What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-02 compared with 2023-05-02 · 140 added, 84 removed, 202 unchanged (53% of the section changed)

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This forward-looking information provides guidance to investors about our EPS expectations excluding these unusual items that we do not believe are reflective of our ongoing operations.

Working capital is calculated using the Condensed Consolidated Balance Sheet amounts for Trade receivables (net of allowance) plus Inventories, less Trade accounts payable and Customer advances.

Working capital is calculated using the Condensed Consolidated Balance Sheet amounts for Receivables (net of allowance) plus Inventories, less Trade accounts payable and Customer advances.

We view excessive working capital as an inefficient use of resources, and seek to minimize the level of investment without adversely impacting ongoing operations of the business.

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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.

Our operations teams had excellent execution in the second quarter of 2023, demonstrating adaptability and flexibility to overcome the dynamic supply chain environment.

Company-wide investments in new product development and continued deployment of digital customer and dealer solutions are important to help to deliver long-term growth.

Our permanent Mexico facility continues to advance on time and on budget.

The new facility is an important element of our strategy to improve Genie’s through-cycle performance.

Starting in March, Genie began to transfer product lines from our temporary facility in Monterrey to our new permanent facility.

In the first half of 2023, Genie began transferring product lines from our temporary facility to our new permanent facility in Monterrey.

Our parts and service teams are investing in digital offerings for dealers and customers, including myTerex and Lift Connect.

Our performance in the first quarter of 2023 reflected strong, global customer demand in our businesses and excellent execution by our team members in a dynamic and challenging environment.

Our performance in the second quarter of 2023 reflected strong, global customer demand in our businesses and excellent execution by our team members in a dynamic and challenging environment.

Net sales of $1.4 billion were up 30% year-over-year as end-markets remained strong.

Gross margins increased by 410 basis points in the quarter as volume, pricing, favorable product mix, improved manufacturing efficiencies and expense discipline helped to offset cost increases, and the negative impact of foreign exchange rates.

SG&A was 10.6% of sales and decreased by 50 basis points from the prior year period as business investment and marketing costs were coupled with continued expense management.

SG&A was up in absolute numbers over the prior year period primarily as a result of inflation, foreign exchange and incremental spend on new acquisitions and marketing expenses on trade shows.

Gross margins increased by 460 basis points in the quarter as volume, pricing, improved manufacturing efficiencies and expense discipline helped to offset cost increases.

SG&A was 9.5% of sales and decreased by 60 basis points from the prior year period as business investment as well as marketing and engineering costs were coupled with continued expense management.

Income from operations of $210 million was up 102% year-over-year.

Operating margin of 15.0%, was up 540 basis points compared to the prior year period.

This led to EPS more than doubling year-over-year to $1.60 in the first quarter of 2023.

Overall, first quarter 2023 financial performance demonstrated continued, strong execution and focus on delivering for our customers and dealers despite elevated macroeconomic volatility and lingering supply chain constraints.

Although supplier on-time delivery has improved sequentially, it remains well below historical norms.

Our “hospital” inventories increased in the first quarter, after declining in the fourth quarter of 2022.

This is a clear indication of the level of disruption we continue to face.

This led to EPS more than doubling year-over-year to $2.35 in the second quarter of 2023 from our ongoing operations.

Overall, second quarter 2023 financial performance demonstrated continued, strong execution and focus on delivering for our customers and dealers despite continued macroeconomic volatility and lingering supply chain constraints.

Although supplier on-time delivery has improved, it remains below historical norms.

Our “hospital” inventories decreased by $25 million from the first quarter.

However, we continued to have $23 million of “hospital” inventory at the end of the second quarter, a clear indication of the level of disruption we continue to face.

Inflationary pressures are moderating, but overall costs continue to increase.

In addition to inflationary pressures and supply chain constraints, our teams are also navigating volatile credit and interest rate markets.

We continue to focus on assisting our customers in their efforts to obtain external financing solutions and monitor regional, customer and supplier risk.

