NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A – BASIS OF PRESENTATION
Basis of Presentation and Principles of Consolidation. The consolidated financial statements include the accounts of Terex Corporation, its majority-owned subsidiaries and other controlled subsidiaries (“Terex” or the “Company”). The Company consolidates all majority-owned and controlled subsidiaries, applies equity method of accounting for investments in which the Company is able to exercise significant influence and applies the cost method for investments which do not have readily determinable fair values. All intercompany balances, transactions and profits have been eliminated. Certain prior period amounts have been reclassified to conform with the 2021 presentation.
As further described in Note D – “Acquisitions and Discontinued Operations”, on July 31, 2019, the Company completed the disposition of its Demag® mobile cranes business (“Demag”) to Tadano Ltd. and certain of its subsidiaries (“Tadano”). During 2019, the Company also exited North American mobile crane product lines manufactured in its Oklahoma City facility. As a result, the Company reported these operations, formerly part of the Cranes segment, in discontinued operations in the Consolidated Statement of Income (Loss) for all periods presented. Residual assets and liabilities were recorded within Prepaid and other current assets, Other assets, Other current liabilities and Other non-current liabilities in the Consolidated Balance Sheet at December 31, 2020. See Note D – “Acquisitions and Discontinued Operations” for further information.
Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates.
Cash and Cash Equivalents. Cash equivalents consist of highly liquid investments with original maturities of three months or less. Carrying amount of cash and cash equivalents approximates its fair value. Cash and cash equivalents include $3.7 million and $5.0 million at December 31, 2021 and 2020, respectively, which were not immediately available for use. These consist primarily of cash balances held in escrow to secure various obligations of the Company.
Inventories. Inventories are stated at the lower of cost or net realizable value (“NRV”). Cost is determined by the first-in, first-out (“FIFO”) and average cost methods (approximately 93% and 7%, respectively). In valuing inventory, the Company is required to make assumptions regarding the level of reserves required to value potentially obsolete or over-valued items at lower of cost or NRV. These assumptions require the Company to analyze the aging of and forecasted demand for its 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. The Company’s 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 the Company 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. Inventory reserves are established taking into account age, frequency of use, or sale, and in the case of repair parts, installed base of machines. While calculations are made involving these factors, significant management judgment regarding expectations for future events is involved. Future events that could significantly influence the Company’s judgment and related estimates include general economic conditions in markets where the Company’s products are sold, new equipment price fluctuations, actions of the Company’s competitors, including introduction of new products and technological advances, as well as new products and design changes the Company introduces. The Company makes adjustments to its inventory reserves based on identification of specific situations and increases its inventory reserves accordingly. As further changes in future economic or industry conditions occur, the Company may revise estimates that were used to calculate its inventory reserves. At December 31, 2021 and 2020, reserves for lower of cost or NRV, excess and obsolete inventory totaled $57.8 million and $61.8 million, respectively.
If actual conditions are less favorable than those the Company has projected, the Company will increase its reserves for lower of cost or NRV, excess and obsolete inventory accordingly. Any increase in the Company’s reserves will adversely impact its results of operations. Establishment of a reserve for lower of cost or NRV, excess and obsolete inventory establishes a new cost basis in the inventory. Such reserves are not reduced until the product is sold.
Shipping and handling costs for product shipments to customers are recorded in Cost of goods sold (“COGS”).
Debt Issuance Costs. Debt issuance costs incurred in securing the Company’s financing arrangements are capitalized and amortized over the term of the associated debt. Debt issuance costs related to senior notes and term loans are presented in the balance sheet as a direct deduction from the carrying amount of the borrowing, consistent with debt discounts. Debt issuance costs related to securing the Company’s revolving line of credit are presented in Other assets. Debt issuance costs related to debt that is extinguished early are charged to expense at the time of retirement. Debt issuance costs were $12.0 million and $15.4 million (net of accumulated amortization of $8.0 million and $17.3 million) at December 31, 2021 and 2020, respectively.
Intangible Assets. Intangible assets include purchased patents, trademarks, customer relationships and other specifically identifiable assets and are amortized on a straight-line basis over the respective estimated useful lives, which range from one to ninety-nine years. Intangible assets are reviewed for impairment when events or changes in circumstances indicate that their carrying amount may not be recoverable.
Goodwill. Goodwill represents the excess of purchase price over the fair value of assets acquired and liabilities assumed as part of a business combination. Goodwill is assigned to one or more reporting segments on the date of acquisition. The Company reviews its goodwill for impairment annually during the fourth quarter of each fiscal year or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of any one of its reporting units below its respective carrying amount.
In performing the goodwill impairment test, the Company may first perform a qualitative assessment or bypass the qualitative assessment and proceed directly to performing the quantitative impairment test. A qualitative assessment requires the Company to consider events or circumstances including macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, changes in management or key personnel, changes in strategy, changes in customers, changes in the composition or carrying amount of a reporting segment’s net assets and changes in its stock price. If, after assessing the totality of events or circumstances, the Company determines that it is more likely than not that the fair values of its reporting units are greater than the carrying amounts, then a quantitative impairment test does not need to be performed.
If the qualitative assessment indicates a quantitative analysis should be performed or a quantitative analysis is directly elected, the Company evaluates goodwill for impairment by comparing the fair value of each of its reporting units to its carrying value, including the associated goodwill. To determine the fair values, the Company uses an income approach, along with other relevant market information, derived from a discounted cash flow model to estimate fair value of its reporting units. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any, would be recognized. The loss recognized would not exceed total amount of goodwill allocated to that reporting unit.
In connection with the annual impairment test conducted as of October 1, 2021, the Company bypassed the qualitative assessment and proceeded directly to the quantitative impairment test. The quantitative assessment indicated that each reporting unit had an estimated fair value which substantially exceeded its respective carrying amount.
Property, Plant and Equipment. Property, plant and equipment are stated at cost. Expenditures for major renewals and improvements are capitalized while expenditures for maintenance and repairs not expected to extend the life of an asset beyond its normal useful life are charged to expense when incurred. Plant and equipment are depreciated over the estimated useful lives (1-40 years and 2-20 years, respectively) of the assets under the straight-line method of depreciation for financial reporting purposes and both straight-line and other methods for tax purposes.
Long-Lived Assets. The Company assesses the realizability of its long-lived assets, including definite-lived intangible assets, and evaluates such assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets (or group of assets) may not be recoverable. Impairment is determined to exist if estimated future undiscounted cash flows are less than carrying value. If an impairment is indicated, assets are written down to their fair value, which is typically determined by a discounted cash flow analysis. Future cash flow projections include assumptions regarding future sales levels and the level of working capital needed to support the assets. The Company uses data developed by business segment management as well as macroeconomic data in making these calculations. There are no assurances that future cash flow assumptions will be achieved. The amount of any impairment then recognized would be calculated as the difference between estimated fair value and carrying value of the asset. Included in Selling, general & administrative expenses (“SG&A”) in the Consolidated Statement of Income (Loss) are $6.3 million, $5.5 million and $1.5 million of asset impairments for the years ended December 31, 2021, 2020 and 2019, respectively.
Accounts Receivable and Allowance for Doubtful Accounts. Trade accounts receivable are recorded at invoiced amount and do not bear interest. Allowance for doubtful accounts is the Company’s estimate of current expected credit losses on its existing accounts receivable and determined based on historical customer assessments, current financial conditions, and reasonable and supportable forecasts. Account balances are charged off against the allowance when the Company determines the receivable will not be recovered. There can be no assurance that the Company’s estimate of accounts receivable collection will be indicative of future results.
The following table summarizes changes in the consolidated allowance for doubtful accounts (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2019
|
$
|
9.9
|
|
|
Provision for credit losses
|
1.8
|
|
|
Other adjustments
|
(2.2)
|
|
|
Balance as of December 31, 2020
|
$
|
9.5
|
|
|
Provision for credit losses
|
2.5
|
|
|
Other adjustments
|
(2.3)
|
|
|
Balance as of December 31, 2021
|
$
|
9.7
|
|
Pursuant to terms of the Company’s trade accounts receivable factoring arrangements, certain of the Company’s subsidiaries may sell their trade accounts receivable. These trade receivables qualify for sales treatment under Accounting Standards Codification (“ASC”) 860, “Transfers and Servicing” (“ASC 860”) and accordingly, the proceeds are included in net cash provided by operating activities. The gross amount of trade receivables sold for years ended December 31, 2021, 2020 and 2019 totaled $527.0 million, $405.8 million and $1,108.0 million, respectively. The factoring discount paid upon sale is recorded as interest expense in the Consolidated Statement of Income (Loss). As of December 31, 2021 and 2020, $60.7 million and $2.0 million, respectively, of receivables qualifying for sale treatment were outstanding and continued to be serviced by the Company.
Finance Receivables. The Company’s net finance receivable balances include both sales-type leases and commercial loans. The Company had $12.2 million and $129.8 million of gross finance receivables at December 31, 2021 and 2020, respectively. The allowance for credit losses on finance receivables was $7.9 million and $13.8 million at December 31, 2021 and 2020, respectively. In February 2021, the Company transferred finance receivables of $89.7 million to a U.S. regional bank, which qualified for sales treatment under ASC 860. The Company received $99.4 million of cash proceeds from the sale and recognized a net gain of $5.6 million.
Revenue Recognition. The Company recognizes revenue when goods or services are transferred to customers in an amount that reflects the consideration which it expects to receive in exchange for those goods or services. In determining when and how revenue is recognized from contracts with customers, the Company performs the following five-step analysis: (i) identification of contract with customer; (ii) determination of performance obligations; (iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
In the United States, the Company has the ability to enter into a security agreement and receive a security interest in the product by filing an appropriate Uniform Commercial Code (“UCC”) financing statement. However, a significant portion of the Company’s revenue is generated outside of the United States. In many countries outside of the United States, as a matter of statutory law, a seller retains title to a product until payment is made. The laws do not provide for a seller’s retention of a security interest in goods in the same manner as established in the UCC. In these countries, the Company retains title to goods delivered to a customer until the customer makes payment so that it can recover the goods in the event of customer default on payment. The Company considers the following events in order to determine when it is appropriate to recognize revenue: (i) the customer has physical possession of the product; (ii) the customer has legal title to the product; (iii) the customer has assumed the risks and rewards of ownership, (iv) the customer has communicated acceptance of the product and (v) the Company has a right to payment. These events serve as indicators, along with the details contained within the contract, that it is appropriate to recognize revenue.
The Company generates revenue through the sale of machines, parts and service, and extended warranties. Revenue from product sales is recorded when the performance obligation is fulfilled, usually at the time of shipment, at the net sales price (transaction price). Estimates of variable consideration, such as volume discounts and rebates, reduce transaction price when it is probable that a customer will attain these types of sales incentives. These estimates are primarily derived from contractual terms and historical experience. The Company elected to present revenue net of sales tax and other similar taxes and account for shipping and handling as activities to fulfill the promise to transfer goods rather than separate performance obligations. Payments are typically due either 30 or 60 days, depending on geography, following delivery of products or completion of services.
Revenue from extended warranties is recognized over time on a straight line basis because the customer benefits evenly from the extended warranty throughout the period; beginning upon expiration of the standard warranty and through end of the term. Revenue from services is recognized based on cost input method as the time and materials used in the repair portrays the most accurate depiction of completion of the performance obligation. During the full year ended December 31, 2021, revenues generated from the sale of extended warranties and services were an immaterial portion of revenue.
The Company sells equipment subject to leases and related lease payments. Income from operating leases is recognized ratably over the lease term. Revenue from sales-type leases is recognized at the inception of the lease.
For detailed sales information see Note B – “Business Segment Information”.
Leases. Terex leases approximately 100 real properties, approximately 400 vehicles and approximately 400 pieces of office and industrial equipment. As the lessee, Terex will classify a lease which it has substantially all the risks and rewards of ownership as a finance lease.
The Company determines if an arrangement contains a lease at contract inception. With the exception of short-term leases (leases with terms less than 12 months), all leases with contractual fixed costs are recorded on the balance sheet on the lease commencement date as a right-of-use (“ROU”) asset and a lease liability. Lease liabilities are initially measured at the present value of the minimum lease payments and subsequently increased to reflect the interest accrued and reduced by the lease payments affected. ROU assets are initially measured at the present value of the minimum lease payments adjusted for any prior lease payments, lease incentives and initial direct costs. The Company does not separate lease and non-lease components of a contract for any class of leases. Certain leases contain escalation, renewal and/or termination options that are factored into the ROU asset as appropriate. Operating leases result in a straight-line rent expense over the life of the lease. For finance leases, ROU assets are amortized on a straight-line basis over the life of the lease and interest accretes to the lease liability which results in a higher interest expense at lease inception that declines over the life of the lease. Generally, variable lease costs are expensed as incurred and are not included in the determination of ROU assets or lease liabilities.
Short-term leases for real property, vehicles and industrial and office equipment are recognized in the income statement on a straight-line basis over the lease term.
The Company uses its estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments, if the rate is not implicit in the lease. Consideration is given to the Company’s recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating incremental borrowing rates.
The Company adopted Accounting Standard Update (“ASU”) 2016-02, “Leases (Topic 842),” on January 1, 2019 under the alternative transition method permitted by ASU 2018-11, “Leases (Topic 842): Targeted Improvements”. For detailed lease information see Note K – “Leases”.
Guarantees. The Company issues guarantees to financial institutions related to financing of equipment purchases by customers. The expectation of losses or non-performance is assessed based on consideration of historical customer assessments, current financial conditions, reasonable and supportable forecasts, equipment collateral value and other factors. Reserves are recorded for expected loss over the contractual period of risk exposure. See Note N – “Litigation and Contingencies” for additional information regarding guarantees issued to financial institutions.
Accrued Warranties. The Company records accruals for potential warranty claims based on its claim experience. The Company’s products are typically sold with a standard warranty covering defects that arise during a fixed period. Each business provides a warranty specific to products it offers. The specific warranty offered by a business is a function of customer expectations and competitive forces. Warranty length is generally a fixed period of time, a fixed number of operating hours or both.
