What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-04-26 compared with 2023-10-27 · 93 added, 177 removed, 170 unchanged (61% of the section changed)

2 unchanged sentences

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.

16 unchanged sentences

We discuss forward-looking information related to expected earnings per share (“EPS”) excluding the impact of potential future acquisitions, divestitures, restructuring and other unusual items.

Our 2023 outlook for earnings per share is a non-GAAP financial measure because it excludes unusual items.

Our 2024 outlook for EPS is a non-GAAP financial measure because it excludes unusual items.

The Company is not able to reconcile these forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures without unreasonable efforts because the Company is unable to predict with a reasonable degree of certainty the exact timing and impact of such items.

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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.

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

Our investments in new product and technologies are important to help enable us to take advantage of sustainability trends such as recycling, electrification and decarbonization.

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

In the third quarter of 2023, our team members were focused on increasing production, starting up of our in-house paint system and process improvements at our new facility.

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

Net sales of $1.3 billion were up 15% year-over-year as end-markets remained strong.

Gross margins increased by 150 basis points in the quarter as volume, pricing, improved manufacturing efficiencies and expense discipline helped to offset cost increases.

SG&A was 10% of sales and decreased by 40 basis points from the prior year period as business investment as well as marketing and engineering costs were coupled with continued expense management.

Our operations teams executed well during the first quarter of 2024, 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.

We continued to make good progress ramping up our facility in Monterrey, Mexico.

Our performance in the first quarter of 2024 reflected a strong start to the year with sales growth and margin expansion versus the prior year period.

Net sales of $1.3 billion were up 5% year-over-year, reflecting continued demand for our products across multiple businesses.

Gross margins increased by 40 basis points year-over-year as manufacturing throughput and disciplined price-cost management.

Income from operations of $158 million was up 7% year-over-year.

Operating margin of 12.2% was up 20 basis points compared to the prior year period.

This led to EPS increasing 46% to $1.75 in the third quarter of 2023 from our ongoing operations.

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

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

However, we continued to have $20 million of “hospital” inventory at the end of the third quarter, a clear indication of the level of disruption we continue to face.

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

MP had another strong quarter with net sales up 18% from the prior year period, driven by strong demand for our aggregates, environmental and concrete products.

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

Customer demand remains healthy across most of our businesses, supported by favorable end market conditions.

Our backlog of $3.1 billion remains significantly above historical levels.

Our consolidated bookings in the first quarter of more than $1 billion were down compared to the prior year period, which reflects a return to more normal seasonal order patterns and softer demand in Europe.

MP had a good start in 2024 and is executing well despite more challenging macro conditions for a few of its businesses.

For the first quarter, MP sales declined by 6% to $520 million compared to the first quarter of 2023, due primarily to lower end-market demand for material handling equipment and cranes in Europe, partially offset by growth for aggregates in North America.

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.

MP’s 16.9% operating margin for the quarter, up 230 basis points as compared to the prior year period, was driven by higher sales volume, favorable mix and improved manufacturing efficiencies.

Although we are seeing some softness in European order activity, MP’s backlog of $0.9 billion remains healthy, supporting our outlook.

AWP’s third quarter 2023 net sales were up 13% compared to the prior year period, primarily driven by improved supply chain, higher demand and price realization necessary to mitigate rising costs.

MP delivered an operating margin of 13.9% for the quarter, down 150 basis points as compared to the prior year period, which was driven by lower sales volume and net unfavorable product mix.

Although we are seeing some softness in European order activity, MP’s backlog of $712 million remains above historical norms, supporting our 2024 outlook.

AWP’s first quarter 2024 net sales were up 13% compared to the prior year period, primarily driven by higher demand, as well as improved supply chain and manufacturing performance.

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 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.

While our Utilities business is generally benefiting from electric grid expansion across the U.S., in the third quarter, this business was negatively impacted by inefficiencies due to supply chain issues, trade show expenses, and unfavorable product mix.

