What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-10-29 compared with 2021-07-30 · 135 added, 132 removed, 253 unchanged (51% of the section changed)

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Non-GAAP Measures

In this document, we refer to various GAAP (U.S.

generally accepted accounting principles) and non-GAAP financial measures.

In this document, we refer to various GAAP ( United States (“U.S.”) generally accepted accounting principles) and non-GAAP financial measures.

These non-GAAP measures may not be comparable to similarly titled measures disclosed by other companies.

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All Terex team members contributed to our effort of continuing to provide products and services for our customers, while maintaining a safe working environment.

We delivered strong financial results in the second quarter as our strategic operational priorities of execution, innovation, and growth continue to make excellent progress.

We expect our SG&A as a percent to sales to be below our target of 12.5% for the full-year 2021.

Our strategic operational priorities of execution, innovation, and growth continue to make excellent progress.

We continue to address supply chain disruptions across various supply inputs and product lines.

Suppliers and logistics providers are currently working to ramp up and meet our production requirements.

Our team members in both reportable segments have worked hard to adapt and maintain production schedules.

Our commercial excellence initiatives are demonstrating results, as pricing actions continue to partially offset accelerating cost inflation.

Our SG&A as a percent to sales will be below our target of 12.5% for the full-year 2021.

We are maintaining strict cost discipline while recognizing that growth in the business will necessitate investment spending.

In the first quarter, we announced the planned move of our Oklahoma City Telehandler production to Monterrey, Mexico.

In the third quarter, we started production of telehandlers in Monterrey, Mexico.

This action is on track and will reduce the cost of manufacturing our telehandler products for the North American market.

We also continue to innovate so our products and services offer the features and benefits that provide value to our customers.

We have invested in our connected assets and digital capabilities to better serve customers.

We are also investing in the business for future growth through inorganic opportunities.

Our MP Team recently acquired a facility in China to localize production to meet growing customer demand in the world’s largest aggregates market and also completed a bolt-on acquisition, purchasing a heavy duty trommels business that broadens our product offerings.

We are investing in our connected assets and digital capabilities to better serve customers.

We are also investing in the business for future growth through organic and inorganic opportunities.

In the third quarter, the MP team completed a bolt-on acquisition, purchasing a heavy duty trommels business that broadens our product offerings.

We also recently launched a new product line, Terex Recycling Systems, which will focus on construction, demolition, commercial and industrial waste applications.

We continued to deliver strong results as customer demand remained robust during the quarter.

Revenues of $1 billion were up 50% compared to the prior year period, with both of our operating segments’ revenues up significantly.

We achieved an operating margin of 12% through disciplined cost control and fulfilling as much customer demand as possible, given the realities of the global supply chain during the quarter.

Our AWP segment’s second quarter 2021 sales increased 44% compared to last year, driven by a dramatic improvement in all our global markets.

For our Genie business globally, rental rates are improving, used equipment pricing is strong and fleet utilization continues to improve which are all positive signs of a recovering aerials rental industry.

Revenues of $1.0 billion were up 30% compared to the prior year period.

However, revenues were approximately 9% below our expectations due to supply chain challenges limiting our production output, especially within AWP.

Our operating margins and earnings per share (“EPS”) in the quarter improved significantly versus the prior year period, but were also lower than our prior expectations as a result of the revenue shortfall, inflationary cost pressures and supply chain challenges impacting the efficiency of our manufacturing operations.

Freight and logistics have also been a growing issue with delays and increased costs.

The availability of containers, ships and increasing offload times are impacting our production and delivery schedules.

AWP’s third quarter 2021 sales increased 29% compared to last year, driven by continued strong demand in all our global markets.

For our Genie business globally, rental rates are improving, used equipment pricing is strong and fleet utilization remains robust which are all positive signs of a recovering aerials rental industry.

We are also beginning to see positive indicators for non-residential investment.

The utilities market also improved significantly with demand strong across its end-markets of tree care, rental, and investor-owned utilities.

We are also experiencing strong growth in our Utilities parts and services business.

AWP delivered significantly improved operating margins in the quarter, driven by increased production and aggressively managing all costs.

Despite having to continue to address supply chain challenges in the second quarter of 2021, AWP results significantly improved in the quarter.

We expect the improved customer sentiment demonstrated by our Genie and Utilities customers to continue throughout 2021 and are encouraged by our backlog for the segment, which is up 182% compared to the prior year period.

This improvement was despite the current global supply chain dynamics which impacted our operations in AWP in the quarter through reduced efficiency in our manufacturing facilities as well as higher material, logistics and labor costs.

We expect end market demand to remain strong through the remainder of 2021 and into 2022 as demonstrated by our backlog for the segment, which is up 257% compared to the prior year period.

As we have already contracted with AWP customers for nearly all of our remaining 2021 revenue, most of the benefit of customer price increases we have been implementing, as an offset to inflationary pressures will not be realized until 2022.

MP had another excellent quarter with sales up 35% compared to last year driven by strong customer sentiment across all end-markets and geographies.

