Vocational segment net sales increased due to higher sales volume ($261 million), largely as a result of increased production rates, and improved pricing ($157 million). The increase in gross margin in the Vocational segment was primarily attributable to improved pricing (300 basis points), offset in part by higher material costs (90 basis points) and higher labor and overhead costs (60 basis points). The increase in operating income in the Vocational segment was largely a result of improved pricing ($157 million) and the impact of higher gross margin associated with higher sales volume ($76 million), offset in part by higher labor and overhead costs ($45 million), higher material costs ($25 million) and higher warranty expense ($16 million). Transport The following table presents the Transport segment results (in millions): Year Ended December 31, 2025 2024 Change % Change Net sales $ 2,096.7 $ 2,155.2 $ (58.5) -2.7% Cost of sales 1,916.0 1,996.1 (80.1) -4.0% Gross income $ 180.7 $ 159.1 $ 21.6 13.6% % of sales 8.6% 7.4% 120 bps Selling, general and administrative $ 102.9 $ 107.7 $ (4.8) -4.5% Operating income $ 77.8 $ 51.4 $ 26.4 51.4% % of sales 3.7% 2.4% 130 bps Transport segment net sales decreased primarily due to lower sales volume of the JLTV to the Department of Defense ($687 million) due to completion of production under the Company's JLTV contract, offset in part by the ramp up of NGDV production ($365 million), higher international tactical wheeled vehicle sales volumes ($142 million), higher Family of Heavy Tactical Vehicles sales volume ($119 million) and the license of JLTV-related intellectual property to the U.S. government ($25 million). The increase in gross margin in the Transport segment was primarily due to improved pricing (120 basis points), improved sales mix (80 basis points) and lower unfavorable cumulative catch-up adjustments (40 basis points), offset in part by higher warranty expense (110 basis points). The decrease in selling, general and administrative expenses in the Transport segment was primarily due to lower incentive compensation accruals ($2 million). The increase in operating income in the Transport segment was largely a result of improved pricing under recent contracts ($30 million), the license of intellectual property to the U.S. government ($25 million) and lower unfavorable cumulative catch-up adjustments ($9 million), offset in part by higher warranty expense ($22 million) and the impact of lower gross margin associated with lower sales volume ($18 million).
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