What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-11 compared with 2021-02-12 · 205 added, 275 removed, 284 unchanged (63% of the section changed)

3 unchanged sentences

We design, build and support products used in construction, maintenance, manufacturing, energy, minerals and materials management applications.

Our products are manufactured in North and South America, Europe, Australia and Asia and sold worldwide.

Terex products and solutions enable customers to reduce their environmental impact including electric and hybrid offerings that deliver quiet and emission-free performance, products that support renewable energy, and products that aid in the recovery of useful materials from various types of waste.

Our products are manufactured in North America, Europe, Australia and Asia and sold worldwide.

We engage with customers through all stages of the product life cycle, from initial specification and financing to parts and service support.

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We do not, nor do we suggest that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

Non-GAAP measures we may use include translation effect of foreign currency exchange rate changes on net sales, gross profit, selling, general & administrative (“SG&A”) costs and operating profit, as well as the net sales, gross profit, SG&A costs and operating profit excluding the impact of acquisitions and divestitures.

Non-GAAP measures we may use include translation effect of foreign currency exchange rate changes on net sales, gross profit, SG&A costs and operating profit, as well as the net sales, gross profit, SG&A costs and operating profit excluding the impact of acquisitions and divestitures.

As changes in foreign currency exchange rates have a non-operating impact on our financial results, we believe excluding effects of these changes assists in assessment of our business results between periods.

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Non-GAAP measures we also use include Net Operating Profit After Tax (“NOPAT”) as adjusted, Income (loss) from operations as adjusted, cash and cash equivalents as adjusted and Stockholders’ equity as adjusted, which are used in the calculation of our after tax return on invested capital (“ROIC”) (collectively the “Non-GAAP Measures”), which are discussed in detail below.

The past year was one of transition for Terex.

We evolved our “Focus, Simplify, Execute to Win” strategy to its next phase of “Execute, Innovate, Grow”.

We are progressing into a leaner organization, with fewer organizational levels, including the elimination and consolidation of management layers.

Also, as we right-size our organization, we have been re-evaluating and reducing our company-wide footprint.

We recognize that to win in the marketplace we must have a globally cost competitive manufacturing footprint.

We have been and will continue to take the actions necessary to achieve this objective.

We will also continue to innovate in our products and technology.

We are listening to our customers, so our products and services offer the features and benefits which provide value to our customers.

We are emphasizing execution, driving innovation and growth, specifically focused on profitable growth.

We were significantly impacted in 2020 by the COVID-19 pandemic.

Overall, 2020 demonstrated the resilience of our business and team members to deliver improving results throughout the year against a very challenging backdrop.

While the COVID-19 pandemic continued in the second half of 2020, global economic activity has stabilized and begun to gradually recover but remains below pre-COVID-19 levels.

In response to the ongoing pandemic, we implemented safety, financial and cost reduction actions.

Although our strategy has evolved, safety is and will remain the top priority of the Company driven by our Zero Harm Safety culture of Think Safe – Work Safe – Home Safe.

Our global and regional crisis response teams remain active and our facilities continue refining their preparedness and response plans to ensure they can respond swiftly as local or regional pandemic conditions change.

The continuing vigilance of our team members both inside and outside of work and the successful COVID-19 safety measures we implemented early on are effectively protecting our team.

After safety, our top priority is our liquidity.

As of December 31, 2020, we had approximately $1.1 billion in available liquidity.

We have taken numerous actions so that we can maintain strong liquidity levels going forward.

It is important that all of Terex’s stakeholders, including customers, suppliers, team members and credit and equity investors, have confidence that we have the operational and financial strength to manage successfully through this period of uncertainty.

Safety remains our top priority;

driven by Think Safe – Work Safe – Home Safe.

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

Our strategic operational priorities of execution, innovation, and growth continue to make excellent progress and strengthened our business operations in 2021.

We proactively managed supply chain disruptions and aggressively managed SG&A costs.

We also improved Genie’s future cost competitiveness as our temporary Mexico facility is now producing telehandlers and continues to ramp-up.

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

We introduced new products including environmental and recycling solutions in MP, new electric offerings in Genie, and electric grid maintenance products in Utilities.

We also continued to invest in connected assets and digital capabilities, such as customer dealer integration and telematics across the enterprise to better serve customers.

Organic and inorganic growth continues to be a focus.

In 2021, we expanded production capabilities of mobile crushing and screening equipment in China and Northern Ireland, completed a bolt-on acquisition, purchasing a heavy duty trommels business that broadens our product offerings, and continued expansion of service facilities for our Utilities customers.

Our performance in 2021 reflected strong improvement in the business and good execution by our team members in a dynamic and challenging environment.

Net sales of $3.9 billion were up 26% year-over-year as end-markets recovered.

SG&A spending was $42 million lower year-over-year at 11% of net sales, beating our 12.5% target.

Operating margin of 8.4% expanded 620 basis points due to higher sales and strict expense discipline.

This led to earnings per share (“EPS”) increasing significantly from $0.13 in 2020 to $3.07 in 2021.

Overall, 2021 demonstrated the resilience of our businesses and team members to deliver improving results throughout the year against a challenging backdrop.

Like most other industrial companies, we faced shortages and cost pressures from materials, logistics, freight and labor.

These headwinds became more pronounced as the year developed, particularly in the fourth quarter, and have constrained our growth in the short-term.

We took pricing actions, but they were not sufficient to offset significant material and logistics inflation in the back half of 2021.

Our AWP segment’s 2021 net sales were up 22% from the prior 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 strengthening aerials rental industry.

We are also continuing 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 year, driven by increased production and aggressively managing all costs.

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

We expect end market demand to remain strong into 2022 as demonstrated by AWP’s backlog, which is up 137% compared to the prior year.

As a result, we anticipate net sales between $2.3 billion and $2.4 billion and an operating margin between 7.8% and 8.5% in 2022.

We expect significantly higher input costs peaking in the first quarter with pricing realization improving through the year.

Our MP segment’s 2021 net sales were up 35% from the prior 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 a 14% operating margin for the year.

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 concrete mixer truck, material handling and environmental businesses.

Customer sentiment continues to improve and we are encouraged by MP’s backlog, which is up 98% compared to the prior year period.

As a result, we anticipate net sales between $1.8 billion and $1.9 billion and an operating margin between 14.0% and 14.5% in 2022, although we expect the first quarter will be challenged by supply constraints.

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

As compared to the prior year period, our sales were up double digits in every major geography.

Throughout 2021, our team members remained vigilant and aggressively managed all costs generating $125 million of free cash flow in the year.

As of December 31, 2021, we had $867 million in available liquidity, with no near-term debt maturities.

Our strong liquidity position and cash generation allowed us to repay $503 million of debt in 2021.

We also continued to invest in the business in 2021 with $60 million of capital expenditures across our businesses.

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.

Throughout 2020, we have made good progress in lowering our costs.

Specifically, we have reduced our SG&A cost structure for 2021 by over $100 million as compared to 2019, driven by headcount reductions, footprint reductions, optimizing our information technology spend and automating and digitizing processes.

