UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
|X| OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
|_| OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission File Number 1-10702
TEREX CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware 34-1531521
(State of incorporation) (I.R.S. Employer
Identification No.)
500 Post Road East, Suite 320, Westport, Connecticut 06880
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (203) 222-7170
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.01 par value
(Title of Class)
New York Stock Exchange
(Name of Exchange on which Registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. YES X NO____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
The aggregate market value of the voting and non-voting common equity stock held
by non-affiliates of the Registrant was approximately $368.8 million based on
the last sale price on March 15, 2000.
The number of shares of the Registrant's Common Stock
outstanding was 27,577,158 as of March 15, 2000.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Terex Corporation Proxy Statement to be filed
with the Securities and Exchange Commission within 120 days after the
year covered by this Form 10-K with respect to the 2000 Annual
Meeting of Stockholders are incorporated
by reference into Part III hereof.
TEREX CORPORATION AND SUBSIDIARIES
Index to Annual Report on Form 10-K
For the Year Ended December 31, 1999
Page
PART I
Item 1 Business............................................................. 3
Item 2 Properties........................................................... 17
Item 3 Legal Proceedings.................................................... 18
Item 4 Submission of Matters to a Vote of Security Holders.................. 19
PART II
Item 5 Market for Registrant's Common Stock and Related Stockholder Matters. 20
Item 6 Selected Financial Data.............................................. 21
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 22
Item 7A Quantitative and Qualitative Disclosure About Market Risk............ 29
Item 8 Financial Statements and Supplementary Data.......................... 30
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures.......................................... 30
PART III
Item 10 Directors and Executive Officers of the Registrant................... *
Item 11 Executive Compensation............................................... *
Item 12 Security Ownership of Certain Beneficial Owners and Management....... *
Item 13 Certain Relationships and Related Transactions....................... *
PART IV
Item 14 Exhibits, Financial Statement Schedule and Reports on Form 8-K....... 31
* Incorporated by reference from Terex Corporation Proxy Statement to be filed
with the Securities and Exchange Commission with respect to the 2000 Annual
Meeting of Stockholders.
2
As used in this Annual Report on Form 10-K, unless otherwise indicated, Terex
Corporation, together with its consolidated subsidiaries, is hereinafter
referred to as "Terex," the "Registrant," or the "Company."
PART I
ITEM 1. BUSINESS
General
Terex is a diversified global manufacturer of a broad range of equipment for the
construction, infrastructure and mining industries. The Company strives to build
a growing franchise under the Terex brand name. The Company remains focused on
its mission of delivering products that are reliable, productive and
cost-effective, and of producing equipment that improves our customers' return
on invested capital. The Company organizes itself into two business segments,
Terex Lifting and Terex Earthmoving. The Company's products are manufactured at
35 plants in the United States, Europe and Australia, and are sold primarily
through a worldwide distribution network with over 1,000 locations to the global
construction, infrastructure and surface mining markets.
Over the past several years, the Company has implemented a series of
interrelated operational and strategic initiatives designed to create a
competitive advantage in the marketplace. These include (i) increasing the
variable portion of its manufacturing costs to over 80%; (ii) reducing operating
expenses as a percentage of revenues substantially below the industry's average
and eliminating non value-added functions throughout the organization; (iii)
providing our customers with a cost-effective product line; and (iv)
diversifying the Company's product line in order to maximize financial
performance.
During 1999, the Company continued to diversify its product offerings by
expanding its presence in the aggregates industry with the acquisitions of
Powerscreen International plc ("Powerscreen") and Cedarapids, Inc.
("Cedarapids"). These two acquisitions make the Company one of the world's
leaders in the markets for screening and crushing equipment for the quarrying,
infrastructure development, demolition and recycling industries. The Company
believes that this sector of the construction industry is growing due in large
part to the Transportation Equity Act for the 21st Century (TEA-21), the
six-year federal transportation bill passed by Congress in 1998. Terex's
integrated product line (including hydraulic mining shovels, articulated trucks,
crushers, screens, asphalt plants, asphalt pavers, and compaction machines) puts
the Company in a position to benefit from this legislation.
During 1999, the Company acquired Amida Industries, Inc. ("Amida") and Bartell
Industries Inc. ("Bartell"). These two companies, which manufacture and sell
floodlighting systems, concrete power trowels, concrete placement systems and
traffic control products designed for the rental distribution business, have
created the base for a new business designed to serve the growing needs of this
customer base. These businesses have been integrated with various other smaller
construction products manufactured and sold by the Company (including compaction
machines, rollers and access equipment) to form the Terex Light Construction
product line.
For financial information about the Company's industry and geographic segments,
see Note N --- "Business Segment Information" in the Notes to the Consolidated
Financial Statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Terex Lifting
Terex Lifting manufactures and sells telescopic mobile cranes (including rough
terrain, truck and all terrain mobile cranes), tower cranes, lattice boom
cranes, aerial work platforms (including scissor, articulated boom and straight
telescoping boom aerial work platforms), utility aerial devices (including
digger derricks and articulated aerial devices), telescopic boom material
handlers (including container stackers and rough terrain), truck mounted cranes
(boom trucks), truck mounted material handlers and related components and
replacement parts. Construction and industrial customers, as well as utility
companies, are the primary users of these products. Customers use these products
to lift equipment, material or workers to various heights. Throughout the world
market, mobile cranes are principally sold to rental companies and dealers with
rental fleets. Terex Lifting's mobile crane market share varies dramatically by
geographical area; however, the Company believes it is the leading manufacturer
of mobile cranes in France, Italy and Spain and is the second largest
manufacturer in the United States. The Company also believes that it is the
second largest manufacturer in the United States of utility aerial devices, the
third largest manufacturer of tower cranes worldwide and the largest
manufacturer of truck mounted material handlers worldwide.
Terex Lifting has 18 significant manufacturing operations: (i) PPM S.A. located
in Montceau-les-Mines, France, at which mobile cranes and container stackers
under the brand names TEREX and PPM are manufactured; (ii) Terex Italia srl,
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located in Crespellano, Italy, at which mobile cranes are manufactured under the
TEREX, BENDINI and PPM brand names; (iii) PPM Cranes, Inc., located in Conway,
South Carolina, at which rough terrain hydraulic telescoping mobile cranes and
truck cranes are manufactured under the P&H (a licensed trademark of
Harnischfeger Corporation) and TEREX brand names; (iv) Terex Lifting - Waverly
Operations, located in Waverly, Iowa, at which rough terrain hydraulic
telescoping mobile cranes and truck cranes are manufactured under the brand
names TEREX and LORAIN, and aerial lift equipment is manufactured under the
brand names TEREX AERIALS and TEREX; (v) Terex-Telelect, Inc. ("Telelect"),
located in Watertown, South Dakota, at which utility aerial devices and digger
derricks are manufactured under the TELELECT and HI-RANGER brand names; (vi)
Terex Aerials Limited, located in Cork, Ireland, at which aerial platforms are
manufactured under the TEREX brand name; (vii) Terex RO Corporation ("Terex
RO"), located in Olathe, Kansas, at which truck mounted cranes are manufactured
under the RO-STINGER brand name; (viii) Terex Handlers, located in Baraga,
Michigan, at which rough terrain telescopic boom material handlers are
manufactured under the SQUARE SHOOTER and TEREX brand names; (ix) Holland Lift,
located in Hoorn, the Netherlands, at which aerial platforms are manufactured
under the HOLLAND LIFT brand name; (x) The American Crane Corporation ("American
Crane") located in Wilmington, North Carolina, at which lattice boom cranes are
manufactured under the AMERICAN brand name; (xi) Italmacchine SpA
("Italmacchine"), located near Perugia, Italy, at which rough terrain telescopic
material handlers are manufactured under the ITALMACCHINE and TEREX brand names
and cement mixers and concrete pumps are manufactured under the ITALMACCHINE
brand name; (xii) Terex Peiner GmbH ("Peiner"), located in Trier, Germany, at
which tower cranes are manufactured under the PEINER trade name; (xiii) Gru
Comedil SpA ("Comedil"), located in Fontanafredda, Italy, at which tower cranes
are manufactured under the COMEDIL trade name; (xiv) Moffett Engineering Limited
("Moffett"), located in Dundalk, Ireland, at which truck mounted material
handlers are manufactured under the Moffett trade name; (xv) Matbro Limited
("Matbro"), located in Tetbury, England, at which material handlers are
manufactured under the MATBRO trade name; (xvi) Terex Princeton ("Princeton"),
located in Canal Winchester, Ohio, at which truck mounted material handlers are
manufactured under the PRINCETON trade name; (xvii) Kooi B.V. ("Kooi"), located
in Vrouwenparochie, The Netherlands, at which truck mounted material handlers
are manufactured under the KOOI trade name; and (xviii) Franna Cranes Pty. Ltd.
("Franna Cranes"), located in Brisbane, Australia, at which all terrain mobile
cranes are manufactured under the FRANNA trade name.
During 1999, the Company completed three acquisitions that continued the growth
of Terex in the lifting segment. In July 1999, the Company acquired Powerscreen,
which included the Moffett and Matbro material handling manufacturers. On
November 3, 1999, the Company completed the purchase of the Material Handling
Division of Teledyne, Inc., which included substantially all the assets
comprising the Princeton business and all of the capital stock of Teledyne GmbH,
which owns Kooi. Princeton and Kooi manufacture truck mounted material handlers.
On December 1, 1999, the Company also completed the purchase of all of the
capital stock of Franna Cranes, the leading manufacturer of all-terrain "pick
and carry" cranes in Australia.
The North American lifting market in 1999 was strong due to construction
spending in the industrial, commercial and housing sectors. The hydraulic mobile
crane business, which experienced a strong first half of 1999, slowed down
during the second half of 1999 as the customer base was impacted by
consolidations. Nevertheless, the Company continued its penetration of the U.S.
commercial market and increased its market share for hydraulic mobile cranes in
1999. In the past two years, the Company believes that Terex Lifting gained
approximately nine percentage points of market share in U.S. hydraulic mobile
cranes. Terex Lifting also expanded its tower crane presence in the North
American market through its American Crane subsidiary. The Company's American
Crane subsidiary also entered into a licensing agreement with IHI of Japan to
provide a more diversified and cost-effective lattice boom crane product line to
the Company's customers.
Terex Handlers generated an increase of approximately 51% in revenues from 1998
to 1999, and its business has increased four-fold since acquired in 1997. In
1999 the Company was also named a preferred supplier of material handlers by the
largest U.S. rental company. Revenues at the Company's Telelect subsidiary,
which manufactures utility aerial devices, increased approximately 38% in 1999
as it continued to increase its penetration in North and Central America.
The European Lifting segment performance was driven by acquisitions and the
improvements in European economic activity, especially in Southern Europe. The
Company's European aerial work platform business grew in excess of 25% in 1999,
driven by increased penetration and usage within the European Community.
Italmacchine, Peiner and Comedil, which were acquired at the end of 1998, were
integrated during 1999 within the Company's manufacturing model and distribution
network, with a resulting increase in business activity.
Terex Earthmoving
Terex Earthmoving currently manufactures and sells large hydraulic excavators,
articulated and rigid off-highway trucks, high capacity surface mining trucks,
scrapers, crushing and screening equipment, asphalt pavers, asphalt mixing
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plants, and related components and replacement parts. These products are used
primarily by construction, mining, quarrying and government customers. Terex
Earthmoving believes that it has the leading market share for large hydraulic
excavator models having machine weights in excess of 200 tons, that it is a
significant competitor in the market for large capacity off highway haulers and
scrapers and that it had the leading market share in high capacity surface
mining trucks in 1999. Terex Earthmoving has eleven significant manufacturing
operations: (i) Terex Equipment Limited ("TEL"), located in Motherwell,
Scotland; (ii) Unit Rig ("Unit Rig") and Payhauler Corporation ("Payhauler"),
located in Tulsa, Oklahoma; (iii) O&K Mining GmbH ("O&K Mining"), located in
Dortmund, Germany; (iv) Powerscreen, located in Dungannon, Northern Ireland and
Kilbeggan, Ireland; (v) Finlay Hydrascreens (Omagh) Limited ("Finlay"), located
in Omagh, Ireland; (vi) B.L. Pegson Limited ("B.L. Pegson"), located in
Coalville, England; (vii) Simplicity Engineering ("Simplicity"), located in
Durand, Michigan; (viii) Re-Tech, located in Lebanon, Pennsylvania; (ix) Benford
Limited ("Benford"), located in Warwick, England; (x) Cedarapids, located in
Cedar Rapids, Iowa; and (xi) Standard Havens, Inc. ("Standard Havens"), located
in Glasgow, Missouri.
TEL manufactures, sells and markets off-highway rigid haulers and articulated
haulers, having capacities ranging from 25 to 100 tons, and scrapers that load,
move and unload large quantities of soil for site preparations, including
roadbeds. TEL's products are sold under the Company's TEREX brand name. Unit Rig
and Payhauler manufacture, sell and market electric rear hauler trucks with
payload capacities ranging from 50 to 340 tons and bottom dump haulers with
capacities ranging from 180 to 270 tons, principally sold to copper, gold, iron
ore and coal mining industry customers, as well as all wheel drive rigid
off-highway trucks. O&K Mining manufactures and sells large hydraulic mining
shovels. Cedarapids, Finlay, Powerscreen, B.L. Pegson, Simplicity and Re-Tech
manufacture, sell and market crushing and screening equipment. Cedarapids also
manufactures, sells and markets a line of asphalt pavers and associated
equipment. Standard Havens manufactures, sells and markets asphalt plants.
Benford manufactures, sells and markets dumpers and compactors. These products
are sold under the Company's TEREX, UNIT RIG, LECTRA HAUL, O&K, PAYHAULER,
POWERSCREEN, FINLAY, SIMPLICITY, CEDARAPIDS, BENFORD, BROWN LENOX, PEGSON,
ROYER, RE-TECH, ENVIROQUIP and CEDARAPIDS/STANDARD HAVENS brand names. TEL's
North, Central and South American sales and distribution are managed by Terex
Americas, a division of the Company, located in Tulsa, Oklahoma. In addition,
Terex Earthmoving has an interest in North Hauler Limited Liability Company, a
corporation incorporated under the laws of China, a joint venture with Second
Inner Mongolia Machinery Company for the production of haulers in China. North
Hauler Limited Liability Company manufactures and sells heavy trucks,
principally used in mining, at a facility in Baotou, Inner Mongolia, and the
People's Republic of China.
During 1999, the Company entered the aggregates industry with the acquisitions
of Powerscreen and Cedarapids. The Company acquired Powerscreen and its
subsidiaries in July 1999 for an aggregate price of approximately $294 million
and Cedarapids in August 1999 for an aggregate price of approximately $170
million. These two acquisitions, which represent approximately $500 million in
combined revenues, provide the Company with a leading market position in the
crushing and screening equipment markets. Both acquisitions further the
Company's strategy of diversifying both its products and the geographic range of
its customers.
In the fourth quarter of 1998, Terex Earthmoving introduced redesigned
articulated and rigid off-highway trucks (25 to 100 tons). These products were
well received in the Company's established markets such as North America and
Europe, as well as in new markets in North Africa and Asia, with over 1,000
trucks sold in 1999. This new product line demonstrates the Company's ability to
provide a cost-effective product line with superior performance and durability
at a very competitive price. Coupled with the enhanced quality of the machines,
Terex trucks gained market share during 1999 on a worldwide basis.
