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, customized vehicle solutions, mobile elevating work platforms (MEWPs), equipment for the electric utility industry, commercial and custom fire and ambulance vehicles, and recreational vehicles. We design, build, and support products used in maintenance, manufacturing, energy, waste and recycling, minerals and materials management, construction, the entertainment industry, emergency response, and the recreational vehicles market. 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) Environmental Solutions (“ES”), (ii) Materials Processing (“MP”), (iii) Specialty Vehicles (“SV”) and (iv) Aerials. Overview On October 29, 2025, the Company entered into a definitive merger agreement with REV Group, Inc. (“REV”), a publicly traded manufacturer and distributor of specialty vehicles and related aftermarket parts and services, in a stock-and-cash transaction (the “REV Transaction”). On February 2, 2026 (the “Closing Date”), the Company completed the REV Transaction in accordance with the terms of the agreement. See Note D - “Acquisitions and Divestitures” in our Notes to Condensed Consolidated Financial Statements for additional information regarding the REV Transaction. This transaction is a significant milestone in Terex’s ongoing transformation, reinforcing the Company’s position as a leading specialty equipment manufacturer with a complementary and diversified portfolio. It positions the Company in resilient, high-demand markets with strong long-term growth potential and is expected to result in lower capital intensity, an improved net leverage profile and strong free cash flow generation. We continue to deploy the Terex Operating System (“TOS”) to further enhance operational efficiency, reduce fixed costs, and drive sustained improvements in operational execution. Our overall financial results in the first quarter were largely in line with our expectations. Net sales for the three months ended March 31, 2026 of $1,734 million, which include $436 million of sales generated by the new SV segment, increased 41.1% compared to the same period in prior year. Excluding the impact of SV, and $28 million of sales in the prior year period from the Company’s tower and rough terrain cranes businesses that were sold on October 31, 2025, net sales increased 8.1% year over year driven by higher sales in all the Company’s other segments. Adjusted EBITDA for the three months ended March 31, 2026 of $173 million, which include $62 million of Adjusted EBITDA generated by SV, increased 35.2% compared to the same period in 2025. Excluding the impact of SV, Adjusted EBITDA decreased 13.3% primarily driven by a decrease in Adjusted EBITDA within the Aerials segment. Additional information regarding segment specific results is provided in the “Results of Operations” section below. The Company’s free cash outflow for the three months ended March 31, 2026, was $57 million, which includes significant merger related costs incurred in connection with the REV Transaction. Backlog as of March 31, 2026 increased sequentially to $7.1 billion, driven by backlog acquired in connection with the REV Transaction and strong bookings within the MP and Aerials segments. In the first quarter of 2026, our largest market remained North America. Over the past 18 months, we deliberately shifted our end market exposure to more US-based, resilient and predictable sectors with attractive growth profiles. Our North American sales now represent approximately 80% of our global sales. As compared to the prior year, sales were up in North America, driven by the REV Transaction, and in all other major geographies. We continue to execute our capital allocation strategy by driving more operational cash through better net working capital management and by returning value to shareholders through dividends and opportunistic share repurchases. Our net working capital as a percentage of trailing three month annualized pro forma net sales was 16.7% as of March 31, 2026 compared to 20.8% for the year ended December 31, 2025. We continue to maintain ample liquidity with approximately $1,022 million available, as of March 31, 2026. See “Liquidity and Capital Resources” for a detailed description of liquidity and working capital levels, including the primary factors affecting such levels, as well as a reconciliation of net cash used in operating activities to free cash flow. 26 Our key end markets remain resilient with reliable replacement and aftermarket demand, strengthened by the opportunity to differentiate through quality, technology and lifecycle support. In the waste & recycling market, we are expecting a modest reduction in CAPEX spending from certain customers in the first half of 2026 as they digest recently delivered vehicles. We anticipate Utilities market growth to be sustained by increasing demand for the U.S. electrical grid with majority of data center related growth still to come. Demand for Fire and Emergency vehicles is stable, tied to growing municipal budgets. In Construction, we continue to see robust Infrastructure activity supported by government funding. The pipeline of mega projects continues to expand, providing a tailwind through at least 2030. We are seeing modest improvement in Europe and Australia, however, the outlook in Europe is impacted by macro events. MP also continues to grow its aggregates and material handling businesses in India. 