UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DCD.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, 20202021

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

Commission file number 1-10702

Terex Corporation
(Exact name of registrant as specified in its charter)
Delaware 34-1531521
(State of Incorporation) (IRS Employer Identification No.)
200 Nyala Farm Road, Westport,45 Glover Ave, 4th Floor, Norwalk, Connecticut 0688006850
(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 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: 69.369.8 million as of October 23, 2020.26, 2021.
The Exhibit Index begins on page 5549.



GENERAL

Unless specifically noted otherwise, thisThis Quarterly Report on Form 10-Q filed by Terex Corporation generally speaks as of September 30, 2020 and excludes discontinued operations. Discontinued operations primarily relate to the Demag® mobile cranes business and mobile crane product lines that were previously manufactured in our Oklahoma City facility. See Note D - “Discontinued Operations and Assets and Liabilities Held for Sale” in the Notes to the Condensed Consolidated Financial Statements for further information.2021 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 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 anglobal health pandemics such as the outbreak of a new strain of coronavirus (“COVID-19”);
•our business is cyclicalhighly competitive and weak general economic conditions affect the sales ofis affected by our productscost structure, pricing, product initiatives and financial results;other actions taken by competitors;
•changes in import/exportwe are dependent upon third-party suppliers, making us vulnerable to supply shortages and price increases;
•our operations are subject to a number of potential risks that arise from operating a multinational business, including compliance with changing regulatory regimesenvironments and the escalation of global trade conflicts could continuepolitical instability;
•a material disruption to negatively impact salesone of our products and significant facilities;
•our financial results;business is sensitive to government spending;
•our business is affected by the cyclical nature of markets we serve;
•our financial results could be adversely impacted by the United Kingdom’s (“U.K.”) departure from the European Union (“E.U.”);
•changes affecting the availability of the London Interbank Offered Rate (“LIBOR”) may have consequences on us that cannot yet reasonably be predicted;
•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;
•our business is sensitive to government spending;
•our business is highly competitive and is affected by our cost structure, pricing, product initiatives and other actions taken by competitors;
•our retention of key management personnel;
•the financial condition of suppliers and customers, and their continued access to capital;
•exposure from providing financing and credit support for some of our customers;
•we may experience losses in excess of recorded reserves;
•we are dependent upon third-party suppliers, making us vulnerable to supply shortages and price increases;
•our business is global and subject to changes in exchange rates between currencies, commodity price changes, regional economic conditions and trade restrictions;relations;
•our operations are subject to a numberretention of potential risks that arise from operating a multinational business, including compliance with changing regulatory environments, the Foreign Corrupt Practices Act and other similar laws and political instability;
•a material disruption to one of our significant facilities;key management personnel;
•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 United StatesU.S. Securities and Exchange Commission (“SEC”);Commission;
•our ability to successfully implement our strategy;
•disruption or breach in our information technology systems and storage of sensitive data;
•our ability to successfully implement our strategy; 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 significantmaterial 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, 2020

2021
  PAGE
4
   
Item 1
Financial Statements
4
Item 2
3429
Item 3
4945
5146
   
5247
   
5247
5247
5448
5448
5448
5548
5549
   
5650
  

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
September 30,		Nine Months Ended
September 30,
 2020201920202019
Net sales$765.6 $1,024.6 $2,289.7 $3,468.1 
Cost of goods sold(619.3)(815.0)(1,899.6)(2,748.9)
Gross profit146.3 209.6 390.1 719.2 
Selling, general and administrative expenses(109.8)(123.2)(353.3)(407.1)
Income (loss) from operations36.5 86.4 36.8 312.1 
Other income (expense)  
Interest income0.8 1.9 2.5 5.4 
Interest expense(15.8)(22.0)(50.0)(69.6)
Other income (expense) – net (0.6)1.6 (0.1)(2.9)
Income (loss) from continuing operations before income taxes20.9 67.9 (10.8)245.0 
(Provision for) benefit from income taxes1.1 (15.5)4.9 (53.8)
Income (loss) from continuing operations22.0 52.4 (5.9)191.2 
Income (loss) from discontinued operations – net of tax(0.1)(10.1)(1.3)(151.8)
Gain (loss) on disposition of discontinued operations – net of tax(16.1)(20.9)(21.1)(9.5)
Net income (loss)$5.8 $21.4 $(28.3)$29.9 
Basic earnings (loss) per share:  
Income (loss) from continuing operations$0.31 $0.73 $(0.09)$2.69 
Income (loss) from discontinued operations – net of tax0 (0.14)(0.02)(2.14)
Gain (loss) on disposition of discontinued operations – net of tax(0.23)(0.29)(0.30)(0.13)
Net income (loss)$0.08 $0.30 $(0.41)$0.42 
Diluted earnings (loss) per share:  
Income (loss) from continuing operations$0.31 $0.73 $(0.09)$2.66 
Income (loss) from discontinued operations – net of tax0 (0.14)(0.02)(2.11)
Gain (loss) on disposition of discontinued operations – net of tax(0.23)(0.29)(0.30)(0.13)
Net income (loss)$0.08 $0.30 $(0.41)$0.42 
Weighted average number of shares outstanding in per share calculation  
Basic69.3 71.3 69.7 71.0 
Diluted69.5 71.8 69.7 71.8 
Comprehensive income (loss)$46.7 $8.4 $(24.7)$14.4 
 Three Months Ended
September 30,		Nine Months Ended
September 30,
 2021202020212020
Net sales$993.8 $765.6 $2,896.7 $2,289.7 
Cost of goods sold(815.3)(619.3)(2,311.2)(1,899.6)
Gross profit178.5 146.3 585.5 390.1 
Selling, general and administrative expenses(104.3)(109.8)(327.3)(353.3)
Income (loss) from operations74.2 36.5 258.2 36.8 
Other income (expense)  
Interest income0.6 0.8 2.9 2.5 
Interest expense(12.3)(15.8)(40.6)(50.0)
Loss on early extinguishment of debt— — (27.7)— 
Other income (expense) – net (1.1)(0.6)2.7 (0.1)
Income (loss) from continuing operations before income taxes61.4 20.9 195.5 (10.8)
(Provision for) benefit from income taxes(13.9)1.1 (36.0)4.9 
Income (loss) from continuing operations47.5 22.0 159.5 (5.9)
Income (loss) from discontinued operations – net of tax— (0.1)— (1.3)
Gain (loss) on disposition of discontinued operations – net of tax0.6 (16.1)2.6 (21.1)
Net income (loss)$48.1 $5.8 $162.1 $(28.3)
Basic earnings (loss) per share:  
Income (loss) from continuing operations$0.68 $0.31 $2.29 $(0.09)
Income (loss) from discontinued operations – net of tax— — — (0.02)
Gain (loss) on disposition of discontinued operations – net of tax0.01 (0.23)0.04 (0.30)
Net income (loss)$0.69 $0.08 $2.33 $(0.41)
Diluted earnings (loss) per share:  
Income (loss) from continuing operations$0.67 $0.31 $2.25 $(0.09)
Income (loss) from discontinued operations – net of tax— — — (0.02)
Gain (loss) on disposition of discontinued operations – net of tax0.01 (0.23)0.04 (0.30)
Net income (loss)$0.68 $0.08 $2.29 $(0.41)
Weighted average number of shares outstanding in per share calculation  
Basic69.8 69.3 69.7 69.7 
Diluted70.9 69.5 70.8 69.7 
Comprehensive income (loss)$18.8 $46.7 $141.2 $(24.7)

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)
 September 30,
2020		December 31,
2019
Assets  
Current assets  
Cash and cash equivalents$508.3 $535.1 
  Trade receivables (net of allowance of $11.6 and $9.9 at September 30, 2020 and December 31, 2019, respectively)403.2 401.9 
Inventories635.5 847.7 
Prepaid and other current assets214.1 235.0 
Total current assets1,761.1 2,019.7 
Non-current assets  
Property, plant and equipment – net401.7 389.4 
Goodwill267.1 269.9 
Intangible assets – net8.6 9.7 
Other assets476.7 506.9 
Total assets$2,915.2 $3,195.6 
Liabilities and Stockholders’ Equity
Current liabilities  
Current portion of long-term debt$7.5 $6.9 
Trade accounts payable337.8 508.1 
Other current liabilities335.7 357.4 
Total current liabilities681.0 872.4 
Non-current liabilities  
Long-term debt, less current portion1,167.0 1,168.8 
Other non-current liabilities214.5 222.1 
Total liabilities2,062.5 2,263.3 
Commitments and contingencies
Stockholders’ equity  
Common stock, $0.01 par value – authorized 300.0 shares; issued 82.9 and 82.2 shares at September 30, 2020 and December 31, 2019, respectively0.9 0.8 
Additional paid-in capital832.2 824.4 
Retained earnings732.6 771.4 
Accumulated other comprehensive income (loss)(253.9)(257.5)
Less cost of shares of common stock in treasury – 14.3 and 11.8 shares at September 30, 2020 and December 31, 2019, respectively(459.1)(406.8)
Total stockholders’ equity852.7 932.3 
Total liabilities and stockholders’ equity$2,915.2 $3,195.6 
 September 30,
2021		December 31,
2020
Assets  
Current assets  
Cash and cash equivalents$553.2 $665.0 
  Trade receivables (net of allowance of $10.5 and $9.5 at September 30, 2021 and December 31, 2020, respectively)513.4 381.2 
Inventories747.7 610.4 
Prepaid and other current assets191.5 222.0 
Total current assets2,005.8 1,878.6 
Non-current assets  
Property, plant and equipment – net412.6 406.6 
Goodwill279.7 275.4 
Intangible assets – net14.1 8.3 
Other assets355.7 462.9 
Total assets$3,067.9 $3,031.8 
Liabilities and Stockholders’ Equity
Current liabilities  
Current portion of long-term debt$5.7 $7.6 
Trade accounts payable548.7 369.9 
Accrued compensation and benefits108.4 85.8 
Other current liabilities277.0 260.0 
Total current liabilities939.8 723.3 
Non-current liabilities  
Long-term debt, less current portion887.7 1,166.2 
Other non-current liabilities189.7 220.8 
Total liabilities2,017.2 2,110.3 
Commitments and contingencies00
Stockholders’ equity  
Common stock, $0.01 par value – authorized 300.0 shares; issued 83.4 and 82.9 shares at September 30, 2021 and December 31, 2020, respectively0.9 0.9 
Additional paid-in capital850.8 837.9 
Retained earnings886.6 750.3 
Accumulated other comprehensive income (loss)(229.3)(208.4)
Less cost of shares of common stock in treasury – 14.2 and 14.3 shares at September 30, 2021 and December 31, 2020, respectively(458.3)(459.2)
Total stockholders’ equity1,050.7 921.5 
Total liabilities and stockholders’ equity$3,067.9 $3,031.8 

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		Non-controlling
Interest		Total
Balance at December 31, 201970.4 $0.8 $824.4 $771.4 $(257.5)$(406.8)$0 $932.3 
Net income (loss)— — — (24.9)— — — (24.9)
Other comprehensive income (loss) – net of tax— — — — (56.2)— — (56.2)
Issuance of common stock0.6 0.1 26.4 — — — — 26.5 
Compensation under stock-based plans – net0.1 — (29.5)— — 3.2 — (26.3)
Dividends— — 0.2 (8.6)— — — (8.4)
Acquisition of treasury stock(2.5)— — — — (54.9)— (54.9)
Other— — — (1.9)— — — (1.9)
Balance at March 31, 202068.6 $0.9 $821.5 $736.0 $(313.7)$(458.5)$0 $786.2 
Net income (loss)— — — (9.2)— — — (9.2)
Other comprehensive income (loss) – net of tax— — — — 18.9 — — 18.9 
Issuance of common stock0.1 — 0.6 — — — — 0.6 
Compensation under stock-based plans – net— — 4.7 — — 0.1 — 4.8 
Acquisition of treasury stock(0.1)— — — — (1.0)— (1.0)
Other— — — 0.1 — — — 0.1 
Balance at June 30, 202068.6 $0.9 $826.8 $726.9 $(294.8)$(459.4)$0 $800.4 
Net income (loss)— — — 5.8 — — — 5.8 
Other comprehensive income (loss) – net of tax— — — — 40.9 — — 40.9 
Issuance of common stock— — 0.7 — — — — 0.7 
Compensation under stock-based plans – net— — 4.7 — — 0.4 — 5.1 
Acquisition of treasury stock— — — — — (0.1)— (0.1)
Other— — — (0.1)— — — (0.1)
Balance at September 30, 202068.6 $0.9 $832.2 $732.6 $(253.9)$(459.1)$0 $852.7 
Outstanding
Shares		Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Common
Stock in
Treasury		Total
Balance at December 31, 202068.6 $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 stock0.5 — 11.4 — — — 11.4 
Compensation under stock-based plans – net0.1 — (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, 202169.2 $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— — 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, 202169.2 $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, 202169.2 $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.
6


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		Non-controlling
Interest		Total
Balance at December 31, 201869.6 $0.8 $797.3 $749.0 $(284.8)$(401.8)$0.5 $861.0 
Net income (loss)— — — (66.6)— — — (66.6)
Other comprehensive income (loss) – net of tax— — — — (2.3)— — (2.3)
Issuance of common stock0.7 — 21.4 — — — — 21.4 
Compensation under stock-based plans – net0.1 — (24.7)— — 1.7 — (23.0)
Dividends— — 0.1 (8.0)— — — (7.9)
Acquisition of treasury stock0 — — — — (0.3)— (0.3)
Balance at March 31, 201970.4 $0.8 $794.1 $674.4 $(287.1)$(400.4)$0.5 $782.3 
Net income (loss)— — — 75.1 — — — 75.1 
Other comprehensive income (loss) – net of tax— — — — (0.2)— — (0.2)
Issuance of common stock— — 1.5 — — — — 1.5 
Compensation under stock-based plans – net— — 11.7 — — 0.1 — 11.8 
Dividends— — 0.2 (8.0)— — — (7.8)
Acquisition of treasury stock0 — — — — (2.1)— (2.1)
Balance at June 30, 201970.4 $0.8 $807.5 $741.5 $(287.3)$(402.4)$0.5 $860.6 
Net income (loss)— — — 21.4 — — — 21.4 
Other comprehensive income (loss) – net of tax— — — — (13.0)— 0 (13.0)
Issuance of common stock0.2 — 4.2 — — — — 4.2 
Compensation under stock-based plans – net— — 0.7 — — 1.0 — 1.7 
Dividends— — 0.2 (8.0)— — — (7.8)
Acquisition of treasury stock0 — — — — (0.3)— (0.3)
Divestiture— — — — — — (0.5)(0.5)
Balance at September 30, 201970.6 $0.8 $812.6 $754.9 $(300.3)$(401.7)$0 $866.3 

Outstanding
Shares		Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Common
Stock in
Treasury		Total
Balance at December 31, 201970.4 $0.8 $824.4 $771.4 $(257.5)$(406.8)$932.3 
Net income (loss)— — — (24.9)— — (24.9)
Other comprehensive income (loss) – net of tax— — — — (56.2)— (56.2)
Issuance of common stock0.6 0.1 26.4 — — — 26.5 
Compensation under stock-based plans – net0.1 — (29.5)— — 3.2 (26.3)
Dividends— — 0.2 (8.6)— — (8.4)
Acquisition of treasury stock(2.5)— — — — (54.9)(54.9)
Other— — — (1.9)— — (1.9)
Balance at March 31, 202068.6 $0.9 $821.5 $736.0 $(313.7)$(458.5)$786.2 
Net income (loss)— — — (9.2)— — (9.2)
Other comprehensive income (loss) – net of tax— — — — 18.9 — 18.9 
Issuance of common stock0.1 — 0.6 — — — 0.6 
Compensation under stock-based plans – net— — 4.7 — — 0.1 4.8 
Acquisition of treasury stock(0.1)— — — — (1.0)(1.0)
Other— — — 0.1 — — 0.1 
Balance at June 30, 202068.6 $0.9 $826.8 $726.9 $(294.8)$(459.4)$800.4 
Net income (loss)— — — 5.8 — — 5.8 
Other comprehensive income (loss) – net of tax— — — — 40.9 — 40.9 
Issuance of common stock— — 0.7 — — — 0.7 
Compensation under stock-based plans – net— — 4.7 — — 0.4 5.1 
Acquisition of treasury stock— — — — — (0.1)(0.1)
Other— — — (0.1)— — (0.1)
Balance at September 30, 2020$68.6 $0.9 $832.2 $732.6 $(253.9)$(459.1)$852.7 

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

7

TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(in millions)
 Nine Months Ended
September 30,
 20202019
Operating Activities  
Net income (loss)$(28.3)$29.9 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:  
Depreciation and amortization36.3 38.6 
(Gain) loss on disposition of discontinued operations21.1 9.5 
Deferred taxes(3.2)(9.6)
Impairments3.1 82.2 
(Gain) loss on sale of assets(0.4)(8.2)
Stock-based compensation expense17.8 31.5 
Inventory and other non-cash charges19.2 44.0 
Changes in operating assets and liabilities (net of effects of acquisitions and divestitures):  
Trade receivables(13.7)67.0 
Inventories214.6 (11.1)
Trade accounts payable(174.0)(151.5)
Other assets and liabilities4.7 (46.8)
Foreign exchange and other operating activities, net(8.3)2.9 
Net cash provided by (used in) operating activities88.9 78.4 
Investing Activities  
Capital expenditures(53.9)(75.4)
Proceeds from sale of capital assets2.5 0.8 
Proceeds from disposition of investments0 30.7 
Proceeds (payments) from disposition of discontinued operations11.4 172.4 
Net cash provided by (used in) investing activities(40.0)128.5 
Financing Activities  
Repayments of debt(174.5)(1,548.2)
Proceeds from issuance of debt170.0 1,508.8 
Share repurchases(55.9)(2.4)
Dividends paid(8.4)(23.5)
Other financing activities, net(12.0)(20.2)
Net cash provided by (used in) financing activities(80.8)(85.5)
Effect of Exchange Rate Changes on Cash and Cash Equivalents4.4 (18.0)
Net Increase (Decrease) in Cash and Cash Equivalents(27.5)103.4 
Cash and Cash Equivalents at Beginning of Period540.1 372.1 
Cash and Cash Equivalents at End of Period$512.6 $475.5 
 Nine Months Ended
September 30,
 20212020
Operating Activities  
Net income (loss)$162.1 $(28.3)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:  
Depreciation and amortization37.9 36.3 
(Gain) loss on disposition of discontinued operations(2.6)21.1 
Loss on early extinguishment of debt27.7 — 
Stock-based compensation expense24.1 17.8 
Inventory and other non-cash charges18.2 18.7 
Changes in operating assets and liabilities (net of effects of acquisitions and divestitures):  
Trade receivables(143.5)(13.7)
Inventories(159.9)214.6 
Trade accounts payable185.8 (174.0)
Other assets and liabilities171.1 4.7 
Foreign exchange and other operating activities, net3.2 (8.3)
Net cash provided by (used in) operating activities324.1 88.9 
Investing Activities  
Capital expenditures(31.7)(53.9)
Proceeds from sale of capital assets1.2 2.5 
Acquisitions, net of cash acquired, and investments(42.9)— 
Proceeds (payments) from disposition of discontinued operations— 11.4 
Net cash provided by (used in) investing activities(73.4)(40.0)
Financing Activities  
Repayments of debt(882.5)(174.5)
Proceeds from issuance of debt600.1 170.0 
Payment of debt extinguishment costs(16.9)— 
Share repurchases(1.7)(55.9)
Dividends paid(25.1)(8.4)
Other financing activities, net(22.6)(12.0)
Net cash provided by (used in) financing activities(348.7)(80.8)
Effect of Exchange Rate Changes on Cash and Cash Equivalents(13.9)4.4 
Net Increase (Decrease) in Cash and Cash Equivalents(111.9)(27.5)
Cash and Cash Equivalents at Beginning of Period670.1 540.1 
Cash and Cash Equivalents at End of Period$558.2 $512.6 

The accompanying notes are an integral part of these condensed consolidated financial statements.
8

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, 20202021 and for the three and nine months ended September 30, 20202021 and 20192020 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, 20192020 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, 2019, filed on February 14, 2020, as updated by the Company's Current Report on Form 8-K filed on August 7, 2020.

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 all other investments.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 20202021 presentation.

