What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-09 compared with 2023-02-10 · 107 added, 174 removed, 282 unchanged (50% of the section changed)

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Terex is a global manufacturer of materials processing machinery and aerial work platforms.

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

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

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

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

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

We report our business in the following segments:

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

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

Non-GAAP measures also include translation effect of foreign currency exchange rate changes on net sales, gross profit, SG&A expenses and operating profit.

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

We calculate the translation effect of foreign currency exchange rate changes by translating current period results using rates that the comparable prior periods were translated at to isolate the foreign exchange component of fluctuation from the operational component.

Similarly, impact of changes in our results from acquisitions and divestitures not included in comparable prior periods may be subtracted from the absolute change in results to allow for better comparability of results between periods.

We calculate a non-GAAP measure of free cash flow.

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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 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 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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The ratio calculated by dividing working capital by trailing three months annualized net sales is a non-GAAP measure we believe measures our resource use efficiency.

Non-GAAP measures also include Net Operating Profit After Tax (“NOPAT”), which is used in the calculation of our after tax return on invested capital (“ROIC”) (collectively the “Non-GAAP Measures”), which are discussed in detail below.

Non-GAAP measures also include Net Operating Profit After Tax (“NOPAT”) and effective tax rate as adjusted, which is used in the calculation of our after tax return on invested capital (“ROIC”) (collectively the “Non-GAAP Measures”), which are discussed in detail below.

Safety remains our top priority;

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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.

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.

In 2022, we completed a number of acquisitions, including enhancing our concrete offerings, adding fabrication capacity for our Northern Ireland businesses and expanding the capabilities of our growing environmental business in the MP segment with the acquisition of a company that designs and creates robots that pick, sort and recycle waste material.

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

Net sales of $4.4 billion were up 14% year-over-year, 20% on a foreign exchange neutral basis, as end-markets remained strong.

Gross margins increased by 190 basis points in the quarter as the team implemented cost take out plans and pricing actions helped to offset cost increases.

The year-over-year gross margin increase was in both our segments.

Despite the high inflationary environment, SG&A spending as a percentage of net sales was down 80 basis points to 10.2% of net sales, reflecting focused cost management.

Operating margin of 9.5% was up 110 basis points year-over-year driven by prudent cost management and the improvement throughout the year in price cost dynamics.

Overall, 2022 financial performance demonstrated continued, strong execution and focus on delivering for our customers and dealers despite global supply chain disruptions, significant inflationary pressures and foreign exchange rate volatility.

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

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

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

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

We have continued to take pricing actions which has been necessary to mitigate rising costs in both segments.

As a result of these actions, we were price/cost neutral for all of 2022.

MP had a strong year with net sales up 15% from 2021, 23% 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.

Our operations teams executed well during 2023, maintaining their focus on improving deliveries to our customers and continuing with cost reduction and productivity improvement initiatives.

We continued our investment in technology and new product development, which are important to help enable us to take advantage of sustainability trends such as recycling, electrification and decarbonization.

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

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

Our performance in 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 $5.2 billion were up 17% year-over-year as end-markets remained strong.

Gross margins increased by 310 basis points in the year as volume, pricing, improved manufacturing efficiencies and expense discipline helped to offset cost increases.

Income from operations of $637 million was up 52% year-over-year.

Operating margin of 12.4% was up 290 basis points compared to the prior year period.

Overall, 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.

While our “hospital” inventory decreased from the prior year to $25 million at the end of 2023, we continue to face disruption, highlighting the challenges our team members continue to navigate and overcome.

Higher interest rates, inflation and geopolitical uncertainties have had an impact in Europe and we have seen slight softening in that market while demand in North America remains strong.

MP had another strong year with net sales up 15% from the prior year, driven by strong demand for our aggregates, environmental and concrete products.

The MP businesses also continued to benefit from 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.

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

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

MP has been aggressively managing all elements of cost resulting in a 15.3% operating margin for the year, up 110 basis points as compared to 2021.

We expect customer sentiment to remain strong and we are encouraged by MP’s backlog (including deliveries beyond 12 months) of $1.2 billion, which is up 12% compared to 2021 backlog of $1.0 billion.

As a result, we anticipate net sales between $2.0 billion and $2.1 billion and an operating margin of approximately 15.5% in 2023.

AWP’s 2022 net sales were up 14% compared to 2021 and increased 19% 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.

Utility product growth was strong in North America.

MP’s 16.1% operating margin for the year, up 80 basis points as compared to the prior year, 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 $768 million remains healthy, supporting our 2024 outlook.

AWP’s 2023 net sales were up 18% compared to the prior year period, primarily driven by improved supply chain, higher demand and price realization necessary to mitigate rising costs.

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

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

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

Globally, increased adoption of aerial work platforms continues to improve labor efficiency and jobsite safety.

In addition, our Genie business will benefit from positive North American demand, while demand in Europe is softening.

We also expect to benefit from the replacement cycle, high utilization rates and increased adoption from emerging markets such as India.

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

AWP delivered operating margins of 7.9% in the year driven by strict expense management and disciplined pricing actions.

We expect end market demand to remain strong into 2023 as demonstrated by AWP’s backlog (including deliveries beyond 12 months) of $2.9 billion, which is up 27% compared to 2021 backlog of $2.3 billion.

As a result, we anticipate net sales between $2.6 billion and $2.7 billion and an operating margin of approximately 9.0% in 2023.

We anticipate moving multiple production lines throughout our global footprint and opening our new permanent facility in Monterrey, Mexico, which we expect to impact manufacturing efficiencies in 2023.

AWP delivered operating margins of 12.7% in 2023, an improvement of 480 basis points, 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 $2.6 billion, supporting our 2024 outlook.

In 2024, we will continue to move multiple production lines throughout our global footprint.

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

In 2023, our largest market remained North America, which represented approximately 59% of our global sales.

As compared to 2021, sales were up double digits in every major geography except for Asia Pacific which was down although essentially flat on a foreign exchange neutral basis.

We continued to execute our disciplined capital allocation strategy in 2022.

We made strategic investments in our businesses and continued to return capital to shareholders.

Our strong balance sheet has allowed us to return approximately $132 million of cash to shareholders during 2022.

We generated $152 million of free cash flow in the year, $27 million greater than we generated in 2021.

As compared to the prior year, sales were up in all major geographies, with sales up double digits in North America.

We generated $366 million of free cash flow in 2023, more than double the free cash flow generated in the prior year, driven by increased operating profit.

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

We continued to invest in our businesses with 2023 capital expenditures and investments of $151 million.

In 2023, our Board of Directors approved two increases to our quarterly dividend, which equaled a 31% increase in our dividend since the start of 2023 reflecting our continued confidence in our strong financial position.

We returned over $100 million to shareholders for the second year in a row.

In 2023, we returned $104 million to shareholders, including $61 million in share repurchases and $43 million in dividend payments.

We continue to maintain ample liquidity and as of December 31, 2023, we had $971 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.

See “Liquidity and Capital Resources” for a detailed description of liquidity and working capital levels, including

the primary factors affecting such levels, as well as a reconciliation of net cash provided by (used in) operating activities to free cash flow.

Customer demand remains strong for our products and services.

However, we continue to operate in a highly uncertain environment with supply chain challenges, inflationary pressures, foreign exchange rate volatility and geopolitical uncertainty, so results can change, positively or negatively.

See Part I, Item 1A.

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

As a result, we currently expect 2023 EPS to be between $4.60 and $5.00, on net sales between $4.6 billion and $4.8 billion.

Our outlook assumes pricing actions along with manufacturing efficiencies will offset cost pressures.

We intend to continue to make prudent investment in the business including our new product development, engineering and digital initiatives.

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.

We expect EPS for 2024 of $6.85 to $7.25 on net sales of $5.1 to $5.3 billion.

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

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

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

NOPAT for each quarter is calculated by multiplying Income (loss) from operations by one minus the full year 2022 effective tax rate (“Effective Tax Rate”).

NOPAT for each quarter is calculated by multiplying Income (loss) from operations by one minus the full year 2023 effective tax rate as adjusted.

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

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

In the calculation of ROIC, we adjusted the effective tax rate for a one-time tax benefit derived from recording of a deferred tax asset in relation to our Swiss operations to create a measure that is more useful to understanding our operating results and the ongoing performance of our underlying business as shown in the tables below.

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

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

dollars, except for the Effective Tax Rate.

dollars, except for the effective tax rate as adjusted.

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

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

Effective Tax Rate 18.1 % 18.1 % 18.1 % 18.1 %

Effective tax rate as adjusted

18.2 % 18.2 % 18.2 % 18.2 %

Income (loss) from operations $ 115.7 $ 163.2 $ 209.9 $ 147.7

Multiplied by:

1 minus Effective Tax Rate 81.9 % 81.9 % 81.9 % 81.9 %

1 minus effective tax rate as adjusted

81.8 % 81.8 % 81.8 % 81.8 %

Net operating income (loss) after tax $ 94.6 $ 133.5 $ 171.7 $ 120.8

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Average Debt less Cash and cash equivalents plus Stockholders’ equity (5 quarters) $ 1,823.7

Twelve Months Ended

December 31, 2023

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

Reconciliation of the full year 2023 effective tax rate:

As reported 579.7 (63.0) 10.9 %

Effect of adjustments:

Tax related to Swiss deferred tax asset

As adjusted $ 579.7 $ (105.3) 18.2 %

RESULTS OF OPERATIONS

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Net sales for the year ended December 31, 2023 increased $733.8 million when compared to 2022.

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

Changes in foreign exchange rates negatively impacted consolidated net sales by approximately $244 million.

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

Gross profit for the year ended December 31, 2023 increased $305.4 million when compared to 2022.

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

SG&A expenses for the year ended December 31, 2022 increased $21.8 million when compared to 2021 primarily due to increased selling, technology and engineering costs in 2022 and non-recurring gains in 2021, partially offset by the positive impact of changes in foreign exchange rates.

SG&A expenses were lower as a percent of sales when compared to 2021 due to continued cost discipline across all areas of our business.

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

SG&A expenses for the year ended December 31, 2023 increased $88.9 million when compared to 2022 primarily due to inflation, increased marketing, engineering, technology and incentive compensation expenses as well as incremental spend on new acquisitions.

Income from operations for the year ended December 31, 2023 increased by $216.5 million when compared to 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.

The increase was primarily due to incremental profit achieved on higher sales volume, price realization, improved manufacturing efficiencies and cost reduction initiatives, partially offset by SG&A cost increases.

Materials Processing

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Income from operations 358.6 16.1 % 297.8 15.3 % 240.9 14.2 % 20.4 %

Net sales for the year ended December 31, 2022 increased by $249.8 million when compared to 2021 primarily due to robust end-market demand for aggregates in all major geographies, material handlers and environmental equipment in North America and Western Europe, and cranes in Asia-Pacific and North America, as well as price realization, necessary to mitigate rising costs, and new product offerings.

Net sales were negatively impacted by changes in foreign exchange rates of approximately $138 million.

Income from operations for the year ended December 31, 2022 increased $56.9 million when compared to 2021 primarily due to incremental margin on higher sales volume, favorable mix and price realization, partially offset by material, labor, manufacturing inefficiency and freight cost increases due to global supply chain disruptions, significant inflationary pressures and the negative impact of changes in foreign exchange rates.

Net sales for the year ended December 31, 2023 increased by $285.4 million when compared to 2022 primarily due to robust end-market demand for aggregates across all major geographies as well as concrete products and environmental equipment in North America.

Income from operations for the year ended December 31, 2023 increased $60.8 million when compared to 2022 primarily due to incremental profit achieved on higher sales volume and improved manufacturing efficiencies, partially offset by SG&A cost increases.

Aerial Work Platforms

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Income from operations 371.3 12.7 % 196.2 7.9 % 152.1 7.0 % 89.2 %

Net sales for the year ended December 31, 2022 increased $304.8 million when compared to 2021 primarily due to price realization, necessary to mitigate rising costs, and higher demand that was driven by fleet replacement and end-market growth for aerial work platforms in all major geographies except China and utility products and telehandlers in North America.

Net sales were negatively impacted by changes in foreign exchange rates of approximately $106 million.

Income from operations for the year ended December 31, 2022 increased $44.1 million when compared to 2021 primarily due to incremental margin on higher sales volume, price realization and favorable mix, partially offset by material, labor, manufacturing inefficiency and freight cost increases due to global supply chain disruptions, significant inflationary pressures and the negative impact of changes in foreign exchange rates.

Net sales for the year ended December 31, 2023 increased $438.1 million when compared to 2022 primarily due to healthy demand for aerial work platforms in all major geographies and telehandlers and utility products in North America as well as improvements in the supply chain and price realization necessary to mitigate rising costs.

Income from operations for the year ended December 31, 2023 increased $175.1 million when compared to 2022 primarily due to incremental profit achieved on higher sales volume, price realization, improved manufacturing efficiencies and cost reduction initiatives, partially offset by SG&A cost increases.

Corporate and Other / Eliminations

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* Not a meaningful percentage

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

The net sales decrease is primarily attributable to lower TFS revenue and higher intercompany sales eliminations.

Loss from operations for the year ended December 31, 2023 increased $19.4 million when compared to 2022.

The increase in operating loss is primarily due to a gain on the sale of the finance receivables and a finance receivable reserve release in 2021.

The increase in operating loss is primarily due to accelerated vesting of stock compensation awards in 2023 and foreign exchange costs allocated to our operating segments in 2022.

2023 2022 2021

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(Provision for) benefit from income taxes (63.0) (66.4) (46.3) 5.1 %

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

Gain (loss) on disposition of discontinued operations – net of tax 1.3 (0.2) 3.4 *

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Interest Expense, Net of Interest Income

Interest expense, net of interest income, was comparable at $46.3 million and $47.8 million for the year ended December 31, 2022 and 2021, respectively.

During the year ended December 31, 2023, interest expense, net of interest income, was $55.7 million or $9.4 million higher when compared to the same period in 2022 due primarily to an increase in receivable sales and higher interest rates, partially offset by higher interest income and no term loan interest in the current year period.

Loss on Early Extinguishment of Debt

During the year ended December 31, 2022, loss on early extinguishment of debt was $0.3 million, or $29.1 million lower when compared to the same period in 2021, due to refinancing of a significant portion of our capital structure and prepayment of term loans in 2021.

During the year ended December 31, 2023, there was no loss on early extinguishment of debt compared to a loss of $0.3 million in 2022 due to prepayment of term loans in the prior period.

Other Income (Expense) – Net

Other income (expense) – net for the year ended December 31, 2022 was an expense of $6.8 million, compared to income of $13.0 million in the same period in 2021.

The increase in expense was primarily due to a gain related to the early termination of a lease in 2021, mark-to-market losses recorded on an equity investment in 2022 compared to gains recorded in 2021 and foreign exchange transaction losses in 2022 compared to gains in 2021.

Other income (expense) – net for the year ended December 31, 2023 was an expense of $1.1 million, compared to $6.8 million in the same period in 2022.

The decrease in expense was primarily due to mark-to-market gains recorded on an equity investment in 2023 compared to losses recorded in 2022, partially offset by higher non-service cost portion of pension expense in 2023.

During the year ended December 31, 2023, we recognized income tax expense of $63.0 million on income of $579.7 million, an effective tax rate of 10.9%, as compared to income tax expense of $66.4 million on income of $366.6 million, an effective tax rate of 18.1%, for the year ended December 31, 2022.

The higher effective tax rate for the year ended December 31, 2022 when compared to the year ended December 31, 2021 is primarily due to unfavorable items including higher U.S.

tax on foreign income and lower uncertain tax positions benefit, partially offset by the release of the valuation allowance for the German interest expense deferred tax asset in 2022.

The lower effective tax rate for the year ended December 31, 2023 when compared to the year ended December 31, 2022 was primarily due to one-time tax benefit derived from recording of a deferred tax asset in relation to our Swiss operations.

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

During the years ended December 31, 2023 and 2022, we recognized a gain (loss) on disposition of discontinued operations - net of tax of $1.3 million and $(0.2) million, respectively.

The loss in 2022 primarily related to the sale of our mobile cranes business in 2019.

The gain in 2021 primarily related to the sales of our MHPS and mobile crane businesses in 2017 and 2019, respectively.

The gain in 2023 primarily relates to post-closing adjustments related to the sales of our former MHPS and mobile cranes businesses.

The loss in 2022 primarily related to the sale of our former mobile cranes business in 2019.

CRITICAL ACCOUNTING ESTIMATES

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Inventories – In valuing inventory, we are required to make assumptions regarding the level of reserves required to value potentially obsolete or over-valued items at the lower of cost or net realizable value (“NRV”).

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

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

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

Our judgments and estimates for E&O inventory are based on analysis of actual and forecasted usage.

Valuation of used equipment taken in trade from customers requires us to use the best information available to determine the value of the equipment to potential customers.

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As further changes in future economic or industry conditions occur, we may revise estimates that were used to calculate our inventory reserves.

If actual conditions are less favorable than those we have projected, we will increase our reserves for lower of cost or NRV, excess and obsolete inventory accordingly.

If actual conditions are less favorable than those we have projected, we will increase our reserves for lower of cost or NRV, E&O inventory accordingly.

Any increase in our reserves will adversely impact our results of operations.

Establishment of a reserve for lower of cost or NRV, excess and obsolete inventory establishes a new cost basis in the inventory.

Establishment of a reserve for lower of cost or NRV, E&O inventory establishes a new cost basis in the inventory.

Such reserves are not reduced until the product is sold.

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

We consider whether each component of an operating segment meets the criteria for a reporting unit in accordance with ASC 350-20.

We consider whether each component of an operating segment meets the criteria for a reporting unit.

However, we aggregate two or more components of an operating segment into a single reporting unit if the components have similar economic characteristics.

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However, actual claims could be higher or lower than amounts estimated, as the amount and value of warranty claims are subject to variation as a result of many factors that cannot be predicted with certainty, including production quality issues, performance of new products, models and technology, changes in weather conditions for product operation, different uses for products and other similar factors.

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

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

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

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

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

Plan assets consist primarily of fixed income and equity securities.

funded plans, approximately 71% of the assets are in fixed income securities, 25% are in equity securities and 4% are in real estate securities.

These allocations are reviewed periodically and updated to meet the long-term goals of the plans.

Determination of defined benefit pension and post-retirement plan obligations and their associated expenses requires use of actuarial valuations to estimate the benefits employees earn while working, as well as the present value of those benefits.

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

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

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

Actual results that differ from the actuarial assumptions used are recorded as unrecognized gains and losses.

Unrecognized gains and losses that exceed 10% of the greater of the plan’s projected benefit obligations or the market-related value of assets are amortized to earnings over the shorter of the estimated future service period of the plan participants or the period until any anticipated final plan settlements.

The assumptions used in the actuarial models are evaluated periodically and are updated to reflect experience.

We believe the assumptions used in the actuarial calculations are reasonable and are within accepted practices in each of the respective geographic locations in which we operate.

Expected long-term rates of return on pension plan assets were 4.00% for the U.K.

plan and 2.50% for the Swiss plan at December 31, 2022.

Our strategy with regard to the investments in the pension plans is to earn a rate of return sufficient to match or exceed the long-term growth of pension liabilities.

The expected rate of return of plan assets represents an estimate of long-term returns on the investment portfolio.

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

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

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

The discount rates were 5.43% for the U.S.

SERP and 2.15% to 7.30% with a weighted average of 4.68% for non-U.S.

plans at December 31, 2022.

The discount rate enables us to estimate the present value of expected future cash flows on the measurement date.

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

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

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

SERP has no expected rate of compensation increase as all participants have retired or have a terminated vested benefit payable in the future.

pension plan is frozen so there is no expected rate of compensation increase;

however, other non-U.S.

plans’ expected rates of compensation increases were 1.50% to 8.00%.

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

plans is 0.26% at December 31, 2022.

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

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

The decrease in the net liability and increased funded status of $2.4 million was due primarily to changes in assumptions from the previous year, primarily increases in discount rates, partially offset by losses on our plan assets resulting from global economic conditions.

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

Market value of plan assets can change significantly in a relatively short period of time.

Additionally, the measurement of plan benefit obligations is sensitive to changes in interest rates.

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

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

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

Changes in U.S.

or foreign laws governing these plans could require additional contributions.

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

A 25 basis point change in each assumption below would have the following effects upon net pension expense and projected benefit obligation, respectively, as of and for the year ended December 31, 2022 (in millions):

Increase Decrease

Discount Rate Expected long-

term rate of return Discount Rate Expected long-

term rate of return

Net pension expense $ — $ — $ — $ —

Projected benefit obligation $ (1.2) $ — $ 1.3 —

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

Projected benefit obligation $ (2.7) $ — $ 2.9 —

Income Taxes – We estimate income taxes based on enacted tax laws in the various jurisdictions where we conduct business.

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“Timing” refers to the period in which future income is expected to be generated.

Timing is important because, in certain jurisdictions, net operating losses (“NOLs”) or other tax attributes expire if not used within an established statutory time frame.

Timing is important because, in certain jurisdictions, net operating losses or other tax attributes expire if not used within an established statutory time frame.

We record a valuation allowance for each deferred tax asset for which realization is not assessed as more likely than not.

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To the extent estimates of future taxable income decrease or do not materialize, additional valuation allowances may be required.

We do not provide for income taxes or tax benefits on differences between financial reporting basis and tax basis of our non-U.S.

We do not provide for foreign income and withholding, U.S.

federal, or state income taxes or tax benefits on differences between financial reporting basis and tax basis of our non-U.S.

subsidiaries where such differences are reinvested and, in our opinion, will continue to be indefinitely reinvested.

If earnings of foreign subsidiaries are not considered indefinitely reinvested, deferred U.S.

income taxes, foreign income taxes, and foreign withholding taxes may have to be provided.

We do not record deferred income taxes on the temporary difference between the book and tax basis in domestic subsidiaries where permissible.

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subsidiaries is not practicable.

If earnings of foreign subsidiaries are not considered indefinitely reinvested, foreign income and withholding, U.S.

federal or state income taxes may have to be provided.

Judgments and estimates are required to determine tax expense and deferred tax valuation allowances and in assessing uncertain tax positions.

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

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

continued changes and complexity in worldwide tax laws, coupled with our geographic scope and size there may be greater exposure to uncertain tax positions.

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

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At December 31, 2023, we had cash and cash equivalents of $371 million and undrawn availability under our revolving line of credit of $600 million, giving us total liquidity of approximately $971 million.

During the year ended December 31, 2022, our liquidity decreased by approximately $140 million from December 31, 2021 primarily due to term loan prepayment, capital expenditures, investments, share repurchases, dividends and acquisitions, partially offset by cash generated from operations which includes the adverse impact of higher inventory due to supply chain disruptions.

During the year ended December 31, 2023, our liquidity increased by approximately $244 million from December 31, 2022 primarily due to cash generated from operations and sale of capital assets, partially offset by capital expenditures, share repurchases, dividends, and acquisitions and investments.

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.

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

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

Changes either in customers’ credit profile or used equipment values may affect the ability of customers to purchase equipment.

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For example, during periods of economic uncertainty, our customers have delayed purchasing decisions, which reduces cash generated from operations.

• Availability and utilization of other sources of liquidity such as trade receivables sales programs.

• Availability and utilization of other sources of liquidity such as trade accounts receivable sales programs.

Typically, we have invested our cash in a combination of highly rated, liquid money market funds and in short-term bank deposits with large, highly rated banks.

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Incremental cash repatriated to the U.S.

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

would not be expected to result in material foreign income and withholding, U.S.

federal or state income tax cost.

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

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Capital expenditures, net of proceeds from sale of capital assets (1)

Free cash flow $ 151.8

Free cash flow (use)

(1) Amount includes $127.2 million of capital expenditures, net of $33.6 million of proceeds from sale of capital assets.

Pursuant to terms of our trade accounts receivable factoring arrangements, during the year ended December 31, 2023, we sold, without material recourse, approximately $835 million of trade accounts receivable to enhance liquidity.

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Three months ended

Net Sales $ 1,217.6

December 31, 2023

Trailing three month annualized net sales

As of 12/31/22

December 31, 2023

Inventories $ 1,186.0

Trade Receivables 547.5

Trade accounts payable

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Working capital

Revolver Borrowings were $177 million at December 31, 2022.

At December 31, 2022, the weighted average interest rate was 6.10% on the Revolver.

During the year ended December 31, 2022, we prepaid $78 million to retire our Term Loans prior to their maturity date to reduce our outstanding debt and lower our leverage.

For information regarding debt, see Note J – “Long-Term Obligations” in Notes to 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 increasing customer financing facilitated through TFS in certain instances.

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

On July 29, 2022, we acquired a manufacturer of volumetric mixers based in Canada to expand our concrete product offering for consideration of approximately $40 million.

See Note D - “Acquisitions and Dispositions” in our Consolidated Financial Statements for additional information regarding these transactions.

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

During the year ended December 31, 2022, we repurchased 2,862,650 shares for $96.6 million under this authorization leaving approximately $43 million available for repurchase under this program.

In December 2022, our Board of Directors authorized the additional repurchase up to $150 million of our outstanding shares of common stock.

Our Board of Directors declared a dividend of $0.13 per share in each quarter of 2022, which were paid to our shareholders.

In February 2023, our Board of Directors declared a dividend of $0.15 per share, which will be paid on March 20, 2023 to our shareholders of record as of March 9, 2023.

We also anticipate our continued use of TFS to drive incremental sales by facilitating customer financing.

On April 1, 2023, we acquired a manufacturer of bulk material handling conveyors based in Missouri, and real estate from Continental Real Estate LLC, to expand manufacturing capacity for mobile conveying equipment in North America for cash consideration of approximately $6 million.

See Note D - “Acquisitions and Dispositions” in our Consolidated Financial Statements for additional information regarding this transaction.

During the year ended December 31, 2023, we repurchased 1,287,214 shares for $60.7 million leaving approximately $132 million available for repurchase under our share repurchase programs.

Our Board of Directors declared a dividend of $0.15 per share in the first and second quarters of 2023 and $0.17 per share in the third and fourth quarters of 2023, which were paid to our stockholders.

In February 2024, our Board of Directors declared a dividend of $0.17 per share, which will be paid on March 19, 2024 to our stockholders of record as of March 8, 2024.

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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Our ability to access capital markets is also subject to our timely filing of periodic reports with the SEC.

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

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.

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

As of December 31, 2022, the Company had outstanding debt of $771.3 million, with $0.1 million payable within 12 months.

As of December 31, 2023, the Company had outstanding debt of $595.5 million, with $0.2 million payable within 12 months, exclusive of minimum lease payments for capital lease obligations and secured borrowings.

Future interest payments associated with the outstanding debt are approximately $180 million with $30 million payable within 12 months.

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Purchase Obligations

The Company had purchase obligations of $696.1 million, with substantially all purchase obligations payable within 12 months.

The Company had purchase obligations of approximately $686 million, with substantially all purchase obligations payable within 12 months.

Purchase obligations include non-cancellable and cancellable commitments.

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Cash provided by operations was $459.3 million and $261.2 million for the years ended December 31, 2023 and 2022, respectively.

The change in operating cash was primarily driven by proceeds from the sale of finance receivables received in 2021, partially offset by increased operating profitability in 2022.

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

Cash used in investing activities was $114.4 million and $154.1 million for the years ended December 31, 2023 and 2022, respectively.

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

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

Cash used in financing activities was $287.8 million and $54.9 million for the year ended December 31, 2023 and 2022, respectively.

The decrease in cash used in financing activities was primarily due to debt prepayments in 2021 compared to borrowings in 2022, partially offset by share repurchases in 2022.

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

OFF-BALANCE SHEET ARRANGEMENTS

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

What changed 10-K

Item 7. Management’s Discussion and Analysis