Terex (US:TEX)2025-07-31 14:43PART I FINANCIAL INFORMATION Item 1 Financial Statements The financial statements for the period ended June 30, 2025, reflect increased net sales but decreased net income and EPS year-over-year, with total assets and liabilities rising due to operations and the ESG acquisition Condensed Consolidated Statement of Comprehensive Income (Loss) Highlights | Metric | Q2 2025 (M) | Q2 2024 (M) | YoY Change | H1 2025 (M) | H1 2024 (M) | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,487 | $1,382 | +7.6% | $2,716 | $2,674 | +1.6% | | Gross Profit | $291 | $329 | -11.6% | $521 | $626 | -16.8% | | Operating Profit | $129 | $193 | -33.2% | $198 | $351 | -43.6% | | Net Income (Loss) | $72 | $141 | -48.9% | $93 | $249 | -62.7% | | Diluted EPS | $1.09 | $2.08 | -47.6% | $1.40 | $3.68 | -62.0% | Condensed Consolidated Balance Sheet Highlights | Metric | June 30, 2025 (M) | Dec 31, 2024 (M) | Change | | :--- | :--- | :--- | :--- | | Total Current Assets | $2,684 | $2,320 | +$364 | | Total Assets | $6,152 | $5,730 | +$422 | | Total Current Liabilities | $1,293 | $1,073 | +$220 | | Long-term Debt | $2,583 | $2,580 | +$3 | | Total Liabilities | $4,187 | $3,898 | +$289 | | Total Stockholders' Equity | $1,965 | $1,832 | +$133 | Condensed Consolidated Statement of Cash Flows Highlights (Six Months Ended June 30) | Metric | 2025 (M) | 2024 (M) | Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $81 | $33 | +$48 | | Net cash used in investing activities | ($38) | ($52) | +$14 | | Net cash used in financing activities | ($84) | ($23) | -$61 | | Net (Decrease) in Cash | ($14) | ($52) | +$38 | Note B – Business Segment Information Effective January 1, 2025, Terex realigned its segments, with the ES segment showing substantial growth from the ESG acquisition, offsetting sales declines in Aerials and MP segments - Effective January 1, 2025, the company realigned its business into three reportable segments: (i) Aerials, (ii) Materials Processing ("MP"), and (iii) Environmental Solutions ("ES")38 Net Sales by Segment (in millions) | Segment | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Aerials | $607 | $732 | -17.1% | $1,057 | $1,355 | -22.0% | | MP | $454 | $499 | -9.0% | $836 | $1,019 | -18.0% | | ES | $430 | $152 | +182.9% | $829 | $303 | +173.6% | Operating Profit by Segment (in millions) | Segment | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Aerials | $46 | $115 | -60.0% | $49 | $207 | -76.3% | | MP | $49 | $77 | -36.4% | $85 | $149 | -43.0% | | ES | $61 | $19 | +221.1% | $117 | $34 | +244.1% | Note D – Acquisitions On October 8, 2024, Terex acquired Environmental Solutions Group (ESG) for $2,010 million in cash, financed by senior notes and a new term loan, with $797 million allocated to goodwill and $1,114 million to identifiable intangible assets - The company acquired Environmental Solutions Group (ESG) from Dover Corporation on October 8, 2024, for a cash purchase price of $2,010 million54 Preliminary Fair Value of ESG Net Assets Acquired (in millions) | Assets/Liabilities | Fair Value | | :--- | :--- | | Total assets acquired | $2,253 | | Goodwill | $797 | | Identified intangibles subject to amortization | $1,114 | | Total liabilities assumed | $253 | | Net assets acquired | $2,000 | - Goodwill of $797 million, assigned to the ES segment, consists of intangible assets that do not qualify for separate recognition, such as assembled workforce and expected synergies60 Note J – Long-Term Obligations To finance the ESG acquisition, Terex increased its revolving credit facility to $800 million and added a $1,250 million term loan, also issuing $750 million in senior notes, with total long-term debt at $2,583 million as of June 30, 2025 - On October 8, 2024, the company amended its credit agreement, increasing the revolving credit facility to $800 million (expiring 2029) and adding a new $1,250 million term loan facility (maturing 2031)81 - On October 8, 2024, the company issued $750 million of 6.25% Senior Notes due 2032 to help fund the ESG acquisition87 Fair Value of Debt as of June 30, 2025 (in millions) | Debt Instrument | Book Value | Fair Value | | :--- | :--- | :--- | | 5% Notes | $600 | $583 | | 6.25% Notes | $750 | $750 | | New Term Facility (net of discount) | $1,241 | $1,247 | Note L – Stockholders’ Equity In the first half of 2025, Terex repurchased 1,360,706 shares for $53 million and declared $0.17 per share dividends, with an additional $150 million authorized for future repurchases Share Repurchases (Six Months Ended June 30) | Year | Total Shares Repurchased | Amount (in millions) | | :--- | :--- | :--- | | 2025 | 1,360,706 | $53 | | 2024 | 345,274 | $20 | - The Board declared dividends of $0.17 per share for Q1 and Q2 2025. A further dividend of $0.17 per share was declared in July 2025103 - In July 2025, the Board authorized an additional repurchase of up to $150 million of the Company's outstanding shares of common stock103 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported Q2 2025 net sales growth of 8% to $1.5 billion driven by the ESG acquisition, offsetting legacy sales decline, while operating