As further described in Note D - “Discontinued Operations and Assets and Liabilities Held for Sale”, on July 31, 2019, the Company completed the disposition of its Demag® mobile cranes business (“Demag”) to Tadano Ltd. and certain of its subsidiaries (“Tadano”). During 2019, the Company also exited North American mobile crane product lines manufactured in its Oklahoma City facility. As a result, the Company reported these operations, formerly part of the Cranes segment, in discontinued operations in the Condensed Consolidated Statement of Comprehensive Income (Loss) for all periods presented. Residual assets and liabilities are recorded within Prepaid and other current assets, Other assets, Other current liabilities and Other non-current liabilities in the Condensed Consolidated Balance Sheet at September 30, 2020 and December 31, 2019. Other operations formerly part of the Cranes segment were reorganized to align with the Company’s new management and reporting structure. The utilities business has been consolidated within Aerial Work Platforms (“AWP”) and the pick and carry, rough terrain and tower cranes businesses have been consolidated within Materials Processing (“MP”). The Company now reports its business in the following segments: (i) AWP and (ii) MP. See Note B - “Business Segment Information” and Note D - “Discontinued Operations and Assets and Liabilities Held for Sale” for further information.

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, 20202021 are not necessarily indicative of results that may be expected for the year ending December 31, 2020.2021.

Cash and cash equivalents include $4.9$3.3 million and $4.6$5.0 million at September 30, 20202021 and December 31, 20192020, respectively, which were not immediately available for use. These consist primarily of cash balances held in escrow to secure various obligations of the Company.

The following table provides amounts of cash and cash equivalents presented in the Condensed Consolidated Statement of Cash Flows (in millions):
9
 September 30, 2021December 31, 2020
Cash and cash equivalents:  
Cash and cash equivalents - continuing operations$553.2 $665.0 
Cash and cash equivalents - held for sale(1)
5.0 5.1 
Total cash and cash equivalents$558.2 $670.1 

(1)     Amounts relate to the Company’s utility hot lines tools business located in South America.

Recently Issued Accounting Standards

Accounting Standards Implemented in 20202021

In June 2016,December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” (“ASU 2016-13”). ASU 2016-13 sets forth a “current expected credit loss” model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. Guidance in this standard replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. Subsequently, the FASB issued the following standards related to ASU 2016-13: ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses,” ASU 2019-05, “Financial Instruments - Credit Losses (Topic 326) Targeted Transition Relief,” ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses,” and ASU 2020-03, “Codification Improvement to Financial Instruments,” which provided additional guidance and clarity to ASU 2016-13 (collectively, the “Credit Loss Standard”). The Company adopted the Credit Loss Standard on January 1, 2020 using a modified retrospective approach. Adoption did not have a material effect on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted ASU 2018-15 on January 1, 2020. Adoption did not have a material effect on the Company’s consolidated financial statements.

In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” (“ASU 2019-04”). ASU 2019-04 provided narrow scope amendments for Topics 326, 815 and 825.  The Company adopted ASU 2019-04 on January 1, 2020. Adoption did not have a material effect on the Company’s consolidated financial statements.

Accounting Standards to be Implemented

In August 2018, the FASB issued ASU 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans,” (“ASU 2018-14”). ASU 2018-14 adds, removes and clarifies disclosure requirements related to defined benefit pension plans and other postretirement plans. The guidance is effective for our fiscal year ending December 31, 2020. Adoption is not expected to have a material effect on the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “IncomeIncome Taxes (Topic 740) - Simplifying the Accounting for Income Taxes”Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application of Topic 740. The effective date will be first quarter of fiscal year 2021 and early adoption is permitted. The Company is currently evaluatingadopted ASU 2019-12 on January 1, 2021. Adoption did not have a material effect on the impact of this guidance on itsCompany’s consolidated financial statements.

9

Accounting Standards to be Implemented

In March 2020, the FASB issued ASU 2020-04, “ReferenceReference 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 that reference the London Interbank Offered Rate ("LIBOR") or anotheraffected by reference rate expectedreform if certain criteria are met to be discontinued becauseease an entity’s financial reporting burden as the market transitions from 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 reference rate reform.Topic 848. The amendments in this ASU wereguidance was effective upon issuance and may be applied through December 31, 2022. The CompanyAdoption is currently evaluatingnot expected to have a material effect on the impact of this guidance on itsCompany’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 review,assessments, current financial conditions and reasonable and supportable forecasts. The Company reviews its allowance for doubtful accounts at least quarterly. Account balances are charged off against the allowance when the Company determines it is expected 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 Company has off-balance sheet credit exposure related to guarantees provided to financial institutions as disclosed in Note M – “Litigation and Contingencies”.
10


The following table summarizes changes in the consolidated allowance for doubtful accounts (in millions):
Balance as of December 31, 20192020$9.99.5 
Provision for credit losses2.12.3 
Other adjustments(0.4)(1.3)
Balance as of September 30, 20202021$11.610.5 

Finance Receivables. The Company’s net finance receivable balances include both sales-type leases and commercial loans. The Company had $12.9 million and $129.8 million of gross finance receivables at September 30, 2021 and December 31, 2020, respectively. The allowance for credit losses on finance receivables was $8.0 million and $13.8 million at September 30, 2021 and December 31, 2020, respectively. In February 2021, the Company transferred finance receivables of $89.7 million to a U.S. regional bank, which qualified for sales treatment under ASC 860. The Company received $99.4 million cash proceeds from the sale and recognized a net gain of $5.6 million.

Guarantees. The Company records a liabilityissues guarantees to financial institutions related to financing of equipment purchases by customers. The expectation of losses or non-performance is assessed based on consideration of historical customer reviews, current financial conditions, reasonable and supportable forecasts, equipment collateral value and other factors. Reserves are recorded for expected loss over the estimated fair valuecontractual period of risk exposure. See Note L – “Litigation and Contingencies” for additional information regarding guarantees issued pursuant to ASC 460. In addition, the Company recognizes a loss under a guarantee when its obligation to make payment under the guarantee is expected. A loss would be recognized if the Company’s payment obligation under the guarantee exceeds the value it can expect to recover to offset such payment, primarily through the sale of the equipment underlying the guarantee.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. Warranty reserves are reviewed quarterly to ensure critical assumptionsAssumptions 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, 20192020$47.552.9 
Accruals for warranties issued during the period27.331.8 
Changes in estimates14.1 (1.5)
Settlements during the period(36.1)(34.7)
Foreign exchange effect/other0.7 (1.0)
Balance as of September 30, 20202021$53.547.5 

10

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 interest rate caps, commodity swaps, cross currency swaps and foreign exchange contracts, interest rate caps, cross currency swaps, commodity swaps and a debt conversion feature on a convertible promissory note discussed in Note JI – “Derivative Financial Instruments” and debt discussed in Note KJ – “Long-term Obligations”. These instruments are valued using a market approach, which uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. 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.

11

NOTE B – BUSINESS SEGMENT INFORMATION

Terex is a global manufacturer of aerial work platforms and materials processing machinery. The Company designs, builds and supports products used in construction, maintenance, manufacturing, energy, minerals and materials management applications. Terex’s products are manufactured in North and South America, Europe, Australia and Asia and sold worldwide. The Company 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: Aerials, Utilities and MP.Materials Processing (“MP”). As Aerials and Utilities operating segments share similar economic characteristics, these operating segments are aggregated into one operating segment, AWP.Aerial Work Platforms (“AWP”). The Company operates in 2 reportable segments: (i) AWP and (ii) MP.

AWP designs, manufactures, services and markets aerial work platform equipment, utility equipment telehandlers and light towerstelehandlers 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.

MP designs, manufactures, services and markets materials processing and specialty equipment, including crushers, washing systems, screens, 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.

The Company’s rough terrain and tower cranes operations were consolidated within MP for financial reporting periods beginning on or after January 1, 2020, to align with its new management and reporting structure. Prior period reportable segment information was adjusted to reflect the realignment of operations.

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 provide financing solutionsfacilitate financial products and services to assist customers who purchasein the acquisition of the Company’s equipment. TFS is included in Corporate and Other.

Corporate and Other also includes eliminations among the 2 reportable segments, as well as general and corporate items.

11

Business segment information is presented below (in millions):
 Three Months Ended
September 30,		Nine Months Ended
September 30,
 2020201920202019
Net sales  
AWP$445.0 $628.2 $1,370.6 $2,226.5 
MP311.3 382.7 890.5 1,224.1 
Corporate and Other / Eliminations9.3 13.7 28.6 17.5 
Total$765.6 $1,024.6 $2,289.7 $3,468.1 
Income (loss) from operations  
AWP$13.3 $45.9 $2.4 $191.8 
MP40.3 58.4 88.7 183.2 
Corporate and Other / Eliminations(17.1)(17.9)(54.3)(62.9)
Total$36.5 $86.4 $36.8 $312.1 
 Three Months Ended
September 30,		Nine Months Ended
September 30,
 2021202020212020
Net sales  
AWP$572.5 $445.0 $1,644.4 $1,370.6 
MP418.7 311.3 1,237.7 890.5 
Corporate and Other / Eliminations2.6 9.3 14.6 28.6 
Total$993.8 $765.6 $2,896.7 $2,289.7 
Income (loss) from operations  
AWP$34.9 $13.3 $126.7 $2.4 
MP57.1 40.3 178.3 88.7 
Corporate and Other / Eliminations(17.8)(17.1)(46.8)(54.3)
Total$74.2 $36.5 $258.2 $36.8 

Sales between segments are generally priced to recover costs plus a reasonable markup for profit, which is eliminated in consolidation.
 September 30,
2021		December 31,
2020
Identifiable assets  
AWP (1)
$1,814.3 $1,541.0 
MP1,675.5 1,596.3 
Corporate and Other / Eliminations (2)
(428.9)(111.8)
Assets held for sale7.0 6.3 
Total$3,067.9 $3,031.8 

(1)     Increase primarily due to higher trade receivable and inventory balances.
(2)     Change primarily due to lower cash and finance receivable balances and higher intercompany eliminations.

12

 September 30,
2020		December 31,
2019
Identifiable assets  
AWP (1)
$1,723.4 $1,814.4 
MP (2)
1,576.3 1,750.9 
Corporate and Other / Eliminations (3)
(391.2)(379.5)
Assets held for sale6.7 9.8 
Total$2,915.2 $3,195.6 

(1)     Decrease due to lower inventory balances.
(2)     Decrease due to settlement of certain intercompany balances.
(3)     Decrease in cash, receivables and other assets offset by settlement of certain intercompany balances.

Geographic net sales information is presented below (in millions):
 Three Months Ended
September 30, 2020		Three Months Ended
September 30, 2019
 AWPMPCorporate and Other / EliminationsTotalAWPMPCorporate and Other / EliminationsTotal
Net sales by region  
North America$278.4 $123.3 $16.0 $417.7 $429.3 $147.9 $28.0 $605.2 
Western Europe55.6 94.6 0 150.2 77.4 119.1 0.2 196.7 
Asia-Pacific89.3 64.3 0.2 153.8 78.5 72.5 0.5 151.5 
Rest of World (1)
21.7 29.1 (6.9)43.9 43.0 43.2 (15.0)71.2 
Total (2)
$445.0 $311.3 $9.3 $765.6 $628.2 $382.7 $13.7 $1,024.6 
 Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
 AWPMPCorporate and Other / EliminationsTotalAWPMPCorporate and Other / EliminationsTotal
Net sales by region  
North America$377.5 $159.8 $8.3 $545.6 $278.4 $123.3 $16.0 $417.7 
Western Europe81.8 117.9 0.2 199.9 55.6 94.6 — 150.2 
Asia-Pacific80.5 95.5 0.5 176.5 89.3 64.3 0.2 153.8 
Rest of World (1)
32.7 45.5 (6.4)71.8 21.7 29.1 (6.9)43.9 
Total (2)
$572.5 $418.7 $2.6 $993.8 $445.0 $311.3 $9.3 $765.6 

(1)     Includes intercompany sales and eliminations.
(2)     Total sales include $386.2$490.3 million and $547.1$386.2 million for the three months ended September 30, 20202021 and 2019,2020, respectively, attributable to the United States,U.S., the Company’s country of domicile.

Nine Months Ended
September 30, 2020		Nine Months Ended
September 30, 2019		 Nine Months Ended
September 30, 2021		Nine Months Ended
September 30, 2020
AWPMPCorporate and Other / EliminationsTotalAWPMPCorporate and Other / EliminationsTotal AWPMPCorporate and Other / EliminationsTotalAWPMPCorporate and Other / EliminationsTotal
Net sales by regionNet sales by region  Net sales by region  
North AmericaNorth America$897.7 $361.5 $49.7 $1,308.9 $1,466.0 $479.0 $63.2 $2,008.2 North America$1,066.7 $488.9 $23.7 $1,579.3 $897.7 $361.5 $49.7 $1,308.9 
Western EuropeWestern Europe186.2 270.5 0.2 456.9 369.9 397.8 0.4 768.1 Western Europe265.8 379.8 0.4 646.0 186.2 270.5 0.2 456.9 
Asia-PacificAsia-Pacific215.8 169.9 1.5 387.2 253.5 217.8 1.6 472.9 Asia-Pacific241.6 258.0 0.9 500.5 215.8 169.9 1.5 387.2 
Rest of World (1)
Rest of World (1)
70.9 88.6 (22.8)136.7 137.1 129.5 (47.7)218.9 
Rest of World (1)
70.3 111.0 (10.4)170.9 70.9 88.6 (22.8)136.7 
Total (2)
Total (2)
$1,370.6 $890.5 $28.6 $2,289.7 $2,226.5 $1,224.1 $17.5 $3,468.1 
Total (2)
$1,644.4 $1,237.7 $14.6 $2,896.7 $1,370.6 $890.5 $28.6 $2,289.7 

(1)     Includes intercompany sales and eliminations.
(2) Total sales include $1,201.7 million$1.4 billion and $1,829.5 million$1.2 billion for the nine months ended September 30, 20202021 and 2019,2020, respectively, attributable to the United States,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.
13


Product type net sales information is presented below (in millions):
 Three Months Ended
September 30, 2020		Three Months Ended
September 30, 2019
 AWPMPCorporate and Other / EliminationsTotalAWPMPCorporate and Other / EliminationsTotal
Net sales by product type  
Aerial Work Platforms$321.1 $0 $0.3 $321.4 $426.0 $0 $0.6 $426.6 
Materials Processing Equipment0 194.7 0 194.7 0 222.7 0 222.7 
Specialty Equipment0 116.4 0.4 116.8 0 157.8 0.6 158.4 
Other (1)
123.9 0.2 8.6 132.7 202.2 2.2 12.5 216.9 
Total$445.0 $311.3 $9.3 $765.6 $628.2 $382.7 $13.7 $1,024.6 
 Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
 AWPMPCorporate and Other / EliminationsTotalAWPMPCorporate and Other / EliminationsTotal
Net sales by product type  
Aerial Work Platforms$413.7 $— $0.2 $413.9 $321.1 $— $0.3 $321.4 
Materials Processing Equipment— 245.5 — 245.5 — 194.7 — 194.7 
Specialty Equipment— 173.1 0.3 173.4 — 116.4 0.4 116.8 
Other (1)
158.8 0.1 2.1 161.0 123.9 0.2 8.6 132.7 
Total$572.5 $418.7 $2.6 $993.8 $445.0 $311.3 $9.3 $765.6 

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

Nine Months Ended
September 30, 2020		Nine Months Ended
September 30, 2019		 Nine Months Ended
September 30, 2021		Nine Months Ended
September 30, 2020
AWPMPCorporate and Other / EliminationsTotalAWPMPCorporate and Other / EliminationsTotal AWPMPCorporate and Other / EliminationsTotalAWPMPCorporate and Other / EliminationsTotal
Net sales by product typeNet sales by product type  Net sales by product type  
Aerial Work PlatformsAerial Work Platforms$947.2 $0 $0.5 $947.7 $1,581.6 $0 $2.2 $1,583.8 Aerial Work Platforms$1,218.9 $— $0.8 $1,219.7 $947.2 $— $0.5 $947.7 
Materials Processing EquipmentMaterials Processing Equipment0 533.6 0 533.6 0 670.3 0 670.3 Materials Processing Equipment— 735.4 — 735.4 — 533.6 — 533.6 
Specialty EquipmentSpecialty Equipment0 354.6 1.1 355.7 0 547.1 2.4 549.5 Specialty Equipment— 501.7 1.8 503.5 — 354.6 1.1 355.7 
Other (1)
Other (1)
423.4 2.3 27.0 452.7 644.9 6.7 12.9 664.5 
Other (1)
425.5 0.6 12.0 438.1 423.4 2.3 27.0 452.7 
TotalTotal$1,370.6 $890.5 $28.6 $2,289.7 $2,226.5 $1,224.1 $17.5 $3,468.1 Total$1,644.4 $1,237.7 $14.6 $2,896.7 $1,370.6 $890.5 $28.6 $2,289.7 

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

NOTE C – INCOME TAXES

During the three months ended September 30, 2020,2021, the Company recognized income tax expense of $13.9 million on income of $61.4 million, an effective tax rate of 22.6%, as compared to income tax benefit of $1.1 million on income of $20.9 million, an effective tax rate of (5.3)%, as compared to income tax expense of $15.5 million on income of $67.9 million, an effective tax rate of 22.8%, for the three months ended September 30, 2019.2020. The lowerhigher effective tax rate for the three months ended September 30, 2021 when compared with the three months ended September 30, 2020 is primarily due to geographic mix andU.S. tax benefits fromon foreign income, the 2020 benefit of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and changes in tax regulations, partially offset by U.S. tax on foreign income, when compared with the three months ended September 30, 2019.geographic mix.

During the nine months ended September 30, 2020,2021, the Company recognized income tax expense of $36.0 million on income of $195.5 million, an effective tax rate of 18.4%, as compared to income tax benefit of $4.9 million on a loss of $10.8 million, an effective tax rate of 45.4%, as compared to income tax expense of $53.8 million on income of $245.0 million, an effective tax rate of 22.0%, for the nine months ended September 30, 2019.2020. The higherlower effective tax rate for the nine months ended September 30, 2021 when compared with the nine months ended September 30, 2020 is primarily due to geographic mix and tax benefits fromthe 2020 benefit of the CARES Act, and changes in tax regulations, partially offset by U.S. tax on foreign income, when compared with the nine months ended September 30, 2019.income.




14

NOTE D – ACQUISITIONS AND DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE

Mobile Cranes Disposal GroupAcquisitions

On July 6, 2021, the Company acquired all of the outstanding shares of Murray Design & Engineering, Ltd (“MDS”), a manufacturer of heavy duty aggregate and recycling trommels, apron feeders and conveyor systems, based in the Republic of Ireland. Total cash consideration transferred was approximately $19 million. The transaction was recorded as a business combination 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. See Note H – “Goodwill and Intangible Assets, Net” for additional information regarding goodwill recognized as a result of the acquisition. MDS’s results of operations are consolidated within the MP segment in the Condensed Consolidated Financial Statements from the date of acquisition.

On May 25, 2021, the Company acquired assets to facilitate manufacturing of certain MP products in China. Total cash consideration transferred was approximately $17 million. The transaction was recorded as an asset acquisition at cost, with the consideration allocated to individual assets acquired.

Discontinued Operations

On July 31, 2019, the Company completed the disposition of Demag to Tadano. The Company received approximately $215 million of consideration, as adjusted for estimated amounts of cash, debt, working capital and certain other items. Products divested were Demag® all terrainmobile cranes and large lattice boom crawler cranes. During the three months ended September 30, 2020, the Company recognized a loss, net of tax, of $16.1 million primarily relatedbusiness to a settlement with Tadano on cash, debt, working capitalLtd. and certain other items related to the disposition of Demag. During the nine months ended September 30, 2019, the Company recognized a charge of approximately $82 million, net of tax, to write-down Demag to its fair value, less costs to sell. During the three and nine months ended September 30, 2019, the Company recorded a loss on disposition of discontinued operations, net of tax, of $20.9 million related to this transaction.subsidiaries. During 2019, the Company also exited North American mobile crane product lines manufactured in its Oklahoma City facility and recognizedfacility. As a gain, net of tax, of $12.8 million related toresult, the sale during the nine months ended September 30, 2019.