MP had another strong quarter with net sales up 22% from the prior year period, 28% on a foreign exchange neutral basis, driven by strong customer sentiment across multiple end-markets and geographies as well as price realization.

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 driven by investments in infrastructure projects and demand for sand to source silicon used in semiconductors.

MP had another strong quarter with net sales up 20% from the prior year period, driven by strong customer sentiment across multiple end-markets and geographies as well as price realization.

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

Our mobile crushing and screening businesses are benefiting from the strength of aggregates and recycled materials.

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.

MP has been managing all elements of cost resulting in a 15.4% operating margin for the quarter, up 120 basis points as compared to the prior year period.

We expect customer sentiment to remain strong and we are encouraged by MP’s backlog of $1.2 billion.

AWP’s first quarter 2023 net sales were up 24% compared to the prior year period and increased 27% on a foreign exchange neutral basis, primarily due to higher demand driven by fleet replacement and end-market growth for aerial work platforms and price realization necessary to mitigate rising costs.

MP’s 17.0% operating margin for the quarter, up 50 basis points as compared to the prior year period, was driven by higher sales volume, favorable mix and improved manufacturing efficiencies.

Although we are seeing some softness in European order activity, MP’s backlog of $1.1 billion remains healthy, supporting our outlook.

AWP’s second quarter 2023 net sales were up 38% compared to the prior year period, primarily driven by improved supply chain, higher demand and price realization necessary to mitigate rising costs.

Utility product growth was strong in North America.

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

AWP delivered operating margins of 12.1% in the quarter driven by higher sales volumes, favorable mix and manufacturing efficiencies, cost reduction initiatives, strict expense management and disciplined pricing actions to offset higher costs.

We expect end market demand to remain strong throughout 2023 as demonstrated by AWP’s backlog of $3.0 billion.

We anticipate moving multiple production lines throughout our global footprint and opening our new permanent facility in Monterrey, Mexico.

AWP delivered operating margins of 16.2% in the second quarter of 2023 driven by higher sales volumes, manufacturing efficiencies, cost reduction initiatives, and disciplined pricing actions to offset higher costs.

AWP continues to have a robust backlog of $2.7 billion.

We have started moving multiple production lines throughout our global footprint and opening our new permanent facility in Monterrey, Mexico.

While these moves are expected to have long-term benefits, we anticipate the moves will result in short-term manufacturing inefficiencies.

In the first quarter of 2023, our largest market remained North America, which represented approximately 55% of our global sales.

In the second quarter of 2023, our largest market remained North America, which represented approximately 60% of our global sales.

As compared to the prior year period, sales were up double digits in every major geography, on a foreign currency neutral basis.

We continued to execute our disciplined capital allocation strategy in the first quarter of 2023.

We are continuing to make strategic investments in our businesses and we also continued to return capital to shareholders.

In February 2023, our Board of Directors approved increasing our quarterly dividend by 15% to $0.15 per share.

We typically use cash in the first quarter of the year and had a negative free cash flow of $11 million in the first quarter of 2023.

We continue to maintain ample liquidity and as of March 31, 2023, we had $677 million in available liquidity, with no near-term debt maturities.

We continued to execute our disciplined capital allocation strategy in the second quarter of 2023 as we made strategic investments in our businesses and we returned capital to shareholders.

In July 2023, our Board of Directors approved increasing our quarterly dividend by 13% to $0.17 per share.

This follows a 15% increase we announced earlier this year.

The 31% increase in our dividend since the start of 2023 reflects our continued confidence in our strong financial position.

We generated $135 million of free cash flow in the second quarter, a $91 million improvement compared to the prior year period, driven by increased operating profit.

We continued to invest in our businesses with capital expenditures and investments of $25 million, which was offset by $33 million of proceeds from the sale of our Oklahoma City facility.

We continue to maintain ample liquidity and as of June 30, 2023, we had $763 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.

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However, it is important to realize we are operating in a challenging macroeconomic environment with many variables and geopolitical uncertainties, so results could change, negatively or positively.