MP has been aggressively managing all elements of cost as end-markets improve resulting in profitability increasing and helping the segment achieve a 16% operating margin.

MP has been aggressively managing all elements of cost as end-markets improve resulting in a 14% operating margin.

We expect global demand for crushing and screening equipment to continue to grow.

Broad-based economic growth, construction activity and aggregates consumption are the primary market drivers.

We are also seeing strong markets for the cement mixer, material handling and environmental businesses.

We are also seeing strong markets for the concrete mixer truck, material handling and environmental businesses.

Customer sentiment continues to improve and we are encouraged by our backlog for the segment, which is up 253% compared to the prior year period.

In the second quarter of 2021, our largest market remained North America, which represented 57% of our global sales.

We expect MP to be impacted by supply chain constraints and inflationary cost pressures, net of price realization, but not to the same extent as AWP.

In the third quarter of 2021, our largest market remained North America, which represented 55% of our global sales.

As compared to the prior year period, our sales were up significantly in every major geography:

up 31% in North America, up 33% in Western Europe and up 15% in Asia Pacific.

We are continuing to focus on our cash generation and liquidity.

The strong, positive free cash flow of $101 million in the three months ended June 30, 2021 demonstrates the hard work of our team members to tightly manage net working capital.

As of June 30, 2021, we had $1.1 billion in available liquidity, with no near-term debt maturities.

Our strong liquidity position and cash generation allowed us to prepay $83 million of term loans in the second quarter, which is in addition to the $196 million of term loans prepaid in early February.

We continue to focus on cash generation and liquidity.

The strong, positive free cash flow of $43 million in the three months ended September 30, 2021 demonstrates the hard work of our team members to tightly manage net working capital.

As of September 30, 2021, we had $1.2 billion in available liquidity, with no near-term debt maturities.

Our strong liquidity position

and cash generation allowed us to prepay an additional $150 million of term loans in October, which is in addition to the $279 million of term loans prepaid earlier in 2021.

We are committed to continuing to strengthen Terex’s balance sheet, while maintaining flexibility to execute on our organic and inorganic growth plans.

We believe we have ample liquidity to meet our business plans.

See “Liquidity and Capital Resources” for a detailed description of liquidity and working capital levels, including the primary factors affecting such levels.

We have seen our end-markets remain robust over the course of the second quarter.

All other things being equal, we expect continued end-market strength in both segments and increasing levels of AWP customer fleet replenishment.

However, while the end-market demand environment has improved significantly, supply chain headwinds persist.

We have taken each of these factors into consideration and as a result, we have increased our outlook for the balance of 2021 and currently expect 2021 earnings per share (“EPS”) to be between $2.85 and $3.05, on net sales of approximately $3.9 billion.

See “Liquidity and Capital Resources” for a detailed description of liquidity and working capital levels, including the primary factors affecting such levels, as well as a reconciliation of net cash provided by (used in) operating activities to free cash flow.

We have seen our end-markets remain robust over the course of the third quarter and we expect continued global end-market strength over the remainder of 2021 and into 2022.

However, our full-year outlook is limited as a result of the availability of components from our supply chain.

As a result, we have updated our outlook for the balance of 2021 and currently expect 2021 EPS to be between $2.75 and $2.85, on net sales of approximately $3.85 billion.

ROIC and other Non-GAAP Measures (as calculated below) assist in showing how effectively we utilize capital invested in our operations.

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We also believe adding Debt less Cash and cash equivalents to Stockholders’ equity provides a better comparison across similar businesses regarding total capitalization, and ROIC highlights the level of value creation as a percentage of capital invested.

As the tables below show, our ROIC at June 30, 2021 was 14.3%.

Amounts described below are reported in millions of United States (“U.S.”) dollars, except for the annualized effective tax rates.

As the tables below show, our ROIC at September 30, 2021 was 16.7%.

Amounts described below are reported in millions of U.S.

dollars, except for the annualized effective tax rates.

Amounts are as of and for the three months ended for the periods referenced in the tables below.

Jun '21 Mar '21 Dec '20 Sep '20 Jun '20

Sep '21 Jun '21 Mar '21 Dec '20 Sep '20

Annualized effective tax rate as adjusted (1)

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Debt less Cash and cash equivalents plus Stockholders’ equity as adjusted $ 1,371.3 $ 1,360.8 $ 1,318.8 $ 1,309.0 $ 1,397.3

(1) The annualized effective tax rate for 2020 periods represents the actual full year 2020 effective tax rate.

June 30, 2021 ROIC 14.3 %

(1) The annualized effective tax rate for Dec’20 represents the actual full year 2020 effective tax rate.

September 30, 2021 ROIC 16.7 %

NOPAT as adjusted (last 4 quarters) $ 226.0

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Stockholders’ equity as adjusted $ 1,036.1 $ 1,014.1 $ 917.4 $ 805.3 $ 735.4

Six Months Ended

June 30, 2021 Income (loss) from continuing operations before income taxes (Provision for) benefit from income taxes Income tax rate

Nine Months Ended

September 30, 2021 Income (loss) from continuing operations before income taxes (Provision for) benefit from income taxes Income tax rate

Reconciliation of annualized effective tax rate:

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RESULTS OF OPERATIONS

Three Months Ended June 30, 2021 Compared with Three Months Ended June 30, 2020

Three Months Ended June 30,

Three Months Ended September 30, 2021 Compared with Three Months Ended September 30, 2020

Three Months Ended September 30,

Sales % Change In

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SG&A $ 104.3 10.5 % $ 109.8 14.3 % (5.0) %

Income (loss) from operations $ 122.5 11.8 % $ 7.4 1.1 % *

* Not a meaningful percentage

Net sales for the three months ended June 30, 2021 increased $348.2 million when compared to the same period in 2020.

The increase in net sales was primarily due to higher demand for aerial work platforms, materials processing equipment, material handlers and concrete mixer trucks.

Income from operations $ 74.2 7.5 % $ 36.5 4.8 % 103.3 %

Net sales for the three months ended September 30, 2021 increased $228.2 million when compared to the same period in 2020.

The increase in net sales was primarily due to higher demand for aerial work platforms, materials processing equipment, material handlers, telehandlers, utility products and concrete mixer trucks.

Changes in foreign exchange rates positively impacted consolidated net sales by approximately $16 million.

Customer sentiment in both segments continues to improve as equipment is being utilized and ordered as end-market demand strengthens.

Gross profit for the three months ended June 30, 2021 increased $124.5 million when compared to the same period in 2020.

The increase was primarily due to higher sales volume, improved manufacturing efficiency, cost reductions and the positive impact of changes in foreign exchange rates, partially offset by increases in input costs.

SG&A costs for the three months ended June 30, 2021 increased $9.4 million when compared to the same period in 2020 primarily due to higher incentive compensation, partially offset by SG&A cost management.

Income from operations for the three months ended June 30, 2021 increased $115.1 million when compared to the same period in 2020.

The increase was primarily due to higher sales volume, improved manufacturing efficiency, SG&A cost management and the positive impact of changes in foreign exchange rates, partially offset by increases in input costs and higher incentive compensation.

Gross profit for the three months ended September 30, 2021 increased $32.2 million when compared to the same period in 2020.

The increase was primarily due to higher sales volume and price realization, partially offset by material, labor and freight cost inflation due to disruptions in the supply chain.

SG&A costs for the three months ended September 30, 2021 decreased $5.5 million when compared to the same period in 2020 primarily due to cost management, including right-sizing our workforce and reduced discretionary spending, taken across all areas of our business.

Income from operations for the three months ended September 30, 2021 increased $37.7 million when compared to the same period in 2020.

The increase was primarily due to higher sales volume and price realization, partially offset by increases in material, labor and freight costs.

Aerial Work Platforms

Three Months Ended June 30,

Three Months Ended September 30,

Sales % Change In

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Net sales $ 572.5 — $ 445.0 — 28.7 %

Income (loss) from operations $ 65.2 11.0 % $ (5.0) (1.2) % *

* Not a meaningful percentage

Net sales for the AWP segment for the three months ended June 30, 2021 increased $181.3 million when compared to the same period in 2020 primarily due to higher demand for aerial work platforms driven by fleet replacement and end-market growth, primarily in North America and Western Europe.

Net sales were positively impacted by the effects of foreign exchange rate changes of approximately $20 million.

Income (loss) from operations for the three months ended June 30, 2021 increased $70.2 million when compared to the same period in 2020 primarily due to higher sales volume, improved manufacturing efficiency and SG&A cost management, partially offset by increases in input costs and higher incentive compensation.

Income from operations $ 34.9 6.1 % $ 13.3 3.0 % 162.4 %

Net sales for the AWP segment for the three months ended September 30, 2021 increased $127.5 million when compared to the same period in 2020 primarily due to higher demand driven by fleet replacement and end-market growth for aerial work platforms and telehandlers in North America and Western Europe and utility products in North America.

Income from operations for the three months ended September 30, 2021 increased $21.6 million when compared to the same period in 2020 primarily due to higher sales volume and price realization, partially offset by material, labor and freight cost inflation due to disruptions in the supply chain.

Materials Processing

Three Months Ended June 30,

Three Months Ended September 30,

Sales % Change In

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Income from operations $ 57.1 13.6 % $ 40.3 12.9 % 41.7 %

Net sales for the MP segment for the three months ended June 30, 2021 increased $177.2 million when compared to the same period in 2020 primarily due to robust end-market demand for materials processing equipment and material handlers in all major geographies and concrete mixer trucks in North America.

Net sales were positively impacted by the effects of foreign exchange rate changes of approximately $28 million.

Income from operations for the three months ended June 30, 2021 increased $48.7 million when compared to the same period in 2020 primarily due to higher sales volume, improved manufacturing efficiency and SG&A cost management, partially offset by increases in input costs and higher incentive compensation.