These actions have enabled us to come into 2021 well positioned to meet our target of SG&A percent to sales for 2021 of 12.5%.

Given the economic and industry uncertainty posed by the pandemic, we reduced our 2020 capital spending by 35%, although we continued to invest in growth as demonstrated by our new Utilities manufacturing facility and continued expansion of our Changzhou, China facility.

We will continue to invest in 2021 with capital spending, net of asset dispositions, expected to be approximately $90 million.

Net sales in 2020 were down 29% compared to 2019 driven by the onset of the pandemic in early 2020.

Net sales stabilized and improved in the second half of 2020 as compared to the first half of 2020.

As a result, net sales were only down 11% in the fourth quarter of 2020 compared to the same quarter in 2019.

End markets for both AWP and MP continued to recover in the second half of 2020 from the lows in the second quarter of 2020.

Our AWP segment’s 2020 net sales were down 35% from the prior year period driven by end markets in the U.S.

and Europe being significantly below last year’s levels as a result of the pandemic.

The market and our aerial products sales in China were strong throughout most of 2020 after a slow start to the year caused by the pandemic.

Overall, the utilities market was softer in 2020 but did not experience the same levels of decline as our aerials business.

We aggressively managed production levels to ensure we were not building excess inventory.

Our aggressive production control allowed us to achieve almost a $180 million reduction in aerial products inventory levels year-over-year.

We expect the improved customer sentiment demonstrated by our Genie and Utilities customers in the second half of 2020 to continue into 2021 and are encouraged by our backlog for the segment, which is up 10% compared to the prior year.

As a result, we anticipate sales of approximately $2.0 billion and an operating margin of approximately 6.5% in 2021.

Our MP segment’s 2020 net sales were down 22% from the prior year period driven by cautious customer sentiment delaying capital purchases of crushing and screening equipment and material handlers.

However, net sales stabilized and improved in the second half of 2020 as compared to the first half of 2020.

As a result, net sales were only down 3% in the fourth quarter of 2020 compared to the same quarter in 2019.

The MP team has been aggressively managing all elements of cost in a challenging environment.

This helped drive the strong financial performance of the MP segment, achieving an operating margin of 11% in 2020, despite the decrease in net sales.

We expect MP to continue its consistent operating performance in 2021 and are encouraged by our backlog for the segment, which is up 59% compared to the prior year.

As a result, we anticipate sales of approximately $1.4 billion and an operating margin of approximately 12% in 2021.

Throughout 2020, we have been intensely focused on rightsizing our inventory levels to the customer demand environment, especially in our aerial products business.

Our focus on net working capital management drove $141 million of free cash flow generation in 2020.

Our strong liquidity and expected 2021 free cash flow generation allowed us to initiate our option to prepay a portion of our term loans prior to their maturity date and reinstate a dividend in 2021.

In 2020, our largest market remained North America, which represented approximately 57% of our global sales in continuing operations.

As compared to the prior year period, our sales were down double digits in every major geography.

We have seen our markets stabilize and improve over the course of 2020 and we currently expect to see markets improve in 2021 due to the global deployment of COVID-19 vaccines and AWP customers’ fleet replenishment.

However, we continue to operate in an unprecedented period and our results could continue to change, negatively or positively.

Disruptions associated with COVID-19, whether it is team member absenteeism or supply chain disruptions, could impact our results.

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.

Customer demand remains strong for our products and services.

However, we are operating in a very challenging supply chain and logistics environment along with the continued impacts of a pandemic, so our results could change negatively or positively.

See Part I, Item 1A.

– “Risk Factors” for a detailed description of the risks resulting from COVID-19.

As a result, we currently expect 2021 earnings per share (“EPS”) to be between $1.95 and $2.35, on net sales of approximately $3.45 billion.

– “Risk Factors” for a detailed description of the risks associated with supply chain disruptions and COVID-19.

As a result, we currently expect 2022 EPS to be between $3.55 and $4.05, on net sales between $4.1 billion and $4.3 billion.

Our outlook assumes pricing actions along with manufacturing efficiencies will offset cost pressures and that supply chain headwinds will abate in the second half of the year.

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

ROIC is determined by dividing the sum of NOPAT for each of the previous four quarters by the average of Debt less Cash and cash equivalents plus Stockholders’ equity for the previous five quarters.

NOPAT for each quarter is calculated by multiplying Income (loss) from operations by one minus the effective tax rate.

NOPAT for each quarter is calculated by multiplying Income (loss) from operations by one minus the full year 2021 effective tax rate (“Effective Tax Rate”).

In the calculation of ROIC, we adjust Income (loss) from operations and Stockholders’ equity to remove the effects of the impact of certain transactions in order to create a measure that is useful to understanding our operating results and the ongoing performance of our underlying business without the impact of unusual items as shown in the tables below.

Cash and cash equivalents is adjusted to include amounts recorded as held for sale.

Furthermore, we believe returns on capital deployed in TFS do not represent our primary operations and, therefore, TFS Assets and results from operations have been excluded from the Non-GAAP Measures.

Furthermore, we believe return on capital deployed in TFS do not represent our primary operations and, therefore, TFS Assets and results from operations have been excluded from the Non-GAAP Measures.

Debt is calculated using amounts for Current portion of long-term debt plus Long-term debt, less current portion.

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Stockholders’ equity as adjusted 1,097.0 1,037.5 1,015.5 918.9 806.8

Debt less Cash and cash equivalents plus Total Terex Corporation stockholders’ equity as adjusted

$ 1,319.7 $ 1,408.0 $ 1,423.8 $ 1,479.8 $ 1,425.3

Debt less Cash and cash equivalents plus Stockholders’ equity as adjusted $ 1,504.2 $ 1,372.7 $ 1,362.2 $ 1,320.3 $ 1,310.5

December 31, 2021 ROIC

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Effects of adjustments, net of tax:

Restructuring and related 8.3 8.3 8.3 8.3 8.3

Transformation 2.9 2.9 2.9 2.9 2.9

Other 1.0 1.0 1.0 1.0 1.0

(Income) loss from TFS (9.3) (9.5) (10.1) (5.8) (0.8)

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RESULTS OF OPERATIONS

2020 COMPARED WITH 2019

Sales % Change In Reported Amounts

The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Exhibit 15 (a) (1) and (2) Financial Statements and Financial Statement Schedules of this Annual Report on Form 10-K.

This section of our Annual Report on Form 10-K generally discusses 2021 and 2020 and provides a year-over-year comparison of 2021 and 2020.

Discussions of 2019 and year-over-year comparison of 2020 and 2019 are not included in this document and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020.

2021 2020 2019

Sales % Change in Reported Amounts 2021 vs 2020

($ amounts in millions)

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Income (loss) from operations 328.0 8.4 % 68.4 2.2 % 335.0 7.7 % 379.5 %

Net sales for the year ended December 31, 2020 decreased $1,276.7 million when compared to 2019.

The decrease in net sales was primarily due to lower demand for aerial work platforms, telehandlers and utility equipment in our AWP segment and materials processing equipment, material handlers, cranes and concrete mixer trucks in our MP segment primarily as a result of COVID-19 adversely affecting our customers’ sentiment and spending, leading to a downturn in our markets.

