What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-30 compared with 2024-07-31 · 118 added, 116 removed, 201 unchanged (54% of the section changed)

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BUSINESS DESCRIPTION

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

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

Terex is a global industrial equipment manufacturer of materials processing machinery, waste and recycling solutions, mobile elevating work platforms (MEWPs), and equipment for the electric utility industry.

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

We provide lifecycle support to our customers through our global parts and services organization, and offer complementary digital solutions, designed to help our customers maximize their return on their investment.

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.

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

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

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We believe this measure of free cash flow provides management and investors further useful information on cash generation or use in our primary operations.

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.

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

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

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Trailing three months annualized net sales is calculated using net sales for the most recent quarter end multiplied by four.

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.

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”) and annualized effective tax rate as adjusted, which are used in the calculation of our after tax return on invested capital (“ROIC”) (collectively the “Non-GAAP Measures”), which are discussed in detail below.

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We remain focused on executing our multi-year growth plan and continue to invest in new technologies and products across our businesses.

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 second 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.

As we enter the second half of the year, we expect to start seeing increased efficiencies from Monterrey, which we believe will enhance long-term margin trajectory of AWP.

Our performance in the second quarter of 2024 reflected healthy customer demand for our products and excellent execution by our team members in a dynamic and challenging environment.

Net sales of $1.4 billion were down 2% year-over-year, reflecting a continued weakness in European markets, partially offset by continued strong demand for aerial work platforms and telehandlers in North America.

Gross margins decreased by 60 basis points year-over-year due to unfavorable mix.

Income from operations of $193 million was down 8% year-over-year.

Operating margin of 14.0% was down 100 basis points compared to the prior year.

Our backlog of $2.4 billion remains significantly above historical levels.

Over time, we expect our backlog to normalize to pre-pandemic levels as our lead times have normalized due to global supply chain improvements.

While consolidated bookings were down in the second quarter year-over-year, we expect improved bookings in the fourth quarter of 2024 and first quarter of 2025 as we return to more normal season ordering patterns and our annual national contracts are finalized.

MP executed well in the quarter despite lower end-market demand across certain materials processing businesses.

For the second quarter, MP sales declined by 14% to $499 million compared to the second quarter of 2023, primarily driven by our material handling business.

MP delivered an operating margin of 15.4% for the quarter, down 160 basis points as compared to the prior year, which was driven by unfavorable product mix, partially offset by cost discipline.

Although we are seeing some softness in order activity, MP’s backlog of $558 million remains slightly elevated from historical norms and is returning to pre-pandemic levels.

AWP’s second quarter 2024 net sales were up 7% compared to the prior year, primarily driven by higher demand in North America, as well as improved supply chain and manufacturing throughput.

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.

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

AWP delivered operating margins of 15.2% for the quarter, down 100 basis points compared to the prior year, driven by Monterrey start-up inefficiencies and a one-time facility sale gain in the prior year.

AWP continues to have a strong backlog of $1.8 billion.

In the second quarter of 2024, our largest market remained North America, which represented approximately 65% of our global sales.

Our strategic operational priorities of execution, innovation and growth continue to strengthen our operations and allow us to capitalize on the demand in our end-markets.

The recently completed acquisition of Environmental Solutions Group ("ESG") strengthens our portfolio.

ESG adds a non-cyclical, financially accretive, and market-leading business to our portfolio with tangible synergies in the fast-growing waste and recycling end market.

Our operations teams adapted quickly to changing market conditions and continued to execute at a high level throughout the third quarter.

Fixed cost management is an area where we have made improvements, for example shifting higher cost production to our Monterrey, Mexico facility.

We will continue to focus on reducing fixed costs by leveraging technology, improving efficiency, and re-thinking operating norms where better approaches are available.

We also continue to leverage technology internally, making investments in robotics, automation, and digitizing workstreams to make us more efficient and more flexible.

This represents an important part of our roadmap to continuously become more competitive and more resilient regardless of market dynamics.

We adapted quickly to in-quarter channel adjustments and executed at a high level throughout the third quarter.

We saw more challenging macro dynamics as the trajectory of future interest rate cuts and the upcoming U.S.

election are casting a shadow of uncertainty leading to more cautious decision-making.

Although U.S.

construction continues to grow, the rate of growth has slowed, and we are seeing local projects being deferred until investors have more clarity on the macro environment.

