Terex 10Q 2022 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-10702

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Terex Corporation

(Exact name of registrant as specified in its charter)


Delaware						34-1531521
(State of Incorporation)						(IRS Employer Identification No.)

45 Glover Ave, 4th Floor, Norwalk, Connecticut 06850

(Address of principal executive offices)

(203) 222-7170

(Registrant’s telephone number, including area code)

_______________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock ($0.01 par value)	TEX	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Number of outstanding shares of common stock: 67.5 million as of October 25, 2022.


The Exhibit Index begins on page 45.

GENERAL

This Quarterly Report on Form 10-Q filed by Terex Corporation generally speaks as of September 30, 2022 unless specifically noted otherwise. Unless otherwise indicated, Terex Corporation, together with its consolidated subsidiaries, is hereinafter referred to as “Terex,” the “Registrant,” “us,” “we,” “our” or the “Company.”

Forward-Looking Information

Certain information in this Quarterly Report includes forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) and the Private Securities Litigation Reform Act of 1995) regarding future events or our future financial performance that involve certain contingencies and uncertainties, including those discussed below in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contingencies and Uncertainties.” In addition, when included in this Quarterly Report or in documents incorporated herein by reference, the words “may,” “expects,” “should,” “intends,” “anticipates,” “believes,” “plans,” “projects,” “estimates,” “will” and the negatives thereof and analogous or similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean that the statement is not forward-looking. We have based these forward-looking statements on current expectations and projections about future events. These statements are not guarantees of future performance. Such statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements. Such risks and uncertainties, many of which are beyond our control, include, among others:

•our business has been, and could be further, adversely impacted by global health pandemics such as the outbreak of a new strain of coronavirus (“COVID-19”);

•our business is highly competitive and is affected by our cost structure, pricing, product initiatives and other actions taken by competitors;

•we are dependent upon third-party suppliers, making us vulnerable to supply shortages and price increases;

•consolidation within our customer base and suppliers;

•our operations are subject to a number of potential risks that arise from operating a multinational business, including compliance with changing regulatory environments and political instability;

•a material disruption to one of our significant facilities;

•our business is sensitive to government spending;

•our ability to integrate acquired businesses;

•our business is affected by the cyclical nature of markets we serve;

•our need to comply with restrictive covenants contained in our debt agreements;

•our ability to generate sufficient cash flow to service our debt obligations and operate our business;

•our ability to access the capital markets to raise funds and provide liquidity;

•the financial condition of suppliers and customers, and their continued access to capital;

•exposure from providing credit support for some of our customers;

•we may experience losses in excess of recorded reserves;

•our business is global and subject to changes in exchange rates between currencies, commodity price changes, regional economic conditions and trade relations;

•our ability to attract and retain key management personnel and skilled labor;

•possible work stoppages and other labor matters;

•changes in import/export regulatory regimes, imposition of tariffs, escalation of global trade conflicts and unfairly traded imports, particularly from China, could continue to negatively impact our business;

•compliance with changing laws and regulations, particularly environmental and tax laws and regulations;

•litigation, product liability claims and other liabilities;

•our compliance with the United States (“U.S.”) Foreign Corrupt Practices Act and similar worldwide anti-corruption laws;

•increased regulatory focus on privacy and data security issues and expanding laws;

•our ability to comply with an injunction and related obligations imposed by the U.S. Securities and Exchange Commission (“SEC”);

•our ability to successfully implement our strategy;

•disruption or breach in our information technology systems and storage of sensitive data; and

•other factors.

Actual events or our actual future results may differ materially from any forward-looking statement due to these and other risks, uncertainties and material factors. The forward-looking statements contained herein speak only as of the date of this Quarterly Report and the forward-looking statements contained in documents incorporated herein by reference speak only as of the date of the respective documents. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained or incorporated by reference in this Quarterly Report to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

TEREX CORPORATION AND SUBSIDIARIES

Index to Quarterly Report on Form 10-Q

For the Quarterly Period Ended September 30, 2022

PART I.FINANCIAL INFORMATION


ITEM 1.			FINANCIAL STATEMENTS

TEREX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

(in millions, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net sales	$	1,120.5	$	993.8	$	3,200.1	$	2,896.7
Cost of goods sold	(883.4)		(815.3)		(2,564.3)		(2,311.2)
Gross profit	237.1		178.5		635.8		585.5
Selling, general and administrative expenses	(116.3)		(104.3)		(336.6)		(327.3)
Income (loss) from operations	120.8		74.2		299.2		258.2
Other income (expense)
Interest income	1.1		0.6		2.1		2.9
Interest expense	(13.5)		(12.3)		(35.8)		(40.6)
Loss on early extinguishment of debt	—		—		(0.1)		(27.7)
Other income (expense) – net	(1.0)		(1.1)		(4.6)		2.7
Income (loss) from continuing operations before income taxes	107.4		61.4		260.8		195.5
(Provision for) benefit from income taxes	(25.6)		(13.9)		(52.6)		(36.0)
Income (loss) from continuing operations	81.8		47.5		208.2		159.5

Gain (loss) on disposition of discontinued operations – net of tax	—		0.6		(0.4)		2.6
Net income (loss)	$	81.8	$	48.1	$	207.8	$	162.1









Basic earnings (loss) per share:
Income (loss) from continuing operations	$	1.21	$	0.68	$	3.03	$	2.29

Gain (loss) on disposition of discontinued operations – net of tax	—		0.01		(0.01)		0.04
Net income (loss)	$	1.21	$	0.69	$	3.02	$	2.33
Diluted earnings (loss) per share:
Income (loss) from continuing operations	$	1.20	$	0.67	$	2.99	$	2.25

Gain (loss) on disposition of discontinued operations – net of tax	—		0.01		—		0.04
Net income (loss)	$	1.20	$	0.68	$	2.99	$	2.29
Weighted average number of shares outstanding in per share calculation
Basic	67.8		69.8		68.8		69.7
Diluted	68.4		70.9		69.6		70.8



Comprehensive income (loss)	$	1.4	$	18.8	$	35.0	$	141.2

The accompanying notes are an integral part of these condensed consolidated financial statements.

TEREX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(unaudited)

(in millions, except par value)


	September 30, 2022		December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	231.7	$	266.9
Trade receivables (net of allowance of $9.0 and $9.7 at September 30, 2022 and December 31, 2021, respectively)	531.1		507.7
Inventories	981.2		813.5
Prepaid and other current assets	123.0		179.7

Total current assets	1,867.0		1,767.8
Non-current assets
Property, plant and equipment – net	450.4		429.6

Goodwill	273.1		280.1
Intangible assets – net	17.5		13.4

Other assets	368.5		372.6

Total assets	$	2,976.5	$	2,863.5

Liabilities and Stockholders’ Equity
Current liabilities
Current portion of long-term debt	$	1.9	$	5.6
Trade accounts payable	589.4		537.7


Accrued freight	47.3		36.2


Other current liabilities	314.1		330.4

Total current liabilities	952.7		909.9
Non-current liabilities
Long-term debt, less current portion	824.6		668.5


Other non-current liabilities	164.5		175.5

Total liabilities	1,941.8		1,753.9
Commitments and contingencies

Stockholders’ equity
Common stock, $0.01 par value – authorized 300.0 shares; issued 84.0 and 83.4 shares at September 30, 2022 and December 31, 2021, respectively	0.9		0.9
Additional paid-in capital	874.0		860.0
Retained earnings	1,117.4		936.9
Accumulated other comprehensive income (loss)	(401.3)		(228.5)
Less cost of shares of common stock in treasury – 17.1 and 14.2 shares at September 30, 2022 and December 31, 2021, respectively	(556.3)		(459.7)


Total stockholders’ equity	1,034.7		1,109.6
Total liabilities and stockholders’ equity	$	2,976.5	$	2,863.5

The accompanying notes are an integral part of these condensed consolidated financial statements.

TEREX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)

(in millions)


	Outstanding Shares	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Common Stock in Treasury		Total
Balance at December 31, 2021	69.2	$	0.9	$	860.0	$	936.9	$	(228.5)	$	(459.7)	$	1,109.6
Net income (loss)	—	—		—		51.9		—		—		51.9
Other comprehensive income (loss) – net of tax	—	—		—		—		(20.0)		—		(20.0)
Issuance of common stock related to compensation	0.5	—		16.3		—		—		—		16.3
Compensation under stock-based plans – net	0.1	—		(15.8)		—		—		1.0		(14.8)

Dividends	—	—		0.2		(9.3)		—		—		(9.1)





Acquisition of treasury stock	(0.5)	—		—		—		—		(19.8)		(19.8)

Balance at March 31, 3022	69.3	$	0.9	$	860.7	$	979.5	$	(248.5)	$	(478.5)	$	1,114.1
Net income (loss)	—	—		—		74.1		—		—		74.1
Other comprehensive income (loss) – net of tax	—	—		—		—		(72.4)		—		(72.4)
Issuance of common stock related to compensation	0.1	—		1.8		—		—		—		1.8
Compensation under stock-based plans – net	(0.1)	—		4.3		—		—		0.1		4.4
Dividends	—	—		0.2		(9.1)		—		—		(8.9)
Acquisition of treasury stock	(1.9)	—		—		—		—		(64.3)		(64.3)
Other	—	—		—		0.1		—		—		0.1
Balance at June 30, 2022	67.4	$	0.9	$	867.0	$	1,044.6	$	(320.9)	$	(542.7)	$	1,048.9
Net income (loss)	—	—		—		81.8		—		—		81.8
Other comprehensive income (loss) – net of tax	—	—		—		—		(80.4)		—		(80.4)
Issuance of common stock	—	—		0.4		—		—		—		0.4
Compensation under stock-based plans – net	—	—		6.4		—		—		—		6.4
Dividends	—	—		0.2		(9.0)		—		—		(8.8)
Acquisition of treasury stock	(0.5)	—		—		—		—		(13.6)		(13.6)

Balance at September 30, 2022	66.9	$	0.9	$	874.0	$	1,117.4	$	(401.3)	$	(556.3)	$	1,034.7

The accompanying notes are an integral part of these condensed consolidated financial statements.

TEREX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)

(in millions)


	Outstanding Shares	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Common Stock in Treasury		Total
Balance at December 31, 2020	68.6	$	0.9	$	837.9	$	750.3	$	(208.4)	$	(459.2)	$	921.5
Net income (loss)	—	—		—		40.1		—		—		40.1
Other comprehensive income (loss) – net of tax	—	—		—		—		(7.1)		—		(7.1)
Issuance of common stock related to compensation	0.5	—		11.4		—		—		—		11.4
Compensation under stock-based plans – net	0.1	—		(13.8)		—		—		2.8		(11.0)

Dividends	—	—		0.2		(8.5)		—		—		(8.3)





Acquisition of treasury stock	—	—		—		—		—		(0.3)		(0.3)
Other	—	—		—		(0.2)		—		—		(0.2)
Balance at March 31, 2021	69.2	$	0.9	$	835.7	$	781.7	$	(215.5)	$	(456.7)	$	946.1
Net income (loss)	—	—		—		73.9		—		—		73.9
Other comprehensive income (loss) – net of tax	—	—		—		—		15.5		—		15.5
Issuance of common stock related to compensation	—	—		0.4		—		—		—		0.4
Compensation under stock-based plans – net	—	—		7.8		—		—		0.1		7.9
Dividends	—	—		0.1		(8.5)		—		—		(8.4)
Acquisition of treasury stock	—	—		—		—		—		(1.4)		(1.4)
Other	—	—		—		(0.1)		—		—		(0.1)
Balance at June 30, 2021	69.2	$	0.9	$	844.0	$	847.0	$	(200.0)	$	(458.0)	$	1,033.9
Net income (loss)	—	—		—		48.1		—		—		48.1
Other comprehensive income (loss) – net of tax	—	—		—		—		(29.3)		—		(29.3)
Issuance of common stock	—	—		0.2		—		—		—		0.2
Compensation under stock-based plans – net	—	—		6.5		—		—		—		6.5
Dividends	—	—		0.1		(8.5)		—		—		(8.4)
Acquisition of treasury stock	—	—		—		—		—		(0.2)		(0.2)

Other	—	—		—		—		—		(0.1)		(0.1)
Balance at September 30, 2021	69.2	$	0.9	$	850.8	$	886.6	$	(229.3)	$	(458.3)	$	1,050.7

The accompanying notes are an integral part of these condensed consolidated financial statements.

