TEREX CORPORATION BUSINESS DESCRIPTION
Terex is a global manufacturer of aerial work platforms and materials processing machinery. We design, build and support products used in construction, maintenance, manufacturing, energy, minerals and materials management applications. Our products are manufactured inNorth and South America ,Europe ,Australia andAsia and sold worldwide. We engage with customers through all stages of the product life cycle, from initial specification and financing to parts and service support. We manage and report our business in the following segments: (i) Aerial Work Platforms ("AWP") and (ii) Materials Processing ("MP"). OnJuly 31, 2019 , we completed the disposition of our Demag® mobile cranes business ("Demag") to Tadano Ltd. and certain of its subsidiaries. During 2019, we also exited North American mobile crane product lines manufactured in ourOklahoma City facility. As a result, we reorganized certain operations, formerly part of our Cranes segment, to align with our new management and reporting structure. Our utilities business has been consolidated within our AWP segment and our pick and carry, rough terrain and tower cranes businesses have been consolidated within our MP segment. Prior period reportable segment information was adjusted to reflect the realignment of our operations.
Further information about our industry and reportable segments appears below and in Note B - "Business Segment Information" in the Notes to the Condensed Consolidated Financial Statements.
Non-GAAP Measures
In this document, we refer to various GAAP (U.S. generally accepted accounting principles) and non-GAAP financial measures. These non-GAAP measures may not be comparable to similarly titled measures disclosed by other companies. We present non-GAAP financial measures in reporting our financial results to provide investors with additional analytical tools which we believe are useful in evaluating our operating results and the ongoing performance of our underlying businesses. We do not, nor do we suggest that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
Non-GAAP measures we may use include translation effect of foreign currency exchange rate changes on net sales, gross profit, selling, general & administrative ("SG&A") costs and operating profit, as well as the net sales, gross profit, SG&A costs and operating profit excluding the impact of acquisitions and divestitures.
As changes in foreign currency exchange rates have a non-operating impact on our financial results, we believe excluding effects of these changes assists in assessment of our business results between periods. We calculate the translation effect of foreign currency exchange rate changes by translating current period results using rates that the comparable prior periods were translated at to isolate the foreign exchange component of fluctuation from the operational component. Similarly, impact of changes in our results from acquisitions and divestitures not included in comparable prior periods may be subtracted from the absolute change in results to allow for better comparability of results between periods.
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
Working capital is calculated using the Condensed Consolidated Balance Sheet
amounts for Trade receivables (net of allowance) plus Inventories, less Trade
accounts payable and Customer advances. We view excessive working capital as an
inefficient use of resources, and seek to minimize the level of investment
without adversely impacting ongoing operations of the business. Trailing three
months annualized net sales is calculated using net sales for the most recent
quarter end multiplied by four. The ratio calculated by dividing working capital
by trailing three months annualized net sales is a non-GAAP measure we believe
measures our resource use efficiency.
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Non-GAAP measures we also use include Net Operating Profit After Tax ("NOPAT")
as adjusted, income (loss) from operations as adjusted, annualized effective tax
rate as adjusted, cash and cash equivalents as adjusted, Debt as adjusted and
Terex Corporation stockholders' equity as adjusted, which are used in the
calculation of our after tax return on invested capital ("ROIC") (collectively
the "Non-GAAP Measures"), which are discussed in detail below.
Overview
While the first two months of the year started in line with our expectations, during March, global economic activity including customer capital equipment purchases sharply contracted due to the COVID-19 pandemic ("COVID-19"). In response to this unprecedented situation, we swiftly implemented safety, financial and cost reduction actions.
