Terex (US:TEX)2025-05-02 15:25PART I - FINANCIAL INFORMATION Item 1. Financial Statements For the first quarter ended March 31, 2025, Terex reported net sales of $1.23 billion, a decrease from $1.29 billion in the prior-year period, with net income declining to $21 million from $109 million and total assets increasing to $5.84 billion, reflecting the impact of the recent ESG acquisition Condensed Consolidated Statement of Comprehensive Income (Loss) | Indicator | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net sales | $1,229 million | $1,292 million | | Gross profit | $230 million | $297 million | | Operating profit | $69 million | $158 million | | Net income (loss) | $21 million | $109 million | | Diluted EPS | $0.31 | $1.60 | Condensed Consolidated Balance Sheet Highlights | Indicator | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $2,436 million | $2,320 million | | Total assets | $5,840 million | $5,730 million | | Long-term debt, less current portion | $2,582 million | $2,580 million | | Total liabilities | $3,996 million | $3,898 million | | Total stockholders' equity | $1,844 million | $1,832 million | Condensed Consolidated Statement of Cash Flows | Indicator | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | ($21 million) | ($34 million) | | Net cash provided by (used in) investing activities | ($26 million) | ($36 million) | | Net cash provided by (used in) financing activities | ($50 million) | $71 million | | Net Increase (Decrease) in Cash and Cash Equivalents | ($90 million) | ($6 million) | Note B – Business Segment Information Effective January 1, 2025, Terex realigned its segments into Materials Processing, Aerials, and Environmental Solutions, with North America comprising 73% of total sales - Effective January 1, 2025, the company realigned its business into three reportable segments: Materials Processing (MP), Aerials, and Environmental Solutions (ES), with the ES segment now including the aggregated Environmental Solutions Group (ESG) and Utilities operating segments39 Segment Performance (Q1 2025 vs Q1 2024) | Segment | Net Sales Q1 2025 | Operating Profit Q1 2025 | Net Sales Q1 2024 | Operating Profit Q1 2024 | | :--- | :--- | :--- | :--- | :--- | | Materials Processing (MP) | $382M | $36M | $520M | $72M | | Aerials | $450M | $2M | $623M | $92M | | Environmental Solutions (ES) | $399M | $56M | $151M | $15M | Net Sales by Region (Q1 2025) | Region | Net Sales (in millions) | | :--- | :--- | | North America | $898 | | Western Europe | $162 | | Asia-Pacific | $102 | | Rest of World | $67 | Note D – Acquisitions Terex acquired the Environmental Solutions Group (ESG) for $2.01 billion in cash, allocating $792 million to goodwill and $1.114 billion to identifiable intangible assets - The company acquired the Environmental Solutions Group (ESG) from Dover Corporation on October 8, 2024, for a purchase price of $2.01 billion in cash52 - The goodwill of $792 million resulting from the acquisition was assigned to the ES segment and is attributed to assembled workforce and expected synergies58 Preliminary Fair Value of Net Assets Acquired (ESG) | Assets/Liabilities | Fair Value (in millions) | | :--- | :--- | | Goodwill | $792 | | Identified intangibles subject to amortization | $1,114 | | Total assets acquired | $2,248 | | Total liabilities assumed | $248 | | Net assets acquired | $2,000 | Note J – Long-Term Obligations To finance the ESG acquisition, Terex secured new credit facilities and issued senior notes, bringing total long-term debt to $2.58 billion as of March 31, 2025 - On October 8, 2024, the company amended its credit agreement, increasing the revolving credit facility to $800 million (maturing 2029) and adding a new $1.25 billion term loan facility (maturing 2031)79 - The company issued $750 million in 6.25% Senior Notes due 2032 to help fund the ESG acquisition86 Fair Value of Debt (as of March 31, 2025) | Debt Instrument | Book Value | Fair Value | | :--- | :--- | :--- | | 5% Notes | $600M | $572M | | 6.25% Notes | $750M | $728M | | New Term Facility (net) | $1,244M | $1,244M | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Q1 2025 results exceeded expectations despite a 4.9% sales decline, supported by the ESG acquisition and a $2.6 billion backlog, leading the company to maintain its full-year outlook - Q1 net sales of $1.2 billion were down 4.9% YoY, as a 25% decline in organic business sales was partially offset by the addition of the ESG business116 - The company's backlog stood at $2.6 billion, which supports the full-year outlook116 - The full-year 2025 outlook is maintained, with expected net sales of $5.3 to $5.5 billion and EPS between $4.70 and $5.10123 - Return on Invested Capital (ROIC) was 15.0% as of March 31, 2025126128 Results of Operations Consolidated operating profit fell 56.3% to $69 million, as sharp declines in the MP and Aerials segments were partially offset by a 273.3% profit surge in Environmental Solutions - The decrease in MP operating profit was due to lower sales volume, unfavorable mix, and higher severance costs136 - The sharp decline in Aerials operating profit was caused by lower sales volume, unfavorable absorption from lower production, and a one-time litigation charge138 Segment Operating Profit Changes (Q1 2025 vs Q1 2024) | Segment | Operating Profit Q1 2025 | Operating Profit Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Materials Processing | $36M | $72M | (50.0)% | | Aerials | $2M | $92M | (97.8)% | | Environmental Solutions | $56M | $15M | 273.3% | Liquidity and Capital Resources The company maintained total liquidity of $1.1 billion and experienced a free cash flow use of $55 million, while returning capital through share repurchases and dividends - Total liquidity was approximately $1,098 million at March 31, 2025, consisting of $298 million in cash and $800 million available under the revolving credit facility146 - During Q1 2025, the company repurchased 798,723 shares for $33 million and paid a dividend of $0.17 per share102103153 Free Cash Flow (Q1 2025) | Item | Amount (in millions) | | :--- | :--- | | Net cash used in operating activities | $(21) | | Capital expenditures, net | $(34) | | Free cash flow (use) | $(55) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign exchange, interest rates, and commodities, with a 10% currency fluctuation estimated to impact operating income by $4 million - A 10% strengthening or weakening of the U.S. dollar would have had an approximate $4 million impact on operating income for Q1 2025168 - As of March 31, 2025, 48% of the company's debt was floating rate debt, though a 10% rate increase was not deemed to have a material impact on interest expense169170 - The company faces commodity risks, particularly from steel price increases and tariffs on imported components, which it mitigates through global sourcing and hedging171173 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of March 31, 2025, with no material changes during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2025174 - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting175 PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various routine legal proceedings, which are not expected to have a material adverse effect on its financial statements - Terex is involved in various legal proceedings (product liability, employment, commercial, etc) that have arisen in the normal course of operations178 - The company believes the outcome of such matters will not have a material adverse effect on its financial statements178 Item 1A. Risk Factors Updated risk factors highlight potential adverse effects from international tariffs, economic sensitivity, and geopolitical instability, including trade conflicts involving Chinese imports - The risk factor concerning the imposition of new, postponed, or increased international tariffs was updated, noting that such tariffs could materially and adversely affect business and results180181 - Demand is sensitive to economic conditions, government spending, and cyclical markets, with recent channel adjustments reflecting macro uncertainty and high interest rates183185 - The company faces risks from operating a multinational business, including geopolitical instability, trade protection measures, and anti-dumping/countervailing duty investigations against Chinese competitors186188190 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2025, Terex repurchased 758,843 shares for $31.7 million, leaving approximately $54 million available for future repurchases under its authorized programs - As of the end of the quarter, approximately $54 million remained available for repurchase under the company's authorized plans192 Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2025 | 150,825 | $44.91 | | Feb 2025 | 206,293 | $43.84 | | Mar 2025 | 408,057 | $39.58 | | Total | 765,175 | $41.78 |