Another important factor, particularly in aerials, is that lead times for new equipment have come down, largely back to pre-pandemic levels.

This allows our rental customers to align their equipment delivery schedules more precisely with their requirements.

In MP, we continue to see dealers re-balance inventory levels as more of their customers are renting their machines longer.

When the machine is on rent it remains on the dealer’s balance sheet and limits their ability to order new machines.

Our backlog of $1.6 billion remains above historical levels.

Bookings reflect a return to more normal seasonality and we expect our backlog to normalize to pre-pandemic levels as our lead times have reduced due to global supply chain improvements.

MP executed well in the quarter despite a challenging macro environment.

For the third quarter, MP sales declined by 18% to $444 million compared to the third quarter of 2023, driven by channel adjustments and lower end-market demand in certain areas.

MP delivered an operating margin of 12.6% for the quarter, down 440 basis points as compared to the prior year, which was driven by lower sales volume and unfavorable geographic and product mix.

MP is continuing to take actions, including factory and other layoffs, reduced work schedules and other cost reduction initiatives.

AWP’s third quarter 2024 net sales were up 2% compared to the prior year, however that was lower than we had previously anticipated due to delivery adjustments from our U.S.

rental customers as our customers adjusted delivery schedules to align with fleet productivity and shorter equipment lead times.

Our Utilities business benefits from grid modernization and hardening efforts across the U.S.

AWP delivered operating margins of 10.8% for the quarter, down 160 basis points compared to the prior year, driven by unfavorable mix and higher freight costs.

In the third quarter of 2024, our largest market remained North America, which represented approximately 67% of our global sales.

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

We continued to execute our capital allocation strategy in the second 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 $24 million deployed for capital expenditures in the second quarter of 2024 to support business growth.

We generated $42 million of free cash flow in the second quarter of 2024.

We continue to maintain ample liquidity and as of June 30, 2024, we had $879 million in available liquidity, with no near-term debt maturities.

We continued to execute our capital allocation strategy in the third 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 $29 million deployed for capital expenditures in the third quarter of 2024 to support business growth.

We generated $88 million of free cash flow in the third quarter of 2024.

Through September 30, 2024, we have returned $66 million to shareholders through share repurchases and dividends.

We continued to maintain ample liquidity and as of September 30, 2024, we had $952 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.

As a result of the strong execution of our team members in the second quarter and our healthy backlog, we anticipate achieving an adjusted EPS for 2024 of $7.15 to $7.45 on 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.

In connection with the ESG acquisition, we up-sized and extended our revolver and obtained $2 billion of proceeds from long-term financing.

See Note J – “Long-Term Obligations” for a detailed description of our financing terms.

As a result of the changing market conditions and the recent ESG acquisition, we anticipate achieving an adjusted EPS for 2024 of $5.85 to $6.25 on sales of $5.0 to $5.2 billion.

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

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.

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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 June 30, 2024 was 25.9%.

As the tables below show, our ROIC at September 30, 2024 was 23.7%.

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

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

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

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

Annualized effective tax rate as adjusted (1)

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Debt less Cash and cash equivalents plus Stockholders’ equity $ 2,233 $ 2,171 $ 2,091 $ 1,924 $ 1,853

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

June 30, 2024 ROIC 25.9 %

(1) The annualized effective tax rate for Dec ’23 period represents the adjusted full-year 2023 effective tax rate.

September 30, 2024 ROIC 23.7 %

NOPAT as adjusted (last 4 quarters) $ 487

Average Debt less Cash and cash equivalents plus Stockholders’ equity (5 quarters) $ 2,054

Six Months Ended

June 30, 2024

Nine Months Ended

September 30, 2024

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

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RESULTS OF OPERATIONS

Three Months Ended June 30, 2024 Compared with Three Months Ended June 30, 2023

Three Months Ended June 30,

Three Months Ended September 30, 2024 Compared with Three Months Ended September 30, 2023

Three Months Ended September 30,

Sales % Change In

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Income from operations 122 10.1 % 163 12.6 % (25.2) %

Net sales for the three months ended June 30, 2024 decreased $21.4 million when compared to the same period in 2023, primarily due to lower end-market demand in Europe, primarily impacting our materials processing business, partially offset by continued strong demand for aerial work platforms and telehandlers in North America.

Gross profit for the three months ended June 30, 2024 decreased $14.5 million when compared to the same period in 2023, primarily due to the impact of lower sales volume as well as unfavorable mix, partially offset by cost discipline.

