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What changed in TEREX CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of TEREX CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+272 added−302 removedSource: 10-K (2024-02-09) vs 10-K (2023-02-10)

Top changes in TEREX CORP's 2023 10-K

272 paragraphs added · 302 removed · 215 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

53 edited+14 added−15 removed68 unchanged
Biggest changeWe strive to be fair and impartial in our decisions, ensuring Equity within our workplace and we know that creating a culture of Inclusion for all our team members is essential. We are committed to all three elements of DEI so we can make Terex the kind of place where every team member feels valued, listened to and appreciated.
Biggest changeOur values are the driving force behind our commitment to maintain an inclusive, supportive, equitable, and safe workplace for all team members. We know that diversity alone is not sufficient. We strive to be fair and impartial in our decisions, ensuring equity within our workplace.
Today, Terex is a global manufacturer of materials processing machinery and aerial work platforms. We design, build and support products used in construction, maintenance, manufacturing, energy, recycling, minerals and materials management applications.
Today, Terex is a global manufacturer of materials processing machinery and aerial work platforms. We design, build and support products used in maintenance, manufacturing, energy, recycling, minerals and materials management, and construction applications.
Outside of North America, independent distributors sell our utility equipment directly to customers. 9 RESEARCH, DEVELOPMENT AND ENGINEERING We maintain engineering staff primarily at our manufacturing locations to conduct research, development and engineering for site-specific products. We have also established competency centers that support entire segments from single locations in certain fields such as control systems.
Outside of North America, independent distributors sell our utility equipment directly to customers. 9 RESEARCH, DEVELOPMENT AND ENGINEERING We maintain engineering staff at our manufacturing locations to conduct research, development and engineering for site-specific products. We have also established competency centers that support entire segments from single locations in certain fields such as control systems.
We have taken a lead on many of these developments within the industries we serve, and we will continue to evolve our approach to alternative, environmentally friendly equipment power as technical capabilities advance, solution economics improve, and customer demand for these solutions continues to increase. 12 Increasing laws and regulations dealing with the environmental aspects of the products we manufacture can result in significant expenditures in designing and manufacturing new forms of equipment that satisfy such new laws and regulations.
We have taken a lead on many of these developments within the industries we serve, and we will continue to evolve our approach to alternative, environmentally friendly equipment power as technical capabilities advance, solution economics improve, and customer demand for these solutions continues to increase. 12 Increasingly stringent laws and regulations dealing with the environmental aspects of the products we manufacture can result in significant expenditures in designing and manufacturing new forms of equipment that satisfy such new laws and regulations.
MP has the following significant manufacturing operations: • Mobile crushers are manufactured in Omagh, Northern Ireland; • Mobile screens and washing systems are manufactured in Dungannon, Northern Ireland; • Mobile crushers, mobile screens, base crushers, base screens, modular and wheeled crushing and screening plants, track conveyors, washing systems and pick and carry cranes are manufactured in Hosur, India; • Modular, mobile and static crushing and screening equipment and base crushers are manufactured in Oklahoma City, Oklahoma; • Static crushers and screens are manufactured in Subang Jaya, Malaysia; • Crushing and screening equipment is manufactured in Durand, Michigan; • Mobile crushers and crushing chambers are manufactured in Coalville, England; • Wood processing, biomass and recycling equipment systems, mobile screens and tracked conveyors are manufactured in Campsie, Northern Ireland; • Fabrications, sub-assemblies and steel kits are manufactured in Ballymoney and Cookstown, Northern Ireland; • Wood processing, biomass and recycling equipment systems are manufactured in Newton, New Hampshire; • Material handlers are manufactured in Bad Schönborn, Germany and Changzhou, China; • Concrete pavers are manufactured in Canton, South Dakota; • Front discharge concrete mixer trucks are manufactured in Fort Wayne, Indiana; • Volumetric concrete mixers are manufactured in Olds, Alberta, Canada; • Pick and carry cranes are manufactured in Brisbane, Australia; • Rough terrain cranes are manufactured in Crespellano, Italy; • Tower cranes are manufactured in Fontanafredda, Italy; • Mobile crushers and mobile screens are manufactured in Jiading, China; and • Mobile and static trommel screens are manufactured in Monaghan, Ireland. 4 We have North American distribution centers in Louisville, Kentucky and Southaven, Mississippi and service centers in Australia, Thailand, Turkey and Malaysia.
MP has the following significant manufacturing operations: • Mobile crushers are manufactured in Omagh, Northern Ireland; • Mobile screens, washing systems and recycling systems are manufactured in Dungannon, Northern Ireland; • Mobile crushers, mobile screens, base crushers, base screens, modular and wheeled crushing and screening plants, track conveyors, washing systems, rough terrain cranes and pick and carry cranes are manufactured in Hosur, India; • Mobile and static crushing and screening equipment and base crushers are manufactured in Oklahoma City, Oklahoma; • Static crushers, screens and telescopic conveyors are manufactured in Subang Jaya, Malaysia; • Crushing and screening equipment is manufactured in Durand, Michigan; • Mobile crushers and crushing chambers are manufactured in Coalville, England; • Wood processing, biomass and recycling equipment systems, mobile screens and tracked conveyors are manufactured in Campsie, Northern Ireland; • Fabrications, sub-assemblies and steel kits are manufactured in Ballymoney and Cookstown, Northern Ireland; • Wood processing, biomass and recycling equipment systems are manufactured in Newton, New Hampshire; • Material handlers are manufactured in Bad Schönborn, Germany and Changzhou, China; • Concrete pavers are manufactured in Canton, South Dakota; • Front discharge concrete mixer trucks are manufactured in Fort Wayne, Indiana; • Volumetric concrete mixers are manufactured in Olds, Alberta, Canada; • Pick and carry cranes are manufactured in Brisbane, Australia; • Rough terrain cranes are manufactured in Crespellano, Italy; • Tower cranes are manufactured in Fontanafredda, Italy; • Mobile crushers and mobile screens are manufactured in Jiading, China; • Mobile and static trommel screens are manufactured in Monaghan, Ireland; and • Bulk material handling conveyors are manufactured in Mount Vernon, Missouri. 4 We have North American distribution centers in Louisville, Kentucky and Southaven, Mississippi and service centers in Australia, Thailand, Turkey and Malaysia.
We market our MP products principally under the Terex ® , Powerscreen ® , Fuchs ® , EvoQuip ® , Canica ® , Cedarapids ® , CBI ® , Simplicity ® , Franna ® , Terex Ecotec ® , Finlay ® , ProAll ® , ZenRobotics ® , Terex Washing Systems, Terex MPS, Terex Jaques ® , Terex Advance ® , ProStack ® , Terex Bid-Well ® , MDS tm and Terex Recycling Systems brand names and business lines.
We market our MP products principally under the following brand names and business lines: Terex ® , Powerscreen ® , Fuchs ® , EvoQuip ® , Canica ® , Cedarapids ® , CBI ® , Simplicity ® , Franna ® , Terex Ecotec ® , Finlay ® , ProAll ® , ZenRobotics ® , Terex Washing Systems, Terex MPS, Terex Jaques ® , Terex Advance ® , ProStack ® , Terex Bid-Well ® , MDS tm , MARCO ® and Terex Recycling Systems.
Our Disciplined Capital Allocation approach remains an important part of our overall strategy, including maintenance of an optimal capital structure (of approximately 2.5 average net debt to EBITDA over the cycle), growth investments, restructuring investments and efficient return of capital to shareholders via dividends and share repurchases.
Our Disciplined Capital Allocation approach remains an important part of our overall strategy, including maintenance of an optimal capital structure (of approximately 2.5 average net debt to EBITDA over the cycle), growth investments, restructuring investments and efficient return of capital to stockholders via dividends and share repurchases.
Over the past two years, we have completed multiple transactions, adding scope and depth to our Company through acquisitions of new facilities and businesses and investments in companies.
Over the past three years, we have completed multiple transactions, adding scope and depth to our Company through acquisitions of new facilities and businesses and investments in companies.
The following table shows the primary competitors, in alphabetical order, for our products in the following categories: BUSINESS SEGMENT PRODUCTS PRIMARY COMPETITORS Materials Processing Crushing & Screening Equipment Astec Industries, Deere (Kleeman), Keestrack, Metso, Portafill, Sandvik and Rubble Master Washing Systems Azfab, CDE Global, Matec, McLanahan, Metso, Phoenix Process Equipment, Superior and Weir/Trio Wood Processing, Biomass, Recycling Equipment and Trommels Astec Industries, Bandit, Doppstadt, Eggersmann, Jenz, Komptech, Morbark and Vermeer Conveyors Astec/Telestack, Deere (Kleeman), Edge, Metso/McCloskey, Puzzulona Thor, Superior and Weir/Trio Material Handlers Atlas, Caterpillar, Liebherr and Sennebogen Concrete Pavers Allen Engineering, Gomaco, Guntert & Zimmerman and Power Curbers Concrete Mixer Trucks Beck Industrial, Con-Tech, Continental Mixer, Indiana Phoenix and Oshkosh (McNeilus) Volumetric Concrete Mixers Bay-lynx, Cemen Tech, Holcombe and Zimmerman Pick and Carry Cranes Ace, Escorts, Humma and TIDD Rough Terrain Cranes Kato, Liebherr, Link-Belt, Manitowoc (Grove), Sany, Tadano-Faun, XCMG and Zoomlion Tower Cranes Comansa, Jaso, Liebherr, Manitowoc (Potain), Wolffkran, XCMG and Zoomlion Robotic Waste Sorting Technology AMP Robotics, Max-Al, Steinert, Tomra and Waste Robotics Aerial Work Platforms Portable Material Lifts and Portable Aerial Work Platforms Oshkosh (JLG), Sumner, Vestil and Wesco Boom Lifts Dingli, Haulotte, Linamar (Skyjack), Monitou, Oshkosh (JLG), Sinoboom, Xtreme/Tanfield (Snorkel) and Zoomlion Scissor Lifts Dingli, Haulotte, LGMG, Linamar (Skyjack), Oshkosh (JLG), Sinoboom, Xtreme/Tanfield (Snorkel) and Zoomlion Utility Equipment Altec, Dur-A-Lift, Posi+ and Time Manufacturing Telehandlers CNH, JCB, Manitou (Gehl), Merlo and Oshkosh (JLG, Skytrak, Caterpillar and Lull brands) MAJOR CUSTOMERS None of our customers individually accounted for more than 10% of our consolidated net sales in 2022.
The following table shows the primary competitors, in alphabetical order, for our products in the following categories: BUSINESS SEGMENT PRODUCTS PRIMARY COMPETITORS Materials Processing Crushing & Screening Equipment Astec Industries, Deere (Kleeman), Keestrack, Metso, Portafill, Rubble Master and Sandvik Washing Systems Azfab, CDE Global, Matec, McLanahan, Metso, Phoenix Process Equipment, Superior and Weir/Trio Wood Processing, Biomass, Recycling Equipment and Trommels Astec Industries, Bandit, Doppstadt, Eggersmann, Jenz, Komptech, Morbark and Vermeer Conveyors Astec/Telestack, Deere (Kleeman), Edge, Metso/McCloskey, Puzzulona Thor, Superior and Weir/Trio Material Handlers Atlas, Caterpillar, Liebherr and Sennebogen Concrete Pavers Allen Engineering, Gomaco, Guntert & Zimmerman and Power Curbers Concrete Mixer Trucks Beck Industrial, Con-Tech, Continental Mixer, McNeilus and Oshkosh Volumetric Concrete Mixers Bay-lynx, Cemen Tech, Holcombe and Zimmerman Pick and Carry Cranes Ace, Escorts, Humma and TIDD Rough Terrain Cranes Kato, Liebherr, Link-Belt, Manitowoc (Grove), Sany, Tadano-Faun, XCMG and Zoomlion Tower Cranes Comansa, Jaso, Liebherr, Manitowoc (Potain), Wolffkran, XCMG and Zoomlion Robotic Waste Sorting Technology AMP Robotics, Max-Al, Steinert, Tomra and Waste Robotics Aerial Work Platforms Portable Material Lifts and Portable Aerial Work Platforms Dingli, Haulotte and Oshkosh (JLG) Boom Lifts Dingli, Haulotte, JCB, Linamar (Skyjack), Manitou, MEC, Oshkosh (JLG), Sinoboom, XCMG and Zoomlion Scissor Lifts Dingli, Haulotte, JCB, LGMG, Linamar (Skyjack), MEC, Oshkosh (JLG), Sinoboom, XCMG and Zoomlion Utility Equipment Altec, Dur-A-Lift, Elliot Equipment, Palfinger, Posi+ and Time Manufacturing Telehandlers JCB, Linamar (Skyjack), Manitou (Gehl), Merlo and Oshkosh (JLG) MAJOR CUSTOMERS None of our customers individually accounted for more than 10% of our consolidated net sales in 2023.
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.
Customers use these products to construct and maintain industrial, commercial, institutional and residential buildings and facilities, for construction and maintenance of transmission and distribution lines, tree trimming, certain construction and foundation drilling applications, and for other commercial operations, as well as in a wide range of infrastructure projects.
We generally consider our relations with our team members to be good and we provide mechanisms such as surveys and helplines for our team members to provide their perspectives. In 2022, 84% of team members participated in our company-wide global engagement survey.
We generally consider our relations with our team members to be good and we provide mechanisms such as surveys and helplines for our team members to provide their perspectives. In 2023, 89% of team members participated in our company-wide global engagement survey.
These programs are grounded in The Terex Way values and help participants build key skills. Business specific leadership programs are also conducted in each of our two segments and additional training programs are offered around specific topics such as Safety; DEI; Technical Skills; and Financial Fundamentals.
These programs are grounded in The Terex Way and help participants build key skills and competencies. Business specific leadership programs are also conducted in each of our segments and additional training programs are offered around specific topics such as safety, DEI, technical skills, financial fundamentals, compliance, cybersecurity and harassment prevention.
BACKLOG Our backlog as of December 31, 2022 and 2021 was as follows (in millions): December 31, 2022 2021 MP $ 1,174.3 $ 1,047.0 AWP 2,896.6 2,283.7 Total $ 4,070.9 $ 3,330.7 We define backlog as firm orders that are expected to be filled, including orders that are expected to be filled beyond one year, although there can be no assurance that all such backlog orders will be filled.
BACKLOG Our backlog as of December 31, 2023 and 2022 was as follows (in millions): December 31, 2023 2022 MP $ 767.5 $ 1,174.3 AWP 2,643.6 2,896.6 Total $ 3,411.1 $ 4,070.9 We define backlog as firm orders that are expected to be filled, including orders that are expected to be filled beyond one year, although there can be no assurance that all such backlog orders will be filled.
Our research, development and engineering expenses are primarily incurred to develop (i) additional applications and extensions of our existing product lines to meet customer needs, such as the telematics application to remotely monitor and manage our products, and take advantage of growth opportunities, and (ii) customer responsive enhancements and continuous cost improvements of existing products.
Our research, development and engineering expenses are primarily incurred to develop (i) additional applications and extensions of our existing product lines to meet customer needs, and take advantage of growth opportunities, and (ii) customer responsive enhancements and continuous cost improvements of existing products.
Customer ROIC is a key focus of our organization and is central to our ability to generate returns for investors. 5 We operate our Company based on our value system, “The Terex Way.” The Terex Way values shape the culture of our Company and reflect our collective commitment to and understanding of what it means to be a part of Terex.
Customer ROIC is a key focus of our organization and is central to our ability to generate returns for investors. 5 We operate our Company based on our value system, “The Terex Way”, which shapes the culture of our Company and reflects our collective commitment to and understanding of what it means to be a part of Terex.