Net sales for the MP segment for the three months ended September 30, 2021 increased $107.4 million when compared to the same period in 2020 primarily due to robust end-market demand for materials processing equipment in Asia-Pacific and North America, material handlers in Western Europe and North America, cranes in Australia and concrete mixer trucks in North America.

Income from operations for the three months ended September 30, 2021 increased $16.8 million when compared to the same period in 2020 primarily due to higher sales volume and price realization, partially offset by material, labor and freight cost inflation due to disruptions in the supply chain.

Corporate and Other / Eliminations

Three Months Ended June 30,

Three Months Ended September 30,

Sales % Change In

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Net sales include on-book financing activities of TFS, governmental sales and elimination of intercompany sales activity among segments.

The net sales decrease is primarily attributable to lower TFS and governmental revenue, partially offset by lower intercompany sales eliminations.

Loss from operations for the three months ended June 30, 2021 increased $3.8 million when compared to the same period in 2020 .

The increase in operating loss is primarily due to lower revenue and higher incentive compensation, partially offset by SG&A cost management and a finance receivable reserve release.

The net sales decrease is primarily attributable to lower TFS revenue, partially offset by increased governmental sales.

Loss from operations for the three months ended September 30, 2021 increased $0.7 million when compared to the same period in 2020 .

The increase in operating loss is primarily due to lower revenue, partially offset by SG&A cost management.

Interest Expense, Net of Interest Income

During the three months ended June 30, 2021, our interest expense, net of interest income, was $11.4 million, or $4.3 million lower than the same period in the prior year due to a decrease in average borrowings and lower rates.

Loss on Early Extinguishment of Debt

During the three months ended June 30, 2021, we recorded a loss on early extinguishment of debt of $25.6 million related to refinancing of a significant portion of our capital structure and partial prepayment of a term loan.

During the three months ended September 30, 2021, our interest expense, net of interest income, was $11.7 million, or $3.3 million lower than the same period in the prior year due to a decrease in average borrowings and lower rates.

Other Income (Expense) – Net

Other income (expense) – net for the three months ended June 30, 2021 was income of $1.2 million, or a $0.9 million decrease in income when compared to the same period in the prior year.

The decrease was primarily due to mark-to-market losses recorded on an equity investment in the current year period compared to gains recorded in the prior year period, partially offset by increased foreign exchange translation gains in the current year period.

During the three months ended June 30, 2021, we recognized income tax expense of $14.4 million on income of $86.7 million, an effective tax rate of 16.6%, as compared to income tax benefit of $3.0 million on loss of $6.2 million, an effective tax rate of 48.4%, for the three months ended June 30, 2020.

The lower effective tax rate for the three months ended June 30, 2021 when compared with the three months ended June 30, 2020 is primarily due to geographic mix and the 2020 benefit of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), partially offset by U.S.

tax on foreign income.

Income (Loss) from Discontinued Operations

Loss from discontinued operations - net of tax for the three months ended June 30, 2020 was $1.0 million related to operations of our mobile cranes business.

Other income (expense) – net for the three months ended September 30, 2021 was expense of $1.1 million, or a $0.5 million increase in expense when compared to the same period in the prior year.

The increase was primarily due to foreign exchange translation losses in the current year period.

During the three months ended September 30, 2021, we recognized income tax expense of $13.9 million on income of $61.4 million, an effective tax rate of 22.6%, as compared to income tax benefit of $1.1 million on income of $20.9 million, an effective tax rate of (5.3)%, for the three months ended September 30, 2020.

The higher effective tax rate for the three months ended September 30, 2021 when compared with the three months ended September 30, 2020 is primarily due to U.S.

tax on foreign income, the 2020 benefit of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and geographic mix.

Gain (Loss) on Disposition of Discontinued Operations - net of taxes

During the three months ended June 30, 2021 and 2020, we recognized a Gain (loss) on disposition of discontinued operations - net of tax of $1.6 million and $(5.0) million, respectively.

The gain in the current year period primarily related to the sale of our former MHPS business.

The loss in the prior year period related to the sale of our mobile cranes business.

Six Months Ended June 30, 2021 Compared with Six Months Ended June 30, 2020

Six Months Ended June 30,

During the three months ended September 30, 2021 and 2020, we recognized a gain (loss) on disposition of discontinued operations - net of tax of $0.6 million and $(16.1) million, respectively.

The loss in the prior year period primarily related to a settlement on cash, debt, working capital and certain other items related to our prior disposition of our mobile cranes business.

Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020

Nine Months Ended September 30,

Sales % Change In

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SG&A $ 327.3 11.3 % $ 353.3 15.4 % (7.4) %

Income (loss) from operations $ 184.0 9.7 % $ 0.3 — % *

* Not a meaningful percentage

Net sales for the six months ended June 30, 2021 increased $378.8 million when compared to the same period in 2020.

The increase in net sales was primarily due to higher demand for aerial work platforms, materials processing equipment, concrete mixer trucks, material handlers and cranes, partially offset by lower telehandler sales volume.

Income from operations $ 258.2 8.9 % $ 36.8 1.6 % 601.6 %

Net sales for the nine months ended September 30, 2021 increased $607.0 million when compared to the same period in 2020.