The Company’s actions to sell Demag and cease manufacturing of mobile crane product lines in its Oklahoma City facility represent a significant strategic shift in its business away from mobile cranes asCompany reported these businesses constituted a significantoperations, formerly part of its operations and financial results. The Company believes these actions were necessary to execute its strategy.

In connection with the disposition of Demag, the Company entered into certain ancillary agreements with Tadano including a Transition Services Agreement (“TSA”), dated as of July 31, 2019, under which the parties will provide one another certain transition services to facilitate the separation of Demag from the Company. At September 30, 2020, all significant agreements covered under the TSA have terminated.

Income (Loss) from Discontinued Operations

The following amounts related to discontinued operations were derived from historical financial information and have been segregated from continuing operations and reported asCranes segment, in discontinued operations in the Condensed Consolidated Statement of Comprehensive Income (Loss) (in millions):
Three Months Ended
September 30,		Nine Months Ended
September 30,
 
 2020201920202019
Net sales$0 $67.7 $5.5 $324.8 
Cost of sales(0.2)(67.9)(5.7)(330.8)
Selling, general and administrative expenses(0.2)(12.0)(1.6)(73.6)
Impairment of mobile cranes disposal group0 0 (0.1)(82.1)
Other income (expense)0 (0.8)(0.1)(4.5)
Income (loss) from discontinued operations before income taxes(0.4)(13.0)(2.0)(166.2)
(Provision for) benefit from income taxes0.3 2.9 0.7 14.4 
Income (loss) from discontinued operations – net of tax$(0.1)$(10.1)$(1.3)$(151.8)
15

Assetsfor all periods presented. During the three and Liabilities Held for Salenine months ended September 30, 2020, the Company recorded income (loss) from discontinued operations, net of tax of $(0.1) million and $(1.3) million, respectively.

Assets and liabilities held for sale consist of the Company’s utility hot lines tools business located in South America, mobile cranes product lines manufactured in Oklahoma City and Demag, all previously contained in its former Cranes segment. Such assets and liabilities are classified as held for sale upon meeting the requirements of ASC 360 - “Property, Plant and Equipment”, and are recorded at lower of carrying amounts or fair value less costs to sell. Assets are no longer depreciated once classified as held for sale.

The following table provides the amounts of assets and liabilities held for sale in the Condensed Consolidated Balance Sheet (in millions):
September 30, 2020December 31, 2019
 CranesCranes
Assets  
Cash and cash equivalents$4.3 $5.0 
Trade receivables – net3.0 3.5 
Inventories2.2 5.3 
Prepaid and other current assets0.2 0.2 
Impairment reserve(3.4)(4.8)
Included in Prepaid and other current assets$6.3 $9.2 
Property, plant and equipment – net$0.6 $0.6 
Intangible assets1.7 2.4 
Impairment reserve(2.0)(2.8)
Other assets0.1 0.4 
Included in Other assets$0.4 $0.6 
Liabilities  
Trade accounts payable$1.1 $4.6 
Accruals and other current liabilities2.0 3.8 
Included in Other current liabilities$3.1 $8.4 
Non-current liabilities$0.9 $1.2 
Included in Other non-current liabilities$0.9 $1.2 

16

The following table provides amounts of cash and cash equivalents presented in the Condensed Consolidated Statement of Cash Flows (in millions):
 September 30, 2020December 31, 2019
Cash and cash equivalents:  
Cash and cash equivalents - continuing operations$508.3 $535.1 
Cash and cash equivalents - held for sale4.3 5.0 
Total cash and cash equivalents$512.6 $540.1 

The following table provides supplemental cash flow information related to discontinued operations (in millions):
Three Months Ended
September 30,		Nine Months Ended
September 30,
 
 2020201920202019
Non-cash operating items:
Depreciation and amortization$0 $0.1 $0 $3.3 
Impairments$0 $0 $0.1 $82.1 
Deferred taxes$(0.1)$(7.3)$0.2 $(5.2)
Investing activities:
Capital expenditures$0 $(0.7)$0 $(3.4)

Gain (Loss) on Disposition of Discontinued Operations - net of tax is presented below (in millions):
Three Months Ended
 September 30,
 20202019
CranesCranesMaterial Handling and Port SolutionsTotal
Gain (loss) on disposition of discontinued operations$(20.5)$(20.8)$0 $(20.8)
(Provision for) benefit from income taxes4.4 (0.1)0 (0.1)
Gain (loss) on disposition of discontinued operations – net of tax$(16.1)$(20.9)$0 $(20.9)

Nine Months EndedThree Months EndedNine Months Ended
September 30, September 30,September 30,
20202019 2021202020212020
CranesCranesMaterial Handling and Port SolutionsTotalCranesMaterial Handling and Port SolutionsTotalCranesCranesMaterial Handling and Port SolutionsTotalCranes
Gain (loss) on disposition of discontinued operationsGain (loss) on disposition of discontinued operations$(27.7)$(7.1)$(1.3)$(8.4)Gain (loss) on disposition of discontinued operations$0.8 $— $0.8 $(20.5)$1.4 $1.2 $2.6 $(27.7)
(Provision for) benefit from income taxes(Provision for) benefit from income taxes6.6 (1.0)(0.1)(1.1)(Provision for) benefit from income taxes(0.2)— (0.2)4.4 (0.4)0.4 — 6.6 
Gain (loss) on disposition of discontinued operations – net of taxGain (loss) on disposition of discontinued operations – net of tax$(21.1)$(8.1)$(1.4)$(9.5)Gain (loss) on disposition of discontinued operations – net of tax$0.6 $— $0.6 $(16.1)$1.0 $1.6 $2.6 $(21.1)

1715

NOTE E – EARNINGS PER SHARE
(in millions, except per share data)Three Months Ended
September 30,		Nine Months Ended
September 30,
 2020201920202019
Income (loss) from continuing operations$22.0 $52.4 $(5.9)$191.2 
Income (loss) from discontinued operations – net of tax(0.1)(10.1)(1.3)(151.8)
Gain (loss) on disposition of discontinued operations – net of tax(16.1)(20.9)(21.1)(9.5)
Net income (loss)$5.8 $21.4 $(28.3)$29.9 
Basic shares:  
Weighted average shares outstanding69.3 71.3 69.7 71.0 
Earnings (loss) per share – basic:  
Income (loss) from continuing operations$0.31 $0.73 $(0.09)$2.69 
Income (loss) from discontinued operations – net of tax0 (0.14)(0.02)(2.14)
Gain (loss) on disposition of discontinued operations – net of tax(0.23)(0.29)(0.30)(0.13)
Net income (loss)$0.08 $0.30 $(0.41)$0.42 
Diluted shares:  
Weighted average shares outstanding – basic69.3 71.3 69.7 71.0 
Effect of dilutive securities:  
Restricted stock awards0.2 0.5 0 0.8 
Diluted weighted average shares outstanding69.5 71.8 69.7 71.8 
Earnings (loss) per share – diluted:  
Income (loss) from continuing operations$0.31 $0.73 $(0.09)$2.66 
Income (loss) from discontinued operations – net of tax0 (0.14)(0.02)(2.11)
Gain (loss) on disposition of discontinued operations – net of tax(0.23)(0.29)(0.30)(0.13)
Net income (loss)$0.08 $0.30 $(0.41)$0.42 

(in millions, except per share data)Three Months Ended
September 30,		Nine Months Ended
September 30,
 2021202020212020
Income (loss) from continuing operations$47.5 $22.0 $159.5 $(5.9)
Income (loss) from discontinued operations – net of tax— (0.1)— (1.3)
Gain (loss) on disposition of discontinued operations – net of tax0.6 (16.1)2.6 (21.1)
Net income (loss)$48.1 $5.8 $162.1 $(28.3)
Basic shares:  
Weighted average shares outstanding69.8 69.3 69.7 69.7 
Earnings (loss) per share – basic:  
Income (loss) from continuing operations$0.68 $0.31 $2.29 $(0.09)
Income (loss) from discontinued operations – net of tax— — — (0.02)
Gain (loss) on disposition of discontinued operations – net of tax0.01 (0.23)0.04 (0.30)
Net income (loss)$0.69 $0.08 $2.33 $(0.41)
Diluted shares:  
Weighted average shares outstanding – basic69.8 69.3 69.7 69.7 
Effect of dilutive securities:  
Restricted stock awards1.1 0.2 1.1 — 
Diluted weighted average shares outstanding70.9 69.5 70.8 69.7 
Earnings (loss) per share – diluted:  
Income (loss) from continuing operations$0.67 $0.31 $2.25 $(0.09)
Income (loss) from discontinued operations – net of tax— — — (0.02)
Gain (loss) on disposition of discontinued operations – net of tax0.01 (0.23)0.04 (0.30)
Net income (loss)$0.68 $0.08 $2.29 $(0.41)
 
Non-vested restricted stock awardsand restricted stock units granted (“restricted stock awards”) 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 0.90.1 million and 1.30.9 million were outstanding during the three months ended September 30, 20202021 and 2019,2020, 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 2.00.1 million and 1.12.0 million were outstanding during the nine months ended September 30, 20202021 and 2019,2020, 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.

18

NOTE F – FINANCE RECEIVABLES

The Company, primarily through TFS, leases equipment and provides financing to customers for the purchase and use of Terex equipment. In the normal course of business, TFS assesses credit risk, establishes structure and pricing of financing transactions, documents the finance receivable, and records and funds the transactions. The Company bills and collects cash from the end customer.

The Company primarily conducts on-book business in the U.S., with limited business in other jurisdictions. The Company does business with various types of customers consisting of rental houses, end user customers and Terex equipment dealers.

The Company’s net finance receivable balances include both sales-type leases and commercial loans. Finance receivables that management intends to hold until maturity are stated at their outstanding unpaid principal balances, net of an allowance for loan losses as well as any deferred fees and costs. Finance receivables originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value, on an individual asset basis. During the three and nine months ended September 30, 2020, the Company transferred finance receivables of $14.6 million and $67.1 million, respectively, to third-party financial institutions, which qualified for sales treatment under ASC 860. During the three and nine months ended September 30, 2019, the Company transferred finance receivables of $60.8 million and $179.7 million, respectively, to third-party financial institutions, which qualified for sales treatment under ASC 860. At September 30, 2020 and December 31, 2019, the Company had $10.5 million and $17.6 million, respectively, of held for sale finance receivables recorded in Prepaid and other current assets in the Condensed Consolidated Balance Sheet.

Revenue attributable to finance receivables management intends to hold until maturity is recognized on the accrual basis using the effective interest method. The Company bills customers and accrues interest income monthly on the unpaid principal balance. The accrual of interest is generally discontinued when the contractual payment of principal or interest has become 90 days past due or management has significant doubts about further collectability of contractual payments, even though the loan may be currently performing. A receivable may remain on accrual status if it is in the process of collection and is either guaranteed or secured. Interest received on non-accrual finance receivables is typically applied against principal. Finance receivables are generally restored to accrual status when the obligation is brought current and the borrower has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The Company has a history of enforcing the terms of these separate financing agreements. The Company is offering principal payment relief options to customers impacted by COVID-19. These loan modifications are accounted for in accordance with Section 4013 of the CARES Act and therefore are not treated as troubled debt restructurings for accounting or disclosure purposes.

Finance receivables, net consisted of the following (in millions):
September 30,
2020		December 31,
2019
Commercial loans$117.8 $145.7 
Sales-type leases14.6 20.5 
Total finance receivables, gross132.4 166.2 
Allowance for credit losses(14.2)(11.0)
Total finance receivables, net$118.2 $155.2 

Approximately $42 million and $52 million of finance receivables are recorded in Prepaid and other current assets at September 30, 2020 and December 31, 2019, respectively. Approximately $77 million and $103 million are recorded in Other assets in the Condensed Consolidated Balance Sheet at September 30, 2020 and December 31, 2019, respectively.

Credit losses are charged against the allowance for credit losses when management ceases active collection efforts. Subsequent recoveries, if any, are credited to earnings. The allowance for credit losses is maintained at a level set by management which represents evaluation of known and inherent risks in the portfolio at the Condensed Consolidated Balance Sheet date. Management’s periodic evaluation of the adequacy of the allowance is based on the Company’s past loan loss experience, market-based loss experience, specific customer situations, reasonable and supportable forecasts of customer default, estimated value of any underlying collateral, current economic conditions, and other relevant factors. This evaluation is inherently subjective, since it requires estimates that may be susceptible to significant change. Although specific and general loss allowances are established in accordance with management’s best estimate, actual losses are dependent upon future events and, as such, further additions to or decreases from the level of loss allowances may be necessary.

19

The following table presents an analysis of the allowance for credit losses (in millions):
Three Months Ended
September 30, 2020		Three Months Ended
September 30, 2019
Commercial LoansSales-Type LeasesTotalCommercial LoansSales-Type LeasesTotal
Balance, beginning of period$13.9 $0.5 $14.4 $10.9 $1.2 $12.1 
Provision for credit losses(0.1)(0.1)(0.2)0.3 (0.5)(0.2)
Charge offs0 0 0 (0.8)0 (0.8)
Recoveries0 0 0 0 0 0 
Balance, end of period$13.8 $0.4 $14.2 $10.4 $0.7 $11.1 

Nine Months Ended
September 30, 2020		Nine Months Ended
September 30, 2019
Commercial LoansSales-Type LeasesTotalCommercial LoansSales-Type LeasesTotal
Balance, beginning of period$10.5 $0.5 $11.0 $4.0 $1.5 $5.5 
Provision for credit losses2.9 (0.1)2.8 7.2 (0.8)6.4 
Charge offs(0.2)0 (0.2)(0.8)0 (0.8)
Recoveries0.6 0 0.6 0 0 0 
Balance, end of period$13.8 $0.4 $14.2 $10.4 $0.7 $11.1 

The Company utilizes a two-tier approach to set allowances: (1) identification of impaired finance receivables and establishment of specific loss allowances on such receivables; and (2) establishment of general loss allowances on the remainder of its portfolio. Specific loss allowances are established based on circumstances and factors of specific receivables. The Company regularly reviews the portfolio which allows for early identification of potentially impaired receivables. The process takes into consideration, among other things, delinquency status, type of collateral and other factors specific to the borrower.

General loss allowance levels are determined based upon a combination of factors including, but not limited to, TFS experience, general market loss experience, performance of the portfolio, current economic conditions, reasonable and supportable forecasts of customer defaults and collateral values, and management's judgment. The two primary risk characteristics inherent in the portfolio are (1) the customer's ability to meet contractual payment terms, and (2) the liquidation values of the underlying primary and secondary collaterals. The Company records a general or unallocated loss allowance that is calculated by applying a reserve rate to its portfolio, net of individually impaired finance receivables. Accounts are considered delinquent when the billed periodic payments of the finance receivables exceed 30 days past the due date. All delinquent accounts are reviewed for potential impairment. A receivable is deemed to be impaired when based on current information and events, it is expected that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Amount of impairment is measured as the difference between the balance outstanding and underlying collateral value of equipment being financed, as well as any other collateral. All finance receivables identified as impaired are evaluated individually. Generally, the Company does not change terms and conditions of existing finance receivables.

20

The following table presents individually impaired finance receivables (in millions):
September 30, 2020September 30, 2019December 31, 2019
Commercial LoansSales-Type LeasesTotalCommercial LoansSales-Type LeasesTotalCommercial LoansSales-Type LeasesTotal
Recorded investment$22.5 $1.2 $23.7 $7.6 $0 $7.6 $7.8 $0 $7.8 
Related allowance11.3 0.2 11.5 7.6 0 7.6 7.8 0 7.8 
Average recorded investment18.3 0.1 18.4 7.4 0 7.4 7.5 0 7.5 

The allowance for credit losses and finance receivables by portfolio, segregated by those amounts that are individually evaluated for impairment and those that are collectively evaluated for impairment, was as follows (in millions):
September 30, 2020December 31, 2019
Allowance for credit losses, ending balance:Commercial LoansSales-Type LeasesTotalCommercial LoansSales-Type LeasesTotal
Individually evaluated for impairment$11.3 $0.2 $11.5 $7.8 $0 $7.8 
Collectively evaluated for impairment2.5 0.2 2.7 2.7 0.5 3.2 
Total allowance for credit losses$13.8 $0.4 $14.2 $10.5 $0.5 $11.0 
Finance receivables, ending balance:
Individually evaluated for impairment$22.5 $1.2 $23.7 $7.8 $0 $7.8 
Collectively evaluated for impairment95.3 13.4 108.7 137.9 20.5 158.4 
Total finance receivables$117.8 $14.6 $132.4 $145.7 $20.5 $166.2 

Accounts are considered delinquent when the billed periodic payments of the finance receivables exceed 30 days past the due date.

The following tables present analysis of aging of recorded investment in finance receivables (in millions):
September 30, 2020
Current31-60 days past due61-90 days past dueGreater than 90 days past dueTotal past dueTotal Finance Receivables
Commercial loans$105.9 $0.2 $0.3 $11.4 $11.9 $117.8 
Sales-type leases13.2 0 1.2 0.2 1.4 14.6 
Total finance receivables$119.1 $0.2 $1.5 $11.6 $13.3 $132.4 

December 31, 2019
Current31-60 days past due61-90 days past dueGreater than 90 days past dueTotal past dueTotal Finance Receivables
Commercial loans$135.1 $2.4 $0.1 $8.1 $10.6 $145.7 
Sales-type leases20.2 0 0.3 0 0.3 20.5 
Total finance receivables$155.3 $2.4 $0.4 $8.1 $10.9 $166.2 

Commercial loans in the amount of $33.0 million and $27.1 million were on non-accrual status as of September 30, 2020 and December 31, 2019, respectively. Sales-type leases in the amount of $2.4 million and $0.3 million were on non-accrual status at September 30, 2020 and December 31, 2019, respectively.

21

Credit Quality Information

Credit quality is reviewed periodically based on customers’ payment status. In addition to delinquency status, any information received regarding a customer (such as bankruptcy filings, etc.) will also be considered to determine the credit quality of the customer. Collateral asset values are also monitored regularly to determine the potential loss exposures on any given transaction.

The Company uses the following internal credit quality indicators, based on an internal risk rating system, using certain external credit data, listed from the lowest level of risk to highest level of risk. The internal rating system considers factors affecting specific borrowers’ ability to repay.

The following table presents finance receivables by risk rating and year of origination as of September 30, 2020 (in millions):
Rating20202019201820172016PriorTotal
Superior$0.8 $0 $0 $0 $0 $0 $0.8 
Above Average5.1 2.2 2.4 0 0 1.2 10.9 
Average8.3 28.6 25.7 2.9 0 0 65.5 
Below Average2.1 16.9 20.1 2.1 4.2 0.1 45.5 
Sub Standard0 8.2 1.5 0 0 0 9.7 
Total$16.3 $55.9 $49.7 $5.0 $4.2 $1.3 $132.4 

The following table present finance receivables by risk rating and year of origination as of December 31, 2019 (in millions):
Rating20192018201720162015PriorTotal
Superior$1.7 $0 $0 $0 $0 $0 $1.7 
Above Average12.6 3.0 0 0 1.7 0 17.3 
Average20.8 17.1 3.4 0.7 0.1 0 42.1 
Below Average44.6 43.1 4.6 3.9 0 0 96.2 
Sub Standard7.7 1.1 0 0��0.1 0 8.9 
Total$87.4 $64.3 $8.0 $4.6 $1.9 $0 $166.2 
The Company believes the finance receivables retained, net of allowance for credit losses, are collectible.

NOTE G – INVENTORIES

Inventories consist of the following (in millions):
September 30,
2020		December 31,
2019		 September 30,
2021		December 31,
2020
Finished equipmentFinished equipment$216.6 $408.1 Finished equipment$256.9 $195.8 
Replacement partsReplacement parts152.6 160.8 Replacement parts155.6 157.0 
Work-in-processWork-in-process60.0 78.7 Work-in-process94.3 57.2 
Raw materials and suppliesRaw materials and supplies206.3 200.1 Raw materials and supplies240.9 200.4 
InventoriesInventories$635.5 $847.7 Inventories$747.7 $610.4 

Reserves for lower of cost or net realizable value and excess and obsolete inventory were $61.7$57.2 million and $53.2$61.8 million at September 30, 20202021 and December 31, 2019,2020, respectively.

