TEREX CORP 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BUSINESS DESCRIPTION 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, 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) Aerials, (ii) Materials Processing (“MP”) and (iii) Environmental Solutions (“ES”). Further information about our reportable segments appears below and in Note B – “Business Segment Information” in the Notes to Condensed Consolidated Financial Statements. Non-GAAP Measures In this document, we refer to various GAAP (U.S. generally accepted accounting principles) and non-GAAP financial measures. 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 provide 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. Non-GAAP measures also include translation effect of foreign currency exchange rate changes on net sales, gross profit, selling, general & administrative (“SG&A”) expenses and operating profit. As changes in foreign currency exchange rates have a non-operating impact on our financial results, we believe excluding effects of these changes assists in assessment of our business results between periods. We calculate the translation effect of foreign currency exchange rate changes by translating current period results using rates that the comparable prior periods were translated at to isolate the foreign exchange component of fluctuation from the operational component. We calculate a non-GAAP measure of free cash flow. We define free cash flow as Net cash provided by (used in) operating activities less Capital expenditures, net of proceeds from sale of capital assets. 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, tariffs, trade policies and other 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. The unavailable information could have a significant impact on the Company’s full-year 2025 GAAP financial results. This forward-looking information provides guidance to investors about our EPS expectations excluding these unusual items that we do not believe are reflective of our ongoing operations. Working capital is calculated using the Condensed Consolidated Balance Sheet amounts for Receivables (net of allowance) plus Inventories, less Trade accounts payable, Customer advances and Short-term unearned revenue. We view excessive working capital as an inefficient use of resources, and seek to minimize the level of investment without adversely impacting ongoing operations of the business. Trailing three months annualized net sales is calculated using net sales for the most recent quarter 29 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. Non-GAAP measures also include Net Operating Profit After Tax (“NOPAT”) as adjusted, operating profit as adjusted, annualized effective tax rate as adjusted and stockholders’ equity 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. Overview 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. Macro cross-currents continue to impact end market demand and channel dynamics. We view the One Big Beautiful Bill Act as largely positive as key provisions, particularly the reinstatement of 100% bonus depreciation, are supportive of equipment demand and increased U.S. industrial activity. Moreover, the bill includes new bonus depreciation for Qualified Production Property, allowing newly constructed non-residential real estate to benefit from 100% bonus depreciation, which we believe will support increased US manufacturing capital expenditures. The bill also allocates significant funds to construction spending, particularly border infrastructure and defense. Running counter to these policy tailwinds are persistently high interest rates and tariff-related uncertainty that continue to impact capital decisions in certain areas. A key strength of the Terex portfolio is the diversification of our end markets. Last year’s Environmental Solutions Group (“ESG”) acquisition significantly expanded our exposure to the waste and recycling end market. Waste and Recycling now represents approximately 30% of our global revenue and is characterized by low cyclicality and steady growth. Utilities makes up about 10% and is growing due to the need to expand and strengthen the power grid. About 15% of our business is related to Infrastructure where significant investment continues to be put in place in the United States and around the world. These three markets, representing more than half of our revenue, are highly resilient and less exposed to macroeconomic or geo-political dynamics than other areas. Another benefit of the ESG acquisition was the opportunity to unlock considerable synergy value across Terex. We are running well ahead of our initial targets and continue to find more opportunities for leverage across our portfolio of businesses. Our overall performance in the quarter was in line with our