TEREX CORP 10-Q

ITEM 1. FINANCIAL STATEMENTS TEREX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (unaudited) (in millions, except per share data) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net sales $ 1,403.1 $ 1,077.1 $ 2,638.8 $ 2,079.6 Cost of goods sold ( 1,060.2 ) ( 864.2 ) ( 2,017.2 ) ( 1,680.9 ) Gross profit 342.9 212.9 621.6 398.7 Selling, general and administrative expenses ( 133.0 ) ( 109.0 ) ( 264.0 ) ( 220.3 ) Income (loss) from operations 209.9 103.9 357.6 178.4 Other income (expense) Interest income 1.1 0.4 3.1 1.0 Interest expense ( 15.4 ) ( 11.8 ) ( 30.3 ) ( 22.4 ) Other income (expense) – net ( 3.8 ) ( 3.3 ) ( 5.4 ) ( 3.6 ) Income (loss) from continuing operations before income taxes 191.8 89.2 325.0 153.4 (Provision for) benefit from income taxes ( 32.0 ) ( 15.1 ) ( 55.3 ) ( 27.0 ) Income (loss) from continuing operations 159.8 74.1 269.7 126.4 Gain (loss) on disposition of discontinued operations – net of tax ( 0.4 ) — 2.3 ( 0.4 ) Net income (loss) $ 159.4 $ 74.1 $ 272.0 $ 126.0 Basic earnings (loss) per share: Income (loss) from continuing operations $ 2.36 $ 1.08 $ 3.98 $ 1.82 Gain (loss) on disposition of discontinued operations – net of tax — — 0.04 — Net income (loss) $ 2.36 $ 1.08 $ 4.02 $ 1.82 Diluted earnings (loss) per share: Income (loss) from continuing operations $ 2.35 $ 1.07 $ 3.94 $ 1.80 Gain (loss) on disposition of discontinued operations – net of tax ( 0.01 ) — 0.03 — Net income (loss) $ 2.34 $ 1.07 $ 3.97 $ 1.80 Weighted average number of shares outstanding in per share calculation Basic 67.6 68.9 67.7 69.3 Diluted 68.1 69.3 68.5 70.1 Comprehensive income (loss) $ 169.4 $ 1.7 $ 308.3 $ 33.6 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 TEREX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (unaudited) (in millions, except par value) June 30, 2023 December 31, 2022 Assets Current assets Cash and cash equivalents $ 297.7 $ 304.1 Receivables (net of allowance of $ 10.5 and $ 9.4 at June 30, 2023 and December 31, 2022, respectively) 681.2 547.5 Inventories 1,122.0 988.4 Prepaid and other current assets 116.9 122.0 Total current assets 2,217.8 1,962.0 Non-current assets Property, plant and equipment – net 490.7 465.6 Goodwill 291.1 284.4 Intangible assets – net 16.8 17.4 Other assets 398.8 388.7 Total assets $ 3,415.2 $ 3,118.1 Liabilities and Stockholders’ Equity Current liabilities Current portion of long-term debt $ 2.4 $ 1.9 Trade accounts payable 690.3 624.6 Other current liabilities 380.9 372.1 Total current liabilities 1,073.6 998.6 Non-current liabilities Long-term debt, less current portion 734.3 773.6 Other non-current liabilities 175.1 164.7 Total liabilities 1,983.0 1,936.9 Commitments and contingencies Stockholders’ equity Common stock, $ 0.01 par value – authorized 300.0 shares; issued 84.6 and 84.0 shares at June 30, 2023 and December 31, 2022, respectively 0.9 0.9 Additional paid-in capital 879.1 881.6 Retained earnings 1,452.0 1,200.6 Accumulated other comprehensive income (loss) ( 305.3 ) ( 341.6 ) Less cost of shares of common stock in treasury – 17.9 and 17.2 shares at June 30, 2023 and December 31, 2022, respectively ( 594.5 ) ( 560.3 ) Total stockholders’ equity 1,432.2 1,181.2 Total liabilities and stockholders’ equity $ 3,415.2 $ 3,118.1 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 TEREX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited) (in millions) Outstanding Shares Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Common Stock in Treasury Total Balance at December 31, 2022 66.8 $ 0.9 $ 881.6 $ 1,200.6 $ ( 341.6 ) $ ( 560.3 ) $ 1,181.2 Net income (loss) — — — 112.6 — — 112.6 Other comprehensive income (loss) – net of tax — — — — 26.3 — 26.3 Issuance of common stock related to compensation 0.6 — 9.5 — — — 9.5 Compensation under stock-based plans – net — — ( 22.3 ) — — 1.5 ( 20.8 ) Dividends — — 0.1 ( 10.3 ) — — ( 10.2 ) Acquisition of treasury stock ( 0.1 ) — — — — ( 4.0 ) ( 4.0 ) Balance at March 31, 2023 67.3 $ 0.9 $ 868.9 $ 1,302.9 $ ( 315.3 ) $ ( 562.8 ) $ 1,294.6 Net income (loss) — — — 159.4 — — 159.4 Other comprehensive income (loss) – net of tax — — — — 10.0 — 10.0 Issuance of common stock related to compensation — — 0.4 — — — 0.4 Compensation under stock-based plans – net — — 9.6 — — — 9.6 Dividends — — 0.2 ( 10.3 ) — — ( 10.1 ) Acquisition of treasury stock ( 0.6 ) — — — — ( 31.6 ) ( 31.6 ) Other — — — — — ( 0.1 ) ( 0.1 ) Balance at June 30, 2023 66.7 $ 0.9 $ 879.1 $ 1,452.0 $ ( 305.3 ) $ ( 594.5 ) $ 1,432.2 Outstanding Shares Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Common Stock in Treasury Total Balance at December 31, 2021 69.2 $ 0.9 $ 860.0 $ 936.9 $ ( 228.5 ) $ ( 459.7 ) $ 1,109.6 Net income (loss) — — — 51.9 — — 51.9 Other comprehensive income (loss) – net of tax — — — — ( 20.0 ) — ( 20.0 ) Issuance of common stock related to compensation 0.5 — 16.3 — — — 16.3 Compensation under stock-based plans – net 0.1 — ( 15.8 ) — — 1.0 ( 14.8 ) Dividends — — 0.2 ( 9.3 ) — — ( 9.1 ) Acquisition of treasury stock ( 0.5 ) — — — — ( 19.8 ) ( 19.8 ) Balance at March 31, 2022 69.3 $ 0.9 $ 860.7 $ 979.5 $ ( 248.5 ) $ ( 478.5 ) $ 1,114.1 Net income (loss) — — — 74.1 — — 74.1 Other comprehensive income (loss) – net of tax — — — — ( 72.4 ) — ( 72.4 ) Issuance of common stock related to compensation 0.1 — 1.8 — — — 1.8 Compensation under stock-based plans – net ( 0.1 ) — 4.3 — — 0.1 4.4 Dividends — — 0.2 ( 9.1 ) — — ( 8.9 ) Acquisition of treasury stock ( 1.9 ) — — — — ( 64.3 ) ( 64.3 ) Other — — — 0.1 — — 0.1 Balance at June 30, 2022 67.4 $ 0.9 $ 867.0 $ 1,044.6 $ ( 320.9 ) $ ( 542.7 ) $ 1,048.9 The accompanying notes are an integral part of these condensed consolidated financial statements . 6 TEREX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) (in millions) Six Months Ended June 30, 2023 2022 Operating Activities Net income (loss) $ 272.0 $ 126.0 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 24.9 23.5 Stock-based compensation expense 17.3 16.2 Inventory and other non-cash charges 9.8 10.3 Changes in operating assets and liabilities (net of effects of acquisitions and divestitures): Receivables ( 128.8 ) ( 68.8 ) Inventories ( 141.2 ) ( 193.4 ) Trade accounts payable 67.5 90.3 Other assets and liabilities 8.0 26.7 Foreign exchange and other operating activities, net 0.3 ( 11.5 ) Net cash provided by (used in) operating activities 129.8 19.3 Investing Activities Capital expenditures ( 39.1 ) ( 47.0 ) Proceeds from sale of capital assets 33.5 0.1 Acquisitions, net of cash acquired, and investments ( 15.8 ) ( 8.2 ) Other investing activities, net 0.4 0.3 Net cash provided by (used in) investing activities ( 21.0 ) ( 54.8 ) Financing Activities Repayments of debt ( 229.8 ) ( 33.0 ) Proceeds from issuance of debt 187.7 185.1 Share repurchases ( 35.4 ) ( 82.9 ) Dividends paid ( 20.3 ) ( 18.0 ) Other financing activities, net ( 21.2 ) ( 13.2 ) Net cash provided by (used in) financing activities ( 119.0 ) 38.0 Effect of Exchange Rate Changes on Cash and Cash Equivalents 3.8 ( 16.1 ) Net Increase (Decrease) in Cash and Cash Equivalents ( 6.4 ) ( 13.6 ) Cash and Cash Equivalents at Beginning of Period 304.1 266.9 Cash and Cash Equivalents at End of Period $ 297.7 $ 253.3 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 TEREX CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE A – BASIS OF PRESENTATION Basis of Presentation and Principles of Consolidation. The accompanying unaudited Condensed Consolidated Financial Statements of Terex Corporation and subsidiaries as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by U.S. GAAP to be included in full-year financial statements. The accompanying Condensed Consolidated Balance Sheet as of December 31, 2022 has been derived from audited consolidated financial statements as of that date, but does not include all disclosures required by U.S. GAAP. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for year ended December 31, 2022. The Condensed Consolidated Financial Statements include accounts of Terex Corporation, its majority-owned subsidiaries and other controlled subsidiaries (“Terex” or the “Company”). The Company consolidates all majority-owned and controlled subsidiaries, applies equity method of accounting for investments in which the Company is able to exercise significant influence and applies the cost method for investments which do not have readily determinable fair values. All intercompany balances, transactions and profits have been eliminated. Certain prior period amounts have been reclassified to conform with the 2023 presentation. In the opinion of management, adjustments considered necessary for the fair statement of these interim financial statements have been made. Except as otherwise disclosed, all such adjustments consist only of those of a normal recurring nature. Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of results that may be expected for the year ending December 31, 2023. Cash and cash equivalents include $ 2.5 million and $ 3.5 million at June 30, 2023 and December 31, 2022, respectively, which were not immediately available for use. These consist primarily of cash balances held in escrow to secure various obligations of the Company . Accounting Standards Implemented in 2023. In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met to ease an entity’s financial reporting burden as the market transitions from London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. Subsequently, the FASB issued ASU 2021-01 to clarify the scope of Topic 848 and ASU 2022-06 to defer the sunset date of Topic 848. Adoption did not have a material effect on the Company’s consolidated financial statements. 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 the Company’s estimate of current expected credit losses on its 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 the receivable will not be recovered. There can be no assurance that the Company’s estimate of accounts receivable collection will be indicative of future results. 8 The following table summarizes changes in the consolidated allowance for doubtful accounts (in millions): Balance as of December 31, 2022 $ 9.4 Provision for credit losses 1.5 Other (1) ( 0.4 ) Balance as of June 30, 2023 $ 10.5 (1 Includes utilization of established reserves, net of recoveries and the impact of foreign exchange rate changes. Guarantees. The Company issues guarantees to financial institutions related to financing of equipment purchases by customers. The expectation of losses or non-performance is evaluated based on consideration of historical customer assessments, current financial conditions, reasonable and supportable forecasts, equipment collateral value and other factors. Reserves are recorded for expected loss over the contractual period of risk exposure. See Note L – “Litigation and Contingencies” for additional information regarding guarantees issued to financial institutions. Accrued Warranties . The Company records accruals for potential warranty claims based on its claim experience. The Company’s products are typically sold with a standard warranty covering defects that arise during a fixed period. Each business provides a warranty specific to products it offers. The specific warranty offered by a business is a function of customer expectations and competitive forces. Warranty length is generally a fixed period of time, a fixed number of operating hours or both. A liability for estimated warranty claims is accrued at the time of sale. The current portion of the product warranty liability is included in Other current liabilities and the non-current portion is included in Other non-current liabilities in the Company’s Condensed Consolidated Balance Sheet. The liability is established using historical warranty claims experience for each product sold. Historical claims experience may be adjusted for known design improvements or for the impact of unusual product quality issues. Assumptions are updated for known events that may affect the potential warranty liability. The following table summarizes changes in the consolidated product warranty liability (in millions): Balance as of December 31, 2022 $ 43.9 Accruals for warranties issued during the period 19.5 Changes in estimates 4.6 Settlements during the period ( 19.7 ) Foreign exchange effect/other 0.1 Balance as of June 30, 2023 $ 48.4 Assets Held for Sale . Long-lived assets expected to be sold or otherwise disposed of within one year are classified as assets held for sale and included in Other assets in the Consolidated Balance Sheet. The Company classified a facility as an asset held for sale in its Aerial Work Platforms (“AWP”) segment with a carrying value of approximately $ 31 million at December 31, 2022. In April 2023, the Company completed the sale of the facility and recognized a gain of approximately $ 2 million, included in Selling, general and administrative expenses. Fair Value Measurements. Assets and liabilities measured at fair value on a recurring basis under the provisions of Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement and Disclosure” (“ASC 820”) include commodity swaps, cross currency swaps and foreign exchange contracts discussed in Note I – “Derivative Financial Instruments” and debt discussed in Note J – “Long-Term Obligations”. These instruments are valued using observable market data for similar assets and liabilities or the present value of future cash payments and receipts. ASC 820 establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The hierarchy consists of three levels: Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 – Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity). Determining which category an asset or liability falls within this hierarchy requires judgment. The Company evaluates its hierarchy disclosures each quarter. 