2216

NOTE HG – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment – net consist of the following (in millions):
 September 30,
2020		December 31,
2019
Property$42.2 $40.9 
Plant244.6 168.1 
Equipment387.8 358.3 
Leasehold improvements57.3 55.8 
Construction in progress28.6 101.1 
Property, plant and equipment – gross 760.5 724.2 
Less: Accumulated depreciation(358.8)(334.8)
Property, plant and equipment – net$401.7 $389.4 
 September 30,
2021		December 31,
2020
Property$53.0 $43.6 
Plant281.0 250.1 
Equipment396.7 390.2 
Leasehold improvements49.6 49.9 
Construction in progress10.7 31.1 
Property, plant and equipment – gross 791.0 764.9 
Less: Accumulated depreciation(378.4)(358.3)
Property, plant and equipment – net$412.6 $406.6 

During the third quarter of 2020, the Company completed construction of a manufacturing facility in Watertown, South Dakota. Related assets were placed in service and transferred from construction in progress to plant and equipment.

NOTE IH – GOODWILL AND INTANGIBLE ASSETS NET

An analysis of changes in the Company’s goodwill by business segment is as follows (in millions):
     AWPMPTotal
Balance at December 31, 2019, gross$139.3 $192.4 $331.7 
Accumulated impairment(38.6)(23.2)(61.8)
Balance at December 31, 2019, net100.7 169.2 269.9 
Foreign exchange effect and other0.3 (3.1)(2.8)
Balance at September 30, 2020, gross139.6 189.3 328.9 
Accumulated impairment(38.6)(23.2)(61.8)
Balance at September 30, 2020, net$101.0 $166.1 $267.1 
     AWPMPTotal
Balance at December 31, 2020, gross$140.6 $196.6 $337.2 
Accumulated impairment(38.6)(23.2)(61.8)
Balance at December 31, 2020, net102.0 173.4 275.4 
Acquisitions— 7.3 7.3 
Foreign exchange effect and other(0.8)(2.2)(3.0)
Balance at September 30, 2021, gross139.8 201.7 341.5 
Accumulated impairment(38.6)(23.2)(61.8)
Balance at September 30, 2021, net$101.2 $178.5 $279.7 

In connection with the MDS acquisition, the Company recognized goodwill of $7.3 million during the period. The goodwill was assigned to the MP reporting unit and attributable primarily to the assembled workforce and expected synergies from the business combination. The goodwill is not expected to be deductible for income tax purposes. See Note D – “Acquisitions and Discontinued Operations” for additional information regarding the MDS acquisition.

17

Intangible assets, net were comprised of the following (in millions):
September 30, 2020December 31, 2019
Weighted Average Life
(in years)		Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Definite-lived intangible assets:
Technology7$9.8 $(9.2)$0.6 $9.4 $(8.8)$0.6 
Customer Relationships2225.9 (23.7)2.2 25.6 (22.8)2.8 
Land Use Rights814.3 (0.7)3.6 4.3 (0.7)3.6 
Other825.3 (23.1)2.2 25.1 (22.4)2.7 
Total definite-lived intangible assets$65.3 $(56.7)$8.6 $64.4 $(54.7)$9.7 
September 30, 2021December 31, 2020
Weighted Average Life
(in years)		Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Definite-lived intangible assets:
Technology8$10.0 $(9.8)$0.2 $10.1 $(9.6)$0.5 
Customer Relationships1932.1 (25.0)7.1 26.1 (24.1)2.0 
Land Use Rights804.3 (0.8)3.5 4.4 (0.7)3.7 
Other826.3 (23.0)3.3 25.5 (23.4)2.1 
Total definite-lived intangible assets$72.7 $(58.6)$14.1 $66.1 $(57.8)$8.3 

Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2020201920202019
Aggregate Amortization Expense$0.4 $0.4 $1.3 $1.3 
In connection with the MDS acquisition, the Company recognized customer relationships and trademarks of $6.3 million with an estimated useful life of 7 years and $1.3 million with an estimated useful life of 10 years during the period. See Note D – “Acquisitions and Discontinued Operations” for additional information regarding the MDS acquisition.

23
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2021202020212020
Aggregate Amortization Expense$0.7 $0.4 $1.6 $1.3 

Estimated aggregate intangible asset amortization expense (in millions) for each of the next five years is as follows:follows (in millions):
2020$1.4 
20212021$1.3 2021$2.2 
20222022$1.3 20222.3 
20232023$0.8 20231.7 
20242024$0.6 20241.5 
202520251.4 

18

NOTE JI – 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 primarily uses cash flow derivatives to manage foreign currency and price risk exposures on third-party and intercompany forecasted transactions.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 methodmethods 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. The Company’s derivative financial instruments are categorized under the ASC 820 hierarchy; see Note A - “Basis of Presentation” for an explanation of the hierarchy.

Foreign Exchange ContractsInterest Rate Caps and Commodity Swaps

The Company enters into foreign exchange contracts to manage variability of future cash flows associated with changing currency exchange rates.  Primary currencies to which the Company is exposed are the Euro, British Pound and Australian Dollar. Foreign currency exchange contracts designated as cash flow hedges are used to manage variability of future cash flows associated with recognized assets or liabilities and forecasted transactions. Certain foreign exchange contracts not designated as hedging instruments are used to mitigate its 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, 2020 mature on or before December 31, 2020.

At September 30, 2020 and December 31, 2019, the Company had $5.3 million and $233.0 million notional amount, respectively, of foreign exchange contracts outstanding that were designated as cash flow hedge contracts. For effective hedging instruments, unrealized gains and losses associated with foreign exchange contracts are deferred as a component of Accumulated other comprehensive income (loss) (“AOCI”) until the underlying hedged transactions settle and are reclassified to Cost of goods sold (“COGS”) in the Company’s Condensed Consolidated Statement of Comprehensive Income (Loss).

The Company had $54.7 million and $121.2 million notional amount of foreign exchange contracts outstanding that were not designated as hedging instruments at September 30, 2020 and December 31, 2019, respectively.  The majority of gains and losses recognized from foreign exchange contracts not designated as hedging instruments were 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 were recognized as gains or losses in COGS and Other income (expense) – net in the Condensed Consolidated Statement of Comprehensive Income (Loss).

24

Other

Other derivativesDerivatives designated as cash flow hedging instruments include interest rate caps and commodity swaps with outstanding notional amountsvalue of $300.0 million and $17.3$18.6 million, respectively, at September 30, 2020.2021. Commodity swaps outstanding at September 30, 20202021 mature on or before August 31, 2021. There were 02022. The outstanding notional value of interest rate caps or cross currencyand commodity swaps designated as cash flow hedging instruments outstandingwas $300.0 million and $26.0 million, respectively, at December 31, 2019. The outstanding notional amount of commodity swaps was $7.0 million at December 31, 2019.2020. The Company uses interest rate caps to mitigate its exposure to changes in interest rates related to variable rate debt cross currency swaps to mitigate its exposure to changes in foreign currency exchange rates and commodity swaps to mitigate price risk for hot rolled coil steel. Fair values of interest rate caps and cross currency swaps are based on the present value of future cash payments and receipts. Fair values of commodity swaps are based on observable market data for similar assets and liabilities. Changes in the fair value of interest rate caps cross currency swaps and commodity swaps are deferred in AOCI.Accumulated other comprehensive income (loss) (“AOCI”). Gains or losses on interest rate caps are reclassified to Interest expense in the Condensed Consolidated Statement of Comprehensive Income (Loss) when the underlying hedged transactions occur. Gains or losses on cross currency swaps are reclassified to Other income (expense) - net in the Condensed Consolidated Statement of Comprehensive Income (Loss) when the underlying hedged item is re-measured. Gains or losses on commodity swaps are reclassified to COGSCost of goods sold (“COGS”) in the Condensed Consolidated Statement of Comprehensive Income (Loss) when the hedged transaction affects earnings. In October 2021, the Company terminated all outstanding interest rate caps.

Other derivativesCross Currency Swaps

Derivatives designated as net investment hedging instruments include cross currency swaps with outstanding notional amountsvalue of $117.2$92.6 million and $97.7 million at September 30, 2020. There were 0 cross currency swaps designated as net investment hedging instruments outstanding at2021 and December 31, 2019.2020, 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.

Other derivativesForeign 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, 2021 mature during the fourth quarter of 2021.

At December 31, 2020, the Company had $7.8 million notional value, respectively, of foreign exchange contracts outstanding that were designated as cash flow hedge contracts. There were 0 foreign exchange contracts that were designated as cash flow hedge contracts outstanding at September 30, 2021. 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 Company’s Condensed Consolidated Statement of Comprehensive Income (Loss).

19

The Company had $38.0 million and $54.2 million notional value of foreign exchange contracts outstanding that were not designated as hedging instruments include a debt conversion feature on a convertible promissory note heldat September 30, 2021 and December 31, 2020, respectively. The majority of gains and losses recognized from foreign exchange contracts not designated as hedging instruments are offset by the Company for which 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 recordedrecognized as gains or losses in COGS and Other income (expense) -– net in the Condensed Consolidated Statement of Comprehensive Income (Loss).

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,
2020		December 31,
2019		September 30,
2021		December 31,
2020
Instrument (1)
Instrument (1)
Balance Sheet AccountDerivatives designated as hedgesDerivatives not designated as hedgesDerivatives designated as hedgesDerivatives not designated as hedges
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 $0 $4.1 $0 
Commodity swapsCommodity swapsOther current assets0.4 0 0 0 Commodity swapsOther current assets$7.9 $— $7.2 $— 
Commodity swapsCommodity swapsOther non-current assets— — 0.3 — 
Interest rate capsInterest rate capsOther non-current assets0.8 — — — 
Foreign exchange contractsForeign exchange contractsOther current liabilities0 (0.1)(3.9)0 Foreign exchange contractsOther current liabilities— (0.3)— — 
Cross currency swaps - net investment hedgeCross currency swaps - net investment hedgeOther current liabilities(1.1)0 0 0 Cross currency swaps - net investment hedgeOther current liabilities(0.6)— (2.0)— 
Interest rate capsInterest rate capsOther current liabilities(1.2)0 0 0 Interest rate capsOther current liabilities(1.2)— (1.2)— 
Commodity swapsCommodity swapsOther current liabilities(0.3)— — — 
Cross currency swaps - net investment hedgeCross currency swaps - net investment hedgeOther non-current liabilities(6.3)0 0 0 Cross currency swaps - net investment hedgeOther non-current liabilities(4.0)— (8.2)— 
Interest rate capsInterest rate capsOther non-current liabilities(3.0)0 0 0 Interest rate capsOther non-current liabilities— — (2.6)— 
Net derivative asset (liability)Net derivative asset (liability)$(11.1)$(0.1)$0.2 $0 Net derivative asset (liability)$2.6 $(0.3)$(6.5)$— 

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


2520

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 taxGain (Loss) Reclassified from AOCI into Income (Loss)
InstrumentThree Months Ended
September 30, 2020		Nine Months Ended
September 30, 2020		Income Statement AccountThree Months Ended
September 30, 2020		Nine Months Ended
September 30, 2020
Foreign exchange contracts$0.2 $(0.5)Cost of goods sold$0.3 $(2.1)
Commodity swaps1.1 0.3 Cost of goods sold(0.1)(1.9)
Cross currency swaps - net investment hedge(3.6)(5.8)Selling, general and administrative expenses0 0 
Interest rate caps(0.5)(3.1)Interest expense(0.3)(0.1)
Total$(2.8)$(9.1)Total$(0.1)$(4.1)
Gain (Loss) Recognized on Derivatives in OCI, net of taxGain (Loss) Reclassified from AOCI into Income (Loss)
InstrumentThree Months Ended
 September 30, 2021		Nine Months Ended
 September 30, 2021		Income Statement AccountThree Months Ended
 September 30, 2021		Nine Months Ended
 September 30, 2021
Foreign exchange contracts$— $— Cost of goods sold$— $0.1 
Commodity swaps(5.8)9.1 Cost of goods sold6.9 8.3 
Cross currency swaps - net investment hedge1.8 4.0 Selling, general and administrative expenses— — 
Interest rate caps0.1 2.7 Interest expense(0.3)(0.9)
Total$(3.9)$15.8 Total$6.6 $7.5 

Gain (Loss) Recognized on Derivatives in OCI, net of taxGain (Loss) Reclassified from AOCI into Income (Loss)
Gain (Loss) Recognized on Derivatives in OCI, net of taxGain (Loss) Reclassified from AOCI into Income (Loss)
InstrumentInstrumentThree Months Ended
September 30, 2019		Nine Months Ended
September 30, 2019		Income Statement AccountThree Months Ended
September 30, 2019		Nine Months Ended
September 30, 2019		InstrumentThree Months Ended
 September 30, 2020		Nine Months Ended
September 30, 2020		Income Statement AccountThree Months Ended
 September 30, 2020		Nine Months Ended
September 30, 2020
Foreign exchange contractsForeign exchange contracts$(1.9)$(1.4)Cost of goods sold$(2.8)$(5.2)Foreign exchange contracts$0.2 $(0.5)Cost of goods sold$0.3 $(2.1)
Commodity swapsCommodity swaps0.2 (0.1)Cost of goods sold(1.5)(2.5)Commodity swaps1.1 0.3 Cost of goods sold(0.1)(1.9)
Cross currency swaps - cash flow hedge0.2 0.9 Other income (expense) - net1.9 2.3 
Cross currency swaps - net investment hedgeCross currency swaps - net investment hedge(3.6)(5.8)Selling, general and administrative expenses— — 
Interest rate capsInterest rate caps(0.5)(3.1)Interest expense(0.3)(0.1)
TotalTotal$(1.5)$(0.6)Total$(2.4)$(5.4)Total$(2.8)$(9.1)Total$(0.1)$(4.1)

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 soldInterest Expense
Three Months Ended
September 30, 2020		Nine Months Ended
September 30, 2020		Three Months Ended
September 30, 2020		Nine Months Ended
September 30, 2020
Income Statement Accounts in which effects of cash flow hedges are recorded$(619.3)$(1,899.6)$(15.8)$(50.0)
Gain (loss) reclassified from AOCI into Income (loss):
Foreign exchange contracts0.3 (2.1)0 0 
Commodity swaps(0.1)(1.9)0 0 
Interest rate caps0 0 (0.3)(0.1)
Amount excluded from effectiveness testing recognized in Income (loss) based on amortization approach:
Cross currency swaps - net investment hedge0 0 0.2 0.3 
Total$0.2 $(4.0)$(0.1)$0.2 
Classification and amount of Gain (Loss) Recognized in Income (Loss)
Cost of goods soldInterest expense
Three Months Ended
September 30, 2021		Nine Months Ended
September 30, 2021		Three Months Ended
September 30, 2021		Nine Months Ended
September 30, 2021
Income Statement Accounts in which effects of cash flow hedges are recorded$(815.3)$(2,311.2)$(12.3)$(40.6)
Gain (loss) reclassified from AOCI into Income (loss):
Foreign exchange contracts— 0.1 — — 
Commodity swaps6.9 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)

2621

Classification and amount of Gain (Loss) Recognized in Income (Loss)Classification and amount of Gain (Loss) Recognized in Income (Loss)
Cost of goods soldOther income (expense) - netCost of goods soldInterest expense
Three Months Ended
September 30, 2019		Nine Months Ended
September 30, 2019		Three Months Ended
September 30, 2019		Nine Months Ended
September 30, 2019		Three Months Ended
September 30, 2020		Nine Months Ended
 September 30, 2020		Three Months Ended
September 30, 2020		Nine Months Ended
 September 30, 2020
Income Statement Accounts in which effects of cash flow hedges are recordedIncome Statement Accounts in which effects of cash flow hedges are recorded$(815.0)$(2,748.9)$1.6 $(2.9)Income Statement Accounts in which effects of cash flow hedges are recorded$(619.3)$(1,899.6)$(15.8)$(50.0)
Gain (loss) reclassified from AOCI into Income (loss):Gain (loss) reclassified from AOCI into Income (loss):Gain (loss) reclassified from AOCI into Income (loss):
Foreign exchange contractsForeign exchange contracts(2.8)(5.2)0 0 Foreign exchange contracts0.3 (2.1)— — 
Commodity swapsCommodity swaps(1.5)(2.5)0 0 Commodity swaps(0.1)(1.9)— — 
Cross currency swaps - cash flow hedge0 0 1.9 2.3 
Interest rate capsInterest rate caps— — (0.3)(0.1)
Amount excluded from effectiveness testing recognized in Income (loss) based on amortization approach:Amount excluded from effectiveness testing recognized in Income (loss) based on amortization approach:
Cross currency swaps - net investment hedgeCross currency swaps - net investment hedge— — 0.2 0.3 
TotalTotal$(4.3)$(7.7)$1.9 $2.3 Total$0.2 $(4.0)$(0.1)$0.2 

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 outstanding at the end of the period in the Condensed Consolidated Statement of Comprehensive Income (Loss) (in millions):
Gain (Loss) Recognized in Income (Loss)
InstrumentIncome Statement AccountThree Months Ended
September 30, 2020		Nine Months Ended
September 30, 2020		Three Months Ended
September 30, 2019		Nine Months Ended
September 30, 2019
Foreign exchange contractsCost of goods sold$0.1 $(0.2)$0 $0 
Foreign exchange contractsOther income (expense) – net(0.4)(0.2)(0.4)(0.7)
Debt conversion featureOther income (expense) – net(0.1)0 (0.1)(0.4)
Total$(0.4)$(0.4)$(0.5)$(1.1)
Gain (Loss) Recognized in Income (Loss)
Three Months Ended
September 30,		Nine Months Ended
September 30,
InstrumentIncome Statement Account2021202020212020
Foreign exchange contractsCost of goods sold$(0.6)$0.1 $(0.6)$(0.2)
Foreign exchange contractsOther income (expense) – net(0.1)(0.4)(0.3)(0.2)
Debt conversion featureOther income (expense) – net— (0.1)— — 
Total$(0.7)$(0.4)$(0.9)$(0.4)

In the Condensed Consolidated Statement of Comprehensive Income (Loss), the Company records hedging activity related to foreign exchange contracts, interest rate caps, commodity swaps, cross currency swaps, and commodity swaps,foreign exchange contracts and the debt conversion feature 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 NM - “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, 2020,2021, it is estimated that $2.7$12.3 million of lossesgains are expected to be reclassified into earnings in the next twelve months.

22

NOTE KJ – LONG-TERM OBLIGATIONS

2017 Credit Agreement

On January 31, 2017, the Company entered into a credit agreement (as amended, the “2017 Credit Agreement”) with the lenders and issuing banks party thereto and Credit Suisse AG, Cayman Islands Branch (“CSAG”), as administrative agent and collateral agent. The 2017 Credit Agreement includescredit agreement included (i) a $600 million revolving line of credit (the “Revolver”) and (ii) senior secured term loans totaling $600 million that will mature onwith a maturity date of January 31, 2024 (the “Term Loans”); both are further described below.. On April 23, 2020,1, 2021, the Company entered into a Loan Modification Agreementan amendment and Amendment No. 4 (“Amendment No. 4”restatement of the credit agreement (as amended and restated, the “Credit Agreement”) which included the following principal changes to the 2017 Credit Agreement. Amendment No. 4 extendedoriginal credit agreement: (i) extension of the term of the Revolver to expire on January 31, 2023. As a result of Amendment No. 4, during 2020,April 1, 2026, which maturity will spring forward to November 1, 2023 if the Company is only subject to a minimum liquidity covenant and then during 2021 it is subject to a maximum secured leverage covenant that is only applicable if borrowings under the Revolver are greater than 30% of the total revolving credit commitments.

27

The 2017 Credit Agreement contains a $400 million senior secured term loan (the “Original Term Loan”). On August 17, 2017, the Company entered into an Incremental Assumption Agreement and Amendment No. 1 to the 2017 Credit Agreement which lowered outstanding 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 Original Term Loandrawn Revolver by 25 basis points. On February 28, 2018,points and (iv) certain other technical changes, including additional language regarding the potential cessation of LIBOR as a benchmark rate. 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 entered into an Incremental Assumption Agreement and Amendment No. 2 (“Amendment No. 2”) toprepaid the 2017 Credit Agreement which lowered the interest rate on the Original Term Loan by an additional 25 basis points. The Original Term Loan portion of the 2017 Credit Agreement bears interest at a rate of LIBOR plus 2.00% with a 0.75% LIBOR floor. On March 7, 2019, the Company entered into an Incremental Assumption Agreement and Amendment No. 3 (“Amendment No. 3”) to the 2017 Credit Agreement. Amendment No. 3 provided the Company with an additional$200 million term loan (the “2019 Term Loan”) under the 2017 Credit Agreement inprior to its maturity date to reduce the amountCompany’s outstanding debt and lower its leverage. The Company recorded a loss on early extinguishment of $200 million.debt related to prepayment of $2.1 million for accelerated amortization of debt acquisition costs and original issue discount. The 2019 Term Loan portion of the 2017 Credit Agreement bearsbore interest at a rate of LIBOR plus 2.75% with a 0.75% LIBOR floor.