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.
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.
We will successfully and profitably grow when we operate efficiently, apply new thinking in creating value for customers and take on new challenges through business investments (i.e. new category and geographic development). We also see a role for further growth via inorganic investments.
The “Grow” theme is the outcome of doing “Execute” and “Innovate” well. We will successfully and profitably grow when we operate efficiently, apply new thinking in creating value for customers and take on new challenges through business investments (i.e. new category and geographic development). We also see a role for further growth via inorganic investments.
We engage with customers through all stages of the product life cycle, from initial specification and financing to parts and service support. We continue to focus on becoming an industry leading operating company. We report our business in the following segments: (i) Materials Processing (“MP”) and (ii) Aerial Work Platforms (“AWP”).
We engage with customers through all stages of the product life cycle, from initial specification to parts and service support. We report our business in the following segments: (i) Materials Processing (“MP”) and (ii) Aerial Work Platforms (“AWP”).
While the outcome of these matters cannot be predicted with certainty, we believe the outcome of such matters will not have a material adverse effect, individually or in aggregate, on our business or operating performance. For more detail, see Item 3 – “Legal Proceedings”.
Currently, we are engaged in various legal proceedings with respect to intellectual property rights. While the outcome of these matters cannot be predicted with certainty, we believe the outcome of such matters will not have a material adverse effect, individually or in aggregate, on our business or operating performance. For more detail, see Item 3 – “Legal Proceedings”.
Approximately one percent of our team members in the U.S. are represented by labor unions. Outside of the U.S., we enter into employment contracts and collective agreements in those countries in which such relationships are mandatory or customary. The provisions of these agreements correspond in each case with the required or customary terms in the subject jurisdiction.
Outside of the U.S., we enter into employment contracts and collective agreements in those countries in which such relationships are mandatory or customary. The provisions of these agreements correspond in each case with the required or customary terms in the subject jurisdiction.
Because many variables can cause changes in backlog and these changes may or may not be of any significance, we consequently view backlog as an important, but not necessarily determinative, indicator of future results. Our overall backlog amounts at December 31, 2022 increased $740.2 million from our backlog amounts at December 31, 2021, driven by strong, global customer demand.
Because many variables can cause changes in backlog and these changes may or may not be of any significance, we consequently view backlog as an important, but not necessarily determinative, indicator of future results. Our overall backlog amounts at December 31, 2023 decreased $659.8 million from our backlog amounts at December 31, 2022, driven by improved customer deliveries.
Globally, job site regulations have become increasingly stringent, requiring quieter equipment with lower or zero emissions. At the same time, for our Genie ® equipment, more job sites are requiring machines capable of working both outdoors and indoors. Our customers want products that operate on battery electric and fuel-electric hybrid options.
At the same time, for our Genie ® equipment, more job sites are requiring machines capable of working both outdoors and indoors. Our customers want products that operate on battery electric and fuel-electric hybrid options.
Where we can, we offer a flexible work environment, enabling team members to manage the demands of their personal and professional lives. DIVERSITY, EQUITY AND INCLUSION We are committed to increasing and retaining demographic diversity at all levels of our global workforce. We value team members of every race, gender, age, religion, identity or experience.
Where we can, we offer a flexible work environment, enabling team members to manage the demands of their personal and professional lives. DIVERSITY, EQUITY AND INCLUSION We are committed to recruiting, engaging, developing, and retaining diversity at all levels of our global workforce.
This provides a basis to project future values of equipment for the underwriting of leases or loans. These secondary market sales channels may also be used for re-marketing any equipment which is returned at end of lease, or is repossessed in case of a customer default.
TFS monitors directly or uses third-party appraisal companies to provide a basis to project future values of Terex used equipment in the secondary market sales channels. These secondary market sales channels may also be used for re-marketing any equipment which is returned at end of lease, or is repossessed in the case of a customer default.
We have a parts and logistics center located in North Bend, Washington for our aerial and utility products. Additionally, a portion of our aerial and utility products parts business is conducted at a shared Terex facility in Southaven, Mississippi.
We have a parts and logistics center located in North Bend, Washington for our AWP products. Additionally, a portion of our aerial and utility products parts business is conducted at a shared Terex facility in Southaven, Mississippi. Our European, Asian Pacific and Latin American parts and logistics operations are conducted through a combination of outsourced facilities and Terex managed operations.
Our utility products are distributed to the utility and municipal markets and contractors in North America principally through a network of rental companies, independent distributors and a direct sales model.
We employ sales representatives who service these channel partners from offices located throughout the world. Our utility products are distributed to the utility and municipal markets and contractors in North America principally through a network of rental companies, independent distributors and a direct sales model.
Continually monitoring our materials, manufacturing and engineering costs is essential to identifying possible savings, which then enables us to leverage those savings to improve our competitiveness and our customers’ return on investment.
Continually monitoring our materials, manufacturing and engineering costs is essential to identifying possible savings, enabling us to leverage those savings to improve our competitiveness and our Customer ROIC.
We compete with other manufacturers based on many factors, particularly price, performance and product reliability. We generally operate under a best value strategy, where we attempt to offer our customers products designed to improve Customer ROIC. However, in some instances, customers may prefer the pricing, performance or reliability aspects of a competitor’s product despite our product pricing or performance.
We compete with other manufacturers based on many factors, particularly price, performance and product reliability. We generally operate under a best value strategy, where we attempt to offer our customers products designed to improve Customer ROIC through our quality by design process.
Many of these patents and related proprietary technology are important to the production of particular products; however, overall, our patents, taken together, are not material to our business or our overall financial results. Currently, we are engaged in various legal proceedings with respect to intellectual property rights.
We have many patents that we use in connection with our operations and most of our products contain some proprietary technology. Many of these patents and related proprietary technology are important to the production of particular products; however, overall, our patents, taken together, are not material to our business or our overall financial results.
We maintain an internal product safety team that is dedicated to improving safety and investigating and resolving any product safety issues that may arise. Use and operation of our equipment in an environmentally conscious manner is an important priority for us. We are aware of global discussions regarding climate change and the impact of greenhouse gas emissions on global warming.
We maintain an internal product safety team that is dedicated to improving safety and investigating and resolving any product safety issues that may arise. Use and operation of our equipment in an environmentally conscious manner is an important priority for us. We produce products that have lower greenhouse gas emissions in response to both regulatory initiatives and market demand.
MATERIALS PROCESSING We distribute our products through a global network of independent distributors, rental companies and direct sales to customers. AERIAL WORK PLATFORMS Our aerial work platform and telehandler products are distributed principally through a global network of rental companies and independent distributors. We employ sales representatives who service these channel partners from offices located throughout the world.
DISTRIBUTION MATERIALS PROCESSING We distribute our MP products to customers through several channels including a global network of independent distributors, direct sales and rental companies. AERIAL WORK PLATFORMS Our aerial work platform and telehandler products are distributed principally through a global network of rental companies and independent distributors.
Digitalization plays an important role in many of the innovations we pursue, but there are other aspects of this strategy that involve non-digital changes to the design of our products and improved ways of doing things. The “Grow” theme is the outcome of doing “Execute” and “Innovate” well.
Digitalization plays an important role in many of the innovations we pursue, but there are other aspects of this strategy that involve non-digital changes to the design of our products and improved ways of doing things. For example, we provide product solutions to help our customers achieve sustainability goals including electric and/or hybrid options.
Non-seasonal macro factors are also important and can surpass seasonal influences in importance in some years. In 2023, traditional seasonality is expected to be less applicable as the supply chain environment has extended product deliveries. We expect the first and second half sales to be comparable, with second and third quarter sales modestly higher.
Non-seasonal macro factors are also important and can surpass seasonal influences in importance in some years. In 2024, we expect first and second half sales to be comparable to each other, with the second and third quarter sales modestly higher than first and fourth quarter sales.
We have a diverse and highly engaged global workforce. Capable, highly skilled and diverse team members are key to our ability to implement our “Execute, Innovate, Grow” strategy. As of December 31, 2022, we had approximately 9,300 team members, including approximately 3,800 team members in the U.S.
Capable, highly skilled and diverse team members are key to our ability to implement our “Execute, Innovate, Grow” strategy. As of December 31, 2023, we had approximately 10,200 team members, including approximately 4,200 team members in the U.S. Approximately one percent of our team members in the U.S. are represented by labor unions.
In addition, we make available on our website under “Investor Relations” – “Governance”, free of charge, our Audit Committee Charter, Compensation Committee Charter, Governance and Nominating Committee Charter, Corporate Governance Guidelines and Code of Ethics and Conduct. In addition, the foregoing information is available in print, without charge, to any stockholder who requests these materials from us.
In addition, we make available on our website under “Investor Relations” – “Governance”, free of charge, our Audit Committee Charter, Compensation and Human Capital Committee Charter, Governance, Nominating and Corporate Responsibility Committee Charter, Corporate Governance Guidelines, Disclosure Committee Charter and Code of Ethics and Conduct.
At the end of 2022, our lost time injury rate was 0.54 and our total recordable injury rate was 1.93. Our aspirational goal will always be zero injuries, but these goals represent milestones along our journey to Zero Harm. TEAM MEMBER TALENT AND SUPPORT Terex strives to attract, develop and retain outstanding talent to be part of our team.
Our aspirational goal will always be zero injuries, but these goals represent milestones along our journey to Zero Harm. TEAM MEMBER TALENT AND SUPPORT Terex strives to attract, develop and retain outstanding talent to be part of our team. We have a diverse and highly engaged global workforce.
Robust product development pipelines are in place, which we expect will continue to bring new, differentiated products to the market in the years ahead. We have also focused on producing more cost-effective product solutions across product families, as well as increasing commonalities of components to ease manufacturing processes.
We have also focused on producing more cost-effective product solutions across product families, as well as increasing commonalities of components to ease manufacturing processes.
On a global basis, TFS facilitates financing transactions directly between (i) end-user customers, distributors and rental companies and (ii) third-party financial institutions, providing recourse in certain circumstances. Most of the transactions are fixed and floating rate loans; however, TFS also facilitates sales-type leases, operating leases and rentals.
TFS uses its equipment financing experience to facilitate financial products and services to assist customers in the acquisition of our equipment. On a global basis, TFS facilitates financing transactions directly between (i) end-user customers, distributors and rental companies and (ii) third-party financial institutions, providing recourse in certain circumstances.
In 2022, our largest customer accounted for less than 4% of our consolidated net sales and our top ten customers in the aggregate accounted for less than 25% of our consolidated net sales. A material portion of AWP net sales are to national rental companies.
In 2023, our largest customer accounted for less than 5% of our consolidated net sales and our top ten customers in the aggregate accounted for less than 27% of our consolidated net sales.
We are increasing our production of products that have lower greenhouse gas emissions in response to both regulatory initiatives and market demand. We continue to be active in the development of incorporating alternative power solutions within our different product lines and are investing in companies that develop alternative energy solutions.
We continue to be active in the development of incorporating alternative power solutions within our different product lines and are investing in companies that develop alternative energy solutions. Globally, job site regulations have become increasingly stringent, requiring quieter equipment with lower or zero emissions.
PATENTS, LICENSES AND TRADEMARKS We use proprietary materials such as patents, trademarks, trade secrets and trade names in our operations and take actions to protect these rights. 11 We use several significant trademarks and trade names, most notably the Terex ® , Genie ® , Powerscreen ® and Fuchs ® trademarks.
A material portion of AWP net sales is to national rental companies. 11 PATENTS, LICENSES AND TRADEMARKS We use proprietary materials such as patents, trademarks, trade secrets and trade names in our operations and take actions to protect these rights.
Our values drive our unwavering focus on Zero Harm Safety, strong governance, Diversity, Equity & Inclusion (“DEI”), responsible environmental stewardship, and support for the communities where we live and work.
The Terex Way continues to guide us on how we conduct business with our stakeholders: team members, customers, stockholders, suppliers, our communities and many others. It drives our unwavering focus on Zero Harm Safety, strong governance, Diversity, Equity & Inclusion (“DEI”), responsible environmental stewardship and sustainability, and support for the communities where we live and work.
In addition, wholesale financing may be arranged between dealers and distributors who sell our equipment and financial institutions with which TFS has established relationships. TFS continually monitors used equipment values of Terex equipment in the secondary market sales channels for all of our equipment categories.
Most of the transactions are fixed and floating rate loans; however, TFS also facilitates sales-type leases, operating leases and rentals. In addition, wholesale financing may be arranged between dealers and distributors who sell our equipment and financial institutions with which TFS has established relationships.
Our European, Asian Pacific and Latin American parts and logistics operations are conducted through a combination of outsourced facilities and Terex managed operations. We also provide service and support for aerial and utility products in the U.S. through a network of service branches and field service operations.
We also provide service and support for aerial and utility products in the U.S. through a network of service branches and field service operations. OTHER We may assist customers in their rental, leasing and acquisition of our products through Terex Financial Services (“TFS”).
The other trademarks and trade names that we use include registered trademarks of Terex Corporation or its subsidiaries. We have many patents that we use in connection with our operations and most of our products contain some proprietary technology.
We use several significant trademarks and trade names, most notably the Terex ® , Genie ® , Powerscreen ® and Fuchs ® trademarks. The other trademarks and trade names that we use include registered trademarks of Terex Corporation or its subsidiaries.
In parallel to this we continue to research and evaluate alternative fuel options that may become viable solutions for our products in the future. Product innovation has become a core element of our growth strategy. We have re-invigorated and increased our emphasis on creating new models and meeting the demands of our customers.
In parallel to this, we continue to research and evaluate alternative lower and no-carbon energy alternatives, including partnering with technology companies and universities, that may become viable solutions for our products in the future. Approximately 70% of MP and Genie products offer electric and/or hybrid options. Product innovation has become a core element of our growth strategy.
In 2016, Terex set the goals of reaching a 0.20 lost time injury rate and 1.00 total recordable injury rate by 2024. We have made good progress since 2016 when our lost time injury rate was 0.80 and our total recordable injury rate was 3.82.
Terex has set the goals of reaching a 0.4 lost time injury rate and 1.4 total recordable injury rate by the end of 2026. At the end of 2023, our lost time injury rate was 0.58 and our total recordable injury rate was 1.98.
The Terex Way is based on six key values: • Integrity : Integrity reflects honesty, ethics, transparency and accountability. We are committed to maintaining high ethical standards in all of our business dealings and we never sacrifice our integrity for profit. • Respect : Respect incorporates concern for safety, health, teamwork, diversity, equity, inclusion and performance.
The Terex Way is based on six key values: • Integrity : We do not sacrifice integrity for profit. We are transparent in all our business dealings.
Our Company has a vibrant, global initiative to increase representation of women in our workplace because we recognize that women are often under-represented in manufacturing organizations such as ours.
As is typical of the manufacturing industry, women are often under-represented. Our Company has a long-standing, vibrant, global initiative to increase representation of women throughout our workforce. We require diverse candidate slates and support women through mentoring, training, and development opportunities.
We are making excellent progress, requiring diverse candidate slates, supporting women through mentoring, training, and colleague-to-colleague education, and using our talent development process to identify qualified women for their next role(s) within our organization.
We also use our talent review process to identify qualified women for their next role(s) within our organization, including implementing meaningful development plans.
We do not have a single competitor across our business segments.
However, in some instances, customers may prefer the pricing, performance or reliability aspects of a competitor’s product despite our product pricing or performance. We do not have a single competitor across our business segments.
In 2022, we established five year goals to increase non-majority representation in the U.S. in three areas: leadership, management, and indirect manufacturing and indirect selling, general & administrative (“SG&A”) roles.