Unit Rig manufactured 223 mining trucks during 1999 compared to 29 mining trucks
in 1998. The $157 million Coal India order for 160 Unit Rig 120-ton mining
trucks that was received in late 1998 was delivered during 1999 ahead of
schedule to the satisfaction of the customer. This was the largest mining truck
order ever awarded to the Company and provides the Company with the unique
opportunity to continue serving the Indian mining industry with their
aftermarket parts and service needs for the next decade. In addition, during
1999 Terex Earthmoving obtained in excess of $200 million in new orders for the
next five years from world-class surface mine operators such as Rio Tinto and
Cleveland Cliffs, making Unit Rig number one in market share for surface mining
trucks in 1999. Despite continued weakness in the mining industry because of low
but rebounding commodity prices, O & K Mining, which was acquired in 1998, has
generated interest from customers searching for cost-effective solutions to
their mining needs for hydraulic shovels. The acquisition of O & K Mining has
allowed Terex Earthmoving to sell mining truck and hydraulic mining shovel
packages to customers worldwide.
The major product development effort in 1999 for Terex Earthmoving included the
MT5500 truck with a minimum of 2700 hp and a 340-ton payload capacity. This
truck, with a new A/C drive system, was introduced in late 1999, and the Company
is already receiving orders from domestic and international customers. In
September 1999, O&K Mining introduced the newly developed RH 120E hydraulic
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shovel. This 250-ton machine has considerably lower operating costs and higher
productivity than its predecessor, the RH 120C. The introduction during 1999 by
O&K Mining of an electric drive version of the RH 400, the world's largest
hydraulic mining shovel, should allow the Company to enter a segment of the
market that was previously not available to it.
Other
Terex Light Construction currently manufactures and sells mobile and portable
floodlighting systems, concrete power trowels, concrete placement systems,
concrete finishing systems and traffic control products, and related components
and replacement parts. These products are typically used for rental and
construction applications. Terex Light Construction consists of Amida, located
in Rock Hill, South Carolina, and Bartell, located in Brampton, Ontario, Canada.
Terex Light Construction also distributes products in North America that are
manufactured in the Terex Benford facility in Warwick, England, including
dumpers and compaction machines. These products are sold under the Company's
AMIDA, BARTELL, BENFORD, MORRISON and TEREX brand names. These products are
typically used for rental and construction applications.
Terex Light Construction has two significant manufacturing operations: (i)
Amida, located in Rock Hill, South Carolina, which manufactures and sells
portable floodlighting systems, concrete power trowels, concrete placement
systems, concrete finishing systems and traffic control products under the
AMIDA, BARTELL, MORRISON, BENFORD and TEREX brand names; and (ii) Bartell,
located in Brampton, Ontario, Canada, which manufactures and sells concrete
power trowels and concrete finishing systems under the BARTELL brand name.
The light equipment concept originated in April 1999 with the acquisition of
Amida. Terex Light Construction is structured to capitalize on the growing
rental segment of the construction equipment industry. The Company's strategy is
to expand its product offerings to the national rental companies, while
maintaining its business with independent rental stores. The Company's
consolidation efforts are creating value for customers through the synergies of
the Company's sales force and elimination of costly distribution steps, such as
manufacturer's representatives, thus lowering the cost of the Company's products
to its customers.
The Terex Light Construction product line was broadened by the addition of the
Benford line of compaction equipment as part of the July 1999 acquisition of
Powerscreen, the acquisition of Bartell in September 1999 and the consolidation
of the Company's U.S. scissor lift business in December 1999. During the time in
1999 when the Company owned these businesses, overall sales in this segment grew
approximately 15% to $30 million, with floodlighting sales up over 30% and
dumper sales up approximately 45%. This growth was driven primarily by the
Company's continued penetration of the national rental companies such as RSC,
United Rentals, Hertz, Prime, and NationsRent. The Company has also developed
new distribution channels in the European, Central American, and South American
markets.
Terex Light Construction expects to capitalize on the continuing growth of the
rental industry and the Company's increasing involvement as a preferred supplier
to the Caterpillar rental store program in both North and South America. New
products that will be introduced in 2000 include the Amida TX3000 small
footprint light tower, the Bartell TS100 diesel ride-on power trowel, and three
new models of Benford vibratory rammers.
Products
Telescopic Mobile Cranes
Telescopic mobile cranes are used primarily for industrial applications, in
commercial and public works construction and in maintenance applications, to
lift equipment or material to heights in excess of 50 feet. Terex Lifting
manufactures the following types of telescopic mobile cranes:
[Graphic] Rough Terrain Cranes -- are designed to lift materials and
equipment on rough or uneven terrain. Rough terrain cranes are
most often located on a single construction or work site such as
a building site, a highway or a utility project for long periods
of time. Rough terrain cranes cannot be driven on highways and
accordingly must be transported by truck to the work site. Rough
terrain cranes manufactured by Terex Lifting have maximum lifting
capacities of up to 100 tons and maximum tip heights of up to 225
feet. Terex Lifting manufactures its rough terrain cranes at its
facilities located at Waverly, Iowa, Conway, South Carolina,
Montceau-les-Mines, France, and Crespellano, Italy under the
brand names TEREX, LORAIN, P&H, PPM and BENDINI.
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[Graphic] Truck Cranes -- have two cabs and can travel rapidly from job
site to job site at highway speeds. In contrast to rough terrain
cranes, which are often located for extended periods at a single
work site, truck cranes are often used for multiple local jobs,
primarily in urban or suburban areas. Truck cranes manufactured
by Terex Lifting have maximum lifting capacities of up to 75 tons
and maximum tip heights of up to 193 feet. Terex Lifting
manufactures truck cranes at its Waverly, Iowa and Conway, South
Carolina facilities under the brand names TEREX, P&H and LORAIN.
[Graphic] All Terrain Cranes -- were developed in Europe as a cross between
rough terrain and truck cranes in that they are designed to
travel across both rough terrain and highways. All terrain cranes
have two cabs and are versatile and highly maneuverable. All
terrain cranes manufactured by Terex Lifting have lifting
capacities of up to 130 tons and maximum tip heights of up to 246
feet. Terex Lifting manufactures its all terrain cranes at its
Montceau-les-Mines, France and Brisbane, Australia facilities
under the brand names TEREX, PPM and FRANNA.
Truck Mounted Cranes (Boom Trucks)
Terex Lifting manufactures telescopic boom cranes for mounting on commercial
truck chassis. Truck mounted cranes are used primarily in the construction
industry to lift equipment or materials to various heights. Boom trucks are
generally lighter and have a lower lifting capacity than truck cranes, and are
used for many of the same applications when lower lifting capabilities are
required. An advantage of a boom truck is that the equipment or material to be
lifted by the crane can be transported by the truck, which can travel at highway
speeds. Applications include the installation of air conditioners and other roof
equipment. The Terex Lifting segment manufactures the following type of crane
for installation on truck chassis:
[Graphic] Telescopic Boom Truck Mounted Cranes -- enable an operator to
reach heights of up to 167 feet and have a maximum lifting
capacity of up to 37.5 tons. Terex Lifting manufactures its
telescopic boom truck mounted cranes at its Olathe, Kansas
facility under the brand name RO-STINGER.
Tower Cranes
Tower cranes lift construction material to heights and place the material at the
point where it is being used. They include a stationary vertical tower near the
top of which is a horizontal jib with a counterweight. On the jib is a trolley
through which runs a load carrying cable and which moves the load along the jib
length. On larger cranes, the operator is located above the work site where the
tower and jib meet, providing superior visibility. The jib also rotates 360
degrees, creating a large working area equal to twice the jib length. Luffing
jib tower cranes have an angled jib with no trolley, and operate like a
traditional lattice boom crane mounted on a tower. Luffing jib tower cranes are
often used in urban areas where space is constrained. Tower cranes are currently
produced by Terex under the PEINER and COMEDIL brand names. Terex produces the
following types of tower cranes:
[Graphic] Self-Erecting Tower Cranes -- are trailer mounted and unfold from
four sections (two for the tower and two for the jib); certain
larger models have a telescopic tower and folding jib. These
cranes can be assembled on site in a few hours. Applications
include residential and small commercial construction. Crane
heights range from 50-75 feet and jib lengths from 60-100 feet.
[Graphic] Hammerhead Tower Cranes -- have a tower and a horizontal jib
assembled from sections. The tower extends above the jib to which
suspension cables supporting the jib are attached. These cranes
are assembled on-site in one to three days depending on height,
and can increase in height with the project; they have a maximum
free-standing height of 200 feet and a maximum jib length of 240
feet.
[Graphic] Flat Top Tower Cranes -- have a tower and a horizontal jib
assembled from sections. There is no tower extension above the
jib, which reduces cost and facilitates assembly; the jib is
self-supporting and consists of reinforced jib sections. These
cranes are assembled on site in one to two days, and can increase
in height with the project; they have a maximum freestanding
height of 305 feet and a maximum jib length of 280 feet.
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[Graphic] Luffing Jib Tower Cranes -- have a tower and an angled jib
assembled from sections. The tower extends above the jib to which
suspension cables supporting the jib are attached. Unlike other
tower cranes, there is no trolley to control lateral movement of
the load, which is accomplished by changing the jib angle. These
cranes are assembled on site in two to three days, and can
increase in height with the project; they have a maximum
freestanding height of 185 feet and a maximum jib length of 200
feet.
Lattice Boom Cranes
Terex Lifting produces crawler and truck mounted lattice boom cranes.
[Graphic] The crawler-mounted cranes are designed to lift material on rough
terrain and can maneuver while bearing a load. Truck mounted
lattice boom cranes are used on-roads, typically in urban areas.
Both types consist of a boom made of tubular steel sections,
which are transported to and erected, together with the base
unit, at a construction site. Terex Lifting manufactures lattice
boom crawler cranes at its Wilmington, North Carolina facilities
under the TEREX and AMERICAN brand names. These lattice boom
crawler cranes have lifting capacities from 125 to 450 tons, and
lattice boom truck cranes have lifting capacities up to 300 tons.
Aerial Work Platforms
Aerial work platforms are self-propelled devices which position workers and
materials easily and quickly to elevated work areas. These products have
developed over the past 20 years as alternatives to scaffolding and ladders. The
work platform is mounted on either a telescoping and/or articulating boom or on
a vertical lifting scissor mechanism. Terex Lifting manufactures the following
types of aerial work platforms:
[Graphic] Scissor Lifts -- are used in open areas in indoor or outdoor
applications in a variety of construction, industrial and
commercial settings. Scissor lifts manufactured by Terex Lifting
have maximum working heights of up to 110 feet and maximum load
capacities of up to 2,000 pounds. Terex Lifting manufactures
scissor aerial work platforms at its Waverly, Iowa, and Hoorn,
The Netherlands facilities under the brand names TEREX AERIALS
and HOLLAND LIFT.
[Graphic] Straight Telescopic Boom Lifts -- are used primarily outdoors in
residential, commercial and industrial new construction and
maintenance projects. Straight telescopic boom lifts manufactured
by Terex Lifting have maximum working heights of up to 126 feet
and maximum load capacities of up to 650 pounds. Terex Lifting
manufactures its straight telescopic aerial work platforms at its
Waverly, Iowa facility under the brand name TEREX AERIALS.
[Graphic] Articulating Telescopic Boom Lifts -- are generally used in
industrial environments where the articulation allows the user to
access elevated areas over machines or structural obstacles which
prevent access with a scissor lift or straight boom. Articulating
lifts available from Terex Lifting have maximum working heights
of up to 86 feet and maximum load capacities of up to 500 pounds.
Terex Lifting manufactures its articulating telescopic boom lifts
at its Cork, Ireland facility under the brand name TEREX AERIALS.
Utility Aerial Devices
Utility aerial devices are used to set utility poles and move workers and
materials to work areas at the top of utility poles and towers. Utility aerial
devices are mounted on commercial truck chassis, which include separately
installed steel cabinets for tool and material storage. Most utility aerial
devices are insulated to permit live wire work.
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[Graphic] Articulated Aerial Devices -- are used to elevate workers to work
areas at the top of utility poles or in trees and include one or
two man baskets. Articulated aerial devices available from Terex
Lifting include telescopic, non-overcenter and overcenter models
and range in working heights from 32 to 103 feet. Articulated
aerial devices are manufactured by Terex Lifting at its
Watertown, South Dakota facility under the brand names TELELECT
and HI-RANGER.
[Graphic] Digger Derricks -- are used to set telephone poles. The digger
derricks include a telescopic boom with an auger mounted at the
tip, which digs a hole, and a device to grasp, manipulate and set
the pole. Digger derricks available from Terex Lifting have
sheave heights exceeding 95 feet and lifting capacities up to
48,000 pounds. Digger derricks are manufactured by Terex Lifting
at its Watertown, South Dakota facility under the brand name
TELELECT.
Telescopic Material Handlers
Telescopic material handlers are used to lift containers or other material from
one location to another at the same job site.
[Graphic] Telescopic Container Stackers -- are used to pick up and stack
containers at dock and terminal facilities. At the end of a
telescopic container stacker's boom is a spreader which enables
it to attach to containers of varying lengths and weights and to
rotate the container up to 360 degrees. Telescopic container
stackers are particularly effective in storage areas where
containers are continually added and removed, and where the
efficient manipulation of, and access to, specific containers is
required. Telescopic container stackers manufactured by Terex
Lifting have lifting capacities up to 49.5 tons, can stack up to
six full or nine empty containers and are able to maneuver
through very narrow areas. Terex Lifting manufactures its
telescopic container stackers under the brand names PPM, TEREX
and P&H SUPERSTACKERS at its Montceau-les-Mines, France facility.
[Graphic] Rough Terrain Telescopic Boom Material Handlers -- serve a
similar function as smaller size rough terrain telescopic mobile
cranes and are used to move and place materials on new
residential and commercial job sites. Terex Lifting manufactures
rough terrain telescopic boom material handlers with load
capacities of up to 10,000 pounds and with a maximum extended
reach of up to 31 feet and lift capabilities of up to 48 feet.
Terex Lifting manufactures rough terrain telescopic boom material
handlers at its facilities in Baraga, Michigan and Perugia, Italy
under the brand names SQUARE SHOOTER, TEREX and ITALMACCHINE.
Truck Mounted Material Handlers
Truck mounted material handlers are mounted on delivery vehicles and are used to
unload materials at the delivery site.
[Graphic] Truck Mounted Material Handlers --Three Terex Lifting divisions -
Princeton, Kooi and Moffett offer a complete range of truck
mounted material handlers worldwide to meet specific customer
capacity, lifting height and ground terrain requirements. The
largest units have capacities up to 6,500 pounds and lift heights
up to 13 feet. All the handlers are designed to ride with the
delivery vehicle and at the destination can be quickly utilized
by the driver to unload and place material at locations
convenient for the customer. Some of the many materials handled
include packaged beverages, agricultural feed, grass turf,
building materials and military armaments. The delivery terrain
can vary from smooth streets to construction job sites. The
primary benefits of the truck mounted material handlers are that
they allow the driver to quickly unload a vehicle at the
customer's location and place the material where the customer can
easily use it. This increases the efficiency of the driver and
delivery vehicle and provides increased value and service to the
customer. Terex Lifting manufactures truck mounted material
handlers in Canal Winchester, Ohio, Vrouwenparochie, the
Netherlands, and Dundalk, Ireland under the respective brand
names PRINCETON, KOOI and MOFFETT.
9
Rigid and Articulated Off-Highway Trucks
Terex Earthmoving manufactures two distinct types of off-highway trucks with
hauling capacities from 25 to 100 tons: articulated and rigid frame.