The 2017Original Term Loan under the Credit Agreement allows unlimitedbears interest at a rate of LIBOR plus 2.00% with a 0.75% LIBOR floor. During the second quarter of 2021, the Company prepaid $83.0 million of the amount outstanding on the Original 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 $0.7 million for accelerated amortization of debt acquisition costs and original issue discount.

Unlimited incremental commitments which 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 ($150 million through 2021 as a result of Amendment No. 4) as long as the Company satisfies athe maximum permitted level of the senior secured leverage ratio containedas defined in the 2017 Credit Agreement.

The 2017 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 2017 Credit Agreement requires the Company to comply with certainthe following financial tests, as defined in the 2017 Credit Agreement. If applicable, thetests: (i) minimum required levelslevel of the interest coverage ratio (“Interest Coverage Ratio”) would beof 2.5 to 1.0 and the(ii) maximum permitted levelslevel of the senior secured leverage ratio (“Senior Secured Leverage Ratio”) would beof 2.75 to 1.0. The 2017 Credit Agreement also contains customary default provisions.

Amendment No. 4 waived compliance with the Interest Coverage Ratio and Senior Secured Leverage Ratio through December 31, 2020, replacing them with a sliding scale minimum liquidity requirement, $100 million at June 30 and September 30, 2020 and $150 million at December 31, 2020. Maximum levels of the Senior Secured Leverage Ratio will be 3.75 to 1.0 at March 31, 2021, 3.25 to 1.0 at June 30, 2021 and 2.75 to 1.0 at September 30, 2021 and thereafter. In addition Amendment No. 4 prohibits share repurchases and dividends, contains anti-cash hoarding provisions and additional financial reporting provisions until December 31, 2020. Amendment No. 4 also increased the interest rate on the Revolver by 25 basis points until December 31, 2021. The Company, at its sole option, has the ability to revert to original financial covenants and Revolver pricing. The Company was in compliance with all covenants contained in the 2017 Credit Agreement as of September 30, 2020.2021.

As of September 30, 20202021 and December 31, 2019,2020, the Company had $581.3$298.4 million and $585.5$579.9 million, net of discount, respectively, in Term Loans outstanding under the 2017 Credit Agreement. The weighted average interest rate on the Term Loans at September 30, 20202021 and December 31, 20192020 was 3.00%2.75% and 4.10%3.00%, respectively. The Company had 0no revolving credit amounts outstanding as of September 30, 20202021 and December 31, 2019.2020.

In October 2021, the Company prepaid an additional $150 million of the Original Term Loan prior to its maturity date to reduce the Company’s outstanding debt and lower its leverage. The Company expects to record a loss on early extinguishment of debt related to prepayment of approximately $1 million for accelerated amortization of debt acquisition costs and original issue discount in the fourth quarter of 2021.

The Company issues 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 2017 Credit Agreement and via bilateral arrangements outside the 2017 Credit Agreement.

23

The 2017 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 2017 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 2017 Credit Agreement and do not decrease availability under the Revolver.

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Letters of credit outstanding (in millions):
September 30, 2020December 31, 2019September 30, 2021December 31, 2020
$400 Million Facility$400 Million Facility$0 $0 $400 Million Facility$— $— 
$300 Million Facility$300 Million Facility35.1 34.8 $300 Million Facility65.3 35.3 
Bilateral ArrangementsBilateral Arrangements46.8 45.3 Bilateral Arrangements45.1 47.2 
TotalTotal$81.9 $80.1 Total$110.4 $82.5 

Furthermore, the Company and certain of its subsidiaries agreed to take certain actions to secure borrowings under the 2017 Credit Agreement. As a result, on January 31, 2017, 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 2017 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 5-5/8%5% Notes, together with cash on hand, including cash from the sale of the Company’s Material Handling and Port Solutions business, was used: (i) to complete a tender offer for up to $550.0 millionfund redemption and discharge of the Company’s Senior5-5/8% Notes due 2021 (“6% Notes”),and (ii) to redeem and discharge such portion of the 6% Notes not purchased in the tender offer, (iii) to fund a $300.0 million partial redemption of the 6% Notes, (iv) to fund repayment of all $300.0 million aggregate principal amount outstanding of the Company’s 6-1/2% senior notes due 2021 on or before April 3, 2017, (v) to pay related premiums, fees, discounts and expenses, and (vi) for general corporate purposes.expenses. The 5-5/8%5% Notes are jointly and severally guaranteed by certain of the Company’s domestic subsidiaries.

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Fair Value of Debt

Based on indicative price quotations from financial institutions multiplied by the amount recorded on the Company’s Condensed Consolidated Balance Sheet (“Book Value”), the Company estimates the fair values (“FV”) of its debt set forth below as of September 30, 2020,2021, as follows (in millions, except for quotes):
 Book ValueQuoteFV
5-5/8% Notes$600.0 $1.00000 $600.0 
2017 Credit Agreement Original Term Loan (net of discount)$385.0 $0.96500 $371.5 
2017 Credit Agreement 2019 Term Loan (net of discount)$196.3 $0.97500 $191.4 
 Book ValueQuoteFair Value
5% Notes$600.0 1.03875 $623.3 
Original Term Loan (net of discount)$298.4 $0.99700 $297.5 

The fair value of debt reported in the table above5% Notes and Original Term Loan is based on adjusted price quotations on the debt instrumentinstruments in an active market and therefore is categorized under Level 1 of the ASC 820 hierarchy. See Note A – “Basis of Presentation” for an explanation of ASC 820 hierarchy.market. The Company believes that the carrying value of its other borrowings, including amounts outstanding, if any, for the revolving credit line under the 2017 Credit Agreement, approximate fair market value based on maturities for debt of similar terms. Fair value of 5% Notes, Original Term Loan and these other borrowings are categorized under Level 2 of the ASC 820 hierarchy. See Note A – “Basis of Presentation” for an explanation of ASC 820 hierarchy.

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NOTE LK – 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 the United States.. 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,		 Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019 2021202020212020
U.S. PensionNon-U.S. PensionOtherU.S. PensionNon-U.S. PensionOtherU.S. PensionNon-U.S. PensionOtherU.S. PensionNon-U.S. PensionOtherU.S. PensionNon-U.S. PensionOtherU.S. PensionNon-U.S. PensionOtherU.S. PensionNon-U.S. PensionOtherU.S. PensionNon-U.S. PensionOther
Components of net periodic cost:Components of net periodic cost:  Components of net periodic cost:  
Service costService cost$0 $0.4 $0 $0 $0.4 $0 $0 $1.0 $0 $0.1 $1.1 $0 Service cost$— $0.2 $— $— $0.4 $— $— $0.7 $— $— $1.0 $— 
Interest costInterest cost0.3 0.7 0 0.5 0.8 0 1.0 2.0 0.1 1.3 2.6 0.1 Interest cost0.2 0.6 0.1 0.3 0.7 — 0.8 1.8 0.1 1.0 2.0 0.1 
Expected return on plan assetsExpected return on plan assets0 (1.3)0 0 (1.1)0 0 (3.9)0 0 (3.5)0 Expected return on plan assets— (1.3)— — (1.3)— — (4.2)— — (3.9)— 
Amortization of actuarial (gain) lossAmortization of actuarial (gain) loss0.1 0.3 0 (0.1)0.4 0 0.1 1.3 0 (0.4)1.2 0 Amortization of actuarial (gain) loss— 0.6 — 0.1 0.3 — 0.2 1.8 — 0.1 1.3 — 
Net periodic cost Net periodic cost $0.4 $0.1 $0 $0.4 $0.5 $0 $1.1 $0.4 $0.1 $1.0 $1.4 $0.1 Net periodic cost $0.2 $0.1 $0.1 $0.4 $0.1 $— $1.0 $0.1 $0.1 $1.1 $0.4 $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.

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NOTE ML – 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 riskrisks 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 as a whole.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.

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Securities and Stockholder Derivative Lawsuits

In 2010, the Company received complaints seeking certification of class action lawsuits as follows:

•A consolidated class action complaint for violations of securities laws was filed in the United States District Court, District of Connecticut on November 18, 2010 and is entitled Sheet Metal Workers Local 32 Pension Fund and Ironworkers St. Louis Council Pension Fund, individually and on behalf of all others similarly situated v. Terex Corporation, et al.

•A stockholder derivative complaint for violation of the Securities and Exchange Act of 1934, breach of fiduciary duty, waste of corporate assets and unjust enrichment was filed on April 12, 2010 in the United States District Court, District of Connecticut and is entitled Peter Derrer, derivatively on behalf of Terex Corporation v. Ronald M. DeFeo, Phillip C. Widman, Thomas J. Riordan, G. Chris Andersen, Donald P. Jacobs, David A. Sachs, William H. Fike, Donald DeFosset, Helge H. Wehmeier, Paula H.J. Cholmondeley, Oren G. Shaffer, Thomas J. Hansen, and David C. Wang, and Terex Corporation.

These lawsuits, which generally covered the time period from February 2008 to February 2009, alleged violations of federal securities laws and Delaware law claiming, among other things, that certain of the Company’s SEC filings and other public statements contained false and misleading statements which resulted in damages to the Company, the plaintiffs and the members of the purported class when they purchased the Company’s securities and that there were breaches of fiduciary duties.

With respect to these claims, the Company believes that it acted at all times in compliance with all applicable laws and, without any admission of wrongdoing or liability, has settled the stockholder derivative and securities lawsuits. The settlement amounts with respect to each lawsuit were covered by the Company’s insurance policies and did not have a material effect on the Company’s financial results. As part of the stockholder derivative settlement, the Company made certain amendments to its corporate governance procedures.

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 101103 million ($1819 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 which may not commence until 2021.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.

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Credit Guarantees

Customers of the Company from time to time may fund the acquisition of the Company’s equipment through third-party finance companies. In certain instances, the Company may provide a credit guarantee to the finance company, by which the Company agrees to make payments to the finance company should the customer default. These may require the Company to: (i) pay-off the customer’s obligations, (ii) assume the customer’s payments or (iii) pay a predetermined percentage of the customer’s outstanding obligation. The current amount of the maximum potential liability under these credit guarantees cannot be reasonably estimated due to limited availability of the unique facts and circumstances of each arrangement, such as customer delinquency and 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, 20202021 and December 31, 2019,2020, the maximum exposure determined at inception was $104.8$163.3 million and $78.4$143.8 million, respectively. Terms of these guarantees coincide with the financing arranged by the customer and generally do not exceed five years. Given the Company’s position as original equipment manufacturerThe allowance for credit losses on credit guarantees was $10.2 million and its knowledge of end markets, the Company, when called upon to fulfill a guarantee, generally has been able to liquidate the financed equipment$8.3 million at a minimal loss, if any, to the Company.September 30, 2021 and December 31, 2020, respectively.

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

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NOTE NM – 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, 20202021 and 2019.2020. All amounts are net of tax (in millions).
Three Months Ended
September 30, 2020		Three Months Ended
September 30, 2019		Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
CTADerivative Hedging Adj.Debt & Equity Securities Adj.Pension Liability Adj.Total
CTA(1)
Derivative Hedging Adj.Debt & Equity Securities Adj.Pension Liability Adj.TotalCTADerivative Hedging Adj.Debt & Equity Securities Adj.Pension Liability Adj.TotalCTADerivative Hedging Adj.Debt & Equity Securities Adj.Pension Liability Adj.Total
Beginning balanceBeginning balance(243.5)(7.1)3.6 (47.8)$(294.8)$(231.7)$(3.5)$2.1 $(54.2)$(287.3)Beginning balance$(156.6)$13.7 $0.6 $(57.7)$(200.0)$(243.5)$(7.1)$3.6 $(47.8)$(294.8)
Other comprehensive income (loss) before reclassificationsOther comprehensive income (loss) before reclassifications45.0 (2.7)0.3 (2.0)40.6 (51.9)(3.5)0.4 14.4 (40.6)Other comprehensive income (loss) before reclassifications(27.1)1.1 (0.2)1.5 (24.7)45.0 (2.7)0.3 (2.0)40.6 
Amounts reclassified from AOCIAmounts reclassified from AOCI0 (0.1)0 0.4 0.3 26.1 2.0 0 (0.5)27.6 Amounts reclassified from AOCI— (5.0)— 0.4 (4.6)— (0.1)— 0.4 0.3 
Net other comprehensive income (loss)Net other comprehensive income (loss)45.0 (2.8)0.3 (1.6)40.9 (25.8)(1.5)0.4 13.9 (13.0)Net other comprehensive income (loss)(27.1)(3.9)(0.2)1.9 (29.3)45.0 (2.8)0.3 (1.6)40.9 
Ending balanceEnding balance$(198.5)$(9.9)$3.9 $(49.4)$(253.9)$(257.5)$(5.0)$2.5 $(40.3)$(300.3)Ending balance$(183.7)$9.8 $0.4 $(55.8)$(229.3)$(198.5)$(9.9)$3.9 $(49.4)$(253.9)

(1)    Reclassifications relate to $26.1 million of losses (net of $2.8 million of tax benefits) reclassified from AOCI to Gain (loss) on disposition of discontinued operations - net of tax in connection with the sale of Demag.

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Nine Months Ended
September 30, 2020		Nine Months Ended
September 30, 2019
CTADerivative Hedging Adj.Debt & Equity Securities Adj.Pension Liability Adj.Total
CTA(1)
Derivative Hedging Adj.Debt & Equity Securities Adj.Pension Liability Adj.Total
Beginning balance$(208.2)$(0.8)$2.6 $(51.1)$(257.5)$(225.6)$(4.4)$0.8 $(55.6)$(284.8)
Other comprehensive income (loss) before reclassifications9.7 (12.5)1.3 0.5 (1.0)(58.0)(5.7)1.7 14.6 (47.4)
Amounts reclassified from AOCI0 3.4 0 1.2 4.6 26.1 5.1 0 0.7 31.9 
Net other comprehensive income (loss)9.7 (9.1)1.3 1.7 3.6 (31.9)(0.6)1.7 15.3 (15.5)
Ending balance$(198.5)$(9.9)$3.9 $(49.4)$(253.9)$(257.5)$(5.0)$2.5 $(40.3)$(300.3)

(1)    Reclassifications relate to $26.1 million of losses (net of $2.8 million of tax benefits) reclassified from AOCI to Gain (loss) on disposition of discontinued operations - net of tax in connection with the sale of Demag.
Nine Months Ended
September 30, 2021		Nine Months Ended
September 30, 2020
CTADerivative Hedging Adj.Debt & Equity Securities Adj.Pension Liability Adj.TotalCTADerivative Hedging Adj.Debt & Equity Securities Adj.Pension Liability Adj.Total
Beginning balance$(145.2)$(6.0)$1.2 $(58.4)$(208.4)$(208.2)$(0.8)$2.6 $(51.1)$(257.5)
Other comprehensive income (loss) before reclassifications(38.5)21.6 (0.8)1.1 (16.6)9.7 (12.5)1.3 0.5 (1.0)
Amounts reclassified from AOCI— (5.8)— 1.5 (4.3)— 3.4 — 1.2 4.6 
Net other comprehensive income (loss)(38.5)15.8 (0.8)2.6 (20.9)9.7 (9.1)1.3 1.7 3.6 
Ending balance$(183.7)$9.8 $0.4 $(55.8)$(229.3)$(198.5)$(9.9)$3.9 $(49.4)$(253.9)

Stock-Based Compensation

During the nine months ended September 30, 2020,2021, the Company awarded 1.40.6 million shares of restricted stock awards to its employees with a weighted average grant date fair value of $22.40$44.56 per share. Approximately 58% of these awards are time-based and vest ratably on each of the first three anniversary dates.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.

The Company used the Monte Carlo method to determine grant date fair value of $21.09$54.92 per share for therestricted stock awards with a market condition granted on February 26, 2020.March 4, 2021. The Monte Carlo method is a statistical simulation technique used to provide the grant date fair value of an award.

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The following table presents the weighted-average assumptions used in the valuation:
Grant date
February 26, 2020March 4, 2021
Dividend yields2.121.12 %
Expected volatility36.3653.03 %
Risk free interest rate1.140.29 %
Expected life (in years)3

Share Repurchases and Dividends

In July 2018, Terex’s Board of Directors authorized the Company to repurchase up to an additional $300 million of the Company’s outstanding shares of common stock, of which approximately $105 million was utilized prior to January 1, 2020.stock. During the nine months ended September 30, 2021, the Company did not repurchase shares under these programs. During the nine months ended September 30, 2020, the Company repurchased 2.5 million shares for $54.6 million under this program. During the nine months ended September 30, 2019, the Company did 0t repurchase shares under this program. In the first quarter of 2020, these programs.

Terex’s Board of Directors declared a dividend of $0.12 per share in the first, second and third quarters of 2021, which was paid to the Company’s shareholders. In April 2020,October 2021, Terex’s Board of Directors declared a dividend of $0.12 per share, which will be paid to the Company announced that it has suspended further share repurchases and dividend payments for the remainder of 2020.Company’s shareholders on December 17, 2021.
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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS DESCRIPTION

Terex is a global manufacturer of aerial work platforms and materials processing machinery. We design, build and support products used in construction, maintenance, manufacturing, energy, minerals and materials management applications. Our products are manufactured in North and South 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) Aerial Work Platforms (“AWP”) and (ii) Materials Processing (“MP”).

On July 31, 2019, we completed the disposition of our Demag® mobile cranes business (“Demag”) to Tadano Ltd. and certain of its subsidiaries (“Tadano”). During 2019, we also exited North American mobile crane product lines manufactured in our Oklahoma City facility. As a result, we reorganized certain operations, formerly part of our Cranes segment, to align with our new management and reporting structure. Our utilities business has been consolidated within our AWP segment and our pick and carry, rough terrain and tower cranes businesses have been consolidated within our MP segment. Prior period reportable segment information was adjusted to reflect the realignment of our operations.

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

Non-GAAP Measures

In this document, we refer to various GAAP (U.S.(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”) costs and operating profit, as well as the net sales, gross profit, SG&A costs 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, plus (minus) increases (decreases) in Terex Financial Services (“TFS”) finance receivables consisting of sales-type leases and commercial loans (“TFS Assets”), 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 2021 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 2021 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.

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

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Overview

While the COVID-19 pandemic continued in the third quarter, global economic activity has stabilized and begun to gradually recover butSafety remains below pre-COVID-19 levels. In response to the ongoing pandemic, we have implemented safety, financial and cost reduction actions.

Safety is and will remain theour top priority of the Companypriority; driven by our Zero Harm Safety culture of 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.

Our strategic operational priorities of execution, innovation, and growth continue to make excellent progress. We continue to address supply chain disruptions across various supply inputs and product lines. Suppliers and logistics providers are currently working to ramp up and meet our production requirements. Our team members in both reportable segments have worked hard to adapt and maintain production schedules. Our commercial excellence initiatives are demonstrating results, as pricing actions continue to partially offset accelerating cost inflation. Our SG&A as a percent to sales will be below our target of 12.5% for the full-year 2021. We are maintaining strict cost discipline while recognizing that growth in the business will necessitate investment spending. In the third quarter, we started production of telehandlers in Monterrey, Mexico. This action is on track and will reduce the cost of manufacturing our telehandler products for the North American market.

We also continue to innovate so our products and services offer the features and benefits that provide value to our customers. We are investing in our connected assets and digital capabilities to better serve customers.

We are also investing in the business for future growth through organic and inorganic opportunities. In the third quarter, the MP team completed a bolt-on acquisition, purchasing a heavy duty trommels business that broadens our product offerings. We also recently launched a new product line, Terex Recycling Systems, which will focus on construction, demolition, commercial and industrial waste applications.