SG&A expenses for the three months ended June 30, 2024 increased $2.3 million when compared to the same period in 2023, primarily due to a prior year facility sale gain.

Income from operations for the three months ended June 30, 2024 decreased $16.8 million when compared to the same period in 2023, primarily due to the impact of lower sales volume, unfavorable mix and a prior year facility sale gain.

Net sales for the three months ended September 30, 2024 decreased $78 million when compared to the same period in 2023, primarily due to lower end-market demand across most geographies, partially offset by healthy demand for telehandlers and utility products in North America.

Gross profit for the three months ended September 30, 2024 decreased $47 million when compared to the same period in 2023, primarily due to the impact of lower sales volume and unfavorable mix as well as higher freight and severance costs.

SG&A expenses for the three months ended September 30, 2024 decreased $6 million when compared to the same period in 2023, primarily due to lower compensation cost.

Income from operations for the three months ended September 30, 2024 decreased $41 million when compared to the same period in 2023, primarily due to the impact of lower sales volume and unfavorable geographic and product mix as well as higher freight and severance costs, partially offset by lower SG&A expenses.

Materials Processing

Three Months Ended June 30,

Three Months Ended September 30,

Sales % Change In

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Income from operations 56 12.6 % 92 17.0 % (39.1) %

Net sales for the three months ended June 30, 2024 decreased $78.8 million when compared to the same period in 2023, primarily due to lower end-market demand across certain product lines and geographies as well as inventory rebalancing at our dealers.

Income from operations for the three months ended June 30, 2024 decreased $21.2 million when compared to the same period in 2023, primarily due to lower sales volume and unfavorable product mix, partially offset by cost discipline.

Net sales for the three months ended September 30, 2024 decreased $97 million when compared to the same period in 2023, primarily due to channel adjustments and lower end-market demand across certain product lines and geographies.

Income from operations for the three months ended September 30, 2024 decreased $36 million when compared to the same period in 2023, primarily due to lower sales volume and unfavorable product and geographic mix as well as higher severance costs.

Aerial Work Platforms

Three Months Ended June 30,

Three Months Ended September 30,

Sales % Change In

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Income from operations 83 10.8 % 93 12.4 % (10.8) %

Net sales for the three months ended June 30, 2024 increased $56.9 million when compared to the same period in 2023, primarily due to healthy demand for aerial work platforms and telehandlers in North America.

Income from operations for the three months ended June 30, 2024 of $133.8 million was comparable to the same period in 2023 as incremental profit achieved on higher sales volume was offset by Monterrey start-up inefficiencies and a prior year facility sale gain.

Net sales for the three months ended September 30, 2024 increased $18 million when compared to the same period in 2023, primarily due to increased demand for telehandlers and utility products in North America, partially offset by lower demand for aerial work platforms as customers adjusted delivery schedules to align with fleet productivity and shorter equipment lead times.

Income from operations for the three months ended September 30, 2024 decreased $10 million when compared to the same period in 2023, primarily due to unfavorable mix as well as higher freight and severance costs.

Corporate and Other / Eliminations

Three Months Ended June 30,

Three Months Ended September 30,

Sales % Change In

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* Not a meaningful percentage

Loss from operations for the three months ended June 30, 2024 decreased $4.2 million when compared to the same period in 2023.

The decrease in operating loss is primarily due to the negative impact of changes in foreign exchange rates in the prior year.

Loss from operations for the three months ended September 30, 2024 decreased $5 million when compared to the same period in 2023.

The decrease in operating loss is primarily due to lower compensation cost.

Interest Expense, Net of Interest Income

Interest expense, net of interest income, for the three months ended June 30, 2024 and 2023 was $13.6 million and $14.3 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.

Interest expense, net of interest income, for the three months ended September 30, 2024 and 2023 was $10 million and $15 million, respectively.

The decrease in expense is primarily due to lower average borrowings, lower receivable sales and higher interest income.

Other Income (Expense) – Net

Other income (expense) – net for the three months ended June 30, 2024 and 2023 was an expense of $5.4 million and $3.8 million, respectively.

The increase in expense is primarily due to higher mark-to-market losses recorded on equity investments.

During the three months ended June 30, 2024, we recognized income tax expense of $33.4 million on income of $174.1 million, an effective tax rate of 19.2%, as compared to income tax expense of $32.0 million on income of $191.8 million, an effective tax rate of 16.7%, for the three months ended June 30, 2023.