[Graphic] Articulated Off-Highway Trucks -- are three axle, six-wheel drive
machines with a capacity range of 25 to 40 tons. Their
differentiating feature is an oscillating connection between the
cab and body, which allows the cab and body to move
independently. This enables all six tires to maintain ground
contact for improved traction on rough terrain. This also allows
the truck to move effectively through extremely rough or muddy
off-road conditions. Articulated off-highway trucks are typically
used together with an excavator or wheel loader to move dirt in
connection with road, tunnel or other infrastructure construction
and commercial, industrial or major residential construction
projects. Terex's articulated trucks are manufactured in
Motherwell, Scotland, under the brand names TEREX and O&K.
[Graphic] Rigid Off-Highway Trucks -- are two axle machines which generally
have larger capacities than articulated trucks but can operate
only on improved or graded surfaces. The capacities of rigid
off-highway trucks range from 35 to 100 tons, and off-highway
trucks have applications in large construction or infrastructure
projects, aggregates and smaller surface mines. Terex
Earthmoving's rigid trucks are manufactured in Motherwell,
Scotland, under the TEREX and O&K brand names and in Tulsa,
Oklahoma, under the PAYHAULER brand name.
[Graphic] High Capacity Surface Mining Trucks -- are off road dump trucks
with capacities in excess of 120 tons used primarily for surface
mining. Terex Earthmoving's trucks are powered by a diesel engine
driving an electric generator that provides power to individual
electric motors in each of the rear wheels. Unit Rig's current
LECTRA HAUL product line consists of a series of rear dump trucks
with payload capabilities ranging from 120 to 340 tons, and
bottom dump trucks with capacities ranging from 180 to 270 tons.
Terex Earthmoving's high capacity surface mining trucks are
manufactured at Unit Rig, located in Tulsa, Oklahoma, under the
UNIT RIG and LECTRA HAUL brand names.
Large Hydraulic Excavators
Terex Earthmoving sells hydraulic excavators, which are shovels primarily used
to load coal, copper ore, iron ore, other mineral-bearing materials, or rocks
into trucks. These products are primarily utilized for quarrying construction
materials or digging in opencast mines. Additional applications include large
construction projects with difficult working conditions where large amounts of
solid material and rock are to be moved.
[Graphic] Terex Earthmoving offers a complete range of large hydraulic
excavators, with operating weights from 58 to 800 tons. O&K
Mining produces the RH 400, available in both electric and diesel
drive, the world's largest hydraulic excavator with an 800 ton
machine weight and 80 ton bucket capacity. The inclusion of the
RH 400 in Terex Earthmoving's product line enables it to compete
with the most popular electric rope shovel size class and
represents a significant growth opportunity for Terex
Earthmoving. Most hydraulic excavators sold by Terex Earthmoving
are manufactured under the O&K brand name by O&K Mining in
Dortmund, Germany.
Crushing and Screening Equipment
Terex Earthmoving's crushing and screening equipment is used in the aggregate
processing and recycling industries. Crushing and screening products include
crushers, screens, feeders and conveyors, which are used when processing raw
aggregate materials. Typical crushing and screening operations utilize a
combination of components in reducing virgin aggregate materials to required
product sizes for final usage in road building and related construction
applications. Crushing and screening plants can be either stationary or
portable. Portable crushing and screening plants are configured with a variety
of components to provide easy site-to-site mobility, application versatility,
flexible on-demand finished product and reduced set-up time.
10
Crushing Equipment
Terex Earthmoving manufactures crushing equipment under the PEGSON and
CEDARAPIDS brand names in Coalville, England and Cedar Rapids, Iowa,
respectively. Terex Earthmoving produces the following types of crushing
equipment:
[Graphic] Jaw Crushers -- are primary crushers with reduction ratios of 6
to 1 for crushing larger rock. Applications include hard rock,
sand and gravel and recycled materials. Models offered yield a
range of production capacities: up to 265 tons per hour for the
smallest unit, and up to 1,700 tons per hour for the largest.
[Graphic] Horizontal Shaft Impactors -- are secondary crushers which
utilize rotor impact bars and breaker plates to achieve high
production tonnages and improved aggregate particle shape. The
rugged durability and easy maintenance of horizontal shaft
impactors ensure less downtime and reduced wear costs for the
owner. They are typically applied to reduce soft to medium hard
materials.
[Graphic] Vertical Shaft Impactors -- are tertiary crushers which reduce
material utilizing various rotor configurations and are highly
adaptable to any application. Vertical shaft impactors can be
customized to material conditions and desired product size/shape.
A full range of models provides customers with increased
tonnages, better circuit balance and screen efficiency.
[Graphic] Cone Crushers -- are used in secondary and tertiary applications
to reduce a number of materials, including quarry rock and
riverbed gravel. High production, low maintenance and enhanced
final material cubical shape are the principal features of these
compression-type roller bearing crushers.
Screening Equipment
Terex Earthmoving manufactures screening equipment at its facilities in
Dungannon, Northern Ireland, Kilbeggan, Ireland, Omagh, Northern Ireland,
Durand, Michigan and Cedar Rapids, Iowa under the brand names POWERSCREEN,
FINLAY, SIMPLICITY and CEDARAPIDS.
[Graphic] Heavy Duty Inclined Screens and Feeders -- are found in high
tonnage applications. These units are typically custom designed
to meet the needs of each particular customer. Although primarily
found in stationary installations, Terex Earthmoving supplies a
variety of screens and feeders for use on heavy duty portable
crushing and screening spreads.
[Graphic] Inclined Screens -- are used in all phases of plant design from
handling shot rock to fine screening. Capable of handling much
larger capacity than a flat screen, inclined screens are most
commonly found in large stationary installations where maximum
output is required. This requires the ability to custom design
and manufacture units that meet both the engineering and
application requirements of the end user.
[Graphic] Feeders -- are generally situated at the primary end of the
processing facility, requiring rugged design in order to handle
the impact of the material being fed from front end loaders,
excavators, etc. The feeder moves material to the crushing and
screening equipment in a controlled fashion. Some feeders
manufactured by Terex Earthmoving remove smaller sized materials
through a short scalping area before reaching the crusher,
significantly reducing the wear in the crusher chamber.
[Graphic] Flat Screens -- combine the high efficiency of a horizontal
screen with the capacity, bearing life and low maintenance of an
inclined screen. They are adaptable for heavy scalping, standard
duty and fine screening applications and are engineered for
durability and user friendliness.
[Graphic] Dry Screening -- is used to process materials such as sand,
gravel, quarry rock, coal, construction and demolition waste,
soil, compost and wood chips.
11
[Graphic] Washing Screens -- are used to separate, wash, scrub, dewater and
stockpile sand and gravel. Products manufactured by Terex
Earthmoving include a completely mobile single chassis washing
plant incorporating separation, washing, dewatering and
stockpiling, mobile and stationary screening rinsers,
bucket-wheel dewaterers, scrubbing devices for aggregate, a
mobile cyclone for maximum retention of sand particles, silt
extraction systems, stockpiling conveyors and a sand screw system
as an alternative option to the bucket-wheel dewaterers.
[Graphic] Trommels -- are used in the recycling of construction and
demolition waste material as well as soil, compost and wood
chips. Trommels incorporate conveyors and variable speed
fingertip control of the belts and rotating drum to separate the
various materials. Terex Earthmoving manufactures a range of
trommel and soil shredding equipment. Terex Earthmoving also
designs, sources, installs, commissions and provides aftersales
support for turnkey recycling systems. These systems are used to
process construction and demolition waste, as well as decasing,
segmenting and processing empty bottles. The soil shredding units
are mainly used by landscape contractors and provide a high
specification end product. Trommels are produced by Terex
Earthmoving at its facilities in Lebanon, Pennsylvania under the
brand names RE-TECH, ROYER and ENVIROQUIP.
Asphalt Equipment
Terex Earthmoving manufactures asphalt mixing plants and asphalt pavers at its
facilities in Cedar Rapids, Iowa, and Glasgow, Missouri.
[Graphic] Asphalt Pavers -- Terex Earthmoving sells asphalt pavers with
maximum widths from 18 feet to 30 feet. Pavers are available in
rubber tire and steel or rubber track designs. The smaller units
have a maximum paving width of 18 feet and are used for
commercial work such as parking lots, development streets and
construction overlay projects. Mid-sized pavers are used for
mainline and commercial projects and have maximum paving widths
ranging from 24 to 28 feet. High production pavers are engineered
and built for heavy-duty, mainline paving and are capable of 30
foot maximum paving widths. All of the above feature direct
hydrostatic drive for maximum uptime, patented frame raise for
maneuverability and three-point suspension for smooth, uniform
mats. Terex Earthmoving's asphalt pavers are manufactured under
the CEDARAPIDS and GRAYHOUND brand names in Cedar Rapids, Iowa.
[Graphic] Asphalt Mixing Plants -- are used by road construction companies
to produce hot mix asphalt. The mixing plants are available in
portable, relocatable and stationary configurations. Associated
plant components and control systems are manufactured to offer
customers a wide variety of equipment to meet individual
production requirements. The asphalt mixing plants are
manufactured under the CEDARAPIDS/STANDARD HAVENS brand name in
Glasgow, Missouri.
Light Construction Equipment
Light construction equipment produced by Terex includes mobile and portable
floodlighting systems, concrete power trowels, concrete placement systems,
concrete finishing systems and traffic control products.
[Graphic] Light Towers -- are used primarily to light work areas for night
construction activity. They are towed to the work-site where the
telescopic tower is extended and outriggers are deployed for
stability. They are diesel powered and provide adequate light for
construction activity for a radius of approximately 300 feet from
the tower.
[Graphic] Power Trowels -- are used to provide a smooth finish on concrete
surfaces. They are used on soft cement as the concrete hardens.
The power trowels are manufactured as walk-behind and ride-on
models. Trowels are typically used in conjunction with other
products manufactured by Terex Light Construction including light
towers, power buggies, screed, and material spreaders.
12
[Graphic] Power Buggies -- are used primarily to transport concrete from
the mixer to the pouring site. Terex Amida power buggies include
dump capacities from 10 to 21 cubic feet with both walk-behind
and ride-on models.
[Graphic] Directional Arrowboards -- are used to direct traffic around road
construction sites. They are primarily solar powered, with solar
panels continuously recharging batteries which provide power
during night hours. Terex Amida arrowboards include 15 and 25
light configurations.
Backlog
The Company's backlog as of December 31, 1999 and 1998 was as follows:
December 31,
----------------------------
1999 1998
-------------- -------------
(in millions)
Terex Lifting......................$ 167.0 $ 221.8
Terex Earthmoving.................. 158.3 196.4
Other.............................. 1.2 ---
============== =============
Total.........................$ 326.5 $ 418.2
============== =============
Substantially all of the Company's backlog orders are expected to be filled
within one year, although there can be no assurance that all such backlog orders
will be filled within that time period. The Company's backlog orders represent
primarily new equipment orders. Parts orders are generally filled on an
as-ordered basis.
Terex Lifting backlog at December 31, 1999 decreased $54.8 million to $167.0
million as compared to $221.8 million at December 31, 1998. The decrease in
backlog was due to the slowdown in the mobile crane segment offset somewhat by
the effect of the businesses acquired in 1999 (approximately $18 million in
backlog at December 31, 1999). The backlog at Terex Earthmoving decreased to
$158.3 million at December 31, 1999 from $196.4 million at December 31, 1998,
principally because of the completion of the $157 million order of Unit Rig
trucks for Coal India, partially offset by the backlog at the businesses
acquired in 1999 which totaled approximately $109 million at December 31, 1999.
Included in Other backlog at December 31, 1999, are backlog orders of Terex
Light Construction.
Distribution
Terex Lifting distributes its products primarily through a global network of
dealers and national accounts in over 1,000 different locations. Terex Lifting's
telescopic mobile cranes are marketed in the great majority of the United States
under the TEREX brand name. Terex Lifting's European telescopic mobile cranes
distribution is carried out primarily under three brand names, TEREX, PPM and
BENDINI, through a distribution network comprised of both distributors and a
direct sales force. Terex Lifting sells its lattice boom cranes through a
distribution network under the TEREX and AMERICAN brand names. Terex Lifting
distributes its mobile cranes in Australia under the FRANNA and TEREX brand
names. Terex Lifting sells its utility aerial devices under the TEREX TELELECT
brand name principally through a network of North American distributors. Terex
Lifting sells its aerial work platform products through a distribution network
throughout the world, but principally in North America and Europe. Terex
Lifting's aerial work platform products are sold under the brand names TEREX
AERIALS and HOLLAND LIFT. Terex Lifting sells its tower cranes through a
distribution network under the PEINER and COMEDIL brand names. Terex Lifting's
material and container handlers products are sold through a distribution network
under the brand names of TEREX, SQUARE SHOOTER, PPM, P&H and ITALMACCHINE. Terex
Lifting's truck mounted material handlers are sold directly in the Netherlands
and Germany under the KOOI brand name; in Ireland and the United Kingdom, they
are also sold directly under the MOFFETT brand name. The remainder of the sales
for Terex's truck mounted material handlers are done through independent dealers
in the United States and Europe under the KOOI, PRINCETON and MOFFETT brand
names.
With respect to Terex Earthmoving products, TEL markets trucks and replacement
parts primarily through worldwide dealership networks. TEL's truck dealers are
independent businesses, which generally serve the construction, mining, timber
and/or scrap industries. Although these dealers carry products of a variety of
manufacturers, and may or may not carry more than one of Terex's products, each
dealer generally carries only one manufacturer's "brand" of each particular type
of product. Terex employs sales representatives who service these dealers from
13
offices located throughout the world. Payhauler distributes its products
primarily through a dealership network. Unit Rig distributes its products and
services directly to customers primarily through its own distribution system.
O&K Mining sells its hydraulic excavators and after-market parts and services
primarily through its export sales department in Dortmund, Germany, through O&K
Mining's global network of wholly-owned foreign subsidiaries and through
dealership networks.
Powerscreen distributes all screening products through a global network of
dealers in more than 80 locations. The American dealers are supported by a
distribution center located in Louisville, Kentucky. Most dealers are single
line Powerscreen dealers. B.L. Pegson sells their entire range of crushers,
screens and feeders worldwide through distributors under the PEGSON brand name.
In total there are approximately 50 dealers, half of which are located in the
United States and served by the distribution center in Louisville, Kentucky.
Finlay distributes all products worldwide through a network of independent
dealers. In total there are approximately 35 distributors located across five
continents. Simplicity sells products through dealers, mainly located in the
United States, as well as direct to original equipment manufactures. Most of
Enviroquip/Royer/Re-Tech's business is in the United States and their products
are sold by distributors.
Cedarapids crushing and screening equipment and asphalt pavers (and aftermarket
support parts for both of these lines) are sold principally through a worldwide
network of distributors under the CEDARAPIDS brand name. There are approximately
40 domestic and 25 international dealers, many of which have multiple branch
offices. Asphalt mixing plants are sold direct to end user customers under the
CEDARAPIDS/STANDARD HAVENS brand name.
Terex Light Construction distributes its products through a global network of
dealers and national accounts. Terex employs sales representatives who service
these dealers throughout the world. Worldwide distribution is conducted under
the AMIDA, BARTELL, MORRISON, BENFORD, and TEREX brand names.
Research and Development
Terex maintains engineering staffs at several of its locations who design new
products and improvements in existing product lines. Terex's engineering
expenses are primarily incurred in connection with the improvements of existing
products, efforts to reduce costs of existing products and, in certain cases,
the development of products which may have additional applications or represent
extensions of the existing product line. Such costs incurred in the development
of new products or significant improvements to existing products of continuing
operations amounted to $9.1, $8.2 and $6.2 million in 1999, 1998 and 1997,
respectively.
Materials
Principal materials used by the Company in its various manufacturing processes
include steel, castings, engines, tires, hydraulic cylinders, drive trains,
electric controls and motors, and a variety of other fabricated or manufactured
items. In the absence of labor strikes or other unusual circumstances,
substantially all materials are normally available from multiple suppliers.
Current and potential suppliers are evaluated on a regular basis on their
ability to meet the Company's requirements and standards. Electric wheel motors
and controls used in the Unit Rig product line are currently supplied
exclusively by General Electric Company. The Company is endeavoring to develop
alternative sources and has entered into a contract with General Atomics, a
former defense contractor, to develop electric wheel motors for Unit Rig trucks.
If the Company is unable to develop alternative sources, or if there is
disruption or termination of its relationship with General Electric Company
(which is not governed by a written contract), it could have a material adverse
effect on Unit Rig's operations.
Competition
Telescopic Mobile Cranes -- The domestic telescopic mobile crane industry is
comprised primarily of three manufacturers. The Company believes that Terex
Lifting is the second largest domestic manufacturer. The Company believes that
the number one domestic manufacturer is Grove Worldwide, and the number three
domestic manufacturer is Link-Belt, a subsidiary of Sumitomo Corp. The Company's
principal markets in Europe are in France, Italy and Spain, where the Company
believes it has the largest market shares. In Europe, Terex Lifting's primary
competitors are Grove Cranes Ltd, Liebherr and Mannesmann Dematic.
Truck Mounted Cranes (Boom Trucks) -- The United States boom truck industry is
dominated by four manufacturers, of which the Company believes Terex RO is the
second largest behind Grove National.
Tower Cranes -- The tower crane industry includes two principal competitors,
Liebherr and Potain, who combined represent well over half of the worldwide
market. Terex and Wolf are the only other competitors with a multi-national
presence; other manufacturers are small and regional.
14
Lattice Boom Cranes -- The lattice boom crane industry includes Manitowoc,
Link-Belt, Mannesmann Dematic, Liebherr, and Hitachi. Manitowoc is the world
leader in lifting capacities over 125 tons, and represents over half of the
United States lattice boom crane market.
Aerial Work Platforms The aerial work platform industry in North America is
fragmented, with seven major competitors. Terex believes that it is the fifth
largest manufacturer of aerial work platforms in North America, behind JLG,
Genie, Grove Manlift and Snorkel. The Company believes that its market share in
boom lifts is greater than its market share in scissor lifts.
Utility Aerial Devices -- The utility aerial device industry is comprised
primarily of three manufacturers. The Company believes that it is the second
largest manufacturer in the United States of utility aerial devices behind
Altec. Outside the United States, Terex is focusing primarily on the Mexican and
Caribbean markets.
Truck Mounted Material Handlers -- The Company owned brands Princeton, Kooi, and
Moffett are the largest manufacturers of truck mounted material handlers.
Telescopic Container Stackers -- The Company believes that four manufacturers
account for a majority of the global market for telescopic container stackers.
The Company believes that it is the second largest manufacturer behind Kalmar.
Other manufacturers include Valmet Belloti and Taylor.
Rough Terrain Telescopic Boom Material Handlers -- OmniQuip, Caterpillar and
Gradall are the largest manufacturers of rough terrain telescopic material
handlers. The Company believes that it is the fourth largest manufacturer of
rough terrain telescopic material handlers.
Off-Highway Trucks -- North America and Europe account for a majority of the
global market. Four manufacturers dominate the global market. Terex believes
that it is the third largest of these manufacturers (behind Volvo and
Caterpillar).
High Capacity Surface Mining Trucks -- The high capacity surface mining truck
industry includes three principal manufacturers: Caterpillar, Komatsu-Dresser
and the Company. The Company believes that it had the leading market share in
1999.
Large Hydraulic Excavators -- The large hydraulic excavator industry is
comprised of primarily seven manufacturers, the largest of which are Hitachi,
Komatsu-DeMag, Liebherr and Caterpillar. Terex believes it is the largest
manufacturer of hydraulic excavators having machine weights in excess of 200
tons. The largest hydraulic excavators also compete against electric mining
shovels (rope excavators) from competitors such as Harnischfeger Corporation and
Bucyrus International, Inc. and, for some applications, against bucket wheel
loaders from competitors such as Caterpillar, Volvo and Komatsu-Dresser.
Crushing and Screening Equipment -- The crushing industry is a competitive
market reflecting a large number of competitors. The two largest competitors are
Nordberg, a subsidiary of Metso Corporation, and Svedala Industri A.B. The
Company believes it is the third largest manufacturer. The screening industry
includes six principal manufactures: Extec (U.K.), Nordberg (Metso Corporation)
(Finland), Astec Industries (U.S.), Svedala (Sweden), Ohio Screen (U.S.), and
Parker Plant (U.K.). The Company believes that it is the market leader in the
mobile screening industry.
Asphalt Pavers -- The asphalt paver industry includes three principal
manufacturers: Blaw-Knox (Ingersoll-Rand), Barber Greene (Caterpillar), and
Roadtec (Astec Industries). The Company believes it is the third largest
manufacturer.
Asphalt Mixing Plants -- The asphalt mixing plant industry includes three
principal manufacturers: Astec Industries, CMI Corporation, and Gencor
Corporation. The Company believes it is the fourth largest manufacturer.
Light Towers -- The United States light tower market is dominated by three
manufacturers. The Company believes that Terex Amida is the largest manufacturer
followed by Allmand Bros. and Coleman Engineering.
Light Concrete Equipment -- The light concrete equipment market is fragmented
with numerous small manufacturers. The Company believes that Allen Engineering,
Multiquip, and Wacker are the primary extended line competitors. The Company
believes that it is the third largest extended line manufacturer in this
category.
15
Employees
As of December 31, 1999, the Company had approximately 6,650 employees. The
Company considers its relations with its personnel to be good. Approximately 33%
of the Company's employees are represented by labor unions which have entered
into or are in the process of entering into various separate collective
bargaining agreements with the Company. The Company experienced a labor strike
at its Terex Lifting manufacturing facility in Waverly, Iowa during December
1999 and January 2000 which was settled in January 2000. The strike at Waverly
had no appreciable affect on the conduct of business or financial results of the
Terex Lifting segment as a whole.
Patents, Licenses and Trademarks
Several of the trademarks and trade names of the Company, in particular the
TEREX, LORAIN, UNIT RIG, MARK, P&H, PPM, SIMON, TELELECT, SQUARE SHOOTER,
PAYHAULER, O&K, HOLLAND LIFT, AMERICAN, ITALMACCHINE, PEINER, COMEDIL, FRANNA,
POWERSCREEN, CEDARAPIDS, FINLAY, KOOI, PRINCETON, SIMPLICITY, PEGSON, BROWN
LENOX, MATBRO, MOFFET, BENFORD and RE-TECH trademarks, are important to the
business of the Company. The Company owns and maintains trademark registrations
and patents in countries where it conducts business, and monitors the status of
its trademark registrations and patents to maintain them in force and renews
them as required. The Company also protects its trademark, trade name and patent
rights when circumstances warrant such action, including the initiation of legal
proceedings, if necessary. P&H is a registered trademark of Harnischfeger
Corporation which the Company has the right to use for certain products pursuant
to a license agreement until 2011. Pursuant to the terms of the acquisition
agreements for the Simon Access Companies, the Company has the right to use the
SIMON name (which is a registered trademark of Simon Engineering plc) for
certain products until April 7, 2000. CELLA is a trademark of Sergio Cella. The
Company also has the right to use the O&K and Orenstein & Koppel names (which
are registered trademarks of Orenstein & Koppel) for most applications in the
mining business for an unlimited period of time. All other trademarks and
tradenames referred to in this Annual Report are registered trademarks of Terex
Corporation or its subsidiaries.
Environmental Considerations
The Company generates hazardous and non-hazardous wastes in the normal course of
its operations. As a result, the Company is subject to a wide range of federal,
state, local and foreign environmental laws and regulations, including the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
that (i) govern activities or operations that may have adverse environmental
effects, such as discharges to air and water, as well as handling and disposal
practices for hazardous and non-hazardous wastes, and (ii) impose liability for
the costs of cleaning up, and certain damages resulting from, sites of past
spills, disposals or other releases of hazardous substances. Compliance with
such laws and regulations has, and will, require expenditures by the Company on
a continuing basis. However, the Company has not incurred, and does not expect
to incur in the future, any material capital expenditures for environmental
control facilities.
Seasonal Factors
The Company markets a large portion of its products in North America and Europe,
and its sales of trucks, asphalt mixing plants, mobile crushing and screening
equipment and cranes during the fourth quarter of each year to the construction
industry are usually lower than sales of such equipment during each of the first
three quarters of the year because of the normal winter slowdown of construction
activity. However, sales of trucks and excavators to the mining industry are
generally less affected by such seasonal factors.
16
ITEM 2. PROPERTIES
The following table outlines the principal manufacturing, warehouse and office
facilities owned or leased by the Company and its subsidiaries:
Entity Facility Location Type and Size of Facility
Terex (Corporate Offices)...................Westport, Connecticut (1) Office; 14,898 sq. ft.
Terex (Distribution Center)................Southaven, Mississippi (1) Warehouse and light manufacturing;
505,000 sq. ft. (2)
Amida Industries............................Rock Hill, South Carolina Office, manufacturing and warehouse;
121,020 sq. ft.
Bartell Industries..........................Brampton, Ontario, Canada Office, manufacturing and warehouse;
32,509 sq. ft.
Terex Lifting
Terex Lifting - Waverly Operations..........Waverly, Iowa Office, manufacturing and warehouse;
383,000 sq. ft.
Terex Lifting - Conway Operations...........Conway, South Carolina (1) Office, manufacturing and warehouse;
153,716 sq. ft.
PPM S.A.....................................Montceau-les-Mines, France Office, manufacturing and warehouse;
418,376 sq. ft.
Terex Italia................................Crespellano, Italy Office, manufacturing and warehouse;
68,501 sq. ft.
PPM Europe Subsidiary.......................Dortmund, Germany (1) Office and warehouse; 129,180 sq. ft.
PPM Europe Subsidiary.......................Rethel, France Office, manufacturing and warehouse;
213,058 sq. ft.
Terex Manufacturing.........................Huron, South Dakota Manufacturing; 88,000 sq. ft.
Telelect....................................Watertown, South Dakota (3) Office, manufacturing and warehouse;
205,350 sq. ft.
Terex Aerials Limited.......................Cork, Ireland (1) Office and manufacturing; 35,250 sq. ft.
Terex RO....................................Olathe, Kansas Office and manufacturing; 80,400 sq. ft.
Terex Handlers..............................Baraga, Michigan Office, manufacturing and warehouse;
53,620 sq. ft.
Comedil.....................................Fontanafredda, Italy Office, manufacturing and warehouse;
100,682 sq. ft.
Holland Lift................................Hoorn, The Netherlands Office, manufacturing and warehouse;
30,000 sq. ft.
Italmacchine................................Perugia, Italy Office, manufacturing and warehouse;
113,834 sq. ft.
Peiner......................................Trier, Germany Office, manufacturing and warehouse;
85,787 sq. ft.
American Crane..............................Wilmington, North Carolina Office, manufacturing and warehouse;
572,200 sq. ft.
American Crane International................Oudenbosch, The Netherlands Office and warehouse; 86,111 sq. ft.
Franna Cranes...............................Brisbane, Australia (1) Office, manufacturing and warehouse;
42,495 sq. ft.
Moffett Engineering.........................Dundalk, Ireland Office, manufacturing and warehouse;
150,000 sq. ft.
Matbro Limited..............................Tetbury, England (1) Office and warehouse; 80,000 sq. ft.
Kooi B.V....................................Vrouwenparochie, Office, manufacturing and warehouse;
The Netherlands (1) 63,940 sq. ft.
Terex Princeton.............................Canal Winchester, Ohio Office, manufacturing and warehouse;
38,000 sq. ft.
17
Terex Earthmoving
O&K Mining..................................Dortmund, Germany (1) Office, manufacturing, warehouse;
775,000 sq. ft.
Unit Rig and Payhauler......................Tulsa, Oklahoma Office, manufacturing and warehouse;
375,587 sq. ft.
TEL.........................................Motherwell, Scotland Office, manufacturing and warehouse;
473,000 sq. ft.
Powerscreen International...................Dungannon, Northern Ireland Office, manufacturing and warehouse;
272,000 sq. ft.
Powerscreen Limited.........................Kilbeggan, Ireland Manufacturing; 70,000 sq. ft.
Finlay Hydrascreens Limited.................Omagh, Northern Ireland Office, manufacturing and warehouse;
152,863 sq. ft.
Benford Limited.............................Warwick, England Office, manufacturing and warehouse;
210,000 sq. ft.
Simplicity Engineering......................Durand, Michigan Office, manufacturing and warehouse;
167,000 sq. ft.
Royer Industries ..........................Kingston, Pennsylvania Office and Manufacturing;
84,000 sq. ft.
B. L. Pegson................................Coalville, England Office, manufacturing and warehouse;
204,486 sq. ft.
Cedarapids..................................Cedar Rapids, Iowa Office, manufacturing and warehouse;
655,695 sq. ft.
Standard Havens ............................Glasgow, Missouri Office, manufacturing and warehouse;
140,000 sq. ft.
Re-Tech.....................................Lebanon, Pennsylvania (1) Office, manufacturing and warehouse;
142,800 sq. ft.
(1) These facilities are either leased or subleased by the indicated entity.
(2) Includes 239,400 sq. ft. of warehouse space subleased to others.
(3) Includes 18,550 sq. ft. which are leased by the indicated entity.
Unit Rig, O&K Mining and Powerscreen also have numerous owned or leased
locations for parts distribution and rebuilding of components located worldwide.
Management believes that the properties listed above are suitable and adequate
for the Company's use. The Company has determined that certain of its properties
exceed its requirements. Such properties may be sold, leased or utilized in
another manner and have been excluded from the above list.
The majority of the Company's U.S. properties are subject to mortgages arising
from its bank credit facilities.
Financial Information about Industry and Geographic Segments, Export Sales and
Major Customers
Information regarding foreign and domestic operations, export sales, segment
information and major customers is included in Note N -- "Business Segment
Information" in the Notes to the Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
As described in Note L -- "Litigation and Contingencies" in the Notes to the
Consolidated Financial Statements, the Company is involved in various legal
proceedings, including product liability and workers' compensation liability
matters, which have arisen in the normal course of its operations and to which
the Company is self-insured for up to $2.5 million per incident. Management
believes that the final outcome of such matters will not have a material adverse
effect on the Company's consolidated financial position.
In December 1994, the Company received an examination report from the Internal
Revenue Service ("IRS") proposing a large tax deficiency for 1987 through 1989.
The examination report raised many issues. Among these issues are substantiation
18
for certain tax deductions and whether the Company was able to use certain net
operating loss carryovers ("NOLs") to offset taxable income. In April 1995, the
Company filed an administrative appeal to the examination.
On November 18, 1999, the Company announced that it had resolved the IRS audit
regarding the Company's federal income tax returns for the years 1987 through
1989. As a result of the completion of the audit, the IRS will no longer
challenge the Company's right to use certain NOLs. Furthermore, because of the
existence of substantial NOLs, Terex will not owe any tax. However, due to
timing issues associated with NOL carrybacks and the substantial amount of time
which has elapsed since the years in question, the Company has accrued
approximately $7.7 million in interest expense, all of which will be tax
deductible. See Note I - "Income Taxes" in the Notes to the Consolidated
Financial Statements for additional information concerning income tax matters.