TEREX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

(in millions)


	Nine Months Ended September 30,
	2022		2021
Operating Activities
Net income (loss)	$	207.8	$	162.1
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	35.1		37.9




Loss on early extinguishment of debt	0.1		27.7
Stock-based compensation expense	22.9		24.1
Inventory and other non-cash charges	19.4		15.6
Changes in operating assets and liabilities (net of effects of acquisitions and divestitures):
Trade receivables	(56.4)		(143.5)
Inventories	(234.0)		(159.9)
Trade accounts payable	91.5		185.8


Other assets and liabilities	44.8		171.1
Foreign exchange and other operating activities, net	(27.0)		3.2
Net cash provided by (used in) operating activities	104.2		324.1
Investing Activities
Capital expenditures	(78.8)		(31.7)

Acquisitions, net of cash acquired, and investments	(50.1)		(42.9)



Other investing activities, net	4.5		1.2
Net cash provided by (used in) investing activities	(124.4)		(73.4)
Financing Activities
Repayments of debt	(103.8)		(882.5)
Proceeds from issuance of debt	254.3		600.1
Payment of debt extinguishment costs	—		(16.9)



Share repurchases	(96.6)		(1.7)
Dividends paid	(26.8)		(25.1)

Other financing activities, net	(13.8)		(22.6)
Net cash provided by (used in) financing activities	13.3		(348.7)
Effect of Exchange Rate Changes on Cash and Cash Equivalents	(28.3)		(13.9)
Net Increase (Decrease) in Cash and Cash Equivalents	(35.2)		(111.9)
Cash and Cash Equivalents at Beginning of Period	266.9		670.1
Cash and Cash Equivalents at End of Period	$	231.7	$	558.2

The accompanying notes are an integral part of these condensed consolidated financial statements.

TEREX CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE A – BASIS OF PRESENTATION

Basis of Presentation and Principles of Consolidation. The accompanying unaudited Condensed Consolidated Financial Statements of Terex Corporation and subsidiaries as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by U.S. GAAP to be included in full-year financial statements. The accompanying Condensed Consolidated Balance Sheet as of December 31, 2021 has been derived from audited consolidated financial statements as of that date, but does not include all disclosures required by U.S. GAAP. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for year ended December 31, 2021.

The Condensed Consolidated Financial Statements include accounts of Terex Corporation, its majority-owned subsidiaries and other controlled subsidiaries (“Terex” or the “Company”). The Company consolidates all majority-owned and controlled subsidiaries, applies equity method of accounting for investments in which the Company is able to exercise significant influence and applies the cost method for investments which do not have readily determinable fair values. All intercompany balances, transactions and profits have been eliminated. Certain prior period amounts have been reclassified to conform with the 2022 presentation.

In the opinion of management, adjustments considered necessary for the fair statement of these interim financial statements have been made. Except as otherwise disclosed, all such adjustments consist only of those of a normal recurring nature. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of results that may be expected for the year ending December 31, 2022.

Cash and cash equivalents include $3.4 million and $3.7 million at September 30, 2022 and December 31, 2021, respectively, which were not immediately available for use. These consist primarily of cash balances held in escrow to secure various obligations of the Company.

Recently Issued Accounting Standards to be Implemented. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met to ease an entity’s financial reporting burden as the market transitions from London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The FASB further issued ASU 2021-01 in January 2021 to clarify the scope of Topic 848. The guidance was effective upon issuance and may be applied through December 31, 2022. Adoption is not expected to have a material effect on the Company’s consolidated financial statements.

Accounts Receivable and Allowance for Doubtful Accounts. Trade accounts receivable are recorded at invoiced amount and do not bear interest. Allowance for doubtful accounts is the Company’s estimate of current expected credit losses on its existing accounts receivable and determined based on historical customer assessments, current financial conditions, and reasonable and supportable forecasts. Account balances are charged off against the allowance when the Company determines the receivable will not be recovered. There can be no assurance that the Company’s estimate of accounts receivable collection will be indicative of future results.

The following table summarizes changes in the consolidated allowance for doubtful accounts (in millions):




Balance as of December 31, 2021	$	9.7
Provision for credit losses	0.8
Other (1)	(1.5)
Balance as of September 30, 2022	$	9.0

(1) Includes utilization of established reserves, net of recoveries and the impact of foreign exchange rate changes.

Guarantees. The Company issues guarantees to financial institutions related to financing of equipment purchases by customers. 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. Reserves are recorded for expected loss over the contractual period of risk exposure. See Note L – “Litigation and Contingencies” for additional information regarding guarantees issued to financial institutions.

Accrued Warranties. The Company records accruals for potential warranty claims based on its claim experience. The Company’s products are typically sold with a standard warranty covering defects that arise during a fixed period. Each business provides a warranty specific to products it offers. The specific warranty offered by a business is a function of customer expectations and competitive forces. Warranty length is generally a fixed period of time, a fixed number of operating hours or both.

A liability for estimated warranty claims is accrued at the time of sale. The current portion of the product warranty liability is included in Other current liabilities and the non-current portion is included in Other non-current liabilities in the Company’s Condensed Consolidated Balance Sheet. The liability is established using historical warranty claims experience for each product sold. Historical claims experience may be adjusted for known design improvements or for the impact of unusual product quality issues. Assumptions are updated for known events that may affect the potential warranty liability.

The following table summarizes changes in the consolidated product warranty liability (in millions):




Balance as of December 31, 2021	$	44.1
Accruals for warranties issued during the period	29.5
Changes in estimates	(2.0)
Settlements during the period	(27.5)
Foreign exchange effect/other	(2.8)
Balance as of September 30, 2022	$	41.3

Fair Value Measurements. Assets and liabilities measured at fair value on a recurring basis under the provisions of Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement and Disclosure” (“ASC 820”) include commodity swaps, cross currency swaps and foreign exchange contracts discussed in Note I – “Derivative Financial Instruments” and debt discussed in Note J – “Long-Term Obligations”. These instruments are valued using observable market data for similar assets and liabilities or the present value of future cash payments and receipts. ASC 820 establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The hierarchy consists of three levels:

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 – Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity).

Determining which category an asset or liability falls within this hierarchy requires judgment. The Company evaluates its hierarchy disclosures each quarter.

NOTE B – BUSINESS SEGMENT INFORMATION

Terex is a global manufacturer of materials processing machinery and aerial work platforms. The Company designs, builds and supports products used in construction, maintenance, manufacturing, energy, recycling, minerals and materials management applications. Certain Terex products and solutions enable customers to reduce their environmental impact 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. The Company’s products are manufactured in North America, Europe, Australia and Asia and sold worldwide. Terex engages with customers through all stages of the product life cycle, from initial specification and financing to parts and service support.

The Company identifies its operating segments according to how business activities are managed and evaluated, and has identified three operating segments: Materials Processing (“MP”), Aerials and Utilities. As Aerials and Utilities operating segments share similar economic characteristics, these operating segments are aggregated into one operating segment, Aerial Work Platforms (“AWP”). The Company operates in two reportable segments: (i) MP and (ii) AWP.

MP designs, manufactures, services and markets materials processing and specialty equipment, including crushers, washing systems, screens, trommels, apron feeders, material handlers, pick and carry cranes, rough terrain cranes, tower cranes, wood processing, biomass and recycling equipment, concrete mixer trucks and concrete pavers, conveyors, and their related components and replacement parts. Customers use these products in construction, infrastructure and recycling projects, in various quarrying and mining applications, as well as in landscaping and biomass production industries, material handling applications, maintenance applications to lift equipment or material, moving materials and equipment on rugged or uneven terrain, lifting construction material and placing material at point of use.

AWP designs, manufactures, services and markets aerial work platform equipment, utility equipment and telehandlers as well as their related components and replacement parts. Customers use these products to construct and maintain industrial, commercial, institutional and residential buildings and facilities, for construction and maintenance of utility and telecommunication lines, tree trimming, certain construction and foundation drilling applications, and for other commercial operations, as well as in a wide range of infrastructure projects.

The Company assists customers in their rental, leasing and acquisition of its products through Terex Financial Services (“TFS”). TFS uses its equipment financing experience to facilitate financial products and services to assist customers in the acquisition of the Company’s equipment. TFS is included in Corporate and Other.

Corporate and Other also includes eliminations among the two reportable segments, as well as general and corporate items.

Business segment information is presented below (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net sales

MP	$	457.9	$	418.7	$	1,391.3	$	1,237.7
AWP	662.6		572.5		1,811.8		1,644.4
Corporate and Other / Eliminations	—		2.6		(3.0)		14.6
Total	$	1,120.5	$	993.8	$	3,200.1	$	2,896.7
Income (loss) from operations

MP	$	66.8	$	57.1	$	210.8	$	178.3
AWP	63.5		34.9		142.2		126.7
Corporate and Other / Eliminations	(9.5)		(17.8)		(53.8)		(46.8)
Total	$	120.8	$	74.2	$	299.2	$	258.2


	September 30, 2022		December 31, 2021
Identifiable assets

MP	$	1,687.2	$	1,648.0
AWP (1)	2,023.8		1,870.8
Corporate and Other / Eliminations	(734.5)		(655.3)

Total	$	2,976.5	$	2,863.5

(1) Increase primarily due to higher inventory and fixed assets.

Sales between segments are generally priced to recover costs plus a reasonable markup for profit, which is eliminated in consolidation.

Geographic net sales information is presented below (in millions):


	Three Months Ended September 30, 2022								Three Months Ended September 30, 2021
	MP		AWP		Corporate and Other / Eliminations		Total			MP		AWP		Corporate and Other / Eliminations		Total
Net sales by region
North America	$	189.9	$	444.8	$	7.4	$	642.1		$	159.8	$	377.5	$	8.3	$	545.6
Western Europe	137.1		98.4		0.1		235.6			117.9		81.8		0.2		199.9
Asia-Pacific	95.0		65.9		0.5		161.4			95.5		80.5		0.5		176.5
Rest of World (1)	35.9		53.5		(8.0)		81.4			45.5		32.7		(6.4)		71.8
Total (2)	$	457.9	$	662.6	$	—	$	1,120.5		$	418.7	$	572.5	$	2.6	$	993.8

(1) Includes intercompany sales and eliminations.

(2) Total sales include $568.6 million and $490.3 million for the three months ended September 30, 2022 and 2021, respectively, attributable to the U.S., the Company’s country of domicile.


	Nine Months Ended September 30, 2022									Nine Months Ended September 30, 2021
		MP		AWP		Corporate and Other / Eliminations		Total			MP		AWP		Corporate and Other / Eliminations		Total
Net sales by region
North America		$	561.7	$	1,226.8	$	10.8	$	1,799.3		$	488.9	$	1,066.7	$	23.7	$	1,579.3
Western Europe		431.8		293.0		0.3		725.1			379.8		265.8		0.4		646.0
Asia-Pacific		282.9		161.5		0.5		444.9			258.0		241.6		0.9		500.5
Rest of World (1)		114.9		130.5		(14.6)		230.8			111.0		70.3		(10.4)		170.9
Total (2)		$	1,391.3	$	1,811.8	$	(3.0)	$	3,200.1		$	1,237.7	$	1,644.4	$	14.6	$	2,896.7

(1) Includes intercompany sales and eliminations.

(2) Total sales include $1.6 billion and $1.4 billion for the nine months ended September 30, 2022 and 2021, respectively, attributable to the U.S., the Company’s country of domicile.

The Company attributes sales to unaffiliated customers in different geographical areas based on the location of the customer.

Product type net sales information is presented below (in millions):


	Three Months Ended September 30, 2022								Three Months Ended September 30, 2021
	MP		AWP		Corporate and Other / Eliminations		Total		MP		AWP		Corporate and Other / Eliminations		Total
Net sales by product type
Aerial Work Platforms	$	—	$	505.5	$	0.3	$	505.8	$	—	$	413.7	$	0.2	$	413.9

Materials Processing Equipment	277.3		—		—		277.3		245.5		—		—		245.5
Specialty Equipment	179.7		—		0.3		180.0		173.1		—		0.3		173.4
Utility Equipment	—		116.7		—		116.7		—		94.0		—		94.0
Other (1)	0.9		40.4		(0.6)		40.7		0.1		64.8		2.1		67.0


Total	$	457.9	$	662.6	$	—	$	1,120.5	$	418.7	$	572.5	$	2.6	$	993.8

(1) Includes other product types, intercompany sales and eliminations.