Our current 2030 goals for minority representation in the U.S. are 17% in leadership, 18% in management, and 26% in indirect manufacturing and selling, general & administrative (“SG&A”) roles. Additionally, back in 2022, we introduced a component to our annual incentive plan focused on the achievement of specific DEI metrics.
MP segment backlog at December 31, 2022 increased approximately 12% from our backlog amounts at December 31, 2021. This increase from 2021 was driven primarily by higher demand across aggregates, environmental and cranes businesses primarily in North America, Western Europe and Asia Pacific.
AWP segment backlog at December 31, 2023 decreased approximately 9% from our backlog amounts at December 31, 2022. The decrease from 2022 was primarily driven by improved customer deliveries while bookings remain strong, primarily in North America.
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OTHER We may assist customers in their rental, leasing and acquisition of our products through Terex Financial Services (“TFS”). TFS uses its equipment financing experience to facilitate financial products and services to assist customers in the acquisition of our equipment.
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Aerial work platform equipment positions workers and materials easily and quickly to elevated work areas, enhancing safety and productivity at height.
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We treat all our team members, customers and suppliers with respect and dignity. • Improvement : Improvement encompasses quality, problem-solving systems, a continuous improvement culture and collaboration.
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We are accountable to our team members, customers and stockholders for achieving our goals while protecting our reputation and assets. • Respect : We provide a safe and healthy environment for our team members. We treat all people with dignity and respect. We value the differences in people’s thinking, backgrounds and cultures.
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We continuously search for new and better ways of doing things, focusing on continuous improvement and the elimination of waste. • Servant Leadership : Servant leadership requires service to others, humility, authenticity and leading by example.
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We are committed to team member development. • Improvement : We continuously search for new and better ways of doing things, eliminating waste and continually improving. We challenge the status quo and require stretch goals.
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We work to serve the needs of our customers, investors and team members. • Courage : Courage entails willingness to take risks, responsibility, action and empowerment. We have the courage to make a difference even when it is difficult. • Citizenship : Citizenship means social responsibility and environmental stewardship.
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We work in teams across boundaries to achieve common goals. • Servant Leadership : We work to serve the needs of our customers, investors and team members.
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We comply with all laws, respect all people’s values and cultures, and are good global, national and local citizens. Our Terex Way values continue to guide how we conduct business with our stakeholders: team member, customers, shareholders, suppliers, our communities and many others.
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We nurture a culture of “chain of support” versus “chain of command.” We ask what we can do to help. • Courage : We have the personal and professional courage to do the right thing and take risks that may cause us to win as well as to fail periodically. We make decisions and take action.
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AWP segment backlog at December 31, 2022 increased approximately 27% from our backlog amounts at December 31, 2021. This increase from 2021 was driven by robust demand primarily in the U.S. DISTRIBUTION We distribute our products through a global network of independent distributors, rental companies and direct sales to customers.
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We do not admonish failure, only failure to learn. • Citizenship : We are good global, local and national citizens and good stewards of the environment and the communities where we live. We participate in making the world we live in a better place.
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We also continue to follow all remaining COVID-19 safety protocols where directed by recognized health authorities or regulatory bodies, and will continue to maintain the necessary protective measures to keep our team safe. We generate hazardous and non-hazardous wastes in the normal course of our manufacturing operations.
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Backlog is still significantly above historical levels. MP segment backlog at December 31, 2023 decreased approximately 35% from our backlog amounts at December 31, 2022. The decrease from 2022 was driven primarily by improved customer deliveries and lower bookings across our MP businesses as lead times decrease and MP backlog begins returning to historical levels.
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Overall, we believe these developments are the leading edge of much greater change to the way equipment in the future will be powered.
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We have re-invigorated and increased our emphasis on creating new models and meeting the demands of our customers. Robust product development pipelines are in place, which we expect will continue to bring new, differentiated products to the market in the years ahead.
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We encourage, value and support non-majority team members in all of our facilities worldwide. We actively seek their engagement and partnership, as we understand that diversity of background, thought and experience leads to improved problem-solving and greater innovation. Diversity in and of itself is not sufficient.
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We encourage, value, and support team members of every race, gender, age, ability, religion, orientation, identity, and experience. We firmly believe that diversity of background, thought, and experience cultivates innovation and better decision-making. Our culture is defined by our Terex Way Values – Integrity, Respect, Improvement, Servant Leadership, Courage, and Citizenship.
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In 2014, we established five-year goals to increase representation in three areas: women in leadership, women in line roles (like operations, engineering and sales) and women overall. Having made progress against these goals, we have extended them for another five years.
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We are also committed to creating a culture of inclusion, which starts with the tangible, intentional actions that all Terex team members – regardless of title or tenure - must make to ensure our team members feel safe, supported, and valued.
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In 2022, we continued the work of our Global DEI Governance Council, regional DEI Councils in the Americas, Europe, the Middle East, Africa and Russia (EMEAR) and Asia Pacific, and our longstanding Women@Terex Steering Committee.
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In 2023, we have built on these efforts by delivering unconscious bias training and developmental webinars, promoting our Terex Affinity Groups, encouraging Company-wide accountability with our Terex-specific inclusion statements, and creating our DEI Site Roadmaps. The DEI Site Roadmaps provide step-by-step guidance for our sites to enhance recruitment, engagement, development, and retention for all team members at Terex.
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The DEI Governance Council is sponsored by our Chief Executive Officer (“CEO”) and Chief Human Resources Officer; our regional councils have Executive Leadership Team (“ELT”) level sponsorship from our segment Presidents.
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In 2023 we updated our goals to increase representation in the following four areas by 2030: women in leadership (to 24%), women in management (to 25%), women in line roles (like operations, engineering and sales) (to 20%) and all women globally (to 24%).
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As part of our commitment to DEI, at the end of 2021 we launched “Affinity Groups,” a new way for team members to interact, exchange ideas, network, support one another and grow. Our Affinity Groups further expanded in 2022 from eight to nine and participation rose two-fold.
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Overall, we have seen significant progress in our DEI metrics and have set the 2030 goals detailed above to reflect our continued commitment. 14 AVAILABLE INFORMATION We maintain a website at www.terex.com.
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Affinity Groups are a way to bring diverse perspectives into the workplace and our internal culture, and to give everyone support and a voice. Our DEI efforts are centered around recruitment, engagement, development and retention. We have completed training for our ELT, senior leadership, managers and the HR community.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

72 edited+18 added−13 removed71 unchanged
Biggest changeSuch risks principally include: • trade protection measures and currency exchange controls; • wage inflation, labor shortages and labor unrest; • uncertainties and instability in global and regional economic conditions, including changes related to market conditions caused by the COVID-19 pandemic, heightened inflation, potential economic recessions, and significant interest rate fluctuations; • ongoing political instability and uncertainties, including, but not limited to, the ongoing conflict between Russia and Ukraine, the relationship between China and the U.S. and other actual or anticipated military or political conflicts; • terrorist activities and the U.S. and international response thereto; • restrictions on the transfer of funds into or out of a country; • export duties and quotas; • domestic and foreign customs and tariffs; • current and changing regulatory environments; • difficulties protecting our intellectual property; • transportation delays and interruptions; • costs and difficulties in integrating, staffing and managing international operations, especially in developing markets such as China, India, Latin America, the Middle East and Africa; • difficulty in obtaining distribution support; • natural disasters; • health epidemics or new pandemics; and • changes in tax laws or interpretations, tax rates and tax legislation.
Biggest changeSuch risks principally include: • uncertainties and instability in global and regional economic conditions, including changes related to market conditions caused by heightened inflation, potential economic recessions, and significant interest rate fluctuations; • ongoing political instability and uncertainties, including, but not limited to, the ongoing conflict between Russia and Ukraine, the conflict between Israel and Hamas, the relationship between China and the U.S. and other actual or anticipated military or political conflicts; • terrorist activities and the U.S. and international response thereto; • wage inflation, labor shortages and labor unrest; • trade protection measures and currency exchange controls; • changes in tax laws or interpretations, tax rates and tax legislation; • export duties and quotas; • domestic and foreign customs and tariffs; • current and changing regulatory environments; • difficulties protecting our intellectual property; • transportation delays and interruptions; • costs and difficulties in integrating, staffing and managing international operations, especially in developing markets such as China, India, Latin America, the Middle East and Africa; • difficulty in obtaining distribution support; • health epidemics or new pandemics; and • natural disasters.
As a result, if we commit or aid or abet any future violations of the anti-fraud, books and records, reporting and internal control provisions of the federal securities laws and related SEC rules, we are likely to suffer severe penalties, financial and otherwise, that could have a material negative impact on our business and results of operations. ITEM 1B.
As a result, if we commit or aid or abet any future violations of the anti-fraud, books and records, reporting and internal control provisions of the federal securities laws and related SEC rules, we are likely to suffer severe penalties, financial and otherwise, that could have a material negative impact on our business and results of operations. 23 ITEM 1B.
Like other global companies, we have experienced cyber threats and incidents in our systems and those of our third-party providers, and we have experienced viruses and attacks targeting our information technology systems and networks, although none have had a material adverse effect on our business or financial condition.
Like other global companies, we have experienced cyber threats and incidents in our systems and those of our 20 third-party providers, and we have experienced viruses and attacks targeting our information technology systems and networks, although none have had a material adverse effect on our business or financial condition.
Historically, losses related to guarantees have been immaterial; however, there can be no assurance that our historical experience with respect to guarantees will be indicative of future results. 20 We may experience losses in excess of our recorded reserves for receivables.
Historically, losses related to guarantees have been immaterial; however, there can be no assurance that our historical experience with respect to guarantees will be indicative of future results. We may experience losses in excess of our recorded reserves for receivables.
Any failure, or perceived failure (whether or not valid), to act responsibly with respect to the environment, to achieve our ESG goals, to maintain ESG practices, to comply with emerging ESG regulations, or to meet investor or customer expectations related to ESG concerns, could harm our reputation, adversely impact our ability to attract and retain qualified and talented team members and customers, expose us to increased scrutiny from the investment community and enforcement authorities, reduce our stock price, have an adverse effect on our future financial results and cause harm to our business.
Any failure, or perceived failure (whether or not valid), to act responsibly with respect to the environment, to achieve our sustainability goals, to maintain sustainability practices, to comply with emerging sustainability regulations, or to meet investor or customer expectations related to sustainability concerns, could harm our reputation, adversely impact our ability to attract and retain qualified and talented team members and customers, expose us to increased scrutiny from the investment community and enforcement authorities, reduce our stock price, have an adverse effect on our future financial results and cause harm to our business.
We have an internal policy that expressly prohibits engaging in any commercial bribery and public corruption, including facilitation payments. We conduct corruption risk assessments, have implemented training programs for our employees with respect to the Company’s prohibition against public corruption and commercial bribery, and perform reputational due diligence on certain third parties that transact Terex business.
We have an internal policy that expressly prohibits engaging in any commercial bribery and public corruption, including facilitation payments. We conduct compliance risk reviews and assessments, have implemented training programs for our employees with respect to the Company’s prohibition against public corruption and commercial bribery, and perform reputational due diligence on certain third parties that transact Terex business.
Recently, there is an increased focus, including by governmental and non-governmental organizations, investors and other stakeholders, and more attention on ESG matters. Such matters include, but are not limited to, reducing greenhouse gas emissions and climate-related risks; DEI; responsible sourcing and supply chain; human rights and social responsibility; and corporate governance and oversight.
Recently, there is an increased focus, including by governmental and non-governmental organizations, investors and other stakeholders, and more attention on sustainability matters. Such matters include, but are not limited to, reducing greenhouse gas emissions and climate-related risks; DEI; responsible sourcing and supply chain; human rights and social responsibility; and corporate governance and oversight.
Due to continued volatility of foreign exchange rates to the U.S. dollar, fluctuations in foreign exchange rates may have an impact on the accuracy of our financial guidance.
Due to volatility of foreign exchange rates to the U.S. dollar, fluctuations in foreign exchange rates may have an impact on the accuracy of our financial guidance.
In addition, such breaches in security could result in misstated financial information, regulatory action, fines and litigation, and other potential liabilities, as well as the costs and operational consequences of implementing further data protection measures, each of which could have a material adverse effect on our business or results of operations.
In addition, such breaches in security could result in misstated financial information, regulatory action, fines and litigation, reputational damage, and other potential liabilities, as well as the costs and operational consequences of implementing further data protection measures, each of which could have a material adverse effect on our business or results of operations.
Our ability to make payments on, and refinance, our debt and fund planned capital expenditures will depend on our ability to generate cash in the future. To some extent, this is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control, including rising interest rates.
Our ability to make payments on, and refinance, our debt and fund planned capital expenditures will depend on our ability to generate cash in the future. To some extent, this is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control, including high interest rates.
In an effort to mitigate this, the Company has increased the prices of its products, recouped tariffs through duty drawback and exclusions, and worked with suppliers to ensure optimum pricing and inventory levels.
In an effort to mitigate this, the Company has increased the prices of our products, recouped tariffs through duty drawback and exclusions, and worked with suppliers to ensure optimum pricing and inventory levels.
There can be no assurance third-party finance companies will continue to extend credit to our customers. Some of our customers have been unable to obtain the credit they need to buy our equipment. Rising interest rates could have a dampening effect on the financial condition of some of our customers and their ability to repay credit obligations.
Some of our customers have been unable to obtain the credit they need to buy our equipment. There can be no assurance third-party finance companies will continue to extend credit to our customers. 18 High interest rates could have a dampening effect on the financial condition of some of our customers and their ability to repay credit obligations.
Delays in obtaining supplies may result from a number of factors affecting our suppliers, including capacity constraints, regulatory changes, global logistics network challenges and cost increases, labor shortages and disputes, wage increases, rising inflation, suppliers’ impaired financial condition, suppliers’ allocations to other purchasers, weather emergencies, pandemics (such as COVID-19) or acts of war or terrorism.
Delays in obtaining supplies may result from a number of factors affecting our suppliers, including capacity constraints, regulatory changes, global logistics network challenges and cost increases, labor shortages and disputes, wage increases, rising inflation, suppliers’ impaired financial condition, suppliers’ allocations to other purchasers, weather emergencies, pandemics or acts of war or terrorism.
Legal, Regulatory & Compliance Risks 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.
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.
Given our commitment to ESG, we actively manage all of these issues. We have a newly created senior vice president position with responsibility for ESG matters, additional dedicated employee resources, and cross-functional/business teams to further develop and implement ESG related initiatives and requirements.
Given our commitment to sustainability, we actively manage all of these issues. We have 22 a senior vice president position with responsibility for sustainability matters, additional dedicated employee resources, and cross-functional/business teams to further develop and implement sustainability related initiatives and requirements.
Although “Execute, Innovate, Grow” is expected to improve future operating margins and revenue growth, if we are unable to achieve expected benefits from these initiatives or are unable to complete them without material disruption to our businesses, the timing and amount of benefits may not be as expected and could adversely impact the Company’s competitive position, financial condition, profitability and/or cash flows. 17 We may face limitations on our ability to integrate acquired businesses.
Although “Execute, Innovate, Grow” is expected to improve future operating margins and revenue growth, if we are unable to achieve expected benefits from these initiatives or are unable to complete them without material disruption to our businesses, the timing and amount of benefits may not be as expected and could adversely impact the Company’s competitive position, financial condition, profitability and/or cash flows.
The risks associated with integrating acquired businesses include: • the business culture of the acquired business may not match well with our culture; • technological and product synergies, economies of scale and cost reductions may not occur as expected; • we may acquire or assume unexpected liabilities; • faulty assumptions may be made regarding the acquisition and integration process; • unforeseen difficulties may arise in integrating operations and systems; • we may fail to attract, retain, motivate and integrate key management and other employees of the acquired business; and • we may experience problems in retaining customers.