For information concerning other contingencies and uncertainties, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Contingencies and Uncertainties."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
19
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
(a) The Company's Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol "TEX." The high and low stock prices for the Company's
Common Stock on the NYSE Composite Tape (for the last two completed years) are
as follows:
1999 1998
------------------------------- --------------------------------
Fourth Third Second First Fourth Third Second First
------- ------ ------- ------ ------- ------- ------ ------
High......... $31.50 $31.88 $35.50 $28.50 $ 28.94 $ 29.56 $31.50 $27.44
Low.......... 24.81 24.25 23.25 22.13 13.38 14.00 26.88 20.00
No dividends were declared or paid in 1998 or in 1999. Certain of the Company's
debt agreements contain restrictions as to the payment of cash dividends. In
addition, payment of dividends is limited by Delaware law. The Company intends
generally to retain earnings, if any, to fund the development and growth of its
business. The Company does not plan on paying dividends on the Common Stock in
the near term. Any future payments of cash dividends will depend upon the
financial condition, capital requirements and earnings of the Company, as well
as other factors that the Board of Directors may deem relevant.
As of March 15, 2000, there were 683 stockholders of record of the Company's
Common Stock.
(b) Not Applicable.
20
ITEM 6. SELECTED FINANCIAL DATA
(in millions except per share amounts and employees)
As of or for the Year Ended December 31,
-------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ------------ ------------- -----------
Summary of Operations
Net sales....................................................$ 1,856.6 $ 1,233.2 $ 842.3 $ 678.5 $ 501.4
Income from operations....................................... 178.3 122.0 71.1 5.1 12.8
Income (loss) from continuing operations before
extraordinary items........................................ 172.9 72.8 30.3 (54.3) (32.1)
Income (loss) from discontinued operations................... --- --- --- 102.0 4.4
Income (loss) before extraordinary items..................... 172.9 72.8 30.3 47.7 (27.7)
Net income (loss)............................................ 172.9 34.5 15.5 47.7 (35.2)
Income (loss) applicable to common stock..................... 172.9 34.5 10.7 24.8 (42.5)
Per Common and Common Equivalent Share:
Basic
Income (loss) from continuing operations.................$ 7.14 $ 3.52 $ 1.57 $ (6.54) $ (3.79)
Income (loss) from discontinued operations............... --- --- --- 8.64 0.42
Income (loss) before extraordinary items................. 7.14 3.52 1.57 2.10 (3.37)
Net income (loss)........................................ 7.14 1.67 0.66 2.10 (4.09)
Diluted
Income (loss) from continuing operations.................$ 6.75 $ 3.25 $ 1.44 $ (5.81) $ (3.79)
Income (loss) from discontinued operations............... --- --- --- 7.67 0.42
Income (loss) before extraordinary items................. 6.75 3.25 1.44 1.86 (3.37)
Net income (loss)........................................ 6.75 1.54 0.60 1.86 (4.09)
Working Capital
Current assets...............................................$ 1,315.3 $ 771.6 $ 426.5 $ 390.2 $ 312.0
Current liabilities.......................................... 579.5 425.4 236.1 195.0 196.3
Working capital.............................................. 735.8 346.2 190.4 195.2 115.7
Property, Plant and Equipment
Net property, plant and equipment............................$ 172.8 $ 99.5 $ 47.8 $ 31.7 $ 40.1
Capital expenditures......................................... 21.4 13.1 9.9 8.1 5.2
Depreciation................................................. 17.6 10.1 8.2 7.0 7.4
Total Assets...................................................$ 2,177.5 $ 1,151.2 $ 588.5 $ 471.2 $ 478.9
Capitalization
Long-term debt and notes payable, including current
maturities.................................................$ 1,156.4 $ 631.3 $ 300.1 $ 281.3 $ 329.9
Minority interest, including redeemable preferred stock of a
subsidiary................................................ --- 0.6 0.6 10.0 9.4
Redeemable convertible preferred stock....................... --- --- --- 46.2 24.6
Stockholders' equity (deficit)............................... 432.8 98.1 59.6 (71.7) (96.9)
Dividends per share of Common Stock..........................$ --- $ --- $ --- $ --- $ ---
Shares of Common Stock outstanding at year end............... 27.5 20.8 20.5 13.2 10.6
Employees
Continuing operations........................................ 6,650 4,142 2,950 2,270 2,614
Discontinued operations (Material Handling).................. --- --- --- --- 986
Total...................................................... 6,650 4,142 2,950 2,270 3,600
The Selected Financial Data include the results of operations of Amida,
Powerscreen, Cedarapids, Bartell, Re-Tech, Princeton/Kooi, Franna, Payhauler,
O&K Mining, Holland Lift, American Crane, Italmacchine, Peiner, Comedil, the
Simon Access Companies, Terex Handlers and PPM from April 1, 1999, July 27,
1999, August 27, 1999, September 20, 1999, September 29, 1999, November 3, 1999,
December 1, 1999, January 5, 1998, March 31, 1998, May 4, 1998, July 31, 1998,
November 3, 1998, November 13, 1998, December 18, 1998, April 7, 1997, April 14,
1997 and May 9, 1995, respectively, the dates of their acquisitions. See Note B
- -- "Acquisitions" in the Notes to the Consolidated Financial Statements for
further information. The Selected Financial Data for the years ended December
31, 1995 and 1996 include the results of operations of Clark Material Handling
Company ("CMHC") as discontinued operations. CMHC was sold by the Company in
November 1996.
21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
The Company organizes itself in two industry segments: Terex Lifting and Terex
Earthmoving. The 1999 results for Terex Lifting include the operations of
Moffett/Matbro, Princeton/Kooi and Franna from their respective acquisition
dates of July 27, 1999, November 3, 1999 and December 1, 1999. The 1998 results
for Terex Lifting include the operations of Holland Lift, American Crane,
Italmacchine, Peiner and Comedil from their respective acquisition dates of May
4, 1998, July 31, 1998, November 3, 1998, November 13, 1998 and December 18,
1998. The 1997 Terex Lifting results include the operations of Simon Access and
Terex Handlers businesses from their respective acquisition dates of April 7,
1997 and April 14, 1997. The 1999 results for Terex Earthmoving include the
operations of Powerscreen (excluding Moffett/Matbro), Cedarapids and Re-Tech
from their respective acquisition dates of July 27, 1999, August 27, 1999 and
September 29, 1999. Terex Earthmoving results for 1998 includes the results of
Payhauler and O&K Mining from their respective acquisition dates of January 5,
1998 and March 31, 1998. Included in the 1999 Other are the results of the
operations of Amida and Bartell from their respective acquisition dates of April
1, 1999 and September 20, 1999 as well as general and corporate items.
1999 Compared with 1998
The table below is a comparison of net sales, gross profit, selling, general and
administrative expenses and income (loss) from operations, by segment, for 1999
and 1998.
Year Ended
December 31, Increase
----------------------
1999 1998 (Decrease)
--------------------------------
(in millions of dollars)
NET SALES
Terex Lifting............................... $ 944.9 $ 770.9 $ 174.0
Terex Earthmoving........................... 878.9 456.4 422.5
Other....................................... 32.8 5.9 26.9
========== ========== ==========
Total.................................... $ 1,856.6 $ 1,233.2 $ 623.4
========== ========== ==========
GROSS PROFIT
Terex Lifting............................... $ 146.0 $ 128.5 $ 17.5
Terex Earthmoving........................... 164.0 96.5 67.5
Other....................................... 6.7 0.8 5.9
========== ========== ==========
Total.................................... $ 316.7 $ 225.8 $ 90.9
========== ========== ==========
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Terex Lifting............................... $ 59.6 $ 46.4 $ 13.2
Terex Earthmoving........................... 76.5 54.8 21.7
Other....................................... 2.3 2.6 (0.3)
========== ========== ==========
Total.................................... $ 138.4 $ 103.8 $ 34.6
========== ========== ==========
INCOME (LOSS) FROM OPERATIONS
Terex Lifting............................... $ 86.4 $ 82.1 $ 4.3
Terex Earthmoving........................... 87.5 41.7 45.8
Other....................................... 4.4 (1.8) 6.2
========== ========== ==========
Total.................................... $ 178.3 $ 122.0 $ 56.3
========== ========== ==========
22
Net Sales
Sales increased $623.4 million, or approximately 51%, to $1,856.6 million in
1999 from $1,233.2 million in 1998. Internally generated growth represented
approximately $234.0 million, or 38%, of this revenue increase while acquired
companies contributed approximately $389.0 million, or 62%.
Terex Lifting's sales were $944.9 million for 1999, an increase of $174.0
million, or 23%, from $770.9 million in 1998, which was driven primarily from
contributions of acquired companies. Internal growth of approximately $25
million represents strong performances by the Company's utility aerial devices
and material handling businesses, which reported sales increases of 38% and 51%
respectively, partially offset by declines in the hydraulic mobile crane and
U.S. aerials businesses. Machine sales increased $138.1 million to $795.0
million while part sales increased $14.9 million to $96.5 million. Terex
Lifting's backlog decreased $54.8 million to $167.0 million attributable
primarily to a decline in the hydraulic mobile crane business, offset partially
by the backlog of businesses acquired in 1999.
Terex Earthmoving's sales were $878.9 million in 1999, an increase of $422.5
million, or 93%, from $456.4 million in 1998, which was split evenly between
internal growth and contributions from acquired companies. Internal growth was
driven by strong performances at the Company's surface mining truck business,
which generated over $300 million in sales in 1999, and the Company's Terex
truck business, which reported an increase in sales of 18% from 1998. Machine
sales increased $354.5 million to $644.1 million while part sales increased
$56.7 million to $200.4 million. Backlog decreased to $158.3 million at December
31, 1999 from $196.4 million at December 31, 1998 primarily from the completion
of the Coal India order, partially offset by the backlog of business acquired in
1999.
Net sales for Other in 1999 represent sales from Amida, Bartell and service
revenues generated by Terex's parts distribution center for services provided to
a third party. Amida and Bartell were acquired by Terex on April 1, 1999 and
September 20, 1999, respectively. In 1998, net sales consisted of service
revenues generated by Terex's parts distribution center.
Gross Profit
Gross profit for 1999 increased $90.9 million to $316.7 million as a result of
acquisitions, internally generated growth and the execution and completion of
the Coal India order during 1999. Gross profit as a percentage of net sales for
1999 decreased to 17.1% as compared to 18.3% for 1998. This decrease was
primarily due to the product mix, as machine sales as a percent of total sales
increased during the year, and special charges related to the closure of the
Company's Milwaukee aerial work platform facility.
Terex Lifting's gross profit increased $17.5 million, or 14%, to $146.0 million,
compared to $128.5 million in 1998. Gross profit as a percentage of sales
decreased to 15.5% from 16.7% in 1998, due to product mix and the special
charges mentioned above. Excluding the special charge, the gross profit
percentage for 1999 was 16.5%.
Terex Earthmoving's gross profit increased $67.5 million, or 70%, to $164.0
million, compared to $96.5 million in 1998. The decrease in gross profit as a
percentage of sales, 18.7% compared to 21.1% in 1998, is primarily related to
product mix as new machine sales represented 71.6% of total sales in 1999
compared to 60.3% in 1998.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (which include the Company's
research and development expenses) increased to $138.4 million in 1999 from
$103.8 million for 1998, reflecting the effects of the companies acquired in
1999 and 1998. As a percentage of sales, however, selling, general and
administrative expenses decreased to 7.5% in 1999 from 8.4% in 1998.
Terex Lifting's selling, general and administrative expenses increased to $59.6
million from $46.4 million in 1998, reflecting the impact of acquired companies.
Selling, general and administrative expenses as a percentage of sales increased
to 6.3% from 6.0% in 1998. Excluding the impact of acquisitions, selling,
general and administrative expenses as a percentage of sales remained constant
at 6.0%.
Terex Earthmoving's selling, general and administrative expenses increased $21.7
million to $76.5 million for 1999 primarily due to the effect of acquired
companies and the cost of a headcount reduction at the Company's manufacturing
facility in Germany. As a percentage of sales, however, selling, general and
administrative expenses decreased to 8.7% in 1999 from 12.0% in 1998. Excluding
the special charge, selling, general and administrative expense as a percentage
of sales was 8.5% for 1999.
23
Selling, general and administrative expenses for Other decreased slightly to
$2.3 million in 1999 as compared to $2.6 million in 1998. The decrease is the
result of a favorable legal settlement to the Company during the fourth quarter
of 1999, partially offset by the inclusion of the Amida and Bartell
acquisitions. See "Business--Research and Development" for a discussion of the
Company's engineering expenses.
Income (Loss) from Operations
Income from operations for the Company increased $56.3 million, or 46%, to
$178.3 million, compared to $122.0 million in 1998. Income from operations as a
percentage of sales decreased to 9.6% compared to 9.9% in 1998. Excluding the
special charges, income from operations as a percentage of sales was 10.1%.
Terex Lifting's income from operations increased $4.3 million, or 5%, to $86.4
million, as compared to $82.1 million in 1998. The increase can be attributed to
the contributions from acquired companies, strong performances by the Company's
utility aerial devices and material handling businesses offset by a decline in
hydraulic mobile crane business and special charges related to closing of the
Company's Milwaukee facility. Income from operations as a percentage of sales
decreased to 9.1% in 1999 from 10.7% in 1998. Excluding the special charges,
income from operations as a percentage of sales was 10.2% in 1999.
Terex Earthmoving's income from operations increased $45.8 million, or 110%, to
$87.5 million, compared to $41.7 million in 1998. As a percentage of sales,
income from operations increased to 10.0% from 9.1% in 1998. The increase in
both dollars and as a percentage is driven primarily by acquisitions, internally
generated growth and continuing cost control efforts.
Income from operations for Other increased $6.2 million as a result of the
inclusion of the Amida and Bartell acquisitions and the impact of a favorable
legal settlement.
Interest Expense
Net interest expense increased to $77.5 million for 1999 from $44.5 million in
1998 as a result of higher average debt levels due to the 1999 acquisitions and
$7.7 million of interest related to the Company's settlement of the IRS matter.
(See Item 3., Legal Proceedings.)
Income Taxes
During 1999, the Company recognized a net income tax benefit of $74.5 million as
compared to a net income tax expense of $1.7 million in 1998. During the fourth
quarter of 1999, the Company announced the resolution of the IRS audit, which
started in December 1994, regarding its income tax returns for the years 1987
through 1989. The resolution of this audit did not require payment of tax. This
net tax benefit resulted from the capitalization of deferred taxes. (See Item
3., Legal Proceedings.)
Extraordinary Items
During 1998, the Company recorded a charge of $38.3 million to recognize a loss
on the early extinguishment of debt in connection with the redemption of $166.7
million of its 13-1/4% Senior Secured Notes (the "Senior Secured Notes") and the
refinancing of the Company's bank credit facilities.
24
1998 Compared with 1997
The table below is a comparison of net sales, gross profit, selling, general and
administrative expenses and income (loss) from operations, by segment, for 1998
and 1997.
Year Ended
December 31, Increase
----------------------
1998 1997 (Decrease)
---------------------------------
(in millions of dollars)
NET SALES
Terex Lifting............................... $ 770.9 $ 548.0 $ 222.9
Terex Earthmoving........................... 456.4 288.4 168.0
Other....................................... 5.9 5.9 ---
========== ========== ===========
Total.................................... $ 1,233.2 $ 842.3 $ 390.9
========== ========== ===========
GROSS PROFIT
Terex Lifting............................... $ 128.5 $ 87.2 $ 41.3
Terex Earthmoving........................... 96.5 50.7 45.8
Other....................................... 0.8 1.7 (0.9)
========== ========== ===========
Total.................................... $ 225.8 $ 139.6 $ 86.2
========== ========== ===========
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Terex Lifting............................... $ 46.4 $ 40.0 $ 6.4
Terex Earthmoving........................... 54.8 26.0 28.8
Other....................................... 2.6 2.5 0.1
========== ========== ===========
Total.................................... $ 103.8 $ 68.5 $ 35.3
========== ========== ===========
INCOME (LOSS) FROM OPERATIONS
Terex Lifting............................... $ 82.1 $ 47.2 $ 34.9
Terex Earthmoving........................... 41.7 24.7 17.0
Other....................................... (1.8) (0.8) (1.0)
========== ========== ===========
Total.................................... $ 122.0 $ 71.1 $ 50.9
========== ========== ===========
Net Sales
Sales increased $390.9 million, or approximately 46%, to $1,233.2 million in
1998 from $842.3 million in 1997. Internally generated growth represented
approximately $146 million of this revenue increase while acquired companies
contributed approximately $245 million.
Terex Lifting's sales were $770.9 million for 1998, an increase of $222.9
million, or 41%, from $548.0 million in 1997, which did not include the results
of Simon Access in the first quarter. Machine sales increased $183.2 million to
$643.7 million while part sales increased $8.7 million to $81.6 million. The
increase in sales is related to internally generated growth of approximately
$138 million, primarily driven by strong performances within the Company's crane
and utility aerial device businesses, and approximately $85 million related to
acquisitions. Terex Lifting's backlog increased $35.3 million to $221.8 million
driven by acquisitions in 1998 and a 9% increase in backlog at existing
businesses.
Terex Earthmoving's sales were $456.4 million in 1998, an increase of $168.0
million, or 58%, from $288.4 million in 1997, primarily driven by acquisitions
in 1998. Machine sales increased $86.6 million to $275.6 million while parts
sales increased $47.5 million to $143.7 million. The sales mix was approximately
31% parts in 1998 compared to approximately 33% parts in 1997. Backlog increased
to $196.4 million at December 31, 1998 from $30.3 million at December 31, 1997
primarily as a result of the Coal India order and the O&K Mining acquisition.
Gross Profit
Gross profit for 1998 increased $86.2 million to $225.8 million as a result of
acquisitions, internally generated growth in Terex Lifting and general
improvements in gross profit margins. Gross profit as a percentage of net sales
for 1998 increased to 18.3% as compared to 16.6% for 1997.
25
Terex Lifting's gross profit increased $41.3 million, or 47%, to $128.5 million,
compared to $87.2 million in 1997. The increase in gross profit is driven by
acquisitions (approximately $16 million), internally generated growth and
improvement in the gross profit percentage. Gross profit as a percentage of
sales increased to 16.7% from 15.9% in 1997 driven primarily by improvements in
the Company's utility aerial device business.
Terex Earthmoving's gross profit increased $45.8 million, or 90%, to $96.5
million, compared to $50.7 million in 1997. The increase in gross profit and
gross profit as a percentage of sales, 21.1% compared to 17.6% in 1997, is
primarily related to the acquisitions in 1998.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (which include the Company's
research and development expenses) increased to $103.8 million in 1998 from
$68.5 million for 1997, reflecting the effects of the companies acquired in 1998
and 1997. However, excluding the effects of the acquisitions, selling, general
and administrative expenses as a percentage of sales decreased to 7.4% from 8.1%
in 1997. Terex Earthmoving's selling, general and administrative expenses
increased $28.8 million to $54.8 million for 1998 primarily due to the effect of
the 1998 acquisitions. Terex Lifting's selling, general and administrative
expenses increased to $46.4 million from $40.0 million in 1997, reflecting the
1998 and 1997 acquisitions. Selling, general and administrative expenses as a
percentage of sales, however, decreased to 6.0% from 7.3% in 1997. Other
increased slightly to $2.6 million in 1998 as compared to $2.5 million in 1997.
See "Business--Research and Development" for a discussion of the Company's
engineering expenses.
Income (Loss) from Operations
Income from operations for the Company increased $50.9 million, or 72%, to
$122.0 million, compared to $71.1 million in 1997. Income from operations as a
percentage of sales increased to 9.9% compared to 8.4% in 1997.
Terex Lifting's income from operations increased $34.9 million, or 74%, to $82.1
million, as compared to $47.2 million in 1997. The increase is the result of
acquisitions (approximately $9 million), internal growth primarily driven by
strong performances within the Company's crane and utility aerial businesses,
and continuing cost control efforts.
Terex Earthmoving's income from operations increased $17.0 million, or 69%, to
$41.7 million, compared to $24.7 million in 1997. As a percentage of sales,
income from operations increased to 9.1% from 8.6% in 1997. The increase in both
dollars and as a percentage is driven primarily by acquisitions.
Interest Expense
Net interest expense increased to $44.5 million for 1998 from $38.5 million in
1997 as a result of higher average debt levels due to the 1998 acquisitions. The
effect of the increased average debt levels was somewhat offset by the lower
interest rates due to the redemption by the Company of $166.7 million of the
Senior Secured Notes on March 6, 1998.
Extraordinary Items
During 1998, the Company recorded a charge of $38.3 million to recognize a loss
on the early extinguishment of debt in connection with the redemption of its
Senior Secured Notes and the refinancing of the Company's bank credit
facilities.
The Company recorded a charge of $2.6 million in 1997 to recognize a loss on the
early extinguishment of debt in connection with a debt refinancing in April
1997. Additionally, the Company recorded a charge of $12.2 million to recognize
a loss on the early extinguishment of debt in connection with the September 1997
redemption of $83.3 million of the Senior Secured Notes.
LIQUIDITY AND CAPITAL RESOURCES
Net cash of $5.0 million was provided by operating activities during the year
ended December 31, 1999. During this period, approximately $132 million was
provided by operating results before depreciation, amortization and
capitalization of deferred taxes, and approximately $127 million was invested in
working capital. The investment in working capital was the result of a decision
to invest in the Terex Lifting business in Europe, the impact of the Coal India
order on fourth quarter receivables and a general increase in business activity.
Net cash used in investing activities was $553.0 million during the year ended
December 31, 1999, primarily related to the acquisitions of Powerscreen,
Cedarapids and the other companies acquired in 1999. Net cash provided by
26
financing activities was $657.2 million during the year ended December 31, 1999.
As described below, cash was provided by the net proceeds from the issuance of
Terex's 8-7/8% Series C Senior Subordinated Notes due 2008, issuance of common
stock and additional borrowings from Terex's new bank credit facility. Cash and
cash equivalents totaled $133.3 million at December 31, 1999.
Including the seven 1999 acquisitions (see Note B --"Acquisitions" in the Notes
to the Consolidated Financial Statements), since the beginning of 1995 Terex has
invested approximately $973 million to strengthen and expand its core businesses
through seventeen strategic acquisitions. Terex expects that acquisitions and
new product development will continue to be important components of its growth
strategy and is continually reviewing acquisition opportunities. The Company
will continue to pursue strategic acquisitions, some of which could individually
or in the aggregate be material, which complement the Company's core operations,
offer cost reduction opportunities as well as distribution and purchasing
synergies and provide product diversification.
On March 9, 1999, the Company issued $100.0 million of its 8-7/8% Series C
Senior Subordinated Notes due 2008. The net proceeds from the offering were used
to prepay scheduled principal payments due through March 31, 2000 of
approximately $30.0 million with respect to Term A and Term B indebtedness under
Terex's bank credit facility, to repay outstanding revolving credit indebtedness
and for acquisitions.
On June 22, 1999, the Company issued 3.5 million shares of common stock in a
public offering for net proceeds to the Company of $103.7 million.
On July 2, 1999, the Company entered into a new bank credit facility for a term
loan of up to $325 million to provide the funds necessary to acquire the
outstanding share capital of Powerscreen and for other general corporate
purposes. This credit facility was subsequently amended and restated on August
23, 1999 to provide an additional term loan of up to $125 million to acquire
Cedarapids. The term loans under this facility mature in March 2006 and bear
interest, at the Company's option, at a rate of 3.00% to 3.50% per annum in
excess of the adjusted Eurodollar rate or 2.00% to 2.50% in excess of the prime
rate.
In conjunction with the Company's new bank credit facility, in July 1999 the
Company received a separate $50 million letter of credit facility. Letters of
credit issued under this facility do not decrease availability under the
Company's $125 million revolving credit facility.
On July 28, 1999, the Company issued an additional 2 million shares of common
stock for net proceeds to the Company of approximately $59 million. The shares
were sold in a transaction initiated by a fund manager on behalf of one of its
funds.
Debt reduction and an improved capital structure are major focal points for the
Company. In this regard, the Company has recently announced its intention to
repay $200 million of debt by the end of 2000 from working capital reduction and
free cash flow. On March 9, 2000, the Company also announced that its Board of
Directors has authorized the repurchase of up to 2 million shares of the
Company's common stock over the next 12 months from cash on hand. In addition,
the Company regularly reviews its alternatives to improve its capital structure
and to reduce debt service through debt refinancings, issuance of equity, asset
sales, including strategic acquisitions and dispositions of business units, or
any combination thereof.
The Company's businesses are working capital intensive and require funding for
purchases of production and replacement parts inventories, capital expenditures
for repair, replacement and upgrading of existing facilities, as well as
financing of receivables from customers and dealers. The Company has significant
debt service requirements including semi-annual interest payments on its 8-7/8%
senior subordinated notes and monthly interest payments on the Company's bank
credit facilities. Management believes that cash generated from operations,
together with the Company's bank credit facilities, provides the Company with
adequate liquidity to meet the Company's operating and debt service
requirements.
CONTINGENCIES AND UNCERTAINIES
Internal Revenue Services
In December 1994, the Company received an examination report from the IRS
proposing a large tax deficiency for 1987 through 1989. The examination report
raised many issues. Among these issues are substantiation for certain tax
deductions and whether the Company was able to use certain NOLs to offset
taxable income. In April 1995, the Company filed an administrative appeal to the
examination.
On November 18, 1999, Terex announced that it had resolved the IRS audit
regarding the Company's federal income tax returns for the years 1987 through
1989. As a result of the completion of the audit, the IRS will no longer
challenge the Company's right to use certain NOLs. Furthermore, because of the
existence of substantial NOLs, Terex will not owe any tax. However, due to
timing issues associated with NOL carrybacks and the substantial amount of time
which has elapsed since the years in question, Terex has accrued approximately
$7.7 million in interest expense, all of which will be tax deductible.
27
See Note I - "Income Taxes" in the Notes to the Consolidated Financial
Statements for additional information concerning income tax matters.
Year 2000 Issue
The Year 2000 ("Y2K") problem is the result of computer programs being written
using two digits rather than four to define the applicable year. The Company did
not experience any material problems as a result of the change over to the year
2000. The total cost associated with required modifications to become Y2K
compliant did not exceed $5 million, and a significant portion of these costs
were planned upgrades to the Company's financial and operating systems.
Foreign Currencies and Interest Rate Risk
The Company's products are sold in over 50 countries around the world and,
accordingly, revenues of the Company are generated in foreign currencies, while
the costs associated with those revenues are only partly incurred in the same
currencies. The major foreign currencies, among others, in which the Company
does business are the British Pound, the French Franc, the German Mark, the
Irish Punt and the Italian Lira. The Company may, from time to time, hedge
specifically identified committed cash flows in foreign currencies using forward
currency sale or purchase contracts. Such foreign currency contracts have not
historically been material in amount.
Because certain of the Company's obligations, including indebtedness under the
Company's bank credit facility, will bear interest at floating rates, an
increase in interest rates could adversely affect, among other things, the
results of operations of the Company. The Company has entered into interest
protection arrangements with respect to approximately $270 million of the
principal amount of its indebtedness under its bank credit facility fixing
interest at various rates between 5.81% and 9.44%.
Forward-Looking Information
Certain information in this Annual Report includes forward looking statements
regarding future events or the future financial performance of the Company that
involve certain contingencies and uncertainties, including those discussed above
in the section entitled "Contingencies and Uncertainties". In addition, when
included in this Annual Report or in documents incorporated herein by reference,
the words "may," "expects," "intends," "anticipates," "plans," "projects,"
"estimates" and the negatives thereof and analogous or similar expressions are
intended to identify forward-looking statements. However, the absence of these
words does not mean that the statement is not forward-looking. The Company has
based these forward-looking statements on current expectations and projections
about future events. These statements are not guarantees of future performance.
Such statements are inherently subject to a variety of risks and uncertainties
that could cause actual results to differ materially from those reflected in
such forward-looking statements. Such risks and uncertainties, many of which are
beyond the Company's control, include, among others: the sensitivity of
construction and mining activity to interest rates, government spending and
general economic conditions; the ability to successfully integrate acquired
businesses; the retention of key management personnel; foreign currency
fluctuations; the Company's businesses are very competitive and may be affected
by pricing, product initiatives and other actions taken by competitors; the
effects of changes in laws and regulations; the Company's business is
international in nature and is subject to exchange rates between currencies, as
well as international politics; the ability of suppliers to timely supply parts
and components at competitive prices and the Company's ability to timely
manufacture and deliver products to customers; compliance with the restrictive
covenants contained in the Company's debt agreements; continued use of net
operating loss carryovers; compliance with applicable environmental laws and
regulations; and other factors. Actual events or the actual future results of
the Company may differ materially from any forward looking statement due to
these and other risks, uncertainties and significant factors. The
forward-looking statements contained herein speak only as of the date of this
Annual Report and the forward-looking statements contained in documents
incorporated herein by reference speak only as of the date of the respective
documents. The Company expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statement
contained or incorporated by reference in this Annual Report to reflect any
change in the Company's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.
28
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks which exist as part of its
ongoing business operations and the Company uses derivative financial
instruments, where appropriate, to manage these risks. The Company, as a matter
of policy, does not engage in trading or speculative transactions. See Note A in
the Notes to the Consolidated Financial Statements for further information on
accounting policies related to derivative financial statements.
Foreign Exchange Risk
The Company is exposed to fluctuations in foreign currency cash flows related to
third party purchases and sales, intercompany product shipments and intercompany
loans. The Company is also exposed to fluctuations in the value of foreign
currency investments in subsidiaries and cash flows related to repatriation of
these investments. Additionally, the Company is exposed to volatility in the
translation of foreign currency earnings to U.S. Dollars. Primary exposures
include the U.S. Dollars versus functional currencies of the Company's major
markets which include the British Pound, German Mark, French Franc, Irish Punt
and Italian Lira. The Company assesses foreign currency risk based on
transactional cash flows and identifies naturally offsetting positions and
purchases hedging instruments to protect anticipated exposures. At December 31,
1999, the Company had foreign exchange contracts, which were hedges of firm
commitments, totaling $19.8 million. The fair market value of these
arrangements, which represents the cost to settle these contracts, were
liabilities of approximately $0.2 million at December 31, 1999.
Interest Rate Risk
The Company is exposed to interest rate volatility with regard to future
issuances of fixed rate debt and existing issuances of variable rate debt.
Primary exposure includes movements in the U.S. prime rate and London Interbank
Offer Rate ("LIBOR"). The Company uses interest rate swaps to reduce interest
rate volatility. At December 31, 1999, the Company had approximately $270
million of interest rate swaps fixing interest rates between 5.81% and 9.44%.
The fair market value of these arrangements, which represents the cost to settle
these contracts, was an asset of approximately $1 million at December 31, 1999.
At December 31, 1999, the Company performed a sensitivity analysis for the
Company's derivatives and other financial instruments that have interest rate
risk. The Company calculated the pretax earnings effect on its interest
sensitive instruments. Based on this sensitivity analysis, the Company has
determined that an increase of 10% in the Company's weighted average interest
rates at December 31, 1999 would have increased interest expense by
approximately $5 million in 1999.