9 NOTE B – BUSINESS SEGMENT INFORMATION Terex is a global manufacturer of materials processing machinery and aerial work platforms. The Company designs, builds and supports products used in construction, maintenance, manufacturing, energy, recycling, minerals and materials management applications. Certain Terex products and solutions enable customers to reduce their impact on the environment 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. The Company’s products are manufactured in North America, Europe, Australia and Asia and sold worldwide. Terex engages with customers through all stages of the product life cycle, from initial specification to parts and service support. The Company identifies its operating segments according to how business activities are managed and evaluated, and has identified three operating segments: Materials Processing (“MP”), Aerials and Utilities. As Aerials and Utilities operating segments share similar economic characteristics, these operating segments are aggregated into one operating segment, AWP, for the purpose of determining reportable segments. The Company operates in two reportable segments: (i) MP and (ii) AWP. MP designs, manufactures, services and markets materials processing and specialty equipment, including crushers, washing systems, screens, trommels, apron feeders, material handlers, pick and carry cranes, rough terrain cranes, tower cranes, wood processing, biomass and recycling equipment, concrete mixer trucks and concrete pavers, conveyors, and their related components and replacement parts. Customers use these products in construction, infrastructure and recycling projects, in various quarrying and mining applications, as well as in landscaping and biomass production industries, material handling applications, maintenance applications to lift equipment or material, moving materials and equipment on rugged or uneven terrain, lifting construction material and placing material at point of use. AWP designs, manufactures, services and markets aerial work platform equipment, utility equipment and telehandlers as well as their related components and replacement parts. Customers use these products to construct and maintain industrial, commercial, institutional and residential buildings and facilities, for construction and maintenance of utility and telecommunication lines, tree trimming, certain construction and foundation drilling applications, and for other commercial operations, as well as in a wide range of infrastructure projects. The Company assists customers in their rental, leasing and acquisition of its products through Terex Financial Services (“TFS”). TFS uses its equipment financing experience to facilitate financial products and services to assist customers in the acquisition of the Company’s equipment. TFS is included in Corporate and Other. 10 Corporate and Other also includes eliminations among the two reportable segments, as well as general and corporate items. Business segment information is presented below (in millions): Three Months Ended June 30, 2023, Six Months Ended June 30, 2023, 2023 2022 2023 2022 Net sales MP $ 577.4 $ 480.7 $ 1,131.2 $ 933.4 AWP 824.9 597.7 1,510.8 1,149.2 Corporate and Other / Eliminations 0.8 ( 1.3 ) ( 3.2 ) ( 3.0 ) Total $ 1,403.1 $ 1,077.1 $ 2,638.8 $ 2,079.6 Income (loss) from operations MP $ 98.2 $ 79.5 $ 183.5 $ 144.0 AWP 133.6 46.2 216.7 78.7 Corporate and Other / Eliminations ( 21.9 ) ( 21.8 ) ( 42.6 ) ( 44.3 ) Total $ 209.9 $ 103.9 $ 357.6 $ 178.4 June 30, 2023 December 31, 2022 Identifiable assets MP $ 1,859.4 $ 1,800.1 AWP 2,272.6 2,122.5 Corporate and Other / Eliminations ( 716.8 ) ( 804.5 ) Total $ 3,415.2 $ 3,118.1 Sales between segments are generally priced to recover costs plus a reasonable markup for profit, which is eliminated in consolidation. Geographic net sales information is presented below (in millions): Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 MP AWP Corporate and Other / Eliminations Total MP AWP Corporate and Other / Eliminations Total Net sales by region North America $ 260.6 $ 584.3 $ 3.4 $ 848.3 $ 205.5 $ 416.6 $ 1.5 $ 623.6 Western Europe 164.5 123.3 — 287.8 145.8 91.1 0.1 237.0 Asia-Pacific 102.8 57.6 — 160.4 91.2 50.4 — 141.6 Rest of World (1) 49.5 59.7 ( 2.6 ) 106.6 38.2 39.6 ( 2.9 ) 74.9 Total (2) $ 577.4 $ 824.9 $ 0.8 $ 1,403.1 $ 480.7 $ 597.7 $ ( 1.3 ) $ 1,077.1 (1) Includes intercompany sales and eliminations. (2) Total sales include $ 771.4 million and $ 564.1 million for the three months ended June 30, 2023 and 2022, respectively, attributable to the U.S., the Company’s country of domicile. 11 Six Months Ended June 30, 2023 Six Months Ended June 30, 2022 MP AWP Corporate and Other / Eliminations Total MP AWP Corporate and Other / Eliminations Total Net sales by region North America $ 508.6 $ 1,017.9 $ 6.2 $ 1,532.7 $ 371.8 $ 782.0 $ 3.4 $ 1,157.2 Western Europe 315.1 263.5 0.1 578.7 294.7 194.6 0.2 489.5 Asia-Pacific 200.7 112.0 0.2 312.9 187.9 95.6 — 283.5 Rest of World (1) 106.8 117.4 ( 9.7 ) 214.5 79.0 77.0 ( 6.6 ) 149.4 Total (2) $ 1,131.2 $ 1,510.8 $ ( 3.2 ) $ 2,638.8 $ 933.4 $ 1,149.2 $ ( 3.0 ) $ 2,079.6 (1) Includes intercompany sales and eliminations. (2) Total sales include $ 1.4 billion and $ 1.1 billion for the six months ended June 30, 2023 and 2022, respectively, attributable to the U.S., the Company’s country of domicile. The Company attributes sales to unaffiliated customers in different geographical areas based on the location of the customer. Product type net sales information is presented below (in millions): Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 MP AWP Corporate and Other / Eliminations Total MP AWP Corporate and Other / Eliminations Total Net sales by product type Aerial Work Platforms $ — $ 585.1 $ 0.6 $ 585.7 $ — $ 436.0 $ 0.5 $ 436.5 Materials Processing Equipment 337.6 — — 337.6 282.1 — — 282.1 Specialty Equipment 240.0 — 0.3 240.3 198.3 — 0.3 198.6 Utility Equipment — 156.9 — 156.9 — 115.4 — 115.4 Other (1) ( 0.2 ) 82.9 ( 0.1 ) 82.6 0.3 46.3 ( 2.1 ) 44.5 Total $ 577.4 $ 824.9 $ 0.8 $ 1,403.1 $ 480.7 $ 597.7 $ ( 1.3 ) $ 1,077.1 (1) Includes other product types, intercompany sales and eliminations. Six Months Ended June 30, 2023 Six Months Ended June 30, 2022 MP AWP Corporate and Other / Eliminations Total MP AWP Corporate and Other / Eliminations Total Net sales by product type Aerial Work Platforms $ — $ 1,069.4 $ 1.1 $ 1,070.5 $ — $ 839.0 $ 0.8 $ 839.8 Materials Processing Equipment 672.0 — — 672.0 549.3 — 0.5 549.8 Specialty Equipment 455.7 — 0.6 456.3 382.7 — 0.7 383.4 Utility Equipment — 285.3 — 285.3 — 226.6 — 226.6 Other (1) 3.5 156.1 ( 4.9 ) 154.7 1.4 83.6 ( 5.0 ) 80.0 Total $ 1,131.2 $ 1,510.8 $ ( 3.2 ) $ 2,638.8 $ 933.4 $ 1,149.2 $ ( 3.0 ) $ 2,079.6 (1) Includes other product types, intercompany sales and eliminations. 