	Nine Months Ended September 30, 2022									Nine Months Ended September 30, 2021
		MP		AWP		Corporate and Other / Eliminations		Total		MP		AWP		Corporate and Other / Eliminations		Total
Net sales by product type
Aerial Work Platforms		$	—	$	1,344.5	$	1.1	$	1,345.6	$	—	$	1,218.9	$	0.8	$	1,219.7
Materials Processing Equipment		826.6		—		0.5		827.1		735.4		—		—		735.4
Specialty Equipment		562.4		—		1.0		563.4		501.7		—		1.8		503.5
Utility Equipment		—		343.3		—		343.3		—		281.7		0.6		282.3
Other (1)		2.3		124.0		(5.6)		120.7		0.6		143.8		11.4		155.8
Total		$	1,391.3	$	1,811.8	$	(3.0)	$	3,200.1	$	1,237.7	$	1,644.4	$	14.6	$	2,896.7

(1) Includes other product types, intercompany sales and eliminations.

NOTE C – INCOME TAXES

During the three months ended September 30, 2022, the Company recognized income tax expense of $25.6 million on income of $107.4 million, an effective tax rate of 23.8%, as compared to income tax expense of $13.9 million on income of $61.4 million, an effective tax rate of 22.6%, for the three months ended September 30, 2021. The higher effective tax rate for the three months ended September 30, 2022 when compared with the three months ended September 30, 2021 is primarily due to higher tax related to the geographic distribution of income partially offset by lower U.S. tax on foreign income.

During the nine months ended September 30, 2022, the Company recognized income tax expense of $52.6 million on income of $260.8 million, an effective tax rate of 20.2%, as compared to income tax expense of $36.0 million on income of $195.5 million, an effective tax rate of 18.4%, for the nine months ended September 30, 2021. The higher effective tax rate for the nine months ended September 30, 2022 when compared with the nine months ended September 30, 2021 is primarily due to higher tax related to the geographic distribution of income and lower favorable discrete benefits partially offset by lower U.S. tax on foreign income in the current year period.

As of September 30, 2022, the Company determined that it was appropriate to retain its valuation allowance on its German interest expense deferred tax asset. However, it is reasonably possible that, in the near term, continuing improvement in operating performance and other positive evidence could change the Company’s assessment of the realizability of the German interest expense deferred tax asset resulting in the reversal of all, or part of, the related valuation allowance.

NOTE D – ACQUISITIONS

Acquisitions

On April 22, 2022, the Company acquired a 100% ownership interest in Steelweld Fabrications Limited (“Steelweld”), a manufacturer of heavy fabrications based in Northern Ireland, to facilitate manufacturing of certain MP products. Total cash consideration was approximately $6 million. On July 29, 2022, the Company acquired a 100% ownership interest in ProAll International Mfg. Inc. and ProAll UK Limited and related assets (“ProAll”), a manufacturer of volumetric mixers based in Canada, to expand the Company’s concrete product offering. Total consideration, including estimated contingent consideration from earnout provisions, was approximately $39 million.

These transactions were recorded as business combinations using the acquisition method which requires measurement of identifiable assets acquired and liabilities assumed at their estimated fair values as of the acquisition date. Goodwill was calculated as the excess of the aggregate of the fair value of the consideration transferred over the fair value of the net assets recognized. The results of operations associated with these businesses are consolidated within the MP segment in the Condensed Consolidated Financial Statements from the respective dates of acquisition.

See Note H – “Goodwill and Intangible Assets” for additional information regarding goodwill recognized as a result of these acquisitions.

NOTE E – EARNINGS PER SHARE


(in millions, except per share data)	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Income (loss) from continuing operations	$	81.8	$	47.5	$	208.2	$	159.5

Gain (loss) on disposition of discontinued operations – net of tax	—		0.6		(0.4)		2.6
Net income (loss)	$	81.8	$	48.1	$	207.8	$	162.1
Basic shares:
Weighted average shares outstanding	67.8		69.8		68.8		69.7
Earnings (loss) per share – basic:
Income (loss) from continuing operations	$	1.21	$	0.68	$	3.03	$	2.29

Gain (loss) on disposition of discontinued operations – net of tax	—		0.01		(0.01)		0.04
Net income (loss)	$	1.21	$	0.69	$	3.02	$	2.33
Diluted shares:
Weighted average shares outstanding – basic	67.8		69.8		68.8		69.7
Effect of dilutive securities:
Restricted stock awards	0.6		1.1		0.8		1.1
Diluted weighted average shares outstanding	68.4		70.9		69.6		70.8
Earnings (loss) per share – diluted:
Income (loss) from continuing operations	$	1.20	$	0.67	$	2.99	$	2.25

Gain (loss) on disposition of discontinued operations – net of tax	—		0.01		—		0.04
Net income (loss)	$	1.20	$	0.68	$	2.99	$	2.29

Non-vested restricted stock awards and restricted stock units (“Restricted Stock Awards”) granted by the Company are treated as potential common shares outstanding in computing diluted earnings per share using the treasury stock method. Weighted average Restricted Stock Awards of approximately 0.5 million and 0.1 million were outstanding during the three months ended September 30, 2022 and 2021, respectively, but were not included in the computation of diluted shares as the effect would be anti-dilutive or performance targets were not expected to be achieved for awards contingent upon performance. Weighted average Restricted Stock Awards of approximately 0.6 million and 0.1 million were outstanding during the nine months ended September 30, 2022 and 2021, respectively, but were not included in the computation of diluted shares as the effect would be anti-dilutive or performance targets were not expected to be achieved for awards contingent upon performance.

NOTE F – INVENTORIES

Inventories consist of the following (in millions):


	September 30, 2022		December 31, 2021
Finished equipment	$	335.0	$	283.0
Replacement parts	147.9		157.3
Work-in-process	161.4		105.5
Raw materials and supplies	336.9		267.7
Inventories	$	981.2	$	813.5

Work-in-process inventory includes approximately $63 million and $10 million of substantially completed inventory awaiting installation of final components at September 30, 2022 and December 31, 2021, respectively.

Reserves for lower of cost or net realizable value and excess and obsolete inventory were $55.6 million and $57.8 million at September 30, 2022 and December 31, 2021, respectively.

NOTE G – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment – net consist of the following (in millions):


	September 30, 2022		December 31, 2021
Property	$	55.3	$	53.1
Plant	268.2		284.4
Equipment	396.1		402.4
Leasehold improvements	45.2		50.0
Construction in progress	71.2		26.9
Property, plant and equipment – gross	836.0		816.8
Less: Accumulated depreciation	(385.6)		(387.2)
Property, plant and equipment – net	$	450.4	$	429.6

NOTE H – GOODWILL AND INTANGIBLE ASSETS

An analysis of changes in the Company’s goodwill by business segment is as follows (in millions):


	MP		AWP		Total
Balance at December 31, 2021, gross	$	202.2	$	139.7	$	341.9
Accumulated impairment	(23.2)		(38.6)		(61.8)
Balance at December 31, 2021, net	179.0		101.1		280.1
Acquisitions	21.9		—		21.9

Foreign exchange effect and other	(25.7)		(3.2)		(28.9)
Balance at September 30, 2022, gross	198.4		136.5		334.9
Accumulated impairment	(23.2)		(38.6)		(61.8)
Balance at September 30, 2022, net	$	175.2	$	97.9	$	273.1

During the nine months ended September 30, 2022, the Company recognized goodwill of $3.5 million in connection with the Steelweld acquisition and $18.4 million in connection with the ProAll acquisition. The goodwill associated with these transactions was attributable primarily to the assembled workforce and expected synergies from the business combinations. The goodwill was assigned to the MP segment and is not expected to be deductible for income tax purposes. See Note D – “Acquisitions” for additional information regarding the acquisitions.

Intangible assets, net were comprised of the following (in millions):


		September 30, 2022						December 31, 2021
	Weighted Average Life (in years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Definite-lived intangible assets:
Technology	7	$	8.6	$	(8.5)	$	0.1	$	9.8	$	(9.7)	$	0.1
Customer Relationships	20	33.9		(25.9)		8.0		31.9		(25.4)		6.5
Land Use Rights	80	4.0		(0.8)		3.2		4.4		(0.8)		3.6
Other	7	29.3		(23.1)		6.2		26.3		(23.1)		3.2
Total definite-lived intangible assets		$	75.8	$	(58.3)	$	17.5	$	72.4	$	(59.0)	$	13.4

During the nine months ended September 30, 2022, the Company recognized customer relationships of $0.6 million with an estimated useful life of three years in connection with the Steelweld acquisition and customer relationships of $3.2 million with an estimate useful life of nine years and trademarks of $3.7 million with an estimated useful life of ten years in connection with the ProAll acquisition. See Note D – “Acquisitions” for additional information regarding the acquisitions.


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2022		2021		2022		2021
Aggregate Amortization Expense	$	0.7	$	0.7	$	1.9	$	1.6

Estimated aggregate intangible asset amortization expense for each of the next five years is as follows (in millions):



2022	$	2.7
2023	2.6
2024	2.4
2025	2.2
2026	2.0

NOTE I – DERIVATIVE FINANCIAL INSTRUMENTS

The Company operates internationally, with manufacturing and sales facilities in various locations around the world. In the normal course of business, the Company uses derivatives to manage commodity, currency and interest rate exposures. For a derivative to qualify for hedge accounting treatment at inception and throughout the hedge period, the Company formally documents the nature and relationships between hedging instruments and hedged items, as well as its risk-management objectives and strategies for undertaking various hedge transactions, and methods of assessing hedge effectiveness. Additionally, for hedges of forecasted transactions, significant characteristics and expected terms of a forecasted transaction must be specifically identified, and it must be probable that each forecasted transaction will occur. If it is deemed probable the forecasted transaction will not occur, then the gain or loss would be recognized in current earnings. Financial instruments qualifying for hedge accounting must maintain a specified level of effectiveness between the hedging instrument and the item being hedged. The Company does not engage in trading or other speculative use of financial instruments. The Company records all derivative contracts at fair value on a recurring basis.

Commodity Swaps

Derivatives designated as cash flow hedging instruments include commodity swaps with outstanding notional value of $18.6 million and $22.5 million at September 30, 2022 and December 31, 2021, respectively. Commodity swaps outstanding at September 30, 2022 mature on or before August 31, 2024. The Company uses commodity swaps to mitigate price risk for hot rolled coil steel. Fair value of commodity swaps are based on observable market data for similar assets and liabilities. Changes in the fair value of commodity swaps are deferred in Accumulated other comprehensive income (loss) (“AOCI”). Gains or losses on commodity swaps are reclassified to Cost of goods sold (“COGS”) in the Condensed Consolidated Statement of Comprehensive Income (Loss) when the hedged transaction affects earnings.

Cross Currency Swaps

Derivatives designated as net investment hedging instruments include cross currency swaps with outstanding notional value of $29.4 million and $68.2 million at September 30, 2022 and December 31, 2021, respectively. The Company uses these cross currency swaps to mitigate its exposure to changes in foreign currency exchange rates related to a net investment in a Euro-denominated functional currency subsidiary. Fair values of cross currency swaps are based on the present value of future cash payments and receipts. Changes in the fair value of cross currency swaps are deferred in AOCI. Gains or losses on cross currency swaps are reclassified to Selling, general and administrative expenses in the Condensed Consolidated Statement of Comprehensive Income (Loss) when the net investment is liquidated.

Foreign Exchange Contracts

The Company enters into foreign exchange contracts to manage variability of future cash flows associated with changing currency exchange rates. Foreign currency exchange contracts, whether designated or not designated as cash flow hedges, are used to mitigate exposure to changes in foreign currency exchange rates on recognized assets and liabilities. Fair values of these contracts are derived using quoted forward foreign exchange prices to interpolate values of outstanding trades at the reporting date based on their maturities. Foreign exchange contracts outstanding at September 30, 2022 mature on or before July 2023.

The Company had $8.6 million and $19.4 million notional value of foreign exchange contracts outstanding that were designated as cash flow hedging instruments at September 30, 2022 and December 31, 2021, respectively. For effective hedging instruments, changes in the fair value of foreign exchange contracts are deferred in AOCI until the underlying hedged transactions settle. Gains or losses on foreign exchange contracts are reclassified to COGS in the Condensed Consolidated Statement of Comprehensive Income (Loss).

The Company had $241.6 million and $139.7 million notional value of foreign exchange contracts outstanding that were not designated as cash flow hedging instruments at September 30, 2022 and December 31, 2021, respectively. The majority of gains and losses recognized from foreign exchange contracts not designated as hedging instruments are offset by changes in the underlying exposures the contracts are intended to mitigate, resulting in no material net impact on earnings. Changes in the fair value of these derivative financial instruments are recognized as gains or losses in COGS and Other income (expense) – net in the Condensed Consolidated Statement of Comprehensive Income (Loss).

Interest Rate Caps

In October 2021, the Company terminated all outstanding interest rate caps. The Company used interest rate caps to mitigate its exposure to changes in interest rates related to variable rate debt. Fair value of interest rate caps were based on the present value of future cash payments and receipts. Changes in the fair value of interest rate caps were deferred in AOCI. Gains or losses on interest rate caps were reclassified to Interest expense in the Condensed Consolidated Statement of Comprehensive Income (Loss) when the underlying hedged transactions occur.

The following table provides the location and fair value amounts of derivative instruments designated and not designated as hedging instruments that are reported in the Condensed Consolidated Balance Sheet (in millions):


		September 30, 2022				December 31, 2021
Instrument (1)	Balance Sheet Account	Derivatives designated as hedges		Derivatives not designated as hedges		Derivatives designated as hedges		Derivatives not designated as hedges
Foreign exchange contracts	Other current assets	$	—	$	4.4	$	(0.1)	$	0.7
Cross currency swaps - net investment hedge	Other current assets	0.4		—		—		—


Commodity swaps	Other current assets	—		—		4.3		—
Cross currency swaps - net investment hedge	Other non-current assets	0.6		—		—		—


Foreign exchange contracts	Other current liabilities	(0.3)		(2.2)		—		—
Cross currency swaps - net investment hedge	Other current liabilities	—		—		(0.5)		—

Commodity swaps	Other current liabilities	(2.1)		—		(1.1)		—
Cross currency swaps - net investment hedge	Other non-current liabilities	—		—		(2.4)		—
Commodity swaps	Other non-current liabilities	(0.5)		—		—		—

Net derivative asset (liability)		$	(1.9)	$	2.2	$	0.2	$	0.7

(1) Categorized as Level 2 under the ASC 820 Fair Value Hierarchy.

The following tables provide the effect of derivative instruments that are designated as hedges in AOCI (in millions):


	Gain (Loss) Recognized on Derivatives in OCI, net of tax				Gain (Loss) Reclassified from AOCI into Income (Loss)

Instrument	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022		Income Statement Account	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
Foreign exchange contracts	$	(0.2)	$	(0.2)	Cost of goods sold	$	—	$	0.1
Commodity swaps	(4.0)		(10.9)		Cost of goods sold	(0.4)		6.9
Cross currency swaps - net investment hedge	2.4		6.1		Selling, general and administrative expenses	—		—

Total	$	(1.8)	$	(5.0)	Total	$	(0.4)	$	7.0


	Gain (Loss) Recognized on Derivatives in OCI, net of tax				Gain (Loss) Reclassified from AOCI into Income (Loss)

Instrument	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021		Income Statement Account	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Foreign exchange contracts	$	—	$	—	Cost of goods sold	$	—	$	0.1
Commodity swaps	(5.8)		9.1		Cost of goods sold	6.9		8.3
Cross currency swaps - net investment hedge	1.8		4.0		Selling, general and administrative expenses	—		—
Interest rate caps	0.1		2.7		Interest expense	(0.3)		(0.9)
Total	$	(3.9)	$	15.8	Total	$	6.6	$	7.5

The following tables provide the effect of derivative instruments that are designated as hedges in the Condensed Consolidated Statement of Comprehensive Income (Loss) (in millions):


	Classification and amount of Gain (Loss) Recognized in Income (Loss)
	Cost of goods sold				Interest expense
	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022		Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
Income Statement Accounts in which effects of cash flow hedges are recorded	$	(883.4)	$	(2,564.3)	$	(13.5)	$	(35.8)
Gain (loss) reclassified from AOCI into Income (loss):
Foreign exchange contracts	—		0.1		—		—
Commodity swaps	(0.4)		6.9		—		—

Amount excluded from effectiveness testing recognized in Income (loss) based on amortization approach:
Cross currency swaps - net investment hedge	—		—		—		0.3
Total	$	(0.4)	$	7.0	$	—	$	0.3


	Classification and amount of Gain (Loss) Recognized in Income (Loss)
	Cost of goods sold				Interest expense
	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021		Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Income Statement Accounts in which effects of cash flow hedges are recorded	$	(815.3)	$	(2,311.2)	$	(12.3)	$	(40.6)
Gain (loss) reclassified from AOCI into Income (loss):
Foreign exchange contracts	—		0.1		—		—
Commodity swaps	6.9		8.3		—		—
Interest rate caps	—		—		(0.3)		(0.9)
Amount excluded from effectiveness testing recognized in Income (loss) based on amortization approach:
Cross currency swaps - net investment hedge	—		—		0.2		0.5
Total	$	6.9	$	8.4	$	(0.1)	$	(0.4)

Derivatives not designated as hedges are used to offset foreign exchange gains or losses resulting from the underlying exposures of foreign currency denominated assets and liabilities. The following table provides the effect of non-designated derivatives in the Condensed Consolidated Statement of Comprehensive Income (Loss) (in millions):


		Gain (Loss) Recognized in Income (Loss)
		Three Months Ended September 30,				Nine Months Ended September 30,
Instrument	Income Statement Account	2022		2021		2022		2021
Foreign exchange contracts	Cost of goods sold	$	(3.1)	$	(0.6)	$	(2.2)	$	(0.6)
Foreign exchange contracts	Other income (expense) – net	2.3		(0.1)		1.3		(0.3)

	Total	$	(0.8)	$	(0.7)	$	(0.9)	$	(0.9)

In the Condensed Consolidated Statement of Comprehensive Income (Loss), the Company records hedging activity related to commodity swaps, cross currency swaps, foreign exchange contracts and interest rate caps in the accounts for which the hedged items are recorded. On the Condensed Consolidated Statement of Cash Flows, the Company presents cash flows from hedging activities in the same manner as it records the underlying item being hedged.

Counterparties to the Company’s derivative financial instruments are major financial institutions and commodity trading companies with credit ratings of investment grade or better and no collateral is required. There are no significant risk concentrations. Management continues to monitor counterparty risk and believes the risk of incurring losses on derivative contracts related to credit risk is unlikely and any losses would be immaterial.

See Note M - “Stockholders’ Equity” for unrealized net gains (losses), net of tax, included in AOCI. Within unrealized net gains (losses) included in AOCI as of September 30, 2022, it is estimated that approximately $2 million of losses are expected to be reclassified into earnings in the next twelve months.

NOTE J – LONG-TERM OBLIGATIONS

Credit Agreement

On January 31, 2017, the Company entered into a credit agreement with the lenders and issuing banks party thereto and Credit Suisse AG, Cayman Islands Branch (“CSAG”), as administrative agent and collateral agent, to provide the Company with a multi-currency revolving line of credit and senior secured term loans. This was subsequently amended to include (i) a $600 million revolving line of credit (the “Revolver”) and (ii) senior secured term loans totaling $600 million with a maturity date of January 31, 2024 (the “Term Loans”). On April 1, 2021, the Company entered into an amendment and restatement of the credit agreement (as amended and restated, the “Credit Agreement”) which included the following principal changes to the original credit agreement: (i) extension of the term of the Revolver to expire on April 1, 2026, which maturity will spring forward to November 1, 2023 if the principal outstanding under the $400 million senior secured term loan (the “Original Term Loan”) is not repaid or its maturity date is not extended, (ii) reinstatement of financial covenants that were waived in 2020, (iii) decrease in the interest rate on the drawn Revolver by 25 basis points and (iv) certain other technical changes, including additional language regarding the potential cessation of LIBOR as a benchmark rate. On March 7, 2019, the Company entered into an Incremental Assumption Agreement and Amendment No. 3 (“Amendment No. 3”) to its credit agreement. Amendment No. 3 provided the Company with an additional term loan (the “2019 Term Loan”) in the amount of $200 million. The Company recorded a loss on early extinguishment of debt related to the amendment and restatement of the Credit Agreement of $2.4 million in the second quarter of 2021.

During the first quarter of 2021, the Company prepaid the 2019 Term Loan prior to its maturity date to reduce the Company’s outstanding debt and lower its leverage. The Company recorded a loss on early extinguishment of debt related to prepayment of $2.1 million for accelerated amortization of debt acquisition costs and original issue discount. The 2019 Term Loan bore interest at a rate of LIBOR plus 2.75% with a 0.75% LIBOR floor.

The Original Term Loan bears interest at a rate of LIBOR plus 2.00% with a 0.75% LIBOR floor. During the second quarter of 2022 and 2021, the Company prepaid $23.0 million and $83.0 million, respectively, of the amount outstanding on the Original Term Loan prior to its maturity date to reduce the Company’s outstanding debt. During the second quarter of 2022 and 2021, the Company recorded a loss on early extinguishment of debt related to prepayment of $0.1 million and $0.7 million, respectively, for accelerated amortization of debt acquisition costs and original issue discount.

Unlimited incremental commitments may be extended at the option of the existing or new lenders and can be in the form of revolving credit commitments, term loan commitments, or a combination of both, with incremental amounts in excess of $300 million as long as the Company satisfies the maximum permitted level of senior secured leverage as defined in the Credit Agreement.

The Credit Agreement requires the Company to comply with a number of covenants which limit, in certain circumstances, the Company’s ability to take a variety of actions, including but not limited to: incur indebtedness; create or maintain liens on its property or assets; make investments, loans and advances; repurchase shares of its common stock; engage in acquisitions, mergers, consolidations and asset sales; redeem debt; and pay dividends and distributions. If the Company’s borrowings under the Revolver are greater than 30% of the total revolving credit commitments, the Credit Agreement requires the Company to comply with the following financial tests: (i) minimum required level of the interest coverage ratio of 2.5 to 1.0 and (ii) maximum permitted level of the senior secured leverage ratio of 2.75 to 1.0. The Credit Agreement also contains customary default provisions. The Company was in compliance with all covenants contained in the Credit Agreement as of September 30, 2022.

As of September 30, 2022 and December 31, 2021, the Company had $54.9 million and $77.8 million, net of discount, respectively, in Term Loans outstanding under the Credit Agreement. The weighted average interest rate on the Term Loans at September 30, 2022 and December 31, 2021 was 4.67% and 2.75%, respectively. The Company had $173.7 million of revolving credit amounts outstanding as of September 30, 2022 and no revolving credit amounts outstanding as of December 31, 2021. The weighted average interest rate on the revolving credit amounts at September 30, 2022 was 4.01%.

The Company obtains letters of credit that generally serve as collateral for certain liabilities included in the Condensed Consolidated Balance Sheet and guaranteeing the Company’s performance under contracts. Letters of credit can be issued under two facilities provided in the Credit Agreement and via bilateral arrangements outside the Credit Agreement.

The Credit Agreement incorporates secured facilities for issuance of letters of credit up to $400 million (the “$400 Million Facility”). Letters of credit issued under the $400 Million Facility decrease availability under the Revolver. The Credit Agreement also permits the Company to have additional secured facilities for the issuance of letters of credit up to $300 million (the “$300 Million Facility”). Letters of credit issued under the $300 Million Facility do not decrease availability under the Revolver.

The Company also has bilateral arrangements to issue letters of credit with various other financial institutions (the “Bilateral Arrangements”). The Bilateral Arrangements are not secured under the Credit Agreement and do not decrease availability under the Revolver.

Letters of credit outstanding (in millions):


	September 30, 2022			December 31, 2021

$400 Million Facility		$	—		$	—
$300 Million Facility		68.0			62.8
Bilateral Arrangements		46.3			45.0
Total		$	114.3		$	107.8

Furthermore, the Company and certain of its subsidiaries agreed to take certain actions to secure borrowings under the Credit Agreement. As a result, Terex and certain of its subsidiaries entered into a Guarantee and Collateral Agreement with CSAG, as collateral agent for the lenders, granting security and guarantees to the lenders for amounts borrowed under the Credit Agreement. Pursuant to the Guarantee and Collateral Agreement, Terex is required to (a) pledge as collateral the capital stock of the Company’s material domestic subsidiaries and 65% of the capital stock of certain of the Company’s material foreign subsidiaries and (b) provide a first priority security interest in substantially all of the Company’s domestic assets.

5-5/8% Senior Notes

On January 31, 2017, the Company sold and issued $600.0 million aggregate principal amount of Senior Notes Due 2025 (“5-5/8% Notes”) at par in a private offering. The 5-5/8% Notes were jointly and severally guaranteed by certain of the Company’s domestic subsidiaries.

On March 15, 2021, the Company delivered a notice for the conditional redemption of all of its outstanding 5-5/8% Notes. On April 5, 2021, the Company redeemed the 5-5/8% Notes in full for $622.9 million, including redemption premiums of $16.9 million and accrued but unpaid interest of $6.0 million. The Company recorded a loss on early extinguishment of debt related to the redemption of the 5-5/8% Notes of $22.5 million in the second quarter of 2021.

5% Senior Notes

In Apri1 2021, the Company sold and issued $600.0 million aggregate principal amount of Senior Notes Due 2029 (“5% Notes”) at par in a private offering. The proceeds from the 5% Notes, together with cash on hand, was used: (i) to fund redemption and discharge of the 5-5/8% Notes and (ii) to pay related premiums, fees, discounts and expenses. The 5% Notes are jointly and severally guaranteed by certain of the Company’s domestic subsidiaries.

Fair Value of Debt

The Company estimates the fair values of its debt set forth below as of September 30, 2022, as follows (in millions, except for quotes):


	Book Value		Quote	Fair Value

5% Notes	$	600.0	0.84000	$	504.0

Original Term Loan (net of discount)	$	54.9	0.99500	$	54.6

The fair value of debt reported in the table above is based on adjusted price quotations on the debt instruments in an active market. The Company believes that the carrying value of its other borrowings, including amounts outstanding, if any, for the revolving credit line under the Credit Agreement, approximate fair market value based on maturities for debt of similar terms. Fair values of debt reported in the table above are categorized under Level 2 of the ASC 820 hierarchy. See Note A – “Basis of Presentation” for an explanation of ASC 820 hierarchy.

NOTE K – RETIREMENT PLANS AND OTHER BENEFITS

The Company maintains defined benefit plans in France, Germany, India, Switzerland and the United Kingdom for some of its subsidiaries, as well as a nonqualified Supplemental Executive Retirement Plan in the U.S. (“U.S. SERP”). In Italy and Mexico, there are mandatory termination indemnity plans providing a benefit that is payable upon termination of employment in substantially all cases of termination. The Company has several non-pension post-retirement benefit programs, including health and life insurance benefits to certain former salaried and hourly employees. Information regarding the Company’s plans, including the U.S. SERP, is as follows (in millions):


	Three Months Ended September 30,												Nine Months Ended September 30,
	2022						2021						2022						2021
	U.S. Pension		Non-U.S. Pension		Other		U.S. Pension		Non-U.S. Pension		Other		U.S. Pension		Non-U.S. Pension		Other		U.S. Pension		Non-U.S. Pension		Other
Components of net periodic cost:
Service cost	$	—	$	0.2	$	—	$	—	$	0.2	$	—	$	—	$	0.6	$	—	$	—	$	0.7	$	—
Interest cost	0.3		0.5		0.1		0.2		0.6		0.1		0.9		1.9		0.1		0.8		1.8		0.1
Expected return on plan assets	—		(1.1)		—		—		(1.3)		—		—		(3.8)		—		—		(4.2)		—

Amortization of actuarial (gain) loss	0.1		0.2		—		—		0.6		—		0.2		0.9		—		0.2		1.8		—

Net periodic cost	$	0.4	$	(0.2)	$	0.1	$	0.2	$	0.1	$	0.1	$	1.1	$	(0.4)	$	0.1	$	1.0	$	0.1	$	0.1

Components of Net periodic cost other than the Service cost component are included in Other income (expense) - net in the Condensed Consolidated Statement of Comprehensive Income (Loss). The Service cost component is included in the same line item or items as other compensation costs arising from services rendered by pertinent employees during the period.

NOTE L – LITIGATION AND CONTINGENCIES

General

The Company is involved in various legal proceedings, including product liability, general liability, workers’ compensation liability, employment, commercial and intellectual property litigation, which have arisen in the normal course of operations. The Company is insured for product liability, general liability, workers’ compensation, employer’s liability, property damage and other insurable risks required by law or contract, with retained liability or deductibles. The Company records and maintains an estimated liability in the amount of management’s estimate of the Company’s aggregate exposure for such retained liabilities and deductibles. For such retained liabilities and deductibles, the Company determines its exposure based on probable loss estimations, which requires such losses to be both probable and the amount or range of probable loss to be estimable. The Company believes it has made appropriate and adequate reserves and accruals for its current contingencies and the likelihood of a material loss beyond amounts accrued is remote. The Company believes the outcome of such matters, individually and in aggregate, will not have a material adverse effect on its condensed consolidated financial statements. However, outcomes of lawsuits cannot be predicted and, if determined adversely, could ultimately result in the Company incurring significant liabilities which could have a material adverse effect on its results of operations.

Terex Latin América Equipamentos Ltda ICMS Proceedings

Terex Latin America Equipamentos Ltda (“TLA”) imports Terex products into Brazil through the state of Espirito Santo to its facility in Sao Paulo. For the 2004 through March 2009 period TLA used a third-party trading company, SAB, as an agent to process the importation of Terex products. TLA properly paid the Espirito Santo ICMS tax (Brazilian state value-added tax) to SAB for payment to Espirito Santo, which would produce an ICMS credit to be used against imposition of Sao Paolo ICMS tax. SAB went into bankruptcy and may not have actually remitted to Espirito Santo the ICMS tax amounts paid to it by TLA. The Brazilian state of Sao Paulo challenged the credit against Sao Paolo ICMS that TLA claimed and assessed unpaid ICMS tax, penalties and related interest in the amount of approximately BRL 107 million ($20 million). TLA challenged the claim of Sao Paulo and learned in October 2019 that the Sao Paulo claim has survived the administrative tribunal process. TLA anticipates that it will receive notice for an amount due from Sao Paulo and expects to protest the Sao Paulo claim in litigation. While the Company believes the position of the state of Sao Paulo is without merit and continues to vigorously oppose it, no assurance can be given as to the final resolution of the ICMS litigation or that TLA will not ultimately be required to pay ICMS and interest to the state of Sao Paulo.

Other

The Company is involved in various other legal proceedings which have arisen in the normal course of its operations. The Company has recorded provisions for estimated losses in circumstances where a loss is probable and the amount or range of possible amounts of the loss is estimable.

Credit Guarantees

The Company may assist customers in their rental, leasing and acquisition of its 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 current amount of the maximum liability is generally limited to our customer’s remaining payments due to the third-party financial institutions at the time of default; however, it cannot be reasonably estimated due to limited availability of the unique facts and circumstances of each arrangement, such as whether changes have been made to the structure of the contractual obligation between the funder and customer.

For credit guarantees outstanding as of September 30, 2022 and December 31, 2021, the maximum exposure determined was $120.7 million and $143.5 million, respectively. Terms of these guarantees coincide with the financing arranged by the customer and generally do not exceed five years. The allowance for credit losses on credit guarantees was $7.3 million and $6.3 million at September 30, 2022 and December 31, 2021, respectively.

There can be no assurance that historical experience in used equipment markets will be indicative of future results. The Company’s ability to recover losses experienced from its guarantees may be affected by economic conditions in used equipment markets at the time of loss.

NOTE M – STOCKHOLDERS’ EQUITY

Changes in Accumulated Other Comprehensive Income (Loss)

The table below presents changes in AOCI by component for the three and nine months ended September 30, 2022 and 2021. All amounts are net of tax (in millions).


	Three Months Ended September 30, 2022										Three Months Ended September 30, 2021
	CTA		Derivative Hedging Adj.		Debt & Equity Securities Adj.		Pension Liability Adj.		Total		CTA		Derivative Hedging Adj.		Debt & Equity Securities Adj.		Pension Liability Adj.		Total
Beginning balance	$	(278.9)	$	0.8	$	(2.9)	$	(39.9)	$	(320.9)	$	(156.6)	$	13.7	$	0.6	$	(57.7)	$	(200.0)
Other comprehensive income (loss) before reclassifications	(80.8)		(2.1)		(1.0)		2.9		(81.0)		(27.1)		1.1		(0.2)		1.5		(24.7)
Amounts reclassified from AOCI	—		0.3		—		0.3		0.6		—		(5.0)		—		0.4		(4.6)
Net other comprehensive income (loss)	(80.8)		(1.8)		(1.0)		3.2		(80.4)		(27.1)		(3.9)		(0.2)		1.9		(29.3)
Ending balance	$	(359.7)	$	(1.0)	$	(3.9)	$	(36.7)	$	(401.3)	$	(183.7)	$	9.8	$	0.4	$	(55.8)	$	(229.3)


	Nine Months Ended September 30, 2022										Nine Months Ended September 30, 2021
	CTA		Derivative Hedging Adj.		Debt & Equity Securities Adj.		Pension Liability Adj.		Total		CTA		Derivative Hedging Adj.		Debt & Equity Securities Adj.		Pension Liability Adj.		Total
Beginning balance	$	(188.0)	$	4.0	$	—	$	(44.5)	$	(228.5)	$	(145.2)	$	(6.0)	$	1.2	$	(58.4)	$	(208.4)
Other comprehensive income (loss) before reclassifications	(171.3)		0.5		(3.9)		6.8		(167.9)		(38.5)		21.6		(0.8)		1.1		(16.6)
Amounts reclassified from AOCI	(0.4)		(5.5)		—		1.0		(4.9)		—		(5.8)		—		1.5		(4.3)
Net other comprehensive income (loss)	(171.7)		(5.0)		(3.9)		7.8		(172.8)		(38.5)		15.8		(0.8)		2.6		(20.9)
Ending balance	$	(359.7)	$	(1.0)	$	(3.9)	$	(36.7)	$	(401.3)	$	(183.7)	$	9.8	$	0.4	$	(55.8)	$	(229.3)

Stock-Based Compensation

During the nine months ended September 30, 2022, the Company awarded 0.7 million shares of Restricted Stock Awards to its employees with a weighted average grant date fair value of $40.33 per share. Approximately 58% of these awards are time-based and vest ratably on each of the first three anniversary dates of the grants. Approximately 28% cliff vest at the end of a three-year period and are subject to performance targets that may or may not be met and for which the performance period has not yet been completed. Approximately 14% cliff vest and are based on performance targets containing a market condition determined over a three-year period.

Fair value of Restricted Stock Awards is based on the market price at the date of grant approval except for awards based on a market condition. The Company used the Monte Carlo method to determine grant date fair value of $44.25 per share for awards with a market condition granted on March 17, 2022. The Monte Carlo method is a statistical simulation technique used to provide the grant date fair value of an award.

The following table presents the weighted-average assumptions used in the valuation:


	Grant date
	March 17, 2022
Dividend yields	1.31	%
Expected volatility	54.25	%
Risk free interest rate	2.09	%
Expected life (in years)	3

Share Repurchases

In July 2018, Terex’s Board of Directors authorized the repurchase up to $300 million of the Company’s outstanding shares of common stock. The table below presents shares repurchased, inclusive of transactions executed but not settled, by the Company under this program.


Nine Months Ended September 30	Total Number of Shares Repurchased	Amount of Shares Repurchased (in millions)
2022	2,747,751	$92.9
2021	—	$—

Dividends

The table below presents dividends declared by Terex’s Board of Directors and paid to the Company’s shareholders:


Year	First Quarter		Second Quarter		Third Quarter
2022	$	0.13	$	0.13	$	0.13
2021	$	0.12	$	0.12	$	0.12

In October 2022, Terex’s Board of Directors declared a dividend of $0.13 per share, which will be paid on December 19, 2022 to the Company’s shareholders of record as of November 10, 2022.


ITEM 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS DESCRIPTION

Terex is a global manufacturer of materials processing machinery and aerial work platforms. We design, build and support products used in construction, maintenance, manufacturing, energy, recycling, minerals and materials management applications. Certain Terex products and solutions enable customers to reduce their environmental impact 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. We engage with customers through all stages of the product life cycle, from initial specification and financing to parts and service support. We report our business in the following segments: (i) Materials Processing (“MP”) and (ii) Aerial Work Platforms (“AWP”).

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 (United States (“U.S.”) 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. 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 we may use include translation effect of foreign currency exchange rate changes on net sales, gross profit, selling, general & administrative (“SG&A”) expenses and operating profit, as well as the net sales, gross profit, SG&A expenses and operating profit excluding the impact of acquisitions and divestitures.

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. Similarly, impact of changes in our results from acquisitions and divestitures not included in comparable prior periods may be subtracted from the absolute change in results to allow for better comparability of results between periods.

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 and other unusual items. Our 2022 outlook for earnings per share 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 2022 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 Trade receivables (net of allowance) plus Inventories, less Trade accounts payable and 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 we also use include Net Operating Profit After Tax (“NOPAT”) as adjusted, annualized effective tax rate as adjusted and cash and cash equivalents 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 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.

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. We are leveraging our business operating systems to navigate supply challenges and labor constraints while working to mitigate material cost inflation. Company-wide investments in new product development and continued deployment of digital customer and dealer solutions are important to help to deliver long-term growth. In the quarter, we expanded the capabilities of our growing environmental business in the MP segment with the acquisition of a company that designs and creates robots that pick, sort and recycle waste material.

Our performance in the third quarter reflected continued, strong, global customer demand in our businesses and good execution by our team members in a dynamic and challenging environment. Net sales of $1.1 billion were up 13% year-over-year, 21% on a foreign exchange neutral basis, as end-markets remained strong. Gross margins increased by 320 basis points in the quarter as the team implemented cost take out plans and pricing actions helped to offset cost increases. The year-over-year gross margin increase was in both our segments. Despite the high inflationary environment, SG&A spending as a percentage of net sales was essentially flat year-over-year at 10.4% of net sales, reflecting focused cost management. Operating margin of 10.8% was up 330 basis points year-over-year and up 120 basis points sequentially driven by prudent cost management and the improvement in price cost dynamics.

Overall, third quarter financial performance demonstrated continued, strong execution and focus on delivering for our customers and dealers despite global supply chain disruptions, significant inflationary pressures and foreign exchange rate volatility. The global operating environment has remained difficult and unpredictable with increases in commodity prices, energy costs and logistics adversely impacting the Company. In addition, the weakening of the Euro and British Pound against the U.S. Dollar had a meaningful negative impact on our results in the quarter. Although these headwinds have constrained our growth, we are aggressively managing these challenges. We have continued to take pricing actions which has been necessary to mitigate rising costs in both segments. As a result of these actions, we anticipate being price cost neutral for all of 2022.

MP had a strong quarter with net sales up 9% from the prior year period, 20% on a foreign exchange neutral basis, driven by price realization and strong customer sentiment across multiple end-markets and geographies. The MP businesses continue to benefit from strong equipment utilization rates and dealers looking to replenish their inventory and rental fleets. Our mobile crushing and screening businesses are benefiting from the strength of aggregates demand for infrastructure and sand for silicon used in semiconductors. Growth of environmental and waste recycling solutions is driving demand for our wood processing, biomass and recycling equipment. The strength of construction and infrastructure spending is driving demand for our cement products in the U.S. Our material handlers are benefiting from diversification into waste, scrap, port and timber applications. The strength of commodity prices is driving demand for our pick and carry cranes in Australia. MP has been aggressively managing all elements of cost resulting in a 14.6% operating margin for the quarter. We are encouraged by MP’s total backlog (including deliveries beyond 12 months) of $1.2 billion, which is up 14% compared to the prior year period’s total backlog of $1.1 billion.

AWP’s third quarter 2022 net sales were up 16% compared to the prior year period and increased 22% on a foreign exchange neutral basis, primarily due to price realization necessary to mitigate rising costs and higher demand driven by fleet replacement and end-market growth for aerial work platforms. Utility product growth was strong in North America. 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, the fundamentals of the North American and European replacement cycle are strong as fleets age and customers have strong utilization rates. Globally, increased adoption continues to improve labor efficiency and jobsite safety. Our Utilities business is benefiting from electric grid expansion across the U.S. AWP delivered operating margins of 9.6% in the quarter driven by strict expense management and disciplined pricing actions. AWP’s end market strength is demonstrated by its total backlog (including deliveries beyond 12 months) of $2.7 billion, which is up 44% compared to the prior year period’s total backlog of $1.9 billion.

In the third quarter, our largest market remained North America, which represented approximately 58% of our global sales. As compared to the prior year period, sales were up double digits in every major geography except for Asia Pacific which was down although essentially flat on a foreign exchange neutral basis.

We continued to execute our disciplined capital allocation strategy in the third quarter. We are making strategic investments in our businesses and continuing to return capital to shareholders. Our strong balance sheet has allowed us to return approximately $120 million of cash to shareholders in the first nine months of 2022. We generated $53 million of free cash flow in the quarter, consistent with our sequential improvement goals, but below our expectations as inventory levels remained high in the third quarter. We continue to maintain ample liquidity and as of September 30, 2022, we had $658 million in available liquidity, with no near-term debt maturities. See “Liquidity and Capital Resources” for a detailed description of liquidity and working capital levels, including the primary factors affecting such levels, as well as a reconciliation of net cash provided by (used in) operating activities to free cash flow.

As a result of our strong performance in the third quarter, we are increasing our outlook for 2022 EPS to between $4.00 and $4.20, on net sales of approximately $4.3 billion. We continue to operate in a highly uncertain environment with supply chain challenges, inflationary pressures, foreign exchange rate volatility, geopolitical uncertainty, and restrictive COVID-19 policies in China, so results can change, positively or negatively.

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 Income (loss) from operations by one minus the annualized effective tax rate.

In the calculation of ROIC, we adjust annualized effective tax rate to reflect management’s expectation of the full year effective tax rate 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. Cash and cash equivalents is adjusted to include amounts recorded as held for sale. Furthermore, 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’ adjusted 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.

Our management and Board of Directors use ROIC as one measure to assess operational performance, including in connection with 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 September 30, 2022 was 19.0%.

Amounts described below are reported in millions of U.S. dollars, except for the annualized effective tax rates. Amounts are as of and for the three months ended for the periods referenced in the tables below.


	Sep '22			Jun '22			Mar '22			Dec '21			Sep '21


Annualized effective tax rate as adjusted(1)	20.0		%	20.0		%	20.0		%	17.6		%
Income (loss) from operations	$	120.8		$	103.9		$	74.5		$	69.8
Multiplied by: 1 minus annualized effective tax rate	80.0		%	80.0		%	80.0		%	82.4		%
Adjusted net operating income (loss) after tax	$	96.6		$	83.1		$	59.6		$	57.5
Debt	$	826.5		$	828.2		$	740.3		$	674.1		$	893.4
Less: Cash and cash equivalents as adjusted	(231.7)			(253.3)			(218.4)			(266.9)			(558.2)
Debt less Cash and cash equivalents as adjusted	594.8			574.9			521.9			407.2			335.2
Stockholders’ equity	1,034.7			1,048.9			1,114.1			1,109.6			1,050.7
Debt less Cash and cash equivalents as adjusted plus Stockholders’ equity	$	1,629.5		$	1,623.8		$	1,636.0		$	1,516.8		$	1,385.9

(1) The annualized effective tax rate for Dec ’21 represents the actual full year 2021 effective tax rate.


September 30, 2022 ROIC	19.0		%
NOPAT as adjusted (last 4 quarters)	$	296.8
Average Debt less Cash and cash equivalents as adjusted plus Stockholders’ equity (5 quarters)	$	1,558.4


























	As of 9/30/22		As of 6/30/22		As of 3/31/22		As of 12/31/21		As of 9/30/21
Reconciliation of Cash and cash equivalents:
Cash and cash equivalents - continuing operations	$	231.7	$	253.3	$	218.4	$	266.9	$	553.2
Cash and cash equivalents - assets held for sale	—		—		—		—		5.0
Cash and cash equivalents as adjusted	$	231.7	$	253.3	$	218.4	$	266.9	$	558.2



Nine Months Ended September 30, 2022	Income (loss) from continuing operations before income taxes		(Provision for) benefit from income taxes		Income tax rate
Reconciliation of annualized effective tax rate:
As reported	$	260.8	$	(52.6)	20.2	%
Effect of adjustments:






Tax related	—		0.5

As adjusted	$	260.8	$	(52.1)	20.0	%

RESULTS OF OPERATIONS

Three Months Ended September 30, 2022 Compared with Three Months Ended September 30, 2021

Consolidated


	Three Months Ended September 30,
	2022				2021
			% of Sales				% of Sales		% Change In Reported Amounts
	($ amounts in millions)
Net sales	$	1,120.5	—		$	993.8	—		12.7	%
Gross profit	$	237.1	21.2	%	$	178.5	18.0	%	32.8	%
SG&A expenses	$	116.3	10.4	%	$	104.3	10.5	%	11.5	%
Income from operations	$	120.8	10.8	%	$	74.2	7.5	%	62.8	%

Net sales for the three months ended September 30, 2022 increased $126.7 million when compared to the same period in 2021. The increase in net sales was primarily due to price realization, necessary to mitigate rising costs, across all segments and healthy demand for our products across multiple businesses. Changes in foreign exchange rates negatively impacted consolidated net sales by approximately $78 million.

Gross profit for the three months ended September 30, 2022 increased $58.6 million when compared to the same period in 2021. The increase was primarily due to price realization, favorable mix and incremental margin on higher sales volume, partially offset by material, labor, manufacturing inefficiency and freight cost increases due to global supply chain disruptions, significant inflationary pressures and the negative impact of changes in foreign exchange rates.

SG&A expenses for the three months ended September 30, 2022 increased $12.0 million when compared to the same period in 2021 primarily due to higher personnel costs and increased engineering and selling costs, partially offset by the positive impact of changes in foreign exchange rates. SG&A expenses were slightly lower as a percent of sales when compared to the same period in 2021.

Income from operations for the three months ended September 30, 2022 increased $46.6 million when compared to the same period in 2021. The increase was primarily due to price realization, favorable mix and incremental margin on higher sales volume which more than offset cost increases and the negative impact of changes in foreign exchange rates.

Materials Processing


	Three Months Ended September 30,
	2022				2021
			% of Sales				% of Sales		% Change In Reported Amounts
	($ amounts in millions)
Net sales	$	457.9	—		$	418.7	—		9.4	%


Income from operations	$	66.8	14.6	%	$	57.1	13.6	%	17.0	%

Net sales for the MP segment for the three months ended September 30, 2022 increased $39.2 million when compared to the same period in 2021 primarily due to price realization, necessary to mitigate rising costs, and healthy demand for our products across multiple businesses in spite of the negative impact of changes in foreign exchange rates of approximately $43 million.

Income from operations for the three months ended September 30, 2022 increased $9.7 million when compared to the same period in 2021 primarily due to price realization, favorable mix and incremental margin on higher sales volume, partially offset by material, labor, manufacturing inefficiency and freight cost increases due to global supply chain disruptions, significant inflationary pressures and the negative impact of changes in foreign exchange rates.

Aerial Work Platforms


	Three Months Ended September 30,
	2022				2021
			% of Sales				% of Sales		% Change In Reported Amounts
	($ amounts in millions)
Net sales	$	662.6	—		$	572.5	—		15.7	%


Income from operations	$	63.5	9.6	%	$	34.9	6.1	%	81.9	%

Net sales for the AWP segment for the three months ended September 30, 2022 increased $90.1 million when compared to the same period in 2021 primarily due to price realization, necessary to mitigate rising costs, and higher demand that was driven by fleet replacement and end-market growth for aerial work platforms in all major geographies and utility products in North America, partially offset by lower telehandlers sales in North America and lower demand in China. Net sales were negatively impacted by changes in foreign exchange rates of approximately $35 million.

Income from operations for the three months ended September 30, 2022 increased $28.6 million when compared to the same period in 2021 primarily due to price realization, favorable mix and incremental margin on higher sales volume, partially offset by material, labor, manufacturing inefficiency and freight cost increases due to global supply chain disruptions, significant inflationary pressures and the negative impact of changes in foreign exchange rates.

Corporate and Other / Eliminations


	Three Months Ended September 30,
	2022			2021
			% of Sales			% of Sales	% Change In Reported Amounts
	($ amounts in millions)
Net sales	$	—	—	$	2.6	—	(100.0)	%
Loss from operations	$	(9.5)	*	$	(17.8)	*	46.6	%

* Not a meaningful percentage

Net sales include financing activities of Terex Financial Services (“TFS”), governmental sales and elimination of intercompany sales activity among segments. The net sales decrease is primarily attributable to higher intercompany sale eliminations and lower TFS revenue.

Loss from operations for the three months ended September 30, 2022 decreased $8.3 million when compared to the same period in 2021. The decrease in operating loss is primarily due to changes in foreign exchange costs absorbed by our operating segments, partially offset by higher technology investment and personnel costs.

Interest Expense, Net of Interest Income

During the three months ended September 30, 2022, our interest expense, net of interest income, was $12.4 million, or $0.7 million higher when compared to the same period in 2021 primarily due to an increase in our weighted average interest rate on revolving credit amounts, partially offset by higher interest income in the current year period.

Other Income (Expense) – Net

Other income (expense) – net for the three months ended September 30, 2022 and 2021 was expense of $1.0 million and $1.1 million, respectively.

Income Taxes

During the three months ended September 30, 2022, we recognized income tax expense of $25.6 million on income of $107.4 million, an effective tax rate of 23.8%, as compared to income tax expense of $13.9 million on income of $61.4 million, an effective tax rate of 22.6%, for the three months ended September 30, 2021. The higher effective tax rate for the three months ended September 30, 2022 when compared with the three months ended September 30, 2021 is primarily due to higher tax related to the geographic distribution of income partially offset by lower U.S. tax on foreign income.

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

During the three months ended September 30, 2021, we recognized a gain on disposition of discontinued operations - net of tax of $0.6 million primarily related to the sale of our mobile cranes business.

Nine Months Ended September 30, 2022 Compared with Nine Months Ended September 30, 2021

Consolidated


	Nine Months Ended September 30,
	2022				2021
			% of Sales				% of Sales		% Change In Reported Amounts
	($ amounts in millions)
Net sales	$	3,200.1	—		$	2,896.7	—		10.5	%
Gross profit	$	635.8	19.9	%	$	585.5	20.2	%	8.6	%
SG&A expenses	$	336.6	10.5	%	$	327.3	11.3	%	2.8	%
Income from operations	$	299.2	9.3	%	$	258.2	8.9	%	15.9	%

Net sales for the nine months ended September 30, 2022 increased $303.4 million when compared to the same period in 2021. The increase in net sales was primarily due to price realization, necessary to mitigate rising costs, across all segments and healthy demand for our products across multiple businesses. Changes in foreign exchange rates negatively impacted consolidated net sales by approximately $161 million.

Gross profit for the nine months ended September 30, 2022 increased $50.3 million when compared to the same period in 2021. The increase was primarily due to price realization, favorable mix and incremental margin on higher sales volume, partially offset by material, labor, manufacturing inefficiency and freight cost increases due to global supply chain disruptions, significant inflationary pressures and the negative impact of changes in foreign exchange rates.

SG&A expenses for the nine months ended September 30, 2022 increased $9.3 million when compared to the same period in 2021 primarily due to higher personnel costs and increased engineering and selling costs, partially offset by the positive impact of changes in foreign exchange rates. SG&A expenses were lower as a percent of sales when compared to the same period in 2021.

Income from operations for the nine months ended September 30, 2022 increased $41.0 million when compared to the same period in 2021. The increase was primarily due to price realization, favorable mix and incremental margin on higher sales volume which more than offset cost increases and the negative impact of changes in foreign exchange rates.

Materials Processing


	Nine Months Ended September 30,
	2022				2021
			% of Sales				% of Sales		% Change In Reported Amounts
	($ amounts in millions)
Net sales	$	1,391.3	—		$	1,237.7	—		12.4	%


Income from operations	$	210.8	15.2	%	$	178.3	14.4	%	18.2	%

Net sales for the MP segment for the nine months ended September 30, 2022 increased $153.6 million when compared to the same period in 2021 primarily due to robust end-market demand for aggregates in all major geographies, material handlers in Western Europe and North America, cranes in Asia-Pacific and North America, and environmental equipment in North America and Western Europe, as well as price realization necessary to mitigate rising costs. Net sales were negatively impacted by changes in foreign exchange rates of approximately $90 million.

Income from operations for the nine months ended September 30, 2022 increased $32.5 million when compared to the same period in 2021 primarily due to incremental margin on higher sales volume, favorable mix and price realization, partially offset by material, labor, manufacturing inefficiency and freight cost increases due to global supply chain disruptions, significant inflationary pressures and the negative impact of changes in foreign exchange rates.

Aerial Work Platforms


	Nine Months Ended September 30,
	2022				2021
			% of Sales				% of Sales		% Change In Reported Amounts
	($ amounts in millions)
Net sales	$	1,811.8	—		$	1,644.4	—		10.2	%


Income from operations	$	142.2	7.8	%	$	126.7	7.7	%	12.2	%

Net sales for the AWP segment for the nine months ended September 30, 2022 increased $167.4 million when compared to the same period in 2021 primarily due to price realization, necessary to mitigate rising costs, and higher demand that was driven by fleet replacement and end-market growth for aerial work platforms in all major geographies and utility products in North America, partially offset by lower demand in China and lower telehandlers sales in North America. Net sales were negatively impacted by changes in foreign exchange rates of approximately $71 million.

Income from operations for the nine months ended September 30, 2022 increased $15.5 million when compared to the same period in 2021 primarily due to price realization, favorable mix and incremental margin on higher sales volume, partially offset by material, labor, manufacturing inefficiency and freight cost increases due to global supply chain disruptions, significant inflationary pressures and the negative impact of changes in foreign exchange rates.

Corporate and Other / Eliminations


	Nine Months Ended September 30,
	2022			2021
			% of Sales			% of Sales	% Change In Reported Amounts
	($ amounts in millions)
Net sales	$	(3.0)	—	$	14.6	—	(120.5)	%
Loss from operations	$	(53.8)	*	$	(46.8)	*	(15.0)	%

* Not a meaningful percentage

Net sales include financing activities of TFS, governmental sales and elimination of intercompany sales activity among segments. The net sales decrease is primarily attributable to lower TFS revenue and higher intercompany sales eliminations.

Loss from operations for the nine months ended September 30, 2022 increased $7.0 million when compared to the same period in 2021. The increase in operating loss is primarily due to a gain on the sale of the on book finance receivables and a finance receivable reserve release in the prior period and the negative impact of changes in foreign exchange rates, a provision for litigation settlement on former product lines and restructuring charges in the current period, partially offset by the changes in foreign exchange costs absorbed by our operating segments and lower SG&A expenses.

Interest Expense, Net of Interest Income

During the nine months ended September 30, 2022, our interest expense, net of interest income, was $33.7 million, or $4.0 million lower when compared to the same period in 2021 due to a decrease in average borrowings and lower interest income, partially offset by an increase in our weighted average interest rate on revolving credit amounts in the current year period.

Loss on Early Extinguishment of Debt

During the nine months ended September 30, 2021, we recorded a loss on early extinguishment of debt of $27.7 million related to refinancing of a significant portion of our capital structure and prepayment of term loans.

Other Income (Expense) – Net

Other income (expense) – net for the nine months ended September 30, 2022 was an expense of $4.6 million, compared to income of $2.7 million in the same period in the prior year. The increase in expense was primarily due to foreign exchange transaction losses in the current year compared to gains in the prior year and mark-to-market losses recorded on an equity investment in the current year compared gains recorded the same period in the prior year.

Income Taxes

During the nine months ended September 30, 2022, we recognized income tax expense of $52.6 million on income of $260.8 million, an effective tax rate of 20.2%, as compared to income tax expense of $36.0 million on income of $195.5 million, an effective tax rate of 18.4%, for the nine months ended September 30, 2021. The higher effective tax rate for the nine months ended September 30, 2022 when compared to the nine months ended September 30, 2021 is primarily due to higher tax related to the geographic distribution of income and lower favorable discrete benefits partially offset by lower U.S. tax on foreign income in the current year period.

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

During the nine months ended September 30, 2022 and 2021, we recognized a gain (loss) on disposition of discontinued operations - net of tax of $(0.4) million and $2.6 million, respectively. The loss in the current year period primarily related to the sale of our mobile cranes business. The gain in the prior year primarily related to the sales of our MHPS and mobile crane businesses.

LIQUIDITY AND CAPITAL RESOURCES

We are focused on generating cash and maintaining liquidity (cash and availability under our revolving line of credit) for the efficient operation of our business. At September 30, 2022, we had cash and cash equivalents of $232 million and undrawn availability under our revolving line of credit of $426 million, giving us total liquidity of approximately $658 million. During the nine months ended September 30, 2022, our liquidity decreased by approximately $209 million from December 31, 2021 primarily due to share repurchases, capital expenditures, acquisitions, investments, term loan prepayment and dividends, partially offset by cash generated from operations which includes the adverse impact of higher working capital.

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 2024 and we have increased our focus on free cash flow generation. 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, 2021 and Part II, Item 1A. – “Risk Factors” below 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 challenges resulting from supply chain constraints, inflationary pressures, foreign exchange rate volatility, geopolitical uncertainty and restrictive COVID-19 policies.

•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 credit-worthiness 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, 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 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 outside and inside the U.S. through funding of capital expenditures, operating expenses or other similar cash needs of these 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, Federal or state tax cost. We will continue to seek opportunities to tax-efficiently mobilize and redeploy funds.

We had free cash flow of $53.2 million and $25.6 million for the three months ended and nine months ended September 30, 2022, respectively.

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


	Three Months Ended 9/30/2022		Nine Months Ended 9/30/2022
Net cash provided by (used in) operating activities	$	84.9	$	104.2

Capital expenditures, net of proceeds from sale of capital assets	(31.7)		(78.6)

Free cash flow (use)	$	53.2	$	25.6

Pursuant to terms of our trade accounts receivable factoring arrangements, during the nine months ended September 30, 2022, we sold, without material recourse, approximately $458 million of trade accounts receivable to enhance liquidity.

Working capital as a percent of trailing three month annualized net sales was 20.0% at September 30, 2022.

The following tables show the calculation of our working capital and trailing three months annualized sales as of September 30, 2022 (in millions):


	Three Months Ended 9/30/2022
Net Sales	$	1,120.5
x	4
Trailing Three Month Annualized Net Sales	$	4,482.0


	As of 9/30/22
Inventories	$	981.2
Trade Receivables	531.1
Trade Accounts Payable	(589.4)
Customer Advances	(27.2)
Working Capital	$	895.7

On January 31, 2017, we entered into a credit agreement which was subsequently amended to include (i) a $600 million revolving line of credit (the “Revolver”) and (ii) senior secured term loans totaling $600 million with a maturity date of January 31, 2024. On April 1, 2021, we entered into an amendment and restatement of the credit agreement (as amended and restated, the “Credit Agreement”) which included the following principal changes to the original credit agreement: (i) extension of the term of the Revolver to expire on April 1, 2026, which maturity will spring forward to November 1, 2023 if the principal outstanding under the $400 million senior secured term loan (the “Original Term Loan”) is not repaid or the maturity date is not extended, (ii) reinstatement of financial covenants that were waived in 2020, (iii) decrease in the interest rate on the drawn Revolver by 25 basis points and (iv) certain other technical changes, including additional language regarding the potential cessation of the London Interbank Offered Rate as a benchmark rate. See Note J - “Long-Term Obligations” in our Condensed Consolidated Financial Statements for additional information regarding the Credit Agreement.

Borrowings under the Credit Agreement at September 30, 2022 were $54.9 million, net of discount, on the Original Term Loan and $173.7 million on the Revolver. During the nine months ended September 30, 2022, we prepaid $23.0 million of the amount outstanding on the Original Term Loan prior to its maturity date to reduce our outstanding debt. At September 30, 2022, the weighted average interest rate was 4.67% on the Original Term Loan and 4.01% on the Revolver.

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 increasing customer financing facilitated through TFS in certain instances.

On April 22, 2022, we acquired a manufacturer of heavy fabrications based in Northern Ireland to facilitate manufacturing of certain MP products for cash consideration of approximately $6 million. On July 29, 2022, we acquired a manufacturer of volumetric mixers based in Canada to expand our concrete product offering for consideration of approximately $39 million. See Note D - “Acquisitions” in our Condensed Consolidated Financial Statements for additional information regarding these transactions.

In July 2018, our Board of Directors authorized the repurchase up to $300 million of our outstanding shares of common stock. During the nine months ended September 30, 2022, we repurchased 2,718,549 shares for $92.0 million under this authorization leaving approximately $47 million available for repurchase under this program.

Our Board of Directors declared a dividend of $0.13 per share in the first, second and third quarters of 2022, which were paid to the Company’s shareholders. In October 2022, our Board of Directors declared a dividend of $0.13 per share, which will be paid on December 19, 2022 to the Company’s shareholders of record as of November 10, 2022.

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, senior notes and senior subordinated notes contain restrictions on our ability to make further borrowings and to sell substantial portions of our assets.

Cash Flows

Cash provided in operations was $104.2 million and $324.1 million for the nine months ended September 30, 2022 and 2021, respectively. The change in operating cash was primarily driven by proceeds from the sale of finance receivables received in the prior year and higher working capital and incentive compensation payments in the current year.

Cash used in investing activities was $124.4 million and $73.4 million for the nine months ended September 30, 2022 and 2021, respectively. The increase in cash used in investing activities relates primarily to higher capital expenditures and investment activity.

Cash provided by financing activities was $13.3 million for the nine months ended September 30, 2022, compared to cash used in financing activities of $348.7 million for the nine months ended September 30, 2021. The increase in cash provided by financing activities was primarily due to debt prepayments in the prior year compared to borrowings in the current year, partially offset by share repurchases in the current year.

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 L – “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 L – “Litigation and Contingencies” in the Notes to Condensed 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. 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.

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.


ITEM 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain market risks that exist as part of our ongoing business operations and we use derivative financial instruments, where appropriate, to manage these risks. As a matter of policy, we do not engage in trading or speculative transactions. For further information on accounting related to derivative financial instruments, refer to Note I – “Derivative Financial Instruments” in our Condensed Consolidated Financial Statements.

Foreign Exchange Risk

Our products are sold in over 100 countries around the world. The reporting currency for our consolidated financial statements is the U.S. dollar. Certain of our assets, liabilities, expenses, revenues and earnings are denominated in other countries’ currencies, including the Euro, British Pound, Chinese Yuan, Indian Rupee, Australian Dollar and Mexican Peso. Those assets, liabilities, expenses, revenues and earnings are translated into U.S. dollars at the applicable foreign exchange rates to prepare our consolidated financial statements. Therefore, increases or decreases in foreign exchange rates between the U.S. dollar and those other currencies affect the value of those items as reflected in our consolidated financial statements, even if their value remains unchanged in their original currency. Due to continued volatility of foreign exchange rates to the U.S. dollar, fluctuations in foreign exchange rates may have an impact on the accuracy of our financial guidance. Such fluctuations in foreign exchange rates relative to the U.S. dollar may cause our actual results to differ materially from those anticipated in our guidance and have a material adverse effect on our business or results of operations. We assess foreign currency risk based on transactional cash flows, identify naturally offsetting positions and purchase hedging instruments to partially offset anticipated exposures.

At September 30, 2022, we performed a sensitivity analysis on the impact that aggregate changes in the translation effect of foreign exchange rate changes would have on our operating income. Based on this sensitivity analysis, we have determined that a change in the value of the U.S. dollar relative to other currencies by 10% to amounts already incorporated in the financial statements for the nine months ended September 30, 2022 would have had approximately a $27 million impact on the translation effect of foreign exchange rate changes already included in our reported operating income for the period.

Interest Rate Risk

We are exposed to interest rate volatility with regard to future issuances of fixed rate debt and existing issuances of variable rate debt. Primary exposure includes movements in benchmark 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. At September 30, 2022, 27.6% of our debt was floating rate debt and the weighted average interest rate of our total debt was 4.68%.

At September 30, 2022, we performed a sensitivity analysis for our financial instruments that have interest rate risk. We calculated the pretax earnings effect on our interest sensitive instruments. Based on this sensitivity analysis, we have determined that an increase of 10% in our average floating interest rates at September 30, 2022 would not have materially increased interest expense during the period.

Commodities Risk

In the absence of labor strikes or other unusual circumstances, substantially all materials and components are normally available from multiple suppliers. However, certain of our businesses receive materials and components from a single source supplier, although alternative suppliers of such materials may be generally available. Delays in our suppliers’ abilities, especially any sole suppliers for a particular business, to provide us with necessary materials and components may delay production at a number of our manufacturing locations, or may require us to seek alternative supply sources. Delays in obtaining supplies may result from a number of factors affecting our suppliers, including capacity constraints, regulatory changes, freight and container availability, labor disputes, suppliers’ impaired financial condition, suppliers’ allocations to other purchasers, weather emergencies, pandemics or acts of war or terrorism. Any delay in receiving supplies could impair our ability to deliver products to our customers and, accordingly, could have a material adverse effect on our business, results of operations and financial condition. Current and potential suppliers are evaluated regularly on their ability to meet our requirements and standards. We actively manage our material supply sourcing, and employ various methods to limit risk associated with commodity cost fluctuations and availability. Our manufacturing operations continue to be adversely affected by material shortages and production delays as the continuity of supply was impacted by capacity constraints, global logistics disruptions, raw material shortages and COVID-19 related production downtime at certain component suppliers. We have designed and implemented plans to mitigate the impact of these risks by using alternate suppliers, expanding our supply base globally, leveraging our overall purchasing volumes to obtain favorable pricing and quantities, developing a closer working relationship with key suppliers and purchasing hedging instruments to partially offset anticipated exposures. However, we anticipate that we will continue to be adversely affected by material shortages and production delays through the remainder of 2022.

Principal materials and components used in our various manufacturing processes include steel, castings, engines, tires, hydraulics, cylinders, drive trains, electric controls and motors, semiconductors, and a variety of other commodities and fabricated or manufactured items. Broad based inflation, partially offset by declines in the cost of certain raw materials, have led to an overall rise in input costs which has adversely affected our financial performance. Additionally, tariffs on certain Chinese origin goods continue to put pressure on input costs, which we have been able to partially mitigate through the U.S. Government’s exclusion process which is scheduled to end on December 31, 2022 and duty draw back mechanism. If we are unable to recover a substantial portion of increased costs from our customers and suppliers or through duty draw back, our business or results of operations could be adversely affected. We will continue to monitor international trade policy and will make adjustments to our supply base where possible to mitigate the impact on our costs. For more information on commodities risk, see Part I, Item 1A. – “Risk Factors” in our Annual Report on Form 10-K and Part II, Item 1A. – “Risk Factors” below.


ITEM 4.			CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure information required to be disclosed in reports we file under the Exchange Act is recorded, processed, summarized and reported within time periods specified in the Securities and Exchange Commission’s rules and forms, and such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required financial disclosure. In connection with the preparation of this Quarterly Report on Form 10-Q, our management carried out an evaluation, under supervision and with participation of our management, including the CEO and CFO, as of September 30, 2022, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) under the Exchange Act. Based upon this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, 2022.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Effectiveness of any system of controls and procedures is subject to certain limitations, and, as a result, there can be no assurance our controls and procedures will detect all errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that objectives of the control system will be attained.

PART II. OTHER INFORMATION


Item 1.			Legal Proceedings

We are involved in various legal proceedings, including product liability, general liability, workers’ compensation liability, employment, commercial and intellectual property litigation, which have arisen in the normal course of operations. We are insured for product liability, general liability, workers’ compensation, employer’s liability, property damage and other insurable risks required by law or contract with retained liability to us or deductibles. We believe the outcome of such matters, individually and in aggregate, will not have a material adverse effect on our condensed consolidated financial statements. However, outcomes of lawsuits cannot be predicted and, if determined adversely, could ultimately result in us incurring significant liabilities which could have a material adverse effect on our results of operations.

For information regarding litigation and other contingencies and uncertainties, including our proceedings involving a claim in Brazil regarding payment of ICMS tax (Brazilian state value-added tax), see Note L - “Litigation and Contingencies,” in the Notes to Condensed Consolidated Financial Statements.


Item 1A.			Risk Factors

There have been no material changes in our risk factors previously disclosed in Part I, Item 1A. – “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021, except for the risk factor updated below:

Changes in import/export regulatory regimes, imposition of tariffs, escalation of global trade conflicts and unfairly traded imports, particularly from China, could continue to negatively impact our business.

The U.S. government has imposed tariffs on certain foreign goods from a variety of countries and regions that it perceives as engaging in unfair trade practices, and previously raised the possibility of imposing additional tariff increases or expanding the tariffs to capture other types of goods. In response, many of these foreign governments have imposed retaliatory tariffs on goods that their countries import from the U.S. Changes in U.S. trade policy have resulted, and may continue to result, in one or more foreign governments adopting responsive trade policies that make it more difficult or costly for us to do business in or import our products from those countries. For example, tariffs on certain Chinese origin goods impact the cost of material and machines we import directly from our manufacturing operations in China, as well as the cost of material and components imported on our behalf by suppliers. The indirect impact of inflationary pressure on costs throughout the supply chain and the direct impact, for example, on costs for machines we import from our manufacturing operations in China, is leading to higher input costs and lower margins on certain products we sell. In addition, tariffs imposed by the Chinese government on U.S. imports have made the cost of some of our products more expensive for our Chinese customers.

We cannot predict the extent to which the U.S. or other countries will impose new or additional quotas, duties, tariffs, taxes or other similar restrictions upon the import or export of our products in the future, nor can we predict future trade policy or the terms of any renegotiated trade agreements and their impact on our business. Tariffs and the possibility of an escalation or further developments of current trade conflicts, particularly between the U.S. and China, could continue to negatively impact global trade and economic conditions in many of the regions where we do business. This could result in continued significant increases in our material and component costs and the cost of machinery imported directly from our manufacturing operations in China. In addition, it may adversely impact demand for our products in China and elsewhere.

We have been able to mitigate a portion of the effects of tariffs through the U.S. government’s duty draw-back mechanism and will further mitigate the impact through the reinstated tariff exclusions on certain components. However, if we are unable to recover a substantial portion of increased costs from our customers and suppliers, the reinstated exclusions or duty draw-back, our business or results of operations could be adversely affected.

The Coalition of American Manufacturers of Mobile Access Equipment, an alliance of mobile access equipment producers in the U.S. of which we are a member, pursued anti-dumping and countervailing cases against unfairly traded Chinese imports of mobile access equipment. The U.S. Department of Commerce has issued countervailing and anti-dumping duty rates on mobile access equipment from China. If these duties are not enough to offset the subsidies provided by the Chinese government to Chinese mobile access equipment manufacturers and/or if the duties are modified as a result of any appeal process, we may continue to operate at a disadvantage to Chinese manufacturers. This could result in reduced demand for our products in the U.S. and have an adverse effect on our business or results of operations.


Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities

The following table provides information about our purchases during the quarter ended September 30, 2022 of our common stock that is registered by us pursuant to the Exchange Act.


	Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased (1)	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (in thousands) (2)
July 1, 2022 - July 31, 2022	317,815	$28.86	316,188	$51,663
August 1, 2022 - August 31, 2022	12,052	$32.45	10,047	$51,341
September 1, 2022 - September 30, 2022	134,019	$31.25	129,791	$47,295
Total	463,886	$29.65	456,026	$47,295

(1)Amount includes shares of common stock purchased to satisfy requirements under the Company’s deferred compensation obligations to employees.

(2)In July 2018, our Board of Directors authorized and the Company publicly announced the repurchase of up to an additional $300 million of the Company’s outstanding common shares.


Item 3.			Defaults Upon Senior Securities

Not applicable.


Item 4.			Mine Safety Disclosures

Not applicable.


Item 5.			Other Information

Not applicable.


Item 6.			Exhibits

The exhibits set forth below are filed as part of this Form 10-Q.


Exhibit No.			Exhibit






























































































31.1			Chief Executive Officer Certification pursuant to Rule 13a-14(a)/15d-14(a). *

31.2			Chief Financial Officer Certification pursuant to Rule 13a-14(a)/15d-14(a). *

32			Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes – Oxley Act of 2002. **

101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH			XBRL Taxonomy Extension Schema Document. *

101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document. *

101.DEF			XBRL Taxonomy Extension Definition Linkbase Document. *

101.LAB			XBRL Taxonomy Extension Label Linkbase Document. *

101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document. *

104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*			Exhibit filed with this document.
**			Exhibit furnished with this document.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TEREX CORPORATION

(Registrant)


Date:	October 28, 2022	/s/ Julie A. Beck
		Julie A. Beck
		Senior Vice President and Chief Financial Officer

		(Principal Financial Officer)


Date:	October 28, 2022	/s/ Stephen A. Johnston
		Stephen A. Johnston
		Vice President, Chief Accounting Officer and Controller
		(Principal Accounting Officer)

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Terex (TEX) 10-Q2022 Q3 Quarterly report

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