Terex Corporation
02/13/2026 | Press release | Distributed by Public on 02/13/2026 14:51
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS DESCRIPTION
Terex is a global industrial equipment manufacturer of materials processing machinery, waste and recycling solutions, mobile elevating work platforms (MEWPs), and equipment for the electric utility industry. We design, build, and support products used in maintenance, manufacturing, energy, waste and recycling, minerals and materials management, construction, and the entertainment industry. We provide lifecycle support to our customers through our global parts and services organization, and offer complementary digital solutions, designed to help our customers maximize their return on their investment. Certain Terex products and solutions enable customers to reduce their impact on the environment 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. Our products are manufactured in North America, Europe, and Asia Pacific and sold worldwide. We engage with customers through all stages of the product life cycle, from initial specification to parts and service support. We report our business in the following segments: (i) ES, (ii) MP, and (iii) Aerials.
Further information about our reportable segments appears below and in Note B - "Business Segment Information" in the Notes to Consolidated Financial Statements.
Non-GAAP Measures
In this document, we refer to various GAAP (U.S. generally accepted accounting principles) and non-GAAP financial measures. These non-GAAP measures may not be comparable to similarly titled measures being disclosed by other companies. Management believes that presenting these non-GAAP financial measures provide investors with additional analytical tools which are useful in evaluating our operating results and the ongoing performance of our underlying businesses because they (i) provide meaningful supplemental information regarding financial performance by excluding impact of one-time items and other items affecting comparability between periods, (ii) permit investors to view performance using the same tools that management uses to budget, make operating and strategic decisions, and evaluate our core operating performance across periods, and (iii) otherwise provide supplemental information that may be useful to investors in evaluating our financial results. We do not, nor do we suggest that investors consider, such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
Non-GAAP measures also include translation effect of foreign currency exchange rate changes on net sales, gross profit, selling, general & administrative ("SG&A") expenses and operating profit.
As changes in foreign currency exchange rates have a non-operating impact on our financial results, we believe excluding effects of these changes assists in assessment of our business results between periods. We calculate the translation effect of foreign currency exchange rate changes by translating current period results using rates that the comparable prior periods were translated at to isolate the foreign exchange component of fluctuation from the operational component.
We calculate a non-GAAP measure of free cash flow. We define free cash flow as Net cash provided by (used in) operating activities less Capital expenditures, net of proceeds from sale of capital assets. We believe this measure of free cash flow provides management and investors further useful information on cash generation or use in our primary operations.
We discuss forward-looking information related to expected earnings before interest, taxes, depreciation and amortization ("EBITDA") and earnings per share ("EPS") excluding the impact of potential future acquisitions, divestitures, restructuring, tariffs, trade policies and other unusual items. Our 2026 outlook for EBITDA and EPS is a non-GAAP financial measure because it excludes unusual items. We are not able to reconcile these forward-looking non-GAAP financial measures to our most directly comparable forward-looking GAAP financial measures without unreasonable efforts because we are unable to predict with a reasonable degree of certainty the exact timing and impact of such items. The unavailable information could have a significant impact on our full year 2026 GAAP financial results. This forward-looking information provides guidance to investors about our EBITDA and EPS expectations excluding these unusual items that we do not believe are reflective of our ongoing operations.
Working capital is calculated using the Consolidated Balance Sheet amounts for Receivables (net of allowance) plus Inventories, less Trade accounts payable, Customer advances and Short-term unearned revenue. We view excessive working capital as an inefficient use of resources, and seek to minimize the level of investment without adversely impacting ongoing operations of the business. Trailing three months annualized net sales is calculated using net sales for the most recent quarter end multiplied by four. The ratio calculated by dividing working capital by trailing three months annualized net sales is a non-GAAP measure we believe measures our resource use efficiency.
Non-GAAP measures also include Net Operating Profit After Tax ("NOPAT") as adjusted, operating profit as adjusted, effective tax rate as adjusted and stockholders' equity as adjusted, which are used in the calculation of our after tax return on invested capital ("ROIC") (collectively the "Non-GAAP Measures"), which are discussed in detail below.
Overview
Safety remains a top priority for Terex, not only for our team members but also our customers. In 2025, our teams delivered our strongest safety performance to date while maintaining reliable delivery of equipment and services.
We remain focused on executing our strategic priorities by investing to expand our presence in resilient and profitable end markets. As part of our ongoing portfolio evaluation to reduce business cyclicality, we completed the divestiture of our tower and rough terrain cranes businesses. We continue to deploy the Terex Operating System ("TOS") to further enhance the efficiency of our operational footprint, reduce fixed costs, and drive sustained improvements in operational execution. In addition, we completed the integration of ESG and are ahead of our commitment to deliver $25 million of synergies.
Overall, 2025 financial performance demonstrated continued focus on our customers and our operational performance while navigating through a very dynamic environment, including tariffs. Net sales grew by 5.7% to $5.4 billion as the full year contribution from the ESG acquisition more than offset declines in Aerials and MP driven by channel adjustment. ESG continued to execute very well from higher throughput and profitability. We achieved operating profit of $475 million and free cash flow of $325 million, which translates to 147% of free cash flow conversion. Working capital reductions remain a key priority of our capital allocation strategy to deliver value to shareholders while investing for longer-term organic growth.
Our ES segment sales increased 12.7% year over year on a proforma basis to $1.7 billion driven by improved throughput and delivery of refuse collection vehicles and utilities trucks. ES delivered strong operating margins of 13.8%, driven by improved operational execution, positive customer and product mix and synergies.