Gross profit for the year ended December 31, 2020 decreased $348.5 million when compared to 2019.

The decrease was primarily due to lower sales in our AWP and MP segments and temporary volume related manufacturing inefficiencies in our AWP segment as a result of the impact of COVID-19.

Net sales for the year ended December 31, 2021 increased $810.4 million when compared to 2020.

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

Changes in foreign exchange rates positively impacted consolidated net sales by approximately $95 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 year ended December 31, 2021 increased $218.1 million when compared to 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 and labor availability constraints.

SG&A costs for the year ended December 31, 2021 decreased $41.5 million when compared to 2020.

The decrease was primarily due to cost control measures, including right-sizing our workforce, temporary salary reductions and reduced discretionary spending, taken across all areas of our business, partially offset by severance and restructuring charges taken in 2020.

Income from operations decreased by $266.6 million for the year ended December 31, 2020 when compared to 2019.

The decrease was primarily due to the negative impact of COVID-19 on our businesses, partially offset by lower selling, general and administrative expenses.

The decrease was primarily due to cost management actions taken across all areas of our business, including right-sizing our workforce and reduced discretionary spending, partially offset by the negative impact of changes in foreign exchange rates.

Income from operations increased by $259.6 million for the year ended December 31, 2021 when compared to 2020.

The increase was primarily due to higher sales volume, SG&A cost management, improved manufacturing efficiency, 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

Sales % Change In Reported Amounts

2021 2020 2019

Sales % Change in Reported Amounts 2021 vs 2020

($ amounts in millions)

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Income from operations 152.1 7.0 % 0.5 — % 196.2 7.2 % *

Net sales for the AWP segment for the year ended December 31, 2020 decreased $943.7 million when compared to 2019 primarily due to lower demand for aerial work platforms in all major geographies, telehandlers in North America and Europe and utility equipment in North America as a result of COVID-19 adversely affecting our customers’ sentiment and spending, leading to a downturn in our markets.

Income from operations for the year ended December 31, 2020 decreased $195.7 million when compared to 2019 primarily due to lower sales volume, temporary volume related manufacturing inefficiencies as a result of the impact of COVID-19 and severance and restructuring charges, partially offset by reduced spending for selling, general and administrative expenses.

* Not a meaningful percentage

Net sales for the AWP segment for the year ended December 31, 2021 increased $395.9 million when compared to 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 $42 million.

Income from operations for the year ended December 31, 2021 increased $151.6 million when compared to 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 and labor availability constraints.

Materials Processing

Sales % Change In Reported Amounts

2021 2020 2019

Sales % Change in Reported Amounts 2021 vs 2020

($ amounts in millions)

1 unchanged sentence

Income from operations 240.9 14.2 % 143.4 11.4 % 227.9 14.2 % 68.0 %

Net sales for the MP segment decreased by $345.8 million for the year ended December 31, 2020 when compared to 2019 primarily due to decreased demand for materials processing equipment, material handlers and cranes in all major geographies and concrete mixer trucks in North America as a result of COVID-19 adversely affecting our customers’ sentiment and spending, leading to a downturn in our markets.

Income from operations for the year ended December 31, 2020 decreased $84.5 million when compared to 2019 primarily due to lower sales volume as a result of the impact of COVID-19, partially offset by reduced spending for selling, general and administrative expenses.

Net sales for the MP segment increased by $435.0 million for the year ended December 31, 2021 when compared to 2020 primarily due to robust end-market demand for aggregates and cranes in all major geographies, material handlers in North America and Western Europe, and concrete mixer trucks and environmental equipment in North America.

Net sales were positively impacted by the effects of foreign exchange rate changes of approximately $53 million.

Income from operations for the year ended December 31, 2021 increased $97.5 million when compared to 2020 primarily due to higher sales volume, 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 and labor availability constraints.

Corporate and Other / Eliminations

Sales % Change In Reported Amounts

2021 2020 2019

Sales % Change in Reported Amounts 2021 vs 2020

($ amounts in millions)

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* Not a meaningful percentage

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

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

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 revenue, partially offset by lower intercompany sales eliminations.

Loss from operations for the year ended December 31, 2021 decreased $10.5 million when compared to 2020.

The decrease in operating loss is primarily due to lower general and administrative spending and reduced personnel expense due to right-sizing our workforce, partially offset by the gain on sale of an investment in 2019 and a specific finance receivable reserve for one customer in 2020 .

The decrease in operating loss is primarily due to SG&A cost management, gains on the sale of assets and a reserve release in the current period for a specific finance receivable reserve recorded in 2020, partially offset by lower revenue.

2021 2020 2019

% Change in Reported Amounts 2021 vs 2020

($ amounts in millions)

Interest (expense), net of interest income $ (47.8) $ (62.3) $ (81.4) (23.3) %

During the year ended December 31, 2020, our interest expense, net of interest income, was $62.3 million, or $19.1 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 (29.4) — — *

Other income (expense) – net 13.0 4.9 (6.1) (165.3) %

Other income (expense) – net for the year ended December 31, 2020 was income of $4.9 million, compared to a loss of $6.1 million in 2019.

The change was primarily due to foreign exchange translation gains in the current year period compared to losses in 2019, a gain related to the repayment to Terex of a third party note and a positive post-closing adjustment in 2020 related to the settlement of our U.S.

defined benefit pension plan in 2018.

During the year ended December 31, 2020, we recognized an income tax expense of $2.0 million on income of $11.0 million, an effective tax rate of 18.2%, as compared to an income tax expense of $37.8 million on income of $247.5 million, an effective tax rate of 15.3%, for the year ended December 31, 2019.

The higher effective tax rate for the year ended December 31, 2020 is primarily due to U.S.

tax on foreign income, partially offset by geographic mix and tax benefits from the CARES Act and changes in tax regulations, when compared to the year ended December 31, 2019.

(Provision for) benefit from income taxes (46.3) (2.0) (37.8) *

Income (loss) from discontinued operations – net of tax — (0.4) (155.4) *

Loss from discontinued operations - net of tax for the year ended December 31, 2020 was $0.4 million compared to a loss of $155.4 million for the year ended December 31, 2019.

The change was due to non-recurring losses in 2019 from recognition of a pre-tax charge of approximately $82 million ($82 million after-tax) to write-down the mobile cranes disposal group to fair value, less costs to sell and the negative performance of our mobile cranes business prior to disposition.

Gain (loss) on disposition of discontinued operations – net of tax 3.4 (19.2) 0.1 117.7 %

During the year ended December 31, 2020, we recognized a loss on disposition of discontinued operations - net of tax of $19.2 million, primarily related to a settlement with Tadano Ltd.

and certain of its subsidiaries (“Tadano”) on cash, debt, working capital and certain other items related to the disposition of Demag ® mobile cranes business to Tadano.