As a result of the strong execution of our team members in the first quarter and our robust backlog, we now expect earnings per share for the full year of $5.60 to $6.00 on sales of $4.8 billion to $5.0 billion.

As a result of the strong execution by our team members in the second quarter and the strength of the customer backlog, we now expect EPS for the full-year of approximately $7.00 on sales of approximately $5.1 billion.

Our sales outlook incorporates the latest dialogue with our customers and our suppliers and our current supply chain expectations.

We anticipate higher volumes as customer demand remains strong and expect pricing actions to offset cost pressures.

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

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

As the tables below show, our ROIC at March 31, 2023 was 23.9%.

As the tables below show, our ROIC at June 30, 2023 was 28.2%.

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 '23 Dec '22 Sep '22 Jun '22 Mar '22

Jun '23 Mar '23 Dec '22 Sep '22 Jun '22

Annualized effective tax rate as adjusted (1)

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(1) The annualized effective tax rate for each 2022 period represents the actual full-year 2022 effective tax rate.

March 31, 2023 ROIC 23.9 %

June 30, 2023 ROIC 28.2 %

NOPAT as adjusted (last 4 quarters) $ 483.9

Average Debt less Cash and cash equivalents plus Stockholders’ equity (5 quarters) $ 1,718.9

Three Months Ended

March 31, 2023

Six Months Ended

June 30, 2023

Income (loss) from continuing operations before income taxes (Provision for) benefit from income taxes Income tax rate

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RESULTS OF OPERATIONS

Three Months Ended March 31, 2023 Compared with Three Months Ended March 31, 2022

Three Months Ended March 31,

Three Months Ended June 30, 2023 Compared with Three Months Ended June 30, 2022

Three Months Ended June 30,

Sales % Change In

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Income from operations 209.9 15.0 % 103.9 9.6 % 102.0 %

Net sales for the three months ended March 31, 2023 increased $233.2 million when compared to the same period in 2022.

The increase in net sales was primarily due to healthy demand for our products across multiple businesses and all major geographies, primarily North America, and price realization, necessary to mitigate rising costs.

Net sales for the three months ended June 30, 2023 increased $326.0 million when compared to the same period in 2022.

The increase in net sales was primarily due to healthy demand for our products across multiple businesses and all major geographies and improved price realization necessary to mitigate rising costs.

Changes in foreign exchange rates negatively impacted consolidated net sales by approximately $10 million.

Gross profit for the three months ended March 31, 2023 increased $92.9 million when compared to the same period in 2022.

The increase was primarily due to incremental margin on higher sales volume, price realization and favorable mix, partially offset by higher cost due to continued global supply chain disruptions, inflationary pressures, labor constraints and the negative impact of changes in foreign exchange rates.

SG&A expenses for the three months ended March 31, 2023 increased $19.7 million when compared to the same period in 2022 primarily due to selling, engineering, technology and higher personnel costs including the impact of recent acquisitions.

SG&A expenses were lower as a percent of sales when compared to the same period in 2022 due to continued cost discipline across all areas of our business.

Income from operations for the three months ended March 31, 2023 increased $73.2 million when compared to the same period in 2022.

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

Gross profit for the three months ended June 30, 2023 increased $130.0 million when compared to the same period in 2022.

The increase was primarily due to incremental margin achieved on higher sales volume, price realization and improved manufacturing efficiencies.

SG&A expenses for the three months ended June 30, 2023 increased $24.0 million when compared to the same period in 2022 primarily due to inflation, incremental spend on new acquisitions and increased marketing, engineering and technology expenses.

SG&A expenses were lower as a percent of sales when compared to the same period in 2022 due to strict expense management and higher sales.

Income from operations for the three months ended June 30, 2023 increased $106.0 million when compared to the same period in 2022.

The increase was primarily due to incremental margin achieved on higher sales volume, price realization and improved manufacturing efficiencies, which was partially offset by cost increases.

Materials Processing

Three Months Ended March 31,

Three Months Ended June 30,

Sales % Change In

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Income from operations 98.2 17.0 % 79.5 16.5 % 23.5 %

Net sales for the three months ended March 31, 2023 increased $101.1 million when compared to the same period in 2022 primarily due to robust end-market demand for aggregates, concrete mixers and environmental equipment in North America and aggregates in Western Europe and Asia Pacific.