expectations, despite tight monetary policies, changing trade policies and geopolitical tensions. This is a testament to the strength of the Terex portfolio that headwinds faced by Aerials were offset by continued strong performance in ES and MP delivering on its planned sequential improvements. Net sales of $1.5 billion grew 8% year over year. Excluding ESG, our legacy sales declined by 12%, consistent with our expectation. Our operating margin was 8.7%, down 530 basis points year over year, consistent with our planned sequential improvement. Stronger ES margins offset lower than expected margins in Aerials. Our bookings trends have returned to normal seasonal patterns. Our backlog remains healthy at $2.2 billion and supports our outlook for the second half of 2025. Aerials second quarter 2025 sales of $607 million was consistent with our expectations but the customer mix was more heavily weighted to our national customers than we anticipated. Independent customers were cautious and held back on capital expenditure deployment given the high degree of macro uncertainty. National customers continue to benefit disproportionately from mega-projects and infrastructure construction and they continued to execute their replacement-focused capex plans. Aerials operating margin improved sequentially on better manufacturing absorption, but was lower than we expected largely because of customer mix. MP second quarter 2025 sales of $454 million were 9% lower than last year, but in line with our expected increase from first quarter 2025. We continue to see high fleet utilization rates in the United States and normalization of dealer stock levels. However, macro uncertainty and high interest rates remain a headwind for rent to own conversions and the European market remained weak in the quarter. As expected, MP began to improve operating margins from the first quarter levels, increasing to 10.8% in the second quarter. Most of the improvement was in the Aggregates vertical while the Cranes and Handling businesses remained challenging. Our ES segment had another strong quarter, generating $430 million in sales with year over year and sequential growth in both ESG and Terex Utilities. Within ESG, operational improvements drove margin gains on Heil refuse collection vehicles and Marathon compactors. Utilities benefited from a positive customer and product mix and improved operational execution. In the second quarter of 2025, our largest market remained North America, which represented approximately 73% of our global sales. As compared to the prior year, sales were up in North America, driven by the ESG acquisition, and down in all other 30 major geographies. Adding ESG made Terex a more US-centric company, which we believe is advantageous in the current geopolitical environment. Based on 2025 outlook, approximately 75% of our U.S. machine sales is generated by products that we produce in our 11 manufacturing locations in the United States. We continued to execute our capital allocation strategy as we made strategic investments in our businesses and we returned capital to shareholders. We continued to maintain ample liquidity and as of June 30, 2025, we had $1.2 billion 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. We are closely following the administration’s approach to international trade policy and the responses from countries around the world. The majority of the products we sell in the United States, we make in the United States which largely limits our exposure. Moreover, we initiated mitigation actions last year and in the first half of 2025 in anticipation of additional tariffs, leveraging our global capabilities to manage the impact. Like other industrial companies, we have a global supply base and are exposed to tariffs on imported material. A key element of our tariff mitigation plan was working closely with our global suppliers to absorb the added cost and forward-place inventory in the United States to buffer the impact of the new tariffs. In addition, we are leveraging the global sourcing capabilities we developed during the first Trump administration and the post-Covid supply chain crisis, to re-balance supply to more favorable sources, among other actions. As a global company with a significant footprint in the United States and around the world, we have optionality and are ready to take additional actions if needed. See Part II, Item 1A. – “Risk Factors” for a detailed description of the risks resulting from the imposition of new, postponed or increased international tariffs. We continue to expect growth in 2025, anticipating net sales of $5.3 to $5.5 billion, as a result of the ESG acquisition more than offsetting year-over-year declines in legacy sales. We are maintaining our full-year earnings per share outlook of $4.70 and $5.10 on lower legacy operating profit, partially offset by ESG accretion. Our outlook assumes that tariffs broadly remain at current rates and reasonable deals are made with key countries. It is important to realize we are operating in a complex environment with many macroeconomic variables and geopolitical uncertainties, so results could change, negatively or positively. 