2019 COMPARED WITH 2018

Sales % Change In Reported Amounts

($ amounts in millions)

Net sales $ 4,353.1 — $ 4,517.2 — (3.6) %

Gross profit $ 887.8 20.4 % $ 961.9 21.3 % (7.7) %

SG&A $ 552.8 12.7 % $ 549.4 12.2 % 0.6 %

Income (loss) from operations $ 335.0 7.7 % $ 412.5 9.1 % (18.8) %

Net sales for the year ended December 31, 2019 decreased $164.1 million when compared to 2018.

The decrease in net sales was primarily due to weakening demand for aerial work platforms in North America and Western Europe in our AWP segment and changes in foreign exchange rates which negatively impacted consolidated net sales by approximately $105 million, partially offset by higher demand for equipment in our MP segment and aerial work platforms in China and utility equipment in our AWP segment.

Gross profit for the year ended December 31, 2019 decreased $74.1 million when compared to 2018.

The decrease was primarily due to the negative impact of foreign exchange rate changes across all segments and lower sales volume and factory overhead absorption in our AWP segment, partially offset by higher sales volume in our MP segment and favorable price variances in our AWP segment.

SG&A costs for the year ended December 31, 2019 increased $3.4 million when compared to 2018 primarily due to increased engineering and selling costs, partially offset by lower personnel costs.

Income from operations decreased by $77.5 million for the year ended December 31, 2019 when compared to 2018.

The decrease was primarily due to the negative effects of foreign exchange rate changes in all segments and lower sales volume and factory overhead absorption in our AWP segment, partially offset by higher sales volume in our MP segment and favorable price variances in our AWP segment.

Aerial Work Platforms

Sales % Change In Reported Amounts

($ amounts in millions)

Net sales $ 2,726.6 — $ 2,950.4 — (7.6) %

Income from operations $ 196.2 7.2 % $ 300.5 10.2 % (34.7) %

Net sales for the AWP segment for the year ended December 31, 2019 decreased $223.8 million when compared to 2018 primarily due to weakening demand for aerial work platforms in North America and Western Europe, partially offset by increased sales in China and higher demand for utility equipment.

Net sales were negatively impacted by effects of foreign exchange rate changes, particularly in Europe, of approximately $43 million.

Income from operations for the year ended December 31, 2019 decreased $104.3 million when compared to 2018.

The decrease was primarily due to lower sales volume, lower factory overhead absorption from a decrease in overall production volume, the negative effects of foreign exchange rate changes and higher engineering and selling costs, partially offset by favorable price variances and a change in allocation of health care costs.

Materials Processing

Sales % Change In Reported Amounts

($ amounts in millions)

Net sales $ 1,602.6 — $ 1,576.8 — 1.6 %

Income from operations $ 227.9 14.2 % $ 211.1 13.4 % 8.0 %

Net sales for the MP segment increased by $25.8 million for the year ended December 31, 2019 when compared to 2018 primarily due to higher demand for material handlers and mobile crushing and screening equipment, pick and carry equipment primarily in Australia and concrete mixer trucks in North America, partially offset by weakening demand for tower cranes.

Net sales were negatively impacted by effects of foreign exchange rate changes, particularly in Europe, of approximately $62 million.

Income from operations for the year ended December 31, 2019 increased $16.8 million when compared to 2018 primarily due to higher overall sales volume and a customer advance forfeiture, partially offset by the negative effects of foreign exchange rate changes.

Corporate and Other / Eliminations

Sales % Change In Reported Amounts

($ amounts in millions)

Net sales $ 23.9 — $ (10.0) — 339.0 %

Loss from operations $ (89.1) * $ (99.1) * 10.1 %

* Not a meaningful percentage

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

The net sales increase is primarily due to lower intercompany sales eliminations and increased governmental sales.

Loss from operations for the year ended December 31, 2019 decreased $10.0 million when compared to 2018.

The decrease in operating loss is primarily due to lower compensation costs and professional fees and the sale of an equity investment, partially offset by the negative effects of exchange rate changes, a change in allocation of health care costs, severance costs and a specific loss allowance on a finance receivable.

Interest Expense, Net of Interest Income

During the year ended December 31, 2019, our interest expense, net of interest income, was $81.4 million, or $17.3 million higher than the prior year due to an increase in average borrowings, partially offset by lower rates.

During the year ended December 31, 2021, our interest expense, net of interest income, was $47.8 million, or $14.5 million lower than in 2020 due to a decrease in average borrowings and lower rates.

Loss on Early Extinguishment of Debt

During the year ended December 31, 2021, we recorded a loss on early extinguishment of debt of $29.4 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 year ended December 31, 2019 was a loss of $6.1 million, compared to a loss of $60.6 million in 2018.

The change was due primarily to a loss in the prior year of approximately $51 million related to the settlement of our U.S.

defined benefit pension plan, as described in Note M - “Retirement Plans and Other Benefits”.

During the year ended December 31, 2019, we recognized an income tax expense of $37.8 million on income of $247.5 million, an effective tax rate of 15.3%, as compared to an income tax expense of $45.4 million on income of $287.1 million, an effective tax rate of 15.8%, for the year ended December 31, 2018.

The lower effective tax rate for the year ended December 31, 2019 was primarily due to favorable jurisdictional mix.

Income (Loss) from Discontinued Operations - Net of Tax

Loss from discontinued operations - net of tax for the year ended December 31, 2019 was $155.4 million, compared to a loss of $130.4 million for the year ended December 31, 2018.

The loss in 2019 was primarily from recognition of a pre-tax charge of approximately $82 million ($82 million after-tax) to write-down the mobile cranes disposal group to fair value, less costs to sell, and the negative performance of our mobile cranes business.

Other income (expense) – net for the year ended December 31, 2021 was income of $13.0 million, compared to $4.9 million in 2020, an increase of $8.1 million.

The increase in income was primarily due to a gain related to the early termination of a lease, partially offset by a positive post-closing adjustment in 2020 related to the settlement of our U.S.

defined benefit pension plan in 2018 and lower foreign exchange rate translation gains and mark-to-market gains on investments in the current year compared to the prior year.

During the year ended December 31, 2021, we recognized income tax expense of $46.3 million on income of $263.8 million, an effective tax rate of 17.6%, as compared to income tax expense of $2.0 million on income of $11.0 million, an effective tax rate of 18.2%, for the year ended December 31, 2020.

The lower effective tax rate for the year ended December 31, 2021 when compared to the year ended December 31, 2020 is primarily due to U.S.

tax on foreign income and certain discrete items, partially offset by geographic mix and the 2020 benefit of the Coronavirus Aid, Relief, and Economic Security Act.

Gain (Loss) on Disposition of Discontinued Operations – Net of Tax

Gain on disposition of discontinued operations - net of tax for the year ended December 31, 2019, was $0.1 million compared to a gain of $2.4 million for the year ended December 31, 2018.

The gain in 2019 was primarily related to a gain on the sale of our North American mobile crane product lines manufactured in its Oklahoma City facility, partially offset by post-closing adjustments for the sale of MHPS and a loss on the sale of Demag.

CRITICAL ACCOUNTING POLICIES

During the years ended December 31, 2021 and 2020, we recognized a gain (loss) on disposition of discontinued operations - net of tax of $3.4 million and $(19.2) 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.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period.