AWP delivered operating margins of 12.5% in the third quarter of 2023 driven by higher sales volumes, manufacturing efficiencies, cost reduction initiatives and disciplined pricing actions to offset higher costs.

AWP continues to have a robust backlog of $2.5 billion.

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

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

Lingering supply chain issues are also expected to negatively impact our Utilities business in the fourth quarter.

In the third quarter of 2023, our largest market remained North America, which represented approximately 61% of our global sales.

As compared to the prior year period, sales were up double digits in North America and up single digits in Western Europe and Asia Pacific.

On a foreign currency neutral basis, sales in Western Europe were down slightly.

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

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

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

The 31% increase

in our dividend since the start of 2023 reflects our continued confidence in our strong financial position.

We generated $106 million of free cash flow in the third quarter, double the free cash flow generated in the prior year period, driven by increased operating profit.

We continue to invest in our businesses with year-to-date capital expenditures and investments of $87 million, which was offset by $33 million of proceeds from the sale of our Oklahoma City facility.

We continue to maintain ample liquidity and as of September 30, 2023, we had $846 million in available liquidity, with no near-term debt maturities.

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

AWP delivered operating margins of 13.9% for the quarter, an improvement of 180 basis points compared to the prior year period, driven by higher sales volumes, improved manufacturing throughput and disciplined price-cost management.

AWP continues to have a strong backlog of $2.4 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 the first quarter of 2024, our largest market remained North America, which represented approximately 61% of our global sales.

As compared to the prior year period, sales were up in North America and down in all other major geographies.

We continued to execute our capital allocation strategy in the first quarter of 2024 as we made strategic investments in our businesses and we returned capital to shareholders.

We continued to invest in our businesses with $35 million deployed for capital expenditures in the first quarter of 2024 to support business growth.

We typically use cash in the first quarter of the year and had a negative free cash flow of $69 million in the first quarter of 2024.

We continue to maintain ample liquidity and as of March 31, 2024, we had $866 million in available liquidity, with no near-term debt maturities.

See “Liquidity and Capital Resources” for a detailed description of liquidity and working capital levels, including the primary factors affecting such levels, as well as a reconciliation of net cash provided by (used in) operating activities to free cash flow.

Customer demand remains strong for our products and services.

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

As a result of the strong execution by our team members in the third quarter and the strength of the customer backlog, we now expect EPS for the full-year of approximately $7.05 on sales of approximately $5.15 billion.

Customer demand remains strong for many of our products and services, although we are planning for continued softness in Europe for the balance of the year.

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

As a result of the strong execution of our team members in the first quarter and our healthy backlog, we now expect EPS for 2024 of $6.95 to $7.35 on net sales of $5.2 to $5.4 billion.

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

Subsequent Event

On October 12, 2023, John L.

notified our Board of Directors of his intention to retire as Chairman, CEO and as a member of the Board, effective January 1, 2024.

Garrison will continue as a consultant for Terex from January 1, 2024 through June 30, 2024.

The Board has appointed Simon Meester, the current President AWP, to succeed Mr.

Garrison as President and CEO, effective January 1, 2024.

Meester has also been appointed a member of the Board effective January 1, 2024.

Meester will not be a member of any committees of the Board.

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 annualized effective tax rate.

NOPAT for each quarter is calculated by multiplying Income (loss) from operations by one minus the annualized 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 adjust annualized effective tax rate to reflect management’s expectation of the full-year effective tax rate 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.

In the calculation of ROIC, we adjust the annualized effective tax rate to reflect management’s expectation of the full-year effective tax rate and amortize the one-time tax benefit derived from recording of a deferred tax asset in relation to our Swiss operations in 2023 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 (“Board”) use ROIC as one measure to assess operational performance, including in connection with certain compensation programs.

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

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

As the tables below show, our ROIC at September 30, 2023 was 29.2%.

As the tables below show, our ROIC at March 31, 2024 was 27.6%.

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

dollars, except for the annualized effective tax rates.

dollars, except for the annualized effective tax rate as adjusted.

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

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

Mar '24 Dec '23 Sep '23 Jun '23 Mar '23

Annualized effective tax rate as adjusted (1)

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Debt less Cash and cash equivalents plus Stockholders’ equity $ 2,091.1 $ 1,924.8 $ 1,852.6 $ 1,871.2 $ 1,817.4

(1) The annualized effective tax rate for Dec ’22 represents the actual full-year 2022 effective tax rate.

September 30, 2023 ROIC 29.2 %

(1) The annualized effective tax rate for each 2023 period represents the adjusted full-year 2023 effective tax rate.

March 31, 2024 ROIC 27.6 %

NOPAT as adjusted (last 4 quarters) $ 526.8

Average Debt less Cash and cash equivalents plus Stockholders’ equity (5 quarters) $ 1,911.4

Nine Months Ended

September 30, 2023

Three Months Ended

March 31, 2024

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

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Effect of adjustments:

Tax related — (9.6)

Tax related to full-year effective tax rate expectation

Tax related to Swiss deferred tax asset

As adjusted $ 136.5 $ (27.0) 19.8 %

RESULTS OF OPERATIONS

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

Three Months Ended September 30,

Sales % Change In

Reported Amounts

($ amounts in millions)

Net sales $ 1,290.1 — $ 1,120.5 — 15.1 %

Gross profit 292.5 22.7 % 237.1 21.2 % 23.4 %

SG&A expenses

129.3 10.0 % 116.3 10.4 % 11.2 %

Income from operations 163.2 12.7 % 120.8 10.8 % 35.1 %

Net sales for the three months ended September 30, 2023 increased $169.6 million when compared to the same period in 2022.

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

Changes in foreign exchange rates positively impacted consolidated net sales by approximately $25 million.

Gross profit for the three months ended September 30, 2023 increased $55.4 million when compared to the same period in 2022.

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

SG&A expenses for the three months ended September 30, 2023 increased $13.0 million when compared to the same period in 2022 primarily due to inflation and increased marketing, engineering and technology expenses.

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

Income from operations for the three months ended September 30, 2023 increased $42.4 million when compared to the same period in 2022.

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

Materials Processing

Three Months Ended September 30,

Sales % Change In

Reported Amounts

($ amounts in millions)

Net sales $ 541.1 — $ 457.9 — 18.2 %

Income from operations 91.3 16.9 % 66.8 14.6 % 36.7 %

Net sales for the three months ended September 30, 2023 increased $83.2 million when compared to the same period in 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.

Net sales were positively impacted by changes in foreign exchange rates of approximately $12 million.

Income from operations for the three months ended September 30, 2023 increased $24.5 million when compared to the same period in 2022 primarily due to incremental profit achieved on higher sales volume, favorable mix and improved manufacturing efficiencies.

Aerial Work Platforms

Three Months Ended September 30,

Sales % Change In

Reported Amounts

($ amounts in millions)

Net sales $ 751.0 — $ 662.6 — 13.3 %

Income from operations 93.6 12.5 % 63.5 9.6 % 47.4 %

Net sales for the three months ended September 30, 2023 increased $88.4 million when compared to the same period in 2022 primarily due to higher demand resulting from end-market growth for aerial work platforms, telehandlers and utility products in North America, as well as improvements in the Genie supply chain and price realization necessary to mitigate rising costs.

Net sales were positively impacted by changes in foreign exchange rates of approximately $13 million.

Income from operations for the three months ended September 30, 2023 increased $30.1 million when compared to the same period in 2022 primarily due to incremental profit achieved on higher sales volume, price realization and cost reduction initiatives, partially offset by cost increases, including costs associated with the ramp-up of our Monterrey facility.

Corporate and Other / Eliminations

Three Months Ended September 30,

Sales % Change In

Reported Amounts

($ amounts in millions)

Net sales $ (2.0) — $ — — *

Loss from operations (21.7) * (9.5) * (128.4) %

* Not a meaningful percentage

Loss from operations for the three months ended September 30, 2023 increased $12.2 million when compared to the same period in 2022.