MP executed well in 2025 despite a challenging macro environment. Full year sales of $1.7 billion were 11.6% lower than 2024 due to macro uncertainty, high interest rates which remain a headwind for rent to own conversions and weak European demand. On the aggregates side, we saw machines on rent longer than usual, impacting dealers' replenishment of new units. Despite the headwinds, MP delivered an operating margin of 13.9% from tight cost control and gain on the sale of its tower and rough terrain cranes businesses. MP ended 2025 with $71 million more backlog than the prior year providing positive momentum heading into 2026.
Aerials 2025 sales declined by 14.5% year over year driven by less demand from independent rental customers who are more exposed to smaller interest rate sensitive projects. We are encouraged to see year over year 7% growth in the fourth quarter driven by replacement demand from mega projects. Aerials full year operating profit of 5.0% is 620 basis point lower than prior year driven by deliberate production cuts in Q1, unfavorable customer mix and tariffs.
In 2025, our largest market remained North America, which represented approximately 72% of our global sales. As compared to the prior year, sales were up in North America driven by the ESG acquisition and down in all other major geographies.
We continued to execute our capital allocation strategy in 2025 by driving more operational cash through tighter net working capital management and redeploying it to repurchase our shares opportunistically. Our net working capital as a percentage of trailing three- month annualized sales improved from 24.0% in December 2024 to 20.8% in December 2025. We continue to invest in our businesses with $118 million deployed for capital expenditures to support business growth. We also returned $98 million to shareholders through share repurchases and dividends in 2025. We ended the year with $1.6 billion of liquidity with no near-term debt maturities, repriced our term loan lowering interest rate by 25 basis points and maintained our corporate ratings.
Our key end markets remain resilient with reliable replacement and aftermarket demand, strengthened by the opportunity to differentiate through quality, technology and life-cycle support. Waste & recycling market is expected to be fueled by population and economic growth, disciplined fleet replacement vehicle innovation that lowers operating costs, and digital solutions. We anticipate Utilities market growth to be sustained by increasing demand for the U.S. electrical grid with majority of data center related growth still to come. Within Infrastructure, we believe there is plenty of runway with previously allocated government spending, with a need for more investments ahead.
We completed the REV Transaction on February 2, 2026 and our 2026 outlook includes REV for the period following the closing of the transaction. We expect 2026 sales of between $7.5 billion and $8.1 billion, EBITDA between $930 million to $1 billion and earnings per share between $4.50 to $5.00 based on the higher share count resulting from the completion of the transaction. We are operating in a complex environment with many macroeconomic variables and geo-political uncertainties and results could change negatively or positively. The outlook we are providing does not account for any potential future acquisitions or divestitures that have not been previously disclosed.
ROIC
ROIC and other Non-GAAP Measures (as calculated below) assist in showing how effectively we utilize capital invested in our operations. ROIC is determined by dividing the sum of NOPAT for each of the previous four quarters by the average of Debt less Cash and cash equivalents plus Stockholders' equity for the previous five quarters. NOPAT for each quarter is calculated by multiplying Operating profit by one minus the full year 2025 effective tax rate as adjusted. Debt is calculated using amounts for Current portion of long-term debt plus Long-term debt, less current portion. We calculate ROIC using the last four quarters' NOPAT as this represents the most recent 12-month period at any given point of determination. In order for the denominator of the ROIC ratio to properly match the operational period reflected in the numerator, we include the average of five quarters' ending balance sheet amounts so that the denominator includes the average of the opening through ending balances (on a quarterly basis) thereby providing, over the same time period as the numerator, four quarters of average invested capital.
In the calculation of ROIC, we adjust operating profit, effective tax rate, and stockholders' equity to remove the effects of the impact of certain transactions in order to create a measure that is more useful to understanding our operating results and the ongoing performance of our underlying business excluding the impact of unusual items as shown in the tables below. Our management and Board use ROIC as one measure to assess operational performance, which is also included in certain compensation programs. We use ROIC as a metric because we believe it measures how effectively we invest our capital and provides a better measure to compare ourselves to peer companies to assist in assessing how we drive operational improvement. We believe ROIC measures return on the amount of capital invested in our businesses and is an accurate and descriptive measure of our performance. We also believe adding Debt less Cash and cash equivalents to Stockholders' equity provides a better comparison across similar businesses regarding total capitalization, and ROIC highlights the level of value creation as a percentage of capital invested. As the tables below show, our ROIC at December 31, 2025 was 11.7%.
Amounts described below are reported in millions of U.S. dollars, except for the effective tax rate as adjusted. Amounts are as of and for the three months ended for the periods referenced in the tables below.
| Dec '25 | Sep '25 | Jun '25 | Mar '25 | Dec '24 | |||||||||||||
|
Effective tax rate as adjusted
|
13.5 | % | 13.5 | % | 13.5 | % | 13.5 | % | |||||||||
|
Operating profit as adjusted
|
123 | 168 | 164 | 111 | |||||||||||||
|
Multiplied by: 1 minus effective tax rate as adjusted
|
86.5 | % | 86.5 | % | 86.5 | % | 86.5 | % | |||||||||
|
Net operating income (loss) after tax as adjusted
|
$ | 106 | $ | 145 | $ | 142 | $ | 96 | |||||||||
| Debt | $ | 2,584 | $ | 2,593 | $ | 2,593 | $ | 2,586 | $ | 2,584 | |||||||
| Less: Cash and cash equivalents | (772) | (509) | (374) | (298) | (388) | ||||||||||||
| Debt less Cash and cash equivalents | 1,812 | 2,084 | 2,219 | 2,288 | 2,196 | ||||||||||||
|
Stockholders' equity as adjusted
|
2,231 | 2,156 | 2,079 | 1,931 | 1,881 | ||||||||||||
|
Debt less Cash and cash equivalents plus Stockholders' equity as adjusted
|
$ | 4,043 | $ | 4,240 | $ | 4,298 | $ | 4,219 | $ | 4,077 | |||||||
|
December 31, 2025 ROIC
|
11.7 | % | |||
| NOPAT as adjusted (last 4 quarters) | $ | 489 | |||
|
Average Debt less Cash and cash equivalents plus Stockholders' equity as adjusted (5 quarters)
|
$ | 4,175 | |||
|
Three months ended 12/31/25
|
Three months ended 9/30/25
|
Three months ended 6/30/25
|
Three months ended 3/31/25
|
||||||||||||||
|
Reconciliation of operating profit:
|
|||||||||||||||||
|
Operating profit as reported
|
$ | 137 | $ | 140 | $ | 129 | $ | 69 | |||||||||
| Adjustments: | |||||||||||||||||
|
Restructuring and other
|
5 | 5 | 12 | 6 | |||||||||||||
|
Purchase price accounting
|
20 | 20 | 20 | 21 | |||||||||||||
| Deal related | 2 | 3 | 3 | 5 | |||||||||||||
|
Litigation related
|
- | - | - | 10 | |||||||||||||
|
Divestitures
|
(41) | - | - | - | |||||||||||||
|
Operating profit as adjusted
|
$ | 123 | $ | 168 | $ | 164 | $ | 111 | |||||||||
| As of 12/31/25 | As of 9/30/25 | As of 6/30/25 | As of 3/31/25 | As of 12/31/24 | |||||||||||||
| Reconciliation of Stockholders' equity: | |||||||||||||||||
| Stockholders' equity as reported | $ | 2,095 | $ | 2,017 | $ | 1,965 | $ | 1,844 | $ | 1,832 | |||||||
| Effects of adjustments, net of tax: | |||||||||||||||||
|
Restructuring and other
|
28 | 23 | 19 | 9 | 3 | ||||||||||||
|
Purchase price accounting
|
102 | 85 | 68 | 50 | 32 | ||||||||||||
|
Deal related
|
37 | 26 | 23 | 19 | 14 | ||||||||||||
|
Litigation related
|
8 | 8 | 8 | 8 | - | ||||||||||||
|
Equity security related
|
(3) | (3) | (4) | 1 | - | ||||||||||||
|
Divestitures
|
(36) | - | - | - | - | ||||||||||||
| Stockholders' equity as adjusted | $ | 2,231 | $ | 2,156 | $ | 2,079 | $ | 1,931 | $ | 1,881 | |||||||
|
Twelve Months Ended
December 31, 2025
|
Income (loss) from continuing operations before income taxes | (Provision for) benefit from income taxes | Income tax rate | ||||||||
|
Reconciliation of the full year 2025 effective tax rate:
|
|||||||||||
| As reported | $ | 292 | $ | (71) | 24.3 | % | |||||
| Effect of adjustments: | |||||||||||
|
Restructuring and other
|
28 | (7) | |||||||||
|
Purchase price accounting
|
82 | (19) | |||||||||
|
Deal related
|
26 | (6) | |||||||||
|
Equity security related
|
(3) | 1 | |||||||||
|
Litigation related
|
10 | (2) | |||||||||
|
Divestitures
|
(41) | 10 | |||||||||
|
Tax related benefit(1)
|
- | 27 | |||||||||
|
Tax related to Swiss deferred tax asset
|
- | 14 | |||||||||
| As adjusted | $ | 394 | $ | (53) | 13.5 | % | |||||
(1) The amount represents tax benefit arising from foreign tax legislative changes, in addition to tax planning associated with restructuring activity.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Exhibit 15 (a) (1) and (2) Financial Statements and Financial Statement Schedules of this Annual Report on Form 10-K. This section of our Annual Report on Form 10-K generally discusses 2025 and 2024 and provides a year-over-year comparison of 2025 and 2024. Discussions of 2023 and year-over-year comparison of 2024 and 2023 are not included in this document and can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024.
Consolidated
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||
|
% of Sales |
% of Sales |
% of Sales |
% Change in Reported Amounts 2025 vs 2024
|
||||||||||||||||||||||||||||||||||||||
| ($ amounts in millions) | |||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 5,421 | - | $ | 5,127 | - | $ | 5,152 | - | 5.7 | % | ||||||||||||||||||||||||||||||
| Gross profit | 1,051 | 19.4 | % | 1,068 | 20.8 | % | 1,177 | 22.8 | % | (1.6) | % | ||||||||||||||||||||||||||||||
| SG&A expenses | 576 | 10.6 | % | 542 | 10.6 | % | 540 | 10.5 | % | 6.3 | % | ||||||||||||||||||||||||||||||
|
Operating profit
|
475 | 8.8 | % | 526 | 10.3 | % | 637 | 12.4 | % | (9.7) | % | ||||||||||||||||||||||||||||||
Net sales for the year ended December 31, 2025 increased $294 million when compared to 2024, primarily due to sales generated from the recently acquired ESG business, partially offset by lower end-market demand across most product lines and geographies within Aerials and MP.
Gross profit for the year ended December 31, 2025 decreased $17 million when compared to 2024, primarily due to the impact of Aerials and MP's lower sales volume and unfavorable absorption due to production adjustments as well as tariffs within Aerials, partially offset by strong ES performance and a favorable discrete item of approximately $18 million pertaining to the release of a customs-related contingency in Aerials.
SG&A expenses for the year ended December 31, 2025 increased $34 million when compared to 2024, primarily due to additional compensation costs related to the recently acquired ESG business, a one-time litigation related charge and higher restructuring and integration costs, partially offset by gain on the sale of the tower and rough terrain cranes businesses within MP and cost reductions within Aerials and MP.
Operating profit for the year ended December 31, 2025 decreased by $51 million when compared to 2024, primarily due to the impact of Aerials' lower sales volume, production adjustments and unfavorable tariffs, partially offset by strong ES performance, gain on the sale of the tower and rough terrain cranes businesses within MP, an Aerials discrete item and cost reduction actions within Aerials and MP.
Environmental Solutions
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||
|
% of Sales |
% of Sales |
% of Sales |
% Change in Reported Amounts 2025 vs 2024
|
||||||||||||||||||||||||||||||||||||||
| ($ amounts in millions) | |||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 1,691 | - | $ | 822 | - | $ | 578 | - | 105.7 | % | ||||||||||||||||||||||||||||||
|
Operating profit
|
234 | 13.8 | % | 82 | 10.0 | % | 50 | 8.7 | % | 185.4 | % | ||||||||||||||||||||||||||||||
Net sales for the year ended December 31, 2025 increased $869 million when compared to 2024 primarily due to sales generated by the acquired ESG business and growth driven by strong throughput and delivery of refuse collection vehicles and utilities trucks. See Note D - "Acquisitions and Divestitures" in our Consolidated Financial Statements for additional information regarding the acquisition of ESG.
Operating profit for the year ended December 31, 2025 increased $152 million when compared to 2024 primarily due to operating profit generated by the acquired ESG business and continued margin improvements in both ESG and Terex Utilities. See Note D - "Acquisitions and Divestitures" in our Consolidated Financial Statements for additional information regarding the acquisition of ESG.
Materials Processing
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||
|
% of Sales |
% of Sales |
% of Sales |
% Change in Reported Amounts 2025 vs 2024
|
||||||||||||||||||||||||||||||||||||||
| ($ amounts in millions) | |||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 1,681 | - | $ | 1,902 | - | $ | 2,227 | - | (11.6) | % | ||||||||||||||||||||||||||||||
|
Operating profit
|
234 | 13.9 | % | 252 | 13.2 | % | 359 | 16.1 | % | (7.1) | % | ||||||||||||||||||||||||||||||
Net sales for the year ended December 31, 2025 decreased by $221 million when compared to 2024, primarily due to lower channel requirements and end-market demand across most product lines and geographies.
Operating profit for the year ended December 31, 2025 decreased $18 million when compared to 2024, primarily due to lower sales volume, partially offset by gain on sale of tower and rough terrain cranes businesses and cost reductions.
Aerials
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||
|
% of Sales |
% of Sales |
% of Sales |
% Change in Reported Amounts 2025 vs 2024
|
||||||||||||||||||||||||||||||||||||||
| ($ amounts in millions) | |||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 2,060 | - | $ | 2,410 | - | $ | 2,352 | - | (14.5) | % | ||||||||||||||||||||||||||||||
|
Operating profit
|
103 | 5.0 | % | 271 | 11.2 | % | 321 | 13.6 | % | (62.0) | % | ||||||||||||||||||||||||||||||
Net sales for the year ended December 31, 2025 decreased $350 million when compared to 2024, primarily due to lower end-market demand across most product lines and geographies.
Operating profit for the year ended December 31, 2025 decreased $168 million when compared to 2024, primarily due to lower sales volume, increased tariff expenses, production adjustments and a one-time litigation related charge, partially offset by a favorable discrete item of approximately $18 million pertaining to the release of a customs-related contingency and cost reductions.
Corporate and Other / Eliminations
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||
|
% of Sales |
% of Sales |
% of Sales |
% Change in Reported Amounts 2025 vs 2024
|
||||||||||||||||||||||||||||||||||||||
| ($ amounts in millions) | |||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | (11) | - | $ | (7) | - | $ | (5) | - | (57.1) | % | ||||||||||||||||||||||||||||||
| Loss from operations | (96) | * | (79) | * | (93) | * | (21.5) | % | |||||||||||||||||||||||||||||||||
* Not a meaningful percentage
Net sales for the year ended December 31, 2025 decreased $4 million when compared to 2024, primarily due to changes in intercompany eliminations and lower sales for government programs.
Loss from operations for the year ended December 31, 2025 increased $17 million when compared to 2024. The increase in operating loss is primarily due to changes in intercompany eliminations and lower sales for government programs.
Other
| 2025 | 2024 | 2023 |
% Change in Reported Amounts 2025 vs 2024
|
||||||||||||||||||||
| ($ amounts in millions) | |||||||||||||||||||||||
| Interest (expense), net of interest income | $ | (165) | $ | (76) | $ | (56) | (117.1) | % | |||||||||||||||
| Other income (expense) - net | (18) | (42) | (1) | 57.1 | % | ||||||||||||||||||
| (Provision for) benefit from income taxes | (71) | (73) | (63) | 2.7 | % | ||||||||||||||||||
| Gain (loss) on disposition of discontinued operations - net of tax | - | - | 1 | * | |||||||||||||||||||
* Not a meaningful percentage
Interest Expense, Net of Interest Income
During the year ended December 31, 2025, interest expense, net of interest income, was $165 million or $89 million higher when compared to 2024, primarily due to the issuance of additional debt in the fourth quarter of 2024 to finance the ESG acquisition.
