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Item 7. Management’s Discussion and Analysis

2025-02-07 compared with 2024-02-09 · 181 added, 107 removed, 282 unchanged (51% 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, waste and recycling, minerals and materials management, construction, 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.

We report our business in the following segments:

(i) MP and (ii) AWP.

(i) MP, (ii) AWP, and (iii) ESG.

Further information about our reportable segments appears below and in Note B – “Business Segment Information” in the Notes to Consolidated Financial Statements.

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generally accepted accounting principles) and non-GAAP financial measures.

These non-GAAP measures may not be comparable to similarly titled measures disclosed by other companies.

We present non-GAAP financial measures in reporting our financial results to provide investors with additional analytical tools which we believe are useful in evaluating our operating results and the ongoing performance of our underlying businesses.

These non-GAAP measures may not be comparable to similarly titled measures being disclosed by other companies.

Management believes that presenting these non-GAAP financial measures provides investors with additional analytical tools which are useful in evaluating our operating results and the ongoing performance of our underlying businesses because they (i) provide meaningful supplemental information regarding financial performance by excluding impact of one-time items and other items affecting comparability between periods, (ii) permit investors to view performance using the same tools that management uses to budget, make operating and strategic decisions, and evaluate our core operating performance across periods, and (iii) otherwise provide supplemental information that may be useful to investors in evaluating our financial results.

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

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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 2024 outlook for earnings per share is a non-GAAP financial measure because it excludes unusual items.

Our 2025 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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The ratio calculated by dividing working capital by trailing three months annualized net sales is a non-GAAP measure we believe measures our resource use efficiency.

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

Safety remains our top priority;

driven by Think Safe – Work Safe – Home Safe.

All Terex team members contributed to our effort of continuing to provide products and services for our customers, while maintaining a safe working environment.

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

Safety is a top priority, not only for our team members, but also our customers.

All Terex team members contribute to our effort of continuing to provide products and services for our customers, while maintaining a safe working environment.

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 2023, maintaining their focus on improving deliveries to our customers and continuing with cost reduction and productivity improvement initiatives.

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

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

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

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

Net sales of $5.2 billion were up 17% year-over-year as end-markets remained strong.

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

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

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

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

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

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

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

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

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

Our mobile crushing and screening businesses are benefiting from the strength of aggregates and recycled materials.

Growth of environmental and waste recycling solutions is driving demand for our wood processing, biomass and recycling equipment.

MP’s 16.1% operating margin for the year, up 80 basis points as compared to the prior year, was driven by higher sales volume, favorable mix and improved manufacturing efficiencies.

Although we are seeing some softness in European order activity, MP’s backlog of $768 million remains healthy, supporting our 2024 outlook.

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

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

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

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

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

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

AWP delivered operating margins of 12.7% in 2023, an improvement of 480 basis points, driven by higher sales volumes, manufacturing efficiencies, cost reduction initiatives and disciplined pricing actions to offset higher costs.

AWP continues to have a robust backlog of $2.6 billion, supporting our 2024 outlook.

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

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

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 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.

The implementation of the Terex Operating System (“TOS”) is an important part of our execution improvement journey.

We are evaluating our global footprint, focusing on opportunities to reduce fixed costs while improving operating performance.

When it comes to innovation, we have a very exciting new product development pipeline focused on maximizing return on investment for our customers.

We also continue to invest in robotics, automation, and digitizing workstreams to make our operations 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.

Overall, 2024 financial performance demonstrated continued, strong execution and focus on delivering for our customers and dealers despite continued macroeconomic volatility resulting in the second highest full-year earnings per share performance in our history.

Our MP and aerials businesses adapted quickly to channel adjustments in the second half of the year, reducing costs and stepping down production levels to align with demand.

ESG executed very well in the fourth quarter, their first quarter as a part of Terex.

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

election cast a shadow of uncertainty leading to more cautious decision-making as 2024 progressed.

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 $2.3 billion is consistent with historical norms and lower lead times.

Bookings also reflect a return to more normal seasonality.

MP executed well in 2024 despite a challenging macro environment.

MP sales declined in 2024 by 15% to $1.9 billion compared to 2023, driven by channel adjustments and challenging macroeconomic factors in Europe, especially in the second half of 2024.

On the Aggregates side, we saw machines on rent longer than usual, impacting dealers’ replenishment of new units.

In addition, the European market was weak throughout 2024 which initially impacted Material Handling, Cranes and eventually Aggregates.