The increase in net sales was primarily due to higher demand for aerial work platforms, materials processing equipment, material handlers, concrete mixer trucks and cranes.

Changes in foreign exchange rates positively impacted consolidated net sales by approximately $99 million.

Customer sentiment in both segments continues to improve as equipment is being utilized and ordered as end-market demand strengthens.

Gross profit for the six months ended June 30, 2021 increased $163.2 million when compared to the same period in 2020.

SG&A costs for the six months ended June 30, 2021 decreased $20.5 million when compared to the same period in 2020.

The decrease was primarily due to SG&A cost management, partially offset by higher incentive compensation.

Income from operations for the six months ended June 30, 2021 increased $183.7 million when compared to the same period in 2020.

Gross profit for the nine months ended September 30, 2021 increased $195.4 million when compared to the same period in 2020.

The increase was primarily due to higher sales volume, improved manufacturing efficiency, price realization and the positive impact of changes in foreign exchange rates, partially offset by material, labor and freight cost inflation due to disruptions in the supply chain.

SG&A costs for the nine months ended September 30, 2021 decreased $26.0 million when compared to the same period in 2020 primarily due to cost management, including right-sizing our workforce and reduced discretionary spending, taken across all areas of our business.

Income from operations for the nine months ended September 30, 2021 increased $221.4 million when compared to the same period in 2020.

The increase was primarily due to higher sales volume, improved manufacturing efficiency, SG&A cost management, price realization and the positive impact of changes in foreign exchange rates, partially offset by increases in material, labor and freight costs.

Aerial Work Platforms

Six Months Ended June 30,

Nine Months Ended September 30,

Sales % Change In

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Net sales $ 1,644.4 — $ 1,370.6 — 20.0 %

Income (loss) from operations $ 91.8 8.6 % $ (10.9) (1.2) % 942.2 %

Net sales for the AWP segment for the six months ended June 30, 2021 increased $146.3 million when compared to the same period in 2020 primarily due to higher demand for aerial work platforms driven by fleet replacement and end-market growth, primarily in North America, Western Europe and China, partially offset lower telehandler sales volume in North America.

Income from operations $ 126.7 7.7 % $ 2.4 0.2 % *

* Not a meaningful percentage

Net sales for the AWP segment for the nine months ended September 30, 2021 increased $273.8 million when compared to the same period in 2020 primarily due to higher demand driven by fleet replacement and end-market growth for aerial work platforms in North America, Western Europe and China.

Net sales were positively impacted by the effects of foreign exchange rate changes of approximately $46 million.

Income (loss) from operations for the six months ended June 30, 2021 increased $102.7 million when compared to the same period in 2020 primarily due to higher sales volume, improved manufacturing efficiency and SG&A cost management, partially offset by increases in input costs and higher incentive compensation.

Income from operations for the nine months ended September 30, 2021 increased $124.3 million when compared to the same period in 2020 primarily due to higher sales volume, improved manufacturing efficiency, price realization, SG&A cost management and the positive effects of foreign exchange rate changes, partially offset by material, labor and freight cost inflation due to disruptions in the supply chain.

Materials Processing

Six Months Ended June 30,

Nine Months Ended September 30,

Sales % Change In

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Income from operations $ 178.3 14.4 % $ 88.7 10.0 % 101.0 %

Net sales for the MP segment for the six months ended June 30, 2021 increased $239.8 million when compared to the same period in 2020 primarily due to robust end-market demand for materials processing equipment and material handlers in all major geographies, concrete mixer trucks in North America and cranes in Australia.

Net sales for the MP segment for the nine months ended September 30, 2021 increased $347.2 million when compared to the same period in 2020 primarily due to robust end-market demand for materials processing equipment in all major geographies, material handlers in North America and Western Europe, concrete mixer trucks in North America and cranes in Australia.

Net sales were positively impacted by the effects of foreign exchange rate changes of approximately $54 million.

Income from operations for the six months ended June 30, 2021 increased $72.8 million when compared to the same period in 2020 primarily due to higher sales volume, improved manufacturing efficiency and SG&A cost management, partially offset by increases in input costs and higher incentive compensation.

Income from operations for the nine months ended September 30, 2021 increased $89.6 million when compared to the same period in 2020 primarily due to higher sales volume, improved manufacturing efficiency, price realization and the positive effects of foreign exchange rate changes, partially offset by material, labor and freight cost inflation due to disruptions in the supply chain.

Corporate and Other / Eliminations

Six Months Ended June 30,

Nine Months Ended September 30,

Sales % Change In

5 unchanged sentences

Net sales include on-book financing activities of TFS, governmental sales and elimination of intercompany sales activity among segments.

The net sales decrease is primarily attributable to lower TFS and governmental revenue, partially offset by lower intercompany sales eliminations.

Loss from operations for the six months ended June 30, 2021 decreased $8.2 million when compared to the same period in 2020.