29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Unaudited Quarterly Financial Data
Summarized quarterly financial data for 1999 and 1998 are as follows (in
millions, except per share amounts):
1999 1998
------------------------------------ ---------------------------------------
Fourth Third Second First Fourth Third Second First
------------------------------------ ---------------------------------------
Net sales $ 489.6 $ 495.6 $ 448.1 $ 423.3 $ 320.4 $ 318.7 $ 333.5 $ 260.6
Gross profit 80.6 88.5 76.7 70.9 61.7 58.7 60.6 44.8
Income (loss) before extraordinary items 86.6 29.9 30.4 26.0 18.1 19.7 20.6 14.4
Net income (loss) 86.6 29.9 30.4 26.0 18.1 19.7 20.6 (23.9)
Per share:
Basic
Income (loss) before extraordinary items $ 3.15 $ 1.12 $ 1.40$ 1.25 $ 0.87 $ 0.95 $ 1.00$ 0.70
Net income (loss) 3.15 1.12 1.40 1.25 0.87 0.95 1.00 (1.16)
Diluted
Income (loss) before extraordinary items $ 3.04 $ 1.07 $ 1.30$ 1.16 $ 0.81 $ 0.88 $ 0.92$ 0.65
Net income (loss) 3.04 1.07 1.30 1.16 0.81 0.88 0.92 (1.08)
The accompanying unaudited quarterly financial data of the Company have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with Item 302 of Regulation S-K. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been made and were of a normal recurring nature except for those discussed
below.
During the fourth quarter of 1999, the Company announced the resolution of an
IRS audit, which started in December 1994, regarding its income tax returns for
the years 1987 through 1989. The resolution of this audit did not require
payment of tax. This net tax benefit resulted from the capitalization of the
deferred taxes. (See Item 3., Legal Proceedings and Note I to the Notes to the
Consolidated Financial Statements.)
Also in the fourth quarter of 1999, the Company announced the closing of its
aerial work platform scissor lift manufacturing plant in Milwaukee, Wisconsin.
As a result of this action the Company had a one-time charge of $9.9 million
related to the impairment of goodwill and certain closure costs. These costs
have been included in cost of sales in the statement of income.
Furthermore, in the fourth quarter of 1999, the Company recorded income of $1.4
million related to a favorable legal settlement partially offset by the cost of
a headcount reduction at its manufacturing facility in Germany. These items have
been reflected in selling, general and administrative expenses in the statement
of income.
Extraordinary Items
In the first quarter of 1998, the Company recognized extraordinary losses on the
early extinguishment of debt -- $1.9 million in connection with the refinancing
of its then existing credit facility and $36.4 million in connection with the
repurchase of its Senior Secured Notes.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
30
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Items 10 through 13 is incorporated by reference to
the definitive Terex Corporation Proxy Statement to be filed with the Securities
and Exchange Commission not later than 120 days after the end of the fiscal year
covered by this Annual Report on Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Financial Statement Schedules.
See "Index to Consolidated Financial Statements and Financial Statement
Schedule" on Page F-1.
(3) Exhibits
See "Index to Exhibits" on Page E-1.
(b) Reports on Form 8-K
During the quarter ended December 31, 1999, the Company filed the following
Current Reports on Form 8-K:
- - A report on form 8-K/A dated July 27, 1999 was filed on October 8, 1999.
The amendment provided the financial statements and pro forma information
required to be filed in connection with the acquisition of Powerscreen
International plc.
- - A report on Form 8-K dated November 18, 1999 was filed on November 18,
1999, announcing the resolution of the Internal Revenue Service audit
regarding the Company's Federal income tax returns for the years 1987
through 1989.
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TEREX CORPORATION
By: /s/ Ronald M. DeFeo March 24, 2000
----------------------------------------
Ronald M. DeFeo,
Chairman, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Name Title Date
/s/ Ronald M. DeFeo Chairman, Chief Executive Officer, March 24, 2000
- --------------------------- and Director
Ronald M. DeFeo (Principal Executive Officer)
/s/ Joseph F. Apuzzo Chief Financial Officer March 24, 2000
- --------------------------- (Principal Financial Officer)
Joseph F. Apuzzo
/s/ Kevin M. O'Reilly Controller March 24, 2000
- --------------------------- (Principal Accounting Officer)
Kevin M. O'Reilly
/s/ G. Chris Andersen Director March 24, 2000
- ---------------------------
G. Chris Andersen
/s/ Don DeFosset Director March 24, 2000
- ---------------------------
Don DeFosset
/s/ Donald P. Jacobs Director March 24, 2000
- ---------------------------
Donald P. Jacobs
/s/ William H. Fike Director March 24, 2000
- ---------------------------
William H. Fike
/s/ Marvin B. Rosenberg Director March 24, 2000
- ---------------------------
Marvin B. Rosenberg
/s/ David A. Sachs Director March 24, 2000
- ---------------------------
David A. Sachs
32
THIS PAGE IS INTENTIONALLY BLANK
NEXT PAGE IS NUMBERED "F-1"
33
TEREX CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements and Financial Statement Schedule
Page
TEREX CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 AND 1998
AND FOR EACH OF THE THREE YEARS
IN THE PERIOD ENDED DECEMBER 31, 1999
Report of independent accountants......................................F - 2
Consolidated statement of income ......................................F - 3
Consolidated balance sheet.............................................F - 4
Consolidated statement of changes in stockholders' equity (deficit)....F - 5
Consolidated statement of cash flows...................................F - 6
Notes to consolidated financial statements.............................F - 7
PPM CRANES, INC.
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 AND 1998
AND FOR EACH OF THE THREE YEARS
IN THE PERIOD ENDED DECEMBER 31, 1999
Report of independent accountants......................................F - 33
Consolidated statement of operations...................................F - 34
Consolidated balance sheet.............................................F - 35
Consolidated statement of changes in shareholders' deficit.............F - 36
Consolidated statement of cash flows...................................F - 37
Notes to consolidated financial statements.............................F - 38
FINANCIAL STATEMENT SCHEDULE
Schedule II -- Valuation and Qualifying Accounts and Reserves..........F - 45
All other schedules for which provision is made in the applicable regulations of
the Securities and Exchange Commission are not required under the related
instructions or are not applicable, and therefore have been omitted.
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of Terex Corporation
In our opinion, the Terex Corporation consolidated financial statements listed
in the accompanying index on page F-1 present fairly, in all material respects,
the financial position of Terex Corporation and its subsidiaries (the "Company")
at December 31, 1999 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
In addition, in our opinion, the financial statement schedule listed in the
accompanying index on page F-1 presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Stamford, Connecticut
February 25, 2000
F-2
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share amounts)
Year Ended December 31,
-----------------------------
1999 1998 1997
--------- --------- ---------
NET SALES.............................................. $1,856.6 $1,233.2 $ 842.3
COST OF GOODS SOLD..................................... 1,539.9 1,007.4 702.7
--------- --------- ---------
GROSS PROFIT........................................ 316.7 225.8 139.6
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........... 138.4 103.8 68.5
--------- --------- ---------
INCOME FROM OPERATIONS.............................. 178.3 122.0 71.1
OTHER INCOME (EXPENSE)
Interest income..................................... 5.3 2.7 0.9
Interest expense.................................... (82.8) (47.2) (39.4)
Amortization of debt issuance costs................. (2.6) (2.1) (2.6)
Other income (expense) - net........................ 0.2 (0.9) 1.0
--------- --------- ---------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS.. 98.4 74.5 31.0
BENEFIT FROM (PROVISION FOR) INCOME TAXES.............. 74.5 (1.7) (0.7)
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEMS.................... 172.9 72.8 30.3
EXTRAORDINARY LOSS ON RETIREMENT OF DEBT............... --- (38.3) (14.8)
--------- --------- ---------
NET INCOME ......................................... 172.9 34.5 15.5
LESS PREFERRED STOCK ACCRETION......................... --- --- (4.8)
--------- --------- ---------
INCOME APPLICABLE TO COMMON STOCK................... $ 172.9 $ 34.5 $ 10.7
========= ========= =========
PER COMMON SHARE:
Basic
Income before extraordinary items................ $ 7.14 $ 3.52 $ 1.57
Extraordinary loss on retirement of debt......... --- (1.85) (0.91)
========= ========= =========
Net income........................................ $ 7.14 $ 1.67 $ 0.66
========= ========= =========
Diluted
Income before extraordinary items................ $ 6.75 3.25 1.44
Extraordinary loss on retirement of debt......... --- (1.71) (0.84)
--------- --------- ---------
Net income....................................... $ 6.75 $ 1.54 $ 0.60
========= ========= =========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING IN PER SHARE CALCULATION:
Basic.......................................... 24.2 20.7 16.2
Diluted........................................ 25.6 22.4 17.7
The accompanying notes are an integral part of these financial statements.
F-3
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions, except par value)
December 31,
------------------------
1999 1998
----------- -----------
CURRENT ASSETS
Cash and cash equivalents................................................................... $ 133.3 $ 25.1
Trade receivables (less allowance of $5.8 and $5.6 as of December 31, 1999 and 1998, 429.2 249.8
respectively)..................................................................................
Net inventories............................................................................. 665.6 472.8
Deferred taxes.............................................................................. 47.2 ---
Other current assets........................................................................ 40.0 23.9
----------- -----------
Total Current Assets..................................................... 1,315.3 771.6
LONG-TERM ASSETS
Property, plant and equipment - net......................................................... 172.8 99.5
Goodwill.................................................................................... 554.7 240.9
Deferred taxes.............................................................................. 55.3 ---
Other assets................................................................................ 79.4 39.2
----------- -----------
TOTAL ASSETS................................................................................... $ 2,177.5 $ 1,151.2
=========== ===========
CURRENT LIABILITIES
Notes payable and current portion of long-term debt......................................... $ 57.6 $ 44.7
Trade accounts payable...................................................................... 297.0 226.9
Accrued compensation and benefits........................................................... 27.3 24.7
Accrued warranties and product liability.................................................... 55.9 36.0
Other current liabilities................................................................... 141.7 93.1
----------- -----------
Total Current Liabilities................................................. 579.5 425.4
NON CURRENT LIABILITIES
Long-term debt, less current portion........................................................ 1,098.8 586.6
Other....................................................................................... 66.4 41.1
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Warrants to purchase common stock........................................................... 0.8 0.8
Equity rights................................................................................ 0.8 3.1
Common Stock, $0.01 par value --
authorized 150.0 shares; issued and outstanding 27.5 and 20.8 shares at December 31, 1999
and 1998, respectively..................................................................... 0.3 0.2
Additional paid-in capital.................................................................. 355.0 179.0
Retained earnings (accumulated deficit)..................................................... 92.0 (80.9)
Accumulated other comprehensive income...................................................... (16.1) (4.1)
----------- -----------
Total Stockholders' Equity.................................................. 432.8 98.1
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................................... $ 2,177.5 $ 1,151.2
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-4
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(in millions)
Retained
Earnings Acumulated
Additional (Accumu- Other
Equity Common Paid-in lated Comprehensive Total
Warrants Rights Stock Capital Deficit) Income
--------- ---------- ---------- ---------- ----------- -------------- ------------
BALANCE AT
DECEMBER 31, 1996....... $ 3.2 $ --- $ 0.1 $ 55.8 $ (126.1) $ (4.7) $ (71.7)
Net income................. --- --- --- --- 15.5 --- 15.5
Other Comprehensive Income:
Conversion of Series
B preferred stock...... --- --- --- 1.0 --- --- 1.0
Translation adjustment. --- --- --- --- --- (3.4) (3.4)
Pension liability
adjustment............. --- --- --- --- --- 0.2 0.2
---------
Comprehensive Income....... 13.3
---------
Accretion of carrying value
of redeemable preferred
stock to redemption value --- --- --- --- (4.8) --- (4.8)
Conversion of Warrants..... (2.4) --- --- 2.4 --- --- ---
Issuance of Common Stock... --- --- 0.1 106.1 --- --- 106.2
Reclassification of equity
rights from non-current
liabilities.............. --- 3.2 --- --- --- --- 3.2
Exchange of Preferred Stock
of a subsidiary for
common stock............. --- --- --- 13.4 --- --- 13.4
---------- ---------- ---------- ---------- ----------- -------------- ------------
BALANCE AT
DECEMBER 31, 1997........ 0.8 3.2 0.2 178.7 (115.4) (7.9) 59.6
Net income................ --- --- --- --- 34.5 --- 34.5
Other Comprehensive Income:
Translation adjustment. --- --- --- --- --- 3.8 3.8
---------
Comprehensive Income....... 38.3
---------
Issuance of Common Stock... --- --- --- 0.8 --- --- 0.8
Exercise of Equity Rights.. --- (0.1) --- (0.5) --- --- (0.6)
---------- ---------- ---------- ---------- ----------- -------------- ---------
BALANCE AT
DECEMBER 31, 1998........ 0.8 3.1 0.2 179.0 (80.9) (4.1) 98.1
Net income................. --- --- --- --- 172.9 --- 172.9
Other Comprehensive Income:
Translation adjustment. --- --- --- --- --- (13.3) (13.3)
Pension liability
adjustment........... --- --- --- --- --- 1.3 1.3
---------
Comprehensive Income....... 160.9
---------
Exercise of Equity Rights.. --- (2.3) --- 1.6 --- --- (0.7)
Issuance of common stock... --- --- 0.1 174.4 --- --- 174.5
---------- ---------- ---------- ---------- ----------- -------------- ---------
BALANCE AT
DECEMBER 31, 1999...... $ 0.8 $ 0.8 $ 0.3 $ 355.0 $ 92.0 $ (16.1) $ 432.8
========== ========== ========== ========== =========== ============== =========
The accompanying notes are an integral part ofthese financial statements.
F-5
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Year Ended December 31,
------------------------------------------
1999 1998 1997
--------------- ------------- ------------
OPERATING ACTIVITIES
Net Income................................................................$ 172.9 $ 34.5 $ 15.5
Adjustments to reconcile net income to cash used in operating activities:
Depreciation .......................................................... 17.6 10.1 8.2
Amortization.............................................................. 14.6 8.3 6.1
Extraordinary loss on retirement of debt............................... --- 38.3 14.8
(Gain)loss on sale of fixed assets..................................... (0.1) --- ---
Deferred taxes......................................................... (82.8) --- ---
Impairment Charges and asset writedowns................................ 9.9 --- ---
Other.................................................................. --- --- 0.1
Changes in operating assets and liabilities
(net of effects of acquisitions):
Trade receivables.................................................. (79.4) (45.5) (4.8)
Net inventories.................................................... (48.1) (106.1) (11.5)
Trade accounts payable............................................. 7.1 35.7 6.5
Other, net......................................................... (6.7) 5.2 (35.2)
--------------- ------------- -------------
Net cash provided by (used in) operating activities.............. 5.0 (19.5) (0.3)
--------------- ------------- -------------
INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired........................ (535.6) (211.3) (97.2)
Capital expenditures................................................... (21.4) (13.1) (9.9)
Proceeds from sale of assets........................................... 4.0 2.4 8.5
--------------- ------------- -------------
Net cash used in investing activities............................ (553.0) (222.0) (98.6)
--------------- ------------- -------------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt, net of issuance costs........ 534.6 513.6 ---
Net borrowings (repayments) under revolving line of credit agreements.. (17.3) (71.5) 99.7
Principal repayments of long-term debt................................. (33.7) (170.8) (83.7)
Payment of premiums on early extinguishment of debt.................... --- (29.0) (9.9)
Redemption of preferred stock.......................................... --- --- (45.4)
Issuance of common stock............................................... 162.8 --- 104.6
Other.................................................................. 10.8 (3.0) (1.1)
--------------- ------------- -------------
Net cash provided by financing activities........................ 657.2 239.3 64.2
--------------- ------------- -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS..............