31 ROIC ROIC and other Non-GAAP Measures (as calculated below) assist in showing how effectively we utilize capital invested in our operations. ROIC is determined by dividing the sum of NOPAT for each of the previous four quarters by the average of Debt less Cash and cash equivalents plus Stockholders’ equity for the previous five quarters. NOPAT for each quarter is calculated by multiplying Operating profit by one minus the annualized effective tax rate, as adjusted. Debt is calculated using amounts for Current portion of long-term debt plus Long-term debt, less current portion. We calculate ROIC using the last four quarters’ NOPAT as this represents the most recent 12-month period at any given point of determination. In order for the denominator of the ROIC ratio to properly match the operational period reflected in the numerator, we include the average of five quarters’ ending balance sheet amounts so that the denominator includes the average of the opening through ending balances (on a quarterly basis) thereby providing, over the same time period as the numerator, four quarters of average invested capital. In the calculation of ROIC, we adjust operating profit, annualized 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 of Directors (“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. We believe ROIC measures return on the amount of capital invested in our businesses and is an accurate and descriptive measure of our performance. 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, 2025 was 12.3%. Amounts described below are reported in millions of U.S. dollars, except for the annualized effective tax rate as adjusted. Amounts are as of and for the three months ended for the periods referenced in the tables below. Jun '25 Mar '25 Dec '24 Sep '24 Jun '24 Annualized effective tax rate as adjusted (1) 15.7 % 15.7 % 15.6 % 15.6 % Operating profit as adjusted $ 164 $ 111 $ 97 $ 127 Multiplied by: 1 minus annualized effective tax rate as adjusted 84.3 % 84.3 % 84.4 % 84.4 % Net operating income (loss) after tax as adjusted $ 138 $ 94 $ 82 $ 107 Debt $ 2,593 $ 2,586 $ 2,584 $ 628 $ 666 Less: Cash and cash equivalents (374) (298) (388) (352) (319) Debt less Cash and cash equivalents 2,219 2,288 2,196 276 347 Stockholders’ equity as adjusted 2,094 1,947 1,899 1,974 1,830 Debt less Cash and cash equivalents plus Stockholders’ equity as adjusted $ 4,313 $ 4,235 $ 4,095 $ 2,250 $ 2,177 (1) The annualized effective tax rate as adjusted for each 2024 period represents the adjusted full-year 2024 effective tax rate. June 30, 2025 ROIC 12.3 % NOPAT as adjusted (last 4 quarters) $ 421 Average Debt less Cash and cash equivalents plus Stockholders’ equity as adjusted (5 quarters) $ 3,414 32 Three months ended 6/30/2025 Three months ended 3/31/2025 Three months ended 12/31/2024 Three months ended 9/30/2024 Reconciliation of operating profit: Operating profit as reported $ 129 69 $ 53 $ 122 Adjustments: Restructuring and other 12 6 4 5 Purchase price accounting 20 21 38 — Deal related 3 5 2 — Litigation related — 10 — — Operating profit as adjusted $ 164 $ 111 $ 97 $ 127 As of 6/30/2025 As of 3/31/2025 As of 12/31/2024 As of 9/30/2024 As of 6/30/2024 Reconciliation of Stockholders’ equity: Stockholders’ equity as reported $ 1,965 $ 1,844 $ 1,832 $ 1,957 $ 1,824 Effects of adjustments, net of tax: Restructuring and other 26 15 11 7 3 Purchase price accounting 67 50 32 — — Deal related 24 21 16 2 2 Litigation related 8 8 — — — Equity security related 4 9 8 8 1 Stockholders’ equity as adjusted $ 2,094 $ 1,947 $ 1,899 $ 1,974 $ 1,830 Six Months Ended June 30, 2025 Income (loss) before income taxes (Provision for) benefit from income taxes Income tax rate Reconciliation of annualized effective tax rate: As reported $ 115 $ (22) 18.9 % Effect of adjustments: Restructuring and other 18 (4) Purchase price accounting 42 (10) Deal related 10 (2) Equity security related (5) 1 Litigation related 10 (2) Tax related benefit (1) — 2 Tax related to full-year effective tax rate expectation — 3 Tax related to Swiss deferred tax asset — 4 As adjusted $ 190 $ (30) 15.7 % (1) The amount represents tax benefit arising from tax planning associated with restructuring activity. 