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These assumptions require us to analyze the aging of and forecasted demand for our inventory, forecast future product sales prices, pricing trends and margins, and to make judgments and estimates regarding obsolete or excess inventory.

Future product sales prices, pricing trends and margins are based on the best available information at that time including actual orders received, negotiations with our customers for future orders, including their plans for expenditures, and market trends for similar products.

Future product sales prices, pricing trends and margins are based on historical experience and actual orders received.

Our judgments and estimates for excess or obsolete inventory are based on analysis of actual and forecasted usage.

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Such reserves are not reduced until the product is sold.

Guarantees – We have issued guarantees to financial institutions related to financing of equipment purchases by our customers.

We assess the expectation of losses or non-performance based on consideration of historical customer reviews, current financial conditions, reasonable and supportable forecasts, equipment collateral value and other factors.

Guarantees – We may assist customers in their rental, leasing and acquisition of our products by facilitating financing transactions directly between (i) end-user customers, distributors and rental companies and (ii) third-party financial institutions, providing recourse in certain circumstances.

The expectation of losses or non-performance is assessed based on consideration of historical customer assessments, current financial conditions, reasonable and supportable forecasts, equipment collateral value and other factors.

Many of these factors, including the assessment of a customer’s ability to pay, are influenced by economic and market factors that cannot be predicted with certainty.

Our customers may fund the acquisition of our equipment through third-party finance companies.

In certain instances, we may provide a credit guarantee to the finance company by which we agree to make payments to the finance company should the customer default.

Our maximum liability is generally limited to our customer’s remaining payments due to the finance company at the time of default.

Our maximum liability is generally limited to our customer’s remaining payments due to the third-party financial institutions at the time of default.

In the event of a customer default, we are generally able to recover and dispose of the equipment at a minimum loss, if any, to us.

Reserves are recorded for expected loss over the contractual period of risk exposure.

There can be no assurance our historical experience in used equipment markets will be indicative of future results.

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

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

There can be no assurance that our historical experience in used equipment markets will be indicative of future results.

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

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

Revenue Recognition – We recognize revenue when goods or services are transferred to customers in an amount that reflects the consideration which we expect to receive in exchange for those goods or services.

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Accounts Receivable and Allowance for Doubtful Accounts – Trade accounts receivable are recorded at invoiced amount and do not bear interest.

Allowance for doubtful accounts is our estimate of current expected credit losses on existing accounts receivable and determined based on historical customer reviews, current financial conditions and reasonable and supportable forecasts.

Allowance for doubtful accounts is our estimate of current expected credit losses on existing accounts receivable and determined based on historical customer assessments, current financial conditions and reasonable and supportable forecasts.

Account balances are charged off against the allowance when the Company determines it is expected the receivable will not be recovered.

There can be no assurance that our estimate of accounts receivable collection will be indicative of future results.

Goodwill – Goodwill is assigned to one or more reporting segments on the date of acquisition.

We review our goodwill for impairment annually during the fourth quarter of each fiscal year and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of any one of our reporting units below its respective carrying amount.

Goodwill – We test goodwill at the reporting unit level for impairment on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value.

Our annual impairment test date is the first day of our fiscal fourth quarter.

In performing the goodwill impairment test, we may first perform a qualitative assessment or bypass the qualitative assessment and proceed directly to performing the quantitative impairment test.

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The loss recognized would not exceed total amount of goodwill allocated to that reporting unit.

See Note I – “Goodwill and Intangible Assets, Net” in the Notes to Consolidated Financial Statements for further information.

Impairment of Long-Lived Assets – We assess the realizability of our long-lived assets, including definite-lived intangible assets, and to evaluate such assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets (or group of assets) may not be recoverable.

Long-Lived Assets – We assess the realizability of our long-lived assets, including definite-lived intangible assets, and to evaluate such assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets (or group of assets) may not be recoverable.

Impairment is determined to exist if estimated future undiscounted cash flows are less than carrying value.

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Defined Benefit Plans – Pension benefits represent financial obligations that will be ultimately settled in the future with employees who meet eligibility requirements.

As of December 31, 2020, we maintained an unfunded, nonqualified Supplemental Executive Retirement Plan (the “U.S.

SERP”) for certain former U.S.

Generally, the U.S.

SERP provides a benefit based on average total compensation earned over a participant’s final five years of employment and years of service reduced by benefits earned under any Company retirement program, excluding salary deferrals and matching contributions.

In addition, benefits are reduced by Social Security Primary Insurance Amounts attributable to Company contributions.

We maintain defined benefit plans in France, Germany, Italy, India, Switzerland and the U.K.

for some of our subsidiaries.

The plans in France, Germany, Italy and India are unfunded plans.

The plan in the U.K.

Participation in the German plans is frozen;

however, eligible participants are credited with post-freeze service for purposes of determining vesting and the amount of benefits.

For our operations in Italy, there are mandatory termination indemnity plans providing a benefit payable upon termination of employment in substantially all cases of termination.

We record this obligation based on the mandated requirements.

The measure of the current obligation is not dependent on the employees’ future service and therefore is measured at current value.

The defined benefit plans in France, India and Switzerland are mandatory benefit plans for all employees.

We maintain defined benefit plans in France, Germany, India, Switzerland and the U.K.

for some of our subsidiaries, as well as a nonqualified Supplemental Executive Retirement Plan in the U.S.

In Italy and Mexico, there are mandatory termination indemnity plans providing a benefit that is payable upon termination of employment in substantially all cases of termination.

We have several non-pension post-retirement benefit programs, including health and life insurance benefits to certain former salaried and hourly employees.

Plan assets consist primarily of fixed income and equity securities.

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We use the services of independent actuaries to assist with these calculations.

Inherent in these valuations are economic assumptions, including expected returns on plan assets, discount rates at which liabilities may be settled, rates of increase of health care costs, rates of future compensation increases as well as employee demographic assumptions such as retirement patterns, mortality and turnover.

Inherent in these valuations are economic assumptions, including expected returns on plan assets and discount rates at which liabilities may be settled.

The actuarial assumptions used may differ materially from actual results due to changing market and economic conditions, higher or lower turnover rates, or longer or shorter life spans of participants.

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These rates are determined annually by management based on a weighted average of current and historical market trends, historical portfolio performance and the portfolio mix of investments.

The expected long-term rate of return on plan assets at December 31 is used to measure the earnings effects for the subsequent year.

The expected long-term rate of return on plan assets at the December 31 measurement date is used to measure the earnings effects for the subsequent year.

The difference between the expected return and the actual return on plan assets affects the calculated value of plan assets and, ultimately, future pension expense (income).

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The rate used reflects a rate of return on high-quality fixed income investments that match the duration of expected benefit payments at the December 31 measurement date.

The discount rate at December 31 is used to measure the year-end benefit obligations and the earnings effects on the subsequent year.

The discount rates are used to measure the year-end benefit obligations and the earnings effects on the subsequent year.

Typically, a higher discount rate decreases the present value of benefit obligations.

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plans’ expected rates of compensation increases were 1.25% to 8.00%.

The weighted average for all non-U.S.

plans of 0.17% at December 31, 2020.