Safety is and will remain the top priority of the Company. The Terex Way Values, along with our commitment to safety, give us strength as we manage the impact of COVID-19. We have taken significant measures to protect the health and safety of our team members in accordance with recommendations from health officials. It is a testimony to our Zero Harm safety program and our team members' efforts that we have had only a small number of confirmed cases at Terex. Based on our experience with ourChangzhou, China facility, we have implemented proactive measures in our sites around the world including, strict social distance processes, health screenings and sanitation measures to keep our team members and their families, our customers and their communities safe. After safety, our top priority is our liquidity. As ofMarch 31, 2020 , we had$945 million in available liquidity. We have taken numerous actions so that we can maintain strong liquidity levels going forward. We amended our credit agreement to provide us with additional flexibility to manage the Company during these challenging times. It is important that all of Terex's stakeholders, including customers, suppliers, team members and credit and equity investors have confidence that we have the operational and financial strength to manage successfully through this period of uncertainty. We believe our liquidity continues to be sufficient to meet our business plans. See "Liquidity and Capital Resources" for a detailed description of liquidity and working capital levels, including the primary factors affecting such levels. We have also begun a comprehensive cost reduction program to help support our financial position. Our actions have included salary reductions (50% by the CEO, 20% by the Executive Leadership Team and 5-10% for other team members), furloughing of team members, reductions in force, temporarily closing facilities, implementing short work weeks, adjusting production in each of our businesses to align with the current, reduced levels of commercial demand, partnering with suppliers to limit the incoming supply of materials, receiving only what is needed to support our current production schedules, reducing our plans for capital expenditures by 35% for the remainder of 2020, utilizing tax and other government opportunities to preserve our liquidity and deferring or reducing other cash outlays.
Operationally, MP started the year with another solid quarter, achieving 8% operating margins, despite challenging markets. However, weakness in AWP's aerials business more than offset MP's positive operating performance.
Our AWP segment's first quarter 2020 net sales were down 30% from the prior year period driven by continued challenging global markets. End markets in theU.S. andEurope sharply contracted in March, despite starting the year in line with our expectations, with a substantial portion of the year-over-year decline occurring in March. OurChangzhou, China factory was shut down or operating at a reduced level for most of the quarter. However, starting in March theChina business gradually started ramping up production. The Utilities market also softened in March but not at the same rate that we experienced in the aerials business. AWP's lower operating margin in the quarter was driven by lower sales volume. Our MP segment's first quarter 2020 net sales were down 23% from the prior year period driven by cautious customer sentiment delaying capital purchases of crushing and screening equipment, material handlers and cranes. Similar to AWP, end markets contracted across the MP businesses in March, despite a relatively good start to the year, with a substantial portion of the year-over-year decline occurring in March. We saw an increase in customer cancellations and requested delivery delays in the second half of March in both AWP and MP. The backlog atMarch 31, 2020 for AWP and MP was$717 million (a decline of 34% from the prior year period) and$272 million (a decline of 52% from the prior year period), respectively. 