33 RESULTS OF OPERATIONS Three Months Ended June 30, 2025 Compared with Three Months Ended June 30, 2024 Consolidated Three Months Ended June 30, 2025 2024 % of Sales % of Sales % Change In Reported Amounts ($ amounts in millions) Net sales $ 1,487 — $ 1,382 — 7.6 % Gross profit 291 19.6 % 329 23.8 % (11.6) % SG&A expenses 162 10.9 % 136 9.8 % 19.1 % Operating profit 129 8.7 % 193 14.0 % (33.2) % Net sales for the three months ended June 30, 2025 increased $105 million when compared to the same period in 2024, primarily due to sales generated from the recently acquired ESG business, partially offset by lower end-market demand across most product lines and geographies within Aerials and MP’s North America Aggregates business. Gross profit for the three months ended June 30, 2025 decreased $38 million when compared to the same period in 2024, primarily due to the impact of lower sales volume within Aerials and MP, as well as unfavorable mix and tariffs within Aerials, partially offset by strong ESG performance. SG&A expenses for the three months ended June 30, 2025 increased $26 million when compared to the same period in 2024, primarily due to additional compensation cost related to the recently acquired ESG business, as well as higher restructuring and integration costs, partially offset by lower compensation cost within Aerials and MP. Operating profit for the three months ended June 30, 2025 decreased $64 million when compared to the same period in 2024, primarily due to the impact of lower legacy sales volume, as well as unfavorable mix and tariffs in Aerials, partially offset by strong ESG performance and cost reduction actions within Aerials and MP. Aerials Three Months Ended June 30, 2025 2024 % of Sales % of Sales % Change In Reported Amounts ($ amounts in millions) Net sales $ 607 — $ 732 — (17.1) % Operating profit 46 7.6 % 115 15.7 % (60.0) % Net sales for the three months ended June 30, 2025 decreased $125 million when compared to the same period in 2024, primarily due to lower end-market demand across most product lines and geographies as rental customers deployed less capital expenditures, focusing primarily on replacement requirements. Operating profit for the three months ended June 30, 2025 decreased $69 million when compared to the same period in 2024, primarily due to lower sales volume, as well as unfavorable mix and tariffs, partially offset by cost reduction actions. Sales to independent rental customers were down proportionately more than sales to national rental customers. 34 Materials Processing Three Months Ended June 30, 2025 2024 % of Sales % of Sales % Change In Reported Amounts ($ amounts in millions) Net sales $ 454 — $ 499 — (9.0) % Operating profit 49 10.8 % 77 15.4 % (36.4) % Net sales for the three months ended June 30, 2025 decreased $45 million when compared to the same period in 2024, primarily due to lower channel requirements and end-market demand in our North America Aggregates business. Operating profit for the three months ended June 30, 2025 decreased $28 million when compared to the same period in 2024, primarily due to lower sales volume and higher restructuring costs, partially offset by cost reduction actions. Environmental Solutions Three Months Ended June 30, 2025 2024 % of Sales % of Sales % Change In Reported Amounts ($ amounts in millions) Net sales 430 — 152 — 182.9 % Operating profit 61 14.2 % 19 12.5 % 221.1 % Net sales for the three months ended June 30, 2025 increased $278 million when compared to the same period in 2024, primarily due to sales generated by the recently acquired ESG business and growth driven by strong throughput and delivery of refuse collection vehicles and strong book-to-bill installs in Terex Utilities. See Note D - “Acquisitions and Dispositions” in our Condensed Consolidated Financial Statements for additional information regarding the acquisition of ESG. Operating profit for the three months ended June 30, 2025 increased $42 million when compared to the same period in 2024, primarily due to operating profit generated by the recently acquired ESG business and continued margin improvements in both ESG and Terex Utilities. See Note D - “Acquisitions and Dispositions” in our Condensed Consolidated Financial Statements for additional information regarding the acquisition of ESG. Corporate and Other / Eliminations Three Months Ended June 30, 2025 2024 % of Sales % of Sales % Change In Reported Amounts ($ amounts in millions) Net sales $ (4) — $ (1) — (300.0) % Operating profit (loss) (27) * (18) * (50.0) % * Not a meaningful percentage Net sales for the three months ended June 30, 2025 decreased $3 million when compared to the same period in 2024, primarily due to changes in intercompany eliminations. 