The weighted average of the rates for all non-U.S.

plans is 0.18% at December 31, 2021.

These estimated annual compensation increases are determined by management every year and are based on historical trends and market indices.

We have recorded the underfunded status of our defined benefit pension plans as a liability and the unrecognized prior service costs and actuarial gains (losses) as an adjustment to Stockholders’ equity on the Consolidated Balance Sheet.

The net decrease in the liability and increased funded status of $0.9 million was due primarily to gains incurred on our pension assets partially offset by changes in assumptions from the previous year, primarily decreases in discount rates.

We have recorded the net underfunded status of our defined benefit pension plans as a liability partially offset by an asset and the unrecognized prior service costs and actuarial gains (losses) as an adjustment to Stockholders’ equity on the Consolidated Balance Sheet.

The net decrease in the net liability and increased funded status of $24.1 million was due primarily to changes in assumptions from the previous year, primarily increases in discount rates and returns on our plan assets.

Actual results in any given year will often differ from actuarial assumptions because of demographic, economic and other factors.

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As a result, if the equity market declines and/or interest rates decrease, the plans’ estimated benefit obligations could increase, causing an increase in liabilities and a reduction in Stockholders’ Equity.

We expect any future obligations under our plans that are not currently funded will be funded from future cash flows from operations.

We expect any future obligations under our plans that are not currently funded to be funded by future cash flows from operations.

If our contributions are insufficient to adequately fund the plans to cover our future obligations, or if the performance of assets in our plans does not meet expectations, or if our assumptions are modified, contributions could be higher than expected, which would reduce cash available for our business.

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Assumptions used in computing our net pension expense and projected benefit obligation have a significant effect on the amounts reported.

A 25 basis point change in each assumption below would have the following effects upon net pension expense and projected benefit obligation, respectively, as of and for the year ended December 31, 2020:

($ amounts in millions) Increase Decrease

Increase Decrease

Discount Rate Expected long-

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Projected benefit obligation $ (1.4) $ — $ 1.4 —

Net pension expense $ 0.4 $ (0.3) $ (0.5) $ 0.2

Net pension expense (benefit) $ 0.2 $ (0.4) $ (0.2) $ 0.4

Projected benefit obligation $ (5.6) $ — $ 5.9 —

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Tax returns are subject to audit and local taxing authorities could challenge tax-filing positions we take.

Our practice is to file income tax returns that conform to requirements of each jurisdiction and to record provisions for tax liabilities, including interest and penalties, in accordance with ASC 740, “Income Taxes.” Given the continued changes and complexity in worldwide tax laws, coupled with our geographic scope and size there may be greater exposure to uncertain tax positions.

Given the subjective nature of applicable tax laws, results of an audit of some of our tax returns could have a significant impact on our financial statements.

Our practice is to file income tax returns that conform to requirements of each jurisdiction and to record provisions for tax liabilities, including interest and penalties, in accordance with Accounting Standards Codification (“ASC”) 740, “Income Taxes.” Given the continued changes and complexity in worldwide tax laws, coupled with our geographic scope and size there may be greater exposure to uncertain tax positions.

Given the subjective nature of applicable tax laws, results of an audit of some of our tax returns could have a significant impact on our consolidated financial statements.

RECENT ACCOUNTING STANDARDS

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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 December 31, 2020, we had cash and cash equivalents of $670.1 million and undrawn availability under our revolving line of credit of $600 million.

During the year ended December 31, 2020, our available liquidity was stable year-over-year at approximately $1.1 billion primarily due to approximately $130 million of cash provided from disciplined working capital management which was offset by a minimum liquidity requirement of $150 million at December 31, 2020.

At December 31, 2021, we had cash and cash equivalents of $266.9 million and undrawn availability under our revolving line of credit of $600 million, giving us total liquidity of approximately $867 million.

During the year ended December 31, 2021, our liquidity decreased by approximately $250 million from December 31, 2020 primarily due to reducing outstanding debt by approximately $503 million and investing in our strategic priorities, partially offset by cash generated from operations, the expiration of a $150 million minimum liquidity requirement and proceeds of approximately $99 million from the sale of finance receivables.

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.

We have no significant debt maturities until 2024 and we have increased our focus on internal cash flow generation.

Our actions to maintain liquidity in 2020 included reducing costs and working capital, delaying certain capital spending projects and the suspension of our share repurchase program and dividend payments.

We also amended our revolving credit facility in April 2020 to provide us with additional flexibility to manage the Company.

These measures, in conjunction with our expectation to generate approximately $100 million of free cash flow in 2021, will provide us with adequate liquidity to comply with our financial covenants under our bank credit facility, continue to support internal operating initiatives and meet our operating and debt service requirements for at least the next 12 months.

See Part II, Item 1A.

Our actions to maintain liquidity include disciplined management of costs and working capital.

We believe these measures will provide us with adequate liquidity to comply with our financial covenants under our bank credit facility, continue to support internal operating initiatives and meet our operating and debt service requirements for at least the next 12 months from the date of issuance of this annual report.

See Part I, Item 1A.

– “Risk Factors” for a detailed description of the risks resulting from our debt and our ability to generate sufficient cash flow to operate our business.

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• The duration and depth of the global economic uncertainty resulting from COVID-19.

• As our sales change, the amount of working capital needed to support our business may change.

• Many of our customers fund their purchases through third-party finance companies that extend credit based on the credit-worthiness of customers and expected residual value of our equipment.

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There can be no assurance that third-party finance companies will continue to extend credit to our customers as they have in the past.

• As our sales change, the amount of working capital needed to support our business may change.

• Our suppliers extend payment terms to us primarily based on our overall credit rating.

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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.

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Free cash flow $ 125.0

(1) Includes $17.8 million of proceeds from sale of capital assets within Proceeds (payments) from disposition of discontinued operations in the Consolidated Statement of Cash Flows for the year ended December 31, 2020.

Pursuant to terms of our trade accounts receivable factoring arrangements, we sold, without recourse, approximately $406 million and $1,108 million of trade accounts receivable to enhance liquidity during the years ended December 31, 2020 and 2019, respectively.

We also sold approximately $80 million and $226 million of sales-type leases and commercial loans during the years ended December 31, 2020 and 2019, respectively.

Receivable and financial asset sales were down 64% from the prior year period as we maintained strong liquidity levels throughout 2020 resulting in lower reliance on low-cost funding arrangements.

Working capital as a percent of trailing three month annualized net sales was 19.2% at December 31, 2020 which is an improvement over the prior year.

The following tables show the calculation of our working capital in continuing operations and trailing three months annualized sales as of December 31, 2020 (in millions):

Pursuant to terms of our trade accounts receivable factoring arrangements, during the year ended December 31, 2021, we sold, without material recourse, approximately $527 million of trade accounts receivable to enhance liquidity.

During the year ended December 31, 2021, we also sold approximately $96 million of sales-type leases and commercial loans.

Working capital as a percent of trailing three month annualized net sales was 19.1% at December 31, 2021.