Other Income (Expense) -Net
Other income (expense) - net for the year ended December 31, 2025 was an expense of $18 million, compared to $42 million in 2024. The decrease in expense was primarily due to net gains recorded on equity securities and lower deal related costs in 2025.
Income Taxes
During the year ended December 31, 2025, we recognized income tax expense of $71 million on income of $292 million, an effective tax rate of 24.3%, as compared to income tax expense of $73 million on income of $408 million, an effective tax rate of 17.8%, for the year ended December 31, 2024. The higher effective tax rate for the year ended December 31, 2025 when compared to the year ended December 31, 2024 was primarily due to an increase in unfavorable discrete items of which the most significant relates to change in German tax legislation.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Changes in estimates and assumptions used by management could have significant impacts on our financial results. Actual results could differ from those estimates.
We believe the following are among our most significant accounting policies which are important in determining the reporting of transactions and events and which utilize estimates about the effect of matters that are inherently uncertain and therefore are based on management judgment. Please refer to Note A - "Basis of Presentation" in the accompanying Consolidated Financial Statements for a listing of our accounting policies.
Inventories-In valuing inventory, we are required to make assumptions regarding the level of reserves required to value potentially obsolete or over-valued items at the lower of cost or net realizable value ("NRV"). These assumptions require us to analyze the aging of and forecasted demand for our inventory, forecast future product sales prices, pricing trends and margins, and to make judgments and estimates regarding excess and obsolete ("E&O") inventory. Future product sales prices, pricing trends and margins are based on historical experience and actual orders received. Our judgments and estimates for E&O inventory are based on analysis of actual and forecasted usage. Valuation of used equipment taken in trade from customers requires us to use the best information available to determine the value of the equipment to potential customers. This value is subject to change based on numerous conditions. 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 our judgment and related estimates include general economic conditions in markets where our products are sold, new equipment price fluctuations, actions of our competitors, including introduction of new products and technological advances, as well as new products and design changes we introduce. We make adjustments to our inventory reserves based on identification of specific situations and increase our inventory reserves accordingly. As further changes in future economic or industry conditions occur, we may revise estimates that were used to calculate our inventory reserves.
If actual conditions are less favorable than those we have projected, we will increase our reserves for lower of cost or NRV, E&O inventory accordingly. Any increase in our reserves will adversely impact our results of operations. Establishment of a reserve for lower of cost or NRV, E&O inventory establishes a new cost basis in the inventory. Such reserves are not reduced until the product is sold.
Revenue Recognition -We recognize revenue when goods or services are transferred to customers in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. In determining when and how revenue is recognized from contracts with customers, we perform 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. The majority of our revenue is recognized 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.
Goodwill -We test goodwill at the reporting unit level for impairment on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. Our annual impairment test date is the first day of our fiscal fourth quarter. We consider whether each component of an operating segment meets the criteria for a reporting unit. However, we aggregate two or more components of an operating segment into a single reporting unit if the components have similar economic characteristics.
In performing the goodwill impairment test, we may first perform a qualitative assessment or bypass the qualitative assessment and proceed directly to performing the quantitative impairment test. A qualitative assessment requires that we 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 our stock price. If, after assessing the totality of events or circumstances, we determine that it is more likely than not that the fair values of our 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, we evaluate goodwill for impairment by comparing the fair value of each of our reporting units to its carrying value, including the associated goodwill. We use a combination of the income approach (discounted cash flows) and market approach (market multiples) in estimating the fair value of our reporting units. When preparing discounted cash flow models under the income approach, we estimate future cash flows using the reporting unit's internal multi-year forecast, and a terminal value calculated using a growth rate that we believe is appropriate in light of current and expected future economic conditions. To discount these cash flows, we use our expected weighted average cost of capital, determined using a capital asset pricing model. When using the market method under the market approach, we apply comparable publicly traded companies' multiples (e.g., earnings, revenues) to our reporting units' operating results. 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, 2025, we 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 exceeded its respective carrying amount at the annual impairment test date.
Business Combinations -We use the acquisition method of accounting for acquired businesses that meet the criteria to be accounted for as a business combination, whereby the fair value of total consideration transferred is allocated to the assets acquired and liabilities assumed based on their respective estimated fair values as of the date of acquisition. The allocation of the purchase price in a business combination requires us to perform valuations with significant judgment and estimates. As such, in the case of significant acquisitions, we engage the assistance of third-party valuation specialists in estimating the fair value of certain assets acquired and liabilities assumed.
Various valuation methodologies may be used in estimating the fair value of assets acquired and liabilities assumed based on the nature of the underlying asset or liability. Inventory acquired is valued using a combination of the replacement cost and comparative sales methodologies, while property acquired is valued using a combination of the market and replacement cost new approaches. Intangible assets acquired, including customer relationships and trademarks and developed technologies, are valued using an income-based approach. The income approach utilizes inputs that require significant assumptions for each identifiable intangible asset, including estimates regarding future revenue growth, profitability, discount rates, attrition rates, royalty rates and economic lives. Revenue growth assumptions (along with profitability assumptions) are based on historical trends and management's expectations for future growth. Discount rates are based on a weighted-average cost of capital utilizing industry market data of similar companies. Attrition rates are estimated based on historical customer experience and analysis of comparable peer transactions. Royalty rates are determined based on profit levels, research of external royalty rates by third-party specialists and the relative importance of each trademark to our Company.
The fair value estimates are based on available historical information and on expectations and assumptions about the future, considering the perspective of marketplace participants. While we believe those expectations and assumptions are reasonable, they are inherently uncertain. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions. Additionally, determining the useful lives of tangible and intangible assets requires judgment, as different types of assets will have different useful lives.
During the measurement period, not to exceed one year from the date of acquisition, we may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill if new information is obtained related to facts and circumstances that existed as of the acquisition date. After the measurement period, any subsequent adjustments are reflected in the consolidated statements of operations. Acquisition costs, such as legal and consulting fees, are expensed as incurred.
Long-Lived Assets - We assess the realizability of our long-lived assets, including definite-lived intangible assets, and evaluate 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. We use 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.
Accrued Warranties- We record accruals for potential warranty claims based on our claim experience. A liability for estimated warranty claims is accrued at the time of sale. 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. However, actual claims could be higher or lower than amounts estimated, as the amount and value of warranty claims are subject to variation as a result of many factors that cannot be predicted with certainty, including production quality issues, performance of new products, models and technology, changes in weather conditions for product operation, different uses for products and other similar factors.
Income Taxes- We estimate income taxes based on enacted tax laws in the various jurisdictions where we conduct business. We recognize deferred income tax assets and liabilities, which represent future tax benefits or obligations of our legal entities. These deferred income tax balances arise from temporary differences due to divergent treatment of certain items for accounting and income tax purposes.
We evaluate the net realizable value of our deferred tax assets each period to ensure that estimated future taxable income will be sufficient in character, amount and timing to result in the use of our deferred tax assets. "Character" refers to the type (ordinary income versus capital gain) as well as the source (foreign vs. domestic) of the income we generate. "Timing" refers to the period in which future income is expected to be generated. Timing is important because, in certain jurisdictions, net operating losses or other tax attributes expire if not used within an established statutory time frame. We record a valuation allowance for each deferred tax asset for which realization is not assessed as more likely than not.
We must consider all objective evidence, both positive and negative, in evaluating the future realization of our 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. Based on these evaluations, we have determined that it is more likely than not that expected future earnings will be sufficient to use most of our deferred tax assets. To the extent estimates of future taxable income decrease or do not materialize, additional valuation allowances may be required.
We do not provide for foreign income and withholding, U.S. federal, or state income taxes or tax benefits on differences between financial reporting basis and tax basis of our non-U.S. subsidiaries where such differences are reinvested and, in our opinion, will continue to be indefinitely reinvested. We do not record deferred income taxes on the temporary difference between the book and tax basis in domestic subsidiaries where permissible. At this time, determination of the unrecognized deferred tax liabilities for temporary differences related to our investment in non-U.S. subsidiaries is not practicable. If earnings of foreign subsidiaries are not considered indefinitely reinvested, foreign income and withholding, U.S. federal or state income taxes may have to be provided.
Judgments and estimates are required to determine tax expense and deferred tax valuation allowances and in assessing uncertain tax positions. Tax returns are subject to audit and local taxing authorities could challenge tax-filing positions we take. Our practice is to file income tax returns that conform to requirements of each jurisdiction and to record provisions for tax liabilities, including interest and penalties, in accordance with Accounting Standards Codification 740, "Income Taxes." Given the continued changes and complexity in worldwide tax laws, coupled with our geographic scope and size there may be greater exposure to uncertain tax positions. Given the subjective nature of applicable tax laws, results of an audit of some of our tax returns could have a significant impact on our consolidated financial statements.
RECENT ACCOUNTING STANDARDS
Please refer to Note A - "Basis of Presentation" in the accompanying Consolidated Financial Statements for a summary of recently issued accounting standards.
LIQUIDITY AND CAPITAL RESOURCES
We are focused on generating cash and maintaining liquidity (cash and availability under our revolving line of credit) for the efficient operation of our business. At December 31, 2025, we had cash and cash equivalents of $772 million and undrawn availability under our revolving line of credit of $800 million, giving us total liquidity of approximately $1,572 million. During the year ended December 31, 2025, our liquidity increased by approximately $384 million from December 31, 2024, primarily due to cash generated from operations, proceeds from sale of business and equity securities, and settlement of net investment hedges, partially offset by cash used in capital expenditures, share repurchases and dividends.
Our main sources of funding are cash generated from operations, including cash generated from the sale of receivables, loans from our bank credit facilities and funds raised in capital markets. We have no significant debt maturities until 2029. Our actions to maintain liquidity include disciplined management of costs and working capital. We believe these measures will provide us with adequate liquidity to comply with our financial covenants under our bank credit facility, continue to support internal operating initiatives and meet our operating and debt service requirements for at least the next 12 months from the date of issuance of this annual report. See Part I, Item 1A. - "Risk Factors" for a detailed description of the risks resulting from our debt and our ability to generate sufficient cash flow to operate our business.
Our ability to generate cash from operations is subject to numerous factors, including the following:
•The duration and depth of the global economic volatility resulting from tariffs, trade war, geopolitical uncertainty, inflationary pressures, foreign exchange rate volatility and high interest rates.
•As our sales change, the amount of working capital needed to support our business may change.