The increase in operating loss is primarily due to changes in foreign exchange costs absorbed by our operating segments in the prior year period.

Interest Expense, Net of Interest Income

During the three months ended September 30, 2023, our interest expense, net of interest income, was $14.9 million, or $2.5 million higher when compared to the same period in 2022 primarily due to increased receivable sales at higher interest rates and an increase in our weighted average interest rate on revolving credit amounts, partially offset by higher interest income in the current year period.

Other Income (Expense) – Net

Other income (expense) – net for the three months ended September 30, 2023 and 2022 was income of $0.7 million and an expense of $1.0 million, respectively.

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

During the three months ended September 30, 2023, we recognized income tax expense of $29.8 million on income of $149.0 million, an effective tax rate of 20.0%, as compared to income tax expense of $25.6 million on income of $107.4 million, an effective tax rate of 23.8%, for the three months ended September 30, 2022.

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

Nine Months Ended September 30, 2023 Compared with Nine Months Ended September 30, 2022

Nine Months Ended September 30,

Three Months Ended March 31, 2024 Compared with Three Months Ended March 31, 2023

Three Months Ended March 31,

Sales % Change In

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Income from operations 158.3 12.2 % 147.7 12.0 % 7.2 %

Net sales for the nine months ended September 30, 2023 increased $728.8 million when compared to the same period in 2022.

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

Changes in foreign exchange rates negatively impacted consolidated net sales by approximately $28 million.

Gross profit for the nine months ended September 30, 2023 increased $278.3 million when compared to the same period in 2022.

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

SG&A expenses for the nine months ended September 30, 2023 increased $56.7 million when compared to the same period in 2022 primarily due to inflation, incremental spend on new acquisitions and increased marketing, engineering and technology expenses.

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

Income from operations for the nine months ended September 30, 2023 increased $221.6 million when compared to the same period in 2022.

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

Net sales for the three months ended March 31, 2024 increased $56.8 million when compared to the same period in 2023 primarily due to healthy demand for aerial work platforms, utility products and aggregates in North America.

Gross profit for the three months ended March 31, 2024 increased $18.6 million when compared to the same period in 2023 primarily due to incremental profit achieved on higher sales volume, improved manufacturing throughput and disciplined price-cost management.

SG&A expenses for the three months ended March 31, 2024 increased $8.0 million when compared to the same period in 2023 primarily due to higher compensation costs and technology expenses.

Income from operations for the three months ended March 31, 2024 increased $10.6 million when compared to the same period in 2023 primarily due to incremental profit achieved on higher sales volume, improved manufacturing throughput and disciplined price-cost management.

Materials Processing

Nine Months Ended September 30,

Three Months Ended March 31,

Sales % Change In

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Income from operations 72.1 13.9 % 85.3 15.4 % (15.5) %

Net sales for the nine months ended September 30, 2023 increased $281.0 million when compared to the same period in 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.

Net sales were negatively impacted by changes in foreign exchange rates of approximately $24 million.

Income from operations for the nine months ended September 30, 2023 increased $64.0 million when compared to the same period in 2022 primarily due to incremental profit achieved on higher sales volume and improved manufacturing efficiencies, partially offset by cost increases and the negative impact of changes in foreign exchange rates.

Net sales for the three months ended March 31, 2024 decreased $33.8 million when compared to the same period in 2023 primarily due to lower end-market demand for material handling equipment and cranes in Europe, partially offset by growth for aggregates in North America.

Income from operations for the three months ended March 31, 2024 decreased $13.2 million when compared to the same period in 2023 primarily due to the impact of lower sales volume and net unfavorable product mix.

Aerial Work Platforms

Nine Months Ended September 30,

Three Months Ended March 31,

Sales % Change In

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Income from operations 107.3 13.9 % 83.1 12.1 % 29.1 %

Net sales for the nine months ended September 30, 2023 increased $450.0 million when compared to the same period in 2022 primarily due to higher demand resulting from end-market growth for aerial work platforms in all major geographies and telehandlers and utility products in North America as well as price realization necessary to mitigate rising costs.

Income from operations for the nine months ended September 30, 2023 increased $168.1 million when compared to the same period in 2022 primarily due to incremental profit achieved on higher sales volume, price realization and improved manufacturing efficiencies, partially offset by cost increases.

Net sales for the three months ended March 31, 2024 increased $86.8 million when compared to the same period in 2023 primarily due to high demand for aerial work platforms, utility products and telehandlers in North America, as well as improved supply chain and manufacturing performance.

Income from operations for the three months ended March 31, 2024 increased $24.2 million when compared to the same period in 2023 primarily due to incremental profit achieved on higher sales volume, improved manufacturing throughput and disciplined price-cost management.

Corporate and Other / Eliminations

Nine Months Ended September 30,

Three Months Ended March 31,

Sales % Change In

4 unchanged sentences

* Not a meaningful percentage

Loss from operations for the nine months ended September 30, 2023 increased $10.5 million when compared to the same period in 2022.

The increase in operating loss is primarily due to changes in foreign exchange costs absorbed by our operating segments in the prior year period.

Loss from operations for the three months ended March 31, 2024 increased $0.4 million when compared to the same period in 2023.

Interest Expense, Net of Interest Income

During the nine months ended September 30, 2023, our interest expense, net of interest income, was $42.1 million, or $8.4 million higher when compared to the same period in 2022 due primarily to an increase in receivable sales and average borrowings at higher interest rates, partially offset by higher interest income in the current year period.

Interest expense, net of interest income, for the three months ended March 31, 2024 and 2023 was $11.4 million and $12.9 million.

The decrease in expense is primarily due to lower average borrowings and higher interest income, partially offset by receivable sales at higher interest rates in the current year period.

Other Income (Expense) – Net

Other income (expense) – net was an expense of $4.7 million for the nine months ended September 30, 2023 and 2022.

During the nine months ended September 30, 2023, we recognized income tax expense of $85.2 million on income of $474.0 million, an effective tax rate of 18.0%, as compared to income tax expense of $52.6 million on income of $260.8 million, an effective tax rate of 20.2%, for the nine months ended September 30, 2022.

The lower effective tax rate for the nine months ended September 30, 2023 when compared with the nine months ended September 30, 2022 is primarily due to lower tax expense on permanent items.

Other income (expense) – net for the three months ended March 31, 2024 and 2023 was an expense of $10.4 million and $1.6 million, respectively.

The increase in expense is primarily due to mark-to-market losses recorded on equity investments in the current year period.

During the three months ended March 31, 2024, we recognized income tax expense of $28.0 million on income of $136.5 million, an effective tax rate of 20.5%, as compared to income tax expense of $23.3 million on income of $133.2 million, an effective tax rate of 17.5%, for the three months ended March 31, 2023.

The higher effective tax rate for the three months ended March 31, 2024 when compared with the three months ended March 31, 2023 is primarily due to higher tax related to geographic distribution of income and lower favorable discrete items.

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

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

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

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

During the three months ended March 31, 2023, the gain (loss) on disposition of discontinued operations - net of tax, primarily relates to post-closing adjustments related to the sales of our former MHPS and mobile cranes businesses.

LIQUIDITY AND CAPITAL RESOURCES

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

At September 30, 2023, we had cash and cash equivalents of $352 million and undrawn availability under our revolving line of credit of $494 million, giving us total liquidity of approximately $846 million.

During the nine months ended September 30, 2023, our liquidity increased by approximately $119 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.

At March 31, 2024, we had cash and cash equivalents of $365 million and undrawn availability under our revolving line of credit of $501 million, giving us total liquidity of approximately $866 million.

During the three months ended March 31, 2024, our liquidity decreased by approximately $105 million from December 31, 2023 primarily due to cash used in operations, capital expenditures and dividends.

