Q3 2018 Conference Call November 2, 2018
Forward Looking Statements This presentation contains forward-looking information regarding future events or the Company s future financial performance based on the current expectations of Terex Corporation. In addition, when included in this press release, the words may, expects, intends, anticipates, plans, projects, estimates and the negatives thereof and analogous or similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean that the statement is not forward-looking. The Company has based these forward-looking statements on current expectations and projections about future events. These statements are not guarantees of future performance. Because forward-looking statements involve risks and uncertainties, actual results could differ materially. Such risks and uncertainties, many of which are beyond the control of Terex, include among others: Our business is cyclical and weak general economic conditions affect the sales of our products and financial results; the need to comply with restrictive covenants contained in our debt agreements; our ability to generate sufficient cash flow to service our debt obligations and operate our business; our ability to access the capital markets to raise funds and provide liquidity; our business is sensitive to government spending; our business is highly competitive and is affected by our cost structure, pricing, product initiatives and other actions taken by competitors; our retention of key management personnel; the financial condition of suppliers and customers, and their continued access to capital; our providing financing and credit support for some of our customers; we may experience losses in excess of recorded reserves; we are dependent upon third-party suppliers, making us vulnerable to supply shortages and price increases; the imposition of tariffs and related actions on trade by the U.S. and foreign governments; our business is global and subject to changes in exchange rates between currencies, commodity price changes, regional economic conditions and trade restrictions; our operations are subject to a number of potential risks that arise from operating a multinational business, including compliance with changing regulatory environments, the Foreign Corrupt Practices Act and other similar laws and political instability; a material disruption to one of our significant facilities; possible work stoppages and other labor matters; compliance with changing laws and regulations, particularly environmental and tax laws and regulations; litigation, product liability claims, intellectual property claims, class action lawsuits and other liabilities; our ability to comply with an injunction and related obligations imposed by the United States Securities and Exchange Commission ( SEC ); disruption or breach in our information technology systems and storage of sensitive data; our ability to successfully implement our Execute to Win strategy; and other factors, risks and uncertainties that are more specifically set forth in our public filings with the SEC. Actual events or the actual future results of Terex may differ materially from any forward-looking statement due to these and other risks, uncertainties and significant factors. The forward-looking statements speak only as of the date of this release. Terex expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement included in this release to reflect any changes in expectations with regard thereto or any changes in events, conditions, or circumstances on which any such statement is based. Non-GAAP Measures: Terex from time to time refers to various non-gaap (generally accepted accounting principles) financial measures in this presentation. Terex believes that this information is useful to understanding its operating results and the ongoing performance of its underlying businesses without the impact of special items. See the appendix at the end of this presentation as well as the Terex third quarter 2018 earnings release on the Investor Relations section of our website www.terex.com for a description and/or reconciliation of these measures. 2
Q3 Financial Highlights Results are Continuing Operations Increased sales by 11% to $1.2 billion Increased as reported Operating Profit by $6 million, and as adjusted Operating Profit (1) by $10.6 million or 14% EPS of $0.51 as reported, $0.68 as adjusted (1) up 37% Increased backlog 41% (2) (1) See the appendix for reconciliation to US GAAP (2) Year over year, excluding the impact of business divestitures 3
Terex Strategy Focus Simplify Execute to Win 4
Execute to Win Simplify Q3 Strategy Deployment Highlights Reduce Complexity and G&A Completed site prep for new Utilities facility in South Dakota Implemented new Terex-wide performance management system Commercial Excellence Trained ~50% of sales force in the Terex Proven Sales Process Continued deployment of CRM Lifecycle Solutions Building global parts and service organization Deploying parts pricing system Strategic Sourcing Implementing Wave 1 supplier award decisions Completed Wave 2 supplier conference 5
Updating FY 2018 Guidance Guidance Updates (1) Net Sales: UP ~17% Operating Margin: ~6.6% EPS: $2.60 - $2.70 (1) Excludes the impact of future divestitures, restructuring, transformation and other unusual items; Updated EPS guidance based on an average diluted share count of ~77.5 million, previous EPS guidance based on ~77.5 million 6
Q3 Segment Highlights AWP Increased sales 14% Increased operating margin 115 bps, incremental margin ~20% Increased backlog 48% Cranes Flat sales Supply base challenges in mobile cranes impacted deliveries and productivity Increased backlog 20% MP Increased sales 14% Increased operating margin 200 bps, incremental margin ~28% Increased backlog 72% 7
Q3 Operating Results USD Millions, except Earnings per Share Q3 2018 Q3 2018 Q3 2017 Q3 2017 As Reported As Adjusted (1) As Reported As Adjusted (1) Net Sales $1,228.5 $1,228.5 $1,111.2 $1,111.2 % Change vs 2017 10.6% 10.6% Gross Profit $232.8 $233.8 $219.0 $220.2 % of Sales 18.9% 19.0% 19.7% 19.8% SG&A ($160.9) ($149.3) ($153.1) ($146.3) % of Sales (13.1%) (12.2%) (13.8%) (13.2%) Income (loss) from Operations 71.9 84.5 65.9 73.9 Operating Margin 5.9% 6.9% 5.9% 6.7% Interest & Other Income (Expense) (21.2) (17.8) (9.2) (11.4) Effective Tax Rate 24.3% 23.0% 0.2% 28.0% Earnings (loss) per Share $0.51 $0.68 $0.63 $0.50 EBITDA (1) $84.9 $97.5 $82.3 $90.3 % Net Sales 6.9% 7.9% 7.4% 8.1% Note: Results shown are for Continuing Operations (1) See the appendix for reconciliation to US GAAP 8
2018 Guidance Update USD Millions, except Earnings per Share Net Sales Operating Margin Terex 2018 Segment Guidance (1) Previous (2) Guidance Updated (1) 2018 2018 Previous (2) Updated Previous (2) Updated Net Sales Up ~18% Up ~17% AWP Up ~23% Up ~22% 11.0% - 11.5% 10.5% - 11.0% Operating Margin ~7% ~6.6% Cranes Up ~13% Up ~11% (1.5%) - (1.0%) ~(2.3%) EPS $2.80 - $3.00 (3) $2.60 - $2.70 (3) MP Up ~16% Up ~16% 12.0% - 12.5% ~12.5% Interest/Other Expense ~($70) ~($70) Corporate & Other ~$0 ~$0 ~($60) ~($60) Tax Rate ~23% ~23% Depreciation/ Amortization (4) ~$60 ~$60 Free Cash Flow ~$100 ~$50 (1) Excludes the impact of future divestitures, restructuring, transformation and other unusual items (2) As of July 31, 2018 (3) Updated EPS guidance based on an average diluted share count of ~77.5 million, previous EPS guidance based on ~77.5 million (4) Depreciation/Amortization excludes ~$4 million of bank fee amortization not included in Income (loss) from operations 9
Disciplined Capital Allocation Cash Flow from Operations + After-tax Proceeds from Divestures Optimal Capital Structure Organic Growth Investments YTD free cash flow similar to prior year, with more capex investment and higher inventory build Making strategic investments in high-performing businesses YTD capex investment up 55% (1) Continuing to invest in Restructuring and Transformation ~$12 million cash in Q3, ~$38 million YTD Increased quarterly dividend per share 25% versus last year $300 million remaining on share repurchase program Restructuring Investments Efficient Returns of Capital to Shareholders Return on Invested Capital (2) 8% ~ 16% 20% (1) Excludes acquisition of Northern Ireland properties (2) See the appendix for reconciliation to US GAAP 2017 2018 Est. 2020 Plan 10
Aerial Work Platforms Strong global markets Increased bookings 50% to $601 million Grew backlog 48% to $527 million Material cost headwinds Innovative new products ARA Show 2018 AWP Guidance Previous (1) 2018 Updated Net Sales Up ~23% Up ~22% Genie 4069BE Hybrid Drive Operating Margin 11.0% - 11.5% 10.5% - 11.0% Genie S-85 XC (1) As of July 31, 2018 Genie S-85 HF High Float Telescopic Boom 11
Cranes Stable global markets Increased backlog 20% Resolving mobile Cranes supply base challenges Strength in Towers New Flat Top Tower Crane Demag AC-55-3 Cranes Guidance Previous (1) 2018 Updated Net Sales Up ~13% Up ~11% Operating Margin (1.5%) - (1.0%) ~(2.3%) (1) As of July 31, 2018 12
Materials Processing Strong global Crushing & Screening market Fuchs MHL 375 Material Handler Growth in Fuchs and Environmental Increased backlog 72% MP Guidance Previous (1) 2018 Updated Net Sales Up ~16% Up ~16% CBI Magnum Force 6800CT Horizontal Grinder Operating Margin 12.0% - 12.5% ~12.5% (1) As of July 31, 2018 13
Summary Strong bookings and backlog growth in AWP and MP Improving AWP and MP margins Expecting improved Q4 Mobile Cranes performance Continuing to implement plans in Simplify and Execute to Win priority areas On-going execution of our disciplined capital allocation strategy 14
Questions? 15
Appendix 16
Backlog Trend USD Millions 1,962 842 139 401 302 1,125 1,102 149 187 407 398 569 517 866 169 355 342 773 203 317 253 1,045 216 323 506 1,274 242 407 625 1,182 224 459 499 1,115 259 499 357 1,631 318 550 763 428 643 891 1,548 1,574 393 446 602 601 553 527 Sequential Year on Year $ % $ % AWP (26) (5%) 170 48% Cranes (1) (0%) 102 20% MP 53 13% 187 72% Total 26 2% 459 41% Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 AWP Cranes MP Total Backlog shown is deliverable in less than 12 months and excludes the impact of business divestitures 17
Q3 Global Sales Sales by Geography 2018 vs 2017 North America Actual FX-Adj. 19% 19% Western Europe Actual FX-Adj. 5% 6% E. Europe, Middle East & Africa Asia/ Pacific Actual FX-Adj. 11% 15% Actual FX-Adj. (3)% (2)% Actual LATAM FX-Adj. 2018 Q3 YTD 2017 Q3 YTD (21)% (16)% Western Europe 24% 23% Asia / Pacific E. Eu, ME, Africa LATAM North America 55% 7% 2% 12% 55% 7% 2% 13% Excludes discontinued operations and Corporate & Other 18
Aerial Work Platforms USD Millions $1,000 Net Bookings Book-to-Bill Ratio 250% $800 170% 195% 200% $600 125% 121% 150% $400 80% 82% 75% 97% 100% 55% $200 50% $0 $378 $619 $579 $467 $402 $845 $764 $406 $601 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 0% Q3 '18 Q3 '17 YTD '18 YTD '17 Net Sales $ 634.2 $ 556.7 $ 2,024.2 $ 1,622.1 % Change vs. '17 13.9% 24.8% Operating Profit (Loss), as reported 72.8 57.5 234.6 140.0 Operating Margin % 11.5% 10.3% 11.6% 8.6% Operating Profit (Loss), as adjusted (1),(2) 72.8 57.5 234.6 140.4 Operating Margin % 11.5% 10.3% 11.6% 8.7% Backlog 527 357 % Change vs. '17 48% (1) See further in the appendix for reconciliation to US GAAP 19
Cranes USD Millions $450 133% Net Bookings Book-to-Bill Ratio 135% 140% 118% 113% 120% $350 102% 117% 102% 100% 83% 87% 80% $250 60% $150 40% 20% $50 $228 $318 $343 $352 $343 $366 $424 $287 $304 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 0% Q3 '18 Q3 '17 YTD '18 YTD '17 Net Sales $ 301.2 $ 301.9 $ 950.5 $ 869.6 % Change vs. '17 (0.2%) 9.3% Operating Profit (Loss), as reported (14.1) (0.3) (36.1) (16.8) Operating Margin % (4.7%) (0.1%) (3.8%) (1.9%) Operating Profit (Loss), as adjusted (1) (11.8) 2.4 (31.4) (13.1) Operating Margin % (3.9%) 0.8% (3.3%) (1.5%) Backlog 601 499 % Change vs. '17 20% (1) See further in the appendix for reconciliation to US GAAP 20
Materials Processing USD Millions $350 $300 $250 118% 100% Net Bookings 111% 95% 111% Book-to-Bill Ratio 137% 121% 89% 119% 140% 120% 100% $200 80% $150 60% $100 40% $50 20% $0 $265 $236 $272 $264 $286 $339 $407 $276 $348 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 0% Q3 '18 Q3 '17 YTD '18 YTD '17 Net Sales $ 295.2 $ 259.9 $ 917.2 $ 789.5 % Change vs. '17 13.6% 16.2% Operating Profit (Loss), as reported 38.5 28.4 119.8 89.5 Operating Margin % 13.0% 10.9% 13.1% 11.3% Operating Profit (Loss), as adjusted (1) 38.5 28.4 117.0 89.6 Operating Margin % 13.0% 10.9% 12.8% 11.3% Backlog 446 259 % Change vs. '17 72% (1) See further in the appendix for reconciliation to US GAAP 21
Q3 2018 Adjustments USD Millions, except Earnings per Share Q3 2018 Restructuring Tax & Interim Q3 2018 As Reported & Related Transformation Other Period As Adjusted Net Sales $ 1,228.5 - - - - $ 1,228.5 Gross Profit 232.8 1.0 - - - 233.8 SG&A (160.9) 1.6 10.0 - - (149.3) Income (loss) from Operations 71.9 2.6 10.0 - - 84.5 Net Interest (Expense) (16.8) - - - - (16.8) Other (Expense) (4.4) - - 3.4 - (1.0) Income (Loss) from Cont. Ops. Before Taxes 50.7 2.6 10.0 3.4-66.7 Benefit from (Provision for) Income Taxes (12.3) (0.1) (1.5) (0.5) (0.9) (15.3) Income (Loss) from Continuing Operations $ 38.4 2.5 8.5 2.9 (0.9) $ 51.4 Earnings (loss) per Share $ 0.51 $ 0.03 $ 0.11 $ 0.04 $ (0.01) $ 0.68 22
Q3 2017 Adjustments USD Millions, except Earnings per Share Q3 2017 Restructuring Extinguishment Tax & Interim Q3 2017 As Reported Deal Related & Related Transformation of Debt Period As Adjusted Net Sales $ 1,111.2 - - - - - $ 1,111.2 Gross Profit 219.0 0.7 0.5 - - - 220.2 SG&A (153.1) (1.0) (1.3) 9.1 - - (146.3) Income (loss) from Operations 65.9 (0.3) (0.8) 9.1 - - 73.9 Net Interest (Expense) (13.6) - - - - - (13.6) Other (Expense) 4.4 (2.9) - - 0.7-2.2 Income (Loss) from Cont. Ops. Before Taxes 56.7 (3.2) (0.8) 9.1 0.7-62.5 Benefit from (Provision for) Income Taxes (0.1) (2.1) (0.3) (1.9) (0.2) (12.9) (17.5) Income (Loss) from Continuing Operations $ 56.6 (5.3) (1.1) 7.2 0.5 (12.9) $ 45.0 Earnings (loss) per Share $ 0.63 $ (0.06) $ (0.01) $ 0.08 $ 0.01 $ (0.15) $ 0.50 23
Q3 Adjusted OP by Segment USD Millions Q3 2018 Q3 2017 As Reported Adjustments As Adjusted As Reported Adjustments As Adjusted AWP $ 72.8 $ - $ 72.8 $ 57.5 $ - $ 57.5 Cranes (14.1) 2.3 (11.8) (0.3) 2.7 2.4 MP 38.5-38.5 28.4-28.4 Corporate & Other (25.3) 10.3 (15.0) (19.7) 5.3 (14.4) Continuing Operations $ 71.9 $ 12.6 $ 84.5 $ 65.9 $ 8.0 $ 73.9 24
YTD Operating Results USD Millions, except Earnings per Share YTD 2018 YTD 2018 YTD 2017 YTD 2017 As Reported As Adjusted (1) As Reported As Adjusted (1) Net Sales $3,891.9 $3,891.9 $3,299.8 $3,299.8 % Change vs 2017 17.9% 17.9% Gross Profit $743.0 $744.2 $612.0 $609.8 % of Sales 19.1% 19.1% 18.5% 18.5% SG&A ($496.4) ($468.0) ($473.1) ($435.7) % of Sales (12.8%) (12.0%) (14.3%) (13.2%) Income (loss) from Operations 246.6 276.2 138.9 174.1 Operating Margin 6.3% 7.1% 4.2% 5.3% Interest & Other Income (Expense) (52.1) (54.3) (52.3) (33.1) Effective Tax Rate 27.0% 23.0% (5.9%) 29.0% Earnings (loss) per Share $1.82 $2.19 $0.93 $1.02 EBITDA (1) $288.8 $318.4 $184.1 $219.3 % Net Sales 7.4% 8.2% 5.6% 6.6% Note: Results shown are for Continuing Operations (1) See the appendix for reconciliation to US GAAP 25
YTD 2018 Adjustments USD Millions, except Earnings per Share YTD 2018 Restructuring Extinguishment Tax & Interim YTD 2018 As Reported & Related Transformation of Debt Other Period As Adjusted Net Sales $ 3,891.9 - - - - - $ 3,891.9 Gross Profit 743.0 1.2 - - - - 744.2 SG&A (496.4) 6.1 25.1 - (2.8) - (468.0) Income (loss) from Operations 246.6 7.3 25.1 - (2.8) - 276.2 Net Interest (Expense) (45.6) - - - - - (45.6) Other (Expense) (6.5) (0.6) - 0.7 (2.3) - (8.7) Income (Loss) from Cont. Ops. Before Taxes 194.5 6.7 25.1 0.7 (5.1) - 221.9 Benefit from (Provision for) Income Taxes (52.6) (1.3) (4.0) (0.1) 0.8 6.2 (51.0) Income (Loss) from Continuing Operations $ 141.9 5.4 21.1 0.6 (4.3) 6.2 $ 170.9 Earnings (loss) per Share $ 1.82 $ 0.07 $ 0.27 $ 0.01 $ (0.06) $ 0.08 $ 2.19 26
YTD 2017 Adjustments USD Millions, except Earnings per Share YTD 2017 Restructuring Extinguishment Asset Tax & Interim YTD 2017 As Reported Deal Related & Related Transformation of Debt Impairment Period As Adjusted Net Sales $ 3,299.8 - - - - - - $ 3,299.8 Gross Profit 612.0 8.8 (11.0) - - - - 609.8 SG&A (473.1) (3.0) 6.6 35.4 - (1.6) - (435.7) Income (loss) from Operations 138.9 5.8 (4.4) 35.4 - (1.6) - 174.1 Net Interest (Expense) (46.8) - - - - - - (46.8) Other (Expense) (5.5) (33.9) - - 53.1 - - 13.7 Income (Loss) from Cont. Ops. Before Taxes 86.6 (28.1) (4.4) 35.4 53.1 (1.6) - 141.0 Benefit from (Provision for) Income Taxes 5.1 (11.1) (0.8) (7.6) (19.0) 0.6 (8.1) (40.9) Income (Loss) from Continuing Operations $ 91.7 (39.2) (5.2) 27.8 34.1 (1.0) (8.1) $ 100.1 Earnings (loss) per Share $ 0.93 $ (0.40) $ (0.05) $ 0.28 $ 0.35 $ (0.01) $ (0.08) $ 1.02 27
YTD Adjusted OP by Segment USD Millions YTD 2018 YTD 2017 As Reported Adjustments As Adjusted As Reported Adjustments As Adjusted AWP $ 234.6 $ - $ 234.6 $ 140.0 $ 0.4 $ 140.4 Cranes (36.1) 4.7 (31.4) (16.8) 3.7 (13.1) MP 119.8 (2.8) 117.0 89.5 0.1 89.6 Corporate & Other (71.7) 27.7 (44.0) (73.8) 31.0 (42.8) Continuing Operations $ 246.6 $ 29.6 $ 276.2 $ 138.9 $ 35.2 $ 174.1 28
Glossary In an effort to provide investors with additional information regarding the Company s results, Terex refers to various GAAP (U.S. generally accepted accounting principles) and non-gaap financial measures which management believes provides useful information to investors. These non-gaap measures may not be comparable to similarly titled measures being disclosed by other companies. In addition, the Company believes that non-gaap financial measures should be considered in addition to, and not in lieu of, GAAP financial measures. Terex believes that this non-gaap information is useful to understanding its operating results and the ongoing performance of its underlying businesses. Management of Terex uses both GAAP and non-gaap financial measures to establish internal budgets and targets and to evaluate the Company s financial performance against such budgets and targets. The amounts described below are unaudited, are reported in millions of U.S. dollars (except per share data and percentages), and are as of or for the period ended September 30, 2018, unless otherwise indicated. 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 at rates that the comparable prior periods were translated at to isolate the foreign exchange component of the fluctuation from the operational component. Similarly, the impact of changes in our results from acquisitions and divestitures that were not included in comparable prior periods may be subtracted from the absolute change in results to allow for better comparability of results between periods. 29
Glossary: Free Cash Flow USD Millions Free Cash Flow - We calculate a non-gaap measure of free cash flow. We define free cash flow as Net cash provided by (used in) operating activities, plus (minus) increases (decreases) in Terex Financial Services finance receivables consisting of sales-type leases and commercial loans ( TFS Assets ), less Capital expenditures (excluding the acquisition of our Northern Ireland properties). We believe that this measure of free cash flow provides management and investors further useful information on cash generation or use in our primary operations. Three Months Nine Months Ended September 30, Ended September 30, 2018 2017 2018 2017 Net cash provided by (used in) operating activities $ (55.2) $ 66.8 $ (19.6) $ (56.2) Increase (Decrease) in TFS Assets (5.0) (8.2) (32.7) (18.0) Capital expenditures (12.5) (9.6) (63.2) (27.2) Addback acquisition of MP Northern Ireland properties - - 21.0 - Free Cash Flow $ (72.7) $ 49.0 $ (94.5) $ (101.4) 30
Glossary: Debt & Net Debt USD Millions Debt is calculated using the Condensed Consolidated Balance Sheet amounts for Notes payable and current portion of long-term debt plus Long-term debt, less current portion plus debt from liabilities held for sale. Net Debt is calculated as Debt less Cash and cash equivalents, including amounts in assets held for sale. These measures aid in the evaluation of the Company s financial condition. September 30, 2018 December 31, 2017 Long-term debt, less current portion $ 1,128.2 $ 979.6 Notes payable and current portion of long-term debt 5.2 5.2 Debt 1,133.4 984.8 Less: Cash and cash equivalents (326.0) (626.5) Less: Cash and cash equivalents in assets held for sale (3.5) (3.6) Net Debt $ 803.9 $ 354.7 31
Glossary: EBITDA USD Millions EBITDA is defined as earnings, before interest, other non-operating income (loss), income (loss) attributable to non-controlling interest, taxes, depreciation and amortization. The Company calculates this by subtracting the following items from Net income (loss): (Gain) loss on disposition of discontinued operations- net of tax; and (Income) loss from discontinued operations net of tax. Then adds the Provision for (benefit from) income taxes; Interest & Other (Income) Expense; the Depreciation and Amortization amounts reported in the Consolidated Statement of Cash Flows less amortization of debt issuance costs that are recorded in Interest expense. Terex believes that disclosure of EBITDA will be helpful to those reviewing its performance, as EBITDA provides information on Terex s ability to meet debt service, capital expenditure and working capital requirements, and is also an indicator of profitability. Three Months Nine Months Ended September 30, Ended September 30, 2018 2017 2018 2017 Net income (loss) 38.6 59.2 146.7 155.4 (Gain) loss on disposition of discontinued operations- net of tax (0.2) (2.6) (4.8) (63.7) Income (loss) from continuing operations 38.4 56.6 141.9 91.7 Provision for (benefit from) income taxes 12.3 0.1 52.6 (5.1) Interest & Other (Income) Expense 21.2 9.2 52.1 52.3 Income (loss) from operations 71.9 65.9 246.6 138.9 Depreciation 12.5 15.9 40.7 43.7 Amortization 1.5 1.5 4.5 4.7 Bank fee amortization not included in Income (loss) from operations (1.0) (1.0) (3.0) (3.2) EBITDA 84.9 82.3 288.8 184.1 Operating profit adjustments 12.6 8.0 29.6 35.2 Adjusted EBITDA $ 97.5 $ 90.3 $ 318.4 $ 219.3 32
Glossary: 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 Terex Corporation stockholders equity for the previous five quarters. NOPAT for each quarter is calculated by multiplying Income (loss) from operations as adjusted by one minus the annualized effective tax rate. In the calculation of ROIC, we adjust income (loss) from operations, annualized effective tax rate, cash and cash equivalents, debt and Terex Corporation stockholders equity to remove the effects of the impact of certain transactions in order to create a measure that is useful to understanding our operating results and the ongoing performance of our underlying business without the impact of unusual items as shown in the tables below. Furthermore, we believe returns on capital deployed in TFS do not represent our primary operations and, therefore, TFS assets and results from operations have been excluded from the Non-GAAP Measures. Debt is calculated using amounts for Notes payable and current portion of longterm debt plus Long-term debt, less current portion. We calculate ROIC using the last four quarters adjusted 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. 33
Glossary: ROIC Continued USD Millions See reconciliation of adjusted amounts below on the following ROIC tables. Amounts are as of and for the three months ended for the period referenced in the tables. Annualized effective tax rate, as adjusted (1),(2) 23.0% 23.0% 23.0% 26.9% Income (loss) from operations, as adjusted $ 83.6 $ 116.1 $ 71.2 $ 45.6 Multiplied by: 1 minus annualized effective tax rate, adjusted 77.0% 77.0% 77.0% 73.1% NOPAT, as adjusted $ 64.4 $ 89.4 $ 54.8 $ 33.3 Debt, as reported $ 1,133.4 $ 1,094.2 $ 1,083.0 $ 984.8 $ 984.9 Less: Cash and cash equivalents, as adjusted (329.5) (377.1) (451.4) (630.1) (595.7) Debt less Cash and cash equivalents, as adjusted 803.9 717.1 631.6 354.7 389.2 Terex Corporation stockholders equity, as adjusted 848.5 805.4 930.1 1,046.8 1,162.2 Debt less Cash and cash equivalents plus Total Terex Corporation stockholders equity, as adjusted $ Sep '18 Jun '18 Mar '18 Dec '17 1,652.4 $ 1,522.5 $ 1,561.7 $ 1,401.5 $ Sep '17 1,551.4 Sep 30, 2018 ROIC 15.7% NOPAT, as adjusted (last 4 quarters) $ 241.9 Average Debt less Cash and cash equivalents plus Terex Corporation stockholders equity, as adjusted (5 quarters) $ 1,537.9 (1) The 2017 annualized effective tax rate is based on the full year 2017 actual results (2) The 2018 annualized effective tax rate is based on management s full year 2018 projections 34