27 RESULTS OF OPERATIONS Three Months Ended March 31, 2026 Compared with Three Months Ended March 31, 2025 Consolidated Three Months Ended March 31, 2026 2025 % of Sales % of Sales % Change In Reported Amounts ($ amounts in millions) Net sales $ 1,734 — $ 1,229 — 41.1 % Gross profit 206 11.9 % 247 20.1 % (16.6) % Selling, general and administrative expenses 241 13.9 % 161 13.1 % 49.7 % Amortization of purchased intangibles 47 2.7 % 17 1.4 % 176.5 % Operating (loss) profit (82) (4.7) % 69 5.6 % * Interest expense, net of interest income 43 * 41 * 4.9 % Benefit from (provision for) income taxes 33 * (5) * * Net (loss) income (89) (5.1) % 21 1.7 % * Adjusted operating profit 150 8.6 % 111 9.1 % 35.1 % Adjusted EBITDA 173 9.9 % 128 10.4 % 35.2 % * Not a meaningful percentage Net Sales Net sales for the three months ended March 31, 2026 increased $505 million when compared to the same period in 2025, including sales generated from SV of $436 million. Excluding the impact of SV, and $28 million of sales in the prior year period from the Company’s tower and rough terrain cranes businesses which were sold on October 31, 2025, the increase in Net sales was primarily due to higher shipment volumes across most product lines and geographies in all other segments and positive effects of foreign exchange rate changes. Gross Profit Gross profit for the three months ended March 31, 2026 decreased $41 million when compared to the same period in 2025, primarily due to the inventory step-up and related amortization of $112 million recorded in connection with the REV Transaction, tariff cost within MP and Aerials, and unfavorable mix within ES and Aerials, partially offset by the gross profit contribution from SV and higher sales volumes within the MP and ES segments. Selling, general, and administrative expense Selling, general and administrative expenses for the three months ended March 31, 2026 increased $80 million when compared to the same period in 2025, primarily due to incremental intangibles amortization, transaction costs of $17 million and other costs related to the REV Transaction including acceleration of stock-based compensation expense and severance and retention costs, as well as negative effects of foreign exchange rate changes. These decreases were partially offset by cost reductions within Corporate, Aerials and MP. Amortization of purchased intangibles Amortization of purchased intangibles for the three months ended March 31, 2026 increased $30 million when compared to the same period in 2025, primarily due to the additional amortization expense from purchased intangibles resulting from the REV Transaction. Operating (loss) profit Operating loss for the three months ended March 31, 2026 was $82 million compared to Operating profit of $69 million in the same period in 2025. The decrease in Operating profit of $151 million was primarily due to the factors detailed above. 28 Interest expense, net of interest income Interest expense, net of interest income, for the three months ended March 31, 2026 and 2025 was $43 million and $41 million, respectively. The increase in expense is primarily due to higher revolver borrowings and interest accrued on customer deposits, partially offset by lower term loan interest rates and higher interest income. Benefit from (provision for) income taxes During the three months ended March 31, 2026, we recognized income tax benefit of $33 million on a pre-tax loss of $126 million, an effective tax rate of 26.5%, as compared to income tax expense of $5 million on pre-tax income of $26 million, an effective tax rate of 20.3%, for the three months ended March 31, 2025. The higher effective tax rate for the three months ended March 31, 2026 when compared with the three months ended March 31, 2025 is primarily due to higher tax related to geographic distribution of income. 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 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 5, 2026. Among this release, the OECD issued Administrative Guidance which includes a “Side by Side” System designed to align the U.S. tax regime with Pillar Two for U.S.