Our main sources of funding are cash generated from operations, including cash generated from the sale of receivables, loans from our bank credit facilities and funds raised in capital markets.

We have no significant debt maturities until 2026 and we continue to focus on free cash flow generation.

We have no significant debt maturities until 2026.

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

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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 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 account receivables 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.

We had free cash flow of $106.4 million and $230.6 million for the three and nine months ended September 30, 2023, respectively.

We had free cash flow use of $68.9 million for the three months ended March 31, 2024.

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

Three Months Ended

9/30/2023 Nine Months Ended

Net cash provided by (used in) operating activities $ (33.9)

1 unchanged sentence

Free cash flow (use) $ (68.9)

Pursuant to terms of our trade accounts receivable factoring arrangements, during the nine months ended September 30, 2023, we sold, without material recourse, approximately $587 million of trade accounts receivable to enhance liquidity.

Working capital as a percent of trailing three month annualized net sales was 20.6% at September 30, 2023.

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

Pursuant to terms of our trade accounts receivable factoring arrangements, during the three months ended March 31, 2024, we sold, without material recourse, approximately $177 million of trade accounts receivable to enhance liquidity.

Working capital as a percent of trailing three month annualized net sales was 22.7% at March 31, 2024.

The following tables show the calculation of our working capital and trailing three months annualized sales as of March 31, 2024 (in millions):

Three Months Ended

September 30, 2023

Net Sales $ 1,290.1

March 31, 2024

Trailing three month annualized net sales

September 30, 2023

March 31, 2024

Inventories $ 1,217.6

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Working capital

Revolving line of credit (the “Revolver”) borrowings at September 30, 2023 were $106.0 million.

At September 30, 2023, the weighted average interest rate was 7.01% on the Revolver.

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

Revolving line of credit (the “Revolver”) borrowings at March 31, 2024 were $99.1 million.

At March 31, 2024, the weighted average interest rate was 6.67% on the Revolver.

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

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

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

During the nine months ended September 30, 2023, we repurchased 736,644 shares for $33.8 million leaving approximately $159 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 quarter of 2023, which were paid to the Company’s shareholders.

In October 2023, our Board of Directors declared a dividend of $0.17 per share, which will be paid on December 19, 2023 to our shareholders of record as of November 9, 2023.

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

During the three months ended March 31, 2024, we repurchased 46,337 shares for $2.7 million leaving approximately $129 million available for repurchase under our share repurchase programs.

Our Board declared a dividend of $0.17 per share in the first quarter of 2024, which was paid to the Company’s shareholders.

Our ability to access capital markets to raise funds, through sale of equity or debt securities, is subject to various factors, some specific to us and others related to general economic and/or financial market conditions.

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

Cash provided by operations was $268.6 million and $104.2 million for the nine months ended September 30, 2023 and 2022, respectively.

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

Cash used in investing activities was $53.4 million and $124.4 million for the nine months ended September 30, 2023 and 2022, respectively.

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 in the current year.

Cash used in financing activities was $160.6 million for the nine months ended September 30, 2023, compared to cash provided by financing activities of $13.3 million for the nine months ended September 30, 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.

Cash used in operations was $33.9 million for the three months ended March 31, 2024, compared to cash provided by operations of $9.1 million for the three months ended March 31, 2023.

The increase in cash used in operations was primarily driven by higher working capital in the current year.

Cash used in investing activities was $35.8 million and $29.7 million for the three months ended March 31, 2024 and 2023, respectively.

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

Cash provided by financing activities was $71.2 million for the three months ended March 31, 2024, compared to cash used in financing activities of $31.7 million for the three months ended March 31, 2023.

The increase in cash provided by financing activities was primarily due to lower debt repayments and higher debt borrowing in the current year.

OFF-BALANCE SHEET ARRANGEMENTS

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

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

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

CONTINGENCIES AND UNCERTAINTIES

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

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

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

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

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

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

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis