ITEM 1A. RISK FACTORS
You should carefully consider the following material risks, together with the cautionary statement under the caption “Forward-Looking Information” above and the other information included in this report. Although the risks are organized by headings, and each risk is discussed separately, many are interrelated. The risks described below are not the only ones we face. Additional risks that are currently unknown to us or that we currently consider immaterial may also impair our business or adversely affect our financial condition or results of operations. If any of the following risks actually occurs, our business, financial condition or results of operation could be adversely affected.
Competition and Strategic Performance Risks
We may be unable to successfully integrate acquired or merged businesses, including REV. We may not realize the anticipated benefits of such mergers and acquisitions.
Mergers and acquisitions have been and may continue to be a significant component of our growth strategy. From time to time, we engage in strategic transactions involving risks, including, but not limited to, the possible failure to successfully integrate
and realize the expected benefits of such transactions. While we believe that strategic acquisitions can improve our competitiveness and profitability, these activities could have a material adverse effect on our business, financial condition and operating results. We have consummated mergers and acquisitions in the past and anticipate making additional acquisitions in the future. On February 2, 2026, we closed on the REV Transaction. Our ability to realize the anticipated benefits of the REV Transaction, including the expected combination benefits, will depend, to a large extent, on the ability of management of the new combined company to integrate the businesses.
Management will be required to devote significant attention and resources to the integration process, which may disrupt business and, if implemented ineffectively, could preclude realization of the full benefits anticipated. The risks associated with the REV Transaction and our other past or future acquisitions include:
• the business culture of the merged or acquired businesses may not match well with our culture;
• we may acquire or assume unexpected liabilities;
• faulty assumptions may be made regarding the integration process;
• unforeseen difficulties may arise in integrating operations and systems;
• we may fail to retain, motivate and integrate key management and other employees of the merged or acquired businesses;
• higher than expected finance costs may arise due to unforeseen changes in tax, trade, environmental, labor, safety, payroll or benefit policies in any jurisdiction in which the merged or acquired business conducts its operations;
• we may experience problems in retaining customers, distributors, dealers, suppliers, vendors, landlords and other business partners; and
• a large transaction such as the REV Transaction could stretch our resources and divert management’s attention from existing operations.
The successful integration of any newly or previously acquired or merged business also requires us to implement effective internal control processes. While we believe we have successfully integrated acquisitions to date, we cannot ensure that previously acquired or newly merged or acquired companies, including REV, will operate profitably, that the intended beneficial effect from the REV Transaction or other acquisitions will be realized and that we will not encounter difficulties in implementing effective internal control processes in these merged or acquired businesses, particularly if such business operates in foreign jurisdictions and/or was privately owned. See Risk Factor entitled “We must comply with an injunction and related obligations resulting from the settlement of an SEC investigation” for additional consequences if we were to commit a violation of the reporting and internal control provisions of the federal securities laws. While our evaluation of the recent REV Transaction and any potential transaction includes business, legal, compliance and financial due diligence with the goal of identifying and evaluating the material risks, these due diligence reviews may not identify all of the issues necessary to accurately identify and estimate the cost and potential risks associated with such transactions or costs associated with any quality issues with the related products or services. In addition, there may be added risks and challenges for managing and integrating REV’s business, or any other business, that differs from the risks and challenges associated with our business prior to completion of the REV Transaction or other transactions. Further, we may need to consolidate or restructure acquired or existing facilities, which may require expenditures related to reductions in workforce and other charges resulting from the consolidations or restructurings, such as the write-down of inventory and lease termination costs. Any of the foregoing could adversely affect our business and results of operations.
We also may not realize the expected benefits of the REV Transaction or any acquired business, including operating and other cost synergies. We have incurred, and expect to incur, substantial transaction and integration expenses related to the REV Transaction, which reflect in part the many processes, policies, procedures, operations, technologies and systems to be integrated. We may also incur additional costs to maintain employee morale and to attract, motivate or retain management personnel and other key employees related to the REV Transaction or any other future acquisition. If we are unable to realize expected synergies from the REV Transaction or other acquisition, or the merger-related costs to achieve these synergies is greater than expected, then the anticipated benefits of such transaction may not be realized fully or at all or may take longer to realize than expected.
Many of these factors will be outside our control and any one of them could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy. In addition, there can be no assurance that we will be able to locate suitable acquisition candidates in the future or acquire them on acceptable terms or that we will be able to finance future transactions.
Further, we may be unable to achieve or maintain our long-term net leverage targets which could result in an event of default under our outstanding debt obligations. See Risk Factor entitled, “We have a significant amount of debt outstanding and must comply with covenants in our debt agreements.”
Our results after the completion of the REV Transaction may be adversely impacted if we do not effectively manage our expanded operations following the completion of the REV Transaction.
Following the recent REV Transaction, the size of our business is now significantly larger. Our ability to successfully manage this expanded business will depend, in part, upon management’s ability to design and implement strategic initiatives that address not only the integration of two independent stand-alone companies, but also the increased scale and scope of the combined business with its associated increased costs and complexity. There can be no assurances that we will be successful or that we will realize the expected operating efficiencies, cost savings and other benefits anticipated from the REV Transaction.
Potential divestitures, and any retained liabilities from such sold businesses, could negatively impact our business and financial results.
As part of our portfolio management process, we review our operations for businesses which may no longer be aligned with our strategic initiatives and long-term objectives. Concurrently with the public announcement of the execution of the REV Transaction, we announced that we would initiate a strategic review process regarding our Aerials business, including a possible divestiture of our Aerials business. We may not be able to complete a transaction providing for a disposition of our Aerials business on favorable terms or on our anticipated timeline, if at all. We also continue to review our portfolio and may pursue additional divestitures. Any such potential transaction involves risks, including, but not limited to, disruption to operations, loss of synergies, significant transaction costs, potential impairment charges, disputes with buyers and potential adverse impacts on relationships with customers, suppliers, and employees. If any such transaction is delayed, not completed, or completed on terms less favorable than anticipated, we may not realize the expected benefits of such divestiture transaction, and our business, financial condition, and results of operations could be materially adversely affected.
The timing and amount of benefits from our strategic initiatives may not be as expected and our financial results could be adversely impacted.
Each business in our Company is unique, but all businesses are managed to the “Execute, Innovate, Grow” operating framework. This is part of our continuing strategy to deliver long-term growth and earnings to our stockholders. We have made, and continue to make, significant investments in these strategic initiatives. However, we cannot provide any assurance that we will be able to realize the full anticipated benefits of these initiatives. Although “Execute, Innovate, Grow” is expected to improve future operating margins and revenue growth, if we are unable to achieve expected benefits from these initiatives or are unable to complete them without material disruption to our businesses, the timing and amount of benefits may not be as expected and could adversely impact the Company’s competitive position, financial condition, profitability and/or cash flows.
The industry in which we operate is highly competitive and subject to pricing pressure; if we fail to compete effectively, both in product offerings and price, demand for our products may decrease and our business could suffer.
Our industry is highly competitive. Our competitors include a variety of both domestic and foreign companies in all major markets. To compete successfully, our products must excel in terms of quality, reliability, durability, productivity, price, delivery times, features, customization, technical capability, product innovation, ease of use, safety and comfort, and we must provide excellent customer service and support. Some of our competitors are smaller companies which may have lower operating costs and greater operational flexibility and may focus on regional markets where they have competitive advantages of proximity and relationships with local municipalities or other regional customers. Other competitors are large, well-established companies with capacity, financial and other resources that may be in excess of ours. The greater financial resources of certain of our competitors may put us at a competitive disadvantage. Low-cost competition from China and other developing markets could also result in decreased demand for our products. If competition in our industry intensifies or if our current competitors lower their prices for competing products, we may lose sales or be required to lower the prices we charge for our products.
One of our strategic initiatives is Innovate, which in part aims at the continuing and timely introduction of new or improved products, technologies and capabilities. If we are unable to continue to improve existing equipment products and technologies that meet our customers’ expectations, or the industry’s expectations, including, but not limited to more technologically advanced and electric powered and lower emission products, the demand for our equipment could be substantially adversely impacted. Our ability to predict and match new product offerings to diverse global customers’ anticipated preferences for different types and sizes of equipment and various equipment features and functionality, at affordable prices, is critical to our success. This requires a thorough understanding of our existing and potential customers on a global basis. Product development, improvements and introductions also require significant financial and technological resources, talent, research, planning, design, development, engineering and testing at the technological, product and manufacturing process levels. If
competitors’ new products arrive in the market before any of our similar new offerings arrive, or competitors offer more attractive features and functions prior to us, then demand for our equipment could be adversely affected or render our product obsolete. Additionally, if we are unable to match or surpass the advances of artificial intelligence that our competitors implement for their products or for internal operations, our competitive position could be impacted. Any new products that we develop may also not receive market acceptance for a number of reasons, including changes in customer preferences or our failure to properly gauge customer preferences. New products may also not generate meaningful net sales or profits for us relative to our expectations and our investments, or they may reduce sales from existing models and adversely affect our results of operations. Failure to compete effectively could result in lower revenues from our products and services, lower gross margins or loss of market share.
Certain of our businesses depend on the performance of dealers and disruptions within our dealer network could have a negative effect on our business.
Certain of our businesses rely on their independent dealer networks to sell our products to end customers. Such businesses are therefore affected by our ability to establish new relationships and maintain relationships with existing dealers. The geographic coverage of our dealers and their individual business conditions can affect the ability of our dealers to sell our products to customers. In a number of markets, there is a lack of exclusivity with dealers, which may decrease our bargaining leverage. In addition, recent consolidation of dealers in certain businesses, as well as the growth of larger, multi-location dealers, may result in increased bargaining power on the part of dealers, which could have a material adverse effect on our business.
While our dealer agreements are often for a multi-year term, we cannot provide assurance that we will be able to renew our dealer agreements on favorable terms, or at all, at their respective scheduled expiration dates. If one or more of our significant dealers chooses not to renew a contract with us or to re-negotiate an agreement under advantageous terms, our sales and results of operations could be adversely affected. Some of our dealer agreements include guarantees, which could have a negative impact on our financial performance if we are required to fulfill them. In addition, laws in many of the locations in which we operate make it difficult for us to terminate or not renew dealer agreements, which may make it difficult for us to optimize our dealer network.
Financial and General Economy Risks
The imposition of new, postponed or increased international tariffs may have a material adverse effect on our business, financial condition and results of operations.
The U.S. government has continued to impose tariffs on a broad range of foreign goods from an increasing number of countries and regions that it perceives as engaging in unfair trade practices. Foreign governments have imposed, and may continue to impose, retaliatory tariffs on imports from the U.S. as well as other barriers to trade. Such changes can make it difficult or costly for us to do business in, or import our products from, such countries. The indirect impact of inflationary pressure on costs throughout the supply chain and the direct impact, for example, on costs for machines we import outside of the U.S., leads to higher input costs and potentially lower margins on certain products we sell. In addition, increasing tariffs imposed by the Chinese government on U.S. imports, and the potential imposition of tariffs by other countries on U.S. imports, have made the cost of some of our products more expensive for our non-U.S. customers and such costs could further increase.
We have been able to mitigate some effects of tariffs through the U.S. government’s duty draw-back mechanism, tariff exclusion process, footprint utilization, pricing actions and prudent sourcing. However, the end of certain tariff exclusions, and the increasing amount of new and proposed tariffs, could further destabilize global trade and economic conditions in many of the regions where we do business. The extent and duration of the tariffs and the resulting impact on general economic conditions and on our business are uncertain and depend on various factors, such as recent legal challenges to the U.S.’s imposition of tariffs, negotiations between the U.S. and affected countries, the responses of other countries or regions, relief that may be granted, availability and cost of alternative sources of supply and demand for our products in affected markets. Modifying our business operations to continuously adapt to or comply with rapidly evolving tariffs may be time-consuming and costly. If we become unable to recover a substantial portion of any tariff related costs from our customers, suppliers, duty draw-back, or other available avenues, it could materially and adversely affect our business, financial condition and results of operations.
Our business is sensitive to general economic conditions, government spending priorities and the cyclical nature of markets we serve.
Demand for our products is affected by the general strength of the economies in which we sell our products, customers’ perceptions concerning the timing of economic cycles, customers’ replacement or repair cycles, prevailing interest rates,
residential and non-residential construction spending, government spending priorities, capital expenditure allocations of our customers, the timing of regulatory standard changes, oil and gas related activity and other factors. The last several years have been marked by geopolitical instability, including multiple global conflicts, social concerns, supply chain and freight constraints, a pandemic, labor shortages and wage increases, high inflation, slower economic growth, high interest rates, foreign currency exchange volatility, recessions, tariffs and potential international trade wars, all of which have increased ongoing economic uncertainty and instability in the global markets. This instability can make it extremely difficult for our customers, our suppliers and us to accurately forecast and plan future business activities.
Certain of our businesses depend upon continued federal, state, and local government expenditures, which have not always remained constant over time. Current government spending levels on programs our businesses support may not be sustainable as a result of changes in government leadership, policies or priorities. Certain of our sales are subject to risks specific to doing business with the U.S. government and municipalities, including, but not limited to budgetary constraints or fluctuations, changes in government programs or requirements, realignment of funds to other government priorities, government shutdowns and other potential delays in government appropriations processes, delays in the payment of our invoices by government authorities, and adoption of new laws or regulations and our ability to meet specified performance thresholds. These or other factors could cause government agencies and departments to delay or reduce their purchases or deliveries under contracts, exercise their right to terminate contracts, or not exercise options to renew contracts, any of which could cause us to lose sales. A significant decline in overall government spending or a shift in expenditures away from agencies or programs that we support could cause a material decline in our sales and harm our financial results.
Some of our customers also depend substantially on government funding of highway construction, maintenance and other infrastructure projects. Policies of governments attempting to address local deficit or structural economic issues could have a material impact on our customers and markets. Any decrease or delay in government funding of highway construction and maintenance, other infrastructure projects and overall government spending could cause our revenues and profits to decrease.
The current market environment generally reflect macro uncertainty, high interest rates, geopolitical uncertainties, and shorter delivery lead times. We cannot provide any assurance that there will not be continued, increased global economic weakness and recessions based on the above uncertainties or other factors. Additionally, changes in trade agreements, the continued imposition of tariffs by the United States, retaliatory tariffs by other countries and any resulting escalation of trade tensions, including a trade war, could have a significant adverse effect on world trade and the world economy. If economic conditions in the U.S., Europe and other key markets weaken, we may experience further negative impacts to our net sales, financial condition, profitability and cash flows, which could result in the need for us to record impairments.
We have a significant amount of debt outstanding and must comply with covenants in our debt agreements.
On October 8, 2024, we entered into an Incremental Assumption, Borrowing Subsidiary Agreement and Amendment No. 2 to our credit agreement which (i) increased the size of our existing revolving credit facilities to $800 million and extended the maturity of our existing revolving credit facilities to expire on October 8, 2029, and (ii) provided for a new seven-year term loan facility in an aggregate principal amount of $1,250 million with a maturity date of October 8, 2031. We also issued an additional $750 million of senior unsecured notes on October 8, 2024, which will mature in 2032.
Following our recent REV Transaction and the acquisition of ESG, our debt levels have increased significantly. Our ability to make required payments of principal and interest on our increased debt levels will depend on future performance of our combined businesses, which, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond our control. In addition, our credit agreement contains financial and restrictive covenants that may limit our ability to, among other things, borrow additional funds or take advantage of business opportunities. While we are currently in compliance with the financial covenants, increases in our debt or decreases in our earnings could cause us to fail to comply with these financial covenants. Our failure to comply with such covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all our indebtedness or otherwise have a material adverse effect on our financial position, results of operation and debt service capability.
Our increased level of debt and the financial and restrictive covenants contained in our credit agreement could have important consequences on our financial position and results of operations, including increasing our vulnerability to increases in interest rates because debt under our credit agreement bears interest at variable rates.
We may be unable to generate sufficient cash flow to service our debt obligations and operate our business.
Servicing our debt requires a significant amount of cash. Our ability to generate sufficient cash depends on numerous factors beyond our control and our business may not generate sufficient cash flow from operating activities. Our ability to make
payments on, and refinance, our debt and fund planned capital expenditures will depend on our ability to generate cash in the future. To some extent, this is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control, including high interest rates. Lower sales, or uncollectible receivables, generally will reduce our cash flow. We cannot assure that our business will generate sufficient cash flow from operations, or future borrowings will be available to us under our credit facility or otherwise, in an amount sufficient to fund our liquidity needs.
If our cash flows and capital resources are insufficient to service our indebtedness, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.
Our access to capital markets and borrowing capacity could be limited in certain circumstances.
Our access to capital markets to raise funds through the sale of equity or debt securities is subject to various factors, including general economic and/or financial market conditions. Significant changes in market liquidity conditions could impact access to funding and associated funding costs, which could reduce our earnings and cash flows. If our consolidated cash flow coverage ratio is less than 2.0 to 1.0, we are subject to significant restrictions on the amount of indebtedness we can incur. Although our cash flow coverage ratio was greater than 2.0 to 1.0 at the end of 2025, there can be no assurance this will continue to occur.
Our access to debt financing at competitive risk-based interest rates is partly a function of our credit ratings. A downgrade to our credit ratings could increase our interest rates, could limit our access to public debt markets, could limit the institutions willing to provide us credit facilities, and could make any future credit facilities or credit facility amendments more costly and/or difficult to obtain.
Although we believe the banks participating in our credit facility have adequate capital and resources, we can provide no assurance that all of these banks will continue to operate as a going concern in the future. If any of the banks in our lending group were to fail or be unwilling to renew our credit facility at or prior to its expiration, it is possible that the borrowing capacity under our current or any future credit facility would be reduced. If the availability under our credit facility was reduced significantly, we could be required to obtain capital from alternate sources to finance our capital needs. Our options for addressing such capital constraints would include, but not be limited to (i) obtaining commitments from the remaining banks in the lending group or from new banks to fund increased amounts under the terms of our credit facility, or (ii) accessing the public capital markets. If it becomes necessary to access additional capital, it is possible that any such alternatives in the current market could be on terms less favorable than under our existing credit facility terms, which could have a negative impact on our consolidated financial position, results of operations or cash flows.
Cancellations, reductions or delays in customer orders, customer breaches of purchase agreements, reduction in expected backlog, reductions in profitability of backlog due to fluctuations in product costs, or our inability to meet customer delivery schedules may adversely affect our results of operations.
Certain of our businesses may have a backlog due to the nature of our production and sales process, and our financial results are affected if any backlog order is deferred or canceled. Our estimates of backlog for some of our contracts could be affected by variables beyond our control and may not be entirely realized, if at all. In addition, given the nature of our customers and our markets, there is a risk that a portion of our backlog may not be fully realized in the future. Failure to realize sales from our existing or future backlog could negatively impact our financial results.
In addition, certain of our businesses, as a result of firm purchase orders from our customers, enter into agreements to produce and sell products at a specified price based upon our estimation of the cost to produce and the timing of delivery. Due to the nature of these product cost estimates and the fluctuations in input costs and availability, we may underestimate the costs of production and therefore overestimate the profitability in our backlog. As a result, the actual profitability on those sales in the future may differ materially from our initial estimates when we recorded the firm purchase order in backlog.
Our ability to meet customer delivery schedules is dependent on a number of factors including, but not limited to, access to components and raw materials, an adequate and capable workforce, assembling/engineering expertise for certain projects and sufficient manufacturing capacity. The availability of these factors may in some cases be subject to conditions outside of our control. A failure to deliver in accordance with our performance obligations may result in damage to existing customer relationships, damage to our reputation and a loss of future bidding opportunities, which could cause the loss of future business and could negatively impact our financial performance.
Our consolidated financial results are reported in U.S. dollars while certain assets and other reported items are denominated in the currencies of other countries, creating currency exchange and translation risk.
Our Company operates in many areas of the world, involving transactions denominated in a variety of currencies. We are subject to currency exchange risk to the extent that our costs are denominated in currencies other than those in which the Company earns revenue.
Additionally, the reporting currency for our consolidated financial statements is the U.S. dollar. Certain of our assets, liabilities, expenses, revenues and earnings are denominated in other countries’ currencies, including the Euro, British Pound, Chinese Yuan, Indian Rupee, Australian Dollar and Mexican Peso. Those assets, liabilities, expenses, revenues and earnings are translated into U.S. dollars at the applicable foreign exchange rates to prepare our consolidated financial statements. Therefore, fluctuations in foreign exchange rates between the U.S. dollar and those other currencies affect the value of those items as reflected in our consolidated financial statements, even if their value remains unchanged in their original currency. Due to volatility of foreign exchange rates to the U.S. dollar, fluctuations in foreign exchange rates may have an impact on the accuracy of our financial guidance. Such fluctuations in foreign exchange rates relative to the U.S. dollar may cause our actual results to differ materially from those anticipated in our guidance and have a material adverse effect on our business or results of operations.
Some of our dealers and customers rely on financing with third parties to purchase our products.
We rely on sales of our products to generate cash from operations. Significant portions of our sales are financed by third-party finance companies on behalf of our dealers and customers. The availability and terms of financing to dealers and retail purchasers by third parties is affected by general economic conditions, credit worthiness of our individual dealers and customers and estimated residual value of our equipment. Deterioration in credit quality of our customers or dealers, or estimated residual value of our equipment, could negatively impact the ability of our customers or dealers to obtain resources they need to purchase our equipment. Although we assist our customers and dealers with arranging their financing with third parties for purchases of our products, some of our customers and dealers have been unable to obtain the credit they need to buy our products. There can be no assurance third-party finance companies will continue to extend credit to our customers and dealers. Additionally, a decrease in the availability of financing, more restrictive lending practices or an increase in the cost of wholesale financing can prevent dealers from carrying adequate levels of inventory, which limits product offerings available to the end customer and could lead to reduced sales of our products. For some businesses, a small number of financial institutions provide our dealers’ total financed products outstanding in a floor plan financing program at any point in time. Substantial increases in interest rates and decreases in the general availability of credit may have an adverse impact upon our business and results of operations.
High interest rates could have a dampening effect on the financial condition of some of our customers and dealers and their ability to repay credit obligations. As a result, some of our customers and dealers may need to cancel existing orders and some may be compelled to sell their equipment at less than fair value to raise cash, which could have a negative impact on residual values of our equipment. These economic conditions could have a material adverse effect on demand for our products and on our financial condition and operating results.
We are exposed to losses from providing credit support to some of our customers and dealers.
We may with the rental, leasing and acquisition of our products by facilitating financing transactions directly between (i) end-user customers, dealers, distributors and rental companies and (ii) third-party financial institutions, providing recourse in certain circumstances. 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. Many of these factors, including the assessment of a customer’s or dealer’s ability to pay, are influenced by economic and market factors that cannot be predicted with certainty. Our maximum liability is generally limited to remaining payments due to the third-party financial institutions at the time of default or repurchase of the products. In the event of a default, we are generally able to recover and dispose of the equipment at a minimal loss, if any, to us.
During periods of economic weakness, collateral underlying our guarantees of indebtedness of customers can decline sharply, thereby increasing our exposure to losses. In the future, we may incur losses in excess of our recorded reserves if the financial condition of our customers was to deteriorate further or the full amount of any anticipated proceeds from the sale of the collateral supporting our customers’ financial obligations is not realized. Historically, losses related to guarantees have been immaterial; however, there can be no assurance that our historical experience with respect to guarantees will be indicative of future results.
We may experience losses in excess of our recorded reserves for receivables.
We evaluate the collectability of our receivables based on consideration of a customer’s payment history, leverage, availability of third-party financing, political and foreign exchange risks, and other factors. Recorded reserves represent our estimate of current expected credit losses on existing receivables and are determined based on historical customer assessments, current financial conditions, and reasonable and supportable forecasts. An unexpected change in customer financial condition or future economic uncertainty could result in additional requirements for specific reserves, which could have a negative impact on our consolidated financial position.
The market price of our common stock may be affected by factors different from those that affected the price of our common stock before the REV Transaction and may decline as a result of the REV Transaction.
Our results of operations and the price of our common stock may begin to be affected by factors different from those factors that affected our common stock before the REV Transaction. We may now face additional risks and uncertainties to which we may not have been exposed to prior to the REV Transaction.
The market price of our common stock may decline as a result of the REV Transaction, and stockholders may lose the value of their investment in our common stock if, among other things, we are unable to achieve the expected growth in earnings, or if the anticipated benefits, including synergies, cost savings, innovation and operational efficiencies, from the REV Transaction are not realized, or if the transaction costs related to the REV Transaction are greater than expected. The market price of our common stock also may decline if we do not achieve the perceived benefits and expected synergies of the transaction as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the REV Transaction on our financial position, results of operations or cash flows is not consistent with the expectations of financial or industry analysts. The issuance of shares of our common stock in the REV Transaction could on its own have the effect of depressing the market price of our common stock. In addition, many prior REV stockholders may decide not to hold the shares of our common stock that they receive as a result of the REV Transaction. Other prior REV stockholders, such as funds with limitations on their permitted holdings of stock in individual issuers, may be required to sell the shares of our common stock they receive as a result of the REV Transaction. Any such sales of our common stock could have the effect of depressing the market price of our common stock. Moreover, general fluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, our common stock, regardless of our operating performance.
Manufacturing and Operational Risks
We are exposed to political, economic and other risks that arise from operating a multinational business .
Our operations are subject to a number of potential risks. Such risks principally include:
• uncertainties and instability in global and regional economic conditions, including changes related to market conditions caused by inflation, economic recessions, and significant interest rate fluctuations;
• ongoing political instability and uncertainties, including, but not limited to, actual or anticipated military or political conflicts;
• domestic and foreign customs and tariffs;
• export duties and quotas;
• trade protection measures and currency exchange controls;
• changes in tax laws or interpretations, tax rates and tax legislation;
• current and changing regulatory environments;
• terrorist activities and the U.S. and international response thereto;
• wage inflation, labor shortages and labor unrest;
• difficulties protecting our intellectual property;
• transportation delays and interruptions;
• costs and difficulties in integrating, staffing and managing international operations, especially in developing markets;
• difficulty in obtaining distribution support;
• health epidemics or new pandemics; and
• natural disasters.
In addition, many of the nations in which we operate have developing legal and economic systems adding greater uncertainty to our operations in those countries than would be expected in North America, Western Europe and certain Asia Pacific markets. These factors may have an adverse effect on our international operations in the future. Efforts to improve operations in
developing markets also requires us to hire, train and retain qualified personnel in countries where language, cultural or regulatory barriers may exist, and may require a greater level of management’s attention. Expansion into developing markets may also require modification of products to meet local requirements or preferences. Modification to the design of our products to meet local requirements and preferences may take longer or be more costly than we anticipate and could have a material adverse effect on our ability to achieve international sales growth.
As a global manufacturer, quotas, duties, tariffs and the possibility of an escalation or further developments of current trade conflicts could continue to negatively impact global trade and economic conditions in many of the regions where we do business. See the Risk Factor entitled “The imposition of new, proposed or increased international tariffs may have a material adverse effect on our business, financial condition and results of operations” for additional details.
The Coalition of American Manufacturers of Mobile Access Equipment, an alliance of mobile access equipment producers in the U.S. of which we are a member, pursued anti-dumping and countervailing cases against unfairly traded Chinese imports of mobile access equipment. The U.S. Department of Commerce has issued countervailing and anti-dumping duty rates on mobile access equipment from China. If these duties are not enough to offset the subsidies provided by the Chinese government to Chinese mobile access equipment manufacturers and/or if the duties are modified as a result of any appeal process, we may continue to operate at a disadvantage to Chinese manufacturers. This could result in reduced demand for our products in the U.S. and have an adverse effect on our business or results of operations. Similarly, following an official complaint by several of our EU competitors, the European Commission recently concluded anti-dumping and anti-subsidy investigations into mobile access equipment imported from China. As a result of these investigations, the European Commission imposed a range of duties on manufacturers who produce equipment in China, with most of the highest duties assigned to Chinese owned competitors. If anti-dumping and anti-subsidy duties are not enough to offset any subsidies provided by the Chinese government to Chinese manufacturers and/or if their duties are modified as a result of any appeal process, it could result in reduced demand for our products in the E.U. and have an adverse effect on our business or results of operation.
Changes in the availability and price of certain materials and components have resulted and could result in significant disruptions to the supply chain causing manufacturing inefficiencies, increased costs and lower profits.
We obtain materials and manufactured components from third-party suppliers. Principal materials and components used in our various manufacturing processes include steel, castings, engines, transmissions, wire harnesses, axles, tires, hydraulics, cylinders, drive trains, cab chassis, electric controls and motors, semiconductors, and a variety of other commodities and fabricated or manufactured items. The cost and availability of these materials, components and final assemblies have varied significantly in past years. While we have seen improvements in the supply chain, additional fluctuations and disruptions are possible due to demand changes, inflation, geopolitical and economic uncertainty, regulatory and policy instability, the imposition of duties and tariffs and trade agreements/barriers, freight availability and costs, wage increases and labor shortages. The Company has mitigated these risks with price increases on our products, recouped tariffs through duty drawback and exclusions, and working with suppliers to ensure optimum pricing and inventory levels. However, if customers become unwilling to accept any future price increases in the Company’s products and the Company is unable to recover a substantial portion of increased costs from our suppliers, or through duty draw-back/exclusions, or otherwise offset the increased costs, then increased fluctuations in costs of materials or inflation generally and supply chain challenges could have a material adverse effect on the Company’s results of operation, profitability, free cash flows, and financial condition.
In the absence of labor strikes or other unusual circumstances, substantially all materials and components are normally available from multiple suppliers. However, certain of our businesses receive materials and components from a limited number of qualified suppliers or a single source supplier, although alternative suppliers of such materials may be generally available. Delays in our suppliers’ abilities, especially any sole suppliers for a particular business, to provide us with necessary materials and components may delay production at a number of our manufacturing locations or may require us to seek alternative supply sources. Delays in obtaining supplies may result from a number of factors affecting our suppliers, including capacity constraints, regulatory changes, global logistics network challenges and cost increases, labor shortages and disputes, shortages of materials and components, wage increases, inflation, suppliers’ impaired financial condition, suppliers’ allocations to other purchasers, weather emergencies, pandemics or acts of war or terrorism. We actively monitor and mitigate our supply chain risk, but there can be no assurance that our mitigation plans will be effective. Any delay or disruptions in receiving supplies could result in manufacturing inefficiencies caused by us having to wait for parts to arrive on production lines, could impair our ability to deliver products to our customers and delay sales, and, accordingly, could have a material adverse effect on our business, results of operations, financial condition and/or cash flows.
In addition, we purchase material and services from our suppliers on terms extended based on our overall credit rating. Deterioration in our credit rating may impact suppliers’ willingness to extend terms and in turn accelerate cash requirements of our business.
Consolidation within our customer base and suppliers may negatively impact our pricing and product margins.
Over the last few years, some of our larger customers have been actively growing through acquisitions. This consolidation has increased the concentration of our largest customers, resulting in increased pricing pressure from our customers. Should our larger customers continue to grow through acquisitions, their buying influence may grow and negatively impact our negotiating leverage. Some of our suppliers have undergone a similar process of consolidation. The consolidation of our largest suppliers has resulted in limited sources of supply for certain parts and components and increased cost pressures from our suppliers. Any future consolidation of our customer base or our suppliers could negatively impact our business, financial condition, results of operations and cash flows. If this trend in customer and supplier consolidation continues, it could have an unfavorable impact on our pricing and product margins.
Our business may suffer if our equipment fails to perform as expected.
If our equipment does not perform as expected or should we or any government safety regulator determine that a safety or other defect or noncompliance exists with respect to our equipment, we may receive warranty claims, need to perform a safety recall campaign, or need to delay product deliveries or launches, the costs of which could become substantial. It could also lead to product liability, breach of warranty, and other claims. Additionally, certain products we manufacture for sale are subject to strict contractually established specifications using complex manufacturing processes. If we fail to meet the contractual requirements for certain products or parts, we may be subject to warranty costs to repair or replace the part itself and additional costs related to the investigation and inspection of non-complying parts. As a manufacturer of equipment, we must manage the cost and risk associated with product warranties, repairs and recalls, regulatory penalties, product liability, breach of warranty, and other claims with respect to our products. We establish warranty reserves that represent our estimate of the costs we expect to incur to fulfill our warranty obligations. We base our estimate for warranty reserves on our historical experience and other related assumptions. If actual results materially differ from these estimates, our results of operations could be materially affected. We also may not be able to enforce warranties to recover losses from suppliers if such suppliers refuse to honor a warranty or go out of business. Overall, any actual or perceived defect or quality issue in our products could lead to negative public perceptions about the safety of our products and could cause harm to our overall business, reputation, financial condition and operating results.
A material disruption to one of our significant manufacturing plants may cause significant lost production and adversely affect our results of operations.
If operations at a significant facility were disrupted as a result of equipment failures, natural disasters, health epidemics, work stoppages, power outages or other reasons, our business, financial conditions and results of operations could be adversely affected. Interruptions in production, and subsequent prolonged startup periods, could cause a significant loss in production, increase costs and delay the delivery of units in production, negatively impacting our customers and dealers. Production capacity limits could cause us to reduce or delay sales efforts until production capacity is available. Although we carry property and business interruption insurance, our coverage may not be adequate to compensate us for all losses that may occur.
Information Technology Risks
A failure of a key information technology system or a breach of our information security from increased cybersecurity threats and more sophisticated computer crime could adversely impact our ability to conduct business and our operating results.
We rely extensively on information technology systems and networks, some of which are managed by third parties, to process, transmit and store electronic information (including sensitive data such as confidential business information and personally identifiable data relating to employees, customers and other business partners), and to manage or support a variety of critical business processes and activities. As technology continues to evolve, we anticipate that we will collect and store even more data in the future and that our systems will increasingly use remote communication. Operating these information technology systems and networks and processing and maintaining related data in a secure manner is critical to our business operations and strategy. We continuously seek to maintain a robust program of information security and controls, but these systems may not function as intended, be damaged, disrupted or shut down due to attacks by computer hackers, computer viruses, employee error or malfeasance, power outages, hardware failures, telecommunication or utility failures, the failure of third-party providers, catastrophes or other unforeseen events, and in any such circumstances our system redundancy and other disaster recovery planning may be ineffective or inadequate. If our business continuity plans do not effectively resolve such issues on a timely basis, we may suffer interruptions in conducting our business which may adversely impact our reputation and operating results.
The current cyber threat environment continues to indicate increased risk for all companies, with cyber-attacks expanding in both frequency and sophistication. These threats may be further enhanced in frequency, sophistication and intensity through threat actors’ adoption of artificial intelligence technologies, which are becoming more rapidly developed and adopted. Like other global companies, we have experienced cyber threats and incidents in our systems and those of our customers, suppliers and third-party service providers, and we have experienced viruses and attacks targeting our information technology systems and networks, although none have had a material adverse effect on our business or financial condition. Our information security efforts include programs designed to address security governance, identification and protection of critical assets, insider risk, third-party risk and cyber defense operations. We are also utilizing artificial intelligence technologies to help detect and defend against cyber threats. While these measures are designed to reduce the risk of a breach or failure of our information technology systems, no security measures or countermeasures can guarantee that the Company will not experience a significant information security incident in the future. A failure of or breach in information technology security, particularly through malicious cyber-attacks, could expose us and our customers, distributors and suppliers to risks of misuse of information or systems, the compromise of confidential information, manipulation and destruction of data, defective products, production downtimes and operations disruptions. In addition, such breaches in security could result in misstated financial information, regulatory action, fines and litigation, reputational damage, and other potential liabilities, as well as the costs and operational consequences of implementing further data protection measures, each of which could have a material adverse effect on our business or results of operations.
Issues related to the development, deployment and use of artificial intelligence technologies in our business operations, information systems, products and services, could result in reputational harm, financial harm, regulatory action or legal liability, and any failure to adapt to such technological developments or industry trends could adversely affect the competitiveness of our business or financial results.
The use of artificial intelligence technologies to improve our business operations, information systems, products, services and features may continue to become more important but poses risks and challenges. The use of artificial intelligence technologies can pose risks from an intellectual property, confidential data leakage, data protection and privacy perspective, as well as raise ethical concerns, compliance issues, and security risks. As artificial intelligence technologies rapidly develop and evolve, and become subject to dynamic and evolving regulatory requirements, the safe and responsible integration of such may be challenging and may impose significant costs, time burdens on management and employees, expertise personnel requirements and risk management burdens on the Company. There is also no guarantee that our use of artificial intelligence will enhance our technologies, benefit our business operations, or produce products and services that are preferred by our customers. Any artificial intelligence technologies that we do develop or utilize may ultimately be deficient, inaccurate, biased, incomplete or flawed, which could result in competitive harm, regulatory penalties, legal liability, brand or reputational harm and financial harm.
Further, a failure to timely and effectively use or deploy artificial intelligence technologies and integrate such into new product offerings and services could negatively impact our competitiveness. Our competitors may be more successful in incorporating artificial intelligence into their business operations, information systems, products and services, or developing superior products and services with the aid of artificial intelligence technology, which could impair our ability to compete effectively and adversely affect our results of operations.
Increasing regulatory focus on privacy and data security issues and expanding laws could expose us to increased liability.
The legislative and regulatory framework for privacy and data protection issues worldwide continues to evolve. We collect and transfer personal data as part of our business processes and activities. This data is subject to a variety of U.S., E.U. and other international laws and regulations, including oversight by various regulatory or other governmental bodies. Any inability, or perceived inability, to adequately address privacy and data protection concerns, even if unfounded, or to comply with applicable laws, regulations, policies, industry standards, contractual obligations, or other legal obligations (including at newly acquired companies) could result in additional cost and liability to us or company officials, damage our reputation, inhibit sales, and otherwise adversely affect our business.
Legal, Regulatory & Compliance Risks
We face product liability claims, litigation and other liabilities.
In our lines of business, numerous suits have been filed alleging damages for accidents that have occurred during use, misuse or operation of our products. We are self-insured, up to certain limits, for these product liability exposures, as well as for certain exposures related to general, workers’ compensation and automobile liability. We obtain insurance coverage for catastrophic
losses as well as those risks where insurance is required by law or contract. We do not believe that the outcome of such matters will have a material adverse effect on our consolidated financial position; however, any significant liabilities not covered by insurance could have an adverse effect on our financial condition. In addition, we may incur significant costs to defend product liability claims and reputational damage from such claims, even if we are ultimately successful in defending them.
In the ordinary course of business, we are subject to various other claims, litigation, government investigations, enforcement actions and other proceedings initiated by government authorities or private parties related to our activities or the industries in which we operate. Such matters, whether with or without merit, can be time-consuming and expensive to defend, divert management’s attention and resources, result in reputational damage to the Company, result in significant damages or other costs, and otherwise have a material adverse effect on our business, financial condition and results of operations. In addition, we are in the early stages of industry anti-trust class action lawsuits in which we have been named a defendant. We believe these anti-trust class actions are without merit and will continue to vigorously oppose them, no assurance can be given as to the final resolution of such litigation or that we will not ultimately be required to pay damages or other costs related to such actions.
We operate in many different jurisdictions and we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar worldwide anti-corruption laws.
We must comply with all applicable laws, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business. Our global activities and distribution model are subject to risk of corruption by our employees, sales agents, distributors, dealers and other third parties that transact Terex business, particularly because these parties are generally not subject to our control. We have an internal policy that expressly prohibits engaging in any commercial bribery and public corruption, including facilitation payments. We conduct compliance risk reviews and assessments, have implemented training programs for our employees with respect to our prohibition against public corruption and commercial bribery, and perform reputational due diligence on certain third parties that transact Terex business. However, we cannot assure you that our policies, procedures and programs will always protect us from reckless or criminal acts committed by our employees or third parties that transact Terex business. We have a zero-tolerance policy for violations of anti-corruption laws and our anti-corruption policy. In the event we believe or have reason to believe our employees, agents, representatives, dealers or distributors or other third parties that transact Terex business have or may have violated our anti-corruption policy or applicable anti-corruption laws, we investigate or have outside counsel investigate relevant facts and circumstances. Although we have a compliance program in place designed to reduce the likelihood of potential violations of such laws, violations of anti-corruption laws could occur and could result in significant fines, criminal or civil sanctions against us or our employees, prohibitions on the conduct of our business including our business with the U.S. government, an adverse effect on our reputation, business, results of operations and financial condition and a violation of our injunction or cease and desist order with the SEC. See Risk Factor entitled, “We must comply with an injunction and related obligations imposed by the SEC.”