The following tables show the calculation of our working capital and trailing three months annualized sales as of December 31, 2021 (in millions):

Three months ended 12/31/2021

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Working Capital $ 758.1

On January 31, 2017, we entered into a credit agreement (as amended, the “2017 Credit Agreement”).

The 2017 Credit Agreement contains a $400 million senior secured term loan (the “Original Term Loan”).

The Original Term Loan portion of the 2017 Credit Agreement bears interest at a rate of LIBOR plus 2.00% with a 0.75% LIBOR floor.

On March 7, 2019, we entered into an Incremental Assumption Agreement and Amendment No.

3 (“Amendment No.

3”) to the 2017 Credit Agreement.

Amendment No.

3 provided us with an additional term loan (the “2019 Term Loan”) under the 2017 Credit Agreement in the amount of $200 million.

The 2019 Term Loan portion of the 2017 Credit Agreement bears interest at a rate of LIBOR plus 2.75% with a 0.75% LIBOR floor (the Original Term Loan together with 2019 Term Loan comprise the “Term Loans” portion of the 2017 Credit Agreement).

Net proceeds from the 2019 Term Loan were used to reduce borrowings under the revolving line of credit.

On April 23, 2020, we entered into a Loan Modification Agreement and Amendment No.

4 (“Amendment No.

4”) to the 2017 Credit Agreement.

The 2017 Credit Agreement contains a $600 million revolving line of credit (the “Revolver”).

The 2017 Credit Agreement allows unlimited incremental commitments, which may be extended at the option of existing or new lenders and can be in the form of revolving credit commitments, term loan commitments, or a combination of both, with incremental amounts in excess of $150 million through 2021 ($300 million thereafter) requiring the Company to satisfy a senior secured leverage ratio contained in the 2017 Credit Agreement.

Interest rates charged under the Revolver in the 2017 Credit Agreement are subject to adjustment based on our consolidated leverage ratio.

Amendment No.

4 extended the term of the Revolver to expire on January 31, 2023.

As a result of Amendment No.

4, during 2021, we also obtained financial covenant relief for 2020 and 2021.

See Note K - “Long-Term Obligations,” in our Consolidated Financial Statements for additional information concerning the 2017 Credit Agreement and Amendment No.

On January 31, 2017, we entered into a credit agreement which was subsequently amended to include (i) a $600 million revolving line of credit (the “Revolver”) and (ii) senior secured term loans totaling $600 million with a maturity date of January 31, 2024 (the “Term Loans”).

On April 1, 2021, we entered into an amendment and restatement of the credit agreement (as amended and restated, the “Credit Agreement”) which included the following principal changes to the original credit agreement:

(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 principal outstanding under the Term Loans 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 J – “Long-Term Obligations” in our Consolidated Financial Statements for additional information regarding the Credit Agreement.

Borrowings under the Credit Agreement as of December 31, 2021 were $77.8 million, net of discount, on our Term Loans.

During the year ended December 31, 2021, we prepaid approximately $500 million of our Term Loans prior to their maturity date to reduce our outstanding debt and lower our leverage.

At December 31, 2021, the weighted average interest rate was 2.75% on our Term Loans.

There were no amounts outstanding on our revolving line of credit as of December 31, 2020.

In February 2021, we initiated our option to prepay the 2019 Term Loan under the 2017 Credit Agreement prior to its maturity date to reduce our outstanding debt and lower our leverage.

We manage our interest rate risk by maintaining the ratio of fixed and floating rate debt, including use of interest rate derivatives when appropriate.

Over the long term, we believe this mix will produce lower interest cost than a purely fixed rate mix while reducing interest rate risk.

Our investment in TFS financial services assets was approximately $114 million, net at December 31, 2020.

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

There were no amounts outstanding on the Revolver as of December 31, 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, 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 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.

We also anticipate our continued use of TFS to drive incremental sales by increasing customer financing facilitated through TFS in certain instances.

In February 2021, we transferred finance receivables of $89.9 million to TCF National Bank, which qualified for sales treatment under ASC 860.

We received $99.4 million cash proceeds from the sale and recognized a net gain of $7.4 million.

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

During the year ended December 31, 2020, we repurchased 2.5 million shares for $54.6 million under this authorization leaving approximately $141 million available for repurchase under this program.

In the first quarter of 2020, our Board of Directors declared a dividend of $0.12 per share, which was paid to our shareholders.

In April 2020, we announced that we had suspended further share repurchases and dividend payments for the remainder of 2020.

In February 2021, our Board of Directors reinstated our quarterly dividend for 2021 and declared a dividend of $0.12 per share which will be paid on March 19, 2021.

In February 2021, we transferred finance receivables of $89.7 million to a U.S.

regional bank, which qualified for sales treatment under ASC 860.

We received $99.4 million of cash proceeds from the sale and recognized a net gain of $5.6 million.

On May 25, 2021, we acquired assets to facilitate manufacturing of certain MP products in China for total cash consideration of approximately $17 million.

On July 6, 2021, we acquired a manufacturer of heavy duty aggregate and recycling trommels, apron feeders and conveyor systems based in the Republic of Ireland for total cash consideration of approximately $19 million.

This acquisition supports our strategy to expand our material processing offerings in the crushing, screening and environmental industries, with products that complement our existing products.

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

During the year ended December 31, 2021, we repurchased 28,688 shares for $1.2 million under this authorization leaving approximately $139 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 each quarter of 2021, which was paid to our shareholders.

In February 2022, our Board of Directors declared a dividend of $0.13 per share, which will be paid to the Company’s shareholders on March 21, 2022.

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 was $225.4 million and $173.4 million for the years ended December 31, 2020 and 2019, respectively.

The increase in cash provided by operations was primarily driven by improved working capital efficiency, offset by decreased operating profitability.

Cash used in investing activities for the year ended December 31, 2020 was $38.5 million, compared to $103.8 million of cash provided by investing activities for the year ended December 31, 2019.

Cash used in investing activities in the current period relates primarily to capital expenditures.

Cash provided by investing activities in the prior period was primarily due to proceeds received from the disposition of Demag and ASV shares, partially offset by capital expenditures.

Cash used in financing activities was $82.8 million and $103.7 million for the years ended December 31, 2020 and 2019, respectively.

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

Contractual Obligations

The following table sets out our specified contractual obligations at December 31, 2020 (in millions):

Payments due by period

Total < 1 year 1-3 years 3-5 years > 5 years

Long-term debt obligations $ 1,372.6 $ 57.2 $ 113.8 $ 1,201.6 $ —

Finance lease obligations 5.1 1.8 2.7 0.6 —

Operating lease obligations 123.6 30.9 50.2 28.4 14.1

The Company’s material cash requirements include the following contractual and other obligations:

As of December 31, 2021, the Company had outstanding debt of $670.6 million, with $4.0 million payable within 12 months.

Future interest payments associated with the outstanding debt are approximately $221 million with $30.5 million payable within 12 months.

For detailed debt information see Note J – “Long Term Obligations”.

The Company has leases for real property, vehicles and office and industrial equipment.

As of December 31, 2021, the Company had contractual fixed costs primarily related to lease commitments of approximately $112 million, with $27.4 million payable within 12 months.