Glossary: ROIC Continued USD Millions Reconciliation of income (loss) from operations: Three months ended 9/30/18 Three months ended 6/30/18 Three months ended 3/31/18 Three months ended 12/31/17 Income (loss) from operations, as reported $ 71.9 $ 103.4 $ 71.3 $ 41.0 Adjustments: Deal Related - - - 7.1 Restructuring & related 2.6 6.9 (2.2) (7.8) Transformation 10.0 7.8 7.3 9.8 Other - - (2.8) - (Income) loss from TFS (0.9) (2.0) (2.4) (4.5) Income (loss) from operations, as adjusted $ 83.6 $ 116.1 $ 71.2 $ 45.6 Reconciliation of Cash and cash equivalents: As of 9/30/18 As of 6/30/18 As of 3/31/18 As of 12/31/17 As of 9/30/17 Cash and cash equivalents - continuing operations $ 326.0 $ 373.6 $ 447.9 $ 626.5 $ 592.7 Cash and cash equivalents - assets held for sale 3.5 3.5 3.5 3.6 3.0 Cash and cash equivalents, as adjusted $ 329.5 $ 377.1 $ 451.4 $ 630.1 $ 595.7 Debt as reported $ 1,133.4 $ 1,094.2 $ 1,083.0 $ 984.8 $ 984.9 Reconciliation of Terex Corporation stockholders equity: Terex Corporation stockholders equity as reported $ 974.1 $ 947.6 $ 1,078.4 $ 1,222.0 $ 1,379.7 TFS assets (149.0) (154.0) (152.0) (181.7) (220.5) Effects of Adjustments, net of tax: Deal Related 3.0 3.0 3.0 3.0 (2.3) Restructuring & related (1.2) (3.2) (8.0) (6.3) (0.6) Transformation 33.2 25.5 19.5 13.9 6.7 Extinguishment of debt 1.0 1.0 1.0 0.5 0.5 Other (4.0) (6.6) (5.4) - - (Income) loss from TFS (8.6) (7.9) (6.4) (4.6) (1.3) Terex Corporation stockholders equity, as adjusted $ 848.5 $ 805.4 $ 930.1 $ 1,046.8 $ 1,162.2 35
Glossary: ROIC Continued USD Millions Nine Months Ended September 30, 2018 Reconciliation of annualized effective tax rate: As reported $ 194.5 $ (52.6) 27.0% Effect of Adjustments: Income (loss) from continuing operations before income taxes (Provision for) benefit from income taxes Income tax rate Restructuring & related 6.7 (1.3) Transformation 25.1 (4.0) Extinguishment of debt 0.7 (0.1) Other (5.1) 0.8 Tax related - 6.2 As adjusted $ 221.9 $ (51.0) 23.0% Year Ended December 31, 2017 Reconciliation of annualized effective tax rate: As reported $ 112.0 $ (52.0) 46.4% Effect of Adjustments: Income (loss) from continuing operations before income taxes (Provision for) benefit from income taxes Income tax rate Deal related (20.9) (11.3) Restructuring & related (12.2) (0.5) Transformation 45.2 (10.1) Extinguishment of debt 53.1 (19.0) Asset Iimpairment (1.6) 0.6 Tax related - (5.3) 2017 Federal Tax Act - 50.4 As adjusted $ 175.6 $ (47.2) 26.9% 36
Glossary: Working Capital USD Millions Working Capital is calculated using the Consolidated Balance Sheet amounts for Trade receivables (net of allowance) plus Inventories less Trade accounts payable and Customer advances. The Company views excessive working capital as an inefficient use of resources, and seeks to minimize the level of investment without adversely impacting the ongoing operations of the business. For the periods below, working capital was: September 30, 2018 Inventories 1,112.3 Trade Receivables 679.1 Less: Trade Payables (652.3) Less: Customer Advances (33.4) Total Working Capital 1,105.7 Trailing Three Months Annualized Net Sales is calculated using the net sales for the quarter multiplied by four. 3 Months Sales 1,228.5 Number of quarters x 4 Annualized Quarterly Sales 4,914.0 WC % of Annualized Quarterly Sales 22.5% The ratio is calculated by dividing working capital by trailing three months annualized net sales. The Company believes this measures its resource use efficiency. 37