35 Operating loss for the three months ended June 30, 2025 increased $9 million when compared to the same period in 2024. The increase in operating loss is primarily due to integration costs and unfavorable impact of changes in foreign exchange rates. Interest Expense, Net of Interest Income Interest expense, net of interest income, for the three months ended June 30, 2025 and 2024 was $42 million and $13 million, respectively. The increase in expense is primarily due to the issuance of additional debt in the fourth quarter of 2024 to finance the ESG acquisition. Other Income (Expense) – Net Other income (expense) – net was an income of $2 million and an expense of $6 million for the three months ended June 30, 2025 and 2024, respectively. The increase in income is primarily due to net gains recorded on equity securities. Income Taxes During the three months ended June 30, 2025, we recognized income tax expense of $17 million on income of $89 million, an effective tax rate of 18.5%, as compared to income tax expense of $33 million on income of $174 million, an effective tax rate of 19.2%, for the three months ended June 30, 2024. The lower effective tax rate for the three months ended June 30, 2025 when compared with the three months ended June 30, 2024 is primarily due to an increase in favorable discrete items. 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 were 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 the Company has determined the impact of enacted Pillar Two legislation on its financial statements is not material, the Company will continue to evaluate the financial statement impacts as additional Pillar Two rules are enacted and OECD guidance is issued. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) (H.R.1) was signed in to law by the President of the United States. The OBBBA contains significant provisions impacting corporate taxation in the U.S. with multiple effective dates. Among the changes effective in 2025 are modifications to capitalization of domestic research and development costs, accelerated depreciation of fixed assets and other qualifying property, as well as limitations on deductions for interest expense. Changes effective in 2026 include, among others, modifications to certain international tax provisions. We are currently evaluating the provisions of the OBBBA to assess their impact on our financial position, results of operations and cash flows. Six Months Ended June 30, 2025 Compared with Six Months Ended June 30, 2024 Consolidated Six Months Ended June 30, 2025 2024 % of Sales % of Sales % Change In Reported Amounts ($ amounts in millions) Net sales $ 2,716 — $ 2,674 — 1.6 % Gross profit 521 19.2 % 626 23.4 % (16.8) % SG&A expenses 323 11.9 % 275 10.3 % 17.5 % Operating profit 198 7.3 % 351 13.1 % (43.6) % Net sales for the six months ended June 30, 2025 increased $42 million when compared to the same period in 2024, primarily due to sales generated from the recently acquired ESG business, partially offset by lower end-market demand across most product lines and geographies within Aerials and MP. 36 Gross profit for the six months ended June 30, 2025 decreased $105 million when compared to the same period in 2024, primarily due to the impact of lower sales volume and unfavorable absorption due to lower production volumes and mix within Aerials and MP, as well as tariffs within Aerials, partially offset by strong ESG performance. SG&A expenses for the six months ended June 30, 2025 increased $48 million when compared to the same period in 2024, primarily due to additional compensation cost related to the recently acquired ESG business, a one-time litigation related charge, and higher restructuring and integration costs, partially offset by lower compensation cost within Aerials and MP. Operating profit for the six months ended June 30, 2025 decreased $153 million when compared to the same period in 2024, primarily due to the impact of lower sales volume, production adjustments and unfavorable mix within Aerials and MP, as well as tariffs within Aerials, partially offset by strong ESG performance and cost reduction actions within Aerials and MP. Aerials Six Months Ended June 30, 2025 2024 % of Sales % of Sales % Change In Reported Amounts ($ amounts in millions) Net sales $ 1,057 — $ 1,355 — (22.0) % Operating profit 49 4.6 % 207 15.3 % (76.3) % Net sales for the six months ended June 30, 2025 decreased $298 million when compared to the same period in 2024, primarily due to lower end-market demand across most product lines and geographies and a return to a more customary seasonal delivery pattern. Operating profit for the six months ended June 30, 2025 decreased $158 million when compared to the same period in 2024, primarily due to lower sales volume, unfavorable mix, increased tariff expenses, production adjustments and a one-time litigation related charge, partially offset by cost reduction actions. Materials Processing Six Months Ended June 30, 2025 2024 % of Sales % of Sales % Change In Reported Amounts ($ amounts in millions) Net sales $ 836 — $ 1,019 — (18.0) % Operating profit 85 10.2 % 149 14.6 % (43.0) % Net sales for the six months ended June 30, 2025 decreased $183 million when compared to the same period in 2024, primarily due to lower channel requirements and end-market demand across most product lines and geographies. Operating profit for the six months ended June 30, 2025 decreased $64 million when compared to the same period in 2024, primarily due to lower sales volume, production adjustments, unfavorable mix and higher restructuring costs, partially offset by cost reduction actions. 