The higher effective tax rate for the three months ended June 30, 2024 when compared with the three months ended June 30, 2023 is primarily due to higher tax related to geographic distribution of income and less favorable discrete items.

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

During the three months ended June 30, 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.

Six Months Ended June 30, 2024 Compared with Six Months Ended June 30, 2023

Six Months Ended June 30,

Other income (expense) – net was an expense of $13 million and income of $1 million for the three months ended September 30, 2024 and 2023, respectively.

The increase in expense is primarily due to transaction costs related to ESG acquisition, higher mark-to-market losses recorded on equity investment, and the negative impact of changes in foreign exchange rates.

During the three months ended September 30, 2024, we recognized income tax expense of $11 million on income of $99 million, an effective tax rate of 11.1%, as compared to income tax expense of $30 million on income of $149 million, an effective tax rate of 20.0%, for the three months ended September 30, 2023.

The lower effective tax rate for the three months ended September 30, 2024 when compared with the three months ended September 30, 2023 is primarily due to an increase in favorable discrete items, partially offset by higher tax related to geographic distribution of income.

Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023

Nine Months Ended September 30,

Sales % Change In

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Income from operations 473 12.2 % 521 13.3 % (9.2) %

Net sales for the six months ended June 30, 2024 increased $35.4 million when compared to the same period in 2023.

The increase in net sales was primarily due to healthy demand for aerial work platforms, telehandlers and utility products in North America, partially offset by lower end-market demand in Europe, primarily impacting our materials processing business.

Gross profit for the six months ended June 30, 2024 increased $4.1 million when compared to the same period in 2023, primarily due to cost discipline and improved manufacturing throughput, partially offset by unfavorable mix.

SG&A expenses for the six months ended June 30, 2024 increased $10.3 million when compared to the same period in 2023, primarily due to higher severance, technology expenses and a prior year facility sale gain.

Income from operations for the six months ended June 30, 2024 decreased $6.2 million when compared to the same period in 2023.

The decrease was primarily due to higher SG&A expenses, unfavorable mix and a prior year facility sale gain, partially offset by disciplined cost management and improved throughput.

Net sales for the nine months ended September 30, 2024 decreased $43 million when compared to the same period in 2023, primarily due to lower end-market demand across most geographies, partially offset by increased demand for aerial work platforms, telehandlers and utility products in North America.

Gross profit for the nine months ended September 30, 2024 decreased $43 million when compared to the same period in 2023, primarily due to the impact of lower sales volume and unfavorable mix as well as higher severance costs, partially offset by cost reductions and improved manufacturing throughput.

SG&A expenses for the nine months ended September 30, 2024 increased $5 million when compared to the same period in 2023, primarily due to higher severance costs, technology expenses and a prior year facility sale gain, partially offset by lower compensation cost.

Income from operations for the nine months ended September 30, 2024 decreased $48 million when compared to the same period in 2023, primarily due to the impact of lower sales volume, unfavorable mix, higher severance costs and increased SG&A expenses, partially offset by cost reduction and improved throughput.

Materials Processing

Six Months Ended June 30,

Nine Months Ended September 30,

Sales % Change In

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Income from operations 205 14.0 % 275 16.4 % (25.5) %

Net sales for the six months ended June 30, 2024 decreased $112.6 million when compared to the same period in 2023, primarily due to lower end-market demand across certain product lines and geographies as well as inventory rebalancing at our dealers.

Income from operations for the six months ended June 30, 2024 decreased $34.4 million when compared to the same period in 2023, primarily due to the impact of lower sales volume and unfavorable product mix, partially offset by cost discipline.

Net sales for the nine months ended September 30, 2024 decreased $209 million when compared to the same period in 2023, primarily due to channel adjustments and lower end-market demand across certain product lines and geographies.

Income from operations for the nine months ended September 30, 2024 decreased $70 million when compared to the same period in 2023, primarily due to lower sales volume and unfavorable product mix and geographic mix as well as higher severance costs, partially offset by cost reductions.

Aerial Work Platforms

Six Months Ended June 30,

Nine Months Ended September 30,

Sales % Change In

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Income from operations 324 13.4 % 310 13.7 % 4.5 %

Net sales for the six months ended June 30, 2024 increased $143.7 million when compared to the same period in 2023, primarily due to higher demand for aerial work platforms, telehandlers and utility products in North America.

Income from operations for the six months ended June 30, 2024 increased $24.4 million when compared to the same period in 2023, primarily due to incremental profit achieved on higher sales volume and improved manufacturing throughput, partially offset by Monterrey start-up inefficiencies and a prior year facility sale gain.

Net sales for the nine months ended September 30, 2024 increased $161 million when compared to the same period in 2023, primarily due to increased demand for aerial work platforms, telehandlers and utility products in North America.

Income from operations for the nine months ended September 30, 2024 increased $14 million when compared to the same period in 2023, primarily due to incremental profit achieved on higher sales volume and improved manufacturing throughput, partially offset by unfavorable mix, Monterrey start-up inefficiencies, higher severance costs and a prior year facility sale gain.

Corporate and Other / Eliminations

Six Months Ended June 30,

Nine Months Ended September 30,

Sales % Change In

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* Not a meaningful percentage

Loss from operations for the six months ended June 30, 2024 decreased $3.8 million when compared to the same period in 2023.

The decrease in operating loss is primarily due to the negative impact of changes in foreign exchange rates in the prior year.

Loss from operations for the nine months ended September 30, 2024 decreased $8 million when compared to the same period in 2023.

The decrease in operating loss is primarily due to lower compensation cost and the negative impact of changes in foreign exchange rates in the prior year, partially offset by higher severance costs.

Interest Expense, Net of Interest Income

During the six months ended June 30, 2024, our interest expense, net of interest income, was $25.0 million, or $2.2 million lower when compared to the same period in 2023, due primarily to lower average borrowings and higher interest income, partially offset by receivable sales at higher interest rates.

During the nine months ended September 30, 2024, our interest expense, net of interest income, was $35 million, or $7 million lower when compared to the same period in 2023, due primarily to lower average borrowings, higher interest income and lower receivable sales, partially offset by receivable sales at higher interest rates.

Other Income (Expense) – Net

Other income (expense) – net for the six months ended June 30, 2024 and 2023 was an expense of $15.8 million and $5.4 million, respectively.

The increase in expense is primarily due to higher mark-to-market losses recorded on equity investments.

During the six months ended June 30, 2024, we recognized income tax expense of $61.4 million on income of $310.6 million, an effective tax rate of 19.8%, as compared to income tax expense of $55.3 million on income of $325.0 million, an effective tax rate of 17.0%, for the six months ended June 30, 2023.

The higher effective tax rate for the six months ended June 30, 2024 when compared with the six months ended June 30, 2023 is primarily due to higher tax related to geographic distribution of income and less favorable discrete items.

Other income (expense) – net for the nine months ended September 30, 2024 and 2023 was an expense of $28 million and $5 million, respectively.

The increase in expense is primarily due to transaction costs related to ESG acquisition, higher mark-to-market losses recorded on equity investments, and the negative impact of changes in foreign exchange rates.

During the nine months ended September 30, 2024, we recognized income tax expense of $73 million on income of $410 million, an effective tax rate of 17.8%, as compared to income tax expense of $85 million on income of $474 million, an effective tax rate of 18.0%, for the nine months ended September 30, 2023.

The lower effective tax rate for the nine months ended September 30, 2024 when compared with the nine months ended September 30, 2023 is primarily due to an increase in favorable discrete items.

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

During the six months ended June 30, 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.

During the nine months ended September 30, 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 June 30, 2024, we had cash and cash equivalents of $319 million and undrawn availability under our revolving line of credit of $560 million, giving us total liquidity of approximately $879 million.

During the six months ended June 30, 2024, our liquidity decreased by approximately $91 million from December 31, 2023 primarily due to cash used in capital expenditures, dividends and share repurchases, partially offset by cash generated from operations.

At September 30, 2024, we had cash and cash equivalents of $352 million and undrawn availability under our revolving line of credit of $600 million, giving us total liquidity of approximately $952 million.

During the nine months ended September 30, 2024, our liquidity decreased by approximately $19 million from December 31, 2023 primarily due to cash used in capital expenditures, dividends and share repurchases, partially offset by cash generated from operations.

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

Additionally on October 8, 2024, our existing revolving line of credit was increased from $600 million to $800 million and the maturity was extended from April 1, 2026 to October 8, 2029.

See Note J – “Long-Term Obligations” for additional details on financing transaction.

