TEREX CORP 10-Q

Item 1A. Risk Factors The risk factors entitled “We may be unable to successfully integrate acquired businesses, including the recently announced agreement to purchase Dover Corporation’s Environmental Solutions Group (“ESG”). We may not realize the anticipated benefits of such acquisitions, including the recently announced agreement to purchase ESG.” updates and replaces the risk factor entitled “We may face limitations on our ability to integrate acquired businesses.” We have also updated the risk factor entitled “We have a significant amount of debt outstanding and must comply with restrictive covenants in our debt agreements.” There have been no other material changes in our risk factors previously disclosed in Part I, Item 1A. – “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023. We may be unable to successfully integrate acquired businesses, including the recently announced agreement to purchase Dover Corporation’s Environmental Solutions Group (“ESG”). We may not realize the anticipated benefits of such acquisitions, including the recently announced agreement to purchase ESG. From time to time, we engage in strategic transactions involving risks, including the possible failure to successfully integrate and realize the expected benefits of such transactions. We have consummated many acquisitions in the past and anticipate making additional acquisitions in the future. On July 21, 2024, we entered into a transaction with Dover Corporation to acquire its ESG business for $2 billion. Our ability to realize the anticipated benefits of the purchase, including the expected combination benefits, will depend, to a large extent, on our ability to integrate the businesses of both companies. In addition, the consummation of the acquisition is not assured and is subject to certain conditions, including regulatory clearance and other customary closing conditions. The management of both companies will be required to devote significant attention and resources to the integration process, which may disrupt the business of either or both of the companies and, if implemented ineffectively, could preclude realization of the full benefits we expect. The risks associated with the ESG acquisition and our other past or future acquisitions include: • the business culture of the acquired business may not match well with our culture; • we may acquire or assume unexpected liabilities; • faulty assumptions may be made regarding the integration process; • unforeseen difficulties may arise in integrating operations and systems; • we may fail to retain, motivate and integrate key management and other employees of the acquired business; • higher than expected finance costs may arise due to unforeseen changes in tax, trade, environmental, labor, safety, payroll or pension policies in any jurisdiction in which the acquired business conducts its operations; • we may experience problems in retaining customers and integrating customer bases; and • a large acquisition could stretch our resources and divert management’s attention from existing operations. The successful integration of any previously acquired or newly acquired business also requires us to implement effective internal control processes in these acquired businesses. While we believe we have successfully integrated acquisitions to date, we cannot ensure that previously acquired or newly acquired companies will operate profitably, that the intended beneficial effect from these acquisitions will be realized and that we will not encounter difficulties in implementing effective internal control processes in these acquired businesses, particularly when the acquired business operates in foreign jurisdictions and/or was privately owned. See the risk factor disclosed in Part I, Item 1A. – “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023 entitled “We must comply with an injunction and related obligations resulting from the settlement of an SEC investigation” for additional consequences if we were to commit a violation of the reporting and internal control provisions of the federal securities laws. While our evaluation of any potential transaction includes business, legal, compliance and financial due diligence with the goal of identifying and evaluating the material risks involved, these due diligence reviews may not identify all of the issues necessary to accurately estimate the cost and potential risks of a particular 41 acquisition or costs associated with any quality issues with an acquisition target's products or services. In addition, to the extent that we seek or make acquisitions in machinery and industrial businesses that are significantly different from our existing operations, there will be added risks and challenges for managing and integrating these businesses. Further, we may need to consolidate or restructure our acquired or existing facilities, which may require expenditures related to reductions in workforce and other charges resulting from the consolidations or restructurings, such as the write-down of inventory and lease termination costs. Any of the foregoing could adversely affect our business and results of operations. Many of these factors will be outside our control and any one of them could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy. If we are unable to close or fail to successfully integrate acquired businesses, this could have an adverse effect on our business, financial condition and results of operations. We also may not realize the expected benefits of any newly acquired business, including expected synergies. For instance, if we are unable to realize expected synergies from the recently announced agreement to purchase ESG, or the cost to achieve these synergies is greater than expected, then the anticipated benefits of the acquisition may not be realized fully or at all or may take longer to realize than expected. We have a significant amount of debt outstanding and must comply with restrictive covenants in our debt agreements. We entered into a (i) Commitment Letter with UBS in which UBS committed to provide Terex with an aggregate principal amount of up to $1,545 million and (ii) an Incremental Assumption and Amendment Agreement and Amendment to our Credit Agreement which establishes delayed draw term loan commitments in the amount of $455 million to be provided by UBS, in connection with the recently announced agreement to purchase ESG. Our total long-term debt at June 30, 2024 was $ 662.2 million, which means that following the acquisition of ESG our debt levels will increase significantly. Our ability to make required payments of principal and interest on our increased debt levels will depend on future performance of our combined businesses, which, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond our control. In addition, both our current and our future credit agreement contain financial and restrictive covenants that may limit our ability to, among other things, borrow additional funds or take advantage of business opportunities. While we are currently in compliance with the financial covenants, increases in our debt or decreases in our earnings could cause us to fail to comply with these financial covenants. Our failure to comply with such covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all our indebtedness or otherwise have a material adverse effect on our financial position, results of operation and debt service capability. Our increased level of debt and the financial and restrictive covenants contained in our current and future credit agreements could have important consequences on our financial position and results of operations, including increasing our vulnerability to increases in interest rates because debt under our current and future credit agreements bear interest at variable rates.