The risks associated with integrating acquired businesses include: • the business culture of the acquired business may not match well with our culture; • technological and product synergies, economies of scale and cost reductions may not occur as expected; • we may acquire or assume unexpected liabilities; • faulty assumptions may be made regarding the acquisition and integration process; • unforeseen difficulties may arise in integrating operations and systems; • we may fail to attract, retain, motivate and integrate key management and other employees of the acquired business; • we may experience problems in retaining customers; and • a large acquisition could stretch our resources and divert management’s attention from the existing operations.
The consolidation of our largest suppliers has resulted in limited sources of supply for certain parts and components and increased cost pressures from our suppliers. Any future consolidation of our customer base or our suppliers could negatively impact our business, financial condition, results of operations and cash flows.
Some of our suppliers have undergone a similar process of consolidation. The consolidation of our largest suppliers has resulted in limited sources of supply for certain parts and components and increased cost pressures from our suppliers. Any future consolidation of our customer base or our suppliers could negatively impact our business, financial condition, results of operations and cash flows.
We face litigation and product liability claims and other liabilities. In our lines of business, numerous suits have been filed alleging damages for accidents that have occurred during use or operation of our products. We are self-insured, up to certain limits, for these product liability exposures, as well as for certain exposures related to general, workers’ compensation and automobile liability.
In our lines of business, numerous suits have been filed alleging damages for accidents that have occurred during use, misuse or operation of our products. We are self-insured, up to certain limits, for these product liability exposures, as well as for certain 21 exposures related to general, workers’ compensation and automobile liability.
We have been able to mitigate a portion of the effects of tariffs through the U.S. government’s duty draw-back mechanism and will further partially mitigate the impact through the U.S. Government’s tariff exclusion process, which has been extended through September 30, 2023, on certain components.
We have been able to mitigate a portion of the effects of tariffs through the U.S. government’s duty draw-back mechanism and will further partially mitigate the impact through the U.S. Government’s tariff exclusion process, which has been extended through May 31, 2024, on certain components.
Principal materials and components used in our various manufacturing processes include steel, castings, engines, tires, hydraulics, cylinders, drive trains, electric controls and motors, semiconductors, and a variety of other commodities and fabricated or manufactured items.
We obtain materials and manufactured components from third-party suppliers. Principal materials and components used in our various manufacturing processes include steel, castings, engines, tires, hydraulics, cylinders, drive trains, electric controls and motors, semiconductors, and a variety of other commodities and fabricated or manufactured items.
However, if customers are unwilling to accept price increases in the Company’s products and the Company is unable to recover a substantial portion of increased costs from our suppliers, or through duty draw-back/exclusions, or otherwise offset the increased costs, then continued or increased fluctuations in costs of materials or inflation generally and continued supply chain challenges could have a material adverse effect on the Company’s results of operation, profitability, free cash flows, and financial condition. 15 In addition, we purchase material and services from our suppliers on terms extended based on our overall credit rating.
However, if customers are unwilling to accept price increases in the Company’s products and the Company is unable to recover a substantial portion of increased costs from our suppliers, or through duty draw-back/exclusions, or otherwise offset the increased costs, then continued or increased fluctuations in costs of materials or inflation generally and continued supply chain challenges could have a material adverse effect on the Company’s results of operation, profitability, free cash flows, and financial condition.
Demand for our products tends to be cyclical and is affected by the general strength of the economies in which we sell our products, customers’ perceptions concerning the timing of economic cycles, prevailing interest rates, residential and non-residential construction spending, capital expenditure allocations of our customers, the timing of regulatory standard changes, oil and gas related activity and other factors.
Demand for our products is affected by the general strength of the economies in which we sell our products, customers’ perceptions concerning the timing of economic cycles, customers’ replacement or repair cycles, prevailing interest rates, residential and non-residential construction spending, government spending priorities, capital expenditure allocations of our customers, the timing of regulatory standard changes, oil and gas related activity and other factors.
The last several years have been marked by the lingering effects of the COVID-19 pandemic, geopolitical instability, including the conflict between Russia and Ukraine, social concerns, supply chain and freight constraints, labor shortages and wage increases, high inflation, rising interest rates, foreign currency exchange volatility, and concerns of possible recessions, all of which have increased ongoing economic uncertainty and instability in the global markets.
The last several years have been marked by geopolitical instability, including the conflict between Russia and Ukraine as well as Israel and Hamas, social concerns, supply chain and freight constraints, pandemic, labor shortages and wage increases, high inflation, high interest rates, foreign currency exchange volatility, and continuing concerns of possible recessions, all of which have increased ongoing economic uncertainty and instability in the global markets.
We generate hazardous and nonhazardous wastes in the normal course of our manufacturing operations. As a result, we are subject to a wide range of environmental laws and regulations. These laws and regulations govern actions that may have adverse environmental effects and require compliance with certain practices when handling and disposing of hazardous and nonhazardous wastes.
As a result, we are subject to a wide range of environmental laws and regulations. These laws and regulations govern actions that may have adverse environmental effects and require compliance with certain practices when handling and disposing of hazardous and nonhazardous wastes.
A failure of or breach in information technology security, particularly through malicious cyber-attacks which continue to increase in both frequency and sophistication by both state and non-state actors, could expose us and our customers, distributors and suppliers to risks of misuse of information or systems, the compromise of confidential information, manipulation and destruction of data, defective products, production downtimes and operations disruptions.
A failure of or breach in information technology security, particularly through malicious cyber-attacks, could expose us and our customers, distributors and suppliers to risks of misuse of information or systems, the compromise of confidential information, manipulation and destruction of data, defective products, production downtimes and operations disruptions.
Our Company operates in many areas of the world, involving transactions denominated in a variety of currencies. We are subject to currency exchange risk to the extent that our costs are denominated in currencies other than those in which the Company earns revenue. Additionally, the reporting currency for our consolidated financial statements is the U.S. dollar.
We are subject to currency exchange risk to the extent that our costs are denominated in currencies other than those in which the Company earns revenue. Additionally, the reporting currency for our consolidated financial statements is the U.S. dollar.
We are in a period marked by high inflation levels, rising interest rates, global economic uncertainty, and if economic conditions in the U.S. and other key markets do not show continued stability or improvement, we may experience negative impacts to our net sales, financial condition, profitability and cash flows, which could result in the need for us to record impairments.
If economic conditions in the U.S., Europe and other key markets do not show continued stability or improvement, we may experience negative impacts to our net sales, financial condition, profitability and cash flows, which could result in the need for us to record impairments.
This consolidation has increased the concentration of our largest customers, resulting in increased pricing pressure from our customers. Should our larger customers continue to grow through acquisitions, their buying influence may grow and negatively impact our negotiating leverage. Some of our suppliers have undergone a similar process of consolidation.
Over the last few years, some of our larger customers have been actively growing through acquisitions. This consolidation has increased the concentration of our largest customers, resulting in increased pricing pressure from our customers. Should our larger customers continue to grow through acquisitions, their buying influence may grow and negatively impact our negotiating leverage.
We rely on the management and leadership skills of our senior management team, particularly those of the Chief Executive Officer. The loss of the services of key employees or senior officers, or the inability to identify, hire, develop and retain other highly qualified personnel in the future, could adversely affect the quality and profitability of our business operations.
The loss of the services of key employees or senior officers, or the inability to identify, hire, develop and retain other highly qualified personnel in the future, could adversely affect the quality and profitability of our business operations.
Foreign Corrupt Practices Act and similar worldwide anti-corruption laws. We must comply with all applicable laws, including the Foreign Corrupt Practices Act and other laws that prohibit engaging in corruption for the purpose of obtaining or retaining business.
We operate in many different jurisdictions and we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-corruption laws. We must comply with all applicable laws, including the Foreign Corrupt Practices Act and other laws that prohibit engaging in corruption for the purpose of obtaining or retaining business.
The timing and amount of benefits from our strategic initiatives may not be as expected and our financial results could be adversely impacted. Each business in our Company is unique, but all businesses are managed to the “Execute, Innovate, Grow” operating framework. This is part of our continuing strategy to deliver long-term growth and earnings to our shareholders.
Any of the foregoing could adversely affect our business, financial condition and results of operations. The timing and amount of benefits from our strategic initiatives may not be as expected and our financial results could be adversely impacted. Each business in our Company is unique, but all businesses are managed to the “Execute, Innovate, Grow” operating framework.
We collect and transfer personal data as part of our business processes and activities. This data is subject to a variety of U.S., E.U. and other international laws and regulations, including oversight by various regulatory or other governmental bodies.
This data is subject to a variety of U.S., E.U. and other international laws and regulations, including oversight by various regulatory or other governmental bodies.
We have made, and continue to make, significant investments in these strategic initiatives. However, we cannot provide any assurance that we will be able to realize the full anticipated benefits of these initiatives.
This is part of our continuing strategy to deliver long-term growth and earnings to our stockholders. We have made, and continue to make, significant investments in these strategic initiatives. However, we cannot provide any assurance that we will be able to realize the full anticipated benefits of these initiatives.
Competition and Strategic Performance Risks The industry in which we operate is highly competitive, subject to pricing pressure; if we fail to compete effectively, demand for our products may decrease and our business could suffer. Our industry is highly competitive. Our competitors include a variety of both domestic and foreign companies in all major markets.
Competition and Strategic Performance Risks The industry in which we operate is highly competitive and subject to pricing pressure; if we fail to compete effectively, both in product offerings and price, demand for our products may decrease and our business could suffer. Our industry is highly competitive.
As of December 31, 2022, we are in compliance with the financial covenants. However, increases in our debt, increases in our interest expense or decreases in our earnings could cause us to fail to comply with these financial covenants.
However, increases in our debt, increases in our interest expense or decreases in our earnings could cause us to fail to comply with these financial covenants.
We must comply with an injunction and related obligations imposed by the SEC.
See Risk Factor entitled, “We must comply with an injunction and related obligations imposed by the SEC.” We must comply with an injunction and related obligations imposed by the SEC.
We have a significant amount of debt outstanding and must comply with restrictive covenants in our debt agreements. 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.
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. As of December 31, 2023, we are in compliance with the financial covenants.
Such fluctuations in foreign exchange rates relative to the U.S. dollar may cause our actual results to differ materially from those anticipated in our guidance and have a material adverse effect on our business or results of operations. 18 Our business is affected by the cyclical nature of markets we serve.
Such fluctuations in foreign exchange rates relative to the U.S. dollar may cause our actual results to differ materially from those anticipated in our guidance and have a material adverse effect on our business or results of operations. 17 We have a significant amount of debt outstanding and must comply with restrictive covenants in our debt agreements.
Any new products that we develop may also not receive market acceptance or otherwise generate meaningful net sales or profits for us relative to our expectations and our investments. Failure to compete effectively could result in lower revenues from our products and services, lower gross margins or cause us to lose market share.
Any new products that we develop may also not receive market acceptance or otherwise generate meaningful net sales or profits for us relative to our expectations and our investments.
In addition, we conduct transaction testing to assess compliance with our internal anti-corruption policy and procedures. However, we cannot assure you that our policies, procedures and programs always will protect us from reckless or criminal acts committed by our employees or third parties that transact Terex business.
However, we cannot assure you that our policies, procedures and programs always will protect us from reckless or criminal acts committed by our employees or third parties that transact Terex business. We have a zero-tolerance policy for violations of anti-corruption laws and our anti-corruption policy.
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. Significant changes in market liquidity conditions could impact access to funding and associated funding costs, which could reduce our earnings and cash flows.
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.
Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. Our access to capital markets and borrowing capacity could be limited in certain circumstances.
Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.
Policies of governments attempting to address local deficit or structural economic issues could have a material impact on our customers and markets. Any decrease or delay in government funding of highway construction and maintenance, other infrastructure projects and overall government spending could cause our revenues and profits to decrease.
Any decrease or delay in government funding of highway construction and maintenance, other infrastructure projects and overall government spending could cause our revenues and profits to decrease.
Modification to the design of our products to meet local requirements and preferences may take longer or be more costly than we anticipate and could have a material adverse effect on our ability to achieve international sales growth. A material disruption to one of our significant manufacturing plants could adversely affect our ability to generate revenue.
Modification to the design of our products to meet local requirements and preferences may take longer or be more costly than we anticipate and could have a material adverse effect on our ability to achieve international sales growth. 15 Changes in the availability and price of certain materials and components have resulted and could result in significant disruptions to the supply chain causing manufacturing inefficiencies, increased costs and lower profits.
From time to time, we may engage in strategic transactions involving risks, including the possible failure to successfully integrate and realize the expected benefits of such transactions. We have consummated multiple acquisitions in the recent past and anticipate making additional acquisitions in the future.
We may face limitations on our ability to integrate acquired businesses. From time to time, we may engage in strategic transactions involving risks, including the possible failure to successfully integrate and realize the expected benefits of such transactions.
To compete successfully, our products must excel in terms of quality, reliability, durability, productivity, price, features, ease of use, safety and comfort, and we must provide excellent customer service. The greater financial resources of certain of our competitors may put us at a competitive disadvantage.
Our competitors include a variety of both domestic and foreign companies in all major markets. To compete successfully, our products must excel in terms of quality, reliability, durability, productivity, price, features, ease of use, safety and comfort, and we must provide excellent customer service and support.
This could result in reduced demand for our products in the U.S. and have an adverse effect on our business or results of operations. Compliance with environmental regulations could be costly and failure to meet ESG expectations or standards or achieve our ESG goals could adversely affect our reputation, business, results of operations, financial condition, or stock price.
Compliance with environmental regulations could be costly and failure to meet sustainability expectations or standards or achieve our sustainability goals could adversely affect our reputation, business, results of operations, financial condition, or stock price. We generate hazardous and nonhazardous wastes in the normal course of our manufacturing operations.
In response to changes in customer preferences concerning global climate changes and related changes in regulations, we may continue to face greater pressure to develop products that generate less greenhouse gas emissions.
Failure to compete effectively could result in lower revenues from our products and services, lower gross margins or cause us to lose market share. 19 In response to changes in customer preferences concerning global climate changes, sustainability and related changes in regulations, we may continue to face greater pressure to develop products that generate less greenhouse gas emissions.
Any of the foregoing could adversely affect our business, financial condition and results of operations. Financial and General Economy Risks Our consolidated financial results are reported in U.S. dollars while certain assets and other reported items are denominated in the currencies of other countries, creating currency exchange and translation risk.
Our consolidated financial results are reported in U.S. dollars while certain assets and other reported items are denominated in the currencies of other countries, creating currency exchange and translation risk. Our Company operates in many areas of the world, involving transactions denominated in a variety of currencies.
An unexpected change in customer financial condition or future economic uncertainty could result in additional requirements for specific reserves, which could have a negative impact on our consolidated financial position. Human Capital Risks We rely on key management and skilled labor, and we may be unable to attract, develop, engage and retain qualified team members.
An unexpected change in customer financial condition or future economic uncertainty could result in additional requirements for specific reserves, which could have a negative impact on our consolidated financial position.
Our ability to realize the anticipated benefits of any purchase, including the expected combination benefits, will depend, to a large extent, on our ability to integrate any acquired businesses.
We consummated a variety of acquisitions in the past three years and anticipate making additional acquisitions in the future including acquisitions that could be substantial in size. Our ability to realize the anticipated benefits of any purchase, including the expected combination benefits, will depend, to a large extent, on our ability to integrate any acquired businesses.
Deterioration in our credit rating may impact suppliers’ willingness to extend terms and in turn accelerate cash requirements of our business. Consolidation within our customer base and suppliers may negatively impact our pricing and product margins. Over the last few years, some of our larger customers have been actively growing through acquisitions.
In addition, we purchase material and services from our suppliers on terms extended based on our overall credit rating. Deterioration in our credit rating may impact suppliers’ willingness to extend terms and in turn accelerate cash requirements of our business. Consolidation within our customer base and suppliers may negatively impact our pricing and product margins.
Any of these factors may have an adverse effect on us or may limit our flexibility in dealing with our workforce. 21 Information Technology Risks Increased cybersecurity threats and more sophisticated computer crime pose a risk to our systems, networks, products and services.
Information Technology Risks Increased cybersecurity threats and more sophisticated computer crime may pose a risk to our systems, networks, products and services.
We cannot assure our business will generate sufficient cash flow from operations, or future borrowings will be available to us under our credit facility or otherwise, in an amount sufficient to fund our liquidity needs. 19 If our cash flows and capital resources are insufficient to service our indebtedness, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness.
Lower sales, or uncollectible receivables, generally will reduce our cash flow. We cannot assure that our business will generate sufficient cash flow from operations, or future borrowings will be available to us under our credit facility or otherwise, in an amount sufficient to fund our liquidity needs.
We do not believe that the outcome of such matters will have a material adverse effect on our consolidated financial position; however, any significant liabilities not covered by insurance could have an adverse effect on our financial condition. 23 We operate in many different jurisdictions and we could be adversely affected by violations of the U.S.
We obtain insurance coverage for catastrophic losses as well as those risks where insurance is required by law or contract. We do not believe that the outcome of such matters will have a material adverse effect on our consolidated financial position; however, any significant liabilities not covered by insurance could have an adverse effect on our financial condition.
See Risk Factor entitled, “We must comply with an injunction and related obligations imposed by the SEC.” Increasing regulatory focus on privacy and data security issues and expanding laws could expose us to increased liability. The legislative and regulatory framework for privacy and data protection issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future.
Increasing regulatory focus on privacy and data security issues and expanding laws could expose us to increased liability. The legislative and regulatory framework for privacy and data protection issues worldwide is rapidly evolving and is likely to continue to remain uncertain for the foreseeable future. We collect and transfer personal data as part of our business processes and activities.
One of our strategic initiatives is Innovate, which in part aims at the introduction of new or improved products, technologies and capabilities.
If competition in our industry intensifies or if our current competitors lower their prices for competing products, we may lose sales or be required to lower the prices we charge for our products. One of our strategic initiatives is Innovate, which in part aims at the introduction of new or improved products, technologies and capabilities.
If this trend in customer and supplier consolidation continues, it could have an unfavorable impact on our pricing and product margins. We are exposed to political, economic and other risks that arise from operating a multinational business. Our operations are subject to a number of potential risks.
Manufacturing and Operational Risks We are exposed to political, economic and other risks that arise from operating a multinational business. Our operations are subject to a number of potential risks.
Maintaining a strong reputation with team members, customers, investors, stakeholders and communities is critical to the success of our business. We have devoted and expect to have to continue to devote significant expenditures in designing and manufacturing new forms of equipment that satisfy new laws/regulations and market expectations related to greenhouse gas emission reductions.
We are experiencing, and expect to continue to experience, increased compliance burdens and associated costs to meet the new regulatory obligations. We have devoted and expect to have to continue to devote significant expenditures in designing and manufacturing new forms of equipment that satisfy new laws/regulations and market expectations related to greenhouse gas emission reductions.
The U.S. Department of Commerce has issued countervailing and anti-dumping duty rates on mobile access equipment from China.
The Coalition of American Manufacturers of Mobile Access Equipment, an alliance of mobile access equipment producers in the U.S. of which we are a member, pursued anti-dumping and countervailing cases against unfairly traded Chinese imports of mobile access equipment. The U.S. Department of Commerce has issued countervailing and anti-dumping duty rates on mobile access equipment from China.
We have experienced, and in the future are likely to experience, significant disruption of the supply of some of our parts, materials, components and final assemblies that we obtain from suppliers or subcontractors. We continue to actively monitor and mitigate our supply chain risk, but there can be no assurance that our mitigation plans will be effective.
While we experienced some supply chain improvements in 2023, we could in the future again experience significant disruption of the supply of some of our parts, materials, components and final assemblies that we obtain from suppliers or subcontractors.
However, if we are unable to recover a substantial portion of increased costs from our customers and suppliers, the extended exclusions or duty draw-back, our business or results of operations could be adversely affected. 22 The Coalition of American Manufacturers of Mobile Access Equipment, an alliance of mobile access equipment producers in the U.S. of which we are a member, pursued anti-dumping and countervailing cases against unfairly traded Chinese imports of mobile access equipment.
However, if we are unable to recover a substantial portion of increased costs from our customers and suppliers or duty draw-back, our business or results of operations could be adversely affected.
T he cost of these materials, components and final assemblies have varied significantly in past several years and are expected to continue to fluctuate due to demand changes, inflation, geopolitical and economic uncertainty, regulatory and policy instability, the imposition of duties and tariffs (including on certain Chinese origin goods) and trade agreements/barriers, freight availability and costs, wage increases and labor shortages.
While we have seen improvements in certain areas of the supply chain, it is still not operating at optimal levels and additional fluctuations and disruptions are possible due to demand changes, inflation, geopolitical and economic uncertainty, regulatory and policy instability, the imposition of duties and tariffs (including on certain Chinese origin goods) and trade agreements/barriers, freight availability and costs, wage increases and labor shortages.
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. Although our cash flow coverage ratio was greater than 2.0 to 1.0 at the end of 2022, there can be no assurance this will continue to occur.
Although our cash flow coverage ratio was greater than 2.0 to 1.0 at the end of 2023, there can be no assurance this will continue to occur. Our access to debt financing at competitive risk-based interest rates is partly a function of our credit ratings.
We may be adversely impacted by work stoppages and other labor matters. As of December 31, 2022, we employed approximately 9,300 people worldwide.
We may be adversely impacted by work stoppages and other labor matters. As of December 31, 2023, we employed approximately 10,200 team members worldwide and approximately one percent of our team members in the U.S. are represented by labor unions.
Like many manufacturers, we foresee sales of electric-powered vehicles and mobile equipment becoming increasingly important and we are actively developing and offering more electric powered products, including our all-electric utility bucket truck launched in 2022.
Like many manufacturers, we foresee sales of electric-powered vehicles and hybrid equipment becoming increasingly important and we continue to actively develop and offer more electric powered and lower emission products.
This instability can make it extremely difficult for our customers, our suppliers and us to accurately forecast and plan future business activities. While we are expecting to experience sales growth in 2023, we cannot provide any assurance that there will not be global economic weakness or a recession based on the above uncertainties.
While we expect sales to remain stable in 2024, we cannot provide any assurance that there will not be global economic weakness or a recession based on the above uncertainties or other unknown factors.
Low-cost competition from China and other developing markets could also result in decreased demand for our products. If competition in our industry intensifies or if our current competitors lower their prices for competing products, we may lose sales or be required to lower the prices we charge for our products.
The greater financial resources of certain of our competitors may put us at a competitive disadvantage. Low-cost competition from China and other developing markets could also result in decreased demand for our products.
These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time.
If our cash flows and capital resources are insufficient to service our indebtedness, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.
The current cyber threat environment continues to indicate increased risk for all companies. In addition, we could be impacted by cyber threats, disruptions or vulnerabilities of our customers and suppliers.
The current cyber threat environment continues to indicate increased risk for all companies, with cyber-attacks expanding in both frequency and sophistication.
Production capacity limits could cause us to reduce or delay sales efforts until production capacity is available. 16 Our business is sensitive to government spending. Many of our customers depend substantially on government funding of highway construction, maintenance and other infrastructure projects. In addition, we sell products to governments and government agencies in the U.S. and other nations.
Production capacity limits could cause us to reduce or delay sales efforts until production capacity is available. Financial and General Economy Risks Our business is sensitive to general economic conditions, government spending priorities and the cyclical nature of markets we serve.
Removed
Manufacturing and Operational Risks Changes in the availability and price of certain materials and components have resulted and could continue to result in significant disruptions to the supply chain causing manufacturing inefficiencies, increased costs and lower profits. We obtain materials and manufactured components from third-party suppliers.
Added
T he cost and availability of these materials, components and final assemblies have varied significantly in the past several years.
Removed
Uncertainties related to the continued magnitude and duration of global supply chain disruptions have adversely affected, and may continue to adversely affect, our business and outlook.
Added
We continue to actively monitor and mitigate our supply chain risk, but there can be no assurance that our mitigation plans will be effective.
Removed
As discussed under the risk factor titled, “Changes in the availability and price of certain materials and components have resulted and could continue to result in significant disruptions to the supply chain causing manufacturing inefficiencies, increased costs, and lower profits,” the supply chain continues to be constrained and battling labor shortages, wage increases, freight constraints and heightened inflationary pressures.
Added
If this trend in customer and supplier consolidation continues, it could have an unfavorable impact on our pricing and product margins. Our business may suffer if our equipment fails to perform as expected.
Removed
If we are not able to receive parts and components on a timely basis and at anticipated costs, we may not achieve the growth we expect in sales or profitability.
Added
If our equipment does not perform as expected or should we or any government safety regulator determine that a safety or other defect or noncompliance exists with respect to our equipment, we may receive warranty claims, need to perform a safety recall campaign, or need to delay product deliveries, the costs of which could become substantial .

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table outlines the principal manufacturing, warehouse, service and office facilities owned or leased (as indicated below) by the Company and its subsidiaries in relation to our continuing businesses: BUSINESS SEGMENT FACILITY LOCATION BUSINESS SEGMENT FACILITY LOCATION Corporate/Other Norwalk, Connecticut (1) MP (Continued) Fort Wayne, Indiana Schaffhausen, Switzerland (1) Olds, Alberta Canada (1) Multiple Business Segments Southaven, Mississippi (1) Bad Schönborn, Germany Changzhou, China Brisbane, Australia (1) Roosendaal, Netherlands Crespellano, Italy MP Oklahoma City, Oklahoma Fontanafredda, Italy Louisville, Kentucky Monaghan, Republic of Ireland Durand, Michigan Jiading, China Coalville, England AWP Moses Lake, Washington (1) Hosur, India North Bend, Washington (1) Subang Jaya, Malaysia (1) Redmond, Washington (1) Ballymoney, Northern Ireland Bothell, Washington (1) Campsie, Northern Ireland Umbertide, Italy Dungannon, Northern Ireland Darra, Australia (1) Omagh, Northern Ireland Watertown, South Dakota Cookstown, Northern Ireland Huron, South Dakota Newton, New Hampshire Monterrey, Mexico Canton, South Dakota (1) These facilities are either partially or fully leased or subleased.
Biggest changeThe following table outlines the principal manufacturing, distribution, service and office facilities owned, leased or utilized through logistics service agreement (as indicated below) by the Company and its subsidiaries in relation to our continuing businesses: BUSINESS SEGMENT FACILITY LOCATION BUSINESS SEGMENT FACILITY LOCATION Corporate/Other Norwalk, Connecticut (1) MP (Continued) Fort Wayne, Indiana Schaffhausen, Switzerland (1) Olds, Alberta Canada (1) Multiple Business Segments Southaven, Mississippi (1) Bad Schönborn, Germany Changzhou, China Brisbane, Australia (1) Roosendaal, Netherlands (2) Crespellano, Italy MP Oklahoma City, Oklahoma (1) Fontanafredda, Italy (1) Louisville, Kentucky Monaghan, Republic of Ireland Durand, Michigan Mount Vernon, Missouri Coalville, England Jiading, China Hosur, India (1) AWP Moses Lake, Washington (1) Subang Jaya, Malaysia (1) North Bend, Washington (1) Ballymoney, Northern Ireland Redmond, Washington (1) Campsie, Northern Ireland Bothell, Washington (1) Dungannon, Northern Ireland Umbertide, Italy Omagh, Northern Ireland (1) Darra, Australia (1) Cookstown, Northern Ireland Watertown, South Dakota Newton, New Hampshire Huron, South Dakota Canton, South Dakota Monterrey, Mexico (1) These facilities are either partially or fully leased or subleased.
ITEM 2. PROPERTIES As of December 31, 2022, our principal manufacturing, warehouse, service and office facilities comprised a total of approximately 7 million square feet of space worldwide.
ITEM 2. PROPERTIES As of December 31, 2023, our principal manufacturing, distribution, service and office facilities comprised a total of approximately seven million square feet of space worldwide.
We also have numerous owned or leased locations for new machine and parts sales, distribution and service located worldwide. We believe the properties listed above are suitable and adequate for our use. From time to time, we may determine that certain of our properties exceed our requirements. Such properties may be sold, leased or utilized in another manner.
From time to time, we may determine that certain of our properties exceed our requirements. Such properties may be sold, leased or utilized in another manner.
Added
(2) This facility is utilized for the distribution of parts sales under a logistics service agreement. We also have additional non-principal locations, owned or leased, for new machine and parts sales, manufacturing, distribution, service and office space worldwide. We believe the properties listed above are suitable and adequate for our use.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. 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.
Biggest changeITEM 3. LEGAL PROCEEDINGS We are involved in various legal proceedings, including product liability, general liability, workers’ compensation liability, employment, commercial, intellectual property and tax litigation, which have arisen in the normal course of operations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe re-examined our Prior Peer Group and concluded that our diversified portfolio of businesses, which evolves in accordance with acquisitions, dispositions and other transactions, is better benchmarked against the S&P Industrial Machinery Index for comparison prospectively rather than including a self-selected peer group of individual companies, as presented in prior years. 26 12/17 12/18 12/19 12/20 12/21 12/22 Terex Corporation 100.00 57.79 63.38 74.71 95.02 93.65 S&P 500 100.00 95.62 125.72 148.85 191.58 156.89 S&P Industrial Machinery 100.00 84.87 116.16 134.01 164.78 140.21 Prior Peer Group 100.00 85.45 116.88 131.95 168.50 147.82 Copyright© 2023 Standard & Poor's, a division of S&P Global.
Biggest changeWe believe that our diversified portfolio of businesses, which evolves in accordance with acquisitions, dispositions and other transactions, is better benchmarked against the S&P Industrial Machinery Index for comparison prospectively rather than a self-selected peer group of individual companies. 26 12/18 12/19 12/20 12/21 12/22 12/23 Terex Corporation 100.00 109.68 129.28 164.44 162.05 220.56 S&P 500 100.00 131.49 155.68 200.37 164.08 207.21 S&P Industrial Machinery & Components 100.00 136.87 157.91 194.16 165.21 208.28 Copyright© 2023 Standard & Poor's, a division of S&P Global.
All rights reserved. Purchases of Equity Securities The following table provides information about our purchases during the quarter ended December 31, 2022 of our common stock that is registered by us pursuant to the Exchange Act.
All rights reserved. Purchases of Equity Securities The following table provides information about our purchases during the quarter ended December 31, 2023 of our common stock that is registered by us pursuant to the Exchange Act.
Any additional payments of dividends will depend upon our financial condition, capital requirements and earnings, as well as other factors that the Board of Directors may deem relevant. As of February 7, 2023, there were 507 stockholders of record of our common stock.
Any additional payments of dividends will depend upon our financial condition, capital requirements and earnings, as well as other factors that the Board of Directors may deem relevant. As of February 6, 2024, there were 485 registered stockholders of record of our common stock.
The stock performance graph shows the change in market value of $100 invested in our common stock, the Standard & Poor’s (“S&P”) 500 Stock Index, the S&P Industrial Machinery Index and our Prior Peer Group (as defined below) for the period commencing December 31, 2017 through December 31, 2022. The cumulative total stockholder return assumes dividends are reinvested.
The stock performance graph shows the change in market value of $100 invested in our common stock, the Standard & Poor’s (“S&P”) 500 Stock Index and the S&P Industrial Machinery Index for the period commencing December 31, 2018 through December 31, 2023. The cumulative total stockholder return assumes dividends are reinvested.
In February 2023, Terex’s Board of Directors declared a dividend of $0.15 per share, which will be paid on March 20, 2023 to the Company’s shareholders of record as of March 9, 2023.
In February 2024, Terex’s Board of Directors declared a dividend of $0.17 per share, which will be paid on March 19, 2024 to the Company’s stockholders of record as of March 8, 2024.
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) October 1, 2022 – October 31, 2022 145,524 $31.66 144,101 $42,733 November 1, 2022 – November 30, 2022 1,198 $38.81 — $42,733 December 1, 2022 – December 31, 2022 3,284 $43.49 — $192,733 Total 150,006 $31.98 144,101 $192,733 (1) Amount includes shares of common stock purchased to satisfy requirements under the Company’s deferred compensation obligations to employees.
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) October 1, 2023 – October 31, 2023 148,979 $48.47 148,129 $151,793 November 1, 2023 – November 30, 2023 300,798 $48.52 299,841 $137,246 December 1, 2023 – December 31, 2023 105,691 $50.83 102,600 $132,050 Total 555,468 $48.95 550,570 $132,050 (1) Amount includes shares of common stock purchased to satisfy requirements under the Company’s deferred compensation obligations to employees.
The stockholder return shown on the graph below is not indicative of future performance. The companies in the Prior Peer Group are weighted by market capitalization. The 2022 new peer index group consists of the S&P Industrial Machinery Index.
The stockholder return shown on the graph below is not indicative of future performance.
Removed
The Prior Peer Group consists of the following companies that were in our same industry, of comparable revenue size to us and/or other manufacturing companies: AGCO Corporation, Carlisle Companies Inc., Crane Company, Dana Incorporated, Dover Corporation, Flowserve Corporation, Hubbell Inc., Lennox International Inc., The Manitowoc Company, Inc., Oshkosh Corporation, Pentair Ltd., Rockwell Automation, Inc., Roper Technologies Inc., Timken Company, Trinity Industries Inc. and Westinghouse Air Brake Technologies Corporation.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeDec '22 Sep '22 Jun '22 Mar '22 Dec '21 Effective Tax Rate 18.1 % 18.1 % 18.1 % 18.1 % Income (loss) from operations $ 120.8 $ 120.8 $ 103.9 $ 74.5 Multiplied by: 1 minus Effective Tax Rate 81.9 % 81.9 % 81.9 % 81.9 % Net operating income (loss) after tax $ 98.9 $ 98.9 $ 85.1 $ 61.0 Debt $ 775.5 $ 826.5 $ 828.2 $ 740.3 $ 674.1 Less: Cash and cash equivalents (304.1) (231.7) (253.3) (218.4) (266.9) Debt less Cash and cash equivalents 471.4 594.8 574.9 521.9 407.2 Stockholders’ equity 1,181.2 1,034.7 1,048.9 1,114.1 1,109.6 Debt less Cash and cash equivalents plus Stockholders’ equity $ 1,652.6 $ 1,629.5 $ 1,623.8 $ 1,636.0 $ 1,516.8 December 31, 2022 ROIC 21.3 % NOPAT as adjusted (last 4 quarters) $ 343.9 Average Debt less Cash and cash equivalents plus Stockholders’ equity (5 quarters) $ 1,611.7 31 RESULTS OF OPERATIONS The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Exhibit 15 (a) (1) and (2) Financial Statements and Financial Statement Schedules of this Annual Report on Form 10-K.
Biggest changeDec '23 Sep '23 Jun '23 Mar '23 Dec '22 Effective tax rate as adjusted 18.2 % 18.2 % 18.2 % 18.2 % Income (loss) from operations $ 115.7 $ 163.2 $ 209.9 $ 147.7 Multiplied by: 1 minus effective tax rate as adjusted 81.8 % 81.8 % 81.8 % 81.8 % Net operating income (loss) after tax $ 94.6 $ 133.5 $ 171.7 $ 120.8 Debt $ 623.2 $ 708.7 $ 736.7 $ 777.0 $ 775.5 Less: Cash and cash equivalents (370.7) (352.3) (297.7) (254.2) (304.1) Debt less Cash and cash equivalents 252.5 356.4 439.0 522.8 471.4 Stockholders’ equity 1,672.3 1,496.2 1,432.2 1,294.6 1,181.2 Debt less Cash and cash equivalents plus Stockholders’ equity $ 1,924.8 $ 1,852.6 $ 1,871.2 $ 1,817.4 $ 1,652.6 December 31, 2023 ROIC 28.5 % NOPAT as adjusted (last 4 quarters) $ 520.6 Average Debt less Cash and cash equivalents plus Stockholders’ equity (5 quarters) $ 1,823.7 Twelve Months Ended December 31, 2023 Income (loss) from continuing operations before income taxes (Provision for) benefit from income taxes Income tax rate Reconciliation of the full year 2023 effective tax rate: As reported 579.7 (63.0) 10.9 % Effect of adjustments: Tax related to Swiss deferred tax asset — (42.3) As adjusted $ 579.7 $ (105.3) 18.2 % 31 RESULTS OF OPERATIONS The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Exhibit 15 (a) (1) and (2) Financial Statements and Financial Statement Schedules of this Annual Report on Form 10-K.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BUSINESS DESCRIPTION Terex is a global manufacturer of materials processing machinery and aerial work platforms. We design, build and support products used in construction, maintenance, manufacturing, energy, recycling, minerals and materials management applications.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BUSINESS DESCRIPTION Terex is a global manufacturer of materials processing machinery and aerial work platforms. We design, build and support products used in maintenance, manufacturing, energy, recycling, minerals and materials management, and construction applications.
Working capital is calculated using the 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.
Working capital is calculated using the Consolidated Balance Sheet amounts for 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.
Our practice is to file income tax returns that conform to requirements of each jurisdiction and to record provisions for tax liabilities, including interest and penalties, in accordance with Accounting Standards Codification 740, “Income Taxes.” Given the continued changes and complexity in worldwide tax laws, coupled with our geographic scope and size there may be greater exposure to uncertain tax positions.
Our practice is to file income tax returns that conform to requirements of each jurisdiction and to record provisions for tax liabilities, including interest and penalties, in accordance with Accounting Standards Codification 740, “Income Taxes.” Given the 36 continued changes and complexity in worldwide tax laws, coupled with our geographic scope and size there may be greater exposure to uncertain tax positions.
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) MP and (ii) AWP. Further information about our reportable segments appears below and in Note B – “Business Segment Information” in the Notes to Consolidated Financial Statements.
We engage with customers through all stages of the product life cycle, from initial specification to parts and service support. We report our business in the following segments: (i) MP and (ii) AWP. Further information about our reportable segments appears below and in Note B – “Business Segment Information” in the Notes to Consolidated Financial Statements.
See “Liquidity and Capital Resources” for a detailed description of liquidity and working capital levels, including the primary factors affecting such levels, as well as a reconciliation of net cash provided by (used in) operating activities to free cash flow. Customer demand remains strong for our products and services.
See “Liquidity and Capital Resources” for a detailed description of liquidity and working capital levels, including 29 the primary factors affecting such levels, as well as a reconciliation of net cash provided by (used in) operating activities to free cash flow. Customer demand remains strong for our products and services.
Timing is important because, in certain jurisdictions, net operating losses (“NOLs”) or other tax attributes expire if not used within an established statutory time frame. We record a valuation allowance for each deferred tax asset for which realization is not assessed as more likely than not.
Timing is important because, in certain jurisdictions, net operating losses or other tax attributes expire if not used within an established statutory time frame. We record a valuation allowance for each deferred tax asset for which realization is not assessed as more likely than not.
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. 42 We generate hazardous and non-hazardous wastes in the normal course of our manufacturing operations.
For contingencies and uncertainties other than income taxes, when it is probable a loss will be incurred and possible to make reasonable estimates of our liability with respect to such matters, a provision is recorded for the amount of such estimate or for the minimum amount of a range of estimates when it is not possible to estimate the amount within the range that is most likely to occur. 41 We generate hazardous and non-hazardous wastes in the normal course of our manufacturing operations.
RECENT ACCOUNTING STANDARDS Please refer to Note A – “Basis of Presentation” in the accompanying Consolidated Financial Statements for a summary of recently issued accounting standards. 38 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.
RECENT ACCOUNTING STANDARDS Please refer to Note A – “Basis of Presentation” in the accompanying Consolidated Financial Statements for a summary of recently issued accounting standards. 37 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.
The unavailable information could have a significant impact on the Company’s full year 2023 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.
The unavailable information could have a significant impact on the Company’s full year 2024 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.
Discussions of 2020 and year-over-year comparison of 2021 and 2020 are not included in this document and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021.
Discussions of 2021 and year-over-year comparison of 2022 and 2021 are not included in this document and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022.
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 2023 outlook for earnings per share is a non-GAAP financial measure because it excludes unusual items.
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 2024 outlook for earnings per share is a non-GAAP financial measure because it excludes unusual items.
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 2026 and we have increased our focus on free cash flow generation.
Our main sources of funding are cash generated from operations, including cash generated from the sale of receivables, loans from our bank credit facilities and funds raised in capital markets. We have no significant debt maturities until 2029 and we have increased our focus on free cash flow generation.
These assumptions require us to analyze the aging of and forecasted demand for our inventory, forecast future product sales prices, pricing trends and margins, and to make judgments and estimates regarding obsolete or excess inventory. Future product sales prices, pricing trends and margins are based on historical experience and actual orders received.
These assumptions require us to analyze the aging of and forecasted demand for our inventory, forecast future product sales prices, pricing trends and margins, and to make judgments and estimates regarding excess and obsolete (“E&O”) inventory. Future product sales prices, pricing trends and margins are based on historical experience and actual orders received.
It is our policy to fund the retirement plans at the minimum level required by applicable regulations. In 2022, we made cash contributions and payments to the retirement plans of $8.9 million, and we estimate that our retirement plan contributions will be approximately $9 million in 2023.
It is our policy to fund the retirement plans at the minimum level required by applicable regulations. In 2023, we made cash contributions and payments to the retirement plans of $9.8 million, and we estimate that our retirement plan contributions will be approximately $10 million in 2024.
This section of our Annual Report on Form 10-K generally discusses 2022 and 2021 and provides a year-over-year comparison of 2022 and 2021.
This section of our Annual Report on Form 10-K generally discusses 2023 and 2022 and provides a year-over-year comparison of 2023 and 2022.
Our ability to generate cash from operations is subject to numerous factors, including the following: • The duration and depth of the global economic challenges resulting from supply chain constraints, inflationary pressures, foreign exchange rate volatility, geopolitical uncertainty, rising interest rates and remaining COVID-19 impacts. • 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.
Our ability to generate cash from operations is subject to numerous factors, including the following: • The duration and depth of the global economic volatility resulting from supply chain constraints, inflationary pressures, foreign exchange rate volatility, geopolitical uncertainty and rising interest rates. • As our sales change, the amount of working capital needed to support our business may change. • Many of our customers fund their purchases through third-party finance companies that extend credit based on the creditworthiness of customers and expected residual value of our equipment.
Non-GAAP measures also include Net Operating Profit After Tax (“NOPAT”), which is used in the calculation of our after tax return on invested capital (“ROIC”) (collectively the “Non-GAAP Measures”), which are discussed in detail below. 28 Overview Safety remains our top priority; driven by Think Safe – Work Safe – Home Safe.
Non-GAAP measures also include Net Operating Profit After Tax (“NOPAT”) and effective tax rate as adjusted, which is used in the calculation of our after tax return on invested capital (“ROIC”) (collectively the “Non-GAAP Measures”), which are discussed in detail below. 28 Overview Safety remains our top priority; driven by Think Safe – Work Safe – Home Safe.
We do not provide for income taxes or tax benefits on differences between financial reporting basis and tax basis of our non-U.S. subsidiaries where such differences are reinvested and, in our opinion, will continue to be indefinitely reinvested.
We do not provide for foreign income and withholding, U.S. federal, or state income taxes or tax benefits on differences between financial reporting basis and tax basis of our non-U.S. subsidiaries where such differences are reinvested and, in our opinion, will continue to be indefinitely reinvested.
Future interest payments associated with the outstanding debt are approximately $203 million with $41.8 million payable within 12 months. For detailed debt information see Note J – “Long Term Obligations” in Notes to Consolidated Financial Statements. Leases The Company has leases for real property, vehicles and office and industrial equipment.
Future interest payments associated with the outstanding debt are approximately $180 million with $30 million payable within 12 months. For detailed debt information see Note J – “Long Term Obligations” in Notes to Consolidated Financial Statements. Leases The Company has leases for real property, vehicles and office and industrial equipment.
Changes in market conditions, changes in our funding levels or actions by governmental agencies may result in accelerated funding requirements in future periods. In 2023, we expect approximately $135 million in capital expenditures, with our largest expenditure related to our manufacturing facility in Mexico.
Changes in market conditions, changes in our funding levels or actions by governmental agencies may result in accelerated funding requirements in future periods. In 2024, we expect approximately $145 million in capital expenditures, with our largest expenditure related to our manufacturing facility in Mexico.
Our judgments and estimates for excess or obsolete inventory are based on analysis of actual and forecasted usage. Valuation of used equipment taken in trade from customers requires us to use the best information available to determine the value of the equipment to potential customers. This value is subject to change based on numerous conditions.
Our judgments and estimates for E&O inventory are based on analysis of actual and forecasted usage. Valuation of used equipment taken in trade from customers requires us to use the best information available to determine the value of the equipment to potential customers. This value is subject to change based on numerous conditions.
Purchase Obligations The Company had purchase obligations of $696.1 million, with substantially all purchase obligations payable within 12 months. Purchase obligations include non-cancellable and cancellable commitments. In many cases, cancellable commitments contain penalty provisions for cancellation.
Purchase Obligations The Company had purchase obligations of approximately $686 million, with substantially all purchase obligations payable within 12 months. Purchase obligations include non-cancellable and cancellable commitments. In many cases, cancellable commitments contain penalty provisions for cancellation.
Additionally, at December 31, 2022, we had outstanding letters of credit that totaled $118.4 million and maximum exposure of $121.4 million for credit guarantees outstanding related to recourse provided to third-party financial institutions when customers finance the purchase of equipment. We maintain defined benefit pension plans for some of our U.S. and non-U.S. operations.
Additionally, at December 31, 2023, we had outstanding letters of credit that totaled $119.9 million and maximum exposure of $89.4 million for credit guarantees outstanding related to recourse provided to third-party financial institutions when customers finance the purchase of equipment. We maintain defined benefit pension plans for some of our U.S. and non-U.S. operations.
As of December 31, 2022, the Company had contractual fixed costs primarily related to lease commitments of approximately $107 million, with $33.3 million payable within 12 months. For detailed lease information see Note K – “Leases” in Notes to Consolidated Financial Statements.
As of December 31, 2023, the Company had contractual fixed costs primarily related to lease commitments of approximately $160 million, with $43 million payable within 12 months. For detailed lease information see Note K – “Leases” in Notes to Consolidated Financial Statements.