32 -------------------------------------------------------------------------------- Despite the challenging month of March, our free cash flow use of approximately$113 million for the first quarter of 2020 was a significant improvement on our free cash flow use of approximately$257 million in the first quarter of 2019. The year-over-year improvement in free cash flow resulted primarily from a reduction in net working capital and a significant use of cash in discontinued operations in 2019. At the beginning of 2020 we were under-producing to retail demand to bring our inventories in-line and, due to the significant number of delays and cancellations in March, we aggressively brought our production down in the AWP segment, driving the net working capital improvement. In the first quarter of 2020, our largest market remainedNorth America , which represented approximately 57% of our global sales in continuing operations. As compared to the prior year period, our sales were down double digits in every major geography. As a result of COVID-19, we withdrew our 2020 financial guidance onMarch 25, 2020 and will not issue revised guidance due to the continuing economic uncertainties. The full severity and duration of the related global economic crisis is not known, but it is expected to continue to negatively impact our operating results. See Part II, Item 1A. - "Risk Factors" for a detailed description of the risks resulting from COVID-19. 33 --------------------------------------------------------------------------------
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 plusTerex Corporation stockholders' equity for the previous five quarters. NOPAT for each quarter is calculated by multiplying Income (loss) from operations by one minus the annualized effective tax rate. In the calculation of ROIC, we adjust income (loss) from operations, annualized effective tax rate, andTerex 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. Cash and cash equivalents and Debt are adjusted to include amounts recorded as held for sale. Furthermore, we believe returns on capital deployed inTerex Financial Services ("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 Current portion of long-term 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. Terex management and Board of Directors use ROIC as one measure to assess operational performance, including in connection with certain compensation programs. We use ROIC as a metric because we believe it measures how effectively we invest our capital and provides a better measure to compare ourselves to peer companies to assist in assessing how we drive operational improvement. We believe ROIC measures return on the amount of capital invested in our primary businesses, excluding TFS, as opposed to another metric such as return on stockholders' equity that only incorporates book equity, and is thus a more accurate and descriptive measure of our performance. We also believe adding Debt less Cash and cash equivalents toTerex Corporation stockholders' equity provides a better comparison across similar businesses regarding total capitalization, and ROIC highlights the level of value creation as a percentage of capital invested. As the tables below show, our ROIC atMarch 31, 2020 was 12.7%. Amounts described below are reported in millions ofU.S. dollars, except for the annualized effective tax rates. Amounts are as of and for the three months ended for the periods referenced in the tables below. Mar '20 Dec '19
Sep '19 Jun' 19 Mar '19
Annualized effective tax rate, as adjusted 19.8 % 15.6 % 15.6 % 15.6 % Income (loss) from operations as adjusted$ (4.5) $ 35.3 $ 86.2 $ 127.9 Multiplied by: 1 minus annualized effective tax rate 80.2 % 84.4 % 84.4 % 84.4 % Adjusted net operating income (loss) after tax$ (3.6) $ 29.8 $ 72.8 $ 107.9 Debt as adjusted$ 1,345.1 $ 1,175.7 $ 1,175.6 $ 1,351.9 $ 1,477.8 Less: Cash and cash equivalents as adjusted (515.0) (540.1) (475.5) (394.6) (330.2) Debt less Cash and cash equivalents as adjusted 830.1 635.6 700.1 957.3 1,147.6Total Terex Corporation stockholders' equity as adjusted 746.6 886.6 804.2 775.1 666.3 Debt less Cash and cash equivalents plusTotal Terex Corporation stockholders' equity as adjusted$ 1,576.7 $ 1,522.2 $ 1,504.3 $ 1,732.4 $ 1,813.9 March 31, 2020 ROIC 12.7 % NOPAT as adjusted (last 4 quarters) $
206.9
Average Debt less Cash and cash equivalents plus
$ 1,629.9
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Three months Three months Three months Three months
ended 3/31/20 ended 12/31/19 ended 9/30/19 ended 6/30/19
Reconciliation of income (loss) from
operations:
Income (loss) from operations, as reported $ (7.1) $ 22.9 $ 86.4 $ 126.0
Adjustments:
Deal related - - (0.9) (7.0)
Restructuring and related - 9.8 2.2 8.7