37 Environmental Solutions Six Months Ended June 30, 2025 2024 % of Sales % of Sales % Change In Reported Amounts ($ amounts in millions) Net sales $ 829 — $ 303 — 173.6 % Operating profit 117 14.1 % 34 11.2 % 244.1 % Net sales for the six months ended June 30, 2025 increased $526 million when compared to the same period in 2024, primarily due to sales generated by the recently acquired ESG business and growth driven by strong throughput and delivery of refuse collection vehicles. See Note D - “Acquisitions and Dispositions” in our Condensed Consolidated Financial Statements for additional information regarding the acquisition of ESG. Operating profit for the six months ended June 30, 2025 increased $83 million when compared to the same period in 2024, primarily due to operating profit generated by the recently acquired ESG business and continued margin improvements in both ESG and Terex Utilities. See Note D - “Acquisitions and Dispositions” in our Condensed Consolidated Financial Statements for additional information regarding the acquisition of ESG. Corporate and Other / Eliminations Six Months Ended June 30, 2025 2024 % of Sales % of Sales % Change In Reported Amounts ($ amounts in millions) Net sales $ (6) — $ (3) — (100.0) % Operating profit (loss) (53) * (39) * (35.9) % * Not a meaningful percentage Net sales for the six months ended June 30, 2025 decreased $3 million when compared to the same period in 2024, primarily due to changes in intercompany eliminations. Operating loss for the six months ended June 30, 2025 increased $14 million when compared to the same period in 2024. The increase in operating loss is primarily due to integration costs and unfavorable impact of changes in foreign exchange rates. Interest Expense, Net of Interest Income Interest expense, net of interest income, for the six months ended June 30, 2025 and 2024 was $83 million and $24 million, respectively. The increase in expense is primarily due to the issuance of additional debt in the fourth quarter of 2024 to finance the ESG acquisition. 38 Other Income (Expense) – Net Other income (expense) – net was $0 million and an expense of $16 million for the six months ended June 30, 2025 and 2024, respectively. The decrease in expense is primarily due to net gains recorded on equity securities and the favorable impact of changes in foreign exchange rates. Income Taxes During the six months ended June 30, 2025, we recognized income tax expense of $22 million on income of $115 million, an effective tax rate of 18.9%, as compared to income tax expense of $62 million on income of $311 million, an effective tax rate of 19.8%, for the six months ended June 30, 2024. The lower effective tax rate for the six months ended June 30, 2025 when compared with the six months ended June 30, 2024 is primarily due to an increase in favorable discrete items. 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, 2025, we had cash and cash equivalents of $374 million and undrawn availability under our revolving line of credit of $800 million, giving us total liquidity of approximately $1,174 million. During the six months ended June 30, 2025, our liquidity decreased by approximately $14 million from December 31, 2024 primarily due to cash used in capital expenditures, share repurchases and dividends, 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. We have no significant debt maturities until 2029. Our actions to maintain liquidity include disciplined management of costs and working capital. 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. See Part I, Item 1A. – “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2024 and Part II Item 1A – “Risk Factors” of this Quarterly Report for a detailed description of the risks resulting from our debt and our ability to generate sufficient cash flow to operate our business. 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 tariffs, trade war, geopolitical uncertainty, inflationary pressures, foreign exchange rate volatility and high interest rates. • As our sales change, the amount of working capital needed to support our business may change. • Many of our customers fund their purchases through third-party finance companies that extend credit based on the creditworthiness of customers and expected residual value of our equipment. Changes either in customers’ credit profile or used equipment values may affect the ability of customers to purchase equipment. There can be no assurance that third-party finance companies will continue to extend credit to our customers as they have in the past. • Our suppliers extend payment terms to us primarily based on our overall credit rating. Deterioration in our credit rating may influence suppliers’ willingness to extend terms and in turn accelerate cash requirements of our business. • Sales of our products are subject to general economic conditions, tariffs, 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 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. Our investment objective is to preserve capital and liquidity while earning a market rate of interest. We seek to use cash held by our foreign subsidiaries to support our operations and continued growth plans through the funding of capital expenditures, operating expenses or other similar cash needs of worldwide operations. Most of this cash could be used in the U.S., if necessary, without additional tax expense. Incremental cash repatriated to the U.S. would not be expected to result in material foreign income and withholding, U.S. federal or state income tax cost. We will continue to seek opportunities to tax-efficiently mobilize and redeploy funds. 39 We had free cash flow of $78 million and $23 million for the three and six months ended June 30, 2025, respectively. The following table reconciles net cash provided by (used in) operating activities to free cash flow (in millions): Three Months Ended 6/30/2025 Six Months Ended 6/30/2025 Net cash provided by (used in) operating activities $ 102 $ 81 Capital expenditures, net of proceeds from sale of capital assets (24) (58) Free cash flow (use) $ 78 $ 23 Pursuant to terms of our trade accounts receivable factoring arrangements, during the six months ended June 30, 2025, we sold, without material recourse, approximately $306 million of trade accounts receivable to enhance liquidity. Working capital as a percentage of trailing three month annualized net sales was 22.8% at June 30, 2025. The following tables show the calculation of our working capital and trailing three months annualized sales as of June 30, 2025 (in millions): Three Months Ended June 30, 2025 Net sales $ 1,487 x 4 Trailing three month annualized net sales $ 5,948 As of June 30, 2025 Inventories $ 1,255 Receivables 904 Trade accounts payable (766) Customer advances and Short-term unearned revenue (35) Working capital $ 1,358 We remain focused on the use of Terex Financial Services to drive incremental sales by facilitating customer financing solutions in key markets. During the six months ended June 30, 2025, we repurchased 1,360,706 shares of common stock for $53 million leaving approximately $33 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 2025, which was paid to our stockholders. In July 2025, our Board declared a dividend of $0.17 per share, which will be paid on September 19, 2025 to our stockholders of record as of August 11, 2025. Additionally, our Board authorized an additional repurchase of up to $150 million of the Company’s outstanding shares of common stock. 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. These include results of operations, projected operating results for future periods and debt to equity leverage. Our ability to access capital markets is also subject to our timely filing of periodic reports with the Securities and Exchange Commission. 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 Flows Cash provided by operations was $81 million and $33 million for the six months ended June 30, 2025 and 2024, respectively. The increase in cash provided by operations was primarily driven by changes in working capital, partially offset by lower operating profitability. Cash used in investing activities was $38 million and $52 million for the six months ended June 30, 2025 and 2024, respectively. The decrease in cash used in investing activities relates primarily to proceeds from settlement of net investment hedges and the receipt of a post-closing purchase price adjustment related to the ESG acquisition. 