The decrease in operating loss is primarily due to a gain on the sale of the on-book finance receivables, SG&A cost management and a reserve release in the current period as well as a specific finance receivable reserve for one customer in the prior year period, partially offset by lower revenue and higher incentive compensation.

The net sales decrease is primarily attributable to lower TFS revenue, partially offset by lower intercompany sales eliminations.

Loss from operations for the nine months ended September 30, 2021 decreased $7.5 million when compared to the same period in 2020.

Interest Expense, Net of Interest Income

During the six months ended June 30, 2021, our interest expense, net of interest income, was $26.0 million, or $6.5 million lower than the same period in the prior year due to a decrease in average borrowings and lower rates.

During the nine months ended September 30, 2021, our interest expense, net of interest income, was $37.7 million, or $9.8 million lower than the same period in the prior year due to a decrease in average borrowings and lower rates.

Loss on Early Extinguishment of Debt

During the six months ended June 30, 2021, we recorded a loss on early extinguishment of debt of $27.7 million related to refinancing of a significant portion of our capital structure and prepayment of term loans.

During the nine months ended September 30, 2021, we recorded a loss on early extinguishment of debt of $27.7 million related to refinancing of a significant portion of our capital structure and prepayment of term loans.

Other Income (Expense) – Net

Other income (expense) – net for the six months ended June 30, 2021 was income of $3.8 million, or a $3.3 million increase in income when compared to the same period in the prior year.

The increase in income was due to mark-to-market gains recorded on an equity investment in the current year period compared to losses recorded in the prior year period and increased foreign exchange translation gains in the current year period, partially offset by a positive post-closing adjustment in 2020 related to the settlement of our U.S.

Other income (expense) – net for the nine months ended September 30, 2021 was income of $2.7 million, or a $2.8 million increase in income when compared to the same period in the prior year.

The increase in income was due to mark-to-market gains recorded on an equity investment in the current year period compared to losses recorded in the prior year period, partially offset by a positive post-closing adjustment in 2020 related to the settlement of our U.S.

defined benefit pension plan in 2018.

During the six months ended June 30, 2021, we recognized income tax expense of $22.1 million on income of $134.1 million, an effective tax rate of 16.5%, as compared to income tax benefit of $3.8 million on loss of $31.7 million, an effective tax rate of 12.0%, for the six months ended June 30, 2020.

The higher effective tax rate for the six months ended June 30, 2021 when compared to the six months ended June 30, 2020 is primarily due to U.S.

tax on foreign income, partially offset by geographic mix and the 2020 benefit of the CARES Act.

During the nine months ended September 30, 2021, we recognized income tax expense of $36.0 million on income of $195.5 million, an effective tax rate of 18.4%, as compared to income tax benefit of $4.9 million on loss of $10.8 million, an effective tax rate of 45.4%, for the nine months ended September 30, 2020.

The lower effective tax rate for the nine months ended September 30, 2021 when compared to the nine months ended September 30, 2020 is primarily due to geographic mix and the 2020 benefit of the CARES Act, partially offset by U.S.

tax on foreign income.

Income (Loss) from Discontinued Operations

Loss from discontinued operations - net of tax for the six months ended June 30, 2020 was $1.2 million related to operations of our mobile cranes business.

Loss from discontinued operations - net of tax for the nine months ended September 30, 2020 was $1.3 million related to operations of our mobile cranes business.

Gain (Loss) on Disposition of Discontinued Operations - net of taxes

During the six months ended June 30, 2021 and 2020, we recognized a Gain (loss) on disposition of discontinued operations - net of tax of $2.0 million and $(5.0) million, respectively.

The gain in the current year period primarily related to the sale of our former MHPS business.

The loss in the prior year period related to the sale of our mobile cranes business.

During the nine months ended September 30, 2021 and 2020, we recognized a gain (loss) on disposition of discontinued operations - net of tax of $2.6 million and $(21.1) million, respectively.

The gain in the current year period primarily related to our prior dispositions of our mobile cranes and MHPS businesses.

The loss in the prior year primarily related to a settlement on cash, debt, working capital and certain other items related to the prior disposition of our mobile cranes business.

LIQUIDITY AND CAPITAL RESOURCES

We are focused on generating cash and maintaining liquidity (cash and availability under our revolving line of credit) for the efficient operation of our business.

At June 30, 2021, we had cash and cash equivalents of $547.5 million and undrawn availability under our revolving line of credit of $600 million, giving us total liquidity of approximately $1.1 billion.

Cash generated from operations during the six months ended June 30, 2021, the expiration of a $150 million minimum liquidity requirement and proceeds of approximately $99 million from the sale of finance receivables allowed us to maintain liquidity at a level consistent with December 31, 2020 while reducing outstanding debt by approximately $281 million and investing in our strategic priorities.

At September 30, 2021, we had cash and cash equivalents of $558.2 million and undrawn availability under our revolving line of credit of $600 million, giving us total liquidity of approximately $1.2 billion.