margin decreased to 8.7% due to lower volumes and unfavorable mix, with the full-year outlook maintained - Q2 2025 net sales grew 8% year-over-year to $1.5 billion, while legacy sales (excluding ESG) declined by 12%117 - Operating margin for Q2 2025 was 8.7%, a decrease of 530 basis points year-over-year, consistent with planned sequential improvement117 - The company maintained its full-year 2025 outlook, expecting net sales of $5.3 to $5.5 billion and earnings per share between $4.70 and $5.10125 - The acquisition of ESG has significantly expanded exposure to the waste and recycling end market, which now represents approximately 30% of global revenue116 Results of Operations Q2 2025 consolidated net sales increased 7.6% to $1.487 billion due to the ESG acquisition, offsetting declines in Aerials and MP segments, while gross profit fell 11.6% and ES segment sales surged 182.9% Q2 2025 vs Q2 2024 Segment Performance (in millions) | Segment | Net Sales 2025 | Net Sales 2024 | % Change | Operating Profit 2025 | Operating Profit 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Aerials | $607 | $732 | (17.1)% | $46 | $115 | (60.0)% | | Materials Processing | $454 | $499 | (9.0)% | $49 | $77 | (36.4)% | | Environmental Solutions | $430 | $152 | 182.9% | $61 | $19 | 221.1% | - Aerials' performance was impacted by lower end-market demand, unfavorable mix, and tariffs, as sales to independent rental customers declined more than sales to national customers138139 - The Environmental Solutions segment's strong growth was primarily due to sales from the newly acquired ESG business and strong performance in Terex Utilities142 Liquidity and Capital Resources As of June 30, 2025, Terex had total liquidity of approximately $1.174 billion, with $81 million cash provided by operations and $23 million in free cash flow for H1 2025, and no significant debt maturities until 2029 - Total liquidity was approximately $1.174 billion at June 30, 2025, with no significant debt maturities until 2029166167 Free Cash Flow (in millions) | Metric | H1 2025 | | :--- | :--- | | Net cash provided by operating activities | $81 | | Capital expenditures, net | ($58) | | Free cash flow | $23 | - Working capital as a percentage of trailing three-month annualized net sales was 22.8% at June 30, 2025172 Item 3 Quantitative and Qualitative Disclosures About Market Risk Terex is exposed to market risks from foreign exchange rates, interest rates, and commodity prices, with a 10% change in FX rates impacting H1 2025 operating income by approximately $10 million, and 48% of debt at floating rates as of June 30, 2025 - A 10% strengthening or weakening of the U.S. dollar would have had an approximate $10 million impact on operating income for the six months ended June 30, 2025189 - As of June 30, 2025, 48% of the company's debt was floating rate, with a total weighted average interest rate of 5.59%190 - The company faces risks from inflationary pressure on components and increased tariffs on steel and other foreign goods, which it actively mitigates through global sourcing and other strategies194 Item 4 Controls and Procedures As of June 30, 2025, the company's CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025195 - No material changes to the internal control over financial reporting occurred during the quarter ended June 30, 2025196 PART II OTHER INFORMATION Item 1 Legal Proceedings The company is involved in various legal proceedings arising from normal business operations, with management believing the outcomes will not materially affect consolidated financial statements - Terex is involved in various legal proceedings, including product liability, commercial, and intellectual property litigation, which have arisen in the normal course of operations199 Item 1A Risk Factors The company updated its risk factors, highlighting potential material adverse effects from increased international tariffs, sensitivity to general economic conditions, and challenges of operating a multinational business - Rising international tariffs on goods from China and other regions could materially increase costs and adversely affect business results if they cannot be recovered from customers or mitigated through sourcing strategies202203 - Demand for products is sensitive to economic cycles, interest rates, and government spending. Geopolitical instability, inflation, and high interest rates have increased economic uncertainty204 - Operating a multinational business exposes the company to risks including political instability, currency controls, changes in tax laws, and trade protection measures207210 Item 2 Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, Terex repurchased 652,984 shares at an average price of $35.59 per share, with approximately $33 million remaining available for repurchase under authorized plans Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 622,100 | $35.07 | | May 2025 | 26,280 | $46.03 | | June 2025 | 4,604 | $45.85 | | Total | 652,984 | $35.59 | - As of the end of Q2 2025, approximately $33 million remained available for share repurchases under the authorized programs214