What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-03 compared with 2022-04-29 · 160 added, 93 removed, 201 unchanged (56% of the section changed)

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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, selling, general & administrative (“SG&A”) expenses and operating profit, as well as the net sales, gross profit, SG&A expenses 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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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.

We continue to drive penetration of new markets and geographies, which have high growth potential, including recycling, material handling and electrification.

Parts and service remain a focus as we enhance our digital offerings for dealers and customers.

We also expanded our Utilities customer service footprint in the quarter with a new Atlanta, Georgia facility.

In addition to technology and customer experience, we continue to invest for future growth, both organically and inorganically.

An important part of our organic growth is our investment in the new Monterrey, Mexico facility.

Our Mexico operation has ramped up production and is shipping telehandlers.

Our performance in the first quarter of 2022 reflected strong, global customer demand in our businesses and good execution by our team members in a dynamic and challenging environment.

Net sales of $1 billion were up 16% year-over-year as end-markets remained strong.

Despite the high inflationary environment, SG&A spending was $3 million lower year-over-year at 11.1% of net sales, reflecting focused cost management.

Operating margin of 7.4% expanded 30 basis points driven by higher sales and strict expense discipline.

This led to earnings per share (“EPS”) increasing by 32% year-over-year to $0.74 in the first quarter of 2022.

Overall, first quarter financial performance demonstrated continued, strong execution.

We continued to experience global supply chain disruptions and significant inflationary pressures due to COVID-19 and geopolitical risks.

These issues are causing increased disruptions and cost pressures in materials, logistics, freight and labor.

These headwinds have constrained our growth and became more pronounced at the end of the quarter.

However, we are aggressively managing these challenges.

We have taken pricing actions, but they were only able to partially offset the cost increases we experienced in the quarter.

We still anticipate being price cost negative in the first half of 2022 but being price cost neutral for all of 2022.

MP had another strong quarter with net sales up 20% from the prior year period driven by strong customer sentiment across all end-markets and geographies.

Our strategic operational priorities of execution, innovation and growth continue to strengthen our operations and allow us to capitalize on the strong demand in our end-markets.

We are leveraging our business operating systems to navigate supply challenges and labor constraints while working to mitigate material cost inflation.

We remain disciplined on SG&A and our recent Northern Ireland acquisition is providing cost effective fabrication and capacity support for future growth.

Sustaining investments in new products company-wide and continued deployment of digital solutions are critical for our competitiveness as we navigate near-term macro challenges to deliver long-term growth.

Our performance in the second quarter reflected strong, global customer demand in our businesses and good execution by our team members in a dynamic and challenging environment.

Net sales of $1.1 billion were up 4% year-over-year, 9% on a foreign exchange neutral basis, as end-markets remained strong.

Despite the high inflationary environment, SG&A spending was flat year-over-year at 10.1% of net sales, reflecting focused cost management.

Operating margin of 9.6% was up 220 basis points sequentially, but was down 220 basis points compared to the prior year.

Although price cost dynamics have improved sequentially from the first quarter, operating profit in the second quarter was down from the prior year as price realization was offset by continued cost increases and the negative impact of changes in foreign exchange rates.

Overall, second quarter financial performance demonstrated continued, strong execution and focus on delivering for our customers and dealers despite global supply chain disruptions and significant inflationary pressures.

The global operating environment has remained difficult and unpredictable with increases in commodity prices, energy costs and logistics adversely impacting the Company.

In addition, the weakening of the Euro and British Pound against the U.S.

Dollar had a meaningful negative impact on our results in the quarter.

Although these headwinds have constrained our growth, we are aggressively managing these challenges.

We have continued to take pricing actions, but, as expected, they were only able to partially offset the cost increases we have experienced.

However, we still anticipate being price cost neutral for all of 2022.

MP had an excellent quarter with net sales up 9% from the prior year period, 16% on a foreign exchange neutral basis, driven by price realization and strong customer sentiment across all end-markets and geographies.

The MP businesses continue to benefit from strong equipment utilization rates and dealers looking to replenish their inventory and rental fleets.

Our mobile crushing and screening businesses are benefiting from the strength of aggregates demand for infrastructure and sand for silicon used in semiconductors.

Secular growth of environmental and waste recycling solutions is driving demand for our wood processing, biomass and recycling equipment.

The strength of residential construction is driving demand for our cement products in the U.S.

Our material handlers are benefiting from strong scrap steel prices as steel prices remain elevated.

Growth of environmental and waste recycling solutions is driving demand for our wood processing, biomass and recycling equipment.

The strength of construction and infrastructure spending is driving demand for our cement products in the U.S.

Our material handlers are benefiting from diversification into waste, scrap, port and timber applications.

The strength of commodity prices is driving demand for our pick and carry cranes in Australia.

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We are encouraged by MP’s backlog of $1.1 billion, which is up 32% compared to the prior year period.

AWP’s first quarter 2022 net sales increased 16% compared to last year, driven by strong global end market demand.

AWP’s second quarter 2022 net sales were up slightly compared to the prior year period and increased 4% on a foreign exchange neutral basis, primarily due to price realization and higher demand in all major geographies, partially offset by lower demand in China.

Construction, infrastructure, and industrial applications are driving demand for Genie products.

Examples of such applications for Genie products include data centers, warehouses and manufacturing facilities.

In addition, the fundamentals of the North American and European replacement cycle are strong as fleets age and customers have strong utilization rates.

Globally, increased adoption continues to improve labor efficiency and jobsite safety.

Except for China, demand remains strong for Genie products in all regions.

Our Utilities business is benefiting from electric grid expansion as well as the demand for 5G telecom across the United States.

AWP delivered operating margins of 5.9% in the quarter driven by strict expense management.

Demand remains strong for Genie products in all regions except China.

Our Utilities business is benefiting from electric grid expansion across the U.S.

AWP delivered operating margins of 7.7% in the quarter driven by strict expense management and disciplined pricing actions.

AWP’s end market strength is demonstrated by its backlog of $2.3 billion, up 62% year-over-year.

In the first quarter of 2022, our largest market remained North America, which represented approximately 54% of our global sales.

As compared to the prior year period, our sales were up double digits in every major geography except for Asia Pacific which was down single digits.

We continued to execute our disciplined capital allocation strategy in the first quarter of 2022.

We are making strategic investments in our businesses as described above and we also continued to return capital to shareholders.

In February 2022, our Board of Directors approved increasing our quarterly dividend by 8% to $0.13 per share.

We also completed $20 million of share repurchases in the quarter.

We typically use cash in the first quarter of the year and had a negative free cash flow of $72 million in the first quarter of 2022.

We continue to maintain ample liquidity and as of March 31, 2022, we had $753 million in available liquidity, with no near-term debt maturities.

In the second quarter, our largest market remained North America, which represented approximately 58% of our global sales.

As compared to the prior year period, sales were up in every major geography except for Asia Pacific which was down low double digits.

We continued to execute our disciplined capital allocation strategy in the second quarter.

We are making strategic investments in our businesses and continuing to return capital to shareholders.

Our strong balance sheet has allowed us to return approximately $100 million of cash to shareholders in the first half of 2022 and to prepay $23 million on our term loans in the quarter.

We generated $44 million of free cash flow in the quarter, consistent with our expectations.

Free cash flow in the second quarter includes the benefit of $38 million received on an IRS approved refund, but is also impacted by elevated levels of substantially completed inventory awaiting installation of final components.

We continue to maintain ample liquidity and as of June 30, 2022, we had $678 million in available liquidity, with no near-term debt maturities.

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 globally for our products and services.

However, the global operating environment, became increasingly difficult and unpredictable as the quarter progressed and it continues here into the second quarter.

Despite these challenges, we are maintaining our outlook for 2022 EPS to be between $3.55 and $4.05, on net sales between $4.1 billion and $4.3 billion.

We are operating in an unprecedented environment with supply chain challenges, inflationary pressures, geopolitical uncertainty, and highly restrictive China COVID-19 policies, so results could change, positively or negatively.

As a result of our strong performance in the first half of the year, we are increasing our outlook for 2022 EPS to between $3.80 and $4.20, on net sales between $4.1 billion and $4.3 billion.

We are operating in an unprecedented environment with supply chain challenges, inflationary pressures, geopolitical uncertainty, and restrictive China COVID-19 policies, so results can change, positively or negatively.

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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In order for the denominator of the ROIC ratio to properly match the operational period reflected in the numerator, we include the average of five quarters’ ending balance sheet amounts so that the denominator includes the average of the opening through ending balances (on a quarterly basis) thereby providing, over the same time period as the numerator, four quarters of average invested capital.

Terex management and Board of Directors use ROIC as one measure to assess operational performance, including in connection with certain compensation programs.

Our management and Board of Directors use ROIC as one measure to assess operational performance, including in connection with certain compensation programs.

We use ROIC as a metric because we believe it measures how effectively we invest our capital and provides a better measure to compare ourselves to peer companies to assist in assessing how we drive operational improvement.

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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 March 31, 2022 was 19.2%.

As the tables below show, our ROIC at June 30, 2022 was 17.3%.

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

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

Mar '22 Dec '21 Sep '21 Jun '21 Mar '21

Jun '22 Mar '22 Dec '21 Sep '21 Jun '21

Annualized effective tax rate as adjusted (1)

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(1) The annualized effective tax rate for each 2021 period represents the actual full year 2021 effective tax rate.

March 31, 2022 ROIC 19.2 %

June 30, 2022 ROIC 17.3 %

NOPAT as adjusted (last 4 quarters) $ 261.3

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Cash and cash equivalents as adjusted $ 253.3 $ 218.4 $ 266.9 $ 558.2 $ 547.5

Three Months Ended

March 31, 2022 Income (loss) from continuing operations before income taxes (Provision for) benefit from income taxes Income tax rate

Six Months Ended

June 30, 2022

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 March 31, 2022 Compared with Three Months Ended March 31, 2021

Three Months Ended March 31,

Three Months Ended June 30, 2022 Compared with Three Months Ended June 30, 2021

Three Months Ended June 30,

Sales % Change In

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Gross profit $ 212.9 19.8 % $ 231.6 22.3 % (8.1) %

SG&A $ 111.3 11.1 % $ 113.9 13.2 % (2.3) %

SG&A expenses

$ 109.0 10.1 % $ 109.1 10.5 % (0.1) %

Income from operations $ 103.9 9.6 % $ 122.5 11.8 % (15.2) %

Net sales for the three months ended March 31, 2022 increased $138.3 million when compared to the same period in 2021.

The increase in net sales was primarily due to strong demand for our products across multiple businesses.

Net sales for the three months ended June 30, 2022 increased $38.4 million when compared to the same period in 2021.

The increase in net sales was primarily due to price realization across all segments and healthy demand for our products across multiple businesses.

Changes in foreign exchange rates negatively impacted consolidated net sales by approximately $52 million.

Gross profit for the three months ended March 31, 2022 increased $10.4 million when compared to the same period in 2021.

The increase was primarily due to higher sales volume.

However, price realization was more than offset by material, labor and freight cost increases due to global supply chain disruptions, significant inflationary pressures and the negative impact of changes in foreign exchange rates.

SG&A costs for the three months ended March 31, 2022 decreased $2.6 million when compared to the same period in 2021 primarily due to continued cost discipline across all areas of our business.

Income from operations for the three months ended March 31, 2022 increased $13.0 million when compared to the same period in 2021.

The increase was primarily due to higher sales volume.

However, price realization was more than offset by cost increases and the negative impact of changes in foreign exchange rates.

Gross profit for the three months ended June 30, 2022 decreased $18.7 million when compared to the same period in 2021.

The decrease was primarily due to material, labor, manufacturing inefficiency and freight cost increases due to global supply chain disruptions, significant inflationary pressures and the negative impact of changes in foreign exchange rates, partially offset by price realization and incremental margin on higher sales volume.

SG&A expenses for the three months ended June 30, 2022 was flat when compared to the same period in 2021.

Income from operations for the three months ended June 30, 2022 decreased $18.6 million when compared to the same period in 2021.

The decrease was primarily due to cost increases and the negative impact of changes in foreign exchange rates which more than offset price realization and incremental margin on higher sales volume.

Materials Processing

Three Months Ended March 31,

Three Months Ended June 30,

Sales % Change In

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Income from operations $ 79.5 16.5 % $ 72.1 16.4 % 10.3 %

Net sales for the MP segment for the three months ended March 31, 2022 increased $74.5 million when compared to the same period in 2021 primarily due to robust end-market demand for aggregates and material handlers in all major geographies, cranes in Asia-Pacific, and concrete mixer trucks and environmental equipment in North America.