MP delivered an operating margin of 13.2% for the year, down 290 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 to reduce cost, including factory and other layoffs, reduced work schedules and other cost reduction initiatives.

AWP’s 2024 sales were up 3% compared to the prior year, with similar growth rates in Aerials and Terex Utilities.

Growth in the first three quarters more than offset the declines we saw in the fourth quarter when deliveries to rental customers were lower than the prior year.

We were encouraged to see market share gains resulting from new products and other customer-focused improvements made by the team.

AWP delivered operating margins of 11.4% for 2024, down 130 basis points compared to the prior year, driven by second half channel adjustments, production cuts and unfavorable mix.

In 2024, our largest market remained North America, which represented approximately 66% of our global sales.

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

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

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

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

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

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

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

We continue to maintain ample liquidity and as of December 31, 2023, we had $971 million in available liquidity, with no near-term debt maturities.

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

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

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.

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

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

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 2024 as we funded the ESG acquisition at favorable rates and terms and maintained our corporate ratings, made strategic investments in our businesses and we returned capital to shareholders.

We continued to invest in our businesses with $137 million deployed for capital expenditures in the 2024 to support business growth.

We generated $190 million of free cash flow in 2024.

We also returned $92 million to shareholders through share repurchases and dividends in 2024.

We continued to maintain ample liquidity and as of December 31, 2024, we had $1,188

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.

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.

Looking at our global markets for 2025, we continue to see strength in Waste and Recycling, Utilities and Infrastructure, while the General Construction and Industrial and Commercial sectors are generally stable with upside potential.

We are encouraged by the improved sentiment that followed the U.S.

election in November.

The new administration’s focus on easing the regulatory environment for new projects and encouraging growth and investment in the U.S.

are stimulants for many of our end markets.

With over two-thirds of our revenue coming from North America, a strong U.S.

economy is an important overall tailwind for us.

We are closely following the administration’s approach to international trade policy.

The majority of the products we sell in the United States, we make in the United States which limits our exposure.

Moreover, we initiated mitigation actions last year in anticipation of additional tariffs, leveraging our global capabilities to manage the impact.

As a global company with a significant footprint in the United States and around the world, we have optionally and are ready to take additional actions if needed.

See Part I, Item 1A.

– “Risk Factors” for a detailed description of the risks resulting from the imposition of new or increased international tariffs.

Another important macro headwind is the elevated level of interest rates and uncertainty around the Fed’s outlook.

We continue to see strong public sector spending on infrastructure, manufacturing and utilities, but rate-sensitive private projects continue to be impacted by the higher rates.

Turning to Europe, we continue to see a generally weak economic environment.

We remain encouraged by increasing adoption of our products in emerging markets such as India, Southeast Asia, the Middle East, and Latin America.

We expect the channel dynamics that impacted our Aerials and MP businesses in the back half of 2024 to carry into the first half of 2025.

We also expect ESG and Terex Utilities to carry strong momentum into 2025 and continue to grow.

We expect overall growth in 2025 as a result of the full-year contribution of ESG, anticipating net sales of [$5.3] to [$5.5] billion.

We expect 2025 earnings per share of between [$4.70] and [$5.10] on lower legacy operating profit, partially offset by ESG accretion.

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.

Our outlook excludes the potential impact of recently announced tariffs.

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

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

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

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

In the calculation of ROIC, we adjust income (loss) from operations, effective tax rate, and stockholders’ equity to remove the effects of the impact of certain transactions in order to create a measure that is more useful to understanding our operating results and the ongoing performance of our underlying business excluding the impact of unusual items as shown in the tables below.

Our management and Board use ROIC as one measure to assess operational performance, which is also included in 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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15.6 % 15.6 % 15.6 % 15.6 %

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

Income (loss) from operations as adjusted

97 127 196 162

Multiplied by:

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84.4 % 84.4 % 84.4 % 84.4 %

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

Net operating income (loss) after tax as adjusted

$ 82 $ 107 $ 165 $ 137

Debt $ 2,584 $ 628 $ 666 $ 724 $ 623

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Debt less Cash and cash equivalents 2,196 276 347 359 252

Stockholders’ equity 1,672.3 1,496.2 1,432.2 1,294.6 1,181.2

Debt less Cash and cash equivalents plus Stockholders’ equity $ 1,924.8 $ 1,852.6 $ 1,871.2 $ 1,817.4 $ 1,652.6