We believe these measures will provide us with adequate liquidity to comply with our financial covenants under our bank credit facility, continue to support internal operating initiatives and meet our operating and debt service requirements for at least the next 12 months from the date of issuance of this quarterly report.

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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 high interest rates.

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

• As our sales change, the amount of working capital needed to support our business may change.

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

We had free cash flow of $42.4 million for the three months ended June 30, 2024 and free cash use of $26.5 million for the six months ended June 30, 2024.

We had free cash flow of $88 million and $61 million for the three and nine months ended September 30, 2024, respectively.

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

Three Months Ended

6/30/2024 Six Months Ended

9/30/2024 Nine Months Ended

Net cash provided by (used in) operating activities $ 117 $ 149

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Free cash flow (use) $ 88 $ 61

Pursuant to terms of our trade accounts receivable factoring arrangements, during the six months ended June 30, 2024, we sold, without material recourse, approximately $375 million of trade accounts receivable to enhance liquidity.

Working capital as a percent of trailing three month annualized net sales was 22.2% at June 30, 2024.

The following tables show the calculation of our working capital and trailing three months annualized sales as of June 30, 2024 (in millions):

Pursuant to terms of our trade accounts receivable factoring arrangements, during the nine months ended September 30, 2024, we sold, without material recourse, approximately $523 million of trade accounts receivable to enhance liquidity.

Working capital as a percent of trailing three month annualized net sales was 26.3% at September 30, 2024.

The following tables show the calculation of our working capital and trailing three months annualized sales as of September 30, 2024 (in millions):

Three Months Ended

June 30, 2024

September 30, 2024

Trailing three month annualized net sales

June 30, 2024

September 30, 2024

Inventories $ 1,222

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Working capital

Revolving line of credit (the “Revolver”) borrowings at June 30, 2024 were $40.0 million.

At June 30, 2024, the weighted average interest rate was 7.09% 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 Terex Financial Services to drive incremental sales by facilitating customer financing.

During the six months ended June 30, 2024, we repurchased 336,092 shares for $19.1 million leaving approximately $113 million available for repurchase under our share repurchase programs.

Our Board declared a dividend of $0.17 per share in the first and second quarters of 2024, which was paid to our shareholders.

In July 2024, our Board of Directors declared a dividend of $0.17 per share, which will be paid on September 19, 2024 to our shareholders of record as of August 9, 2024.

We had no revolving line of credit (the “Revolver”) borrowings at September 30, 2024.

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

We remain focused on the use of Terex Financial Services to drive incremental sales by facilitating customer financing solutions in key markets.

During the nine months ended September 30, 2024, we repurchased 562,371 shares of common stock for $31 million leaving approximately $101 million available for repurchase under our share repurchase programs.

Our Board declared a dividend of $0.17 per share in each of the first, second and third quarters of 2024, which were paid to our shareholders.

In October 2024, our Board declared a dividend of $0.17 per share, which will be paid on December 19, 2024 to our shareholders of record as of November 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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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 $32.6 million and $129.8 million for the six months ended June 30, 2024 and 2023, respectively.

The decrease in cash provided by operations was primarily driven by higher working capital.

Cash used in investing activities was $51.3 million and $21.0 million for the six months ended June 30, 2024 and 2023, respectively.

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

Cash used in financing activities was $22.4 million and $119.0 million for the six months ended June 30, 2024 and 2023, respectively.

The decrease in cash used in financing activities was primarily due to lower debt repayments and share repurchases, partially offset by lower debt borrowing.

Cash provided by operations was $149 million and $269 million for the nine months ended September 30, 2024 and 2023, respectively.

The decrease in cash provided by operations was primarily driven by lower operating profitability and higher working capital.

Cash used in investing activities was $80 million and $54 million for the nine months ended September 30, 2024 and 2023, respectively.

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

Cash used in financing activities was $88 million and $161 million for the nine months ended September 30, 2024 and 2023, respectively.

The decrease in cash used in financing activities was primarily due to debt repayments in 2023.

OFF-BALANCE SHEET ARRANGEMENTS

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

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

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

CONTINGENCIES AND UNCERTAINTIES

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

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

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

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

See Note K – “Litigation and Contingencies” in the Notes to Condensed Consolidated Financial Statements for more information regarding contingencies and uncertainties.

See Note L – “Litigation and Contingencies” in the Notes to Condensed Consolidated Financial Statements for more information regarding contingencies and uncertainties.

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