Net sales for the three months ended June 30, 2023 increased $96.7 million when compared to the same period in 2022 primarily due to robust end-market demand for aggregates across all major geographies, concrete mixers and environmental equipment in North America and material handlers in Western Europe.

Net sales were negatively impacted by changes in foreign exchange rates of approximately $9 million.

Income from operations for the three months ended March 31, 2023 increased $20.8 million when compared to the same period in 2022 primarily due to incremental margin on higher sales volume and favorable mix, partially offset by higher cost due to continued global supply chain disruptions, inflationary pressures, labor constraints and the negative impact of changes in foreign exchange rates.

Income from operations for the three months ended June 30, 2023 increased $18.7 million when compared to the same period in 2022 primarily due to incremental margin achieved on higher sales volume, favorable mix and improved manufacturing efficiencies, partially offset by cost increases.

Aerial Work Platforms

Three Months Ended March 31,

Three Months Ended June 30,

Sales % Change In

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Income from operations 133.6 16.2 % 46.2 7.7 % 189.2 %

Net sales for the three months ended March 31, 2023 increased $134.4 million when compared to the same period in 2022 primarily due to higher demand that was driven by fleet replacement and end-market growth for aerial work platforms in all major geographies except China and telehandlers and utility products in North America as well as price realization, necessary to mitigate rising costs.

Net sales for the three months ended June 30, 2023 increased $227.2 million when compared to the same period in 2022 primarily due to higher demand resulting from end-market growth for aerial work platforms in all major geographies and utility products and telehandlers in North America, as well as price realization necessary to mitigate rising costs.

Net sales were negatively impacted by changes in foreign exchange rates of approximately $1 million.

Income from operations for the three months ended March 31, 2023 increased $50.6 million when compared to the same period in 2022 primarily due to incremental margin on higher sales volume, price realization and favorable mix, partially offset by higher cost due to continued global supply chain disruptions, inflationary pressures, labor constraints and the negative impact of changes in foreign exchange rates.

Income from operations for the three months ended June 30, 2023 increased $87.4 million when compared to the same period in 2022 primarily due to incremental margin achieved on higher sales volume, price realization, cost reduction initiatives and favorable manufacturing efficiencies, partially offset by cost increases.

Corporate and Other / Eliminations

Three Months Ended March 31,

Three Months Ended June 30,

Sales % Change In

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* Not a meaningful percentage

The net sales decrease is primarily attributable to higher intercompany sales eliminations, partially offset by higher governmental sales.

Loss from operations for the three months ended March 31, 2023 decreased $1.8 million when compared to the same period in 2022 .

The decrease in operating loss is primarily due to restructuring charges recorded in the prior year period partially offset by the negative impact of changes in foreign exchange rates in the current year period.

Interest Expense, Net of Interest Income

During the three months ended March 31, 2023, our interest expense, net of interest income, was $12.9 million, or $2.9 million higher when compared to the same period in 2022 primarily due to an increase in our weighted average interest rate on revolving credit amounts, partially offset by higher interest income in the current year period.

During the three months ended June 30, 2023, our interest expense, net of interest income, was $14.3 million, or $2.9 million higher when compared to the same period in 2022 primarily due to increased receivable sales at higher interest rates and an increase in our weighted average interest rate on revolving credit amounts, partially offset by higher interest income in the current year period.

Other Income (Expense) – Net

Other income (expense) – net for the three months ended March 31, 2023 and 2022 was an expense of $1.6 million and $0.3 million, respectively.

The increase is due primarily to increased non-service cost portion of pension expense.

During the three months ended March 31, 2023, we recognized income tax expense of $23.3 million on income of $133.2 million, an effective tax rate of 17.5%, as compared to income tax expense of $11.9 million on income of $64.2 million, an effective tax rate of 18.5%, for the three months ended March 31, 2022.