•Many of our customers fund their purchases through third-party finance companies that extend credit based on the creditworthiness of customers and expected residual value of our equipment. Changes either in customers' credit profile or used equipment values may affect the ability of customers to purchase equipment. There can be no assurance that third-party finance companies will continue to extend credit to our customers as they have in the past.
•Our suppliers extend payment terms to us primarily based on our overall credit rating. Deterioration in our credit rating may influence suppliers' willingness to extend terms and in turn accelerate cash requirements of our business.
•Sales of our products are subject to general economic conditions, tariffs, weather, competition, translation effect of foreign currency exchange rate changes, and other factors that in many cases are outside our direct control. For example, during periods of economic uncertainty, our customers have delayed purchasing decisions, which in turn reduces cash generated from operations.
•Availability and utilization of other sources of liquidity such as trade account receivables sales programs.
Typically, we have invested our cash in a combination of highly rated, liquid money market funds and in short-term bank deposits with large, highly rated banks. Our investment objective is to preserve capital and liquidity while earning a market rate of interest.
We seek to use cash held by our foreign subsidiaries to support our operations and continued growth plans through the funding of capital expenditures, operating expenses or other similar cash needs of worldwide operations. Most of this cash could be used in the U.S., if necessary, without additional tax expense. Incremental cash repatriated to the U.S. would not be expected to result in material foreign income and withholding, U.S. federal or state income tax cost. We will continue to seek opportunities to tax-efficiently mobilize and redeploy funds.
We had free cash flow of $325 million for the year ended December 31, 2025. The following table reconciles net cash provided by (used in) operating activities to free cash flow (in millions):
|
Year Ended
12/31/2025
|
||||||||
| Net cash provided by (used in) operating activities | $ | 440 | ||||||
|
Capital expenditures, net of proceeds from sale of capital assets
|
(115) | |||||||
|
Free cash flow (use)
|
$ | 325 | ||||||
Pursuant to terms of our trade accounts receivable factoring arrangements, during the year ended December 31, 2025, we sold, without material recourse, approximately $702 million of trade accounts receivable to enhance liquidity.
Working capital as a percentage of trailing three month annualized net sales was 20.8% at December 31, 2025. The following tables show the calculation of our working capital and trailing three months annualized sales as of December 31, 2025 (in millions):
|
Three months ended
December 31, 2025
|
|||||
|
Net sales
|
$ | 1,318 | |||
| x | 4 | ||||
|
Trailing three month annualized net sales
|
$ | 5,272 | |||
|
As of
December 31, 2025
|
|||||
| Inventories | $ | 1,109 | |||
|
Receivables
|
712 | ||||
|
Trade accounts payable
|
(683) | ||||
|
Customer advances and Short-term unearned revenue
|
(44) | ||||
|
Working capital
|
$ | 1,094 | |||
We remain focused on the use of TFS to drive incremental sales by facilitating customer financing solutions in key markets.
During the year ended December 31, 2025, we repurchased 1,360,706 shares of common stock for $53 million leaving approximately $183 million available for repurchase under our share repurchase programs. Our Board declared a dividend of $0.17 per share in each quarter of 2025, which were paid to our stockholders. In February 2026, our Board declared a dividend of $0.17 per share, which will be paid on March 19, 2026 to our stockholders of record as of March 6, 2026.
Our ability to access capital markets to raise funds, through sale of equity or debt securities, is subject to various factors, some specific to us and others related to general economic and/or financial market conditions. These include results of operations, projected operating results for future periods and debt to equity leverage. Our ability to access capital markets is also subject to our timely filing of periodic reports with the SEC. In addition, terms of our bank credit facilities and senior notes contain restrictions on our ability to make further borrowings and to sell substantial portions of our assets.
The Company's material cash requirements include the following contractual and other obligations:
Debt
As of December 31, 2025, the Company had outstanding debt of $2,552 million, with no payment due within 12 months, exclusive of minimum lease payments for capital lease obligations and secured borrowings. Future interest payments associated with such outstanding debt are approximately $707 million with $150 million payable within 12 months. For detailed debt information see Note I - "Long Term Obligations" in Notes to Consolidated Financial Statements.
Leases
The Company has leases for real property, vehicles and office and industrial equipment. As of December 31, 2025, the Company had contractual fixed costs primarily related to lease commitments of approximately $165 million, with $46 million payable within 12 months. For detailed lease information see Note J - "Leases" in Notes to Consolidated Financial Statements.
Purchase Obligations
As of December 31, 2025, the Company had purchase obligations of approximately $618 million, with substantially all purchase obligations payable within 12 months. Purchase obligations predominantly include cancellable and some non-cancellable commitments which may contain cancellation penalty provisions.
We reported a liability of $20 million related to unrecognized tax benefits as of December 31, 2025. We expect this liability to decrease approximately by $5 million due to payments related to expected effective audit settlement in 2026.
Additionally, at December 31, 2025, we had outstanding letters of credit that totaled $85 million and maximum exposure of $53 million for credit guarantees outstanding related to recourse provided to third-party financial institutions when customers finance the purchase of equipment.
We maintain defined benefit pension plans for some of our U.S. and non-U.S. operations. It is our policy to fund the retirement plans at the minimum level required by applicable regulations. In 2025, we made cash contributions and payments to the retirement plans of $11 million, and we estimate that our retirement plan contributions will be approximately $4 million in 2026. Changes in market conditions, changes in our funding levels or actions by governmental agencies may result in accelerated funding requirements in future periods.
In 2026, we expect approximately $185 million in capital expenditures, including capital expenditures in the REV business, with our largest expenditures related to our manufacturing facility in the U.S. and transformation initiatives.