Our operations, products, and the industries in which we operate are subject to environmental, health and safety laws and regulations, and we may face significant costs or liabilities associated with a failure to meet sustainability or environmental, health and safety requirements or expectations.
Our operations are subject to a variety of federal, state, local and foreign environmental and workers’ health and safety laws and regulations concerning, among other things, water and air discharges, noise pollution, solid and hazardous waste generation, management and disposal, remediation of releases of hazardous materials, employee health and safety, and engine fuel economy and emissions from the products we manufacture. Some environmental laws impose strict, retroactive and joint and several liability for the remediation of the release of hazardous substances, which could subject us to liability without regard to whether we were negligent or at fault. Environmental, health and safety laws and regulations continue to evolve, and we may become subject to increasingly stringent environmental standards in the future, which could increase costs of compliance or require us to manufacture with alternative technologies and materials. We are required to obtain and maintain environmental, health and safety permits and approvals for our facilities and operations. Our failure to comply with such laws, regulations, permits and approvals could expose us to substantial fines or penalties and to civil and criminal liability. These liabilities, sanctions, damages and remediation efforts related to any non-compliance with such laws and regulations could have a material adverse effect on our business or results of operations. No such incidents have occurred which required us to pay material amounts to comply with such laws and regulations.
In addition, product compliance laws and regulations impose a variety of environmental requirements, including emissions and performance standards, on certain products we manufacture. These laws and regulations govern features such as vehicle fuel efficiency, emissions (including greenhouse gas emissions), and noise and safety, and are expected to continue to add to the cost of certain of our products and increase the engineering and product development programs of certain businesses. These standards, as well as other federal and state emissions and other standards applicable to certain products we manufacture, have
increased and will continue to increase costs of development for engines and products and administrative costs arising from implementation of the standards, and have impacted in recent years and may continue to impact the cost or availability of certain items, such as chassis, used in our products. In addition, regulatory proposals under consideration or those that are proposed in the future may set standards that are difficult to achieve or adversely affect our results of operations due to increased research, development, or warranty costs or otherwise.
Concerns regarding sustainability matters have resulted, and may continue to result, in new legal and regulatory requirements, including, but not limited to, the European Union’s European Sustainability Reporting Standards under the Corporate Sustainability Reporting Directive and California’s Climate Corporate Data Accountability Act. Sustainability is integral to our strategic business priorities, including product innovation and solutions that enable our customers to operate in safe and sustainable ways. We have devoted and expect to have to continue to devote expenditures and resources toward designing and manufacturing new forms of equipment that satisfy new laws/regulations and market expectations and complying with sustainability reporting obligations. Any sustainability goals, commitments, and targets reflect plans and do not guarantee that we will be able to achieve them. Maintaining a strong reputation with team members, customers, investors, stakeholders and communities is critical to the success of our business. A failure, or perceived failure (whether or not valid), to act responsibly with respect to the environment, achieve our sustainability goals, maintain sustainability practices, comply with sustainability regulations, or meet expectations related to sustainability concerns, could harm our reputation, adversely impact our ability to attract and retain customers and qualified and talented team members, have an adverse effect on our future financial results or cause harm to our business.
We must comply with an injunction and related obligations imposed by the SEC.
We and our directors, officers and employees are required to comply at all times with the terms of a 2009 settlement with the SEC that includes an injunction barring us from committing or aiding and abetting any future violations of the anti-fraud, books and records, reporting and internal control provisions of the federal securities laws and related SEC rules. In addition, regarding a separate and unrelated SEC matter, we consented to the entry of an administrative cease and desist order prohibiting future violations of certain provisions of the federal securities laws. As a result, if we commit or aid or abet any future violations of the anti-fraud, books and records, reporting and internal control provisions of the federal securities laws and related SEC rules, we are likely to suffer severe penalties, financial and otherwise, that could have a material negative impact on our business and results of operations.
Human Capital Risks
We rely on key management, employees and skilled labor, and we may be unable to attract, develop, engage and retain qualified team members.
We rely on the management and leadership skills of our senior management team, particularly those of the Chief Executive Officer. Additionally, certain key employees have extensive experience in our markets and are familiar with our business, systems and processes. The loss of the services of key employees or senior management, or the inability to identify, hire, develop and retain other highly qualified personnel for such roles in the future, could adversely affect the quality and profitability of our business operations, at least in the short to medium term.
Additionally, our ability to maintain or expand our business and execute our strategy depends on our ability to attract, hire, train, develop, engage, motivate and retain qualified team members with the requisite education, background, experience and skills necessary to understand and adapt to the continuously developing needs of our customers. Efforts to attract talent to fill open roles with labor availability constraints and wage inflation can take more time and cost us significantly more. Moreover, constrained labor conditions and wage inflation pressures may mean that retention of existing talent may continue to require significant additional pay and incentives. If we fail to attract, hire, train, develop, engage, motivate and retain qualified personnel, or if we experience prolonged excessive turnover, we may experience declining sales, manufacturing delays, the loss of knowledge of departing employees or other inefficiencies, increased recruiting, hiring, onboarding and training resources, relocation costs and other difficulties, and our business, financial condition, results of operations and cash flows could be materially and adversely affected.
We may be adversely impacted by work stoppages and other labor matters.
As of December 31, 2025, approximately one percent of our team members in the U.S. were represented by labor unions. While we have no reason to believe that we will be impacted by work stoppages or other labor matters, we cannot assure that future issues with our team members or labor unions will be resolved favorably or that we will not encounter future strikes, further unionization efforts or other types of conflicts with labor unions or our team members. From time to time, union
organizers may work to organize employees at some of our facilities. If union representation is implemented at additional sites and we are unable to agree with the union on reasonable employment terms, including wages, benefits, and work rules, we could experience a significant disruption of our operations and incur higher ongoing labor costs. Any of these factors may have an adverse effect on us or may limit our flexibility in managing our workforce.