We consider whether each component of an operating segment meets the criteria for a reporting unit in accordance with ASC 350-20. However, we aggregate two or more components of an operating segment into a single reporting unit if the components have similar economic characteristics.
We consider whether each component of an operating segment meets the criteria for a reporting unit. However, we aggregate two or more components of an operating segment into a single reporting unit if the components have similar economic characteristics.
We reported a liability of $2.5 million related to unrecognized tax benefits as of December 31, 2022 and do not expect this liability to change materially in 2023. As such, any related payments in 2023 should not be significant.
We reported a liability of $6.4 million related to unrecognized tax benefits as of December 31, 2023 and do not expect this liability to change materially in 2024. As such, any related payments in 2024 should not be significant.
As the tables below show, our ROIC at December 31, 2022 was 21.3%. 30 Amounts described below are reported in millions of U.S. dollars, except for the Effective Tax Rate. Amounts are as of and for the three months ended for the periods referenced in the tables below.
As the tables below show, our ROIC at December 31, 2023 was 28.5%. 30 Amounts described below are reported in millions of U.S. dollars, except for the effective tax rate as adjusted. Amounts are as of and for the three months ended for the periods referenced in the tables below.
We calculate the translation effect of foreign currency exchange rate changes by translating current period results using rates that the comparable prior periods were translated at to isolate the foreign exchange component of fluctuation from the operational component.
We calculate the translation effect of foreign currency exchange rate changes by translating current period results using rates that the comparable prior periods were translated at to isolate the foreign exchange component of fluctuation from the operational component. We calculate a non-GAAP measure of free cash flow.
The decrease in cash used in financing activities was primarily due to debt prepayments in 2021 compared to borrowings in 2022, partially offset by share repurchases in 2022. 41 OFF-BALANCE SHEET ARRANGEMENTS Guarantees We may assist customers in their rental, leasing and acquisition of our products by facilitating financing transactions directly between (i) end-user customers, distributors and rental companies and (ii) third-party financial institutions, providing recourse in certain circumstances.
The increase in cash used in financing activities was primarily due to higher debt repayments and lower debt borrowing in the current year, partially offset by lower share repurchases in the current year. 40 OFF-BALANCE SHEET ARRANGEMENTS Guarantees We may assist customers in their rental, leasing and acquisition of our products by facilitating financing transactions directly between (i) end-user customers, distributors and rental companies and (ii) third-party financial institutions, providing recourse in certain circumstances.
Revenue Recognition – We recognize revenue when goods or services are transferred to customers in an amount that reflects the consideration which we expect to receive in exchange for those goods or services.
Such reserves are not reduced until the product is sold. Revenue Recognition – We recognize revenue when goods or services are transferred to customers in an amount that reflects the consideration which we expect to receive in exchange for those goods or services.
The gain in 2021 primarily related to the sales of our MHPS and mobile crane businesses in 2017 and 2019, respectively. 34 CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period.
The loss in 2022 primarily related to the sale of our former mobile cranes business in 2019. 34 CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period.
At December 31, 2022, we had cash and cash equivalents of $304 million and undrawn availability under our revolving line of credit of $423 million, giving us total liquidity of approximately $727 million.
At December 31, 2023, we had cash and cash equivalents of $371 million and undrawn availability under our revolving line of credit of $600 million, giving us total liquidity of approximately $971 million.
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. 40 The Company’s material cash requirements include the following contractual and other obligations: Debt As of December 31, 2022, the Company had outstanding debt of $771.3 million, with $0.1 million payable within 12 months.
In addition, terms of our bank credit facilities and senior notes contain restrictions on our ability to make further borrowings and to sell substantial portions of our assets. 39 The Company’s material cash requirements include the following contractual and other obligations: Debt As of December 31, 2023, the Company had outstanding debt of $595.5 million, with $0.2 million payable within 12 months, exclusive of minimum lease payments for capital lease obligations and secured borrowings.
If actual conditions are less favorable than those we have projected, we will increase our reserves for lower of cost or NRV, excess and obsolete inventory accordingly. Any increase in our reserves will adversely impact our results of operations.
If actual conditions are less favorable than those we have projected, we will increase our reserves for lower of cost or NRV, E&O inventory accordingly. Any increase in our reserves will adversely impact our results of operations. Establishment of a reserve for lower of cost or NRV, E&O inventory establishes a new cost basis in the inventory.
Consolidated 2022 2021 2020 % of Sales % of Sales % of Sales % Change in Reported Amounts 2022 vs 2021 ($ amounts in millions) Net sales $ 4,417.7 — $ 3,886.8 — $ 3,076.4 — 13.7 % Gross profit 871.2 19.7 % 757.4 19.5 % 539.3 17.5 % 15.0 % SG&A expenses 451.2 10.2 % 429.4 11.0 % 470.9 15.3 % 5.1 % Income from operations 420.0 9.5 % 328.0 8.4 % 68.4 2.2 % 28.0 % Net sales for the year ended December 31, 2022 increased $530.9 million when compared to 2021.
Consolidated 2023 2022 2021 % of Sales % of Sales % of Sales % Change in Reported Amounts 2023 vs 2022 ($ amounts in millions) Net sales $ 5,151.5 — $ 4,417.7 — $ 3,886.8 — 16.6 % Gross profit 1,176.6 22.8 % 871.2 19.7 % 757.4 19.5 % 35.1 % SG&A expenses 540.1 10.5 % 451.2 10.2 % 429.4 11.0 % 19.7 % Income from operations 636.5 12.4 % 420.0 9.5 % 328.0 8.4 % 51.5 % Net sales for the year ended December 31, 2023 increased $733.8 million when compared to 2022.
Income Taxes During the year ended December 31, 2022, we recognized income tax expense of $66.4 million on income of $366.6 million, an effective tax rate of 18.1%, as compared to income tax expense of $46.3 million on income of $263.8 million, an effective tax rate of 17.6%, for the year ended December 31, 2021 .
Income Taxes During the year ended December 31, 2023, we recognized income tax expense of $63.0 million on income of $579.7 million, an effective tax rate of 10.9%, as compared to income tax expense of $66.4 million on income of $366.6 million, an effective tax rate of 18.1%, for the year ended December 31, 2022.
We evaluate the net realizable value of our deferred tax assets each period to ensure that estimated future taxable income will be sufficient in character, amount and timing to result in the use of our deferred tax assets.
These deferred income tax balances arise from temporary differences due to divergent treatment of certain items for accounting and income tax purposes. We evaluate the net realizable value of our deferred tax assets each period to ensure that estimated future taxable income will be sufficient in character, amount and timing to result in the use of our deferred tax assets.
We calculate ROIC using the last four quarters’ NOPAT as this represents the most recent 12-month period at any given point of determination.
Debt is calculated using amounts for Current portion of long-term debt plus Long-term debt, less current portion. We calculate ROIC using the last four quarters’ NOPAT as this represents the most recent 12-month period at any given point of determination.
Gain (Loss) on Disposition of Discontinued Operations – Net of Tax During the years ended December 31, 2022 and 2021, we recognized a gain (loss) on disposition of discontinued operations - net of tax of $(0.2) million and $3.4 million, respectively. The loss in 2022 primarily related to the sale of our mobile cranes business in 2019.
Gain (Loss) on Disposition of Discontinued Operations – Net of Tax During the years ended December 31, 2023 and 2022, we recognized a gain (loss) on disposition of discontinued operations - net of tax of $1.3 million and $(0.2) million, respectively.
The increase in net sales was primarily due to healthy demand for our products across multiple businesses and price realization, necessary to mitigate rising costs, across all segments. Changes in foreign exchange rates negatively impacted consolidated net sales by approximately $244 million. Gross profit for the year ended December 31, 2022 increased $113.8 million when compared to 2021.
The increase in net sales was primarily due to healthy demand for our products across multiple businesses and all major geographies as well as improvements in the supply chain and price realization necessary to mitigate rising costs. Gross profit for the year ended December 31, 2023 increased $305.4 million when compared to 2022.
During the year ended December 31, 2022, our liquidity decreased by approximately $140 million from December 31, 2021 primarily due to term loan prepayment, capital expenditures, investments, share repurchases, dividends and acquisitions, partially offset by cash generated from operations which includes the adverse impact of higher inventory due to supply chain disruptions.
During the year ended December 31, 2023, our liquidity increased by approximately $244 million from December 31, 2022 primarily due to cash generated from operations and sale of capital assets, partially offset by capital expenditures, share repurchases, dividends, and acquisitions and investments.
Company-wide investments in new product development and continued deployment of digital customer and dealer solutions are important to help to deliver long-term growth.
We continued our investment in technology and new product development, which are important to help enable us to take advantage of sustainability trends such as recycling, electrification and decarbonization. Company-wide investments in new product development and continued deployment of digital customer and dealer solutions are important to help deliver long-term growth.
The increase in operating loss is primarily due to a gain on the sale of the finance receivables and a finance receivable reserve release in 2021. 33 Other 2022 2021 2020 % Change in Reported Amounts 2022 vs 2021 ($ amounts in millions) Interest (expense), net of interest income $ (46.3) $ (47.8) $ (62.3) 3.1 % Loss on early extinguishment of debt (0.3) (29.4) — 99.0 % Other income (expense) – net (6.8) 13.0 4.9 (152.3) % (Provision for) benefit from income taxes (66.4) (46.3) (2.0) (43.4) % Income (loss) from discontinued operations – net of tax — — (0.4) * Gain (loss) on disposition of discontinued operations – net of tax (0.2) 3.4 (19.2) (105.9) % * Not a meaningful percentage Interest Expense, Net of Interest Income Interest expense, net of interest income, was comparable at $46.3 million and $47.8 million for the year ended December 31, 2022 and 2021, respectively.
Other 2023 2022 2021 % Change in Reported Amounts 2023 vs 2022 ($ amounts in millions) Interest (expense), net of interest income $ (55.7) $ (46.3) $ (47.8) (20.3) % Loss on early extinguishment of debt — (0.3) (29.4) * Other income (expense) – net (1.1) (6.8) 13.0 83.8 % (Provision for) benefit from income taxes (63.0) (66.4) (46.3) 5.1 % Gain (loss) on disposition of discontinued operations – net of tax 1.3 (0.2) 3.4 * * Not a meaningful percentage Interest Expense, Net of Interest Income During the year ended December 31, 2023, interest expense, net of interest income, was $55.7 million or $9.4 million higher when compared to the same period in 2022 due primarily to an increase in receivable sales and higher interest rates, partially offset by higher interest income and no term loan interest in the current year period.
Our Board of Directors declared a dividend of $0.13 per share in each quarter of 2022, which were paid to our shareholders. In February 2023, our Board of Directors declared a dividend of $0.15 per share, which will be paid on March 20, 2023 to our shareholders of record as of March 9, 2023.
In February 2024, our Board of Directors declared a dividend of $0.17 per share, which will be paid on March 19, 2024 to our stockholders of record as of March 8, 2024.
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.
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 accounts receivable sales programs.
Our performance in 2022 reflected continued, strong, global customer demand in our businesses and good execution by our team members in a dynamic and challenging environment. Net sales of $4.4 billion were up 14% year-over-year, 20% on a foreign exchange neutral basis, as end-markets remained strong.
Our permanent Mexico facility continues to advance on time and on budget. Our performance in 2023 reflected strong, global customer demand in our businesses and excellent execution by our team members in a dynamic and challenging environment. Net sales of $5.2 billion were up 17% year-over-year as end-markets remained strong.
Most of this cash could be used in the U.S., if necessary, without additional tax expense. Incremental cash repatriated to the U.S. would not be expected to result in material foreign, Federal or state tax cost. We will continue to seek opportunities to tax-efficiently mobilize and redeploy funds.
Incremental cash repatriated to the U.S. would not be expected to result in material foreign income and withholding, U.S. federal or state income tax cost. We will continue to seek opportunities to tax-efficiently mobilize and redeploy funds. We had free cash flow of $365.7 million for the year ended December 31, 2023.
We do not, nor do we suggest that investors consider, such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
We do not, nor do we suggest that investors consider, such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Non-GAAP measures also include translation effect of foreign currency exchange rate changes on net sales, gross profit, SG&A expenses and operating profit.
Aerial Work Platforms 2022 2021 2020 % of Sales % of Sales % of Sales % Change in Reported Amounts 2022 vs 2021 ($ amounts in millions) Net sales $ 2,483.6 — $ 2,178.8 — $ 1,782.9 — 14.0 % Income from operations 196.2 7.9 % 152.1 7.0 % 0.5 — % 29.0 % Net sales for the year ended December 31, 2022 increased $304.8 million when compared to 2021 primarily due to price realization, necessary to mitigate rising costs, and higher demand that was driven by fleet replacement and end-market growth for aerial work platforms in all major geographies except China and utility products and telehandlers in North America.
Income from operations for the year ended December 31, 2023 increased $60.8 million when compared to 2022 primarily due to incremental profit achieved on higher sales volume and improved manufacturing efficiencies, partially offset by SG&A cost increases. 32 Aerial Work Platforms 2023 2022 2021 % of Sales % of Sales % of Sales % Change in Reported Amounts 2023 vs 2022 ($ amounts in millions) Net sales $ 2,921.7 — $ 2,483.6 — $ 2,178.8 — 17.6 % Income from operations 371.3 12.7 % 196.2 7.9 % 152.1 7.0 % 89.2 % Net sales for the year ended December 31, 2023 increased $438.1 million when compared to 2022 primarily due to healthy demand for aerial work platforms in all major geographies and telehandlers and utility products in North America as well as improvements in the supply chain and price realization necessary to mitigate rising costs.
Cash Flows Cash provided by operations was $261.2 million and $293.4 million for the years ended December 31, 2022 and 2021, respectively. The change in operating cash was primarily driven by proceeds from the sale of finance receivables received in 2021, partially offset by increased operating profitability in 2022.
Cash Flows Cash provided by operations was $459.3 million and $261.2 million for the years ended December 31, 2023 and 2022, respectively. The increase in cash provided by operations was primarily driven by increased operating profitability in the current year.
The following table reconciles net cash provided by (used in) operating activities to free cash flow (in millions): Year Ended 12/31/2022 Net cash provided by (used in) operating activities $ 261.2 Capital expenditures, net of proceeds from sale of capital assets (109.4) Free cash flow $ 151.8 Pursuant to terms of our trade accounts receivable factoring arrangements, during the year ended December 31, 2022, we sold, without material recourse, approximately $665 million of trade accounts receivable to enhance liquidity. 39 Working capital as a percent of trailing three month annualized net sales was 18.0% at December 31, 2022.
Pursuant to terms of our trade accounts receivable factoring arrangements, during the year ended December 31, 2023, we sold, without material recourse, approximately $835 million of trade accounts receivable to enhance liquidity. 38 Working capital as a percent of trailing three month annualized net sales was 20.4% at December 31, 2023.
Cash used in investing activities was $154.1 million and $102.2 million for the years ended December 31, 2022 and 2021, respectively. The increase in cash used in investing activities relates primarily to higher capital expenditures and investment activity. Cash used in financing activities was $54.9 million and $580.1 million for the year ended December 31, 2022 and 2021, respectively.
Cash used in investing activities was $114.4 million and $154.1 million for the years ended December 31, 2023 and 2022, respectively. The decrease in cash used in investing activities relates primarily to higher proceeds from the sale of capital assets and lower acquisition and investment activity, partially offset by higher capital expenditures in the current year.
Other Income (Expense) – Net Other income (expense) – net for the year ended December 31, 2022 was an expense of $6.8 million, compared to income of $13.0 million in the same period in 2021.