On February 2, 2026, we completed the REV Transaction where REV shareholders received 0.9809 share of Terex and $8.71 in cash consideration for each share of REV (representing total cash consideration of $426 million). In connection with the REV Transaction, there were an additional 48.1 million shares of Terex issued upon conversion.
Cash Flows
Cash provided by operations was $440 million and $326 million for the years ended December 31, 2025 and 2024, respectively. The increase in cash provided by operations was primarily driven by changes in working capital, partially offset by lower operating profitability.
Cash provided by investing activities was $32 million for the year ended December 31, 2025, compared to cash used in investing activities of $2,127 million for the years ended December 31, 2024. The increase in cash provided by investing activities in the current year related primarily to proceeds from the sale of the tower and rough terrain cranes businesses, the sale of equity securities, the settlement of net investment hedges and the receipt of a post-closing purchase price adjustment related to the ESG acquisition. The decrease in cash provided by investing activities in the prior year related primarily to the acquisition of ESG.
Cash used in financing activities was $123 million for the year ended December 31, 2025, compared to cash provided by financing activities of $1,837 million for the year ended December 31, 2024. The increase in cash used in financing activities was primarily due to lower debt borrowing.
OFF-BALANCE SHEET ARRANGEMENTS
Guarantees
We may assist customers in their rental, leasing and acquisition of our products by facilitating financing transactions directly between (i) end-user customers, distributors and rental companies and (ii) third-party financial institutions, providing recourse in certain circumstances. The expectation of losses or non-performance is evaluated based on consideration of historical customer assessments, current financial conditions, reasonable and supportable forecasts, equipment collateral value and other factors. Many of these factors, including the assessment of a customer's ability to pay, are influenced by economic and market factors that cannot be predicted with certainty. Our maximum liability is generally limited to our customer's remaining payments due to the third-party financial institutions at the time of default. In the event of a customer default, we are generally able to recover and dispose of the equipment at a minimum loss, if any, to us. Reserves are recorded for expected loss over the contractual period of risk exposure.
There can be no assurance that our historical experience in used equipment markets will be indicative of future results. Our ability to recover losses experienced from our guarantees may be affected by economic conditions in used equipment markets at the time of loss.
See Note L - "Litigation and Contingencies" in the Notes to Consolidated Financial Statements for further information regarding our guarantees.
CONTINGENCIES AND UNCERTAINTIES
Foreign Exchange and Interest Rate Risk
Our products are sold in over 100 countries around the world and, accordingly, our revenues are generated in foreign currencies, while costs associated with those revenues are only partly incurred in the same currencies. Primary currencies to which we are exposed are the Euro, British Pound, Chinese Yuan, Australian Dollar, Indian Rupee and Mexican Peso. We
purchase hedging instruments to manage variability of future cash flows associated with recognized assets or liabilities due to changing currency exchange rates. See Risk Factors in Part I, Item 1A. for further information on our foreign exchange risk.
We manage our exposure to interest rate risk by establishing a mix of indebtedness bearing interest at both floating and fixed rates at inception and maintain a ratio of floating and fixed rates on this mix of indebtedness using interest rate derivatives when necessary.
See Item 7A. - "Quantitative and Qualitative Disclosures About Market Risk" for a discussion of the impact changes in foreign currency exchange rates and interest rates may have on our financial performance.
Other
We are subject to a number of contingencies and uncertainties including, without limitation, product liability claims, workers' compensation liability, intellectual property litigation, self-insurance obligations, tax examinations, guarantees, class action lawsuits and other matters. See Note L - "Litigation and Contingencies" in the Notes to Consolidated Financial Statements for more information regarding contingencies and uncertainties. We are insured for product liability, general liability, workers' compensation, employer's liability, property damage, intellectual property and other insurable risks required by law or contract with retained liability to us or deductibles. Many of the exposures are unasserted or proceedings are at a preliminary stage, and it is not presently possible to estimate the amount or timing of any liability. However, we do not believe these contingencies and uncertainties will, individually or in aggregate, have a material adverse effect on our operations. For contingencies and uncertainties other than income taxes, when it is probable a loss will be incurred and possible to make reasonable estimates of our liability with respect to such matters, a provision is recorded for the amount of such estimate or for the minimum amount of a range of estimates when it is not possible to estimate the amount within the range that is most likely to occur.
We generate hazardous and non-hazardous wastes in the normal course of our manufacturing operations. As a result, we are subject to a wide range of environmental laws and regulations. All of our employees are required to obey all applicable health, safety and environmental laws and regulations and must observe the proper safety rules and environmental practices in work situations. These laws and regulations govern actions that may have adverse environmental effects, such as discharges to air and water, and require compliance with certain practices when handling and disposing of hazardous and non-hazardous wastes. These laws and regulations would also impose liability for the costs of, and damages resulting from, cleaning up sites, past spills, disposals and other releases of hazardous substances, should any such events occur. We are committed to complying with these standards and monitoring our workplaces to determine if equipment, machinery and facilities meet specified safety standards. Each of our manufacturing facilities is subject to an environmental audit at least once every five years to monitor compliance. Also, no incidents have occurred which required us to pay material amounts to comply with such laws and regulations. We are dedicated to ensuring that safety and health hazards are adequately addressed through appropriate work practices, training and procedures. We are committed to reducing injuries and working towards a world-class level of safety practices in our industry. See Part I, Item 1. - "Business - Safety and Environmental Considerations" for additional discussion of safety and environmental items.
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