40 Cash used in financing activities was $84 million and $23 million for the six months ended June 30, 2025 and 2024, respectively. The increase in cash used in financing activities was primarily due to lower borrowings and higher share repurchases. OFF-BALANCE SHEET ARRANGEMENTS Guarantees We may assist customers in their rental, leasing and acquisition of our products by facilitating financing transactions directly between (i) end-user customers, distributors and rental companies and (ii) third-party financial institutions, providing recourse in certain circumstances. The expectation of losses or non-performance is evaluated based on consideration of historical customer assessments, current financial conditions, reasonable and supportable forecasts, equipment collateral value and other factors. Many of these factors, including the assessment of a customer’s ability to pay, are influenced by economic and market factors that cannot be predicted with certainty. Our maximum liability is generally limited to our customer’s remaining payments due to the third-party financial institutions at the time of default. In the event of a customer default, we are generally able to recover and dispose of the equipment at a minimum loss, if any, to us. Reserves are recorded for expected loss over the contractual period of risk exposure. There can be no assurance that our historical experience in used equipment markets will be indicative of future results. 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. CONTINGENCIES AND UNCERTAINTIES Foreign Exchange and Interest Rate Risk Our products are sold in over 100 countries around the world and, accordingly, our revenues are generated in foreign currencies, while costs associated with those revenues are only partly incurred in the same currencies. Primary currencies to which we are exposed are the Euro, British Pound, Chinese Yuan, Indian Rupee, Australian Dollar and Mexican Peso. We purchase hedging instruments to manage variability of future cash flows associated with recognized assets or liabilities due to changing currency exchange rates. We manage our exposure to interest rate risk by establishing a mix of indebtedness bearing interest at both floating and fixed rates at inception and maintain a ratio of floating and fixed rates on this mix of indebtedness using interest rate derivatives when necessary. See Note I – “Derivative Financial Instruments” in the Notes to Condensed Consolidated Financial Statements for further information regarding our derivatives and Item 3 “Quantitative and Qualitative Disclosures About Market Risk” for a discussion of the impact changes in foreign currency exchange rates and interest rates may have on our financial performance. Other 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. 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. Many of the exposures are unasserted or proceedings are at a preliminary stage, and it is not presently possible to estimate the amount or timing of any liability. However, we do not believe these contingencies and uncertainties will, individually or in aggregate, have a material adverse effect on our operations. For contingencies and uncertainties other than income taxes, when it is probable a loss will be incurred and possible to make reasonable estimates of our liability with respect to such matters, a provision is recorded for the amount of such estimate or for the minimum amount of a range of estimates when it is not possible to estimate the amount within the range that is most likely to occur. 41 We generate hazardous and non-hazardous wastes in the normal course of our manufacturing operations. As a result, we are subject to a wide range of environmental laws and regulations. All of our employees are required to obey all applicable health, safety and environmental laws and regulations and must observe the proper safety rules and environmental practices in work situations. These laws and regulations govern actions that may have adverse environmental effects, such as discharges to air and water, and require compliance with certain practices when handling and disposing of hazardous and non-hazardous wastes. These laws and regulations would also impose liability for the costs of, and damages resulting from, cleaning up sites, past spills, disposals and other releases of hazardous substances, should any such events occur. We are committed to complying with these standards and monitoring our workplaces to determine if equipment, machinery and facilities meet specified safety standards. Each of our manufacturing facilities is subject to an environmental audit at least once every five years to monitor compliance. Also, no incidents have occurred which required us to pay material amounts to comply with such laws and regulations. We are dedicated to ensuring that safety and health hazards are adequately addressed through appropriate work practices, training and procedures. We are committed to reducing injuries and working towards a world-class level of safety practices in our industry. RECENT ACCOUNTING STANDARDS Please refer to Note A – “Basis of Presentation” in the accompanying Condensed Consolidated Financial Statements for a summary of recently issued accounting standards. 42