For detailed lease information see Note K – “Leases”.

Purchase Obligations

498.0 497.2 0.8 — —

Total $ 1,999.3 $ 587.1 $ 167.5 $ 1,230.6 $ 14.1

The Company had purchase obligations of $744.3 million, with substantially all purchase obligations payable within 12 months.

Purchase obligations include non-cancellable and cancellable commitments.

In many cases, cancellable commitments contain penalty provisions for cancellation.

Long-term debt obligations include expected interest expense.

Interest expense is calculated using fixed interest rates for indebtedness that has fixed rates and the implied forward rates for term loan indebtedness as of December 31, 2020.

As of December 31, 2020, our liability for uncertain income tax positions was $3.6 million.

The amount of reasonably possible payments in 2021 related to our tax audits worldwide is not significant.

Payments may be made in part to mitigate the accrual of interest in connection with income tax audit assessments that may be issued and that we would contest, or may in part be made to settle the matter with tax authorities.

Due to the high degree of uncertainty regarding the timing of potential future cash flows associated with remaining liabilities, we are unable to make a reasonable estimate of the amount and period in which these remaining liabilities might be paid.

Additionally, at December 31, 2020, we had outstanding letters of credit that totaled $82.5 million and had issued $143.8 million in credit guarantees of customer financing to purchase equipment.

We maintain defined benefit pension plans for some of our operations in the United States and Europe.

We reported a liability of $2.6 million related to unrecognized tax benefits as of December 31, 2021 and do not expect this liability to change materially in 2022.

As such, any related payments in 2022 would not be significant.

Additionally, at December 31, 2021, we had outstanding letters of credit that totaled $107.8 million and maximum exposure of $143.5 million for credit guarantees outstanding related to recourse provided to third-party financial institutions when customers finance the purchase of equipment.

We maintain defined benefit pension plans for some of our U.S.

It is our policy to fund the retirement plans at the minimum level required by applicable regulations.

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Changes in market conditions, changes in our funding levels or actions by governmental agencies may result in accelerated funding requirements in future periods.

In 2022, we expect approximately $90 million in net capital expenditures, with our largest expenditure related to our manufacturing facility in Mexico.

Cash provided by operations was $293.4 million and $225.4 million for the years ended December 31, 2021 and 2020, respectively.

The increase in cash provided by operations was primarily driven by increased operating profitability and proceeds from the sale of customer finance receivables, partially offset by higher working capital as a result of robust end-market demand.

Cash used in investing activities was $102.2 million and $38.5 million for the years ended December 31, 2021 and 2020, respectively.

The increase in cash used in investing activities relates primarily to cash used in acquisition and investment activity, partially offset by lower capital expenditures in the current year and proceeds from the disposition of discontinued operations in the prior year.

Cash used in financing activities was $580.1 million and $82.8 million for the years ended December 31, 2021 and 2020, respectively.

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 higher share repurchases in the prior year.

OFF-BALANCE SHEET ARRANGEMENTS

Our customers, from time to time, fund the acquisition of our equipment through third-party finance companies.

In certain instances, we may provide a credit guarantee to the finance company by which we agree to make payments to the finance company should the customer default.

Our maximum liability is generally limited to our customer’s remaining payments due to the finance company at the time of default.

In the event of a customer default, we are generally able to recover and dispose of the equipment at a minimal loss, if any, to us.

We issue, from time to time, residual value guarantees under sales-type leases.

A residual value guarantee involves a guarantee that a piece of equipment will have a minimum fair market value at a future date if certain conditions are met by the customer.

We are generally able to mitigate some risk associated with these guarantees because maturity of guarantees is staggered, which limits the amount of used equipment entering the marketplace at any one time.

There can be no assurance our historical experience in used equipment markets will be indicative of future results.

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

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

We may assist customers in their rental, leasing and acquisition of our products by facilitating financing transactions directly between (i) end-user customers, distributors and rental companies and (ii) third-party financial institutions, providing recourse in certain circumstances.

Many of these factors, including the assessment of a customer’s ability to pay, are influenced by economic and market factors that cannot be predicted with certainty.

Our maximum liability is generally limited to our customer’s remaining payments due to the third-party financial institutions at the time of default.

In the event of a customer default, we are generally able to recover and dispose of the equipment at a minimum loss, if any, to us.

Reserves are recorded for expected loss over the contractual period of risk exposure.

There can be no assurance that our historical experience in used equipment markets will be indicative of future results.

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

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

CONTINGENCIES AND UNCERTAINTIES

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Our products are sold in over 100 countries around the world and, accordingly, our revenues are generated in foreign currencies, while costs associated with those revenues are only partly incurred in the same currencies.

Primary currencies to which we are exposed are the Euro, British Pound, Chinese Yuan, Australian Dollar and Mexican Peso.

We purchase hedging instruments to manage variability of future cash flows associated with recognized assets or liabilities due to changing currency exchange rates.

Primary currencies to which we are exposed are the Euro, British Pound and Australian Dollar.

See Risk Factor entitled, “We are subject to currency fluctuations.” in Part I, Item 1A.

for further information on our foreign exchange risk.

We manage exposure to interest rates by incurring a mix of indebtedness bearing interest at both floating and fixed rates at inception and maintaining the ratio of floating and fixed rates on this mix of indebtedness using interest rate derivatives when necessary.

See Note J – “Derivative Financial Instruments” in the Notes to Consolidated Financial Statements for further information about our derivatives and Item 7A.

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 I – “Derivative Financial Instruments” in the Notes to Consolidated Financial Statements for further information regarding our derivatives and Item 7A.

– “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 O – “Litigation and Contingencies” in the Notes to 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 N – “Litigation and Contingencies” in the Notes to 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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For contingencies and uncertainties other than income taxes, when it is probable a loss will be incurred and possible to make reasonable estimates of our liability with respect to such matters, a provision is recorded for the amount of such estimate or for the minimum amount of a range of estimates when it is not possible to estimate the amount within the range that is most likely to occur.

We generate hazardous and non-hazardous wastes in the normal course of our manufacturing operations.

As a result, we are subject to a wide range of environmental laws and regulations.

All of our employees are required to obey all applicable health, safety and environmental laws and regulations and must observe the proper safety rules and environmental practices in work situations.

These laws and regulations govern actions that may have adverse environmental effects, such as discharges to air and water, and require compliance with certain practices when handling and disposing of hazardous and non-hazardous wastes.

These laws and regulations would also impose liability for the costs of, and damages resulting from, cleaning up sites, past spills, disposals and other releases of hazardous substances, should any such events occur.

We are committed to complying with these standards and monitoring our workplaces to determine if equipment, machinery and facilities meet specified safety standards.

Each of our manufacturing facilities is subject to an environmental audit at least once every five years to monitor compliance.

Also, no incidents have occurred which required us to pay material amounts to comply with such laws and regulations.

We are dedicated to ensuring that safety and health hazards are adequately addressed through appropriate work practices, training and procedures.

We are committed to reducing injuries and working towards a world-class level of safety practices in our industry.

See Part I, Item 1.

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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-K

Item 7. Management’s Discussion and Analysis