12 NOTE C – INCOME TAXES During the three months ended June 30, 2023, the Company 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. During the six months ended June 30, 2023, the Company 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. On December 15, 2022, the European Union (“EU”) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15% for large corporations, as established by the Organization for Economic Co-operation and Development (“OECD”) Pillar Two Framework. The OECD continues to release additional guidance on the two-pillar approach with widespread implementation anticipated by 2026. The Company is continuing to evaluate the potential impact on future periods of the Pillar Two Framework. NOTE D – ACQUISITIONS On April 1, 2023, the Company acquired assets and liabilities of Continental Manufacturing Company, a manufacturer of bulk material handling conveyors based in Missouri, and real estate from Continental Real Estate LLC (collectively “MARCO”), to expand manufacturing capacity for mobile conveying equipment in North America and the Company’s product offerings that complement the existing portfolio. Total cash consideration was approximately $ 6 million. The transaction was recorded as a business combination using the acquisition method which requires measurement of identifiable assets acquired and liabilities assumed at their estimated fair values as of the acquisition date. Goodwill was calculated as the excess of the aggregate of the fair value of the consideration transferred over the fair value of the net assets recognized. The results of operations associated with the business are consolidated within the MP segment in the Condensed Consolidated Financial Statements from the date of acquisition. See Note H – “Goodwill and Intangible Assets” for additional information regarding goodwill recognized as a result of this acquisition. 13 NOTE E – EARNINGS PER SHARE (in millions, except per share data) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Income (loss) from continuing operations $ 159.8 $ 74.1 $ 269.7 $ 126.4 Gain (loss) on disposition of discontinued operations – net of tax ( 0.4 ) — 2.3 ( 0.4 ) Net income (loss) $ 159.4 $ 74.1 $ 272.0 $ 126.0 Basic shares: Weighted average shares outstanding 67.6 68.9 67.7 69.3 Earnings (loss) per share – basic: Income (loss) from continuing operations $ 2.36 $ 1.08 $ 3.98 $ 1.82 Gain (loss) on disposition of discontinued operations – net of tax — — 0.04 — Net income (loss) $ 2.36 $ 1.08 $ 4.02 $ 1.82 Diluted shares: Weighted average shares outstanding – basic 67.6 68.9 67.7 69.3 Effect of dilutive securities: Restricted stock awards 0.5 0.4 0.8 0.8 Diluted weighted average shares outstanding 68.1 69.3 68.5 70.1 Earnings (loss) per share – diluted: Income (loss) from continuing operations $ 2.35 $ 1.07 $ 3.94 $ 1.80 Gain (loss) on disposition of discontinued operations – net of tax ( 0.01 ) — 0.03 — Net income (loss) $ 2.34 $ 1.07 $ 3.97 $ 1.80 Non-vested restricted stock awards and restricted stock units (“Restricted Stock Awards”) granted by the Company are treated as potential common shares outstanding in computing diluted earnings per share using the treasury stock method. Weighted average Restricted Stock Awards of approximately 0.5 million and 0.9 million were outstanding during the three months ended June 30, 2023 and 2022, respectively, but were not included in the computation of diluted shares as the effect would be anti-dilutive or performance targets were not expected to be achieved for awards contingent upon performance. Weighted average Restricted Stock Awards of approximately 0.3 million and 0.6 million were outstanding during the six months ended June 30, 2023 and 2022, respectively, but were not included in the computation of diluted shares as the effect would be anti-dilutive or performance targets were not expected to be achieved for awards contingent upon performance. NOTE F – INVENTORIES Inventories consist of the following (in millions): June 30, 2023 December 31, 2022 Finished equipment $ 414.9 $ 319.2 Replacement parts 189.4 163.0 Work-in-process 136.5 153.5 Raw materials and supplies 381.2 352.7 Inventories $ 1,122.0 $ 988.4 Work-in-process inventory includes approximately $ 23 million and $ 36 million of substantially completed inventory awaiting installation of final components at June 30, 2023 and December 31, 2022, respectively. Reserves for lower of cost or net realizable value and excess and obsolete inventory were $ 65.7 million and $ 61.0 million at June 30, 2023 and December 31, 2022, respectively. 14 NOTE G – PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment – net consist of the following (in millions): June 30, 2023 December 31, 2022 Property $ 54.0 $ 40.2 Plant 290.1 246.8 Equipment 427.6 418.9 Leasehold improvements 50.5 49.9 Construction in progress 65.4 92.9 Property, plant and equipment – gross 887.6 848.7 Less: Accumulated depreciation ( 396.9 ) ( 383.1 ) Property, plant and equipment – net $ 490.7 $ 465.6 NOTE H – GOODWILL AND INTANGIBLE ASSETS An analysis of changes in the Company’s goodwill by business segment is as follows (in millions): MP AWP Total Balance at December 31, 2022, gross $ 208.2 $ 138.0 $ 346.2 Accumulated impairment ( 23.2 ) ( 38.6 ) ( 61.8 ) Balance at December 31, 2022, net 185.0 99.4 284.4 Acquisitions 0.3 — 0.3 Foreign exchange effect and other 5.8 0.6 6.4 Balance at June 30, 2023, gross 214.3 138.6 352.9 Accumulated impairment ( 23.2 ) ( 38.6 ) ( 61.8 ) Balance at June 30, 2023, net $ 191.1 $ 100.0 $ 291.1 In connection with the MARCO acquisition, the Company recognized goodwill of $ 0.3 million. The goodwill associated with the transaction was attributable primarily to the assembled workforce and expected synergies from the business combination. The goodwill was assigned to the MP segment and is expected to be deductible for income tax purposes. See Note D – “Acquisitions” for additional information regarding the acquisition. Intangible assets, net were comprised of the following (in millions): June 30, 2023 December 31, 2022 Weighted Average Life (in years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Definite-lived intangible assets: Technology 7 $ 9.5 $ ( 9.4 ) $ 0.1 $ 9.3 $ ( 9.2 ) $ 0.1 Customer Relationships 17 35.4 ( 27.8 ) 7.6 34.8 ( 26.8 ) 8.0 Land Use Rights 80 3.9 ( 0.8 ) 3.1 4.0 ( 0.8 ) 3.2 Other 9 30.2 ( 24.2 ) 6.0 29.8 ( 23.7 ) 6.1 Total definite-lived intangible assets $ 79.0 $ ( 62.2 ) $ 16.8 $ 77.9 $ ( 60.5 ) $ 17.4 In connection with the MARCO acquisition, the Company recognized customer relationships of $ 0.2 million with an estimated useful life of four years and trademarks of $ 0.3 million with an estimated useful life of ten years . See Note D – “Acquisitions” for additional information regarding the acquisition. 