A liability for estimated warranty claims is accrued at the time of sale. The current portion of the product warranty liability is included in Accrued warranties and product liability and the non-current portion is included in Other non-current liabilities in the Company’s Consolidated Balance Sheet. The liability is established using historical warranty claims experience for each product sold. Historical claims experience may be adjusted for known design improvements or for the impact of unusual product quality issues. Assumptions are updated for known events that may affect the potential warranty liability.
The following table summarizes changes in the consolidated product warranty liability (in millions):
|
|
|
|
|
|
|
|
Balance as of December 31, 2019
|
$
|
47.5
|
|
|
Accruals for warranties issued during the period
|
38.9
|
|
|
|
|
|
Changes in estimates
|
14.3
|
|
|
Settlements during the period
|
(48.4)
|
|
|
Foreign exchange effect/other
|
0.6
|
|
|
Balance as of December 31, 2020
|
$
|
52.9
|
|
|
Accruals for warranties issued during the period
|
42.5
|
|
|
Changes in estimates
|
(4.7)
|
|
|
Settlements during the period
|
(45.7)
|
|
|
Foreign exchange effect/other
|
(0.9)
|
|
|
Balance as of December 31, 2021
|
$
|
44.1
|
|
Accrued Product Liability. The Company records accruals for product liability claims when deemed probable and estimable based on facts and circumstances, and prior claims experience. Accruals for product liability claims are valued based upon the Company’s prior claims experience, including consideration of jurisdiction, circumstances of the accident, type of loss or injury, identity of plaintiff, other potential responsible parties, analysis of outside legal counsel, analysis of internal product liability counsel and experience of the Company’s product safety employees. Actual product liability costs could be different due to a number of variables such as the decisions of juries or judges.
Defined Benefit Pension and Other Post-retirement Benefits. The Company provides post-retirement benefits to certain former salaried and hourly employees and certain hourly employees covered by bargaining unit contracts that provide such benefits. The Company accounts for these benefits under ASC 715, “Compensation-Retirement Benefits” (“ASC 715”). ASC 715 requires balance sheet recognition of the overfunded or underfunded status of pension and post-retirement benefit plans. Under ASC 715, actuarial gains and losses and prior service costs or credits must be recognized in Accumulated other comprehensive income, net of tax effects, until they are amortized as a component of net periodic benefit cost. See Note L – “Retirement Plans and Other Benefits.”
Deferred Compensation. The Company maintains a deferred compensation plan. The Company’s common stock held in a rabbi trust pursuant to the Company’s deferred compensation plan, is treated in a manner similar to treasury stock and is recorded at cost within Stockholders’ equity as of December 31, 2021 and 2020. The plan obligations for participant deferrals in common stock are classified as Additional paid-in capital and deferrals in the bond fund investment are classified as Accrued compensation and benefits and Other non-current liabilities in the Consolidated Balance Sheet. The total of common stock required to settle this deferred compensation obligation is included in the denominator in both basic and diluted earnings per share calculations.
Stock-Based Compensation. At December 31, 2021, the Company had stock-based employee compensation plans, which are described more fully in Note M – “Stockholders’ Equity.” The Company accounts for those plans under the recognition and measurement principles of ASC 718, “Compensation–Stock Compensation” (“ASC 718”). ASC 718 requires that expense resulting from all share-based payment transactions be recognized in the consolidated financial statements at fair value over the service period. The Company recognizes forfeitures as they occur.
Foreign Currency Translation. Assets and liabilities of the Company’s non-U.S. operations are translated at year-end exchange rates. Income and expenses are translated at average exchange rates during the year. For operations whose functional currency is the local currency, translation adjustments are recorded in the Accumulated other comprehensive income component of Stockholders’ equity. Gains or losses resulting from foreign currency transactions are recorded in the accounts based on the underlying transaction.
Derivatives. Derivative financial instruments are recorded in the Consolidated Balance Sheet at their fair value as either assets or liabilities. Changes in the fair value of derivatives are recorded each period in earnings or Accumulated other comprehensive income, depending on whether a derivative is designated and effective as part of a hedge transaction and, if it is, the type of hedge transaction. Gains and losses on derivative instruments reported in Accumulated other comprehensive income are included in earnings in the periods in which earnings are affected by the hedged item. See Note I – “Derivative Financial Instruments.”
Research, Development and Engineering Costs. Research, development and engineering costs are expensed as incurred. Such costs incurred in the development of new products or significant improvements to existing products are included in SG&A. Research, development and engineering costs were $52.2 million, $58.9 million and $72.4 million during 2021, 2020 and 2019, respectively.
Income Taxes. The Company accounts for income taxes using the asset and liability method. This method requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between financial statement carrying amounts and the tax bases of assets and liabilities. See Note C – “Income Taxes.”
Earnings Per Share. Basic earnings (loss) per share is computed by dividing Net income (loss) for the period by the weighted average number of shares of common stock outstanding. Diluted earnings (loss) per share is computed by dividing Net income (loss) for the period by the weighted average number of shares of common stock outstanding and potential dilutive common shares. See Note E – “Earnings Per Share.”
Fair Value Measurements. Assets and liabilities measured at fair value on a recurring basis under the provisions of ASC 820, “Fair Value Measurement and Disclosure” (“ASC 820”) include commodity swaps, interest rate caps, cross currency swaps and foreign exchange contracts, discussed in Note I – “Derivative Financial Instruments” and debt discussed in Note J – “Long-term Obligations”. These instruments are valued using observable market data for similar assets and liabilities or the present value of future cash payments and receipts. ASC 820 establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The hierarchy consists of three levels:
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity).
Determining which category an asset or liability falls within this hierarchy requires judgment. The Company evaluates its hierarchy disclosures each quarter.
Recently Issued Accounting Standards
Accounting Standards Implemented in 2021
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application of Topic 740. The Company adopted ASU 2019-12 on January 1, 2021. Adoption did not have a material effect on the Company’s consolidated financial statements.
Accounting Standards to be Implemented
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met to ease an entity’s financial reporting burden as the market transitions from LIBOR and other interbank offered rates to alternative reference rates. The FASB further issued ASU 2021-01 in January 2021 to clarify the scope of Topic 848. The guidance was effective upon issuance and may be applied through December 31, 2022. Adoption is not expected to have a material effect on the Company’s consolidated financial statements.
NOTE B – BUSINESS SEGMENT INFORMATION
Terex is a global manufacturer of aerial work platforms and materials processing machinery. The Company designs, builds and supports products used in construction, maintenance, manufacturing, energy, minerals and materials management applications. Terex products and solutions enable customers to reduce their environmental impact including electric and hybrid offerings that deliver quiet and emission-free performance, products that support renewable energy, and products that aid in the recovery of useful materials from various types of waste. The Company’s products are manufactured in North America, Europe, Australia and Asia and sold worldwide. Terex engages with customers through all stages of the product life cycle, from initial specification and financing to parts and service support.
The Company identifies its operating segments according to how business activities are managed and evaluated, and has identified three operating segments: Aerials, Utilities and Materials Processing (“MP”). As Aerials and Utilities operating segments share similar economic characteristics, these operating segments are aggregated into one operating segment, Aerial Work Platforms (“AWP”). The Company operates in two reportable segments: (i) AWP and (ii) MP.
AWP designs, manufactures, services and markets aerial work platform equipment, utility equipment and telehandlers as well as their related components and replacement parts. Customers use these products to construct and maintain industrial, commercial, institutional and residential buildings and facilities, for construction and maintenance of utility and telecommunication lines, tree trimming, certain construction and foundation drilling applications, and for other commercial operations, as well as in a wide range of infrastructure projects.
MP designs, manufactures, services and markets materials processing and specialty equipment, including crushers, washing systems, screens, trommels, apron feeders, material handlers, pick and carry cranes, rough terrain cranes, tower cranes, wood processing, biomass and recycling equipment, concrete mixer trucks and concrete pavers, conveyors, and their related components and replacement parts. Customers use these products in construction, infrastructure and recycling projects, in various quarrying and mining applications, as well as in landscaping and biomass production industries, material handling applications, maintenance applications to lift equipment or material, moving materials and equipment on rugged or uneven terrain, lifting construction material and placing material at point of use.
The Company assists customers in their rental, leasing and acquisition of its products through Terex Financial Services (“TFS”). TFS uses its equipment financing experience to facilitate financial products and services to assist customers in the acquisition of the Company’s equipment. TFS is included in Corporate and Other.
Corporate and Other also includes eliminations among the two reportable segments, as well as general and corporate items.
None of the Company’s customers individually accounted for more than 10% of consolidated net sales in 2021, 2020 or 2019.
Business segment information is presented below (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2021
|
|
2020
|
|
2019
|
|
Net sales
|
|
|
|
|
|
|
AWP
|
$
|
2,178.8
|
|
|
$
|
1,782.9
|
|
|
$
|
2,726.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MP
|
1,691.8
|
|
|
1,256.8
|
|
|
1,602.6
|
|
|
|
|
|
|
|
|
|
Corporate and Other / Eliminations
|
16.2
|
|
|
36.7
|
|
|
23.9
|
|
|
Total
|
$
|
3,886.8
|
|
|
$
|
3,076.4
|
|
|
$
|
4,353.1
|
|
|
Income (loss) from operations
|
|
|
|
|
|
|
AWP
|
$
|
152.1
|
|
|
$
|
0.5
|
|
|
$
|
196.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MP
|
240.9
|
|
|
143.4
|
|
|
227.9
|
|
|
|
|
|
|
|
|
|
Corporate and Other / Eliminations
|
(65.0)
|
|
|
(75.5)
|
|
|
(89.1)
|
|
|
Total
|
$
|
328.0
|
|
|
$
|
68.4
|
|
|
$
|
335.0
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
AWP
|
$
|
25.9
|
|
|
$
|
23.2
|
|
|
$
|
23.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MP
|
13.3
|
|
|
11.4
|
|
|
9.1
|
|
|
|
|
|
|
|
|
|
Corporate
|
11.0
|
|
|
15.1
|
|
|
14.3
|
|
|
Total
|
$
|
50.2
|
|
|
$
|
49.7
|
|
|
$
|
46.4
|
|
|
Capital expenditures
|
|
|
|
|
|
|
AWP
|
$
|
41.2
|
|
|
$
|
47.4
|
|
|
$
|
82.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MP
|
15.8
|
|
|
11.6
|
|
|
12.9
|
|
|
|
|
|
|
|
|
|
Corporate
|
2.7
|
|
|
5.5
|
|
|
10.5
|
|
|
Total
|
$
|
59.7
|
|
|
$
|
64.5
|
|
|
$
|
105.5
|
|
Sales between segments are generally priced to recover costs plus a reasonable markup for profit, which is eliminated in consolidation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in millions)
|
2021
|
|
2020
|
|
Identifiable assets
|
|
|
|
|
AWP(1)
|
$
|
1,870.8
|
|
|
$
|
1,541.0
|
|
|
|
|
|
|
|
|
|
|
|
|
MP
|
1,648.0
|
|
|
1,596.3
|
|
|
|
|
|
|
|
Corporate and Other / Eliminations (2)
|
(655.3)
|
|
|
(111.8)
|
|
|
Assets held for sale
|
—
|
|
|
6.3
|
|
|
Total
|
$
|
2,863.5
|
|
|
$
|
3,031.8
|
|
(1) Increase primarily due to higher trade receivable and inventory balances.
(2) Change primarily due to lower cash and finance receivable balances and higher intercompany eliminations.
Long-lived assets consist of net fixed assets, which can be attributed to the specific geographic regions (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2021
|
|
2020
|
|
Long-lived Assets
|
|
|
|
|
United States
|
$
|
218.0
|
|
|
$
|
237.4
|
|
|
United Kingdom
|
76.4
|
|
|
74.5
|
|
|
|
|
|
|
|
China
|
55.8
|
|
|
39.5
|
|
|
Other European countries
|
38.9
|
|
|
36.2
|
|
|
|
|
|
|
|
All other
|
40.5
|
|
|
19.0
|
|
|
Total
|
$
|
429.6
|
|
|
$
|
406.6
|
|
Geographic net sales information is presented below (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2021
|
|
|
AWP
|
|
|
|
MP
|
|
Corporate and Other / Eliminations
|
|
Total
|
|
Net sales by region
|
|
|
|
|
|
|
|
|
|
|
North America
|
$
|
1,415.8
|
|
|
|
|
$
|
667.4
|
|
|
$
|
26.3
|
|
|
$
|
2,109.5
|
|
|
Western Europe
|
346.7
|
|
|
|
|
515.6
|
|
|
0.5
|
|
|
862.8
|
|
|
Asia-Pacific
|
310.3
|
|
|
|
|
349.3
|
|
|
3.1
|
|
|
662.7
|
|
|
Rest of World (1)
|
106.0
|
|
|
|
|
159.5
|
|
|
(13.7)
|
|
|
251.8
|
|
|
Total (2)
|
$
|
2,178.8
|
|
|
|
|
$
|
1,691.8
|
|
|
$
|
16.2
|
|
|
$
|
3,886.8
|
|
(1) Includes intercompany sales and eliminations.
(2) Total sales include $1.9 billion attributable to the U.S., the Company’s country of domicile.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
|
|
AWP
|
|
|
|
MP
|
|
Corporate and Other / Eliminations
|
|
Total
|
|
Net sales by region
|
|
|
|
|
|
|
|
|
|
|
North America
|
$
|
1,185.2
|
|
|
|
|
$
|
497.7
|
|
|
$
|
62.5
|
|
|
$
|
1,745.4
|
|
|
Western Europe
|
230.7
|
|
|
|
|
379.0
|
|
|
0.3
|
|
|
610.0
|
|
|
Asia-Pacific
|
271.6
|
|
|
|
|
256.0
|
|
|
2.6
|
|
|
530.2
|
|
|
Rest of World (1)
|
95.4
|
|
|
|
|
124.1
|
|
|
(28.7)
|
|
|
190.8
|
|
|
Total (2)
|
$
|
1,782.9
|
|
|
|
|
$
|
1,256.8
|
|
|
$
|
36.7
|
|
|
$
|
3,076.4
|
|
(1) Includes intercompany sales and eliminations.
(2) Total sales include $1.6 billion attributable to the U.S., the Company’s country of domicile.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
|
|
AWP
|
|
|
|
MP
|
|
Corporate and Other / Eliminations
|
|
Total
|
|
Net sales by region
|
|
|
|
|
|
|
|
|
|
|
North America
|
$
|
1,801.8
|
|
|
|
|
$
|
605.6
|
|
|
$
|
76.5
|
|
|
$
|
2,483.9
|
|
|
Western Europe
|
431.1
|
|
|
|
|
514.2
|
|
|
0.6
|
|
|
945.9
|
|
|
Asia-Pacific
|
325.1
|
|
|
|
|
301.4
|
|
|
2.1
|
|
|
628.6
|
|
|
Rest of World (1)
|
168.6
|
|
|
|
|
181.4
|
|
|
(55.3)
|
|
|
294.7
|
|
|
Total (2)
|
$
|
2,726.6
|
|
|
|
|
$
|
1,602.6
|
|
|
$
|
23.9
|
|
|
$
|
4,353.1
|
|
(1) Includes intercompany sales and eliminations.
(2) Total sales include $2.3 billion attributable to the U.S., the Company’s country of domicile.
The Company attributes sales to unaffiliated customers in different geographical areas based on the location of the customer.
Product type net sales information is presented below (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2021
|
|
|
AWP
|
|
|
|
MP
|
|
Corporate and Other / Eliminations
|
|
Total
|
|
Net sales by product type
|
|
|
|
|
|
|
|
|
|
|
Aerial Work Platforms
|
$
|
1,611.8
|
|
|
|
|
$
|
—
|
|
|
$
|
1.6
|
|
|
$
|
1,613.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Materials Processing Equipment
|
—
|
|
|
|
|
995.9
|
|
|
1.3
|
|
|
997.2
|
|
|
Specialty Equipment
|
—
|
|
|
|
|
693.5
|
|
|
2.2
|
|
|
695.7
|
|
|
Utility Equipment
|
380.6
|
|
|
|
|
—
|
|
|
0.6
|
|
|
381.2
|
|
|
Other (1)
|
186.4
|
|
|
|
|
2.4
|
|
|
10.5
|
|
|
199.3
|
|
|
Total
|
$
|
2,178.8
|
|
|
|
|
$
|
1,691.8
|
|
|
$
|
16.2
|
|
|
$
|
3,886.8
|
|
(1) Includes other product types, intercompany sales and eliminations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
|
|
AWP
|
|
|
|
MP
|
|
Corporate and Other / Eliminations
|
|
Total
|
|
Net sales by product type
|
|
|
|
|
|
|
|
|
|
|
Aerial Work Platforms
|
$
|
1,234.8
|
|
|
|
|
$
|
—
|
|
|
$
|
0.9
|
|
|
$
|
1,235.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Materials Processing Equipment
|
—
|
|
|
|
|
760.5
|
|
|
—
|
|
|
760.5
|
|
|
Specialty Equipment
|
—
|
|
|
|
|
493.6
|
|
|
1.4
|
|
|
495.0
|
|
|
Utility Equipment
|
352.4
|
|
|
|
|
—
|
|
|
—
|
|
|
352.4
|
|
|
Other (1)
|
195.7
|
|
|
|
|
2.7
|
|
|
34.4
|
|
|
232.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
1,782.9
|
|
|
|
|
$
|
1,256.8
|
|
|
$
|
36.7
|
|
|
$
|
3,076.4
|
|
(1) Includes other product types, intercompany sales and eliminations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
|
|
AWP
|
|
|
|
MP
|
|
Corporate and Other / Eliminations
|
|
Total
|
|
Net sales by product type
|
|
|
|
|
|
|
|
|
|
|
Aerial Work Platforms
|
$
|
1,912.1
|
|
|
|
|
$
|
—
|
|
|
$
|
2.8
|
|
|
$
|
1,914.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Materials Processing Equipment
|
—
|
|
|
|
|
895.4
|
|
|
—
|
|
|
895.4
|
|
|
Specialty Equipment
|
—
|
|
|
|
|
699.9
|
|
|
5.3
|
|
|
705.2
|
|
|
Utility Equipment
|
419.2
|
|
|
|
|
—
|
|
|
—
|
|
|
419.2
|
|
|
Other (1)
|
395.3
|
|
|
|
|
7.3
|
|
|
15.8
|
|
|
418.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
2,726.6
|
|
|
|
|
$
|
1,602.6
|
|
|
$
|
23.9
|
|
|
$
|
4,353.1
|
|
(1) Includes other product types, intercompany sales and eliminations.
NOTE C – INCOME TAXES
The components of income (loss) from continuing operations before income taxes are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
United States
|
|
$
|
(16.7)
|
|
|
$
|
(148.8)
|
|
|
$
|
(32.4)
|
|
|
Foreign
|
|
280.5
|
|
|
159.8
|
|
|
279.9
|
|
|
Income (loss) from continuing operations before income taxes
|
|
$
|
263.8
|
|
|
$
|
11.0
|
|
|
$
|
247.5
|
|
The Company recorded Income (loss) from discontinued operations and Gain (loss) on disposition of discontinued operations before income taxes of $2.6 million, $(28.9) million and $(175.8) million for the years ended December 31, 2021, 2020 and 2019, respectively.
The major components of the Company’s provision for (benefit from) income taxes on continuing operations before income taxes are summarized below (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
Current:
|
|
|
|
|
|
|
|
Federal
|
|
$
|
6.6
|
|
|
$
|
(27.1)
|
|
|
$
|
14.7
|
|
|
State
|
|
1.8
|
|
|
2.3
|
|
|
1.2
|
|
|
Foreign
|
|
36.7
|
|
|
21.3
|
|
|
38.1
|
|
|
Current income tax provision (benefit)
|
|
45.1
|
|
|
(3.5)
|
|
|
54.0
|
|
|
Deferred:
|
|
|
|
|
|
|
|
Federal
|
|
(3.8)
|
|
|
1.2
|
|
|
(14.9)
|
|
|
State
|
|
1.5
|
|
|
4.3
|
|
|
(3.3)
|
|
|
Foreign
|
|
3.5
|
|
|
—
|
|
|
2.0
|
|
|
Deferred income tax (benefit) provision
|
|
1.2
|
|
|
5.5
|
|
|
(16.2)
|
|
|
Provision for (benefit from) income taxes
|
|
$
|
46.3
|
|
|
$
|
2.0
|
|
|
$
|
37.8
|
|
The elimination of tax from intercompany transactions is included in current tax expense. The Company recorded Provision for (benefit from) income taxes of $(0.8) million, $(9.3) million and $(20.5) million from discontinued operations and on disposition of discontinued operations for the years ended December 31, 2021, 2020 and 2019, respectively.
In January 2018, the FASB released guidance on the accounting for tax on Global Intangible Low-taxed Income (“GILTI”). The guidance indicates that either accounting for deferred taxes related to GILTI or treating any taxes on GILTI as period costs are both acceptable accounting policy elections. Terex elected to treat taxes on GILTI inclusions as period costs.
Deferred tax assets and liabilities result from differences in the bases of assets and liabilities for tax and financial reporting purposes. The tax effects of the basis differences and loss carry forwards as of December 31, 2021 and 2020 for continuing operations are summarized below for major balance sheet captions (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
Property, plant and equipment
|
|
$
|
(16.1)
|
|
|
$
|
(18.1)
|
|
|
Intangibles
|
|
(6.8)
|
|
|
(6.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
6.7
|
|
|
6.1
|
|
|
Accrued warranties and product liability
|
|
10.8
|
|
|
12.5
|
|
|
Loss carry forwards
|
|
184.4
|
|
|
204.4
|
|
|
Retirement plans
|
|
11.3
|
|
|
14.0
|
|
|
Accrued compensation and benefits
|
|
15.8
|
|
|
16.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease ROU asset
|
|
(23.5)
|
|
|
(26.1)
|
|
|
Operating lease liability
|
|
23.8
|
|
|
27.0
|
|
|
Other
|
|
24.1
|
|
|
18.5
|
|
|
Deferred tax assets valuation allowance
|
|
(100.0)
|
|
|
(112.1)
|
|
|
Net deferred tax assets (liabilities)
|
|
$
|
130.5
|
|
|
$
|
136.9
|
|
Deferred tax assets were $233.0 million before valuation allowances of $100.0 million, resulting in $133.0 million of net deferred tax assets which are partially offset by deferred tax liabilities of $2.5 million at December 31, 2021. Deferred tax assets for continuing operations were $251.6 million ($0.1 million for discontinued operations) before valuation allowances of $112.1 million, resulting in $139.5 million of net deferred tax assets which are partially offset by deferred tax liabilities for continuing operations of $2.6 million at December 31, 2020. There were no deferred tax liabilities for discontinued operations at December 31, 2021 and 2020.
The Company evaluates the net realizable value of its deferred tax assets each reporting period. The Company must consider all objective evidence, both positive and negative, in evaluating the future realization of its deferred tax assets, including tax loss carry forwards. Available evidence, including historical information is supplemented by currently obtainable information about future tax years. Realization of deferred tax assets requires sufficient taxable income of the appropriate character. To the extent estimates of future taxable income decrease or do not materialize, additional valuation allowances may be required. The Company records a valuation allowance for each deferred tax asset for which realization is not assessed as more likely than not. The valuation allowance for deferred tax assets as of December 31, 2021 and 2020 was $100.0 million and $112.1 million, respectively. The net change in the total valuation allowance for the years ended December 31, 2021 and 2020 was a decrease of $12.1 million and an increase of $5.1 million, respectively.
The Company’s Provision for (benefit from) income taxes is different from the amount that would be provided by applying the statutory federal income tax rate to the Company’s Income (loss) from continuing operations before income taxes. The reasons for the difference are summarized as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
|
Tax at statutory federal income tax rate
|
|
$
|
55.4
|
|
|
$
|
2.3
|
|
|
$
|
51.9
|
|
|
|
State taxes
|
|
2.7
|
|
|
5.2
|
|
|
(1.7)
|
|
|
|
Change in valuation allowance
|
|
(9.0)
|
|
|
—
|
|
|
(4.9)
|
|
|
|
Foreign tax differential on income/losses of foreign subsidiaries
|
|
(12.0)
|
|
|
(13.0)
|
|
|
(14.5)
|
|
|
|
U.S. tax on multi-national operations
|
|
8.1
|
|
|
17.6
|
|
|
7.2
|
|
|
|
Change in foreign tax rates
|
|
(0.6)
|
|
|
0.7
|
|
|
3.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. tax legislation
|
|
—
|
|
|
(10.9)
|
|
|
—
|
|
|
|
Research and development
|
|
(0.8)
|
|
|
(1.2)
|
|
|
(2.0)
|
|
|
|
Provision to return adjustments
|
|
0.5
|
|
|
(1.7)
|
|
|
(2.4)
|
|
|
|
Compensation
|
|
1.8
|
|
|
3.1
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
0.2
|
|
|
(0.1)
|
|
|
(0.6)
|
|
|
|
Provision for (benefit from) income taxes
|
|
$
|
46.3
|
|
|
$
|
2.0
|
|
|
$
|
37.8
|
|
|
|
|
|
The Company does not provide for foreign income and withholding, U.S. Federal, or state income taxes or tax benefits on the financial reporting basis over the tax basis of its investments in foreign subsidiaries to the extent such amounts are indefinitely reinvested to support operations and continued growth plans outside the U.S. The Company reviews its plan to indefinitely reinvest on a quarterly basis. In making its decision to indefinitely reinvest, the Company evaluates its plans of reinvestment, its ability to control repatriation and to mobilize funds without triggering basis differences, and the profitability of U.S. operations and their cash requirements and the need, if any, to repatriate funds. If the assessment of the Company with respect to earnings of non-U.S. subsidiaries changes, deferred taxes for foreign income taxes and withholding, U.S. Federal or state income taxes or tax benefits may have to be accrued.
The Company considers foreign earnings that have been taxed in the U.S. or have qualified for the high-tax exception to taxation to not be indefinitely reinvested. The Company has recorded foreign, federal and state tax expense with respect to earnings which have been subject to federal income tax and which are no longer indefinitely reinvested. The Company plans to indefinitely reinvest all undistributed foreign earnings in excess of those previously taxed in the U.S. For the year ended December 31, 2021, the Company’s estimate of its remaining unremitted earnings of its foreign subsidiary ownership chains that have positive retained earnings and have not been subject to tax in the U.S. was approximately $103 million. At this time, determination of the unrecognized deferred tax liabilities for temporary differences related to the Company’s investment in non-U.S. subsidiaries is not practicable.
At December 31, 2021, the Company has various state net operating loss carry forwards available to reduce future state taxable income and income taxes, the majority of which will expire at various dates through 2041. The Company also has approximately $599 million of foreign loss carry forwards, consisting of $278 million in Germany, $168 million in Italy, $54 million in China, $31 million in India, and $68 million in other countries, which are available to offset future taxable income. The majority of these tax loss carry forwards are available without expiration. In addition, the gross amount of the Australian capital loss carryforward is $23 million, and it has an unlimited carryforward period.
The Company made total net income tax payments including discontinued operations of $28.4 million, $26.3 million and $46.8 million in 2021, 2020 and 2019, respectively. At December 31, 2021 and 2020, Other current assets included net income tax receivable amounts of $52.4 million and $56.2 million, respectively.
The Company and its subsidiaries conduct business globally and file income tax returns in U.S. Federal, state and foreign jurisdictions, as required. From a tax perspective, major jurisdictions where the Company is often subject to examination by tax authorities include Germany, Italy, the United Kingdom (“U.K.”), China, India and the U.S. Currently, various entities of the Company are under audit in Italy, India and elsewhere. With limited exceptions, the statute of limitations for the Company and most of its subsidiaries has expired for tax years prior to 2016. The Company assesses uncertain tax positions for recognition, measurement and effective settlement. Where the Company has determined that its tax return filing position does not satisfy the more likely than not recognition threshold of ASC 740, “Income Taxes,” it has recorded no tax benefits. Where the Company has determined that its tax return filing positions are more likely than not to be sustained, the Company has measured and recorded the largest amount of tax benefit greater than 50% likely to be realized. The Company recognizes accrued interest and penalties, if any, related to income taxes as (Provision for) benefit from income taxes in its Consolidated Statement of Income (Loss).
The following table summarizes the activity related to the Company’s unrecognized tax benefits (in millions).
|
|
|
|
|
|
|
|
Balance as of January 1, 2019
|
$
|
13.5
|
|
|
Additions for current year tax positions
|
—
|
|
|
Additions for prior year tax positions
|
2.0
|
|
|
Reductions for prior year tax positions
|
(0.4)
|
|
|
Reductions for current year tax positions
|
—
|
|
|
Reductions for expiration of statute of limitations
|
(0.8)
|
|
|
Settlements
|
—
|
|
|
|
|
|
Balance as of December 31, 2019
|
14.3
|
|
|
Additions for current year tax positions
|
—
|
|
|
Additions for prior year tax positions
|
9.2
|
|
|
Reductions for prior year tax positions
|
(3.7)
|
|
|
Reductions for current year tax positions
|
—
|
|
|
Reductions for expiration of statute of limitations
|
—
|
|
|
Settlements
|
(1.3)
|
|
|
|
|
|
Balance as of December 31, 2020
|
18.5
|
|
|
Additions for current year tax positions
|
—
|
|
|
Additions for prior year tax positions
|
0.6
|
|
|
Reductions for prior year tax positions
|
(0.1)
|
|
|
Reductions for current year tax positions
|
—
|
|
|
Reductions for expiration of statute of limitations
|
(0.9)
|
|
|
Settlements
|
(15.5)
|
|
|
|
|
|
Balance as of December 31, 2021
|
$
|
2.6
|
|
The Company evaluates each reporting period whether it is reasonably possible material changes to its uncertain tax position liability could occur in the next 12 months. Changes may occur as a result of uncertain tax positions being considered effectively settled, re-measured, paid, acquired or divested, as a result of a change in tax law or judicial decision, or due to expiration of the relevant statute of limitations. It is not possible to predict which uncertain tax positions, if any, may be challenged by tax authorities. Timing and impact of income tax audits and their resolution is uncertain. New facts, laws, pronouncements and judicial decisions can change assessments concerning technical merit and measurement. The amounts of or periods in which changes to reserves for uncertain tax positions will occur is difficult to predict. The Company does not expect the amount of unrecognized tax benefits disclosed as of December 31, 2021 will change materially in 2022.
As of December 31, 2021 and 2020, the Company had $2.6 million and $18.5 million, respectively, of unrecognized tax benefits. Of the $2.6 million at December 31, 2021, $2.0 million, if recognized, would affect the effective tax rate. Potential interest and penalties were a receivable of $0.2 million and a liability of $1.4 million as of December 31, 2021 and 2020, respectively. During the years ended December 31, 2021 and 2020, the Company recognized total tax (benefit) expense of $(1.5) million and $0.2 million for interest and penalties, respectively.
NOTE D – ACQUISITIONS AND DISCONTINUED OPERATIONS
Acquisitions
On July 6, 2021, the Company acquired all of the outstanding shares of Murray Design & Engineering, Ltd (“MDS”), a manufacturer of heavy duty aggregate and recycling trommels, apron feeders and conveyor systems, based in the Republic of Ireland. Total cash consideration transferred was approximately $19 million. The transaction was recorded as a business combination using the acquisition method which requires measurement of identifiable assets acquired and liabilities assumed at their estimated fair values as of the acquisition date. Goodwill was calculated as the excess of the aggregate of the fair value of the consideration transferred over the fair value of the net assets recognized. See Note H – “Goodwill and Intangible Assets, Net” for additional information regarding goodwill recognized as a result of the acquisition. MDS’s results of operations are consolidated within the MP segment in the consolidated financial statements from the date of acquisition.
On May 25, 2021, the Company acquired assets to facilitate manufacturing of certain MP products in China. Total cash consideration transferred was approximately $17 million. The transaction was recorded as an asset acquisition at cost, with the consideration allocated to individual assets acquired.
Dispositions
On November 30, 2021, the Company sold its utility hot lines tools business located in South America, which had been recorded as assets and liabilities held for sale prior to its disposition. The Company received consideration of $5.8 million from the sale at fair value and recognized a gain of $6.4 million included in SG&A in the Consolidated Statement of Income (Loss). Prior to disposition, the results of operations for the hot lines tools business, including any impairment reserves taken, were consolidated within the AWP segment in the consolidated financial statements.
On July 31, 2019, the Company completed the disposition of Demag® mobile cranes business to Tadano Ltd. and certain of its subsidiaries. During 2019, the Company also exited North American mobile crane product lines manufactured in its Oklahoma City facility. The Company’s actions to sell Demag and cease manufacturing of mobile crane product lines in its Oklahoma City facility represented a significant strategic shift in its business away from mobile cranes as these businesses constituted a significant part of its operations and financial results. The Company believes these actions were necessary to execute its strategy. As a result, the Company reported these operations, formerly part of the Cranes segment, in discontinued operations in the Consolidated Statement of Income (Loss) for all periods presented.
Income (Loss) from Discontinued Operations
The Company reported certain operations, formerly part of the Cranes segment, in discontinued operations in the Consolidated Statement of Income (Loss) for all periods presented. The following information was derived from historical financial information and has been segregated from continuing operations (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
$
|
6.0
|
|
|
|
$
|
327.2
|
|
|
|
Cost of sales
|
|
|
|
|
(5.8)
|
|
|
|
(335.2)
|
|
|
|
Selling, general and administrative expenses
|
|
|
|
|
(0.9)
|
|
|
|
(75.6)
|
|
|
|
Impairment of mobile cranes disposal group
|
|
|
|
|
—
|
|
|
|
(82.1)
|
|
|
|
Asset impairments
|
|
|
|
|
(0.1)
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
—
|
|
|
|
(4.5)
|
|
|
|
Income (loss) from discontinued operations before income taxes
|
|
|
|
|
(0.8)
|
|
|
|
(170.2)
|
|
|
|
(Provision for) benefit from income taxes
|
|
|
|
|
0.4
|
|
|
|
14.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations – net of tax
|
|
|
|
|
$
|
(0.4)
|
|
|
|
$
|
(155.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides supplemental cash flow information related to discontinued operations (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2020
|
|
2019
|
|
Non-cash operating items:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
$
|
—
|
|
|
$
|
3.3
|
|
|
|
|
|
|
|
|
|
Deferred taxes
|
|
|
$
|
0.1
|
|
|
$
|
(1.4)
|
|
|
|
|
|
|
|
|
|
Impairments
|
|
|
$
|
0.1
|
|
|
$
|
82.1
|
|
|
Investing activities:
|
|
|
|
|
|
|
Capital expenditures
|
|
|
$
|
—
|
|
|
$
|
(3.4)
|
|
Gain (Loss) on Disposition of Discontinued Operations - net of tax (in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cranes
|
MHPS
|
|
|
Total
|
|
Cranes
|
MHPS
|
|
|
Total
|
|
Cranes
|
MHPS
|
|
Other
|
Total
|
|
|
Gain (loss) on disposition of discontinued operations
|
$
|
1.4
|
|
$
|
1.2
|
|
|
|
$
|
2.6
|
|
|
$
|
(27.7)
|
|
$
|
(0.4)
|
|
|
|
$
|
(28.1)
|
|
|
$
|
(1.0)
|
|
$
|
(4.6)
|
|
|
$
|
—
|
|
$
|
(5.6)
|
|
|
|
(Provision for) benefit from income taxes
|
0.1
|
|
0.7
|
|
|
|
0.8
|
|
|
8.8
|
|
0.1
|
|
|
|
8.9
|
|
|
2.2
|
|
3.4
|
|
|
0.1
|
|
5.7
|
|
|
|
Gain (loss) on disposition of discontinued operations – net of tax
|
$
|
1.5
|
|
$
|
1.9
|
|
|
|
$
|
3.4
|
|
|
$
|
(18.9)
|
|
$
|
(0.3)
|
|
|
|
$
|
(19.2)
|
|
|
$
|
1.2
|
|
$
|
(1.2)
|
|
|
$
|
0.1
|
|
$
|
0.1
|
|
|
NOTE E – EARNINGS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
|
(in millions, except per share data)
|
|
|
2021
|
|
2020
|
|
2019
|
|
Income (loss) from continuing operations
|
$
|
217.5
|
|
|
$
|
9.0
|
|
|
$
|
209.7
|
|
|
Income (loss) from discontinued operations – net of tax
|
—
|
|
|
(0.4)
|
|
|
(155.4)
|
|
|
Gain (loss) on disposition of discontinued operations – net of tax
|
3.4
|
|
|
(19.2)
|
|
|
0.1
|
|
|
Net income (loss)
|
$
|
220.9
|
|
|
$
|
(10.6)
|
|
|
$
|
54.4
|
|
|
Basic shares:
|
|
|
|
|
|
|
Weighted average shares outstanding
|
69.7
|
|
|
69.6
|
|
|
71.1
|
|
|
Earnings (loss) per share – basic:
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
$
|
3.12
|
|
|
$
|
0.13
|
|
|
$
|
2.95
|
|
|
Income (loss) from discontinued operations – net of tax
|
—
|
|
|
(0.01)
|
|
|
(2.18)
|
|
|
Gain (loss) on disposition of discontinued operations – net of tax
|
0.05
|
|
|
(0.27)
|
|
|
—
|
|
|
Net income (loss)
|
$
|
3.17
|
|
|
$
|
(0.15)
|
|
|
$
|
0.77
|
|
|
Diluted shares:
|
|
|
|
|
|
|
Weighted average shares outstanding – basic
|
69.7
|
|
|
69.6
|
|
|
71.1
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
Restricted stock awards
|
1.2
|
|
|
0.5
|
|
|
0.7
|
|
|
Diluted weighted average shares outstanding
|
70.9
|
|
|
70.1
|
|
|
71.8
|
|
|
Earnings (loss) per share – diluted:
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
$
|
3.07
|
|
|
$
|
0.13
|
|
|
$
|
2.92
|
|
|
Income (loss) from discontinued operations – net of tax
|
—
|
|
|
(0.01)
|
|
|
(2.16)
|
|
|
Gain (loss) on disposition of discontinued operations – net of tax
|
0.05
|
|
|
(0.27)
|
|
|
—
|
|
|
Net income (loss)
|
$
|
3.12
|
|
|
$
|
(0.15)
|
|
|
$
|
0.76
|
|
Non-vested restricted stock awards and restricted stock units (“restricted stock awards”) granted by the Company are treated as potential common shares outstanding in computing diluted earnings per share using the treasury stock method. Weighted average restricted stock awards of approximately 0.1 million, 0.8 million and 0.6 million were outstanding during the years ended December 31, 2021, 2020 and 2019, respectively, but were not included in the computation of diluted shares as the effect would be anti-dilutive or performance targets were not expected to be achieved for awards contingent upon performance.
NOTE F – INVENTORIES
Inventories consist of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2021
|
|
2020
|
|
Finished equipment
|
$
|
283.0
|
|
|
$
|
195.8
|
|
|
Replacement parts
|
157.3
|
|
|
157.0
|
|
|
Work-in-process
|
105.5
|
|
|
57.2
|
|
|
Raw materials and supplies
|
267.7
|
|
|
200.4
|
|
|
Inventories
|
$
|
813.5
|
|
|
$
|
610.4
|
|
Reserves for lower of cost or NRV and excess and obsolete inventory were $57.8 million and $61.8 million at December 31, 2021 and 2020, respectively.
NOTE G – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment – net consist of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2021
|
|
2020
|
|
Property
|
$
|
53.1
|
|
|
$
|
43.6
|
|
|
Plant
|
284.4
|
|
|
250.1
|
|
|
Equipment
|
402.4
|
|
|
390.2
|
|
|
Leasehold improvements
|
50.0
|
|
|
49.9
|
|
|
Construction in progress
|
26.9
|
|
|
31.1
|
|
|
Property, plant and equipment – gross
|
816.8
|
|
|
764.9
|
|
|
Less: Accumulated depreciation
|
(387.2)
|
|
|
(358.3)
|
|
|
Property, plant and equipment – net
|
$
|
429.6
|
|
|
$
|
406.6
|
|
Depreciation expense was $44.3 million, $42.3 million and $39.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.
NOTE H – GOODWILL AND INTANGIBLE ASSETS
An analysis of changes in the Company’s goodwill by business segment is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AWP
|
|
MP
|
|
Total
|
|
Balance at December 31, 2019, gross
|
$
|
139.3
|
|
|
$
|
192.4
|
|
|
$
|
331.7
|
|
|
Accumulated impairment
|
(38.6)
|
|
|
(23.2)
|
|
|
(61.8)
|
|
|
Balance at December 31, 2019, net
|
100.7
|
|
|
169.2
|
|
|
269.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange effect and other
|
1.3
|
|
|
4.2
|
|
|
5.5
|
|
|
Balance at December 31, 2020, gross
|
140.6
|
|
|
196.6
|
|
|
337.2
|
|
|
Accumulated impairment
|
(38.6)
|
|
|
(23.2)
|
|
|
(61.8)
|
|
|
Balance at December 31, 2020, net
|
102.0
|
|
|
173.4
|
|
|
275.4
|
|
|
Acquisitions
|
—
|
|
|
7.3
|
|
|
7.3
|
|
|
|
|
|
|
|
|
|
Foreign exchange effect and other
|
(0.9)
|
|
|
(1.7)
|
|
|
(2.6)
|
|
|
Balance at December 31, 2021, gross
|
139.7
|
|
|
202.2
|
|
|
341.9
|
|
|
Accumulated impairment
|
(38.6)
|
|
|
(23.2)
|
|
|
(61.8)
|
|
|
Balance at December 31, 2021, net
|
$
|
101.1
|
|
|
$
|
179.0
|
|
|
$
|
280.1
|
|
In connection with the MDS acquisition, the Company recognized goodwill of $7.3 million during the year. The goodwill was assigned to the MP reporting unit and attributable primarily to the assembled workforce and expected synergies from the business combination. The goodwill is not expected to be deductible for income tax purposes. See Note D – “Acquisitions and Discontinued Operations” for additional information regarding the MDS acquisition.
Intangible assets, net were comprised of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
|
December 31, 2020
|
|
|
Weighted Average Life
(in years)
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Definite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology
|
7
|
|
$
|
9.8
|
|
|
$
|
(9.7)
|
|
|
$
|
0.1
|
|
|
$
|
10.1
|
|
|
$
|
(9.6)
|
|
|
$
|
0.5
|
|
|
Customer Relationships
|
19
|
|
31.9
|
|
|
(25.4)
|
|
|
6.5
|
|
|
26.1
|
|
|
(24.1)
|
|
|
2.0
|
|
|
Land Use Rights
|
80
|
|
4.4
|
|
|
(0.8)
|
|
|
3.6
|
|
|
4.4
|
|
|
(0.7)
|
|
|
3.7
|
|
|
Other
|
8
|
|
26.3
|
|
|
(23.1)
|
|
|
3.2
|
|
|
25.5
|
|
|
(23.4)
|
|
|
2.1
|
|
|
Total definite-lived intangible assets
|
|
|
$
|
72.4
|
|
|
$
|
(59.0)
|
|
|
$
|
13.4
|
|
|
$
|
66.1
|
|
|
$
|
(57.8)
|
|
|
$
|
8.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In connection with the MDS acquisition, the Company recognized customer relationships of $6.3 million with an estimated useful life of 7 years and trademarks of $1.3 million with an estimated useful life of 10 years during the year. See Note D – “Acquisitions and Discontinued Operations” for additional information regarding the MDS acquisition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
(in millions)
|
2021
|
|
2020
|
|
2019
|
|
Aggregate Amortization Expense
|
$
|
2.2
|
|
|
$
|
1.8
|
|
|
$
|
1.8
|
|
Estimated aggregate intangible asset amortization expense for each of the next five years is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022
|
|
$
|
2.3
|
|
|
2023
|
|
1.7
|
|
|
2024
|
|
1.5
|
|
|
2025
|
|
1.4
|
|
|
2026
|
|
1.3
|
|
NOTE I – DERIVATIVE FINANCIAL INSTRUMENTS
The Company operates internationally, with manufacturing and sales facilities in various locations around the world. In the normal course of business, the Company uses cash flow derivatives to manage exposures. For a derivative to qualify for hedge accounting treatment at inception and throughout the hedge period, the Company formally documents the nature and relationships between hedging instruments and hedged items, as well as its risk-management objectives and strategies for undertaking various hedge transactions, and methods of assessing hedge effectiveness. Additionally, for hedges of forecasted transactions, significant characteristics and expected terms of a forecasted transaction must be specifically identified, and it must be probable that each forecasted transaction will occur. If it is deemed probable the forecasted transaction will not occur, then the gain or loss would be recognized in current earnings. Financial instruments qualifying for hedge accounting must maintain a specified level of effectiveness between the hedging instrument and the item being hedged. The Company does not engage in trading or other speculative use of financial instruments. The Company records all derivative contracts at fair value on a recurring basis. The Company’s derivative financial instruments are categorized under the ASC 820 hierarchy; see Note A – “Basis of Presentation” for an explanation of the hierarchy.
Commodity Swaps and Interest Rate Caps
Derivatives designated as cash flow hedging instruments include commodity swaps and interest rate caps. The outstanding notional value of commodity swaps was $22.5 million as of December 31, 2021. There were no interest rate caps outstanding at December 31, 2021. Commodity swaps outstanding at December 31, 2021 mature on or before August 31, 2022. The outstanding notional amount of commodity swaps and interest rate caps was $26.0 million and $300.0 million, respectively, at December 31, 2020. The Company uses commodity swaps to mitigate price risk for hot rolled coil steel and interest rate caps to mitigate its exposure to changes in interest rates related to variable rate debt. Fair values of commodity swaps are based on observable market data for similar assets and liabilities. Fair values of interest rate caps are based on the present value of future cash payments and receipts. Changes in the fair value of commodity swaps and interest rate caps are deferred in Accumulated other comprehensive income (loss) (“AOCI”). Gains or losses on commodity swaps are reclassified to COGS in the Consolidated Statement of Income (Loss) when the hedged transaction affects earnings. Gains or losses on interest rate caps are reclassified to Interest expense in the Consolidated Statement of Income (Loss) when the underlying hedged transactions occur.
Cross Currency Swaps
Derivatives designated as net investment hedging instruments include cross currency swaps with outstanding notional value of $68.2 million and $97.7 million at December 31, 2021 and 2020, respectively. The Company uses these cross currency swaps to mitigate its exposure to changes in foreign currency exchange rates related to a net investment in a Euro-denominated functional currency subsidiary. Fair values of cross currency swaps are based on the present value of future cash payments and receipts. Changes in the fair value of cross currency swaps are deferred in AOCI. Gains or losses on cross currency swaps are reclassified to Selling, general and administrative expenses in the Consolidated Statement of Income (Loss) when the net investment is liquidated.
Foreign Exchange Contracts
The Company enters into foreign exchange contracts to manage variability of future cash flows associated with changing currency exchange rates. Foreign currency exchange contracts, whether designated or not designated as cash flow hedges, are used to mitigate exposure to changes in foreign currency exchange rates on recognized assets and liabilities. Fair values of these contracts are derived using quoted forward foreign exchange prices to interpolate values of outstanding trades at the reporting date based on their maturities. Foreign exchange contracts outstanding at December 31, 2021 mature during the first half of 2022.
At December 31, 2021 and 2020, the Company had $19.4 million and $7.8 million notional value, respectively, of foreign exchange contracts outstanding that were designated as cash flow hedge contracts. For effective hedging instruments, changes in the fair value of foreign exchange contracts are deferred in AOCI until the underlying hedged transactions settle. Gains or losses on foreign exchange contracts are reclassified to COGS in the Company’s Consolidated Statement of Income (Loss).
The Company had $139.7 million and $54.2 million notional value of foreign exchange contracts outstanding that were not designated as hedging instruments at December 31, 2021 and 2020, respectively. The majority of gains and losses recognized from foreign exchange contracts not designated as hedging instruments are offset by changes in the underlying hedged items, resulting in no material net impact on earnings. Changes in the fair value of these derivative financial instruments are recognized as gains or losses in COGS and Other income (expense) – net in the Consolidated Statement of Income (Loss).
The following table provides the location and fair value amounts of derivative instruments designated and not designated as hedging instruments that are reported in the Consolidated Balance Sheet (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2021
|
|
December 31,
2020
|
|
Instrument (1)
|
Balance Sheet Account
|
Derivatives designated as hedges
|
Derivatives not designated as hedges
|
|
Derivatives designated as hedges
|
Derivatives not designated as hedges
|
|
Foreign exchange contracts
|
Other current assets
|
$
|
(0.1)
|
|
$
|
0.7
|
|
|
$
|
—
|
|
$
|
—
|
|
|
Commodity swaps
|
Other current assets
|
4.3
|
|
—
|
|
|
7.2
|
|
—
|
|
|
Commodity swaps
|
Other non-current assets
|
—
|
|
—
|
|
|
0.3
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swaps - net investment hedge
|
Other current liabilities
|
(0.5)
|
|
—
|
|
|
(2.0)
|
|
—
|
|
|
Interest rate caps
|
Other current liabilities
|
—
|
|
—
|
|
|
(1.2)
|
|
—
|
|
|
Commodity swaps
|
Other current liabilities
|
(1.1)
|
|
—
|
|
|
—
|
|
—
|
|
|
Cross currency swaps - net investment hedge
|
Other non-current liabilities
|
(2.4)
|
|
—
|
|
|
(8.2)
|
|
—
|
|
|
Interest rate caps
|
Other non-current liabilities
|
—
|
|
—
|
|
|
(2.6)
|
|
—
|
|
|
Net derivative asset (liability)
|
$
|
0.2
|
|
$
|
0.7
|
|
|
$
|
(6.5)
|
|
$
|
—
|
|
(1) Categorized as Level 2 under the ASC 820 Fair Value Hierarchy.
The following tables provide the effect of derivative instruments that are designated as hedges in AOCI (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized on Derivatives in OCI, net of tax
|
|
Gain (Loss) Reclassified from AOCI into Income
|
|
|
Year Ended December 31,
|
|
Year Ended December 31,
|
|
Instrument
|
2021
|
2020
|
2019
|
Income Statement Account
|
2021
|
2020
|
2019
|
|
Foreign exchange contracts
|
$
|
(0.1)
|
|
$
|
(0.6)
|
|
$
|
2.7
|
|
Cost of goods sold
|
$
|
0.1
|
|
$
|
(2.1)
|
|
$
|
(5.5)
|
|
|
Commodity swaps
|
2.4
|
|
7.0
|
|
$
|
0.3
|
|
Cost of goods sold
|
15.6
|
|
(2.4)
|
|
(2.8)
|
|
|
Cross currency swaps - cash flow hedge
|
—
|
|
—
|
|
0.6
|
|
Other income (expense) - net
|
—
|
|
—
|
|
1.1
|
|
|
Cross currency swaps - net investment hedges
|
4.8
|
|
(8.8)
|
|
—
|
|
Selling, general and administrative expenses
|
—
|
|
—
|
|
—
|
|
|
Interest rate caps
|
2.9
|
|
(2.8)
|
|
—
|
|
Interest expense
|
(1.2)
|
|
(0.4)
|
|
—
|
|
|
Total
|
$
|
10.0
|
|
$
|
(5.2)
|
|
$
|
3.6
|
|
Total
|
$
|
14.5
|
|
$
|
(4.9)
|
|
$
|
(7.2)
|
|
The following tables provide the effect of derivative instruments that are designated as hedges in the Consolidated Statement of Income (Loss) (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification and amount of Gain or Loss
Recognized in Income
|
|
|
Cost of goods sold
|
|
Interest Expense
|
|
Other income (expense) - net
|
|
|
Year Ended December 31,
|
|
|
2021
|
2020
|
2019
|
|
2021
|
2020
|
2019
|
|
2021
|
2020
|
2019
|
|
Income Statement Accounts in which effects of cash flow hedges are recorded
|
$
|
(3,129.4)
|
|
$
|
(2,537.1)
|
|
$
|
(3,465.3)
|
|
|
$
|
(51.5)
|
|
$
|
(65.9)
|
|
$
|
(87.9)
|
|
|
$
|
13.0
|
|
$
|
4.9
|
|
$
|
(6.1)
|
|
|
Gain (Loss) Reclassified from AOCI into Income (Loss):
|
|
Foreign exchange contracts
|
0.1
|
|
(2.1)
|
|
(5.5)
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
Commodity swaps
|
15.6
|
|
(2.4)
|
|
(2.8)
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
Cross currency swaps - cash flow hedge
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
1.1
|
|
|
Interest rate caps
|
—
|
|
—
|
|
—
|
|
|
(1.2)
|
|
(0.4)
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
Amount excluded from effectiveness testing recognized in Income (Loss) based on amortization approach:
|
|
Cross currency swaps - net investment hedge
|
—
|
|
—
|
|
—
|
|
|
0.6
|
|
0.5
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
Total
|
$
|
15.7
|
|
$
|
(4.5)
|
|
$
|
(8.3)
|
|
|
$
|
(0.6)
|
|
$
|
0.1
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1.1
|
|
Derivatives not designated as hedges are used to offset foreign exchange gains or losses resulting from the underlying exposures of foreign currency denominated assets and liabilities. The following table provides the effect of non-designated derivatives outstanding at the end of the period in the Consolidated Statement of Income (Loss) (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Instrument
|
Income Statement Account
|
2021
|
2020
|
2019
|
|
Foreign exchange contracts
|
Cost of goods sold
|
$
|
(0.5)
|
|
$
|
0.6
|
|
$
|
—
|
|
|
Foreign exchange contracts
|
Other income (expense) – net
|
0.5
|
|
—
|
|
(0.2)
|
|
|
Debt conversion feature (1)
|
Other income (expense) – net
|
—
|
|
—
|
|
(0.5)
|
|
|
Total
|
|
$
|
—
|
|
$
|
0.6
|
|
$
|
(0.7)
|
|
(1) Debt conversion feature on a convertible promissory note held by the Company.
In the Consolidated Statement of Income (Loss), the Company records hedging activity related to commodity swaps, interest rate caps, cross currency swaps, foreign exchange contracts and the debt conversion feature in the accounts for which the hedged items are recorded. On the Consolidated Statement of Cash Flows, the Company presents cash flows from hedging activities in the same manner as it records the underlying item being hedged.
Counterparties to the Company’s derivative financial instruments are major financial institutions and commodity trading companies with credit ratings of investment grade or better and no collateral is required. There are no significant risk concentrations. Management continues to monitor counterparty risk and believes the risk of incurring losses on derivative contracts related to credit risk is unlikely and any losses would be immaterial.
See Note M – “Stockholders’ Equity” for unrealized net gains (losses), net of tax, included in AOCI. Within unrealized net gains (losses) included in AOCI as of December 31, 2021, it is estimated that $2.0 million of gains are expected to be reclassified into earnings in the next twelve months.
NOTE J – LONG-TERM OBLIGATIONS
Long-term debt is summarized as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2021
|
|
2020
|
|
5% Senior Notes due May 15, 2029, net of unamortized debt issuance costs of $6.9 at December 31, 2021
|
$
|
593.1
|
|
|
$
|
—
|
|
|
5-5/8% Senior Notes due February 1, 2025, net of unamortized debt issuance costs of $6.0 at December 31, 2020
|
—
|
|
|
594.0
|
|
|
Credit Agreement – term debt due January 31, 2024 (“Original Term Loan”, as defined below), net of unamortized debt issuance costs of $0.4 and $3.0 at December 31, 2021 and 2020, respectively
|
77.4
|
|
|
381.0
|
|
|
Credit Agreement – term debt due January 31, 2024 (“2019 Term Loan”, as defined below), net of unamortized debt issuance costs of $1.6 at December 31, 2020
|
—
|
|
|
194.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease obligations
|
3.5
|
|
|
4.4
|
|
|
Other
|
0.1
|
|
|
0.1
|
|
|
Total debt
|
674.1
|
|
|
1,173.8
|
|
|
Less: Current portion of long-term debt
|
(5.6)
|
|
|
(7.6)
|
|
|
Long-term debt, less current portion
|
$
|
668.5
|
|
|
$
|
1,166.2
|
|
Credit Agreement
On January 31, 2017, the Company entered into a credit agreement with the lenders and issuing banks party thereto and Credit Suisse AG, Cayman Islands Branch (“CSAG”), as administrative agent and collateral agent, which was subsequently amended to include (i) a $600 million revolving line of credit (the “Revolver”) and (ii) senior secured term loans totaling $600 million with a maturity date of January 31, 2024 (the “Term Loans”). On April 1, 2021, the Company entered into an amendment and restatement of the credit agreement (as amended and restated, the “Credit Agreement”) which included the following principal changes to the original credit agreement: (i) extension of the term of the Revolver to expire on April 1, 2026, which maturity will spring forward to November 1, 2023 if the principal outstanding under the $400 million senior secured term loan (the “Original Term Loan”) is not repaid or its maturity date is not extended, (ii) reinstatement of financial covenants that were waived in 2020, (iii) decrease in the interest rate on the drawn Revolver by 25 basis points and (iv) certain other technical changes, including additional language regarding the potential cessation of LIBOR as a benchmark rate. The Company recorded a loss on early extinguishment of debt related to the amendment and restatement of the Credit Agreement of $2.4 million in the second quarter of 2021.
On March 7, 2019, the Company entered into an Incremental Assumption Agreement and Amendment No. 3 (“Amendment No. 3”) to its credit agreement. Amendment No. 3 provided the Company with an additional term loan (the “2019 Term Loan”) in the amount of $200 million. During the first quarter of 2021, the Company prepaid the 2019 Term Loan prior to its maturity date to reduce the Company’s outstanding debt and lower its leverage. The Company recorded a loss on early extinguishment of debt related to prepayment of $2.1 million for accelerated amortization of debt acquisition costs and original issue discount. The 2019 Term Loan bore interest at a rate of LIBOR plus 2.75% with a 0.75% LIBOR floor.
The Original Term Loan under the Credit Agreement bears interest at a rate of LIBOR plus 2.00% with a 0.75% LIBOR floor. During the year ended December 31, 2021, the Company prepaid $303 million of the amount outstanding on the Original Term Loan prior to its maturity date to reduce the Company’s outstanding debt and lower its leverage. The Company recorded a loss on early extinguishment of debt related to prepayment of $2.4 million for accelerated amortization of debt acquisition costs and original issue discount.
Unlimited incremental commitments may be extended at the option of the existing or new lenders and can be in the form of revolving credit commitments, term loan commitments, or a combination of both, with incremental amounts in excess of $300 million as long as the Company satisfies the maximum permitted level of senior secured leverage as defined in the Credit Agreement.
The Credit Agreement requires the Company to comply with a number of covenants which limit, in certain circumstances, the Company’s ability to take a variety of actions, including but not limited to: incur indebtedness; create or maintain liens on its property or assets; make investments, loans and advances; repurchase shares of its common stock; engage in acquisitions, mergers, consolidations and asset sales; redeem debt; and pay dividends and distributions. If the Company’s borrowings under the Revolver are greater than 30% of the total revolving credit commitments, the Credit Agreement requires the Company to comply with the following financial tests: (i) minimum required level of the interest coverage ratio of 2.5 to 1.0 and (ii) maximum permitted level of the senior secured leverage ratio of 2.75 to 1.0. The Credit Agreement also contains customary default provisions. The Company was in compliance with all covenants contained in the Credit Agreement as of December 31, 2021.
As of December 31, 2021 and 2020, the Company had $77.8 million and $579.9 million, net of discount, respectively, in Term Loans outstanding under the Credit Agreement. The weighted average interest rate on the Term Loans at December 31, 2021 and 2020 was 2.75% and 3.00%, respectively. The Company had no revolving credit amounts outstanding as of December 31, 2021 and 2020.
The Company obtains letters of credit that generally serve as collateral for certain liabilities included in the Consolidated Balance Sheet and guaranteeing the Company’s performance under contracts. Letters of credit can be issued under two facilities provided in the Credit Agreement and via bilateral arrangements outside the Credit Agreement.
The Credit Agreement incorporates secured facilities for issuance of letters of credit up to $400 million (the “$400 Million Facility”). Letters of credit issued under the $400 Million Facility decrease availability under the Revolver. The Credit Agreement also permits the Company to have additional secured facilities for the issuance of letters of credit up to $300 million (the “$300 Million Facility”). Letters of credit issued under the $300 Million Facility do not decrease availability under the Revolver.
The Company also has bilateral arrangements to issue letters of credit with various other financial institutions (the “Bilateral Arrangements”). The Bilateral Arrangements are not secured under the Credit Agreement and do not decrease availability under the Revolver.
Letters of credit outstanding (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$400 Million Facility
|
$
|
—
|
|
|
|
|
|
|
$
|
—
|
|
|
|
|
|
|
$300 Million Facility
|
62.8
|
|
|
|
|
|
|
35.3
|
|
|
|
|
|
|
Bilateral Arrangements
|
45.0
|
|
|
|
|
|
|
47.2
|
|
|
|
|
|
|
Total
|
$
|
107.8
|
|
|
|
|
|
|
$
|
82.5
|
|
|
|
|
|
Furthermore, the Company and certain of its subsidiaries agreed to take certain actions to secure borrowings under the Credit Agreement. As a result, Terex and certain of its subsidiaries entered into a Guarantee and Collateral Agreement with CSAG, as collateral agent for the lenders, granting security and guarantees to the lenders for amounts borrowed under the Credit Agreement. Pursuant to the Guarantee and Collateral Agreement, Terex is required to (a) pledge as collateral the capital stock of the Company’s material domestic subsidiaries and 65% of the capital stock of certain of the Company’s material foreign subsidiaries and (b) provide a first priority security interest in substantially all of the Company’s domestic assets.
5-5/8% Senior Notes
On January 31, 2017, the Company sold and issued $600.0 million aggregate principal amount of Senior Notes Due 2025 (“5-5/8% Notes”) at par in a private offering. The 5-5/8% Notes were jointly and severally guaranteed by certain of the Company’s domestic subsidiaries.
On March 15, 2021, the Company delivered a notice for the conditional redemption of all of its outstanding 5-5/8% Notes. On April 5, 2021, the Company redeemed the 5-5/8% Notes in full for $622.9 million, including redemption premiums of $16.9 million and accrued but unpaid interest of $6.0 million. The Company recorded a loss on early extinguishment of debt related to the redemption of the 5-5/8% Notes of $22.5 million in the second quarter of 2021.
5% Senior Notes
In April 2021, the Company sold and issued $600.0 million aggregate principal amount of Senior Notes Due 2029 (“5% Notes”) at par in a private offering. The proceeds from the 5% Notes, together with cash on hand, was used: (i) to fund redemption and discharge of the 5-5/8% Notes and (ii) to pay related premiums, fees, discounts and expenses. The 5% Notes are jointly and severally guaranteed by certain of the Company’s domestic subsidiaries.
Schedule of Debt Maturities
Scheduled annual maturities of the principal portion of long-term debt outstanding at December 31, 2021 in the successive five-year period and thereafter are summarized below. Amounts shown are exclusive of minimum lease payments for capital lease obligations (in millions):
|
|
|
|
|
|
|
|
2022
|
$
|
4.0
|
|
|
2023
|
4.0
|
|
|
2024
|
69.9
|
|
|
2025
|
—
|
|
|
2026
|
—
|
|
|
Thereafter
|
600.0
|
|
|
Total Debt
|
677.9
|
|
|
Less: Unamortized debt issuance costs
|
(7.3)
|
|
|
Net debt
|
$
|
670.6
|
|
Fair Value of Debt
The Company estimates the fair values of its debt set forth below as of December 31, 2021 and 2020, as follows (in millions, except for quotes):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
Book Value
|
|
Quote
|
|
Fair Value
|
|
5% Notes
|
$
|
600.0
|
|
|
1.03000
|
|
|
$
|
618.0
|
|
|
|
|
|
|
|
|
|
Original Term Loan (net of discount)
|
77.8
|
|
|
0.99875
|
|
|
77.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
Book Value
|
|
Quote
|
|
Fair Value
|
|
5-5/8% Notes
|
$
|
600.0
|
|
|
1.02750
|
|
|
$
|
616.5
|
|
|
Original Term Loan (net of discount)
|
384.0
|
|
|
0.98750
|
|
|
379.2
|
|
|
2019 Term Loan (net of discount)
|
195.9
|
|
|
0.99000
|
|
|
193.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of debt reported in the table above is based on adjusted price quotations on the debt instruments in an active market. The Company believes that the carrying value of its other borrowings, including amounts outstanding, if any, for the revolving credit line under the Credit Agreement, approximate fair market value based on maturities for debt of similar terms. Fair value of debt reported in the table above are categorized under Level 2 of the ASC 820 hierarchy. See Note A – “Basis of Presentation” for an explanation of ASC 820 hierarchy.
The Company paid $51.3 million, $58.1 million and $70.9 million of interest in 2021, 2020 and 2019, respectively.
NOTE K – LEASES
Terex has operating leases for real property, vehicles and office and industrial equipment, generally expiring over terms from 1 to 15 years. Many of the leases held by Terex include options to extend or terminate the lease.
Real property leases are used for office, administrative and industrial purposes. The base terms of these leases typically expire between 2 and 15 years, with options to renew between 1 and 15 years. Most of our renewal options are linked to market conditions and Terex cannot estimate how existing renewal options will affect the monthly payments.
The vehicle leases mainly include cars and trucks. Term length for these leases typically varies between 1 and 7 years.
Office and industrial equipment leases primarily include machinery used for conducting business at office locations and manufacturing sites worldwide. Term length for these leases typically varies between 1 and 6 years.
Operating Leases
Operating lease cost consists of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2021
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
Operating lease cost
|
$
|
31.3
|
|
|
$
|
32.0
|
|
|
$
|
33.8
|
|
|
Variable lease cost
|
4.1
|
|
|
4.9
|
|
|
6.7
|
|
|
Short-term lease cost
|
4.3
|
|
|
4.8
|
|
|
5.0
|
|
|
Total operating lease costs
|
$
|
39.7
|
|
|
$
|
41.7
|
|
|
$
|
45.5
|
|
Variable lease costs are expensed as incurred and are not included in the determination of ROU assets or lease liabilities. Operating lease obligations consist primarily of commitments to rent real properties.
Supplemental balance sheet information related to leases (in millions, except lease term and discount rate):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2021
|
|
2020
|
|
Operating lease right-of-use assets included within Other assets
|
$
|
99.2
|
|
|
$
|
102.9
|
|
|
|
|
|
|
|
Current maturities of operating leases included within Other current liabilities
|
$
|
20.2
|
|
|
$
|
24.8
|
|
|
Non-current operating leases included within Other liabilities
|
73.1
|
|
|
82.9
|
|
|
Total operating lease liabilities
|
$
|
93.3
|
|
|
$
|
107.7
|
|
|
|
|
|
|
|
Weighted average discount rate for operating leases
|
4.77
|
%
|
|
5.33
|
%
|
|
Weighted average remaining operating lease term in years
|
5
|
|
5
|
|
|
|
|
|
Maturities of operating lease liabilities (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022
|
$
|
24.1
|
|
|
|
|
2023
|
25.8
|
|
|
|
|
2024
|
18.5
|
|
|
|
|
2025
|
11.6
|
|
|
|
|
2026
|
7.7
|
|
|
|
|
Thereafter
|
18.9
|
|
|
|
|
Total undiscounted operating lease payments
|
106.6
|
|
|
|
|
Less: Imputed interest
|
(13.3)
|
|
|
|
|
Total operating lease liabilities
|
93.3
|
|
|
|
|
Less: Current maturities of operating lease liabilities
|
(20.2)
|
|
|
|
|
Non-current operating lease liabilities
|
$
|
73.1
|
|
|
|
Supplemental cash flow and other information related to operating leases (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2021
|
|
2020
|
|
Cash paid for amounts included in the measurement of operating lease liabilities
|
$
|
37.1
|
|
|
$
|
32.1
|
|
|
Operating right-of-use assets obtained in exchange for operating lease liabilities
|
$
|
31.1
|
|
|
$
|
21.4
|
|
NOTE L – RETIREMENT PLANS AND OTHER BENEFITS
U.S. Pension Plan
The Company maintains a nonqualified Supplemental Executive Retirement Plan (“U.S. SERP”). The U.S. SERP provides retirement benefits to certain former U.S. employees of the Company. Generally, the U.S. SERP provides a benefit based on average total compensation earned over a participant’s final five years of employment and years of service reduced by benefits earned under any Company retirement program, excluding salary deferrals and matching contributions. In addition, benefits are reduced by Social Security Primary Insurance Amounts attributable to Company contributions. The U.S. SERP is unfunded and participation in the U.S. SERP has been frozen. There is also a defined contribution plan for certain senior executives of the Company.
Non-U.S. Plans
The Company maintains defined benefit plans in France, Germany, India, Switzerland and the U.K. for some of its subsidiaries. Participation in the U.K. plan has been frozen. The U.K. plan is a funded plan and the Company funds this plan in accordance with funding regulations in the U.K. and a negotiated agreement between the Company and the plan’s trustee. The Switzerland plan is a funded plan and the Company funds this plan in accordance with funding regulations. Participation in the German plans is frozen; however, eligible participants are credited with post-freeze service for purposes of determining vesting and the amount of benefits. The plans in France, Germany, and India are unfunded plans. In Italy and Mexico, there are mandatory termination indemnity plans providing a benefit that is payable upon termination of employment in substantially all cases of termination. The Company records this obligation based on mandated requirements. The measure of current obligation is not dependent on the employees’ future service and therefore is measured at current value.
Other Post-employment Benefits
The Company has several non-pension post-retirement benefit programs. The Company provides post-employment health and life insurance benefits to certain former salaried and hourly employees. The health care programs are contributory, with participants’ contributions adjusted annually, and the life insurance plan is noncontributory.
Savings Plans
The Company sponsors various tax deferred savings plans into which eligible employees may elect to contribute a portion of their compensation. The Company may, but is not obligated to, contribute to certain of these plans. Charges recognized for these savings plans were $17.3 million, $17.9 million and $20.8 million for the years ended December 31, 2021, 2020 and 2019, respectively. For the years ended December 31, 2021, 2020 and 2019, Company matching contributions to tax deferred savings plans were invested at the direction of plan participants.
Information regarding the Company’s plans, including U.S. SERP, was as follows (in millions, except percent values):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension Benefits
|
|
Non-U.S. Pension Benefits
|
|
Other Benefits
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Accumulated benefit obligation at end of year
|
$
|
43.6
|
|
|
$
|
46.1
|
|
|
$
|
149.5
|
|
|
$
|
165.2
|
|
|
|
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
$
|
46.1
|
|
|
$
|
43.1
|
|
|
$
|
167.3
|
|
|
$
|
153.0
|
|
|
$
|
2.4
|
|
|
$
|
2.8
|
|
|
Service cost
|
—
|
|
|
—
|
|
|
1.1
|
|
|
1.5
|
|
|
—
|
|
|
—
|
|
|
Interest cost
|
1.1
|
|
|
1.4
|
|
|
2.3
|
|
|
2.8
|
|
|
0.1
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.3)
|
|
|
—
|
|
|
—
|
|
|
Curtailments
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.0)
|
|
|
—
|
|
|
—
|
|
|
Plan amendments
|
—
|
|
|
—
|
|
|
(0.2)
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
Actuarial loss (gain)(1)
|
(1.2)
|
|
|
4.0
|
|
|
(10.0)
|
|
|
12.5
|
|
|
(0.1)
|
|
|
(0.2)
|
|
|
Benefits paid
|
(2.4)
|
|
|
(2.4)
|
|
|
(6.8)
|
|
|
(6.5)
|
|
|
(0.3)
|
|
|
(0.3)
|
|
|
Foreign exchange effect
|
—
|
|
|
—
|
|
|
(2.4)
|
|
|
5.9
|
|
|
—
|
|
|
—
|
|
|
Benefit obligation at end of year
|
43.6
|
|
|
46.1
|
|
|
151.3
|
|
|
167.3
|
|
|
2.1
|
|
|
2.4
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
—
|
|
|
—
|
|
|
139.9
|
|
|
122.1
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual return on plan assets
|
—
|
|
|
—
|
|
|
6.1
|
|
|
13.8
|
|
|
—
|
|
|
—
|
|
|
Settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.3)
|
|
|
—
|
|
|
—
|
|
|
Employer contribution
|
2.4
|
|
|
2.4
|
|
|
7.1
|
|
|
7.1
|
|
|
0.3
|
|
|
0.3
|
|
|
Employee contribution
|
—
|
|
|
—
|
|
|
0.2
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
Benefits paid
|
(2.4)
|
|
|
(2.4)
|
|
|
(6.8)
|
|
|
(6.5)
|
|
|
(0.3)
|
|
|
(0.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange effect
|
—
|
|
|
—
|
|
|
(1.3)
|
|
|
4.3
|
|
|
—
|
|
|
—
|
|
|
Fair value of plan assets at end of year
|
—
|
|
|
—
|
|
|
145.2
|
|
|
139.9
|
|
|
—
|
|
|
—
|
|
|
Funded status
|
$
|
(43.6)
|
|
|
$
|
(46.1)
|
|
|
$
|
(6.1)
|
|
|
$
|
(27.4)
|
|
|
$
|
(2.1)
|
|
|
$
|
(2.4)
|
|
|
Amounts recognized in the statement of financial position are included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7.5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Other current liabilities
|
$
|
2.3
|
|
|
$
|
2.3
|
|
|
$
|
0.5
|
|
|
$
|
0.6
|
|
|
$
|
0.3
|
|
|
$
|
0.3
|
|
|
Other non-current liabilities
|
41.3
|
|
|
43.8
|
|
|
13.1
|
|
|
26.8
|
|
|
1.8
|
|
|
2.1
|
|
|
Total liabilities
|
$
|
43.6
|
|
|
$
|
46.1
|
|
|
$
|
13.6
|
|
|
$
|
27.4
|
|
|
$
|
2.1
|
|
|
$
|
2.4
|
|
|
Amounts recognized in accumulated other comprehensive loss consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial net loss
|
$
|
5.6
|
|
|
$
|
7.1
|
|
|
$
|
38.4
|
|
|
$
|
52.1
|
|
|
$
|
—
|
|
|
$
|
0.2
|
|
|
Prior service cost
|
—
|
|
|
—
|
|
|
2.6
|
|
|
3.0
|
|
|
—
|
|
|
—
|
|
|
Total amounts recognized in accumulated other comprehensive loss
|
$
|
5.6
|
|
|
$
|
7.1
|
|
|
$
|
41.0
|
|
|
$
|
55.1
|
|
|
$
|
—
|
|
|
$
|
0.2
|
|
(1) Actuarial gains related to U.S. and non-U.S. pension benefits for the year ended December 31, 2021 were due primarily to higher discount rates when compared to the rate used in the prior year. Actuarial losses related to U.S. and non-U.S. pension benefits for the year ended December 31, 2020 were due primarily to lower discount rates when compared to the rate used in the prior year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension Benefits
|
|
Non-U.S. Pension Benefits
|
|
Other Benefits
|
|
|
2021
|
|
2020
|
|
2019
|
|
2021
|
|
2020
|
|
2019
|
|
2021
|
|
2020
|
|
2019
|
|
Weighted-average assumptions as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate(1)
|
2.80
|
%
|
|
2.50
|
%
|
|
3.31
|
%
|
|
1.93
|
%
|
|
1.42
|
%
|
|
1.87
|
%
|
|
2.58
|
%
|
|
2.12
|
%
|
|
3.10
|
%
|
|
Expected return on plan assets
|
N/A
|
|
N/A
|
|
N/A
|
|
3.93
|
%
|
|
3.93
|
%
|
|
4.40
|
%
|
|
N/A
|
|
N/A
|
|
N/A
|
|
Rate of compensation increase(1)
|
N/A
|
|
N/A
|
|
N/A
|
|
0.18
|
%
|
|
0.17
|
%
|
|
0.17
|
%
|
|
N/A
|
|
N/A
|
|
N/A
|
(1) The weighted average assumptions as of December 31 are used to calculate the funded status at the end of the current year and the net periodic cost for the subsequent year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension Benefits
|
|
Non-U.S. Pension Benefits
|
|
Other Benefits
|
|
|
2021
|
|
2020
|
|
2019
|
|
2021
|
|
2020
|
|
2019
|
|
2021
|
|
2020
|
|
2019
|
|
Components of net periodic cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.2
|
|
|
$
|
1.1
|
|
|
$
|
1.5
|
|
|
$
|
1.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Interest cost
|
1.1
|
|
|
1.4
|
|
|
1.6
|
|
|
2.3
|
|
|
2.8
|
|
|
3.6
|
|
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|
Expected return on plan assets
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.3)
|
|
|
(5.4)
|
|
|
(4.7)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Recognition of prior service cost
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Amortization of actuarial loss
|
0.3
|
|
|
—
|
|
|
(0.5)
|
|
|
2.1
|
|
|
1.7
|
|
|
1.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Other
|
—
|
|
|
—
|
|
|
(0.2)
|
|
|
(0.2)
|
|
|
(0.9)
|
|
|
(0.7)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net periodic cost
|
$
|
1.4
|
|
|
$
|
1.4
|
|
|
$
|
1.1
|
|
|
$
|
0.1
|
|
|
$
|
(0.2)
|
|
|
$
|
2.3
|
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
Components of Net periodic cost other than the Service cost component are included in Other income (expense) - Net in the Consolidated Statement of Income (Loss). The Service cost component is included in the same line item or items as other compensation costs arising from services rendered by pertinent employees during the period.
Pension Settlements
Participants in the Company’s U.K. pension plan may elect to receive a lump-sum settlement of remaining pension benefits under the terms of the plan. As a result of participants electing the lump-sum option during the year ended December 31, 2019, the Company settled $2.4 million of non-U.S. pension obligations. The settlements were paid from plan assets and did not require a cash contribution from the Company. As a result, the Company recorded settlement losses of $0.6 million reflecting the accelerated recognition of unamortized losses in the plan proportionate to the obligation that was settled in 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension Benefits
|
|
Non-U.S. Pension Benefits
|
|
Other Benefits
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (gain) loss
|
$
|
(1.3)
|
|
|
$
|
4.0
|
|
|
$
|
(10.7)
|
|
|
$
|
4.2
|
|
|
$
|
(0.2)
|
|
|
$
|
(0.2)
|
|
|
Amortization of actuarial gain (loss)
|
(0.2)
|
|
|
—
|
|
|
(2.1)
|
|
|
(1.7)
|
|
|
—
|
|
|
—
|
|
|
Amortization of prior service cost
|
—
|
|
|
—
|
|
|
(0.1)
|
|
|
(0.2)
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange effect
|
—
|
|
|
—
|
|
|
(1.2)
|
|
|
1.9
|
|
|
—
|
|
|
—
|
|
|
Total recognized in other comprehensive income (loss)
|
$
|
(1.5)
|
|
|
$
|
4.0
|
|
|
$
|
(14.1)
|
|
|
$
|
4.2
|
|
|
$
|
(0.2)
|
|
|
$
|
(0.2)
|
|
For the Company’s plans, including the U.S. SERP, that have accumulated benefit obligations in excess of plan assets, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets were (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension
Benefits
|
|
Non-U.S. Pension Benefits
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Projected benefit obligation
|
$
|
43.6
|
|
|
$
|
46.1
|
|
|
$
|
52.2
|
|
|
$
|
167.3
|
|
|
Accumulated benefit obligation
|
$
|
43.6
|
|
|
$
|
46.1
|
|
|
$
|
50.4
|
|
|
$
|
165.2
|
|
|
Fair value of plan assets
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
38.6
|
|
|
$
|
139.9
|
|
Determination of plan obligations and associated expenses requires the use of actuarial valuations based on certain economic assumptions, which includes discount rates and expected rates of return on plan assets The discount rate enables the Company to estimate the present value of expected future cash flows on the measurement date. The rate used reflects a rate of return on high-quality fixed income investments that matches the duration of expected benefit payments at the December 31 measurement date.
The methodology used to determine the rate of return on non-U.S. pension plan assets was based on average rate of earnings on funds invested and to be invested. Based on historical returns and future expectations, the Company believes the investment return assumptions are reasonable. The expected rate of return of plan assets represents an estimate of long-term returns on the investment portfolio. This assumption is reviewed by the trustees and varies with each of the plans.
The overall investment strategy for non-U.S. defined benefit plans is to achieve a mix of investments to support long-term growth and minimize volatility while maximizing rates of return by diversification of asset types, fund strategies and fund managers. Fixed income investments include investments in European government securities and European corporate bonds and constitute approximately 70% and 74% of the portfolio at December 31, 2021 and 2020, respectively. Equity investments, multi-asset investment funds and real estate investments that invest in a diversified range of property principally in the retail, office and industrial/warehouse sectors constitute approximately 30% and 26% of the portfolio at December 31, 2021 and 2020, respectively. Investments of the plans primarily include investments in companies from diversified industries with 85% invested internationally and 15% invested in North America. The target investment allocations to support the Company’s investment strategy for 2022 are approximately 76% to 77% fixed income securities and approximately 23% to 24% equity securities, multi-asset investment funds and real estate investments.
Fair value of cash in the table below is based on price quotations in an active market and therefore categorized under Level 1 of the ASC 820 hierarchy. Fair value of investment funds is priced on the market value of underlying investments in the portfolio and therefore categorized as Level 2 of the ASC 820 hierarchy. Fair value of group annuity insurance contracts is based on techniques that require inputs that are both significant to the fair value measurement and unobservable and therefore categorized as Level 3 of the ASC 820 hierarchy. Specifically, group annuity insurance contracts are valued at original buy in price adjusted for changes in discount rates and other actuarial assumptions. See Note A – “Basis of Presentation,” for an explanation of the ASC 820 hierarchy.
The fair value of the Company’s plan assets at December 31, 2021 are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. Pension Plans
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Cash, including money market funds
|
|
|
|
|
|
|
|
|
$
|
2.3
|
|
|
$
|
2.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
U.S. equities
|
|
|
|
|
|
|
|
|
22.5
|
|
|
—
|
|
|
22.5
|
|
|
—
|
|
|
Non-U.S. equities
|
|
|
|
|
|
|
|
|
16.5
|
|
|
—
|
|
|
16.5
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. corporate bond funds
|
|
|
|
|
|
|
|
|
2.3
|
|
|
—
|
|
|
2.3
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. governmental fixed income funds
|
|
|
|
|
|
|
|
|
29.1
|
|
|
—
|
|
|
29.1
|
|
|
—
|
|
|
Group annuity insurance contracts
|
|
|
|
|
|
|
|
|
34.1
|
|
|
—
|
|
|
—
|
|
|
34.1
|
|
|
Real estate
|
|
|
|
|
|
|
|
|
3.9
|
|
|
—
|
|
|
3.9
|
|
|
—
|
|
|
Other securities
|
|
|
|
|
|
|
|
|
34.5
|
|
|
—
|
|
|
34.5
|
|
|
—
|
|
|
Total investments measured at fair value
|
|
|
|
|
|
|
|
|
145.2
|
|
|
$
|
2.3
|
|
|
$
|
108.8
|
|
|
$
|
34.1
|
|
The fair value of the Company’s plan assets at December 31, 2020 are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. Pension Plans
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Cash, including money market funds
|
|
|
|
|
|
|
|
|
$
|
4.4
|
|
|
$
|
4.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
U.S. equities
|
|
|
|
|
|
|
|
|
18.4
|
|
|
—
|
|
|
18.4
|
|
|
—
|
|
|
Non-U.S. equities
|
|
|
|
|
|
|
|
|
14.4
|
|
|
—
|
|
|
14.4
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. corporate bond funds
|
|
|
|
|
|
|
|
|
2.9
|
|
|
—
|
|
|
2.9
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. governmental fixed income funds
|
|
|
|
|
|
|
|
|
36.8
|
|
|
—
|
|
|
36.8
|
|
|
—
|
|
|
Group annuity insurance contracts
|
|
|
|
|
|
|
|
|
35.3
|
|
|
—
|
|
|
—
|
|
|
35.3
|
|
|
Real estate
|
|
|
|
|
|
|
|
|
3.8
|
|
|
—
|
|
|
3.8
|
|
|
—
|
|
|
Other securities
|
|
|
|
|
|
|
|
|
23.9
|
|
|
—
|
|
|
23.9
|
|
|
—
|
|
|
Total investments measured at fair value
|
|
|
|
|
|
|
|
|
$
|
139.9
|
|
|
$
|
4.4
|
|
|
$
|
100.2
|
|
|
$
|
35.3
|
|
Changes in fair value measurements of Level 3 investments during the years ended December 31, 2021 and 2020 are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
|
December 31, 2020
|
|
Balance at beginning of year
|
|
$
|
35.3
|
|
|
$
|
35.5
|
|
|
Actuarial gain (loss)
|
|
1.4
|
|
|
0.8
|
|
|
Interest Income
|
|
0.3
|
|
|
0.3
|
|
|
Transfers into (out of) Level 3
|
|
(2.4)
|
|
|
(2.4)
|
|
|
Foreign exchange effect
|
|
(0.5)
|
|
|
1.1
|
|
|
Balance at end of year
|
|
$
|
34.1
|
|
|
$
|
35.3
|
|
The Company plans to contribute approximately $2 million to its U.S. defined benefit pension plan and post-retirement plans and approximately $7 million to its non-U.S. defined benefit pension plans in 2022. During the year ended December 31, 2021, the Company contributed $2.6 million to its U.S. defined benefit pension plan and post-retirement plans and $7.1 million to its non-U.S. defined benefit pension plans. The Company’s estimated future benefit payments under its plans are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
U.S. Pension Benefits
|
|
Non-U.S. Pension Benefits
|
|
Other Benefits
|
|
2022
|
|
$
|
2.4
|
|
|
$
|
5.6
|
|
|
$
|
0.3
|
|
|
2023
|
|
$
|
2.5
|
|
|
$
|
6.2
|
|
|
$
|
0.2
|
|
|
2024
|
|
$
|
2.5
|
|
|
$
|
6.4
|
|
|
$
|
0.2
|
|
|
2025
|
|
$
|
2.5
|
|
|
$
|
6.6
|
|
|
$
|
0.2
|
|
|
2026
|
|
$
|
2.5
|
|
|
$
|
6.7
|
|
|
$
|
0.1
|
|
|
2027-2031
|
|
$
|
12.2
|
|
|
$
|
34.0
|
|
|
$
|
0.5
|
|
For the other benefits, for measurement purposes, an 8.50% rate of increase in the per capita cost of covered health care benefits was assumed for 2021, dropping to 7% in 2022 and then decreasing one-half percentage point per year until it reaches 4.00% for 2028 and thereafter. A one-percentage-point change in assumed health care cost trend rates would not have a material effect on total service and interest cost components or post-retirement benefit obligation.