The lower effective tax rate for the three months ended March 31, 2023 when compared with the three months ended March 31, 2022 is primarily due to reduced tax expense on permanent items partially offset by lower favorable discrete items.

Other income (expense) – net for the three months ended June 30, 2023 and 2022 was an expense of $3.8 million and $3.3 million, respectively.

The increase is due primarily to higher mark-to-market losses recorded on equity investments in the current year period compared to the same period in the prior year and increased non-service cost portion of pension expense, partially offset by foreign exchange transaction gains in the current year period compared to losses in the prior year period.

During the three months ended June 30, 2023, we recognized income tax expense of $32.0 million on income of $191.8 million, an effective tax rate of 16.7%, as compared to income tax expense of $15.1 million on income of $89.2 million, an effective tax rate of 16.9%, for the three months ended June 30, 2022.

The lower effective tax rate for the three months ended June 30, 2023 when compared with the three months ended June 30, 2022 is primarily due to lower tax expense on permanent items partially offset by higher tax related to geographic distribution of income.

Six Months Ended June 30, 2023 Compared with Six Months Ended June 30, 2022

Six Months Ended June 30,

Sales % Change In

Reported Amounts

($ amounts in millions)

Net sales $ 2,638.8 — $ 2,079.6 — 26.9 %

Gross profit $ 621.6 23.6 % $ 398.7 19.2 % 55.9 %

SG&A expenses

$ 264.0 10.0 % $ 220.3 10.6 % 19.8 %

Income from operations $ 357.6 13.6 % $ 178.4 8.6 % 100.4 %

Net sales for the six months ended June 30, 2023 increased $559.2 million when compared to the same period in 2022.

The increase in net sales was primarily due to healthy demand for our products across multiple businesses and all major geographies and improved price realization necessary to mitigate rising costs.

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

Gross profit for the six months ended June 30, 2023 increased $222.9 million when compared to the same period in 2022.

The increase was primarily due to incremental margin achieved on higher sales volume, price realization and improved manufacturing efficiencies, partially offset by the negative impact of changes in foreign exchange rates.

SG&A expenses for the six months ended June 30, 2023 increased $43.7 million when compared to the same period in 2022 primarily due to inflation, incremental spend on new acquisitions and increased marketing, engineering and technology expenses.

SG&A expenses were lower as a percent of sales when compared to the same period in 2022 due to strict expense management and higher sales.

Income from operations for the six months ended June 30, 2023 increased $179.2 million when compared to the same period in 2022.

The increase was primarily due to incremental margin achieved on higher sales volume, price realization and improved manufacturing efficiencies, which was partially offset by cost increases and the negative impact of changes in foreign exchange rates.

Materials Processing

Six Months Ended June 30,

Sales % Change In

Reported Amounts

($ amounts in millions)

Net sales $ 1,131.2 — $ 933.4 — 21.2 %

Income from operations $ 183.5 16.2 % $ 144.0 15.4 % 27.4 %

Net sales for the MP segment for the six months ended June 30, 2023 increased $197.8 million when compared to the same period in 2022 primarily due to robust end-market demand for aggregates across all major geographies, concrete mixers and environmental equipment in North America and material handlers in Western Europe.

Net sales were negatively impacted by changes in foreign exchange rates of approximately $36 million.

Income from operations for the six months ended June 30, 2023 increased $39.5 million when compared to the same period in 2022 primarily due to incremental margin achieved on higher sales volume, favorable mix and improved manufacturing efficiencies, partially offset by cost increases and the negative impact of changes in foreign exchange rates.

Aerial Work Platforms

Six Months Ended June 30,

Sales % Change In

Reported Amounts

($ amounts in millions)

Net sales $ 1,510.8 — $ 1,149.2 — 31.5 %

Income from operations $ 216.7 14.3 % $ 78.7 6.8 % 175.3 %

Net sales for the AWP segment for the six months ended June 30, 2023 increased $361.6 million when compared to the same period in 2022 primarily due to higher demand resulting from end-market growth for aerial work platforms in all major geographies and telehandlers and utility products in North America as well as price realization necessary to mitigate rising costs.

Net sales were negatively impacted by changes in foreign exchange rates of approximately $16 million.

Income from operations for the six months ended June 30, 2023 increased $138.0 million when compared to the same period in 2022 primarily due to incremental margin achieved on higher sales volume, price realization, cost reduction initiatives and favorable manufacturing efficiencies, partially offset by cost increases.

Corporate and Other / Eliminations

Six Months Ended June 30,

Sales % Change In

Reported Amounts

($ amounts in millions)

Net sales $ (3.2) — $ (3.0) — (6.7) %

Loss from operations $ (42.6) * $ (44.3) * 3.8 %

* Not a meaningful percentage

Loss from operations for the six months ended June 30, 2023 decreased $1.7 million when compared to the same period in 2022.

The decrease in operating loss is primarily due to a provision for litigation settlement on former product lines and restructuring charges and the negative impact of changes in foreign exchange rates in the prior year period.

Interest Expense, Net of Interest Income

During the six months ended June 30, 2023, our interest expense, net of interest income, was $27.2 million, or $5.8 million higher when compared to the same period in 2022 due primarily to an increase in receivable sales and average borrowings at higher interest rates, partially offset by higher interest income in the current year period.

Other Income (Expense) – Net

Other income (expense) – net for the six months ended June 30, 2023 was an expense of $5.4 million, compared to $3.6 million in the same period in the prior year.

The increase is due primarily to increased non-service cost portion of pension expense and higher mark-to-market losses recorded on equity investments in the current year period compared the same period in the prior year, partially offset by lower foreign exchange transaction losses in the current year period compared to the prior year period.

During the six months ended June 30, 2023, we recognized income tax expense of $55.3 million on income of $325.0 million, an effective tax rate of 17.0%, as compared to income tax expense of $27.0 million on income of $153.4 million, an effective tax rate of 17.6%, for the six months ended June 30, 2022.

The lower effective tax rate for the six months ended June 30, 2023 when compared with the six months ended June 30, 2022 is primarily due to lower tax expense on permanent items partially offset by higher tax related to geographic distribution of income.

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

During the three months ended March 31, 2023 and 2022, we recognized a gain (loss) on disposition of discontinued operations - net of tax of $2.7 million and $(0.4) million, respectively.

During the six months ended June 30, 2023 and 2022, we recognized a gain (loss) on disposition of discontinued operations - net of tax of $2.3 million and $(0.4) million, respectively.

The gain in the current year period primarily relates to post-closing adjustments related to the sales of our former MHPS and mobile cranes businesses.

The loss in the prior year related to our former mobile cranes business.

LIQUIDITY AND CAPITAL RESOURCES

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

At March 31, 2023, we had cash and cash equivalents of $254 million and undrawn availability under our revolving line of credit of $423 million, giving us total liquidity of approximately $677 million.

During the three months ended March 31, 2023, our liquidity decreased by approximately $50 million from December 31, 2022 primarily due to capital expenditures, investments and dividends, partially offset by cash generated from operations.

At June 30, 2023, we had cash and cash equivalents of $298 million and undrawn availability under our revolving line of credit of $465 million, giving us total liquidity of approximately $763 million.

During the six months ended June 30, 2023, our liquidity increased by approximately $36 million from December 31, 2022 primarily due to cash generated from operations and sale of capital assets, partially offset by capital expenditures, investments, share repurchases and dividends.

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

• The duration and depth of the global economic challenges resulting from supply chain constraints, inflationary pressures, foreign exchange rate volatility, geopolitical uncertainty, rising interest rates and remaining COVID-19 impacts.

• The duration and depth of the global economic volatility resulting from supply chain constraints, inflationary pressures, foreign exchange rate volatility, geopolitical uncertainty and rising interest rates.

• 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 $10.6 million for the three months ended March 31, 2023.

We had free cash flow of $134.8 million and $124.2 million for the three and six months ended June 30, 2023, respectively.