Net sales for the MP segment for the three months ended June 30, 2022 increased $39.9 million when compared to the same period in 2021 primarily due to price realization and robust end-market demand for aggregates and material handlers in all major geographies and cranes in Asia-Pacific and North America, partially offset by lower demand for cranes in Western Europe.

Net sales were negatively impacted by the effects of foreign exchange rate changes of approximately $31 million.

Income from operations for the three months ended March 31, 2022 increased $15.4 million when compared to the same period in 2021 primarily due to higher sales volume.

Price realization offset material, labor and freight cost increases due to global supply chain disruptions and significant inflationary pressures.

Income from operations for the three months ended June 30, 2022 increased $7.4 million when compared to the same period in 2021 primarily due to price realization and incremental margin on higher sales volume, partially offset by material, labor, manufacturing inefficiency and freight cost increases due to global supply chain disruptions, significant inflationary pressures and the negative effects of foreign exchange rate changes.

Aerial Work Platforms

Three Months Ended March 31,

Three Months Ended June 30,

Sales % Change In

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Income from operations $ 46.2 7.7 % $ 65.2 11.0 % (29.1) %

Net sales for the AWP segment for the three months ended March 31, 2022 increased $74.8 million when compared to the same period in 2021 primarily due to higher demand driven by fleet replacement and end-market growth for aerial work platforms, utility products and telehandlers in North America, partially offset by lower demand for aerial work platforms in China.

Net sales for the AWP segment for the three months ended June 30, 2022 increased $2.5 million when compared to the same period in 2021 primarily due to price realization and higher demand that was driven by fleet replacement and end-market growth for aerial work platforms and utility products in all major geographies, partially offset by lower demand in China.

Net sales were negatively impacted by the effects of foreign exchange rate changes of approximately $21 million.

Income from operations for the three months ended March 31, 2022 increased $5.9 million when compared to the same period in 2021 primarily due to higher sales volume.

However, price realization was more than offset by material, labor and freight cost increases due to global supply chain disruptions and significant inflationary pressures.

Income from operations for the three months ended June 30, 2022 decreased $19.0 million when compared to the same period in 2021 primarily due to material, labor, manufacturing inefficiency and freight cost increases due to global supply chain disruptions, significant inflationary pressures and the negative effects of foreign exchange rate changes, partially offset by price realization.

Corporate and Other / Eliminations

Three Months Ended March 31,

Three Months Ended June 30,

Sales % Change In

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The net sales decrease is primarily attributable to lower TFS revenue.

Loss from operations for the three months ended March 31, 2022 increased $8.3 million when compared to the same period in 2021 .

The increase in operating loss is primarily due to a gain on the sale of assets in the prior period and the negative impact of changes in foreign exchange rates, provision for litigation on former product lines and restructuring charges in the current year, partially offset by lower SG&A.

Loss from operations for the three months ended June 30, 2022 increased $7.0 million when compared to the same period in 2021 .

The increase in operating loss is primarily due the negative impact of changes in foreign exchange rates, provision for litigation settlement on a former product line and restructuring charges in the current period and a finance receivable reserve release in the prior period, partially offset by lower SG&A expenses.

Interest Expense, Net of Interest Income

During the three months ended March 31, 2022, our interest expense, net of interest income, was $10.0 million, or $4.6 million lower than the same period in the prior year primarily due to a decrease in average borrowings.

During the three months ended June 30, 2022, our interest expense, net of interest income, was $11.3 million, or $0.1 million lower than the same period in the prior year primarily due to a decrease in average borrowings, partially offset by lower interest income in the current year period.

Loss on Early Extinguishment of Debt

During the three months ended March 31, 2021, we recorded a loss on early extinguishment of debt of $2.1 million related to the prepayment of the 2019 Term Loan, as defined in Note I - “Long-Term Obligations”.

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 prepayment of term loans.

Other Income (Expense) – Net

Other income (expense) – net for the three months ended March 31, 2022 was expense of $0.3 million compared to income of $2.6 million in the same period in the prior year.

The increase in expense was primarily due to lower mark-to-market gains recorded on an equity investment and higher foreign exchange translation losses in the current year compared to the same period in the prior year.

During the three months ended March 31, 2022, we recognized income tax expense of $11.9 million on income of $64.2 million, an effective tax rate of 18.5%, as compared to income tax expense of $7.7 million on income of $47.4 million, an effective tax rate of 16.2%, for the three months ended March 31, 2021.

The higher effective tax rate for the three months ended March 31, 2022 when compared with the three months ended March 31, 2021 is primarily due to increased tax on the geographic distribution of income partially offset by reduced U.S.

Other income (expense) – net for the three months ended June 30, 2022 was expense of $3.3 million compared to income of $1.2 million in the same period in the prior year.

The increase in expense was primarily due to foreign exchange translation losses in the current year compared to gains in the same period in the prior year.

During the three months ended June 30, 2022, we recognized income tax expense of $15.1 million on income of $89.2 million, an effective tax rate of 16.9%, as compared to income tax expense of $14.4 million on income of $86.7 million, an effective tax rate of 16.6%, for the three months ended June 30, 2021.

The higher effective tax rate for the three months ended June 30, 2022 when compared with the three months ended June 30, 2021 is primarily due to lower favorable discrete benefit in the current quarter largely offset by reduced tax on the geographic distribution of income.

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

During the three months ended June 30, 2021, we recognized a gain (loss) on disposition of discontinued operations - net of tax of $1.6 million primarily related to the sale of our former MHPS business.

Six Months Ended June 30, 2022 Compared with Six Months Ended June 30, 2021

Six Months Ended June 30,

Sales % Change In

Reported Amounts

($ amounts in millions)

Net sales $ 2,079.6 — $ 1,902.9 — 9.3 %

Gross profit $ 398.7 19.2 % $ 407.0 21.4 % (2.0) %

SG&A expenses

$ 220.3 10.6 % $ 223.0 11.7 % (1.2) %

Income from operations $ 178.4 8.6 % $ 184.0 9.7 % (3.0) %

Net sales for the six months ended June 30, 2022 increased $176.7 million when compared to the same period in 2021.

The increase in net sales was primarily due to price realization across all segments and healthy demand for our products across multiple businesses.

Changes in foreign exchange rates negatively impacted consolidated net sales by approximately $83 million.

Gross profit for the six months ended June 30, 2022 decreased $8.3 million when compared to the same period in 2021.

SG&A expenses for the six months ended June 30, 2022 decreased $2.7 million when compared to the same period in 2021 primarily due to continued cost discipline across all areas of our business.

Income from operations for the six months ended June 30, 2022 decreased $5.6 million when compared to the same period in 2021.

The decrease was primarily due to cost increases and the negative impact of changes in foreign exchange rates which more than offset price realization and incremental margin on higher sales volume.

Materials Processing

Six Months Ended June 30,

Sales % Change In

Reported Amounts

($ amounts in millions)

Net sales $ 933.4 — $ 819.0 — 14.0 %

Income from operations $ 144.0 15.4 % $ 121.2 14.8 % 18.8 %

Net sales for the MP segment for the six months ended June 30, 2022 increased $114.4 million when compared to the same period in 2021 primarily due to robust end-market demand for aggregates and material handlers in all major geographies, cranes in Asia-Pacific and North America, and environmental equipment in North America and Western Europe, as well as price realization.

Net sales were negatively impacted by the effects of foreign exchange rate changes of approximately $47 million.

Income from operations for the six months ended June 30, 2022 increased $22.8 million when compared to the same period in 2021 primarily due to incremental margin on higher sales volume and price realization, partially offset by material, labor, manufacturing inefficiency and freight cost increases due to global supply chain disruptions, significant inflationary pressures and the negative effects of foreign exchange rate changes.

Aerial Work Platforms

Six Months Ended June 30,

Sales % Change In

Reported Amounts

($ amounts in millions)

Net sales $ 1,149.2 — $ 1,071.9 — 7.2 %

Income from operations $ 78.7 6.8 % $ 91.8 8.6 % (14.3) %

Net sales for the AWP segment for the six months ended June 30, 2022 increased $77.3 million when compared to the same period in 2021 primarily due to price realization and higher demand that was driven by fleet replacement and end-market growth for aerial work platforms, utility products and telehandlers in in all major geographies, partially offset by lower demand in China.

Net sales were negatively impacted by the effects of foreign exchange rate changes of approximately $36 million.

Income from operations for the six months ended June 30, 2022 decreased $13.1 million when compared to the same period in 2021 primarily due to material, labor, manufacturing inefficiency and freight cost increases due to global supply chain disruptions, significant inflationary pressures and the negative effects of foreign exchange rate changes, partially offset by price realization and incremental margin on higher sales volume.

Corporate and Other / Eliminations

Six Months Ended June 30,

Sales % Change In

Reported Amounts

($ amounts in millions)

Net sales $ (3.0) — $ 12.0 — (125.0) %

Loss from operations $ (44.3) * $ (29.0) * (52.8) %

* Not a meaningful percentage

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 six months ended June 30, 2022 increased $15.3 million when compared to the same period in 2021.

The increase in operating loss is primarily due to a gain on the sale of the on book finance receivables and a finance receivable reserve release in the prior period and the negative impact of changes in foreign exchange rates, a provision for litigation settlement on former product lines and restructuring charges in the current period, partially offset by lower SG&A expenses.

Interest Expense, Net of Interest Income

During the six months ended June 30, 2022, our interest expense, net of interest income, was $21.3 million, or $4.7 million lower than the same period in the prior year due to a decrease in average borrowings, partially offset by lower interest income in the current year period.

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.

Other Income (Expense) – Net

Other income (expense) – net for the six months ended June 30, 2022 was an expense of $3.6 million, compared to income of $3.8 million in the same period in the prior year.

The increase in expense was primarily due to foreign exchange translation losses in the current year compared to gains in the prior year and lower mark-to-market gains recorded on an equity investment in the current year compared the same period in the prior year.

During the six months ended June 30, 2022, we recognized income tax expense of $27.0 million on income of $153.4 million, an effective tax rate of 17.6%, as compared to income tax expense of $22.1 million on income of $134.1 million, an effective tax rate of 16.5%, for the six months ended June 30, 2021.

The higher effective tax rate for the six months ended June 30, 2022 when compared to the six months ended June 30, 2021 is primarily due to lower favorable discrete benefit in the current year period partially offset by reduced U.S.

tax on foreign income.

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

During the six months ended June 30, 2022 and 2021, we recognized a gain (loss) on disposition of discontinued operations - net of tax of $(0.4) million and $2.0 million, respectively.

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

The gain in the prior year primarily related to the sale of our former MHPS 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 March 31, 2022, we had cash and cash equivalents of $218.4 million and undrawn availability under our revolving line of credit of $535 million, giving us total liquidity of approximately $753 million.

During the three months ended March 31, 2022, our liquidity decreased by approximately $114 million from December 31, 2021 primarily due to cash used in our operating activities, share repurchases and capital expenditures.

At June 30, 2022, we had cash and cash equivalents of $253 million and undrawn availability under our revolving line of credit of $425 million, giving us total liquidity of approximately $678 million.

During the six months ended June 30, 2022, our liquidity decreased by approximately $189 million from December 31, 2021 primarily due to share repurchases, capital expenditures, term loan prepayment and dividends, partially offset by cash generated from operations which includes the adverse impact of higher working capital.

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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See Part I, Item 1A.

– “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021 for a detailed description of the risks resulting from our debt and our ability to generate sufficient cash flow to operate our business.

– “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021 and Part II, Item 1A.

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

Our ability to generate cash from operations is subject to numerous factors, including the following:

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

• The duration and depth of the global economic challenges resulting from supply chain constraints, inflationary pressures, geopolitical uncertainty and restrictive COVID-19 policies.

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

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

We had free cash flow use of $71.8 million for the three months ended March 31, 2022.

We had free cash flow of $44.2 million for the three months ended June 30, 2022 and free cash flow use of $27.6 million for the six months ended June 30, 2022.

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

Three Months Ended

6/30/2022 Six Months Ended

Net cash provided by (used in) operating activities $ 71.0 $ 19.3

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Free cash flow (use) $ 44.2 $ (27.6)

Pursuant to terms of our trade accounts receivable factoring arrangements, during the three months ended March 31, 2022, we sold, without material recourse, approximately $141 million of trade accounts receivable to enhance liquidity.

Working capital as a percent of trailing three month annualized net sales was 21.2% at March 31, 2022.

The following tables show the calculation of our working capital and trailing three months annualized sales as of March 31, 2022 (in millions):

Pursuant to terms of our trade accounts receivable factoring arrangements, during the six months ended June 30, 2022, we sold, without material recourse, approximately $292 million of trade accounts receivable to enhance liquidity.

Working capital as a percent of trailing three month annualized net sales was 20.7% at June 30, 2022.

The following tables show the calculation of our working capital and trailing three months annualized sales as of June 30, 2022 (in millions):

Three Months Ended

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

Borrowings under the Credit Agreement at March 31, 2022 were $77.9 million, net of discount, on the Original Term Loan and $65.0 million on the Revolver.

At March 31, 2022, the weighted average interest rate was 2.75% on the Original Term Loan and 2.17% on the Revolver.

Borrowings under the Credit Agreement at June 30, 2022 were $54.9 million, net of discount, on the Original Term Loan and $175.0 million on the Revolver.

During the six months ended June 30, 2022, we prepaid $23.0 million of the amount outstanding on the Original Term Loan prior to its maturity date to reduce our outstanding debt.

At June 30, 2022, the weighted average interest rate was 2.86% on the Original Term Loan and 2.80% on the Revolver.

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.

On April 22, 2022, we acquired a manufacturer of heavy fabrications based in Northern Ireland to facilitate manufacturing of certain MP products for cash consideration of approximately $6 million.

On July 29, 2022, we acquired a manufacturer of volumetric mixers based in Canada to expand our concrete product offering for consideration of approximately $39 million.

See Note A - “Basis of Presentation” in our Condensed Consolidated Financial Statements for additional information regarding these transactions.

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

During the three months ended March 31, 2022, we repurchased — shares for $17.5 million under this authorization leaving approximately $122 million available for repurchase under this program.

In the first quarter of 2022, our Board of Directors declared a dividend of $0.13 per share, which was paid to the Company’s shareholders.

During the six months ended June 30, 2022, we repurchased 2,262,523 shares for $78.5 million under this authorization leaving approximately $61 million available for repurchase under this program.

In the first and second quarters of 2022, our Board of Directors declared a dividend of $0.13 per share, which was paid to the Company’s shareholders.

In July 2022, our Board of Directors declared a dividend of $0.13 per share, which will be paid on September 19, 2022 to the Company’s shareholders of record as of August 12, 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 used in operations for the three months ended March 31, 2022 totaled $51.7 million, compared to cash provided by operations of $138.1 million for the three months ended March 31, 2021.

Cash provided in operations was $19.3 million and $269.2 million for the six months ended June 30, 2022 and 2021, respectively.

The change in operating cash was primarily driven by proceeds from the sale of finance receivables received in the prior year and higher working capital and incentive compensation payments in the current year.

Cash used in investing activities was $23.2 million and $6.1 million for the three months ended March 31, 2022 and 2021, respectively.

The increase in cash used in investing activities relates primarily to higher capital expenditures and investment activity.

Cash provided by financing activities was $28.0 million for the three months ended March 31, 2022, compared to cash used in financing activities of $214.9 million for the three months ended March 31, 2021.

The increase in cash provided by financing activities was primarily due to debt prepayments in the prior year compared to borrowings in the current year, partially offset by share repurchases.

Cash used in investing activities was $54.8 million and $48.6 million for the six months ended June 30, 2022 and 2021, respectively.

The increase in cash used in investing activities relates primarily to higher capital expenditures, partially offset by lower investment activity.

Cash provided by financing activities was $38.0 million for the six months ended June 30, 2022, compared to cash used in financing activities of $337.7 million for the six months ended June 30, 2021.

The increase in cash provided by financing activities was primarily due to debt prepayments in the prior year compared to borrowings in the current year, partially offset by share repurchases in the current year.

OFF-BALANCE SHEET ARRANGEMENTS

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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.

Primary currencies to which we are exposed are the Euro, British Pound, Chinese Yuan, Indian Rupee, 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.

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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