Cash generated from operations during the nine months ended September 30, 2021, the expiration of a $150 million minimum liquidity requirement and proceeds of approximately $99 million from the sale of finance receivables allowed us to maintain liquidity at a level consistent with December 31, 2020 while reducing outstanding debt by approximately $282 million and investing in our strategic priorities.

Our main sources of funding are cash generated from operations, including cash generated from the sale of receivables, loans from our bank credit facilities and funds raised in capital markets.

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through funding of capital expenditures, operating expenses or other similar cash needs of these operations.

Most of this cash could be used in the U.S., if necessary, without additional tax cost.

Most of this cash could be used in the U.S., if necessary, without additional tax expense.

Incremental cash repatriated to the U.S.

would not be expected to result in material foreign and state tax cost.

would not be expected to result in material foreign, Federal or state tax cost.

We will continue to seek opportunities to tax-efficiently mobilize and redeploy funds.

We had free cash flow of $101.4 million and $140.9 million for the three and six months ended June 30, 2021, respectively.

We had free cash flow of $42.5 million and $183.4 million for the three and nine months ended September 30, 2021, respectively.

The following table reconciles net cash provided by (used in) operating activities to free cash flow (in millions):

Three Months Ended

6/30/2021 Six Months Ended

9/30/2021 Nine Months Ended

Net cash provided by (used in) operating activities $ 54.9 $ 324.1

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Free cash flow $ 42.5 $ 183.4

Pursuant to terms of our trade accounts receivable factoring arrangements, during the six months ended June 30, 2021, we sold, without material recourse, approximately $220 million of trade accounts receivable to enhance liquidity.

During the six months ended June 30, 2021, we also sold approximately $96 million of sales-type leases and commercial loans.

Pursuant to terms of our trade accounts receivable factoring arrangements, during the nine months ended September 30, 2021, we sold, without material recourse, approximately $359 million of trade accounts receivable to enhance liquidity.

During the nine months ended September 30, 2021, we also sold approximately $96 million of sales-type leases and commercial loans.

We continue to maintain strong liquidity levels resulting in less utilization of low-cost funding arrangements.

Working capital as a percent of trailing three month annualized net sales was 16.5% at June 30, 2021.

The following tables show the calculation of our working capital in continuing operations and trailing three months annualized sales as of June 30, 2021 (in millions):

Working capital as a percent of trailing three month annualized net sales was 17.4% at September 30, 2021.

The following tables show the calculation of our working capital in continuing operations and trailing three months annualized sales as of September 30, 2021 (in millions):

Three Months Ended

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(i) extension of the term of the Revolver to expire on April 1, 2026, which maturity will spring forward to November 1, 2023 if the $400 million senior secured term loan outstanding is not repaid or the maturity date is not extended, (ii) reinstatement of financial covenants that were waived in 2020, (iii) decrease in the interest rate on the drawn Revolver by 25 basis points and (iv) certain other technical changes, including additional language regarding the potential cessation of the London Interbank Offered Rate (“LIBOR”) as a benchmark rate.

See Note I - “Long-Term Obligations,” in our Condensed Consolidated Financial Statements for additional information concerning the Credit Agreement.

Borrowings under the Credit Agreement at June 30, 2021 were $299.4 million, net of discount, on our Term Loans.

During the six months ended June 30, 2021, we prepaid approximately $279 million of our Term Loans prior to their maturity date to reduce our outstanding debt and lower our leverage.

At June 30, 2021, the weighted average interest rate was 2.75% on our Term Loans.

There were no amounts outstanding on the Revolver as of June 30, 2021.

See Note J - “Long-Term Obligations” in our Condensed Consolidated Financial Statements for additional information regarding the Credit Agreement.

Borrowings under the Credit Agreement at September 30, 2021 were $298.4 million, net of discount, on our Term Loans.

During the nine months ended September 30, 2021, we prepaid approximately $279 million of our Term Loans prior to their maturity date to reduce our outstanding debt and lower our leverage.

In October 2021, we prepaid an additional $150 million of our Term Loans prior to their maturity date to reduce our outstanding debt and lower our leverage.

At September 30, 2021, the weighted average interest rate was 2.75% on our Term Loans.

There were no amounts outstanding on the Revolver as of September 30, 2021.

In April 2021, we sold and issued $600.0 million aggregate principal amount of Senior Notes Due 2029 (“5% Notes”) at par in a private offering.

The proceeds from the 5% Notes, together with cash on hand, was used to fund redemption and discharge of the $600.0 million aggregate principal amount of Senior Notes Due 2025 (“5-5/8% Notes”) in full for $622.9 million, including redemption premiums of $16.9 million and accrued but unpaid interest of $6.0 million.

See Note I - “Long-Term Obligations,” in our Condensed Consolidated Financial Statements for additional information concerning the 5% Notes and 5-5/8% Notes.

The proceeds from the 5% Notes, together with cash on hand, were used to fund redemption and discharge of the $600.0 million aggregate principal amount of Senior Notes Due 2025 (“5-5/8% Notes”) in full for $622.9 million, including redemption premiums of $16.9 million and accrued but unpaid interest of $6.0 million.