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

Three Months Ended

6/30/2023 Six Months Ended

Net cash provided by (used in) operating activities $ 120.7 $ 129.8

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Free cash flow (use) $ 134.8 $ 124.2

Pursuant to terms of our trade accounts receivable factoring arrangements, during the three months ended March 31, 2023, we sold, without material recourse, approximately $183 million of trade accounts receivable to enhance liquidity.

Working capital as a percent of trailing three month annualized net sales was 20.0% at March 31, 2023.

The following tables show the calculation of our working capital and trailing three months annualized sales as of March 31, 2023 (in millions):

Pursuant to terms of our trade accounts receivable factoring arrangements, during the six months ended June 30, 2023, we sold, without material recourse, approximately $382 million of trade accounts receivable to enhance liquidity.

Working capital as a percent of trailing three month annualized net sales was 19.2% at June 30, 2023.

The following tables show the calculation of our working capital and trailing three months annualized sales as of June 30, 2023 (in millions):

Three Months Ended

June 30, 2023

Net Sales $ 1,403.1

Trailing Three Month Annualized Net Sales $ 5,612.4

As of 3/31/23

June 30, 2023

Inventories $ 1,122.0

Trade Receivables 630.1

Receivables 681.2

Trade Accounts Payable (690.3)

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Working Capital $ 1,078.0

Revolving line of credit (the “Revolver”) borrowings at March 31, 2023 were $177.0 million.

At March 31, 2023, the weighted average interest rate was 6.52% on the Revolver.

For information regarding debt, see Note I – “Long-Term Obligations” in Notes to Condensed Consolidated Financial Statements.

Revolving line of credit (the “Revolver”) borrowings at June 30, 2023 were $134.5 million.

At June 30, 2023, the weighted average interest rate was 6.84% on the Revolver.

For information regarding debt, see Note J – “Long-Term Obligations” in Notes to Condensed Consolidated Financial Statements.

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 facilitating customer financing.

During the three months ended March 31, 2023, we repurchased 68,745 shares for $3.2 million leaving approximately $189 million available for repurchase under our share repurchase programs.

In the first quarter of 2023, our Board of Directors declared a dividend of $0.15 per share, which were paid to the Company’s shareholders.

During the six months ended June 30, 2023, we repurchased 736,644 shares for $33.8 million leaving approximately $159 million available for repurchase under our share repurchase programs.

In the first and second quarters of 2023, our Board of Directors declared a dividend of $0.15 per share, which was paid to the Company’s shareholders.

In July 2023, our Board of Directors declared a dividend of $0.17 per share, which will be paid on September 19, 2023 to our shareholders of record as of August 14, 2023.

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 and senior notes contain restrictions on our ability to make further borrowings and to sell substantial portions of our assets.

Cash provided by operations was $9.1 million for the three months ended March 31, 2023, compared to cash used in operations of $51.7 million for the three months ended March 31, 2022.

Cash provided by operations was $129.8 million and $19.3 million for the six months ended June 30, 2023 and 2022, respectively.

The increase in cash provided by operations was primarily driven by increased operating profitability in the current year.

Cash used in investing activities was $29.7 million and $23.2 million for the three months ended March 31, 2023 and 2022, respectively.

The increase in cash used in investing activities relates primarily to higher investment activity in the current year.

Cash used in financing activities was $31.7 million for the three months ended March 31, 2023, compared to cash provided by financing activities of $28.0 million for the three months ended March 31, 2022.

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

Cash used in investing activities was $21.0 million and $54.8 million for the six months ended June 30, 2023 and 2022, respectively.

The decrease in cash used in investing activities relates primarily to lower capital expenditures and higher proceeds from the sale of capital assets, partially offset by higher acquisition and investment activity in the current year.

Cash used in financing activities was $119.0 million for the six months ended June 30, 2023, compared to cash provided by financing activities of $38.0 million for the six months ended June 30, 2022.

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

OFF-BALANCE SHEET ARRANGEMENTS

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

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

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

CONTINGENCIES AND UNCERTAINTIES

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

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

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

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

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

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

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

15 unchanged sentences

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