Loss on Early Extinguishment of Debt During the year ended December 31, 2023, there was no loss on early extinguishment of debt compared to a loss of $0.3 million in 2022 due to prepayment of term loans in the prior period. 33 Other Income (Expense) – Net Other income (expense) – net for the year ended December 31, 2023 was an expense of $1.1 million, compared to $6.8 million in the same period in 2022.
Our investment objective is to preserve capital and liquidity while earning a market rate of interest. We seek to use cash held by our foreign subsidiaries to support our operations and continued growth plans through funding of capital expenditures, operating expenses or other similar cash needs of worldwide operations.
We seek to use cash held by our foreign subsidiaries to support our operations and continued growth plans through funding of capital expenditures, operating expenses or other similar cash needs of worldwide operations. Most of this cash could be used in the U.S., if necessary, without additional tax expense.
The increase was primarily due to incremental margin on higher sales volume, price realization and favorable mix which more than offset cost increases and the negative impact of changes in foreign exchange rates. 32 Materials Processing 2022 2021 2020 % of Sales % of Sales % of Sales % Change in Reported Amounts 2022 vs 2021 ($ amounts in millions) Net sales $ 1,941.6 — $ 1,691.8 — $ 1,256.8 — 14.8 % Income from operations 297.8 15.3 % 240.9 14.2 % 143.4 11.4 % 23.6 % Net sales for the year ended December 31, 2022 increased by $249.8 million when compared to 2021 primarily due to robust end-market demand for aggregates in all major geographies, material handlers and environmental equipment in North America and Western Europe, and cranes in Asia-Pacific and North America, as well as price realization, necessary to mitigate rising costs, and new product offerings.
Materials Processing 2023 2022 2021 % of Sales % of Sales % of Sales % Change in Reported Amounts 2023 vs 2022 ($ amounts in millions) Net sales $ 2,227.0 — $ 1,941.6 — $ 1,691.8 — 14.7 % Income from operations 358.6 16.1 % 297.8 15.3 % 240.9 14.2 % 20.4 % Net sales for the year ended December 31, 2023 increased by $285.4 million when compared to 2022 primarily due to robust end-market demand for aggregates across all major geographies as well as concrete products and environmental equipment in North America.
Corporate and Other / Eliminations 2022 2021 2020 % of Sales % of Sales % of Sales % Change in Reported Amounts 2022 vs 2021 ($ amounts in millions) Net sales $ (7.5) — $ 16.2 — $ 36.7 — (146.3) % Loss from operations (74.0) * (65.0) * (75.5) * (13.8) % * Not a meaningful percentage Net sales include financing activities of TFS, governmental sales and elimination of intercompany sales activity among segments.
Corporate and Other / Eliminations 2023 2022 2021 % of Sales % of Sales % of Sales % Change in Reported Amounts 2023 vs 2022 ($ amounts in millions) Net sales $ 2.8 — $ (7.5) — $ 16.2 — 137.3 % Loss from operations (93.4) * (74.0) * (65.0) * (26.2) % * Not a meaningful percentage Loss from operations for the year ended December 31, 2023 increased $19.4 million when compared to 2022.
If earnings of foreign subsidiaries are not considered indefinitely reinvested, deferred U.S. income taxes, foreign income taxes, and foreign withholding taxes may have to be provided. We do not record deferred income taxes on the temporary difference between the book and tax basis in domestic subsidiaries where permissible.
We do not record deferred income taxes on the temporary difference between the book and tax basis in domestic subsidiaries where permissible. At this time, determination of the unrecognized deferred tax liabilities for temporary differences related to our investment in non-U.S. subsidiaries is not practicable.
We continue to maintain ample liquidity and as of December 31, 2022, we had $727 million in available liquidity, with no near-term debt maturities.
We returned over $100 million to shareholders for the second year in a row. In 2023, we returned $104 million to shareholders, including $61 million in share repurchases and $43 million in dividend payments. We continue to maintain ample liquidity and as of December 31, 2023, we had $971 million in available liquidity, with no near-term debt maturities.
Income from operations for the year ended December 31, 2022 increased $44.1 million when compared to 2021 primarily due to incremental margin on higher sales volume, price realization and favorable mix, partially offset by material, labor, manufacturing inefficiency and freight cost increases due to global supply chain disruptions, significant inflationary pressures and the negative impact of changes in foreign exchange rates.
Income from operations for the year ended December 31, 2023 increased $175.1 million when compared to 2022 primarily due to incremental profit achieved on higher sales volume, price realization, improved manufacturing efficiencies and cost reduction initiatives, partially offset by SG&A cost increases.
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.
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 full year 2023 effective tax rate as adjusted.
The following tables show the calculation of our working capital and trailing three months annualized sales as of December 31, 2022 (in millions): Three months ended 12/31/2022 Net Sales $ 1,217.6 x 4 Trailing Three Month Annualized Net Sales $ 4,870.4 As of 12/31/22 Inventories $ 988.4 Trade Receivables 547.5 Trade Accounts Payable (624.6) Customer Advances (36.2) Working Capital $ 875.1 Revolver Borrowings were $177 million at December 31, 2022.
The following tables show the calculation of our working capital and trailing three months annualized sales as of December 31, 2023 (in millions): Three months ended December 31, 2023 Net sales $ 1,222.6 x 4 Trailing three month annualized net sales $ 4,890.4 As of December 31, 2023 Inventories $ 1,186.0 Receivables 547.8 Trade accounts payable (702.6) Customer advances (32.2) Working capital $ 999.0 We remain focused on expanding customer financing solutions in key markets like the U.S., Europe and China.
The MP businesses continue to benefit from strong equipment utilization rates and dealers looking to replenish their inventory and rental fleets. Our mobile crushing and screening businesses are benefiting from the strength of aggregates driven by investments in infrastructure projects and demand for sand to source silicon used in semiconductors.
The MP businesses also continued to benefit from dealers looking to replenish their inventory and rental fleets. Our mobile crushing and screening businesses are benefiting from the strength of aggregates and recycled materials. Growth of environmental and waste recycling solutions is driving demand for our wood processing, biomass and recycling equipment.
The increase in expense was primarily due to a gain related to the early termination of a lease in 2021, mark-to-market losses recorded on an equity investment in 2022 compared to gains recorded in 2021 and foreign exchange transaction losses in 2022 compared to gains in 2021.
The decrease in expense was primarily due to mark-to-market gains recorded on an equity investment in 2023 compared to losses recorded in 2022, partially offset by higher non-service cost portion of pension expense in 2023.
Income from operations for the year ended December 31, 2022 increased $56.9 million when compared to 2021 primarily due to incremental margin on higher sales volume, favorable mix and price realization, partially offset by material, labor, manufacturing inefficiency and freight cost increases due to global supply chain disruptions, significant inflationary pressures and the negative impact of changes in foreign exchange rates.
Income from operations for the year ended December 31, 2023 increased by $216.5 million when compared to 2022. The increase was primarily due to incremental profit achieved on higher sales volume, price realization, improved manufacturing efficiencies and cost reduction initiatives, partially offset by SG&A cost increases.
Our strategic operational priorities of execution, innovation and growth continue to strengthen our operations and allow us to capitalize on the strong demand in our end-markets. We are leveraging our business operating systems to navigate supply challenges and labor constraints while working to mitigate material cost inflation.
Our strategic operational priorities of execution, innovation and growth continue to strengthen our operations and allow us to capitalize on the strong demand in our end-markets. Our operations teams executed well during 2023, maintaining their focus on improving deliveries to our customers and continuing with cost reduction and productivity improvement initiatives.
We recognize deferred income tax assets and liabilities, which represent future tax benefits or obligations of our legal entities. These deferred income tax balances arise from temporary differences due to divergent treatment of certain items for accounting and income tax purposes.
Income Taxes – We estimate income taxes based on enacted tax laws in the various jurisdictions where we conduct business. We recognize deferred income tax assets and liabilities, which represent future tax benefits or obligations of our legal entities.
The higher effective tax rate for the year ended December 31, 2022 when compared to the year ended December 31, 2021 is primarily due to unfavorable items including higher U.S. tax on foreign income and lower uncertain tax positions benefit, partially offset by the release of the valuation allowance for the German interest expense deferred tax asset in 2022.
The lower effective tax rate for the year ended December 31, 2023 when compared to the year ended December 31, 2022 was primarily due to one-time tax benefit derived from recording of a deferred tax asset in relation to our Swiss operations.
Gross margins increased by 190 basis points in the quarter as the team implemented cost take out plans and pricing actions helped to offset cost increases. The year-over-year gross margin increase was in both our segments.
Gross margins increased by 310 basis points in the year as volume, pricing, improved manufacturing efficiencies and expense discipline helped to offset cost increases. Income from operations of $637 million was up 52% year-over-year. Operating margin of 12.4% was up 290 basis points compared to the prior year period.
We had free cash flow of $151.8 million for the year ended December 31, 2022.
Cash used in financing activities was $287.8 million and $54.9 million for the year ended December 31, 2023 and 2022, respectively.
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Non-GAAP measures we may use include translation effect of foreign currency exchange rate changes on net sales, gross profit, SG&A expenses and operating profit, as well as the net sales, gross profit, SG&A expenses and operating profit excluding the impact of acquisitions and divestitures.
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Overall, 2023 financial performance demonstrated continued, strong execution and focus on delivering for our customers and dealers despite continued macroeconomic volatility and lingering supply chain constraints. Although supplier on-time delivery has improved, it remains below historical norms.
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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.
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While our “hospital” inventory decreased from the prior year to $25 million at the end of 2023, we continue to face disruption, highlighting the challenges our team members continue to navigate and overcome.
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In 2022, we completed a number of acquisitions, including enhancing our concrete offerings, adding fabrication capacity for our Northern Ireland businesses and expanding the capabilities of our growing environmental business in the MP segment with the acquisition of a company that designs and creates robots that pick, sort and recycle waste material.
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Higher interest rates, inflation and geopolitical uncertainties have had an impact in Europe and we have seen slight softening in that market while demand in North America remains strong. MP had another strong year with net sales up 15% from the prior year, driven by strong demand for our aggregates, environmental and concrete products.
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Despite the high inflationary environment, SG&A spending as a percentage of net sales was down 80 basis points to 10.2% of net sales, reflecting focused cost management. Operating margin of 9.5% was up 110 basis points year-over-year driven by prudent cost management and the improvement throughout the year in price cost dynamics.
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MP’s 16.1% operating margin for the year, up 80 basis points as compared to the prior year, was driven by higher sales volume, favorable mix and improved manufacturing efficiencies. Although we are seeing some softness in European order activity, MP’s backlog of $768 million remains healthy, supporting our 2024 outlook.
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Overall, 2022 financial performance demonstrated continued, strong execution and focus on delivering for our customers and dealers despite global supply chain disruptions, significant inflationary pressures and foreign exchange rate volatility. The global operating environment has remained difficult and unpredictable with increases in commodity prices, energy costs and logistics adversely impacting the Company.
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AWP’s 2023 net sales were up 18% compared to the prior year period, primarily driven by improved supply chain, higher demand and price realization necessary to mitigate rising costs. Construction, infrastructure, and industrial applications are driving demand for Genie products. Examples of such applications for Genie products include data centers, warehouses and manufacturing facilities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeHowever, we anticipate that we will continue to be adversely affected by material shortages and production delays into 2023. Principal materials and components used in our various manufacturing processes include steel, castings, engines, tires, hydraulics, cylinders, drive trains, electric controls and motors, semiconductors, and a variety of other commodities and fabricated or manufactured items.
Biggest changePrincipal materials and components used in our various manufacturing processes include steel, castings, engines, tires, hydraulics, cylinders, drive trains, electric controls and motors, semiconductors, and a variety of other commodities and fabricated or manufactured items. Inflationary pressure on certain purchased components have continued while the cost of U.S. steel increased in the latter part of 2023.
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 year ended December 31, 2022 would have had approximately a $40 million impact on the translation effect of foreign exchange rate changes already included in our reported operating income for the period.
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 year ended December 31, 2023 would have had approximately a $50 million impact on the translation effect of foreign exchange rate changes already included in our reported operating income for the period ended December 31, 2023.
Based on this sensitivity analysis, we have determined that an increase of 10% in our average floating interest rates at December 31, 2022 would not have materially increased interest expense during the year ended December 31, 2022. 43 Commodities Risk In the absence of labor strikes or other unusual circumstances, substantially all materials and components are normally available from multiple suppliers.
Based on this sensitivity analysis, we have determined that an increase of 10% in our average floating interest rates at December 31, 2023 would not have materially increased interest expense during the year ended December 31, 2023. 42 Commodities Risk In the absence of labor strikes or other unusual circumstances, substantially all materials and components are normally available from multiple suppliers.
At December 31, 2022, approximately 23% of our debt was floating rate debt and the weighted average interest rate of our total debt was 4.81%. At December 31, 2022, we performed a sensitivity analysis for our financial instruments that have interest rate risk. We calculated the pretax earnings effect on our interest sensitive instruments.
At December 31, 2023, less than 1% of our debt was floating rate debt and the weighted average interest rate of our total debt was 4.15%. At December 31, 2023, we performed a sensitivity analysis for our financial instruments that have interest rate risk. We calculated the pretax earnings effect on our interest sensitive instruments.
Government’s exclusion process, which has been extended through September 30, 2023, and duty draw back mechanism. If we are unable to recover a substantial portion of increased costs from our customers and suppliers or through duty draw-back, our business or results of operations could be adversely affected.
Government’s exclusion process, which has been extended through May 31, 2024, duty draw back and other mechanisms we continue to explore. If we are unable to recover a substantial portion of increased costs from our customers and suppliers or through duty draw back, our business or results of operations could be adversely affected.
Such fluctuations in foreign exchange rates relative to the U.S. dollar may cause our actual results to differ materially from those anticipated in our guidance and have a material adverse effect on our business or results of operations.
Such fluctuations in foreign exchange rates relative to the U.S. dollar may cause our actual results to differ materially from those anticipated and have a material adverse effect on our business or results of operations. We assess foreign currency risk based on transactional cash flows, identify naturally offsetting positions and purchase hedging instruments to partially offset anticipated exposures.
We assess foreign currency risk based on transactional cash flows, identify naturally offsetting positions and purchase hedging instruments to partially offset anticipated exposures. At December 31, 2022, we performed a sensitivity analysis on the impact that aggregate changes in the translation effect of foreign exchange rate changes would have on our operating income.
At December 31, 2023, we performed a sensitivity analysis on the impact that aggregate changes in the translation effect of foreign exchange rate changes would have on our operating income.
We actively manage our material supply sourcing, and employ various methods to limit risk associated with commodity cost fluctuations and availability. Our manufacturing operations continue to be adversely affected by material shortages and production delays as the continuity of supply was impacted by capacity constraints, global logistics disruptions, raw material shortages and remaining COVID-19 impacts.
We actively manage our material sourcing, and employ various methods to limit risk associated with commodity cost fluctuations and availability. While the overall continuity of material supply into our manufacturing operations has improved from the prior year, we continue to experience intermittent disruptions with certain material types, most notably electronic components.
Broad based inflation, partially offset by declines in the cost of certain raw materials, have led to an overall rise in input costs which has adversely affected our financial performance. Additionally, tariffs on certain Chinese origin goods continue to put pressure on input costs, which we have been able to partially mitigate through the U.S.
Additionally, import of certain purchased components and parts may be impacted by the implications of sanctions preventing the use of iron and steel from Russia in such components and parts. Tariffs on certain Chinese origin goods continue to put pressure on input costs, which we have been able to partially mitigate through the U.S.
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However, we anticipate that we will continue to be affected by intermittent material shortages and production delays into 2024, though the extent of these disruptions has eased.

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