-parented multinational groups, effective for tax years beginning on or after January 1, 2026. 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 that were effective in 2025 were 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. The impacts of OBBBA are reflected in our results for the quarter ended March 31, 2026. There was no material effect on our income tax benefit or effective tax rate. Net (loss) income Net loss for the three months ended March 31, 2026 was $89 million compared to Net income of $21 million in the same period in 2025. The decrease in Net income of $110 million was primarily due to the factors detailed above. Adjusted operating profit Adjusted operating profit for the three months ended March 31, 2026 increased $39 million when compared to the same period in 2025, primarily due to Adjusted operating profit generated by REV of $58 million, higher sales volumes in certain segments and cost reductions, partially offset by tariff cost and unfavorable mix within ES and Aerials. Adjusted EBITDA Adjusted EBITDA for the three months ended March 31, 2026 increased $45 million when compared to the same period in 2025, primarily due to Adjusted EBITDA generated by SV of $62 million, higher sales volumes in in MP and operational improvement initiatives, partially offset by tariff, which were not in effect in the prior year period, and unfavorable mix within Aerials, and product mix within ES. Environmental Solutions Three Months Ended March 31, 2026 2025 % of Sales % of Sales % Change In Reported Amounts ($ amounts in millions) Net sales $ 412 — $ 399 — 3.3 % Adjusted EBITDA $ 74 18.0 % $ 81 20.3 % (8.6) % 29 Net sales for the three months ended March 31, 2026 increased $13 million when compared to the same period in 2025, primarily due to strong throughput and delivery of utilities products, partially offset by lower shipments of refuse collection vehicles. Adjusted EBITDA for the three months ended March 31, 2026 decreased $7 million when compared to the same period in 2025, primarily due to unfavorable product mix, partially offset by higher sales volume and synergy realization. Materials Processing Three Months Ended March 31, 2026 2025 % of Sales % of Sales % Change In Reported Amounts ($ amounts in millions) Net sales $ 419 — $ 382 — 9.7 % Adjusted EBITDA $ 63 15.0 % $ 43 11.2 % 46.5 % Net sales for the three months ended March 31, 2026 increased $37 million when compared to the same period in 2025, primarily due to higher shipment volumes across most product lines and geographies as well as positive effects of foreign exchange rate changes. These increases were partially offset by the absence of sales from the Company’s tower and rough terrain crane businesses, which were sold on October 31, 2025 and are included in the prior‑year period. Adjusted EBITDA for the three months ended March 31, 2026 increased $20 million when compared to the same period in 2025, primarily due to higher sales volume, price realization and efficiency improvement. Specialty Vehicles Three Months Ended March 31, 2026 2025 % of Sales % of Sales % Change In Reported Amounts ($ amounts in millions) Net sales $ 436 — $ — — * Adjusted EBITDA $ 62 14.2 % $ — * * * Not a meaningful percentage Net sales and Adjusted EBITDA represent the results of operations of REV from the REV Transaction since February 2, 2026. See Note D - “Acquisitions and Divestitures” in our Condensed Consolidated Financial Statements for additional information regarding the REV Transaction. 30 Aerials Three Months Ended March 31, 2026 2025 % of Sales % of Sales % Change In Reported Amounts ($ amounts in millions) Net sales $ 469 — $ 450 — 4.2 % Adjusted EBITDA $ — — % $ 20 4.4 % (100.0) % Net sales for the three months ended March 31, 2026 increased $19 million when compared to the same period in 2025, primarily due to positive effects of foreign exchange rate changes and higher shipment volumes in Western Europe across most product lines, partially offset by unfavorable mix. Adjusted EBITDA for the three months ended March 31, 2026 decreased $20 million when compared to the same period in 2025, primarily due to tariffs incurred in the current year that were not present in the prior year period, as well as temporary unfavorable mix and timing of price realization. Corporate and Other / Eliminations Three Months Ended March 31, 2026 2025 % of Sales % of Sales % Change In Reported Amounts ($ amounts in millions) Net sales $ (2) — $ (2) — — % Adjusted EBITDA (26) * (16) * (62.5) % * Not a meaningful percentage Adjusted EBITDA for the three months ended March 31, 2026 decreased $10 million when compared to the same period in 2025. The decrease is primarily due to additional costs driven by the REV Transaction which includes higher compensation costs and technology expenses. 