Stockholders’ equity as adjusted

1,918 1,993 1,850 1,751 1,682

Debt less Cash and cash equivalents plus Stockholders’ equity as adjusted

$ 4,114 $ 2,269 $ 2,197 $ 2,110 $ 1,934

December 31, 2024 ROIC

NOPAT as adjusted (last 4 quarters) $ 491

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

Average Debt less Cash and cash equivalents plus Stockholders’ equity as adjusted (5 quarters)

Three months ended 12/31/24

Three months ended 9/30/24

Three months ended 6/30/24

Three months ended 3/31/24

Reconciliation of income (loss) from operations:

Income (loss) from operations as reported $ 53 $ 122 $ 193 $ 158

Accelerated vesting / severance

Purchase price accounting

Deal related 2 — — —

Income (loss) from operations as adjusted $ 97 $ 127 $ 196 $ 162

As of 12/31/24 As of 9/30/24 As of 6/30/24 As of 3/31/24 As of 12/31/23

Reconciliation of Stockholders’ equity:

Stockholders’ equity as reported $ 1,832 $ 1,957 $ 1,824 $ 1,732 $ 1,672

Effects of adjustments, net of tax:

Accelerated vesting / severance

25 21 17 14 11

Purchase price accounting

Product liability

Mark-to-market

10 10 4 2 (4)

Stockholders’ equity as adjusted $ 1,918 $ 1,993 $ 1,850 $ 1,751 $ 1,682

Twelve Months Ended

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Effect of adjustments:

Accelerated vesting / severance

Purchase price accounting

Mark-to-Market

Tax related to Swiss deferred tax asset

Foreign tax redetermination UTP

As adjusted $ 499 $ (78) 15.6 %

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Income from operations 526 10.3 % 637 12.4 % 420 9.5 % (17.4) %

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

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

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

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

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

Income from operations for the year ended December 31, 2023 increased by $216.5 million when compared to 2022.

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

Net sales for the year ended December 31, 2024 decreased $25 million when compared to 2023 primarily due to lower end-market demand across certain product lines and geographies within MP, partially offset by sales generated from the newly acquired ESG business and increased demand for booms and telehandlers in North America.

Gross profit for the year ended December 31, 2024 decreased $109 million when compared to 2023 primarily due to the impact of lower sales volume, unfavorable absorption and mix, and higher severance costs, partially offset by cost reductions.

SG&A expenses for the year ended December 31, 2024 increased $2 million when compared to 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 year ended December 31, 2024 decreased by $111 million when compared to 2023 primarily due to the impact of lower sales volume, unfavorable absorption and mix, and higher severance costs, partially offset by cost reduction and lower compensation cost.

Materials Processing

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Income from operations 252 13.2 % 359 16.1 % 298 15.3 % (29.8) %

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

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

Net sales for the year ended December 31, 2024 decreased by $325 million when compared to 2023 primarily due to channel adjustments and lower end-market demand across certain product lines and geographies.

Income from operations for the year ended December 31, 2024 decreased $107 million when compared to 2023 primarily due to lower sales volume and unfavorable product and geographic mix as well as higher severance costs, partially offset by cost reductions.

Aerial Work Platforms

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Income from operations 342 11.4 % 371 12.7 % 196 7.9 % (7.8) %

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

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

Net sales for the year ended December 31, 2024 increased $74 million when compared to 2023 primarily due to increased demand for booms and telehandlers in North America.

Income from operations for the year ended December 31, 2024 decreased $29 million when compared to 2023 primarily due to unfavorable product mix, and unfavorable absorption from reduced production in the second half of the year, partially offset by incremental profit achieved on higher sales volume and reduced SG&A expenses.

Environmental Solutions Group

2024 2023 2022

Sales % Change in Reported Amounts 2024 vs 2023

($ amounts in millions)

Net sales $ 228 — $ — — $ — — *

Income from operations 12 5.3 % — * — * *

* Not a meaningful percentage

Net sales and Income from operations represent the results of operations from acquisition date of October 8, 2024 through December 31, 2024 related to the newly acquired ESG business.

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

Corporate and Other / Eliminations

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* Not a meaningful percentage

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

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

Loss from operations for the year ended December 31, 2024 decreased $13 million when compared to 2023.

The decrease in operating loss is primarily due to lower compensation cost and the favorable changes in foreign exchange performance, partially offset by higher severance costs.