NOTE M – STOCKHOLDERS’ EQUITY
On December 31, 2021, there were 83.4 million shares of common stock issued and 69.2 million shares of common stock outstanding. Of the 216.6 million unissued shares of common stock at that date, 1.9 million shares of common stock were reserved for issuance for the vesting of restricted stock.
Common Stock in Treasury
The Company values treasury stock on an average cost basis. As of December 31, 2021, the Company held 14.2 million shares of common stock in treasury totaling $459.7 million, which include 0.6 million shares held in a trust for the benefit of the Company’s deferred compensation plan totaling $16.9 million.
Preferred Stock
The Company’s certificate of incorporation was amended in June 1998 to authorize 50.0 million shares of preferred stock, $0.01 par value per share. As of December 31, 2021 and 2020, there were no shares of preferred stock outstanding.
Long-Term Incentive Plans
In May 2021, the stockholders approved the Terex Corporation Amended and Restated 2018 Omnibus Incentive Plan (the “2018 Plan”) which increased the number of shares of common stock (“Shares”) authorized for issuance by 2.0 million. The purpose of the 2018 Plan is to assist the Company in attracting and retaining selected individuals to serve as employees, directors, officers, consultants and advisors of the Company and its subsidiaries and affiliates who will contribute to the Company’s success and to achieve long-term objectives which will inure to the benefit of all stockholders of the Company through the additional incentive inherent in the ownership of the common stock. The 2018 Plan authorizes the granting of (i) options to purchase shares of Common Stock, (ii) stock appreciation rights, (iii) restricted stock awards, (iv) restricted stock units, (v) other stock awards, (vi) cash awards and (vii) performance awards. Under the 2018 Plan, Shares covering restricted stock awards, restricted stock units and other stock awards shall only be counted as used to the extent that they are actually issued. As of December 31, 2021, 3.3 million Shares were available for grant under the 2018 Plan.
Under the 2018 Plan, approximately 58% of outstanding awards are time-based and vest ratably on each of the first three anniversary dates. Approximately 28% cliff vest at the end of a three-year period and are subject to performance targets that may or may not be met and for which the performance period has not yet been completed. Approximately 14% cliff vest and are based on performance targets containing a market condition determined over a three-year period.
Fair value of restricted stock awards is based on the market price at the date of grant approval except for 0.4 million shares based on a market condition. The Company uses the Monte Carlo method to provide grant date fair value for awards with a market condition. The Monte Carlo method is a statistical simulation technique used to provide the grant date fair value of an award.
The following table presents the weighted-average assumptions used in the valuations:
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Grant date
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Grant date
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Grant date
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March 4, 2021
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February 26, 2020
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March 12, 2019
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Dividend yields
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1.12%
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2.12%
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1.31%
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Expected historical volatility
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53.03%
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36.36%
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36.64%
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Risk free interest rate
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0.29%
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1.14%
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2.40%
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Expected life (in years)
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3
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3
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3
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Grant date fair value per share
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$54.92
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$21.09
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$38.77
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The following table is a summary of restricted stock awards under all of the Company’s plans:
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Restricted Stock
Awards
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Weighted
Average Grant
Date Fair Value
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Nonvested at December 31, 2020
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2,391,325
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$
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27.64
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Granted
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638,520
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$
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44.26
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Vested
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(706,935)
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$
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32.53
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Canceled, expired or other
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(435,204)
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$
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20.11
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Nonvested at December 31, 2021
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1,887,706
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$
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34.44
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As of December 31, 2021, unrecognized compensation costs related to restricted stock totaled approximately $36 million, which will be expensed over a weighted average period of 1.6 years. The grant date weighted average fair value for restricted stock awards during the years ended December 31, 2021, 2020 and 2019 was $44.26, $22.42 and $33.84, respectively. The total fair value of shares vested for restricted stock awards was $23.0 million, $37.2 million and $44.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Tax benefits associated with stock-based compensation were $5.1 million, $3.5 million and $7.3 million for the years ended December 31, 2021, 2020 and 2019, respectively. The excess tax benefit for all stock-based compensation is included in the Consolidated Statement of Cash Flows as an operating cash activity.
Comprehensive Income (Loss)
The following table reflects the accumulated balances of other comprehensive income (loss) (in millions):
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Cumulative
Translation
Adjustment
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Derivative
Hedging
Adjustment
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Debt & Equity
Securities
Adjustment
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Pension
Liability
Adjustment
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Accumulated
Other
Comprehensive
Income (Loss)
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Balance at January 1, 2019
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$
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(225.6)
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$
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(4.4)
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$
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0.8
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$
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(55.6)
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$
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(284.8)
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Current year change
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17.4
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3.6
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1.8
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4.5
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27.3
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Balance at December 31, 2019
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(208.2)
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(0.8)
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2.6
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(51.1)
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(257.5)
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Current year change
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63.0
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(5.2)
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(1.4)
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(7.3)
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49.1
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Balance at December 31, 2020
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(145.2)
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(6.0)
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1.2
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(58.4)
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(208.4)
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Current year change
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(42.8)
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10.0
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(1.2)
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13.9
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(20.1)
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Balance at December 31, 2021
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$
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(188.0)
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$
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4.0
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$
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—
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$
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(44.5)
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$
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(228.5)
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As of December 31, 2021, accumulated other comprehensive income (loss) for the cumulative translation adjustment, derivative hedging adjustment, debt and equity securities adjustment and pension liability adjustment are net of a tax benefit/(provision) of $9.9 million, $(1.4) million, $(0.1) million and $2.1 million, respectively.
Changes in Accumulated Other Comprehensive Income (Loss)
The table below presents changes in AOCI by component for the year ended December 31, 2021 and 2020. All amounts are net of tax (in millions).
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Year ended December 31, 2021
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Year ended December 31, 2020
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CTA
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Derivative
Hedging
Adj. (1)
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Debt &
Equity
Securities
Adj.
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Pension
Liability
Adj.
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Total
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CTA
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Derivative
Hedging
Adj.
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Debt &
Equity
Securities
Adj.
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Pension
Liability
Adj.
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Total
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Beginning balance
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$
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(145.2)
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$
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(6.0)
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$
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1.2
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$
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(58.4)
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$
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(208.4)
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$
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(208.2)
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$
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(0.8)
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$
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2.6
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$
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(51.1)
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$
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(257.5)
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Other comprehensive income (loss) before reclassifications
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(42.7)
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21.3
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(1.2)
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11.9
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(10.7)
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63.0
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(9.2)
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(1.4)
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(8.6)
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43.8
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Amounts reclassified from AOCI
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(0.1)
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(11.3)
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—
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2.0
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(9.4)
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—
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4.0
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—
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1.3
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5.3
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Net other comprehensive income (loss)
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(42.8)
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10.0
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(1.2)
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13.9
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(20.1)
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63.0
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(5.2)
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(1.4)
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(7.3)
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49.1
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Ending balance
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$
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(188.0)
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$
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4.0
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$
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—
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$
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(44.5)
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$
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(228.5)
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$
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(145.2)
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$
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(6.0)
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$
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1.2
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$
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(58.4)
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$
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(208.4)
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(1) Reclassifications primarily relate to $12.1 million of income (net of $3.5 million of tax expense) reclassified from AOCI to Cost of Goods Sold related to commodity swaps.
Share Repurchases
In July 2018, Terex’s Board of Directors authorized the repurchase up to $300 million of the Company’s outstanding shares of common stock. The table below presents shares repurchased by the Company during the years ended December 31, 2021, 2020 and 2019 under this program:
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Year Ended December 31
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Total Number of Shares Repurchased
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Amount of Shares Repurchased
(in millions)
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2021
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28,688
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$1.2
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2020
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2,501,900
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$54.6
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2019
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175,275
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$4.9
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Dividends
The table below presents dividends declared by Terex’s Board of Directors and paid to the Company’s shareholders in each quarter of 2021, 2020 and 2019:
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Year
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First Quarter
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Second Quarter
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Third Quarter
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Fourth Quarter
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2021
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$
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0.12
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$
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0.12
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$
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0.12
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$
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0.12
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2020
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$
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0.12
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$
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—
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$
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—
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$
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—
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2019
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$
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0.11
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$
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0.11
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$
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0.11
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$
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0.11
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In February 2022, Terex’s Board of Directors declared a dividend of $0.13 per share which will be paid to the Company’s shareholders on March 21, 2022.
NOTE N – LITIGATION AND CONTINGENCIES
General
The Company is involved in various legal proceedings, including product liability, general liability, workers’ compensation liability, employment, commercial and intellectual property litigation, which have arisen in the normal course of operations. The Company is insured for product liability, general liability, workers’ compensation, employer’s liability, property damage and other insurable risks required by law or contract, with retained liability or deductibles. The Company records and maintains an estimated liability in the amount of management’s estimate of the Company’s aggregate exposure for such retained liabilities and deductibles. For such retained liabilities and deductibles, the Company determines its exposure based on probable loss estimations, which requires such losses to be both probable and the amount or range of probable loss to be estimable. The Company believes it has made appropriate and adequate reserves and accruals for its current contingencies and the likelihood of a material loss beyond amounts accrued is remote. The Company believes the outcome of such matters, individually and in aggregate, will not have a material adverse effect on its consolidated financial statements. However, outcomes of lawsuits cannot be predicted and, if determined adversely, could ultimately result in the Company incurring significant liabilities which could have a material adverse effect on its results of operations.
Terex Latin América Equipamentos Ltda ICMS Proceedings
Terex Latin America Equipamentos Ltda (“TLA”) imports Terex products into Brazil through the state of Espirito Santo to its facility in Sao Paulo. For the 2004 through March 2009 period, TLA used a third-party trading company, SAB, as an agent to process the importation of Terex products. TLA properly paid the Espirito Santo ICMS tax (Brazilian state value-added tax) to SAB for payment to Espirito Santo, which would produce an ICMS credit to be used against imposition of Sao Paolo ICMS tax. SAB went into bankruptcy and may not have actually remitted to Espirito Santo the ICMS tax amounts paid to it by TLA. The Brazilian state of Sao Paulo challenged the credit against Sao Paolo ICMS that TLA claimed and assessed unpaid ICMS tax, penalties and related interest in the amount of approximately BRL 104 million ($19 million). TLA challenged the claim of Sao Paulo and learned in October 2019 that the Sao Paulo claim has survived the administrative tribunal process. TLA anticipates that it will receive notice for an amount due from Sao Paulo and expects to protest the Sao Paulo claim in litigation. While the Company believes the position of the state of Sao Paulo is without merit and continues to vigorously oppose it, no assurance can be given as to the final resolution of the ICMS litigation or that TLA will not ultimately be required to pay ICMS and interest to the state of Sao Paulo.
Other
The Company is involved in various other legal proceedings which have arisen in the normal course of its operations. The Company has recorded provisions for estimated losses in circumstances where a loss is probable and the amount or range of possible amounts of the loss is estimable.
Credit Guarantees
The Company may assist customers in their rental, leasing and acquisition of its 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 current amount of the maximum liability is generally limited to our customer’s remaining payments due to the third-party financial institutions at the time of default; however, it cannot be reasonably estimated due to limited availability of the unique facts and circumstances of each arrangement, such as whether changes have been made to the structure of the contractual obligation between the funder and customer.
For credit guarantees outstanding as of December 31, 2021 and 2020, the maximum exposure determined was $143.5 million and $143.8 million, respectively. Terms of these guarantees coincide with the financing arranged by the customer and generally do not exceed five years. The allowance for credit losses on credit guarantees was $6.3 million and $8.3 million at December 31, 2021 and 2020, respectively.
There can be no assurance that historical experience in used equipment markets will be indicative of future results. The Company’s ability to recover losses experienced from its guarantees may be affected by economic conditions in used equipment markets at the time of loss.