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 the impact of one-time items and other items affecting comparability between periods, and non-cash items such as depreciation and amortization, (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. We discuss Adjusted operating profit, which is defined as Operating profit or loss as adjusted for acquisition or divestiture related items, restructuring, purchase price accounting, and other items that we believe are not indicative of our ongoing operating performance. We also discuss Adjusted EBITDA. To determine Adjusted EBITDA, we adjust net income or net loss for the following items: non-cash depreciation and amortization, interest expense, income taxes, acquisition or divestiture related items, restructuring, purchase price accounting, and other items that we believe are not indicative of our ongoing operating performance. 31 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. Working capital is calculated using the Condensed Consolidated Balance Sheet amounts for Receivables (net of allowance) plus Inventories, less Trade accounts payable, and short and long-term Customer advances. 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 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 translation effect of foreign currency exchange rate changes on net sales, gross profit, selling, general & administrative expenses and operating profit, as well as net sales, gross profit, and SG&A costs and operating profit excluding the impact of acquisitions and divestitures. The following table reconciles Net (loss) income to Adjusted operating profit for the periods presented: Three Months Ended March 31, 2026 2025 Net (loss) income $ (89) $ 21 Gain (loss) on disposition of discontinued operations – net of tax 4 — Benefit from (provision for) income taxes 33 (5) Interest income 4 2 Interest expense (47) (43) Other expense – net (1) (2) Operating (loss) profit (82) 69 Restructuring and other (a) 1 6 Deal related (b) 68 5 Purchase price accounting (c) 166 21 Divestitures (d) (3) — Litigation related (e) — 10 Adjusted operating profit $ 150 $ 111 32 The following table reconciles Net (loss) income to Adjusted EBITDA for the periods presented: Three Months Ended March 31, 2026 ES MP SV Aerials Corporate and Other / Elims Total Net income (loss) (1) $ 49 $ 60 $ (91) $ (8) $ (99) $ (89) Gain on disposition of discontinued operations – net of tax — — — — (4) (4) Benefit from income taxes — — — — (33) (33) Interest income — — — — (4) (4) Interest expense — 3 3 — 41 47 Other expense — — — 1 — 1 Operating profit (loss) 49 63 (88) (7) (99) (82) Depreciation 4 5 4 7 3 23 Amortization 20 — 31 — 3 54 Non-cash interest costs — — — (2) (2) EBITDA 73 68 (53) — (95) (7) Restructuring and other (a) 1 — — — — 1 Deal related (b) — — — — 68 68 Purchase price accounting (c) — — 113 — 1 114 Divestitures (d) — (5) 2 — — (3) Adjusted EBITDA $ 74 $ 63 $ 62 $ — $ (26) $ 173 (1) Management does not allocate income taxes, interest costs incurred at the Corporate level, and certain other Corporate items to the segments. Three Months Ended March 31, 2025 ES MP Aerials Corporate and Other / Elims Total Net income (loss) (1) $ 56 $ 33 $ 2 $ (70) $ 21 Provision for income taxes — — — 5 5 Interest income — — — (2) (2) Interest expense — 3 — 40 43 Other expense — — — 2 2 Operating profit (loss) 56 36 2 (25) 69 Depreciation 4 4 6 3 17 Amortization 20 1 — 1 22 Non-cash interest costs — — — (2) (2) EBITDA 80 41 8 (23) 106 Restructuring and other (a) — 2 2 2 6 Deal related (b) — — — — 5 5 Purchase price accounting (c) 1 — — — 1 Litigation related (e) — — 10 — 10 Adjusted EBITDA $ 81 $ 43 $ 20 $ (16) $ 128 (1) Management does not allocate income taxes, interest costs incurred at the Corporate level, and certain other Corporate items to the segments. 33 a. Costs for the three months ended March 31, 2026 are associated with reduction in force in the ES segment. Costs for the three months ended March 31, 2025 are associated with restructuring programs across MP, Aerials, and Corporate segments. b. Costs for the three months ended March 31, 2026 are primarily related to the REV Transaction, including acceleration of stock-based compensation awards, severance and retention costs incurred, and transaction costs. Costs for the three months ended March 31, 2025 relate to costs incurred as part of the ESG integration. c. Costs for the three months ended March 31, 2026 primarily relate to the REV Transaction, and include inventory step-up, incremental stock based compensation cost for replacement stock awards, and amortization of purchased intangibles. Costs for the three months ended March 31, 2025 primarily relate to ESG, and primarily relate to the amortization of purchased intangibles. Amortization is not included within Purchase price accounting in the reconciliation of Net (loss) income to Adjusted EBITDA, as amortization is a separate line item within the reconciliation. d. Reflects a gain realized on the previously disposed of Cranes business, offset by the loss on sale of a business within the SV segment. e. Reflects costs incurred to settle a claim which was outside the normal course of business. 