15 Three Months Ended June 30, Six Months Ended June 30, (in millions) 2023 2022 2023 2022 Aggregate Amortization Expense $ 0.6 $ 0.6 $ 1.4 $ 1.2 Estimated aggregate intangible asset amortization expense for each of the next five years is as follows (in millions): 2023 $ 2.5 2024 2.3 2025 2.2 2026 2.0 2027 2.0 NOTE I – DERIVATIVE FINANCIAL INSTRUMENTS The Company operates internationally, with manufacturing and sales facilities in various locations around the world. In the normal course of business, the Company uses derivatives to manage commodity, currency and interest rate exposures. For a derivative to qualify for hedge accounting treatment at inception and throughout the hedge period, the Company formally documents the nature and relationships between hedging instruments and hedged items, as well as its risk-management objectives and strategies for undertaking various hedge transactions, and methods of assessing hedge effectiveness. Additionally, for hedges of forecasted transactions, significant characteristics and expected terms of a forecasted transaction must be specifically identified, and it must be probable that each forecasted transaction will occur. If it is deemed probable the forecasted transaction will not occur, then the gain or loss would be recognized in current earnings. Financial instruments qualifying for hedge accounting must maintain a specified level of effectiveness between the hedging instrument and the item being hedged. The Company does not engage in trading or other speculative use of financial instruments. The Company records all derivative contracts at fair value on a recurring basis. Commodity Swaps Derivatives designated as cash flow hedging instruments include commodity swaps with outstanding notional value of $ 29.4 million and $ 22.5 million at June 30, 2023 and December 31, 2022, respectively. Commodity swaps outstanding at June 30, 2023 mature on or before November 30, 2024. The Company uses commodity swaps to mitigate price risk for hot rolled coil steel. Fair value of commodity swaps are based on observable market data for similar assets and liabilities. Changes in the fair value of commodity swaps are deferred in Accumulated other comprehensive income (loss) (“AOCI”). Gains or losses on commodity swaps are reclassified to Cost of goods sold (“COGS”) in the Condensed Consolidated Statement of Comprehensive Income (Loss) when the hedged transaction affects earnings. Cross Currency Swaps Derivatives designated as net investment hedging instruments include cross currency swaps with outstanding notional value of $ 151.8 million and $ 121.4 million at June 30, 2023 and December 31, 2022, respectively. The Company uses these cross currency swaps to mitigate its exposure to changes in foreign currency exchange rates related to a net investment in a Euro-denominated functional currency subsidiary. Fair values of cross currency swaps are based on the present value of future cash payments and receipts. Changes in the fair value of cross currency swaps are deferred in AOCI. Gains or losses on cross currency swaps are reclassified to Selling, general and administrative expenses in the Condensed Consolidated Statement of Comprehensive Income (Loss) when the net investment is liquidated. Foreign Exchange Contracts The Company enters into foreign exchange contracts to manage variability of future cash flows associated with changing currency exchange rates. Foreign currency exchange contracts, whether designated or not designated as cash flow hedges, are used to mitigate exposure to changes in foreign currency exchange rates on recognized assets and liabilities or forecasted transactions. Fair values of these contracts are derived using quoted forward foreign exchange prices to interpolate values of outstanding trades at the reporting date based on their maturities. Foreign exchange contracts outstanding at June 30, 2023 mature on or before June 2024. 16 The Company had $ 60.9 million and $ 7.8 million notional value of foreign exchange contracts outstanding that were designated as cash flow hedging instruments at June 30, 2023 and December 31, 2022, respectively. For effective hedging instruments, changes in the fair value of foreign exchange contracts are deferred in AOCI until the hedged transactions affect earnings. Gains or losses on foreign exchange contracts are reclassified to COGS in the Condensed Consolidated Statement of Comprehensive Income (Loss). The Company had $ 363.8 million and $ 241.1 million notional value of foreign exchange contracts outstanding that were not designated as cash flow hedging instruments at June 30, 2023 and December 31, 2022, respectively. The majority of gains and losses recognized from foreign exchange contracts not designated as hedging instruments are offset by changes in the underlying exposures the contracts are intended to mitigate, resulting in no material net impact on earnings. Changes in the fair value of these derivative financial instruments are recognized as gains or losses in COGS and Other income (expense) – net in the Condensed Consolidated Statement of Comprehensive Income (Loss). The following table provides the location and fair value amounts of derivative instruments designated and not designated as hedging instruments that are reported in the Condensed Consolidated Balance Sheet (in millions): June 30, 2023 December 31, 2022 Instrument (1) Balance Sheet Account Derivatives designated as hedges Derivatives not designated as hedges Derivatives designated as hedges Derivatives not designated as hedges Foreign exchange contracts Other current assets $ 0.1 $ 0.5 $ — $ 1.7 Cross currency swaps - net investment hedge Other current assets 0.2 — — — Commodity swaps Other current assets 0.5 — 0.3 — Cross currency swaps - net investment hedge Other non-current assets 0.1 — — — Foreign exchange contracts Other current liabilities ( 0.6 ) ( 1.1 ) ( 0.3 ) ( 2.0 ) Cross currency swaps - net investment hedge Other current liabilities ( 3.1 ) — ( 1.7 ) — Commodity swaps Other current liabilities ( 0.8 ) — ( 1.5 ) — Cross currency swaps - net investment hedge Other non-current liabilities ( 4.0 ) — ( 3.0 ) — Commodity swaps Other non-current liabilities ( 0.2 ) — ( 0.4 ) — Net derivative asset (liability) $ ( 7.8 ) $ ( 0.6 ) $ ( 6.6 ) $ ( 0.3 ) (1) Categorized as Level 2 under the ASC 820 Fair Value Hierarchy. The following tables provide the effect of derivative instruments that are designated as hedges in AOCI (in millions): Gain (Loss) Recognized on Derivatives in OCI, net of tax Gain (Loss) Reclassified from AOCI into Income (Loss) Instrument Three Months Ended June 30, 2023 Six Months Ended June 30, 2023 Income Statement Account Three Months Ended June 30, 2023 Six Months Ended June 30, 2023 Foreign exchange contracts $ — $ ( 0.4 ) Cost of goods sold $ ( 0.2 ) $ ( 0.2 ) Commodity swaps 0.8 4.1 Cost of goods sold ( 1.1 ) ( 2.9 ) Cross currency swaps - net investment hedge ( 0.7 ) ( 1.7 ) Selling, general and administrative expenses — — Total $ 0.1 $ 2.0 Total $ ( 1.3 ) $ ( 3.1 ) 17 Gain (Loss) Recognized on Derivatives in OCI, net of tax Gain (Loss) Reclassified from AOCI into Income (Loss) Instrument Three Months Ended June 30, 2022 Six Months Ended June 30, 2022 Income Statement Account Three Months Ended June 30, 2022 Six Months Ended June 30, 2022 Foreign exchange contracts $ ( 0.1 ) $ — Cost of goods sold $ 0.1 $ 0.1 Commodity swaps ( 5.1 ) ( 6.9 ) Cost of goods sold 2.3 7.3 Cross currency swaps - net investment hedge 3.0 3.7 Selling, general and administrative expenses — — Total $ ( 2.2 ) $ ( 3.2 ) Total $ 2.4 $ 7.4 The following tables provide the effect of derivative instruments that are designated as hedges in the Condensed Consolidated Statement of Comprehensive Income (Loss) (in millions): Classification and amount of Gain (Loss) Recognized in Income (Loss) Cost of goods sold Interest expense Three Months Ended June 30, 2023 Six Months Ended June 30, 2023 Three Months Ended June 30, 2023 Six Months Ended June 30, 2023 Income Statement Accounts in which effects of cash flow hedges are recorded $ ( 1,060.2 ) $ ( 2,017.2 ) $ ( 15.4 ) $ ( 30.3 ) Gain (loss) reclassified from AOCI into Income (loss): Foreign exchange contracts ( 0.2 ) ( 0.2 ) — — Commodity swaps ( 1.1 ) ( 2.9 ) — — Amount excluded from effectiveness testing recognized in Income (loss) based on amortization approach: Cross currency swaps - net investment hedge — — 0.4 1.2 Total $ ( 1.3 ) $ ( 3.1 ) $ 0.4 $ 1.2 Classification and amount of Gain (Loss) Recognized in Income (Loss) Cost of goods sold Interest expense Three Months Ended June 30, 2022 Six Months Ended June 30, 2022 Three Months Ended June 30, 2022 Six Months Ended June 30, 2022 Income Statement Accounts in which effects of cash flow hedges are recorded $ ( 864.2 ) $ ( 1,680.9 ) $ ( 11.8 ) $ ( 22.4 ) Gain (loss) reclassified from AOCI into Income (loss): Foreign exchange contracts 0.1 0.1 — — Commodity swaps 2.3 7.3 — — Amount excluded from effectiveness testing recognized in Income (loss) based on amortization approach: Cross currency swaps - net investment hedge — — 0.2 0.3 Total $ 2.4 $ 7.4 $ 0.2 $ 0.3 Derivatives not designated as hedges are used to offset foreign exchange gains or losses resulting from the underlying exposures of foreign currency denominated assets and liabilities. The following table provides the effect of non-designated derivatives in the Condensed Consolidated Statement of Comprehensive Income (Loss) (in millions): Gain (Loss) Recognized in Income (Loss) Three Months Ended June 30, Six Months Ended June 30, Instrument Income Statement Account 2023 2022 2023 2022 Foreign exchange contracts Cost of goods sold $ ( 2.8 ) $ 1.0 $ ( 3.1 ) $ 0.9 Foreign exchange contracts Other income (expense) – net ( 0.7 ) ( 0.3 ) 0.3 ( 1.0 ) Total $ ( 3.5 ) $ 0.7 $ ( 2.8 ) $ ( 0.1 ) 18 In the Condensed Consolidated Statement of Comprehensive Income (Loss), the Company records hedging activity related to commodity swaps, cross currency swaps and foreign exchange contracts in the accounts for which the hedged items are recorded. On the Condensed Consolidated Statement of Cash Flows, the Company presents cash flows from hedging activities in the same manner as it records the underlying item being hedged. Counterparties to the Company’s derivative financial instruments are major financial institutions and commodity trading companies with credit ratings of investment grade or better and no collateral is required. There are no significant risk concentrations. Management continues to monitor counterparty risk and believes the risk of incurring losses on derivative contracts related to credit risk is unlikely and any losses would be immaterial. See Note M - “Stockholders’ Equity” for unrealized net gains (losses), net of tax, included in AOCI. Within unrealized net gains (losses) included in AOCI as of June 30, 2023, it is estimated that approximately $ 3 million of losses are expected to be reclassified into earnings in the next twelve months. NOTE J – LONG-TERM OBLIGATIONS Credit Agreement On January 31, 2017, the Company entered into a credit agreement with the lenders and issuing banks party thereto and Credit Suisse AG, Cayman Islands Branch (“CSAG”), as administrative agent and collateral agent, to provide the Company with a multi-currency revolving line of credit and senior secured term loans. This 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. On April 1, 2021, the Company 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, (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 LIBOR as a benchmark rate. On May 8, 2023, the Company and certain of its subsidiaries entered into an Amendment No. 1 (“Amendment”) to the Credit Agreement, with the lenders and issuing banks party thereto and CSAG. The principal changes contained in the Amendment relate to the replacement of the adjusted LIBOR with term Secured Overnight Financing Rate. In 2019, the Company entered into an Incremental Assumption Agreement and Amendment to its credit agreement that provided the Company with an additional term loan (the “2019 Term Loan”) in the amount of $ 200 million. The Company prepaid the 2019 Term Loan during 2021 and the $ 400 million senior secured term loan during 2022 prior to their maturity date to reduce the Company’s outstanding debt and lower its leverage. Unlimited incremental commitments may be extended at the option of the 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 $ 300 million as long as the Company satisfies the maximum permitted level of senior secured leverage as defined in the Credit Agreement. The Credit Agreement requires the Company to comply with a number of covenants which limit, in certain circumstances, the Company’s ability to take a variety of actions, including but not limited to: incur indebtedness; create or maintain liens on its property or assets; make investments, loans and advances; repurchase shares of its common stock; engage in acquisitions, mergers, consolidations and asset sales; redeem debt; and pay dividends and distributions. If the Company’s borrowings under the Revolver are greater than 30 % of the total revolving credit commitments, the Credit Agreement requires the Company to comply with the following financial tests: (i) minimum required level of the interest coverage ratio of 2.5 to 1.0 and (ii) maximum permitted level of the senior secured leverage ratio of 2.75 to 1.0. The Credit Agreement also contains customary default provisions. The Company was in compliance with all covenants contained in the Credit Agreement as of June 30, 2023. The Company had $ 134.5 million and $ 177.0 million of Revolver amounts outstanding at June 30, 2023 and December 31, 2022, respectively. The weighted average interest rate on the Revolver amounts was 6.84 % and 6.10 % at June 30, 2023 and December 31, 2022, respectively. The Company obtains letters of credit that generally serve as collateral for certain liabilities included in the Condensed Consolidated Balance Sheet and guaranteeing the Company’s performance under contracts. Letters of credit can be issued under two facilities provided in the Credit Agreement and via bilateral arrangements outside the Credit Agreement. 19 The Credit Agreement incorporates secured facilities for issuance of letters of credit up to $ 400 million (the “$400 Million Facility”). Letters of credit issued under the $400 Million Facility decrease availability under the Revolver. The Credit Agreement also permits the Company to have additional secured facilities for the issuance of letters of credit up to $ 300 million (the “$300 Million Facility”). Letters of credit issued under the $300 Million Facility do not decrease availability under the Revolver. The Company also has bilateral arrangements to issue letters of credit with various other financial institutions (the “Bilateral Arrangements”). The Bilateral Arrangements are not secured under the Credit Agreement and do not decrease availability under the Revolver. Letters of credit outstanding (in millions): June 30, 2023 December 31, 2022 $400 Million Facility $ — $ — $300 Million Facility 71.1 70.4 Bilateral Arrangements 48.7 48.0 Total $ 119.8 $ 118.4 On January 31, 2017, the Company entered into a Guarantee and Collateral Agreement with CSAG, as collateral agent for the lenders, granting security and guarantees to the lenders for amounts borrowed under the Credit Agreement. Pursuant to the Guarantee and Collateral Agreement, Terex is required to (a) pledge as collateral the capital stock of the Company’s material domestic subsidiaries and 65 % of the capital stock of certain of the Company’s material foreign subsidiaries and (b) provide a first priority security interest in substantially all of the Company’s domestic assets. On December 29, 2022, the Company entered into an amendment to the Guarantee and Collateral Agreement which included the following principal changes to the original agreement: (i) enabling a subsidiary to enter into hedging derivatives with external counterparties and (ii) inclusion of Terex subsidiary entities’ cash management services provided by lending banks to be secured under the Guarantee and Collateral Agreement. 5% Senior Notes In Apri1 2021, the Company sold and issued $ 600.0 million aggregate principal amount of Senior Notes Due 2029 (“5% Notes”) at par in a private offering. The proceeds from the 5 % Notes, together with cash on hand, was used: (i) to fund redemption and discharge of 5-5/8% Senior Notes and (ii) to pay related premiums, fees, discounts and expenses. The 5 % Notes are jointly and severally guaranteed by certain of the Company’s domestic subsidiaries. Fair Value of Debt The Company estimates the fair value of its debt set forth below as of June 30, 2023, as follows (in millions, except for quotes): Book Value Quote Fair Value 5% Notes $ 600.0 0.93000 $ 558.0 The fair value of debt reported in the table above is based on adjusted price quotations on the debt instruments in an inactive market. The Company believes that the carrying value of its other borrowings, including amounts outstanding, if any, for the revolving credit line under the Credit Agreement, approximate fair market value based on maturities for debt of similar terms. Fair values of debt reported in the table above are categorized under Level 2 of the ASC 820 hierarchy. See Note A – “Basis of Presentation” for an explanation of ASC 820 hierarchy. 20 NOTE K – RETIREMENT PLANS AND OTHER BENEFITS The Company maintains defined benefit plans in France, Germany, India, Switzerland and the United Kingdom for some of its subsidiaries, as well as a nonqualified Supplemental Executive Retirement Plan in the U.S. (“U.S. SERP”). 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. The Company has several non-pension post-retirement benefit programs, including health and life insurance benefits to certain former salaried and hourly employees. Information regarding the Company’s plans, including the U.S. SERP, is as follows (in millions): Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 U.S. Pension Non-U.S. Pension Other U.S. Pension Non-U.S. Pension Other U.S. Pension Non-U.S. Pension Other U.S. Pension Non-U.S. Pension Other Components of net periodic cost: Service cost $ — $ 0.1 $ — $ — $ 0.2 $ — $ — $ 0.3 $ — $ — $ 0.4 $ — Interest cost 0.5 1.1 — 0.3 0.7 — 0.9 2.2 — 0.6 1.4 — Expected return on plan assets — ( 0.8 ) — — ( 1.3 ) — — ( 1.6 ) — — ( 2.7 ) — Amortization of prior service cost — 0.1 — — — — — 0.1 — — — — Amortization of actuarial (gain) loss ( 0.1 ) 0.5 — — 0.4 — ( 0.1 ) 1.1 — 0.1 0.7 — Net periodic cost $ 0.4 $ 1.0 $ — $ 0.3 $ — $ — $ 0.8 $ 2.1 $ — $ 0.7 $ ( 0.2 ) $ — Components of Net periodic cost other than the Service cost component are included in Other income (expense) - net in the Condensed Consolidated Statement of Comprehensive Income (Loss). The Service cost component is included in the same line item or items as other compensation costs arising from services rendered by pertinent employees during the period. NOTE L – LITIGATION AND CONTINGENCIES General The Company is involved in various legal proceedings, including product liability, general liability, workers’ compensation liability, employment, commercial, intellectual property and tax litigation, which have arisen in the normal course of operations. The Company is insured for product liability, general liability, workers’ compensation, employer’s liability, property damage and other insurable risks required by law or contract, with retained liability or deductibles. The Company records and maintains an estimated liability in the amount of management’s estimate of the Company’s aggregate exposure for such retained liabilities and deductibles. For such retained liabilities and deductibles, the Company determines its exposure based on probable loss estimations, which requires such losses to be both probable and the amount or range of probable loss to be estimable. The Company believes it has made appropriate and adequate reserves and accruals for its current contingencies and the likelihood of a material loss beyond amounts accrued is remote. The Company believes the outcome of such matters, individually and in aggregate, will not have a material adverse effect on its condensed consolidated financial statements. However, outcomes of lawsuits cannot be predicted and, if determined adversely, could ultimately result in the Company incurring significant liabilities which could have a material adverse effect on its results of operations. 21 Terex Latin América Equipamentos Ltda ICMS Proceedings Terex Latin America Equipamentos Ltda (“TLA”) imports Terex products into Brazil through the state of Espirito Santo to its facility in Sao Paulo. For the 2004 through March 2009 period TLA used a third-party trading company, SAB, as an agent to process the importation of Terex products. TLA properly paid the Espirito Santo ICMS tax (Brazilian state value-added tax) to SAB for payment to Espirito Santo, which would produce an ICMS credit to be used against imposition of Sao Paolo ICMS tax. SAB went into bankruptcy and may not have actually remitted to Espirito Santo the ICMS tax amounts paid to it by TLA. The Brazilian state of Sao Paulo challenged the credit against Sao Paolo ICMS that TLA claimed and assessed unpaid ICMS tax, penalties and related interest in the amount of approximately BRL 111 million ($ 23 million). TLA challenged the claim of Sao Paulo and learned in October 2019 that the Sao Paulo claim has survived the administrative tribunal process. While the Company believes the position of the state of Sao Paulo is without merit and continues to vigorously oppose it, no assurance can be given as to the final resolution of the ICMS litigation or that TLA will not ultimately be required to pay ICMS and interest to the state of Sao Paulo. Other The Company is involved in various other legal proceedings which have arisen in the normal course of its operations. The Company has recorded provisions for estimated losses in circumstances where a loss is probable and the amount or range of possible amounts of the loss is estimable. Credit Guarantees The Company may assist customers in their rental, leasing and acquisition of its 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 current amount of the maximum liability is generally limited to our customer’s remaining payments due to the third-party financial institutions at the time of default; however, it cannot be reasonably estimated due to limited availability of the unique facts and circumstances of each arrangement, such as whether changes have been made to the structure of the contractual obligation between the funder and customer. For credit guarantees outstanding as of June 30, 2023 and December 31, 2022, the maximum exposure determined was $ 103.3 million and $ 121.4 million, respectively. Terms of these guarantees coincide with the financing arranged by the customer and generally do not exceed five years . The allowance for credit losses on credit guarantees was $ 5.5 million and $ 6.3 million at June 30, 2023 and December 31, 2022, respectively. There can be no assurance that historical experience in used equipment markets will be indicative of future results. The Company’s ability to recover losses experienced from its guarantees may be affected by economic conditions in used equipment markets at the time of loss. 22 NOTE M – STOCKHOLDERS’ EQUITY Changes in Accumulated Other Comprehensive Income (Loss) The table below presents changes in AOCI by component for the three and six months ended June 30, 2023 and 2022. All amounts are net of tax (in millions). Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 CTA Derivative Hedging Adj. Debt & Equity Securities Adj. Pension Liability Adj. Total CTA Derivative Hedging Adj. Debt & Equity Securities Adj. Pension Liability Adj. Total Beginning balance $ ( 261.1 ) $ ( 4.5 ) $ ( 3.0 ) $ ( 46.7 ) $ ( 315.3 ) $ ( 206.9 ) $ 3.0 $ ( 1.7 ) $ ( 42.9 ) $ ( 248.5 ) Other comprehensive income (loss) before reclassifications 11.1 ( 1.0 ) ( 0.2 ) ( 1.5 ) 8.4 ( 72.0 ) ( 0.3 ) ( 1.2 ) 2.7 ( 70.8 ) Amounts reclassified from AOCI — 1.1 — 0.5 1.6 — ( 1.9 ) — 0.3 ( 1.6 ) Net other comprehensive income (loss) 11.1 0.1 ( 0.2 ) ( 1.0 ) 10.0 ( 72.0 ) ( 2.2 ) ( 1.2 ) 3.0 ( 72.4 ) Ending balance $ ( 250.0 ) $ ( 4.4 ) $ ( 3.2 ) $ ( 47.7 ) $ ( 305.3 ) $ ( 278.9 ) $ 0.8 $ ( 2.9 ) $ ( 39.9 ) $ ( 320.9 ) Six Months Ended June 30, 2023 Six Months Ended June 30, 2022 CTA Derivative Hedging Adj. Debt & Equity Securities Adj. Pension Liability Adj. Total CTA Derivative Hedging Adj. Debt & Equity Securities Adj. Pension Liability Adj. Total Beginning balance $ ( 285.5 ) $ ( 6.4 ) $ ( 3.5 ) $ ( 46.2 ) $ ( 341.6 ) $ ( 188.0 ) $ 4.0 $ — $ ( 44.5 ) $ ( 228.5 ) Other comprehensive income (loss) before reclassifications 35.5 ( 0.5 ) 0.3 ( 2.5 ) 32.8 ( 90.5 ) 2.6 ( 2.9 ) 3.9 ( 86.9 ) Amounts reclassified from AOCI — 2.5 — 1.0 3.5 ( 0.4 ) ( 5.8 ) — 0.7 ( 5.5 ) Net other comprehensive income (loss) 35.5 2.0 0.3 ( 1.5 ) 36.3 ( 90.9 ) ( 3.2 ) ( 2.9 ) 4.6 ( 92.4 ) Ending balance $ ( 250.0 ) $ ( 4.4 ) $ ( 3.2 ) $ ( 47.7 ) $ ( 305.3 ) $ ( 278.9 ) $ 0.8 $ ( 2.9 ) $ ( 39.9 ) $ ( 320.9 ) Stock-Based Compensation During the six months ended June 30, 2023, the Company awarded 0.6 million shares of Restricted Stock Awards to its employees with a weighted average fair value of $ 59.42 per share. Approximately 60 % of these awards are time-based and vest ratably on each of the first three anniversary dates of the grants. Approximately 27 % cliff vest at the end of a three-year period and are subject to performance targets that may or may not be met and for which the performance period has not yet been completed. Approximately 13 % cliff vest and are based on performance targets containing a market condition determined over a three-year period. Fair value of time-based awards is based on the market price of our common stock at the date of grant approval. The fair value of performance-based awards, except for awards based on a market condition, is based on the market price of our common stock at the date of grant approval, except fair values are multiplied by the probability of achievement as of the period-end date. For awards based on a market condition, fair value is based on the Monte Carlo method at grant date. The Monte Carlo method is a statistical simulation technique used to provide the grant date fair value of an award. The Company used the Monte Carlo method to determine grant date fair value of $ 63.33 per share for awards with a market condition granted on March 15, 2023. 23 The following table presents the weighted-average assumptions used in the valuations: Grant date March 15, 2023 Dividend yields 1.21 % Expected volatility 46.54 % Risk free interest rate 3.81 % Expected life (in years) 3 Share Repurchases In July 2018, Terex’s Board of Directors authorized the repurchase up to $ 300 million of the Company’s outstanding shares of common stock. In December 2022, Terex’s Board of Directors authorized the additional repurchase up to $ 150 million of the Company’s outstanding shares of common stock. The table below presents shares repurchased, inclusive of transactions executed but not settled, by the Company under these programs. Six Months Ended June 30 Total Number of Shares Repurchased Amount of Shares Repurchased (in millions) 2023 736,644 $ 33.8 2022 2,298,050 $ 79.5 Dividends The table below presents dividends declared by Terex’s Board of Directors and paid to the Company’s shareholders: Year First Quarter Second Quarter 2023 $ 0.15 $ 0.15 2022 $ 0.13 $ 0.13 In July 2023, Terex’s Board of Directors declared a dividend of $ 0.17 per share, which will be paid on September 19, 2023 to the Company’s shareholders of record as of August 14, 2023. 24