2024 2023 2022

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Interest (expense), net of interest income $ (76) $ (56) $ (46) (35.7) %

Loss on early extinguishment of debt — (0.3) (29.4) *

Other income (expense) – net (42) (1) (7) *

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Interest Expense, Net of Interest Income

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

Loss on Early Extinguishment of Debt

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

During the year ended December 31, 2024, interest expense, net of interest income, was $76 million or $20 million higher when compared to 2023 primarily due to the issuance of additional debt to finance the ESG acquisition, partially offset by reduced borrowing from the revolving line of credit and higher interest income in the current year.

Other Income (Expense) – Net

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

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

Other income (expense) – net for the year ended December 31, 2024 was an expense of $42 million, compared to $1 million in 2023.

The increase in expense was primarily due to transaction costs related to ESG acquisition and higher mark-to-market losses recorded on an equity investment in 2024 compared to gains recorded in 2023, partially offset by favorable impact of changes in foreign exchange rates and lower non-service cost portion of pension expense in 2024.

During the year ended December 31, 2024, we recognized income tax expense of $73 million on income of $408 million, an effective tax rate of 17.8%, as compared to income tax expense of $63 million on income of $580 million, an effective tax rate of 10.9%, for the year ended December 31, 2023.

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

The higher effective tax rate for the year ended December 31, 2024 when compared to the year ended December 31, 2023 was primarily due to one-time tax benefit in 2023 derived from recording of a deferred tax asset in relation to our Swiss operations.

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

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

During the year ended December 31, 2023, we recognized a gain (loss) on disposition of discontinued operations - net of tax of $1 million.

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

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

CRITICAL ACCOUNTING ESTIMATES

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The loss recognized would not exceed total amount of goodwill allocated to that reporting unit.

In connection with the annual impairment test conducted as of October 1, 2024, we bypassed the qualitative assessment and proceeded directly to the quantitative impairment test.

The quantitative assessment indicated that each reporting unit had an estimated fair value which substantially exceeded its respective carrying amount at the annual impairment test date.

Business Combinations – We use the acquisition method of accounting for acquired businesses that meet the criteria to be accounted for as a business combination, whereby the fair value of total consideration transferred is allocated to the assets acquired and liabilities assumed based on their respective estimated fair values as of the date of acquisition.

The allocation of the purchase price in a business combination requires us to perform valuations with significant judgment and estimates.

As such, in the case of significant acquisitions, we engage the assistance of third-party valuation specialists in estimating the fair value of certain assets acquired and liabilities assumed.

Various valuation methodologies may be used in estimating the fair value of assets acquired and liabilities assumed based on the nature of the underlying asset or liability.

Inventory acquired is valued using a combination of the replacement cost and comparative sales methodologies, while property acquired is valued using a combination of the market and replacement cost new approaches.

Intangible assets acquired, including customer relationships and trademarks and developed technologies, are valued using an income-based approach.

The income approach utilizes inputs that require significant assumptions for each identifiable intangible asset, including estimates regarding future revenue growth, profitability, discount rates, attrition rates, royalty rates and economic lives.

Revenue growth assumptions (along with profitability assumptions) are based on historical trends and management’s expectations for future growth.

Discount rates are based on a weighted-average cost of capital utilizing industry market data of similar companies.

Attrition rates are estimated based on historical customer experience and analysis of comparable peer transactions.

Royalty rates are determined based on profit levels, research of external royalty rates by third-party specialists and the relative importance of each trademark to our Company.

The fair value estimates are based on available historical information and on expectations and assumptions about the future, considering the perspective of marketplace participants.

While we believe those expectations and assumptions are reasonable, they are inherently uncertain.

Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.

Additionally, determining the useful lives of tangible and intangible assets requires judgment, as different types of assets will have different useful lives.

During the measurement period, not to exceed one year from the date of acquisition, we may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill if new information is obtained related to facts and circumstances that existed as of the acquisition date.

After the measurement period, any subsequent adjustments are reflected in the consolidated statements of operations.

Acquisition costs, such as legal and consulting fees, are expensed as incurred.

Long-Lived Assets – We assess the realizability of our long-lived assets, including definite-lived intangible assets, and evaluate such assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets (or group of assets) may not be recoverable.

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

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

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

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

On December 15, 2022, the European Union (“EU”) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15% for large corporations, as established by the Organization for Economic Co-operation and Development (“OECD”) Pillar Two Framework.

A number of countries in which we operate have adopted legislation, many of which are effective in 2024 subject to the OECD transitional safe harbor rules, while other countries are still in the process of introducing legislation.

In addition, the OECD continues to issue guidance on this matter including the technical documents released on January 15, 2025.

Among this release, the OECD issued Administrative Guidance on the application of the Global Anti-Base Erosion (GloBE) Model Rules.

While we determined the impact of enacted Pillar Two legislation on our financial statements is not material, we will continue to evaluate the financial statement impacts as additional Pillar Two rules are enacted and OECD guidance is issued, including the documents recently released.

RECENT ACCOUNTING STANDARDS

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At December 31, 2024, we had cash and cash equivalents of $388 million and undrawn availability under our revolving line of credit of $800 million, giving us total liquidity of approximately $1,188 million.

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

During the year ended December 31, 2024, our liquidity increased by approximately $217 million from December 31, 2023 primarily due to an increase in our revolving line of credit.

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 2029 and we have increased our focus on free cash flow generation.

We have no significant debt maturities until 2029.

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.

• 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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• Sales of our products are subject to general economic conditions, weather, competition, translation effect of foreign currency exchange rate changes, and other factors that in many cases are outside our direct control.

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 accounts receivable sales programs.

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

• 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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Free cash flow (use)

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

Pursuant to terms of our trade accounts receivable factoring arrangements, during the year ended December 31, 2024, we sold, without material recourse, approximately $715 million of trade accounts receivable to enhance liquidity.

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Working capital

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.

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

We remain focused on use of TFS to drive incremental sales by facilitating customer financing solutions in key markets.

On October 8, 2024, we acquired ESG for cash consideration of $2,010 million.

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

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

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

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

The Company financed the purchase price and related fees and expenses using the net proceeds from senior notes, new term loan borrowings and cash on hand.

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

During the year ended December 31, 2024, we repurchased 860,674 shares of common stock for $46 million leaving approximately $86 million available for repurchase under our share repurchase programs.

Our Board declared a dividend of $0.17 per share in each quarter of 2024, which were paid to our stockholders.

In February 2025, our Board declared a dividend of $0.17 per share, which will be paid on March 19, 2025 to our stockholders of record as of March 7, 2025.

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

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

As of December 31, 2024, the Company had outstanding debt of $2,554 million, with no payment due within 12 months, exclusive of minimum lease payments for capital lease obligations and secured borrowings.

Future interest payments associated with the outstanding debt are approximately $645 million with $152 million payable within 12 months.

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In many cases, cancellable commitments contain penalty provisions for cancellation.

We reported a liability of $6.4 million related to unrecognized tax benefits as of December 31, 2023 and do not expect this liability to change materially in 2024.

As such, any related payments in 2024 should not be significant.

We reported a liability of $18 million related to unrecognized tax benefits as of December 31, 2024.

We expect this liability to decrease approximately by $4 million due to payments related to expected effective audit settlement in 2025.

Additionally, at December 31, 2024, we had outstanding letters of credit that totaled $95 million and maximum exposure of $72 million for credit guarantees outstanding related to recourse provided to third-party financial institutions when customers finance the purchase of equipment.

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Changes in market conditions, changes in our funding levels or actions by governmental agencies may result in accelerated funding requirements in future periods.

In 2024, we expect approximately $145 million in capital expenditures, with our largest expenditure related to our manufacturing facility in Mexico.

In 2025, we expect approximately $120 million in capital expenditures, with our largest expenditures related to our manufacturing facility in Mexico and transformation initiatives.

Cash provided by operations was $326 million and $459 million for the years ended December 31, 2024 and 2023, respectively.

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

The decrease in cash provided by operations was primarily driven by lower operating profitability.

Cash used in investing activities was $2,127 million and $114 million for the years ended December 31, 2024 and 2023, 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, partially offset by higher capital expenditures in the current year.

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

The 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.

The increase in cash used in investing activities relates primarily to the acquisition of ESG.

Cash provided by financing activities was $1,837 million for the year ended December 31, 2024, compared to cash used in financing activities of $288 million for the year ended December 31, 2023.

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

OFF-BALANCE SHEET ARRANGEMENTS

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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 N – “Litigation and Contingencies” in the Notes to 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 N – “Litigation and Contingencies” in the Notes to 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-K

Item 7. Management’s Discussion and Analysis