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 March 31, 2026, we had cash and cash equivalents of $392 million and undrawn availability under our revolving line of credit of $630 million, giving us total liquidity of approximately $1,022 million. During the three months ended March 31, 2026, our liquidity decreased by approximately $550 million from December 31, 2025 primarily due to cash used for the REV Transaction, capital expenditures, operating activities, and dividend payments, partially offset by proceeds from the sale of a business. 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, 2025 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 34 result in material foreign income and withholding, U.S. federal or state income tax cost. We will continue to seek opportunities to tax-efficiently mobilize and redeploy funds. We had free cash outflow of $57 million for the three months ended March 31, 2026, respectively. The following table reconciles net cash used in operating activities to free cash outflow (in millions): Three Months Ended 3/31/2026 Net cash used in operating activities $ (31) Capital expenditures (26) Free cash outflow $ (57) Pursuant to terms of our trade accounts receivable factoring arrangements, during the three months ended March 31, 2026, we sold, without material recourse, approximately $175 million of trade accounts receivable to enhance liquidity. Working capital as a percentage of trailing three month annualized pro forma net sales was 16.7% at March 31, 2026. The following tables show the calculation of our working capital and trailing three months annualized pro forma sales as of March 31, 2026 (in millions): Three Months Ended March 31, 2026 Net sales, as reported $ 1,734 REV Group pro forma net sales (January 2026) 180 Total pro forma net sales 1,914 x 4 Trailing three month annualized pro forma net sales $ 7,656 As of March 31, 2026 Inventories $ 1,656 Receivables 970 Trade accounts payable (931) Short and long-term Customer advances (413) Working capital $ 1,282 During the three months ended March 31, 2026, there were no shares of common stock repurchased, leaving approximately $183 million available for repurchase under our share repurchase programs. Our Board declared a dividend of $0.17 per share in the first quarter of 2026, which was paid to our stockholders. 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 used in operations was $31 million and $21 million for the three months ended March 31, 2026 and 2025, respectively. The increase in cash used in operations was primarily driven by payments of transaction costs and severance in connection with the REV Transaction, partially offset by changes in working capital. Cash used in investing activities was $467 million and $26 million for the three months ended March 31, 2026 and 2025, respectively. The increase in cash used in investing activities relates primarily to cash consideration paid in connection with the REV Transaction, partially offset by proceeds from the sale of a business and lower capital expenditures. 35 Cash provided by financing activities was $122 million for the three months ended March 31, 2026, compared to cash used in financing activities of $50 million for the prior year period. The increase in cash provided by financing activities was primarily driven by higher borrowings in the current year period and share repurchases in the prior‑year period not repeating in the current year period, partially offset by higher cash payments related to shares withheld for tax payment on Restricted Stock Awards and increased dividend payments. OFF-BALANCE SHEET ARRANGEMENTS Guarantees See Note J – “Litigation and Contingencies” in the Notes to Condensed Consolidated Financial Statements for 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, Australian Dollar, Indian Rupee 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 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 J – “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. 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. 36 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. 37 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in our exposure to interest rate risk, foreign exchange risk and commodity price risk from the information provided in our Annual Report on Form 10-K filed on February 13, 2026.