this COVID-induced downturn first. And -- but it was also the first and the quickest to come out of it. And so the market in China is pretty healthy, and we expect it's going to continue to be a long-term growth market for us. The European markets continue to be really tough, very, I'd call it, even a bit behind the U.S. market in terms of where our utilization rates are and where our customers are in terms of their willingness to increase CapEx. So Europe is going to continue to be under some pressure for a few quarters yet, we expect.

We have a question from Jerry Revich, Goldman Sachs.

Can we talk about fire and emergency? So in the last downturn, the peak to trough sales decline was over 30% for you folks. But I'm wondering if you could expand on the differences that you see in this cycle, talk about the market share momentum that you have in the order book. And also, can you just expand on your comments on lower capital stock, if you don't mind?

Yes. Jerry, I'll give you some color there. So this downturn and the last downturn, where you talked about the 30% peak to trough, are 2 totally different downturns in our view. The last downturn that you're referring to is the Great Recession. It was a real estate-based collapse and the real estate and property tax collapse is what really forced the market to come down from, say, I think it was 5,000 units down to the low 3,000s, and it's now come back into the low to mid-4,000s in terms of the annual market size. This downturn in the pandemic, it's not a real estate-based problem. It's not a macroeconomic issue. It's a pandemic issue. It's -- we're going to see, at some point, continuing better therapies and, at some point, a vaccine. And we believe that we have a stronger position than we've ever had in the history of our company in F&E. We've got better dealers than we've ever had in the history of our company at F&E. The innovation we put into the product, the cost with which we're able to operate because of simplification, we believe that puts us in a really good position. I'll acknowledge there could be a little bit of municipality spending pressure, but we still feel like we'll be able to move through that without too much impact to our business if it happens in 2022, for example.

Okay. And then on the commercial segment, you folks have made really strong strides from a margin standpoint. Obviously, you're not giving guidance for '21. But I'm wondering what's your level of confidence that you can continue to expand margins year-over-year as you have some good operating momentum exiting the year post the restructurings and even with the incentive comp headwinds that you outlined for the company as a whole?

Yes. So I can't say any -- I mean, I'll say this about the whole company. The access team in terms of their ability to manage through a very rapid decline in the last couple of quarters. The F&E team has just been doing a phenomenal job, the defense team managing that JLTV launch with all this COVID disruption to the workforce. And the commercial team is no different. They've really done a great job continuing on their simplification journey. They're continuing to put building blocks in place, as we speak, as they focus on mixers in 1 site and RCVs in another. There's probably the most headway for margin expansion in this, no surprise, and we expect that, that margin expansion will continue. So we feel like we're going in the right direction with our commercial business.

I think, Jerry, I think the big thing with commercial for next year, and that's -- we're not able to make a call yet on their top lines. And I think that's really going to determine where that margin ends up for the year. Certainly, what I'd expect is through the actions we've taken in that business, we're going to have very solid incrementals or decrementals, whichever direction that ends up going.

[Operator Instructions]. We have a question from Chad Dillard, Bernstein.

Yes. I'm asking a question on Chad's behalf. So could you talk about the level of quoting activities you are seeing in fire & emergency compared to a year ago?

Well, I will just say that we had an all-time record order year in 2020, so I think that's the best indication of quoting activity that I can provide. Now orders came down a little bit in the fourth quarter. So that's...

As expected.

Yes, not unexpected. We had a massive order rate in the prior quarter. So it's coming -- or in the -- I should say, our Q2, we had a massive order quarter. So we thought that it would come down a little bit. It always comes down in Q3 and we thought it would be a little bit light in Q4. But I don't think there's any abnormality to our quoting that's happening in F&E today. Our business is looking pretty healthy.

Yes.

Great. And the follow-up is on the $85 million of headwind you were talking about, that is in addition to the sort of the temporary cost coming back, right? Or is that already...

Yes, the $85 million, I'll quickly walk through that because it is an important point. So we benefited by $120 million of temporary cost actions in 2020. Those -- that $120 million comes back into our expense run rate in 2021. What we do pick up, though, is a $35 million benefit of permanent actions we've taken and those permanent actions grow to $50 million by 2022.

We have a question from Ann Duignan, JPMorgan.

Most of my questions have been answered by now. But in your discussion of lower sales year-over-year, half 1, can you just walk us through the different segments and what you're contemplating there? I know we've spent a lot of time on access, but what about the other segments?

Ann, we're not breaking it down by segment either. Obviously, I think we have, again, with the backlog in fire & emergency and defense, to give you an idea of the opportunity for the year. The challenge we're facing right now is just with the pandemic. We are facing some workforce availability challenges here in Wisconsin in the fire & emergency and defense segments. And if you look to the fire & emergency segment, when the pandemic first started and we had the shelter-in-place restrictions, it was tougher for customers to come in to pick up fire trucks. That's an important part of that process. And we do have some level of concern that, that could be a headwind early in the year. So that's really what's holding us back from being able to provide a little bit more clarity on that because I think we could see some movement of that volume around between quarters.

Yes. It's really an operational thing. I mean, if you look at the backlogs for defense and fire & emergency, they're really, really healthy. It's a question of how much is COVID going to impact us in terms of our ability to get product out the door.

Yes. And that's why I asked the question because I was curious looking at the strength of the backlog versus the comment that total sales will be down first half, so I just wanted to dig a little deeper. And I appreciate that it's not -- visibility is not great right now. Just as a follow-up, on the electric vehicles in commercial, you noted that you have 5 trucks going to customers for testing. Have you lost a significant amount of market share or orders because you weren't prepared with electric vehicles? I mean, somebody has won those huge orders that have been announced in the recent 3 to 6 months.

So I'm glad you brought that up, a great question. We have not lost ground. We have not lost market share because of electrification. We look at ourselves as being out front on electrification. We have an enormous amount of work happening in electrification. And when you look at those Boise units, they'll be some of the first actual units on the market actually for sale in the refuse collection industry. When you talk about huge orders, you're talking about companies that are talking about orders in the -- at some point in the future, some of these companies have never made an RCV before in their history. Some of them have never even made a truck before in their history. So the question as to whether or not they can actually do it, I think, is a valid question. But we are out on the forefront in electrification.

There are no further questions at this time. I'd like to turn the floor back over to Wilson Jones for closing comments.

Well, I want to thank everyone for hanging in there with us today. I apologize for the technical difficulties. I think it was a major outage going on up in New Jersey. So again, I want to thank you for hanging there with us. I encourage you all to stay safe and healthy as we work through these challenging times. We certainly look forward to speaking with you on a virtual conference or on our next earnings call. Take care, everyone. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.