See Note J - “Long-Term Obligations” in our Condensed Consolidated Financial Statements for additional information regarding the 5% Notes and 5-5/8% Notes.

We remain focused on expanding customer financing solutions in key markets like the U.S., Europe and China.

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In July 2018, our Board of Directors authorized the repurchase up to $300 million of our outstanding shares of common stock.

During the six months ended June 30, 2021, we did not repurchase shares under this authorization leaving approximately $141 million available for repurchase under this program.

In February 2021, our Board of Directors reinstated our quarterly dividend for 2021 and declared a dividend of $0.12 per share in the first and second quarters of 2021, which was paid to the Company’s shareholders.

In July 2021, our Board of Directors declared a dividend of $0.12 per share, which will be paid to the Company’s shareholders on September 20, 2021.

During the nine months ended September 30, 2021, we did not repurchase shares under this authorization leaving approximately $141 million available for repurchase under this program.

In February 2021, our Board of Directors reinstated our quarterly dividend for 2021 and declared a dividend of $0.12 per share in the first, second and third quarters of 2021, which was paid to the Company’s shareholders.

In October 2021, our Board of Directors declared a dividend of $0.12 per share, which will be paid to the Company’s shareholders on December 17, 2021.

Our ability to access capital markets to raise funds, through sale of equity or debt securities, is subject to various factors, some specific to us and others related to general economic and/or financial market conditions.

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In addition, terms of our bank credit facilities, senior notes and senior subordinated notes contain restrictions on our ability to make further borrowings and to sell substantial portions of our assets.

Cash provided by operations for the six months ended June 30, 2021 totaled $269.2 million, compared to $12.3 million for the six months ended June 30, 2020.

Cash provided by operations for the nine months ended September 30, 2021 totaled $324.1 million, compared to $88.9 million for the nine months ended September 30, 2020.

The increase in cash provided by operations was primarily driven by increased operating profitability and proceeds from the sale of finance receivables.

Cash used in investing activities for the six months ended June 30, 2021 was $48.6 million, compared to $34.6 million for the six months ended June 30, 2020.

Cash used in investing activities for the nine months ended September 30, 2021 was $73.4 million, compared to $40.0 million for the nine months ended September 30, 2020.

The increase in cash used in investing activities in the current period relates primarily to cash used in acquisition and investment activity, partially offset by lower capital expenditures.

Cash used in financing activities was $337.7 million for the six months ended June 30, 2021, compared to $78.9 million for the six months ended June 30, 2020.

The increase in cash used in financing activities was primarily due to higher debt repayments and debt extinguishment costs in the current year, partially offset by share repurchases in the prior year.

Cash used in financing activities was $348.7 million for the nine months ended September 30, 2021, compared to $80.8 million for the nine months ended September 30, 2020.

The increase in cash used in financing activities was primarily due to higher debt repayments, dividend payments and debt extinguishment costs in the current year, partially offset by share repurchases in the prior year.

OFF-BALANCE SHEET ARRANGEMENTS

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Our ability to recover losses experienced from our guarantees may be affected by economic conditions in effect at the time of loss.

See Note K – “Litigation and Contingencies” in the Notes to Condensed Consolidated Financial Statements for further information regarding our guarantees.

See Note L – “Litigation and Contingencies” in the Notes to Condensed Consolidated Financial Statements for further information regarding our guarantees.

CONTINGENCIES AND UNCERTAINTIES

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We manage our exposure to interest rate risk by establishing a mix of indebtedness bearing interest at both floating and fixed rates at inception and maintain a ratio of floating and fixed rates on this mix of indebtedness using interest rate derivatives when necessary.

See Note H – “Derivative Financial Instruments” in the Notes to Condensed Consolidated Financial Statements for further information about our derivatives and Item 3 “Quantitative and Qualitative Disclosures About Market Risk” for a discussion of the impact changes in foreign currency exchange rates and interest rates may have on our financial performance.

See Note I – “Derivative Financial Instruments” in the Notes to Condensed Consolidated Financial Statements for further information regarding our derivatives and Item 3 “Quantitative and Qualitative Disclosures About Market Risk” for a discussion of the impact changes in foreign currency exchange rates and interest rates may have on our financial performance.

We are subject to a number of contingencies and uncertainties including, without limitation, product liability claims, workers’ compensation liability, intellectual property litigation, self-insurance obligations, tax examinations, guarantees, class action lawsuits and other matters.

See Note K – “Litigation and Contingencies” in the Notes to Condensed Consolidated Financial Statements for more information concerning contingencies and uncertainties, including our proceedings involving a claim in Brazil regarding payment of ICMS tax, penalties and related interest.

See Note L – “Litigation and Contingencies” in the Notes to Condensed Consolidated Financial Statements for more information regarding contingencies and uncertainties, including our proceedings involving a claim in Brazil regarding payment of ICMS tax, penalties and related interest.

We are insured for product liability, general liability, workers’ compensation, employer’s liability, property damage, intellectual property and other insurable risks required by law or contract with retained liability to us or deductibles.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis