10-Q 1 tex-20220331.htm 10-Q TEREX CORPORATION MARCH 31, 2022 tex-20220331
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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 March 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-10702
tex-20220331_g1.jpg

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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock ($0.01 par value)TEXNew 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 companyEmerging 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: 69.3 million as of April 25, 2022.
The Exhibit Index begins on page 37.



GENERAL

This Quarterly Report on Form 10-Q filed by Terex Corporation generally speaks as of March 31, 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 retention of 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 March 31, 2022

3


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
March 31,
 20222021
Net sales$1,002.5 $864.2 
Cost of goods sold(816.7)(688.8)
Gross profit185.8 175.4 
Selling, general and administrative expenses(111.3)(113.9)
Income (loss) from operations74.5 61.5 
Other income (expense)
Interest income0.6 0.7 
Interest expense(10.6)(15.3)
Loss on early extinguishment of debt (2.1)
Other income (expense) – net (0.3)2.6 
Income (loss) from continuing operations before income taxes64.2 47.4 
(Provision for) benefit from income taxes(11.9)(7.7)
Income (loss) from continuing operations52.3 39.7 
Gain (loss) on disposition of discontinued operations – net of tax(0.4)0.4 
Net income (loss)$51.9 $40.1 
Basic earnings (loss) per share:
Income (loss) from continuing operations$0.75 $0.57 
Gain (loss) on disposition of discontinued operations – net of tax(0.01)0.01 
Net income (loss)$0.74 $0.58 
Diluted earnings (loss) per share:
Income (loss) from continuing operations$0.74 $0.56 
Gain (loss) on disposition of discontinued operations – net of tax(0.01)0.01 
Net income (loss)$0.73 $0.57 
Weighted average number of shares outstanding in per share calculation
Basic69.8 69.5 
Diluted70.9 70.8 
Comprehensive income (loss)$31.9 $33.0 

The accompanying notes are an integral part of these condensed consolidated financial statements.
4


TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
(in millions, except par value)
 March 31,
2022
December 31,
2021
Assets  
Current assets  
Cash and cash equivalents$218.4 $266.9 
  Trade receivables (net of allowance of $9.5 and $9.7 at March 31, 2022 and December 31, 2021, respectively)
525.6 507.7 
Inventories921.3 813.5 
Prepaid and other current assets169.8 179.7 
Total current assets1,835.1 1,767.8 
Non-current assets  
Property, plant and equipment – net433.9 429.6 
Goodwill275.4 280.1 
Intangible assets – net12.7 13.4 
Other assets382.8 372.6 
Total assets$2,939.9 $2,863.5 
Liabilities and Stockholders’ Equity
Current liabilities  
Current portion of long-term debt$1.9 $5.6 
Trade accounts payable571.5 537.7 
Other current liabilities346.1 366.6 
Total current liabilities919.5 909.9 
Non-current liabilities  
Long-term debt, less current portion738.4 668.5 
Other non-current liabilities167.9 175.5 
Total liabilities1,825.8 1,753.9 
Commitments and contingencies
Stockholders’ equity  
Common stock, $0.01 par value – authorized 300.0 shares; issued 83.9 and 83.4 shares at March 31, 2022 and December 31, 2021, respectively
0.9 0.9 
Additional paid-in capital860.7 860.0 
Retained earnings979.5 936.9 
Accumulated other comprehensive income (loss)(248.5)(228.5)
Less cost of shares of common stock in treasury – 14.6 and 14.2 shares at March 31, 2022 and December 31, 2021, respectively
(478.5)(459.7)
Total stockholders’ equity1,114.1 1,109.6 
Total liabilities and stockholders’ equity$2,939.9 $2,863.5 

The accompanying notes are an integral part of these condensed consolidated financial statements.
5


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 compensation0.5 — 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, 2022
69.3 $0.9 $860.7 $979.5 $(248.5)$(478.5)$1,114.1 

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 compensation0.5 — 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 

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

6


TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(in millions)
 Three Months Ended
March 31,
 20222021
Operating Activities  
Net income (loss)$51.9 $40.1 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:  
Depreciation and amortization11.7 12.8 
(Gain) loss on disposition of discontinued operations0.4 (0.4)
Stock-based compensation expense9.4 9.9 
Inventory and other non-cash charges2.9 4.3 
Changes in operating assets and liabilities (net of effects of acquisitions and divestitures):  
Trade receivables(20.9)(114.1)
Inventories(118.0)(60.6)
Trade accounts payable41.9 111.3 
Other assets and liabilities(27.2)131.4 
Foreign exchange and other operating activities, net(3.8)3.4 
Net cash provided by (used in) operating activities(51.7)138.1 
Investing Activities  
Capital expenditures(20.1)(7.3)
Proceeds from sale of capital assets 1.2 
Acquisitions, net of cash acquired, and investments(3.1) 
Net cash provided by (used in) investing activities(23.2)(6.1)
Financing Activities  
Repayments of debt (197.5)
Proceeds from issuance of debt65.0  
Share repurchases(17.7)(0.2)
Dividends paid(9.1)(8.3)
Other financing activities, net(10.2)(8.9)
Net cash provided by (used in) financing activities28.0 (214.9)
Effect of Exchange Rate Changes on Cash and Cash Equivalents(1.6)(9.4)
Net Increase (Decrease) in Cash and Cash Equivalents(48.5)(92.3)
Cash and Cash Equivalents at Beginning of Period266.9 670.1 
Cash and Cash Equivalents at End of Period$218.4 $577.8 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7


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 March 31, 2022 and for the three months ended March 31, 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 months ended March 31, 2022 are not necessarily indicative of results that may be expected for the year ending December 31, 2022.

Cash and cash equivalents include $3.2 million and $3.7 million at March 31, 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 losses0.4 
Other adjustments(0.6)
Balance as of March 31, 2022
$9.5 

8


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 K – “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 period8.7 
Changes in estimates(1.6)
Settlements during the period(9.7)
Foreign exchange effect/other(0.4)
Balance as of March 31, 2022
$41.1 

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 H – “Derivative Financial Instruments” and debt discussed in Note I – “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.

9


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
March 31,
 20222021
Net sales  
MP$452.7 $378.2 
AWP551.5 476.7 
Corporate and Other / Eliminations(1.7)9.3 
Total$1,002.5 $864.2 
Income (loss) from operations  
MP$64.5 $49.1 
AWP32.5 26.6 
Corporate and Other / Eliminations(22.5)(14.2)
Total$74.5 $61.5 

 March 31,
2022
December 31,
2021
Identifiable assets  
MP$1,693.3 $1,648.0 
AWP1,901.4 1,870.8 
Corporate and Other / Eliminations(654.8)(655.3)
Total$2,939.9 $2,863.5 


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

10


Geographic net sales information is presented below (in millions):
 Three Months Ended
March 31, 2022
Three Months Ended
March 31, 2021
 MPAWPCorporate and Other / EliminationsTotalMPAWPCorporate and Other / EliminationsTotal
Net sales by region 
North America$166.3 $365.4 $1.9 $533.6 $146.4 $296.0 $10.2 $452.6 
Western Europe148.9 103.5 0.1 252.5 118.3 94.3 0.1 212.7 
Asia-Pacific96.7 45.2  141.9 82.3 70.3 0.2 152.8 
Rest of World (1)
40.8 37.4 (3.7)74.5 31.2 16.1 (1.2)46.1 
Total (2)
$452.7 $551.5 $(1.7)$1,002.5 $378.2 $476.7 $9.3 $864.2 

(1)     Includes intercompany sales and eliminations.
(2)     Total sales include $487.7 million and $415.7 million for the three months ended March 31, 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
March 31, 2022
Three Months Ended
March 31, 2021
 MPAWPCorporate and Other / EliminationsTotalMPAWPCorporate and Other / EliminationsTotal
Net sales by product type 
Aerial Work Platforms$ $403.0 $0.3 $403.3 $ $356.8 $0.4 $357.2 
Materials Processing Equipment267.2  0.5 267.7 228.6   228.6 
Specialty Equipment184.4  0.4 184.8 149.1  0.7 149.8 
Utility Equipment 111.2  111.2  91.8 0.6 92.4 
Other (1)
1.1 37.3 (2.9)35.5 0.5 28.1 7.6 36.2 
Total$452.7 $551.5 $(1.7)$1,002.5 $378.2 $476.7 $9.3 $864.2 

(1)     Includes other product types, intercompany sales and eliminations.
 
NOTE C – INCOME TAXES

During the three months ended March 31, 2022, the Company recognized income tax expense of $11.9 million on income of $64.2 million, an effective tax rate of 18.5%, as compared to income tax expense of $7.7 million on income of $47.4 million, an effective tax rate of 16.2%, for the three months ended March 31, 2021. The higher effective tax rate for the three months ended March 31, 2022 when compared with the three months ended March 31, 2021 is primarily due to increased tax on the geographic distribution of income partially offset by reduced U.S. tax on foreign income.





11


NOTE D – EARNINGS PER SHARE
(in millions, except per share data)Three Months Ended
March 31,
 20222021
Income (loss) from continuing operations
$52.3 $39.7 
Gain (loss) on disposition of discontinued operations – net of tax
(0.4)0.4 
Net income (loss)$51.9 $40.1 
Basic shares:  
Weighted average shares outstanding69.8 69.5 
Earnings (loss) per share – basic:  
Income (loss) from continuing operations$0.75 $0.57 
Gain (loss) on disposition of discontinued operations – net of tax
(0.01)0.01 
Net income (loss)$0.74 $0.58 
Diluted shares:  
Weighted average shares outstanding – basic69.8 69.5 
Effect of dilutive securities:  
Restricted stock awards
1.1 1.3 
Diluted weighted average shares outstanding70.9 70.8 
Earnings (loss) per share – diluted:  
Income (loss) from continuing operations$0.74 $0.56 
Gain (loss) on disposition of discontinued operations – net of tax
(0.01)0.01 
Net income (loss)$0.73 $0.57 
 
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 0.3 million and 0.1 million were outstanding during the three months ended March 31, 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 E – INVENTORIES

Inventories consist of the following (in millions):
March 31,
2022
December 31,
2021
Finished equipment$288.5 $283.0 
Replacement parts167.9 157.3 
Work-in-process153.3 105.5 
Raw materials and supplies311.6 267.7 
Inventories$921.3 $813.5 

Work-in-process inventory includes approximately $52 million and $10 million of substantially completed inventory awaiting installation of final components at March 31, 2022 and December 31, 2021, respectively. Information regarding principal materials, components and commodities and any risks associated with these items are included in Item 3. – “Quantitative and Qualitative Disclosures about Market Risk – Commodities Risk.”

Reserves for lower of cost or net realizable value and excess and obsolete inventory were $59.6 million and $57.8 million at March 31, 2022 and December 31, 2021, respectively.

12


NOTE F – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment – net consist of the following (in millions):
 March 31,
2022
December 31,
2021
Property$55.2 $53.1 
Plant281.8 284.4 
Equipment405.1 402.4 
Leasehold improvements45.1 50.0 
Construction in progress36.6 26.9 
Property, plant and equipment – gross 823.8 816.8 
Less: Accumulated depreciation(389.9)(387.2)
Property, plant and equipment – net$433.9 $429.6 

NOTE G – GOODWILL AND INTANGIBLE ASSETS

An analysis of changes in the Company’s goodwill by business segment is as follows (in millions):
 MP    AWPTotal
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 
Foreign exchange effect and other(4.1)(0.6)(4.7)
Balance at March 31, 2022, gross
198.1 139.1 337.2 
Accumulated impairment(23.2)(38.6)(61.8)
Balance at March 31, 2022, net
$174.9 $100.5 $275.4 

Intangible assets, net were comprised of the following (in millions):
March 31, 2022December 31, 2021
Weighted Average Life
(in years)
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Definite-lived intangible assets:
Technology7$9.6 $(9.5)$0.1 $9.8 $(9.7)$0.1 
Customer Relationships1931.6 (25.6)6.0 31.9 (25.4)6.5 
Land Use Rights
794.3 (0.8)3.5 4.4 (0.8)3.6 
Other826.2 (23.1)3.1 26.3 (23.1)3.2 
Total definite-lived intangible assets
$71.7 $(59.0)$12.7 $72.4 $(59.0)$13.4 

Three Months Ended
March 31,
(in millions)20222021
Aggregate Amortization Expense$0.6 $0.4 

Estimated aggregate intangible asset amortization expense for each of the next five years is as follows (in millions):
2022$2.3 
20231.7 
20241.5 
20251.4 
20261.3 

13


NOTE H – 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 cash flow derivatives to manage 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 $19.2 million and $22.5 million at March 31, 2022 and December 31, 2021, respectively. Commodity swaps outstanding at March 31, 2022 mature on or before August 31, 2022. 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 $66.4 million and $68.2 million at March 31, 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 March 31, 2022 mature during the second quarter of 2022.

The Company had $23.7 million and $19.4 million notional value of foreign exchange contracts outstanding that were designated as cash flow hedging instruments at March 31, 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 $194.0 million and $139.7 million notional value of foreign exchange contracts outstanding that were not designated as cash flow hedging instruments at March 31, 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 hedged items, 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).

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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 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):
March 31,
2022
December 31,
2021
Instrument (1)
Balance Sheet AccountDerivatives designated as hedgesDerivatives not designated as hedgesDerivatives designated as hedgesDerivatives not designated as hedges
Foreign exchange contractsOther current assets$0.1 $1.0 $(0.1)$0.7 
Commodity swapsOther current assets6.9  4.3  
Foreign exchange contractsOther current liabilities(0.1)(