Transformation - 3.4 2.2 4.0
Other - 0.2 - -
(Income) loss from TFS 2.6 (1.0) (3.7) (3.8)
Income (loss) from operations as adjusted
As of 3/31/20 As of 12/31/19 As of 9/30/19 As of 6/30/19 As of 3/31/19
Reconciliation of Cash and cash equivalents:
Cash and cash equivalents - continuing
operations $ 511.3 $
535.1
3.7 5.0 4.9 27.1 25.6
Cash and cash equivalents, as adjusted
Reconciliation of Debt: Debt - continuing operations$ 1,345.1 $
1,175.7
- - - 4.2 4.4
Debt, as adjusted $ 1,345.1 $
1,175.7
Reconciliation ofTerex Corporation stockholders' equity:Terex Corporation stockholders' equity as reported$ 786.2 $
932.3
(150.0) (154.0) (159.0) (180.2) (204.6)
Effects of adjustments, net of tax:
Deal related 75.3 75.3 75.3 75.8 83.1
Restructuring and related 24.2 24.2 15.9 12.4 2.7
Transformation 14.4 14.4 11.5 9.3 4.8
Other 2.3 2.3 1.3 1.7 (0.7)
(Income) loss from TFS (5.8) (7.9) (7.1) (4.0) (0.8)
Terex Corporation stockholders' equity as
adjusted $ 746.6 $ 886.6 $ 804.2 $ 775.1 $ 666.3
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Income (loss)
from continuing (Provision for)
Three Months Ended operations before benefit from
March 31, 2020 income taxes income taxes Income tax rate
Reconciliation of annualized effective tax
rate:
As reported $ (25.5) $ 0.8 3.1 %
Effect of adjustments:
Tax related - 4.2
As adjusted $ (25.5) $ 5.0 19.8 %
Income (loss) from
continuing (Provision for)
Year Ended operations before benefit from income
December 31, 2019 income taxes taxes Income tax rate
Reconciliation of annualized effective tax
rate:
As reported $ 247.5 $ (37.8) 15.3 %
Effect of adjustments:
Deal related (7.5) 0.2
Restructuring and related 22.4 (4.7)
Transformation 13.7 (2.8)
Other 0.6 (0.1)
Tax related - 2.0
As adjusted $ 276.7 $ (43.2) 15.6 %
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RESULTS OF OPERATIONS
Three Months EndedMarch 31, 2020 Compared with Three Months EndedMarch 31, 2019 Consolidated Three Months Ended March 31, 2020 2019 % of % of % Change In Sales Sales Reported Amounts ($ amounts in millions) Net sales$ 833.6 -$ 1,136.6 - (26.7) % Gross profit$ 136.7 16.4 %$ 237.8 20.9 % (42.5) % SG&A$ 143.8 17.3 %$ 138.1 12.2 % 4.1 % Income (loss) from operations$ (7.1) (0.9) %$ 99.7 8.8 % (107.1) % Net sales for the three months endedMarch 31, 2020 decreased$303.0 million when compared to the same period in 2019. The decrease in net sales was primarily due to lower demand for aerial work platforms and telehandlers in our AWP segment and cranes, material handlers and materials processing equipment in our MP segment.
Gross profit for the three months ended
SG&A costs for the three months ended
Income from operations for the three months endedMarch 31, 2020 decreased$106.8 million when compared to the same period in 2019. The decrease was primarily due to lower sales volume across both segments and overhead absorption in our AWP segment. Aerial Work Platforms Three Months Ended March 31, 2020 2019 % of % of % Change In Sales Sales Reported Amounts ($ amounts in millions) Net sales$ 511.7 -$ 727.9 - (29.7) % Income from operations$ (5.9) (1.2) %$ 59.6 8.2 % (109.9) %
Net sales for the AWP segment for the three months ended
Income from operations for the three months endedMarch 31, 2020 decreased$65.5 million when compared to the same period in 2019. The decrease was primarily due to lower sales volume and lower overhead absorption from a decrease in volume. 37 --------------------------------------------------------------------------------
Materials Processing
Three Months Ended March 31,
2020 2019
% of % of % Change In
Sales Sales Reported Amounts
($ amounts in millions)
Net sales $ 315.6 - $ 410.5 - (23.1) %
Income from operations $ 25.0 7.9 % $ 59.5 14.5 % (58.0) %
Net sales for the MP segment for the three months ended
Income from operations for the three months endedMarch 31, 2020 decreased$34.5 million when compared to the same period in 2019 primarily due to lower sales volume.
Corporate and Other / Eliminations
Three Months Ended March 31,
2020 2019
% of % of % Change In
Sales Sales Reported Amounts
($ amounts in millions)
Net sales $ 6.3 - $ (1.8) - *
Loss from operations $ (26.2) * $ (19.4) * (35.1) %
* - Not a meaningful percentage
Net sales include on-book financing activities of TFS and elimination of intercompany sales activity among segments. The net sales increase is primarily attributable to lower intercompany sales eliminations.
Loss from operations for the three months endedMarch 31, 2020 increased$6.8 million when compared to the same period in 2019. The increase in operating loss is primarily due to a specific finance receivable reserve for one customer and change in allocation of corporate costs.
Interest Expense, Net of Interest Income
During the three months ended
Other Income (Expense) - Net
Other income (expense) - net for the three months endedMarch 31, 2020 was an expense of$1.6 million , or a$1.6 million decrease in expense, when compared to the same period in the prior year. The decrease was due to lower foreign exchange translation losses in the current year period and a positive post-closing adjustment in 2020 related to the settlement of ourU.S. defined benefit pension plan in 2018, partially offset by mark-to-market losses recorded on an equity investment in the current year period compared to gains recorded in the prior year period. 38 --------------------------------------------------------------------------------
Income Taxes
During the three months endedMarch 31, 2020 , we recognized income tax benefit of$0.8 million on loss of$25.5 million , an effective tax rate of 3.1%, as compared to income tax expense of$18.0 million on income of$75.2 million , an effective tax rate of 23.9%, for the three months endedMarch 31, 2019 . The lower effective tax rate for the three months endedMarch 31, 2020 is primarily due to increasedU.S. tax on foreign income, recording of state valuation allowances and deferred tax resulting fromIndia tax legislation, partially offset by tax benefits from geographic mix and the Corona Aid, Relief, and Economic Security Act, when compared with the three months endedMarch 31, 2019 .
Income (Loss) from Discontinued Operations - net of taxes
Loss from discontinued operations - net of tax for the three months endedMarch 31, 2020 was$0.2 million compared to loss from discontinued operations - net of tax of$124.4 million for the same period in the prior year, a reduction of$124.2 million . The loss in the prior year was primarily from recognition of a pre-tax charge of approximately$86 million ($86 million after-tax) to write-down the mobile cranes disposal group to fair value, less costs to sell, and the negative performance of our mobile cranes business.
Gain (Loss) on Disposition of Discontinued Operations - net of taxes
During the three months ended
LIQUIDITY AND CAPITAL RESOURCES
We are focused on generating cash and maintaining liquidity (cash and availability under our revolving line of credit) for the efficient operation of our business. AtMarch 31, 2020 , we had cash and cash equivalents of$515 million and undrawn availability under our revolving line of credit of$430 million , giving us total liquidity of approximately$945 million . During the three months endedMarch 31, 2020 , our liquidity decreased by approximately$195 million fromDecember 31, 2019 primarily due to cash used in our operations, share repurchases and capital expenditures. Our main sources of funding are cash generated from operations, including cash generated from the sale of receivables, loans from our bank credit facilities and funds raised in capital markets. We have no significant debt maturities until 2023 and we have increased our focus on internal cash flow generation. Our actions to maintain liquidity in view of current conditions in the economy include reducing costs and working capital, suspending our share repurchase program and suspending making further dividend payments in 2020. We also amended our revolving credit facility inApril 2020 . We believe the amendment provides us with the flexibility needed to manage the Company during these challenging times. We believe these measures, in conjunction with our actions to delay certain capital spending projects, will provide us with adequate liquidity to comply with our financial covenants under our bank credit facility, continue to support internal operating initiatives and meet our operating and debt service requirements for at least the next 12 months. See Part II, Item 1A. - "Risk Factors" for a detailed description of the risks resulting from our debt and our ability to generate sufficient cash flow to operate our business.
Our ability to generate cash from operations is subject to numerous factors, including the following:
•The duration and depth of the global economic weakness resulting from COVID-19.
•Many of our customers fund their purchases through third-party finance
companies that extend credit based on the credit-worthiness of customers and
expected residual value of our equipment. Changes either in customers' credit
profile or used equipment values may affect the ability of customers to purchase
equipment. There can be no assurance third-party finance companies will continue
to extend credit to our customers as they have in the past.
•As our sales change, the amount of working capital needed to support our
business may change.
•Our suppliers extend payment terms to us primarily based on our overall credit
rating. Declines in our credit rating may influence suppliers' willingness to
extend terms and in turn accelerate cash requirements of our business.
•Sales of our products are subject to general economic conditions, weather,
competition, translation effect of foreign currency exchange rate changes, and
other factors that in many cases are outside our direct control. For example,
during periods of economic uncertainty, our customers have delayed purchasing
decisions, which reduces cash generated from operations.
•Availability and utilization of other sources of liquidity such as trade
receivables sales programs.
39
--------------------------------------------------------------------------------Typically, we have invested our cash in a combination of highly rated, liquid money market funds and in short-term bank deposits with large, highly rated banks. Our investment objective is to preserve capital and liquidity while earning a market rate of interest.
We seek to use cash held by our foreign subsidiaries to support our operations and continued growth plans outside and insidethe United States through funding of capital expenditures, operating expenses or other similar cash needs of these operations. Most of this cash could be used in theU.S. , if necessary, without additional tax cost. Incremental cash repatriated to theU.S. would not be expected to result in material foreign and state tax cost. We will continue to seek opportunities to tax-efficiently mobilize and redeploy funds.
We had free cash flow use of
The following table reconciles Net cash provided by (used in) operating activities to free cash flow (in millions):
Three Months Ended
3/31/2020
Net cash provided by (used in) operating activities $ (88.7)
Increase (decrease) in TFS assets (4.0)Capital expenditures, net of proceeds from sale of capital assets (1)
(20.2)
Free cash flow $ (112.9)
(1) Includes
Pursuant to terms of our trade accounts receivable factoring arrangements, during the three months endedMarch 31, 2020 , we sold, without recourse, approximately$141 million of trade accounts receivable to enhance liquidity. During the three months endedMarch 31, 2020 , we also sold approximately$33 million of sales-type leases and commercial loans.
Working capital as a percent of trailing three month annualized net sales was
22.6% at
The following tables show the calculation of our working capital in continuing operations and trailing three months annualized sales as ofMarch 31, 2020 (in millions): Three Months Ended 3/31/2020 Net Sales $ 833.6 x 4
Trailing Three Month Annualized Net Sales $ 3,334.4
As of 3/31/20
Inventories $ 823.0
Trade Receivables 402.0
Trade Accounts Payable (454.9)
Customer Advances (15.7)
Working Capital $ 754.4
40-------------------------------------------------------------------------------- OnJanuary 31, 2017 , we entered into a credit agreement (as amended, the "2017 Credit Agreement"). The 2017 Credit Agreement contains a$400 million senior secured term loan (the "Original Term Loan"). The Original Term Loan portion of the 2017 Credit Agreement bears interest at a rate of London Interbank Offered Rate ("LIBOR") plus 2.00% with a 0.75% LIBOR floor. OnMarch 7, 2019 , we entered into an Incremental Assumption Agreement and Amendment No. 3 ("Amendment No. 3") to the 2017 Credit Agreement. Amendment No. 3 provided us with an additional term loan (the "2019 Term Loan") under the 2017 Credit Agreement in the amount of$200 million . The 2019 Term Loan portion of the 2017 Credit Agreement bears interest at a rate of LIBOR plus 2.75% with a 0.75% LIBOR floor (the Original Term Loan together with 2019 Term Loan comprise the "Term Loans" portion of the 2017 Credit Agreement). Net proceeds from the 2019 Term Loan were used to reduce borrowings under the revolving line of credit. OnApril 23, 2020 , we entered into a Loan Modification Agreement and Amendment No. 4 ("Amendment No. 4") to the 2017 Credit Agreement. The 2017 Credit Agreement contains a$600 million revolving line of credit (the "Revolver"). The 2017 Credit Agreement allows unlimited incremental commitments, which may be extended at the option of existing or new lenders and can be in the form of revolving credit commitments, term loan commitments, or a combination of both, with incremental amounts in excess of$150 million through 2021 ($300 million thereafter) requiring the Company to satisfy a senior secured leverage ratio contained in the 2017 Credit Agreement. Interest rates charged under the Revolver in the 2017 Credit Agreement are subject to adjustment based on our consolidated leverage ratio. Amendment No. 4 extended the term of the Revolver to expire onJanuary 31, 2023 . As a result of Amendment No. 4, during 2020, we are only subject to a minimum liquidity covenant and then during 2021 we are subject to a maximum secured leverage covenant that is only applicable if our borrowings under the Revolver are greater than 30% of the total revolving credit commitments. See Note K - "Long-Term Obligations," in our Condensed Consolidated Financial Statements for additional information concerning the 2017 Credit Agreement and Amendment No. 4. Borrowings under the 2017 Credit Agreement atMarch 31, 2020 were$584.0 million , net of discount, on our Term Loans. AtMarch 31, 2020 , the weighted average interest rate was 3.55% on the Term Loans portion of the 2017 Credit Agreement. We had$170.0 million outstanding on the Revolver. The weighted average interest rate on the Revolver atMarch 31, 2020 was 2.55%. We manage our interest rate risk by maintaining the ratio of fixed and floating rate debt, including use of interest rate derivatives when appropriate. Over the long term, we believe this mix will produce lower interest cost than a purely fixed rate mix while reducing interest rate risk. Our investment in TFS financial services assets was approximately$150 million , net atMarch 31, 2020 . We remain focused on expanding financing solutions in key markets like theU.S. ,Europe andChina . We also anticipate using TFS to drive incremental sales by increasing customer financing through TFS in certain instances. InJuly 2018 , our Board of Directors authorized the repurchase up to an additional$300 million of our outstanding shares of common stock. During the three months endedMarch 31, 2020 , we repurchased 2.5 million shares for$54.6 million under this authorization leaving approximately$141 million available for repurchase under this program. In the first quarter of 2020, our Board of Directors declared a dividend of$0.12 per share, which was paid to our shareholders. We previously announced that we have suspended further share repurchases and dividend payments for the remainder of 2020. Our ability to access capital markets to raise funds, through sale of equity or debt securities, is subject to various factors, some specific to us and others related to general economic and/or financial market conditions. These include results of operations, projected operating results for future periods and debt to equity leverage. Our ability to access capital markets is also subject to our timely filing of periodic reports with theSecurities and Exchange Commission ("SEC"). In addition, terms of our bank credit facilities, senior notes and senior subordinated notes contain restrictions on our ability to make further borrowings and to sell substantial portions of our assets.
Cash Flows
Cash used in operations for the three months endedMarch 31, 2020 totaled$88.7 million , compared to cash used in operations of$265.4 million for the three months endedMarch 31, 2019 . The decrease in cash used in operations was primarily driven by improved working capital efficiency, partially offset by decreased operating profitability. Cash used in investing activities for the three months endedMarch 31, 2020 was$20.2 million , compared to$10.6 million of cash used in investing activities for the three months endedMarch 31, 2019 . The increase in cash used in investing activities was primarily due to capital expenditures. 41 -------------------------------------------------------------------------------- Cash provided by financing activities was$98.3 million for the three months endedMarch 31, 2020 , compared to$236.4 million of cash provided by financing activities for the three months endedMarch 31, 2019 . The decrease in cash provided by financing activities was primarily due to lower net debt borrowings and higher share repurchases in the current quarter.
OFF-BALANCE SHEET ARRANGEMENTS
Guarantees
Our customers, from time to time, fund the acquisition of our equipment through third-party finance companies. In certain instances, we may provide a credit guarantee to the finance company by which we agree to make payments to the finance company should the customer default. Our maximum liability is generally limited to our customer's remaining payments due to the finance company at the time of default. In the event of a customer default, we are generally able to recover and dispose of the equipment at a minimal loss, if any, to us. We issue, from time to time, residual value guarantees under sales-type leases. A residual value guarantee involves a guarantee that a piece of equipment will have a minimum fair market value at a future date if certain conditions are met by the customer. We are generally able to mitigate some risk associated with these guarantees because maturity of guarantees is staggered, which limits the amount of used equipment entering the marketplace at any one time. There can be no assurance our historical experience in used equipment markets will be indicative of future results. Our ability to recover losses from our guarantees may be affected by economic conditions in used equipment markets at the time of loss.
See Note M - "Litigation and Contingencies" in the Notes to the Condensed Consolidated Financial Statements for further information regarding our guarantees.
CONTINGENCIES AND UNCERTAINTIES
Foreign Exchange and Interest Rate Risk
Our products are sold in over 100 countries around the world and, accordingly, our revenues are generated in foreign currencies, while costs associated with those revenues are only partly incurred in the same currencies. We enter into foreign exchange contracts to manage variability of future cash flows associated with recognized assets or liabilities or forecasted transactions due to changing currency exchange rates. Primary currencies to which we are exposed are the Euro, British Pound and Australian Dollar. We manage exposure to interest rates by incurring a mix of indebtedness bearing interest at both floating and fixed rates at inception and maintaining the ratio of floating and fixed rates on this mix of indebtedness using interest rate derivatives when necessary. See Note J - "Derivative Financial Instruments" in the Notes to the Condensed Consolidated Financial Statements for further information about our derivatives and Item 3 "Quantitative and Qualitative Disclosures About Market Risk" for a discussion of the impact changes in foreign currency exchange rates and interest rates may have on our financial performance.
Other
We are subject to a number of contingencies and uncertainties including, without limitation, product liability claims, workers' compensation liability, intellectual property litigation, self-insurance obligations, tax examinations, guarantees, class action lawsuits and other matters. See Note M - "Litigation and Contingencies" in the Notes to the Condensed Consolidated Financial Statements for more information concerning contingencies and uncertainties, including our proceedings involving a claim inBrazil regarding payment of ICMS tax, penalties and related interest. We are insured for product liability, general liability, workers' compensation, employer's liability, property damage, intellectual property and other insurable risks required by law or contract with retained liability to us or deductibles. Many of the exposures are unasserted or proceedings are at a preliminary stage, and it is not presently possible to estimate the amount or timing of any liability. However, we do not believe these contingencies and uncertainties will, individually or in aggregate, have a material adverse effect on our operations. For contingencies and uncertainties other than income taxes, when it is probable a loss will be incurred and possible to make reasonable estimates of our liability with respect to such matters, a provision is recorded for the amount of such estimate or for the minimum amount of a range of estimates when it is not possible to estimate the amount within the range is most likely to occur. 42 -------------------------------------------------------------------------------- We generate hazardous and non-hazardous wastes in the normal course of our manufacturing operations. As a result, we are subject to a wide range of environmental laws and regulations. All of our employees are required to obey all applicable health, safety and environmental laws and regulations and must observe the proper safety rules and environmental practices in work situations. These laws and regulations govern actions that may have adverse environmental effects, such as discharges to air and water, and require compliance with certain practices when handling and disposing of hazardous and non-hazardous wastes. These laws and regulations would also impose liability for the costs of, and damages resulting from, cleaning up sites, past spills, disposals and other releases of hazardous substances, should any such events occur. We are committed to complying with these standards and monitoring our workplaces to determine if equipment, machinery and facilities meet specified safety standards. Each of our manufacturing facilities is subject to an environmental audit at least once every five years to monitor compliance and no incidents have occurred which required us to pay material amounts to comply with such laws and regulations. We are dedicated to ensuring that safety and health hazards are adequately addressed through appropriate work practices, training and procedures. We are committed to reducing lost time injuries and working towards a world-class level of safety practices in our industry.
RECENT ACCOUNTING STANDARDS
Please refer to Note A - "Basis of Presentation" in the accompanying Condensed Consolidated Financial Statements for a summary of recently issued accounting standards.
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