We continued to deliver strong results as customer demand remained robust during the quarter. Revenues of $1.0 billion were up 30% compared to the prior year period. However, revenues were approximately 9% below our expectations due to supply chain challenges limiting our production output, especially within AWP. Our operating margins and earnings per share (“EPS”) in the quarter improved significantly versus the prior year period, but were also lower than our prior expectations as a result of the revenue shortfall, inflationary cost pressures and supply chain challenges impacting the efficiency of our manufacturing operations. Freight and logistics have also been a growing issue with delays and increased costs. The availability of containers, ships and increasing offload times are impacting our production and delivery schedules.

AWP’s third quarter 2021 sales increased 29% compared to last year, driven by continued strong demand in all our global markets. For our Genie business globally, rental rates are improving, used equipment pricing is strong and regional crisis response teamsfleet utilization remains robust which are all positive signs of a recovering aerials rental industry. We are also beginning to see positive indicators for non-residential investment. The utilities market also improved significantly with demand strong across its end-markets of tree care, rental, and investor-owned utilities. We are also experiencing strong growth in our Utilities parts and services business. AWP delivered significantly improved operating margins in the quarter, driven by increased production and aggressively managing all costs. This improvement was despite the current global supply chain dynamics which impacted our operations in AWP in the quarter through reduced efficiency in our manufacturing facilities as well as higher material, logistics and labor costs. We expect end market demand to remain activestrong through the remainder of 2021 and into 2022 as demonstrated by our facilitiesbacklog for the segment, which is up 257% compared to the prior year period. As we have already contracted with AWP customers for nearly all of our remaining 2021 revenue, most of the benefit of customer price increases we have been implementing, as an offset to inflationary pressures will not be realized until 2022.

MP had another excellent quarter with sales up 35% compared to last year driven by strong customer sentiment across all end-markets and geographies. MP has been aggressively managing all elements of cost as end-markets improve resulting in a 14% operating margin. We expect global demand for crushing and screening equipment to continue refining their preparednessto grow. Broad-based economic growth, construction activity and response plansaggregates consumption are the primary market drivers. We are also seeing strong markets for the concrete mixer truck, material handling and environmental businesses. Customer sentiment continues to ensure that they can respond swiftlyimprove and we are encouraged by our backlog for the segment, which is up 253% compared to the prior year period. We expect MP to be impacted by supply chain constraints and inflationary cost pressures, net of price realization, but not to the same extent as local or regional pandemic conditions change.AWP.

In the third quarter of 2021, our largest market remained North America, which represented 55% of our global sales. As compared to the prior year period, our sales were up significantly in every major geography: up 31% in North America, up 33% in Western Europe and up 15% in Asia Pacific.

We continue to focus on cash generation and liquidity. The continuing vigilancestrong, positive free cash flow of $43 million in the three months ended September 30, 2021 demonstrates the hard work of our team members both inside and outside of work and the successful COVID-19 safety measures we implemented early on are doing a good job of protecting our team.

After safety, our top priority is our liquidity.to tightly manage net working capital. As of September 30, 2020,2021, we had approximately $1.1$1.2 billion in available liquidity. We have taken numerous actions so that we can maintainliquidity, with no near-term debt maturities. Our strong liquidity levels going forward. Itposition
31

and cash generation allowed us to prepay an additional $150 million of term loans in October, which is important that allin addition to the $279 million of term loans prepaid earlier in 2021. We are committed to continuing to strengthen Terex’s stakeholders, including customers, suppliers, team membersbalance sheet, while maintaining flexibility to execute on our organic and credit and equity investors have confidence thatinorganic growth plans. We believe we have the operational and financial strength to manage successfully through this period of uncertainty. We believe ourample liquidity continues to be sufficient to meet our business plans. See “Liquidity and Capital Resources” for a detailed description of liquidity and working capital levels, including the primary factors affecting such levels.levels, as well as a reconciliation of net cash provided by (used in) operating activities to free cash flow.

InWe have seen our end-markets remain robust over the first nine monthscourse of 2020, we have made good progress in lowering our costs. Specifically, we have reduced our SG&A costs by over $50 million as compared to the first nine months of 2019, driven by furloughs, team member salary reductions, and deferral of merit increases. We are executing a SG&A cost reduction initiative with a target of SG&A percent to sales for 2021 of 12.5%. In addition to reducing 2021 SG&A percent to sales, this initiative is replacing temporary 2020 cost savings actions with permanent cost reductions. Due to reduced levels of demand, we continued to permanently reduce our workforce levels in the third quarter and in October to align with production levels.we expect continued global end-market strength over the remainder of 2021 and into 2022. However, our full-year outlook is limited as a result of the availability of components from our supply chain. As a result, of actions taken, principally within AWP, during the month of October, we anticipate at least $15 million of severance and restructuring charges in the fourth quarter of 2020. We are continuing to closely partner with suppliers to limit the incoming supply of materials, receiving only what is needed to support current production schedules and avoid significant supply chain disruptions. Given the economic and industry uncertainty posed by the pandemic, we also reduced our 2020 capital spending by 35%, although we continue to invest in growth as demonstrated by our new Utilities manufacturing facility and continuing to expand our Changzhou, China facility.

We are continuing to transition from our “Focus, Simplify, Execute to Win” strategy to its next phase of “Execute, Innovate, Grow.” We are evolving into a leaner organization, with fewer organizational levels, including the elimination and consolidation of management layers. Also, as we right-size our organization, we have been re-evaluatingupdated our outlook for the balance of 2021 and reducing our company-wide footprint. We recognize thatcurrently expect 2021 EPS to win in the marketplace we must have a globally cost competitive manufacturing footprint. We have beenbe between $2.75 and will continue to take the actions necessary to achieve this objective. We also will continue to innovate in our products and technology. We are listening to our customers so our products and services offer the features and benefits which provide value to our customers. We are emphasizing execution driving innovation and growth, specifically focused$2.85, on profitable growth.

Net sales in the third quarter of 2020 stabilized and improved sequentially almost 11% as end markets continue to recover from the lows in the second quarter. AWP net sales improved sequentially by almost 8% in the third quarter from the second quarter, while MP net sales improved almost 18%. Despite the challenging global macroeconomic and industry environment in which we are operating, our disciplined focus on meeting customer demand and tightly managing all costs resulted in significantly improved financial results compared to the second quarter of 2020.

Our AWP segment’s third quarter 2020 net sales were down 29% from the prior year period driven by end markets in the U.S. and Europe remaining significantly below last year’s levels. We continued to aggressively manage production levels to ensure we were not building excess inventory. The market and our aerial products sales in China were robust in the third quarter. Overall, the Utilities market stabilized in the quarter but remained soft in certain customer segments. AWP’s lower operating margin in the quarter compared to the prior year period was driven by lower sales volume. The backlog for AWP was relatively flat, only down 3% from the prior year period, while bookings were up in the third quarter as compared to the prior year period.approximately $3.85 billion.

35

Our MP segment’s third quarter 2020 net sales were down 19% from the prior year period driven by cautious customer sentiment delaying capital purchases of crushing and screening equipment and material handlers. The strong financial performance of the MP segment, achieving an operating margin of 13% demonstrates our MP team has been aggressively managing its cost structure in a challenging market environment. The backlog for MP was only down 8% from the prior year period, while bookings were up in the third quarter as compared to the prior year period.

Throughout the first nine months of 2020 we have been intensely focused on rightsizing our inventory levels to the customer demand environment, especially in our aerial products business. Our focus on net working capital management drove $54.4 million of positive free cash flow generation in the third quarter. We expect to continue to deliver positive free cash flow performance in the fourth quarter, which historically has been our strongest quarter from a free cash generation perspective.

In the third quarter of 2020, our largest market remained North America, which represented approximately 55% of our global sales in continuing operations. As compared to the prior year period, our sales in Asia-Pacific were essentially flat, but were down double digits in every other major geography.

Based on the Company’s current expectations of the markets for the remainder of 2020, the Company continues to anticipate sales in the second half of 2020 to be similar to the first half of the year. Although the full severity and duration of the global pandemic is unknown, it is anticipated that our operating results will continue to be impacted. See Part II, Item 1A. – “Risk Factors” for a detailed description of the risks resulting from COVID-19.
3632

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 incomeIncome (loss) from operations, annualized effective tax rate, and stockholders’Stockholders’ equity to remove the effects of the impact of certain transactions in order to create a measure that is useful to understanding our operating results and the ongoing performance of our underlying business without the impact of unusual items as shown in the tables below. Cash and cash equivalents is adjusted to include amounts recorded as held for sale.

Furthermore, we believe returns on capital deployed in Terex Financial Services (“TFS”)TFS do not represent our primary operations and, therefore, TFS Assets and results from operations have been excluded from the Non-GAAP Measures. 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.

Terex 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 primary businesses, excluding TFS, as opposed to another metric such as return on stockholders’ equity that only incorporates book equity, and is thus a more 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, 20202021 was 3.8%16.7%.

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 '20Jun '20Mar '20Dec '19Sep '19 Sep '21Jun '21Mar '21Dec '20Sep '20
Annualized effective tax rate, as adjusted28.8 %28.8 %28.8 %15.6 % 
Annualized effective tax rate as adjusted(1)
Annualized effective tax rate as adjusted(1)
18.8 %18.8 %18.8 %18.2 % 
Income (loss) from operations as adjustedIncome (loss) from operations as adjusted$34.7 $4.0 $(4.5)$35.3 Income (loss) from operations as adjusted$74.9 $117.3 $55.4 $30.6 
Multiplied by: 1 minus annualized effective tax rateMultiplied by: 1 minus annualized effective tax rate71.2 %71.2 %71.2 %84.4 %Multiplied by: 1 minus annualized effective tax rate81.2 %81.2 %81.2 %81.8 %
Adjusted net operating income (loss) after taxAdjusted net operating income (loss) after tax$24.7 $2.8 $(3.2)$29.8  Adjusted net operating income (loss) after tax$60.8 $95.2 $45.0 $25.0  
DebtDebt$1,174.5 $1,174.5 $1,345.1 $1,175.7 $1,175.6 Debt$893.4 $894.2 $979.2 $1,173.8 $1,174.5 
Less: Cash and cash equivalents as adjustedLess: Cash and cash equivalents as adjusted(512.6)(429.9)(515.0)(540.1)(475.5)Less: Cash and cash equivalents as adjusted(558.2)(547.5)(577.8)(670.1)(512.6)
Debt less Cash and cash equivalents as adjustedDebt less Cash and cash equivalents as adjusted661.9 744.6 830.1 635.6 700.1 Debt less Cash and cash equivalents as adjusted335.2 346.7 401.4 503.7 661.9 
Stockholders’ equity as adjustedStockholders’ equity as adjusted748.2 681.1 651.2 791.4 709.0 Stockholders’ equity as adjusted1,036.1 1,014.1 917.4 805.3 735.4 
Debt less Cash and cash equivalents plus Stockholders’ equity as adjustedDebt less Cash and cash equivalents plus Stockholders’ equity as adjusted$1,410.1 $1,425.7 $1,481.3 $1,427.0 $1,409.1 Debt less Cash and cash equivalents plus Stockholders’ equity as adjusted$1,371.3 $1,360.8 $1,318.8 $1,309.0 $1,397.3 

(1) The annualized effective tax rate for Dec’20 represents the actual full year 2020 effective tax rate.

September 30, 20202021 ROIC3.816.7 %
NOPAT as adjusted (last 4 quarters)$54.1226.0 
Average Debt less Cash and cash equivalents plus Stockholders’ equity as adjusted (5 quarters)$1,430.61,351.4 
3733


Three months ended 9/30/21Three months ended 6/30/21Three months ended 3/31/21Three months ended 12/31/20
Reconciliation of income (loss) from operations:  
Income (loss) from operations as reported$74.2 $122.5 $61.5 $31.6 
Adjustments:
(Income) loss from TFS0.7 (5.2)(6.1)(1.0)
Income (loss) from operations as adjusted$74.9 $117.3 $55.4 $30.6 
As of 9/30/21As of 6/30/21As of 3/31/21As of 12/31/20As of 9/30/20
Reconciliation of Cash and cash equivalents:
Cash and cash equivalents - continuing operations$553.2 $542.2 $572.9 $665.0 $508.3 
Cash and cash equivalents - assets held for sale5.0 5.3 4.9 5.1 4.3 
Cash and cash equivalents as adjusted$558.2 $547.5 $577.8 $670.1 $512.6 
Reconciliation of Stockholders’ equity:
Stockholders’ equity as reported$1,050.7 $1,033.9 $946.1 $921.5 $852.7 
TFS Assets(3.7)(8.3)(21.4)(113.9)(115.8)
Effects of adjustments, net of tax:
(Income) loss from TFS(10.9)(11.5)(7.3)(2.3)(1.5)
Stockholders’ equity as adjusted$1,036.1 $1,014.1 $917.4 $805.3 $735.4 
Three months ended 9/30/20Three months ended 6/30/20Three months ended 3/31/20Three months ended 12/31/19
Reconciliation of income (loss) from operations:  
Income (loss) from operations, as reported$36.5 $7.4 $(7.1)$22.9 
Adjustments:
Deal related— — — — 
Restructuring and related— — — 9.8 
Transformation— — — 3.4 
Other— — — 0.2 
(Income) loss from TFS(1.8)(3.4)2.6 (1.0)
Income (loss) from operations as adjusted$34.7 $4.0 $(4.5)$35.3 
As of 9/30/20As of 6/30/20As of 3/31/20As of 12/31/19As of 9/30/19
Reconciliation of Cash and cash equivalents:
Cash and cash equivalents - continuing operations$508.3 $426.0 $511.3 $535.1 $470.6 
Cash and cash equivalents - assets held for sale4.3 3.9 3.7 5.0 4.9 
Cash and cash equivalents, as adjusted$512.6 $429.9 $515.0 $540.1 $475.5 
Reconciliation of Stockholders’ equity:
Stockholders’ equity as reported$852.7 $800.4 $786.2 $932.3 $866.3 
TFS Assets(115.8)(131.9)(150.0)(154.0)(159.0)
Effects of adjustments, net of tax:
Deal related(0.5)(0.5)(0.5)(0.5)(0.5)
Restructuring and related11.8 11.8 11.8 11.8 3.5 
Transformation5.1 5.1 5.1 5.1 2.2 
Other0.6 0.6 0.6 0.6 (0.4)
(Income) loss from TFS(5.7)(4.4)(2.0)(3.9)(3.1)
Stockholders’ equity as adjusted$748.2 $681.1 $651.2 $791.4 $709.0 
Nine Months Ended
September 30, 2021		Income (loss) from continuing operations before income taxes(Provision for) benefit from income taxesIncome tax rate
Reconciliation of annualized effective tax rate:
As reported$195.5 $(36.0)18.4 %
Effect of adjustments:
Tax related— (0.8)
As adjusted$195.5 $(36.8)18.8 %

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Nine Months Ended
September 30, 2020		Income (loss) from continuing operations before income taxes(Provision for) benefit from income taxesIncome tax rate
Reconciliation of annualized effective tax rate:
As reported$(10.8)$4.9 45.4 %
Effect of adjustments:
Tax related— (1.8)
As adjusted$(10.8)$3.1 28.8 %

Year Ended
December 31, 2019		Income (loss) from continuing operations before income taxes(Provision for) benefit from income taxesIncome tax rate
Reconciliation of annualized effective tax rate:
As reported$247.5 $(37.8)15.3 %
Effect of adjustments:
Deal related(7.5)0.2 
Restructuring and related22.4 (4.7)
Transformation13.7 (2.8)
Other0.6 (0.1)
Tax related— 2.0 
As adjusted$276.7 $(43.2)15.6 %


3934

RESULTS OF OPERATIONS

Three Months Ended September 30, 20202021 Compared with Three Months Ended September 30, 20192020

Consolidated

Three Months Ended September 30,  Three Months Ended September 30, 
20202019  20212020 
 % of
Sales		 % of
Sales		% Change In
Reported Amounts		  % of
Sales		 % of
Sales		% Change In
Reported Amounts
($ amounts in millions)  ($ amounts in millions) 
Net salesNet sales$765.6 — $1,024.6 — (25.3)%Net sales$993.8 — $765.6 — 29.8 %
Gross profitGross profit$146.3 19.1 %$209.6 20.5 %(30.2)%Gross profit$178.5 18.0 %$146.3 19.1 %22.0 %
SG&ASG&A$109.8 14.3 %$123.2 12.0 %(10.9)%SG&A$104.3 10.5 %$109.8 14.3 %(5.0)%
Income (loss) from operations$36.5 4.8 %$86.4 8.4 %(57.8)%
Income from operationsIncome from operations$74.2 7.5 %$36.5 4.8 %103.3 %

Net sales for the three months ended September 30, 2020 decreased $259.02021 increased $228.2 million when compared to the same period in 2019.2020. The decreaseincrease in net sales was primarily due to lowerhigher demand for aerial work platforms, telehandlers and utility equipment in our AWP segment and materials processing equipment, material handlers, telehandlers, utility products and concrete mixer truckstrucks. Changes in our MP segment primarilyforeign exchange rates positively impacted consolidated net sales by approximately $16 million. Customer sentiment in both segments continues to improve as a result of COVID-19 adversely affecting our customers’ sentimentequipment is being utilized and spending, leading to a downturn in our markets.ordered as end-market demand strengthens.

Gross profit for the three months ended September 30, 2020 decreased $63.32021 increased $32.2 million when compared to the same period in 2019.2020. The decreaseincrease was primarily due to lowerhigher sales as a result ofvolume and price realization, partially offset by material, labor and freight cost inflation due to disruptions in the impact of COVID-19.supply chain.

SG&A costs for the three months ended September 30, 20202021 decreased $13.4$5.5 million when compared to the same period in 2019.  The decrease was2020 primarily due to cost control measures,management, including right-sizing our workforce furloughs, salary reductions and reduced discretionary spending, taken across all areas of our business to mitigate the negative impact of COVID-19.business.

Income from operations for the three months ended September 30, 2020 decreased $49.92021 increased $37.7 million when compared to the same period in 2019.2020. The decreaseincrease was primarily due to the negative impact of COVID-19 on our businesses,higher sales volume and price realization, partially offset by lower selling, generalincreases in material, labor and administrative expenses.freight costs.

4035

Aerial Work Platforms

Three Months Ended September 30,  Three Months Ended September 30, 
20202019  20212020 
 % of
Sales		 % of
Sales		% Change In
Reported Amounts		  % of
Sales		 % of
Sales		% Change In
Reported Amounts
($ amounts in millions)  ($ amounts in millions) 
Net salesNet sales$445.0 — $628.2 — (29.2)%Net sales$572.5 — $445.0 — 28.7 %
Income (loss) from operations$13.3 3.0 %$45.9 7.3 %(71.0)%
Income from operationsIncome from operations$34.9 6.1 %$13.3 3.0 %162.4 %

Net sales for the AWP segment for the three months ended September 30, 2020 decreased $183.22021 increased $127.5 million when compared to the same period in 20192020 primarily due to lowerhigher demand driven by fleet replacement and end-market growth for aerial work platforms in all major geographies, except Asia-Pacific due to strong demand in China, and telehandlers and utility equipment in North America as a result of COVID-19 adversely affecting our customers’ sentiment and spending, leading to a downturnWestern Europe and utility products in our markets.North America.

Income (loss) from operations for the three months ended September 30, 2020 decreased $32.62021 increased $21.6 million when compared to the same period in 20192020 primarily due to lowerhigher sales volume as a result of the impact of COVID-19,and price realization, partially offset by reduced spending for selling, generalmaterial, labor and administrative expenses.freight cost inflation due to disruptions in the supply chain.

Materials Processing

Three Months Ended September 30,  Three Months Ended September 30, 
20202019  20212020 
 % of
Sales		 % of
Sales		% Change In
Reported Amounts		  % of
Sales		 % of
Sales		% Change In
Reported Amounts
($ amounts in millions)  ($ amounts in millions) 
Net salesNet sales$311.3 — $382.7 — (18.7)%Net sales$418.7 — $311.3 — 34.5 %
Income (loss) from operations$40.3 12.9 %$58.4 15.3 %(31.0)%
Income from operationsIncome from operations$57.1 13.6 %$40.3 12.9 %41.7 %

Net sales for the MP segment for the three months ended September 30, 2020 decreased $71.42021 increased $107.4 million when compared to the same period in 20192020 primarily due to decreasedrobust end-market demand for materials processing equipment in Asia-Pacific and North America, material handlers in all major geographiesWestern Europe and North America, cranes in Australia and concrete mixer trucks in North America as a result of COVID-19 adversely affecting our customers’ sentiment and spending, leading to a downturn in our markets.America.

Income from operations for the three months ended September 30, 2020 decreased $18.12021 increased $16.8 million when compared to the same period in 20192020 primarily due to lowerhigher sales volume as a result of the impact of COVID-19,and price realization, partially offset by reduced spending for selling, generalmaterial, labor and administrative expenses.freight cost inflation due to disruptions in the supply chain.

4136

Corporate and Other / Eliminations

Three Months Ended September 30,  Three Months Ended September 30, 
20202019  20212020 
 % of
Sales		 % of
Sales		% Change In
Reported Amounts		  % of
Sales		 % of
Sales		% Change In
Reported Amounts
($ amounts in millions)  ($ amounts in millions) 
Net salesNet sales$9.3 — $13.7 — (32.1)%Net sales$2.6 — $9.3 — (72.0)%
Income (loss) from operations$(17.1)*$(17.9)*4.5 %
Loss from operationsLoss from operations$(17.8)*$(17.1)*(4.1)%
* - Not a meaningful percentage

Net sales include on-book financing activities of TFS, governmental sales and elimination of intercompany sales activity among segments. The net sales decrease is primarily attributable to lower TFS activityrevenue, partially offset by lower intercompany sales eliminations.increased governmental sales.

Loss from operations for the three months ended September 30, 2020 decreased $0.82021 increased $0.7 million when compared to the same period in 20192020.The increase in operating loss is primarily due to lower revenue, partially offset by SG&A cost management.

Interest Expense, Net of Interest Income

During the three months ended September 30, 2020,2021, our interest expense, net of interest income, was $15.0$11.7 million, or $5.1$3.3 million lower than the same period in the prior year due to a decrease in average borrowings and lower rates.

Other Income (Expense) – Net

Other income (expense) – net for the three months ended September 30, 20202021 was an expense of $0.6$1.1 million, or a $2.2$0.5 million increase in expense when compared to the same period in the prior year. The increase was primarily due primarily to mark-to-marketforeign exchange translation losses recorded on an equity investment in the current year period compared to gains recorded in the prior year period and lower foreign exchange translation gains in the current year period, compared to the 2019 period.

Income Taxes

During the three months ended September 30, 2020,2021, we recognized income tax expense of $13.9 million on income of $61.4 million, an effective tax rate of 22.6%, as compared to income tax benefit of $1.1 million on income of $20.9 million, an effective tax rate of (5.3)%, as compared to income tax expense of $15.5 million on income of $67.9 million, an effective tax rate of 22.8%, for the three months ended September 30, 2019.2020. The lowerhigher effective tax rate for the three months ended September 30, 2021 when compared with the three months ended September 30, 2020 is primarily due to geographic mix andU.S. tax benefits fromon foreign income, the 2020 benefit of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and changes in tax regulations, partially offset by U.S. tax on foreign income, when compared with the three months ended September 30, 2019.

Income (Loss) from Discontinued Operations - net of taxes

Loss from discontinued operations - net of tax for the three months ended September 30, 2020 was $0.1 million compared to loss from discontinued operations - net of tax of $10.1 million for the same period in the prior year, a reduction of $10.0 million. The loss in the prior year was primarily due to the negative performance of our mobile cranes business prior to disposition.geographic mix.

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

During the three months ended September 30, 2021 and 2020, we recognized a lossgain (loss) on disposition of discontinued operations - net of tax of $16.1$0.6 million and $(16.1) million, respectively. The loss in the prior year period primarily related to a settlement with Tadano on cash, debt, working capital and certain other items related to theour prior disposition of Demag. During the three months ended September 30, 2019, we recognized a loss on disposition of discontinued operations - net of tax of $20.9 million primarily related to the disposition of Demag.

our mobile cranes business.
4237




Nine Months Ended September 30, 20202021 Compared with Nine Months Ended September 30, 20192020

Consolidated

Nine Months Ended September 30,  Nine Months Ended September 30, 
20202019  20212020 
 % of
Sales		 % of
Sales		% Change In
Reported Amounts		  % of
Sales		 % of
Sales		% Change In
Reported Amounts
($ amounts in millions)  ($ amounts in millions) 
Net salesNet sales$2,289.7 — $3,468.1 — (34.0)%Net sales$2,896.7 — $2,289.7 — 26.5 %
Gross profitGross profit$390.1 17.0 %$719.2 20.7 %(45.8)%Gross profit$585.5 20.2 %$390.1 17.0 %50.1 %
SG&ASG&A$353.3 15.4 %$407.1 11.7 %(13.2)%SG&A$327.3 11.3 %$353.3 15.4 %(7.4)%
Income (loss) from operations$36.8 1.6 %$312.1 9.0 %(88.2)%
Income from operationsIncome from operations$258.2 8.9 %$36.8 1.6 %601.6 %

Net sales for the nine months ended September 30, 2020 decreased $1,178.42021 increased $607.0 million when compared to the same period in 2019.2020. The decreaseincrease in net sales was primarily due to lowerhigher demand for aerial work platforms, telehandlers and utility equipment in our AWP segment and materials processing equipment, material handlers, cranes and concrete mixer trucks and cranes. Changes in our MP segment primarilyforeign exchange rates positively impacted consolidated net sales by approximately $99 million. Customer sentiment in both segments continues to improve as a result of COVID-19 adversely affecting our customers’ sentimentequipment is being utilized and spending, leading to a downturn in our markets.ordered as end-market demand strengthens.

Gross profit for the nine months ended September 30, 2020 decreased $329.12021 increased $195.4 million when compared to the same period in 2019.2020. The decreaseincrease was primarily due to lowerhigher sales volume, improved manufacturing efficiency, price realization and temporary manufacturing shutdowns as a result of the positive impact of COVID-19.changes in foreign exchange rates, partially offset by material, labor and freight cost inflation due to disruptions in the supply chain.

SG&A costs for the nine months ended September 30, 20202021 decreased $53.8$26.0 million when compared to the same period in 2019.  The decrease was2020 primarily due to cost control measures,management, including right-sizing our workforce furloughs, salary reductions and reduced discretionary spending, taken across all areas of our business to mitigate the negative impact of COVID-19.business.

Income from operations for the nine months ended September 30, 2020 decreased $275.32021 increased $221.4 million when compared to the same period in 2019.2020. The decreaseincrease was primarily due to higher sales volume, improved manufacturing efficiency, SG&A cost management, price realization and the negativepositive impact of COVID-19 on our businesses,changes in foreign exchange rates, partially offset by lower selling, generalincreases in material, labor and administrative expenses.freight costs.

38


Aerial Work Platforms

 Nine Months Ended September 30, 
 20212020 
  % of
Sales		 % of
Sales		% Change In
Reported Amounts
 ($ amounts in millions) 
Net sales$1,644.4 — $1,370.6 — 20.0 %
Income from operations$126.7 7.7 %$2.4 0.2 %*
 Nine Months Ended September 30, 
 20202019 
  % of
Sales		 % of
Sales		% Change In
Reported Amounts
 ($ amounts in millions) 
Net sales$1,370.6 — $2,226.5 — (38.4)%
Income (loss) from operations$2.4 0.2 %$191.8 8.6 %(98.7)%
* Not a meaningful percentage

Net sales for the AWP segment for the nine months ended September 30, 2020 decreased $855.92021 increased $273.8 million when compared to the same period in 20192020 primarily due to lowerhigher demand driven by fleet replacement and end-market growth for aerial work platforms in all major geographies and telehandlers and utility equipment in North America, as a resultWestern Europe and China. Net sales were positively impacted by the effects of COVID-19 adversely affecting our customers’ sentiment and spending, leading to a downturn in our markets.foreign exchange rate changes of approximately $46 million.

Income from operations for the nine months ended September 30, 2020 decreased $189.42021 increased $124.3 million when compared to the same period in 20192020 primarily due to lowerhigher sales volume, improved manufacturing efficiency, price realization, SG&A cost management and temporary manufacturing shutdowns as a resultthe positive effects of the impact of COVID-19,foreign exchange rate changes, partially offset by reduced spending for selling, generalmaterial, labor and administrative expenses.

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freight cost inflation due to disruptions in the supply chain.

Materials Processing

Nine Months Ended September 30,  Nine Months Ended September 30, 
20202019  20212020 
 % of
Sales		 % of
Sales		% Change In
Reported Amounts		  % of
Sales		 % of
Sales		% Change In
Reported Amounts
($ amounts in millions)  ($ amounts in millions) 
Net salesNet sales$890.5 — $1,224.1 — (27.3)%Net sales$1,237.7 — $890.5 — 39.0 %
Income (loss) from operations$88.7 10.0 %$183.2 15.0 %(51.6)%
Income from operationsIncome from operations$178.3 14.4 %$88.7 10.0 %101.0 %

Net sales for the MP segment for the nine months ended September 30, 2020 decreased $333.62021 increased $347.2 million when compared to the same period in 20192020 primarily due to decreasedrobust end-market demand for materials processing equipment material handlers and cranes in all major geographies, material handlers in North America and Western Europe, concrete mixer trucks in North America as a resultand cranes in Australia. Net sales were positively impacted by the effects of COVID-19 adversely affecting our customers’ sentiment and spending, leading to a downturn in our markets.foreign exchange rate changes of approximately $54 million.

Income from operations for the nine months ended September 30, 2020 decreased $94.52021 increased $89.6 million when compared to the same period in 20192020 primarily due to lowerhigher sales volume, improved manufacturing efficiency, price realization and temporary manufacturing shutdowns as a resultthe positive effects of the impact of COVID-19,foreign exchange rate changes, partially offset by reduced spending for selling, generalmaterial, labor and administrative expenses.freight cost inflation due to disruptions in the supply chain.


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Corporate and Other / Eliminations

Nine Months Ended September 30,  Nine Months Ended September 30, 
20202019  20212020 
 % of
Sales		 % of
Sales		% Change In
Reported Amounts		  % of
Sales		 % of
Sales		% Change In
Reported Amounts
($ amounts in millions)  ($ amounts in millions) 
Net salesNet sales$28.6 — $17.5 — 63.4 %Net sales$14.6 — $28.6 — (49.0)%
Income (loss) from operations$(54.3)*$(62.9)*13.7 %
Loss from operationsLoss from operations$(46.8)*$(54.3)*13.8 %
* - Not a meaningful percentage

Net sales include on-book financing activities of TFS, governmental sales and elimination of intercompany sales activity among segments. The net sales increasedecrease is primarily attributable to lower TFS revenue, partially offset by lower intercompany sales eliminations.

Loss from operations for the nine months ended September 30, 20202021 decreased $8.6$7.5 million when compared to the same period in 2019.2020. The decrease in operating loss is primarily due to lower general and administrative spending and reduced personnel expense due to temporary furloughs related to COVID-19, partially offset by thea gain on the sale of an investmentthe on-book finance receivables, SG&A cost management and a reserve release in 2019,the current period as well as a specific finance receivable reserve for one customer and change in allocation of corporate costs.the prior year period, partially offset by lower revenue.

Interest Expense, Net of Interest Income

During the nine months ended September 30, 2020,2021, our interest expense, net of interest income, was $47.5$37.7 million, or $16.7$9.8 million lower than the same period in the prior year due to a decrease in average borrowings and lower rates.

44Loss 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, 20202021 was an expenseincome of $0.1$2.7 million, or a $2.8 million decreaseincrease in expenseincome when compared to the same period in the prior year. The decreaseincrease in expenseincome was due to foreign exchange translationmark-to-market gains recorded on an equity investment in the current year period compared to losses recorded in the 2019prior year period, andpartially offset by a positive post-closing adjustment in 2020 related to the settlement of our U.S. defined benefit pension plan in 2018, partially offset by mark-to-market losses recorded on an equity investment in the current year period compared to gains recorded in the prior year period.2018.

Income Taxes

During the nine months ended September 30, 2020,2021, we recognized income tax expense of $36.0 million on income of $195.5 million, an effective tax rate of 18.4%, as compared to income tax benefit of $4.9 million on a loss of $10.8 million, an effective tax rate of 45.4%, as compared to income tax expense of $53.8 million on income of $245.0 million, an effective tax rate of 22.0%, for the nine months ended September 30, 2019.2020. The higherlower effective tax rate for the nine months ended September 30, 2021 when compared to the nine months ended September 30, 2020 is primarily due to geographic mix and tax benefits fromthe 2020 benefit of the CARES Act, and changes in tax regulations, partially offset by U.S. tax on foreign income, when compared to the nine months ended September 30, 2019.income.

Income (Loss) from Discontinued Operations

Loss from discontinued operations - net of tax for the nine months ended September 30, 2020 was $1.3 million comparedrelated to loss from discontinued operations - net of tax of $151.8 million for the same period in the prior year. The loss in the prior period was primarily from recognition of a pre-tax charge of approximately $82 million ($82 million after-tax) to write-down the mobile cranes disposal group to fair value, less costs to sell and the negative performance of our mobile cranes business prior to disposition.business.

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

During the nine months ended September 30, 2021 and 2020, we recognized a lossgain (loss) on disposition of discontinued operations - net of tax of $21.1$2.6 million and $(21.1) million, respectively. The gain in the current year period primarily related to our prior dispositions of our mobile cranes and MHPS businesses. The loss in the prior year primarily related to a settlement with Tadano on cash, debt, working capital and certain other items related to the prior disposition of Demag. During the nine months ended September 30, 2019, we recognized a loss on disposition of discontinued operations - net of tax of $9.5 million primarily related to the disposition of Demag, partially offset by a gain on the sale of our boom truck, truck crane and crossover product lines and related inventory previously manufactured in our Oklahoma City facility.mobile cranes business.
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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, 2020,2021, we had cash and cash equivalents of $512.6$558.2 million and undrawn availability under our revolving line of credit of $600 million, giving us total liquidity of approximately $1.1$1.2 billion. DuringCash generated from operations during the nine months ended September 30, 2021, the expiration of a $150 million minimum liquidity requirement and proceeds of approximately $99 million from the sale of finance receivables allowed us to maintain liquidity at a level consistent with December 31, 2020 our liquidity decreasedwhile reducing outstanding debt by approximately $28$282 million from December 31, 2019.and investing in our strategic priorities.

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 20232024 and we have increased our focus on internal cash flow generation. Our actions to maintain liquidity in viewinclude disciplined management of current conditions in the economy include reducing costs and working capital, suspending our share repurchase program and suspending making further dividend payments in 2020. We also amended our revolving credit facility in April 2020. We believe the amendment provides us with the flexibility needed to manage the Company during these challenging times.capital. We believe these measures in conjunction with our actions to delay certain capital spending projects, 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.months from the date of issuance of this quarterly report. See Part II,I, Item 1A. – “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020 for a detailed description of the risks resulting from our debt and our ability to generate sufficient cash flow to operate our business.

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Our ability to generate cash from operations is subject to numerous factors, including the following:

•The duration and depth of the global economic weaknessuncertainty resulting from COVID-19.
•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.
•As our sales change, the amount of working capital needed to support our business may change.
•Our suppliers extend payment terms to us primarily based on our overall credit rating. DeclinesDeterioration 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 United StatesU.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 cost.expense. Incremental cash repatriated to the U.S. would not be expected to result in material foreign, andFederal or state tax cost. We will continue to seek opportunities to tax-efficiently mobilize and redeploy funds.

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We had positive free cash flow of $54.4$42.5 million and $12.7$183.4 million for the three and nine months ended September 30, 2020,2021, respectively.

The following table reconciles Netnet cash provided by (used in) operating activities to free cash flow (in millions):
Three Months Ended
9/30/2020		Nine Months Ended
9/30/2020
Net cash provided by (used in) operating activities$76.6 $88.9 
Increase (decrease) in TFS assets(16.1)(38.2)
Capital expenditures, net of proceeds from sale of capital assets (1)
(6.1)(38.0)
Free cash flow$54.4 $12.7 
Three Months Ended
9/30/2021		Nine Months Ended
9/30/2021
Net cash provided by (used in) operating activities$54.9 $324.1 
Increase (decrease) in TFS assets(4.6)(110.2)
Capital expenditures, net of proceeds from sale of capital assets(7.8)(30.5)
Free cash flow$42.5 $183.4 

(1)     Includes $4.4 million and $13.4 million of proceeds from sale of capital assets within Proceeds (payments) from the disposition of discontinued operations in the Condensed Consolidated Statement of Cash Flows for the three and nine months ended September 30, 2020, respectively.

Pursuant to terms of our trade accounts receivable factoring arrangements, during the nine months ended September 30, 2020,2021, we sold, without material recourse, approximately $319$359 million of trade accounts receivable to enhance liquidity. During the nine months ended September 30, 2020,2021, we also sold approximately $67$96 million of sales-type leases and commercial loans. We continue to maintain strong liquidity levels resulting in less utilization of low-cost funding arrangements.

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Working capital as a percent of trailing three month annualized net sales was 22.4%17.4% at September 30, 2020.2021.

The following tables show the calculation of our working capital in continuing operations and trailing three months annualized sales as of September 30, 20202021 (in millions):
Three Months Ended
9/30/20202021
Net Sales$765.6993.8 
x4 
Trailing Three Month Annualized Net Sales$3,062.43,975.2 

As of 9/30/2021
Inventories$635.5747.7 
Trade Receivables403.2513.4 
Trade Accounts Payable(337.8)(548.7)
Customer Advances(14.6)(19.6)
Working Capital$686.3692.8 

On January 31, 2017, we entered into a credit agreement. The credit agreement (as amended, the “2017 Credit Agreement”). The 2017 Credit Agreement contains a $400 million senior secured term loan (the “Original Term Loan”). The Original Term Loan portion of the 2017 Credit Agreement bears interest at a rate of London Interbank Offered Rate (“LIBOR”) plus 2.00% with a 0.75% LIBOR floor. On March 7, 2019, we entered into an Incremental Assumption Agreement and Amendment No. 3 (“Amendment No. 3”) to the 2017 Credit Agreement. Amendment No. 3 provided us with an additional term loan (the “2019 Term Loan”) under the 2017 Credit Agreement in the amount of $200 million. The 2019 Term Loan portion of the 2017 Credit Agreement bears interest at a rate of LIBOR plus 2.75% with a 0.75% LIBOR floor (the Original Term Loan together with 2019 Term Loan comprise the “Term Loans” portion of the 2017 Credit Agreement). Net proceeds from the 2019 Term Loan were used to reduce borrowings under the revolving line of credit. On April 23, 2020, we entered into a Loan Modification Agreement and Amendment No. 4 (“Amendment No. 4”) to the 2017 Credit Agreement. The 2017 Credit Agreement containsincluded (i) a $600 million revolving line of credit (the “Revolver”). The 2017 Credit Agreement allows unlimited incremental commitments, which may be extended at the option of 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 $150 million through 2021 ($300 million thereafter) requiring the Company to satisfy a(ii) senior secured leverage ratio contained interm loans totaling $600 million with a maturity date of January 31, 2024 (the “Term Loans”). On April 1, 2021, we entered into an amendment and restatement of the 2017 Credit Agreement. Interest rates charged undercredit agreement (as amended and restated, the Revolver in“Credit Agreement”) which included the 2017 Credit Agreement are subjectfollowing principal changes to adjustment based on our consolidated leverage ratio. Amendment No. 4 extendedthe original credit agreement: (i) extension of the term of the Revolver to expire on January 31, 2023. As a resultApril 1, 2026, which maturity will spring forward to November 1, 2023 if the $400 million senior secured term loan outstanding is not repaid or the maturity date is not extended, (ii) reinstatement of Amendment No. 4, duringfinancial covenants that were waived in 2020, we are only subject to a minimum liquidity covenant(iii) decrease in the interest rate on the drawn Revolver by 25 basis points and then during 2021 we are subject to a maximum secured leverage covenant that is only applicable if our borrowings under(iv) certain other technical changes, including additional language regarding the Revolver are greater than 30%potential cessation of the total revolving credit commitments.London Interbank Offered Rate (“LIBOR”) as a benchmark rate. See Note KJ - “Long-Term Obligations,”Obligations” in our Condensed Consolidated Financial Statements for additional information concerningregarding the 2017 Credit Agreement and Amendment No. 4.Agreement.

Borrowings under the 2017 Credit Agreement at September 30, 20202021 were $581.3$298.4 million, net of discount, on our Term Loans. During the nine months ended September 30, 2021, we prepaid approximately $279 million of our Term Loans prior to their maturity date to reduce our outstanding debt and lower our leverage. In October 2021, we prepaid an additional $150 million of our Term Loans prior to their maturity date to reduce our outstanding debt and lower our leverage. At September 30, 2020,2021, the weighted average interest rate was 3.00%2.75% on our Term Loans. There were no amounts outstanding on the Term Loans portion of the 2017 Credit Agreement. We had no revolving credit amounts outstandingRevolver as of September 30, 2020.2021.

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In April 2021, we 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, were used to fund redemption and discharge of the $600.0 million aggregate principal amount of Senior Notes Due 2025 (“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. See Note J - “Long-Term Obligations” in our Condensed Consolidated Financial Statements for additional information regarding the 5% Notes and 5-5/8% Notes.

We manage our interest rate risk by maintaining the ratio of fixed and floating rate debt, including use of interest rate derivatives when appropriate. Over the long term, we believe this mix will produce lower interest cost than a purely fixed rate mix while reducing interest rate risk.

Our investment in TFS financial services assets was approximately $116 million, net at September 30, 2020. 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. In February 2021, we transferred finance receivables of $89.7 million to a U.S. regional bank, which qualified for sales treatment under ASC 860. We received $99.4 million cash proceeds from the sale and recognized a net gain of $5.6 million.

On May 25, 2021, we acquired assets to facilitate manufacturing of certain MP products in China for total cash consideration of approximately $17 million.

On July 6, 2021, we acquired a manufacturer of heavy duty aggregate and recycling trommels, apron feeders and conveyor systems based in the Republic of Ireland for total cash consideration of approximately $19 million. This acquisition supports our strategy to expand our material processing offerings in the crushing, screening and environmental industries, with products that complement our existing products.

In July 2018, our Board of Directors authorized the repurchase up to an additional $300 million of our outstanding shares of common stock. During the nine months ended September 30, 2020,2021, we repurchased 2.5 milliondid not repurchase shares for $54.6 million under this authorization leaving approximately $141 million available for repurchase under this program.

In February 2021, our Board of Directors reinstated our quarterly dividend for 2021 and declared a dividend of $0.12 per share in the first, quartersecond and third quarters of 2020,2021, which was paid to the Company’s shareholders. In October 2021, our Board of Directors declared a dividend of $0.12 per share, which waswill be paid to our shareholders. In April 2020, we announced that we have suspended further share repurchases and dividend payments for the remainder of 2020.
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Company’s shareholders on December 17, 2021.

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 (“SEC”).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 by operations for the nine months ended September 30, 20202021 totaled $88.9$324.1 million, compared to cash provided by operations of $78.4$88.9 million for the nine months ended September 30, 2019.2020. The increase in cash provided by operations was primarily driven by improved working capital efficiency, offset by decreasedincreased operating profitability.profitability and proceeds from the sale of finance receivables.

Cash used in investing activities for the nine months ended September 30, 20202021 was $40.0$73.4 million, compared to $128.5$40.0 million of cash provided by investing activities for the nine months ended September 30, 2019. Cash2020. The increase in cash used in investing activities in the current period relates primarily to capital expenditures. Cash provided by investing activitiescash used in the prior period was primarily due to proceeds received from the sale of Demagacquisition and ASV shares,investment activity, partially offset by lower capital expenditures.

Cash used in financing activities was $348.7 million for the nine months ended September 30, 2021, compared to $80.8 million for the nine months ended September 30, 2020, compared to $85.5 million of cash used in financing activities for the nine months ended September 30, 2019.2020. The decreaseincrease in cash used in financing activities was primarily due to higher net debt repayments, and dividend payments and debt extinguishment costs in the priorcurrent year, partially offset by higher share repurchases in the currentprior year.

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OFF-BALANCE SHEET ARRANGEMENTS

Guarantees

Our customers from time to time,may fund the acquisition of our equipment through third-party finance companies. In certain instances, we may provide a credit guarantee to the finance company by which we agree to make payments to the finance company should the customer default. Our maximum liability is generally limited to our customer’s remaining payments due to the finance company at the time of default. InThe expectation of losses or non-performance is assessed based on consideration of historical customer reviews, current financial conditions, reasonable and supportable forecasts, equipment collateral value and other factors. Reserves are recorded for expected loss over the eventcontractual period of a customer default, we are generally able to recover and dispose of the equipment at a minimal loss, if any, to us.

We issue, from time to time, residual value guarantees under sales-type leases.  A residual value guarantee involves a guarantee that a piece of equipment will have a minimum fair market value at a future date if certain conditions are met by the customer. We are generally able to mitigate some risk associated with these guarantees because maturity of guarantees is staggered, which limits the amount of used equipment entering the marketplace at any one time.exposure.

There can be no assurance that our historical credit default 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 marketseffect at the time of loss.

See Note ML – “Litigation and Contingencies” in the Notes to the 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 and Australian Dollar. We enter into foreign exchange contractspurchase hedging instruments to manage variability of future cash flows associated with recognized assets or liabilities or forecasted transactions due to changing currency exchange rates.  Primary currencies to which we are exposed are the Euro, British Pound and Australian Dollar.

We manage our exposure to interest ratesrate risk by incurringestablishing a mix of indebtedness bearing interest at both floating and fixed rates at inception and maintaining themaintain a ratio of floating and fixed rates on this mix of indebtedness using interest rate derivatives when necessary.

48

See Note JI – “Derivative Financial Instruments” in the Notes to the Condensed Consolidated Financial Statements for further information aboutregarding 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 ML – “Litigation and Contingencies” in the Notes to the Condensed Consolidated Financial Statements for more information concerningregarding 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.

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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 andcompliance. 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 lost time 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 JI – “Derivative Financial Instruments” in our Condensed Consolidated Financial Statements.

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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 and Australian dollar.Dollar. 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 currency exchange rates to the U.S. dollar, fluctuations in currencyforeign exchange rates may have an impact on the accuracy of our financial guidance. Such fluctuations in foreign currencyexchange 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 note that departure of the U.K. from the E.U. may impact the value of the British Pound as compared to the U.S. dollar and other currencies as the U.K. negotiates trade agreements with the E.U. 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, 2020,2021, we performed a sensitivity analysis on the impact that aggregate changes in the translation effect of foreign currency 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, 20202021 would have had approximately a $12$23 million impact on the translation effect of foreign currency 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 LIBOR and the U.S. prime rate and LIBOR.rate. 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, 2020, approximately 24%2021, substantially all of our debt was floatingfixed rate debt through the use of interest rate derivatives and the weighted average interest rate for allof our debt was 4.27%4.32%.

At September 30, 2020, we performed a sensitivity analysis for our derivatives and other 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, 2020 would have increased interest expense by $0.9 million for the nine months ended September 30, 2020.
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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. During 2021, our manufacturing operations were 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-related production downtime at certain component suppliers. We designhave designed and implementimplemented 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. One key elementHowever, we anticipate that we will continue to be adversely affected by material shortages and production delays through the remainder of our strategy is to focus on strategic sourcing to gain efficiencies using our global purchasing power.2021 and into 2022.

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Principal materials and components used in our various manufacturing processes include steel, castings, engines, tires, hydraulics, cylinders, drive trains, electric controls and motors, and a variety of other commodities and fabricated or manufactured items. Increases in the cost of these materials and components may affectinput costs, primarily steel, has adversely affected our financial performance. If we are not able to recover increased raw material or component costs from our customers, our margins could be adversely affected. Overall material input costs were generally stable in the first nine months of 2020. However, Section 301Additionally, tariffs on certain Chinese origin goods continuedcontinue to put pressure on input costs. We continue to benefit from temporary tariff exclusions on certain categories of goods from China. Some of these exclusionscosts, which we have been extended byable to partially mitigate through the U.S. Government into 2021, while other exclusions have either not been extendedGovernment’s duty draw-back mechanism.  If we are unable to recover a substantial portion of increased costs from our customers and suppliers or are due to expire later this year. The eliminationthrough duty draw-back, our business or results of tariff exclusions has an adverse impact on our material costs. We continue to utilize the duty drawback mechanism to offset some of the impact of these tariffs.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.


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 Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within time periods specified in the SEC’sSecurities 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, 2020,2021, 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, 2020.2021.

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, 20202021 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.

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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 riskrisks 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 position.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 concerningregarding 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 ML - “Litigation and Contingencies,” in the Notes to the 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, 2019,2020, except for the risk factors updated below:

The novel coronavirus pandemic has adversely impacted,We are dependent upon third-party suppliers, making us vulnerable to supply shortages and is expectedprice increases.

We obtain materials and manufactured components from third-party suppliers. 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 continueprovide us with necessary materials and components may delay production at a number of our manufacturing locations, or may require us to adversely impact,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,condition.

Principal materials and the ultimate impact will depend on future developments, whichcomponents used in our various manufacturing processes include steel, castings, engines, tires, hydraulics, cylinders, drive trains, electric controls and motors, and a variety of other commodities and fabricated or manufactured items. Increases in input costs and freight due to price inflation and global supply chain disruptions may adversely affect our financial performance. If we are highly uncertainunable to recover a substantial portion of increased costs from our customers and cannotsuppliers or through duty draw-back, our business or results of operation could be predicted.adversely affected.

In March 2020, the World Health Organization declared COVID-19 a global pandemicaddition, we purchase material and governmental authorities around the world implemented shelter-in-place orders, quarantines, social distancing requirements, travel bans and other similar governmental restrictions to reduce the spread of COVID-19. This negatively impacted the global economy, created significant volatility and disruption of financial markets, and caused disruptionsservices from our suppliers on terms extended based on our overall credit rating. Deterioration in our supply chainscredit rating may impact suppliers’ willingness to extend terms and logistics. It also adversely affectedin turn accelerate cash requirements of our customers’ sentiment and spending, leading to a downturn in our markets. Additionally, COVID-19 adversely affected our workforce, with temporary factory closures, slowdowns, restrictions on travel and transports, among other effects, thereby negatively impacting our operations. We reduced our workforce to focus only on critical activities and a significant percentage of global team members continue to work remotely, which can introduce operational and cybersecurity risks. We developed and implemented new health and safety protocols, business continuity plans and different scenario plans in an effort to try to mitigate the negative impact of COVID-19. Our management continues to remain focused on mitigating the impact of COVID-19, which has required a large investment of time and resources, which may delay other value-add initiatives.business.

It is not possibleChanges in import/export regulatory regimes, imposition of tariffs, escalation of global trade conflicts and unfairly traded imports, particularly from China, could continue to accurately predict with any degree of certainty the impact COVID-19 will have on our operations going forward as the situation continues to remain fluid. Despite our efforts and numerous measures taken to manage the impacts of COVID-19, the full degree and extent to which it will ultimately affect our operational and financial performance will depend on uncertain future developments and factors beyond our control, including, but not limited to, the pace of the continued spread of the pandemic, the severity and duration of the pandemic, including any resurgences, second waves or spikes in areas where we, our suppliers or our customers operate, any governmental regulations imposed in response and the identification and distribution of any vaccine or cure. We expect that any significant further or prolonged deterioration in the global economic conditions and disruptions to our global supply chain would adverselynegatively impact our operations, business results and financial condition. Such factors could also continue to adversely affect our customers’ financial condition, resulting in further reduced spending for our products and services. The longer the pandemic continues, the more likely that more of the foregoing risks may be realized.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 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 COVID-19 may also continueinflationary 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 exacerbate other risks discussed in Item 1A. Risk Factors inhigher 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 Annual Report on Form 10-Kproducts more expensive for year ended December 31, 2019, any of which could have a material effect on us. This situation continues to evolve and additional impacts may arise that we are not aware of currently.

our Chinese customers.
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Our business is affected by
We cannot predict the cyclical natureextent to which the new U.S. administration or other countries will impose new or additional quotas, duties, tariffs, taxes or other similar restrictions upon the import or export of marketsour products in the future, nor can we serve.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.

Demand for our products tendsWhile we have been able to be cyclical and is affected by the general strengthmitigate a portion of the economies in whicheffects of tariffs through the U.S. government’s duty draw-back mechanism and from tariff exclusions, all tariff exclusions have expired. There is potential that some tariff exclusions may be reinstated, although this is uncertain. If we sell our products, prevailing interest rates, residential and non-residential construction spending, capital expenditure allocationsare unable to recover a substantial portion of increased costs from our customers and other factors. Adverse economic conditions, including a decrease in commodity prices, the recent deterioration in the worldwide financial markets and decreasing global economic activity, have caused and may continue to causesuppliers or through duty draw-back, our customers to foregobusiness or postpone new purchases. If our customers are not successful in generating sufficient revenue or are precluded from securing financing, they may notresults of operations could be able to pay, or may delay payment of, receivables that are owed to us. Any inability of current and/or potential customers to pay us for our products will adversely affect our earnings and cash flow.affected.

Our sales dependThe Coalition of American Manufacturers of Mobile Access Equipment, an alliance of mobile access equipment producers in part uponthe U.S. of which we are a member, is pursuing anti-dumping and countervailing cases against unfairly traded Chinese imports of mobile access equipment. While the U.S. Department of Commerce has issued in 2021 a countervailing and preliminary anti-dumping duty rate on mobile access equipment from China, these duties may not be enough to offset the subsidies provided by the Chinese government to Chinese mobile access equipment manufacturers. If additional duties are not imposed on imports of Chinese mobile access equipment and/or the duties are not finalized through affirmative final determinations, we may continue to operate at a disadvantage to Chinese manufacturers. This could result in reduced demand for our customers’ replacement or repair cycles, which are impacted in part by historical purchase levels. We are in a period in which global economic conditions and key commodity prices have rapidly and significantly declined, and if economic conditionsproducts in the U.S. and other key markets deteriorate further or do not show improvement, we may experience further negative impacts to our net sales, financial condition, profitability and cash flows, which could result in the need for us to record impairments. We have taken a number of steps, and will continually review our operations, to reduce our costs. There can be no assurance, however, that these steps will mitigate the negative impact of the recent deterioration in economic conditions.

Our financial results could be adversely impacted by the U.K.’s departure from the E.U.

Uncertainty related to the withdrawal of the U.K. from the E.U. commonly referred to as “Brexit,” could negatively impact the global economy, particularly many important European economies. While the U.K. officially left the E.U. on January 31, 2020, the U.K. has entered into a transition period during which period of time the U.K.’s trading relationship with the E.U. will remain largely the same while the U.K. negotiates trade and other agreements with the E.U. and other countries. The terms and eventual date of any agreement between the U.K and E.U. remain highly uncertain. Given the lack of comparable precedent, it is not certain what financial, trade and legal implications the withdrawal of the U.K. from the E.U. will ultimately have on us, particularly for our MP segment which has significant manufacturing facilities in Northern Ireland. Depending on the agreements negotiated by the U.K. with the E.U. and other countries, or the potential of no agreement being reached, we could become subject to, among other things, export tariffs and regulatory restrictions that could increase transaction costs, reduce our ability to hire or retain employees in Northern Ireland, reduce access to supplies and materials, cause shipping delays because of the need for new customs inspections and procedures and reduce demand or access to customers in international markets, all of which would impair our ability to conduct our operations as they have been conducted historically. While we continue to closely monitor the ever-changing negotiations and take steps to identify and implement potential countermeasures for our businesses that are likely to be affected, these and other potential implications of Brexit could adversely affect our business, financial condition or results of operation.

We have a significant amount of debt outstanding and must comply with restrictive covenants in our debt agreements.

Our total debt at September 30, 2020 was approximately $1.2 billion. Our credit agreement and other debt agreements contain financial and restrictive covenants that may limit our ability to, among other things, borrow additional funds or take advantage of business opportunities. While we were in compliance with such financial covenants as of March 31, 2020, we sought and received an amendment to our credit agreement on April 23, 2020. This amendment was necessary because of continued deteriorating business conditions resulting from COVID-19 that caused us to believe there was a likelihood that we would be in violation of certain financial covenants under our credit agreement as early as the second quarter of 2020 without such an amendment and we would have lost access to a significant amount of liquidity. Increases in our debt, increases in our interest expense or decreases in our earnings could cause us to fail to comply with our financial covenants. Failing to comply with such covenants could result in a loss of a significant amount of liquidity or an event of default that, if not cured or waived, could result in the acceleration of all our indebtedness or otherwise have a material adverse effect on our financial position,business or results of operations and debt service capability.operations.

Our level of debt and the financial and restrictive covenants contained in our credit agreement could have important consequences on our financial position and results of operations, including increasing our vulnerability to increases in interest rates because debt under our credit agreement bears interest at variable rates. In addition, our credit agreement indebtedness may use LIBOR as a benchmark for establishing our interest rate. LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform which may cause LIBOR to perform differently than in the past or to be replaced entirely. Consequences of these developments cannot be entirely predicted, but could include an increase in the cost of our credit agreement indebtedness.

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Our access to capital markets and borrowing capacity could be limited in certain circumstances.

Our access to capital markets to raise funds through the sale of equity or debt securities is subject to various factors, including general economic and/or financial market conditions. As a result of current economic conditions, including turmoil and uncertainty in the capital markets, credit markets have tightened significantly, which makes obtaining new capital more challenging and more expensive. If our consolidated cash flow coverage ratio is less than 2.0 to 1.0, we are subject to significant restrictions on the amount of indebtedness we can incur. Our cash flow coverage ratio was greater than 2.0 to 1.0 on September 30, 2020.

Our access to debt financing at competitive risk-based interest rates is partly a function of our credit ratings. A downgrade to our credit ratings could increase our interest rates, could limit our access to public debt markets, could limit the institutions willing to provide us credit facilities, and could make any future credit facilities or credit facility amendments more costly and/or difficult to obtain.

Although we believe the banks participating in our credit facility have adequate capital and resources, we can provide no assurance that all of these banks will continue to operate as a going concern in the future. If any of the banks in our lending group were to fail or be unwilling to renew our credit facility at or prior to its expiration, it is possible that the borrowing capacity under our current or any future credit facility would be reduced. If the availability under our credit facility was reduced significantly, we could be required to obtain capital from alternate sources to finance our capital needs. Our options for addressing such capital constraints would include, but not be limited to (i) obtaining commitments from the remaining banks in the lending group or from new banks to fund increased amounts under the terms of our credit facility, or (ii) accessing the public capital markets. If it becomes necessary to access additional capital, it is possible that any such alternatives in the current market could be on terms less favorable than under our existing credit facility terms, which could have a negative impact on our consolidated financial position, results of operations or cash flows.

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, 20202021 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, 2020 - July 31, 20201,945$17.69—$140,517
August 1, 2020 - August 31, 20202,542$19.65—$140,517
September 1, 2020 - September 30, 20203,116$19.69—$140,517
Total7,603$19.16—$140,517
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, 2021 - July 31, 2021764$44.58—$140,517
August 1, 2021 - August 31, 20211,014$50.42—$140,517
September 1, 2021 - September 30, 20212,993$45.10—$140,517
Total4,771$46.14—$140,517

(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.
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Item 5.Other Information

Not applicable.

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Item 6.Exhibits

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


Exhibit No.Exhibit
10.1
Employment Letter from Terex Corporation signed by Julie A. Beck on October 8, 2021. *, ***
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.INSXBRL 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.SCHXBRL Taxonomy Extension Schema Document. *
101.CALXBRL Taxonomy Extension Calculation Linkbase Document. *
101.DEFXBRL Taxonomy Extension Definition Linkbase Document. *
101.LABXBRL Taxonomy Extension Label Linkbase Document. *
101.PREXBRL Taxonomy Extension Presentation Linkbase Document. *
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*Exhibit filed with this document.
**Exhibit furnished with this document.
***Denotes a management contract or compensatory plan or arrangement.

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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, 202029, 2021/s/ John D. Sheehan
 John D. Sheehan
 Senior Vice President and
 Chief Financial Officer
 (Principal Financial Officer)


Date:October 28, 202029, 2021/s/ Mark I. ClairStephen A. Johnston
 Mark I. Clair
Vice President, Controller andStephen A. Johnston
 Chief Accounting Officer
 (Principal Accounting Officer)

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