(1.0) (1.4) (8.6)
--------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...................... 108.2 (3.6) (43.3)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.......................... 25.1 28.7 72.0
--------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................................$ 133.3 $ 25.1 $ 28.7
=============== ============= =============
The accompanying notes are an integral part of these financial statements.
F-6
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
(dollar amounts in millions, unless otherwise noted, except per share amounts)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The Consolidated Financial Statements include the
accounts of Terex Corporation and its majority owned subsidiaries ("Terex" or
the "Company"). All material intercompany balances, transactions and profits
have been eliminated. The equity method is used to account for investments in
affiliates in which the Company has an ownership interest between 20% and 50%.
Investments in entities in which the Company has an ownership interest of less
than 20% are accounted for on the cost method or at fair value in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 115 "Accounting
for Certain Investments in Debt and Equity Securities."
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents. Cash equivalents consist of highly liquid investments
with original maturities of three months or less. The carrying amount of cash
and cash equivalents approximates their fair value. Cash and cash equivalents at
December 31, 1999 and 1998 include $8.6 and $1.1, respectively, the use of which
was not immediately available.
Inventories. Inventories are stated at the lower of cost or market value. Cost
is determined by the first-in, first-out ("FIFO") method.
Debt Issuance Costs. Debt issuance costs incurred in securing the Company's
financing arrangements are capitalized and amortized over the term of the
associated debt. Capitalized debt issuance costs related to debt that is retired
early are charged to expense at the time of retirement. Debt issuance costs
before amortization totaled $25.2 and $14.2 at December 31, 1999 and 1998,
respectively. During 1999, 1998 and 1997, the Company amortized $2.6, $2.1 and
$2.6, respectively, of capitalized debt issuance costs; in addition, $7.7 of
such costs were charged to extraordinary loss on retirement of debt in 1998.
Intangible Assets. Intangible assets include purchased patents, trademarks and
other specifically identifiable assets arising from business combinations and
are amortized on a straight-line basis over the respective estimated useful
lives not exceeding seven years.
Goodwill. Goodwill, representing the difference between the total purchase price
and the fair value of assets (tangible and intangible) and liabilities at the
date of acquisition, is being amortized on a straight-line basis over between
fifteen and forty years. Accumulated amortization is $27.1 and $15.1 at December
31, 1999 and 1998, respectively.
Property, Plant and Equipment. Property, plant and equipment are stated at cost.
Expenditures for major renewals and improvements are capitalized while
expenditures for maintenance and repairs not expected to extend the life of an
asset beyond its normal useful life are charged to expense when incurred. Plant
and equipment are depreciated over the estimated useful lives of the assets
under the straight-line method of depreciation for financial reporting purposes
and both straight-line and other methods for tax purposes.
Impairment of Long Lived Assets. The Company's policy is to assess the
realizability of its long lived assets and to evaluate such assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets (or group of assets) may not be recoverable.
Impairment is determined to exist if the estimated future undiscounted cash
flows is less than its carrying value. The amount of any impairment then
recognized would be calculated as the difference between estimated future
discounted cash flows and the carrying value of the asset.
Revenue Recognition. Revenue and costs are generally recorded when products are
shipped and invoiced to either independently owned and operated dealers or to
customers. Certain new units may be invoiced prior to the time customers take
physical possession. Revenue is recognized in such cases only when the customer
has a fixed commitment to purchase the units, the units have been completed,
F-7
tested and made available to the customer for pickup or delivery, and the
customer has requested that the Company hold the units for pickup or deliver at
a time specified by the customer. In such cases, the units are invoiced under
the Company's customary billing terms, title to the units and risks of ownership
pass to the customer upon invoicing, the units are segregated from the Company's
inventory and identified as belonging to the customer and the Company has no
further obligations under the order.
Accrued Warranties and Product Liability. The Company records accruals for
potential warranty and product liability claims based on the Company's claim
experience. Warranty costs are accrued at the time revenue is recognized. The
Company provides self-insurance accruals for estimated product liability
experience on known claims and for claims anticipated to have been incurred
which have not yet been reported.
Non Pension Postretirement Benefits. The Company provides postretirement
benefits to certain former salaried and hourly employees and certain hourly
employees covered by bargaining unit contracts that provide such benefits and
has elected the delayed recognition method of adoption of the accounting
standard related to the benefits. (See Note K -- "Retirement Plans.")
Foreign Currency Translation. Assets and liabilities of the Company's
international operations are translated at year-end exchange rates. Income and
expenses are translated at average exchange rates prevailing during the year.
For operations whose functional currency is the local currency, translation
adjustments are accumulated in the Cumulative Translation Adjustment component
of Stockholders' Equity. Gains or losses resulting from foreign currency
transactions are recorded in the accounts based on the underlying transaction.
Financial Instruments. The Company may from time to time use foreign exchange
contracts to hedge recorded balance sheet amounts related to certain
international operations and firm commitments that create currency exposures.
The Company does not enter into speculative contracts. Gains and losses on
hedges of assets and liabilities are recognized in income as offsets to the
gains and losses from the underlying hedged amounts. Gains and losses on hedges
of firm commitments are recorded on the basis of the underlying transaction. At
December 31, 1999 and 1998 the Company had foreign exchange contracts, which
were hedges of firm commitments, totaling $19.8 and $11.0, respectively. At
December 31, 1999, the fair value of these contracts approximates a $0.2
liability.
As certain of the Company's obligations, including indebtedness under the 1998
Bank Credit facility and the 1999 Bank Credit Facility (as defined in Note G),
bear interest at floating rates, the Company entered into certain interest
protection arrangements. At December 31, 1999, the Company had approximately
$270 of such interest protection arrangements fixing interest at various rates
between 5.81% and 9.44%. The differentials to be received or paid are recognized
as adjustments to interest expense. The fair market value of these arrangements
was an asset of approximately $1.0 at December 31, 1999.
Environmental Policies. Environmental expenditures that relate to current
operations are either expensed or capitalized depending on the nature of the
expenditure. Expenditures relating to conditions caused by past operations that
do not contribute to current or future revenue generation are expensed.
Liabilities are recorded when environmental assessments and/or remedial actions
are probable, and the costs can be reasonably estimated. Such amounts were not
material at December 31, 1999 and 1998.
Research and Development Costs. Research and development costs are expensed as
incurred. Such costs incurred in the development of new products or significant
improvements to existing products are included in Selling, General and
Administrative Expenses.
Income Taxes. The Company accounts for income taxes using the asset and
liability method. This approach requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of temporary
differences between the carrying amounts and the tax bases of assets and
liabilities (see Note I -- "Income Taxes").
Earnings Per Share. Basic earnings per share is computed by dividing net income
for the period by the weighted average number of shares of Terex common stock
outstanding. Diluted earnings per share is computed by dividing net income for
the period by the weighted average number of shares of Terex common stock
outstanding and dilutive potential common shares.
Hedging Activities. In June 1998, the Financial Accounting Standards Board
issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which establishes a new model for accounting for derivative and
hedging activities and supersedes and amends a number of existing standards.
F-8
Upon initial application, all derivatives are required to be recognized in the
statement of financial position as either assets or liabilities and measured at
fair value. Changes in the fair value of derivatives are recorded each period in
current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. In addition, all hedging relationships must be reassessed
and documented pursuant to the provisions of SFAS No. 133. In June 1999, the
Financial Accounting Standards Board delayed the effective date of SFAS No. 133
by one year so that it would be effective for the Company beginning in 2001. The
Company does not expect that adoption of this statement will have a significant
impact on its financial position or results of operations.
NOTE B -- ACQUISITIONS
On April 1, 1999, the Company completed the purchase of Amida Industries, Inc.
("Amida"). Amida manufactures and markets light construction equipment
consisting of light towers, concrete products and traffic safety devices at its
facility in Rock Hill, South Carolina.
The Company announced on June 15, 1999 an offer to acquire all of the issued and
to be issued share capital of Powerscreen International plc ("Powerscreen"). On
July 27, 1999, the effective date of acquisition, Terex declared the offer for
Powerscreen unconditional, with respect to all valid acceptances received.
Powerscreen, headquartered in Dungannon, Northern Ireland, is a manufacturer and
marketer of screening and crushing equipment for the quarrying, construction and
demolition industries. The purchase price of GBP 181 (approximately $294) was
financed with a loan under a bank credit facility maturing March 2006 (see Note
G - "Long-Term Obligations").
On August 26, 1999, the Company acquired Cedarapids, Inc. ("Cedarapids") for
approximately $170. Cedarapids, headquartered in Cedar Rapids, Iowa, is a
manufacturer and marketer of mobile crushing and screening equipment, asphalt
pavers and asphalt material mixing plants. The acquisition was financed through
cash on hand and approximately $125 in additional debt (see Note G - "Long-Term
Obligations").
On September 20, 1999, the Company completed the acquisition of certain assets
and liabilities of Bartell Industries, Inc. ("Bartell"), a manufacturer and
marketer of concrete finishing equipment located near Toronto, Canada.
On September 29, 1999, the Company completed the acquisition of certain assets
and liabilities of Re-Tech, a manufacturer and marketer of trommels, conveyors,
and picking stations located in Pennsylvania.
On November 3, 1999, the Company completed the acquisition of certain assets of
the Material Handling Business of Teledyne Specialty Equipment
("Princeton/Kooi"). Princeton/Kooi manufacturers and markets truck mounted lift
trucks at its facilities in Canal Winchester, Ohio and Vrouwenparochie, The
Netherlands.
On December 1, 1999, the Company completed the purchase of Franna Cranes Pty.
Ltd. ("Franna"). Franna manufactures and markets mobile cranes at its facility
in Brisbane, Australia.
The Amida, Powerscreen, Cedarapids, Bartell, Re-Tech, Princeton/Kooi and Franna
acquisitions (the "Acquired Businesses") are being accounted for using the
purchase method, with the purchase price allocated to the assets acquired and
the liabilities assumed based upon their respective estimated fair values at the
date of acquisition. The excess of purchase price over the net assets acquired
(approximately $302) is being amortized on a straight-line basis over 40
years.
The Company is in the process of completing certain valuations, appraisals and
actuarial and other studies for purposes of determining certain fair values. The
Company is also estimating costs related to plans to integrate the activities of
the Acquired Businesses into the Company, including plans to exit certain
activities and consolidate and restructure certain functions. The Company may
revise its preliminary allocations as additional information is obtained. In
addition, with respect to certain of the Acquired Businesses, the Company is in
the process of finalizing the purchase price with the seller and any adjustment
will be reflected in goodwill.
On January 5, 1998, the Company completed the purchase of Payhauler Corp.
("Payhauler"). Payhauler, which is part of the Terex Earthmoving segment,
manufactures four-wheel drive off-highway trucks.
On March 31, 1998, the Company purchased all of the outstanding shares of O&K
Mining GmbH ("O&K Mining") from O&K Orenstein & Koppel AG ("Orenstein & Koppel")
for net aggregate consideration of approximately $168, subject to certain
post-closing adjustments. The transaction was financed through the issuance of
the Company's 1998 Senior Subordinated Notes (as defined in Note G) and
borrowings under the Company's 1998 Bank Credit Facility (as defined in Note G).
F-9
O & K Mining, which is part of the Terex Earthmoving segment, is headquartered
in Dortmund, Germany, and has operations in the United States, the United
Kingdom, Australia, Canada, South Africa and Singapore. O&K Mining markets a
complete range of large hydraulic mining shovels serving the global surface
mining industry and the global construction and infrastructure development
markets. The Company has commenced litigation with the seller to finalize
adjustments to the purchase price. Any adjustment will be reflected in goodwill.
On May 4, 1998, the Company completed the purchase of Holland Lift International
B.V. ("Holland Lift"). Holland Lift, which is part of the Terex Lifting segment,
manufactures aerial work platforms at its facility near Amsterdam, the
Netherlands.
On July 31, 1998, the Company completed the acquisition of The American Crane
Corporation ("American Crane"). American Crane, which is part of the Terex
Lifting segment, manufactures lattice boom cranes at its facility in Wilmington,
North Carolina.
On November 3, 1998, the Company completed the acquisition of Italmacchine SpA
("Italmacchine"). Italmacchine, which is part of the Terex Lifting segment,
manufactures rough terrain telescopic boom forklifts at its facility near
Perugia, Italy.
On November 13, 1998, the Company completed the acquisition of Peiner HTS
("Peiner"). Peiner, which is part of the Terex Lifting segment, manufactures
tower cranes at it its facility in Trier, Germany.
On December 18, 1998, the Company completed the acquisition of Gru Comedi SpA
("Comedil"). Comedil, which is part of the Terex Lifting segment, manufactures
tower cranes at its facility in Fontanafredda, Italy.
The Payhauler, O&K Mining, Holland Lift, American Crane, Italmacchine, Peiner
and Comedil acquisitions are being accounted for using the purchase method, with
the purchase price allocated to the assets acquired and the liabilities assumed
based upon their respective estimated fair values at the date of acquisition.
The excess of purchase price over the net assets acquired (approximately $177)
is being amortized on a straight-line basis over 40 years.
Simon Access and Baraga - During 1997, the Company completed the purchase of the
industrial businesses of Simon Access division ("Simon Access") of Simon
Engineering plc and Baraga Products, Inc. and M&M Enterprises of Baraga, Inc.
(collectively, "Baraga", or the "Square Shooter Business"). The acquisitions are
being accounted for using the purchase method, with the purchase price allocated
to the assets acquired and the liabilities assumed based upon their respective
estimated fair values at the date of acquisition.
The operating results of the acquired businesses are included in the Company's
consolidated results of operations since the date of acquisition. The following
unaudited pro forma summary presents the consolidated results of operations,
including the pre-acquisition results of the acquired businesses, for the
respective period, after giving effect to certain adjustments, including
amortization of goodwill, interest expense and amortization of debt issuance
costs related to the Company's refinancings discussed in Note G.
Unaudited Pro Forma for the
Year Ended December 31,
--------------------------
1999 1998
------------ -------------
Net sales..........................................$ 2,315.6 $ 2,021.8
Income from operations............................. 220.3 179.0
Income before extraordinary items.................. 185.4 77.5
Income before extraordinary items, per share:
Basic...........................................$ 7.24 $ 3.36
Diluted.........................................$ 6.87 $ 3.13
The pro forma information is not necessarily indicative of what the actual
results of operations of the Company would have been for the periods indicated,
nor does it purport to represent the results of operations for future periods.
F-10
NOTE C -- SPECIAL CHARGES
During the fourth quarter of 1999, the Company announced the closing of its
aerial work platform scissor lift manufacturing plant in Milwaukee, Wisconsin.
As a result of this action the Company had a one-time charge of $9.9 related to
the impairment of goodwill and certain closure costs. These costs have been
included in cost of sales in the statement of income.
Also in the fourth quarter of 1999, the Company recorded income of $1.4 related
to a favorable legal settlement partially offset by the cost of a headcount
reduction at its manufacturing facility in Germany. These items have been
reflected in selling, general and administrative expenses in the statement of
income.
NOTE D -- EARNINGS PER SHARE
(in millions, except per share data)
--------------------------------------------------------------------------------------------------
1999 1998 1997
-------------------------------- -------------------------------- --------------------------------
Per- Per- Per
Share Share Share
Income Shares Amount Income Shares Amount Income Shares Amount
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Basic earnings per share
Income applicable to common
stockholders before
extraordinary items..........$ 172.9 24.2 $ 7.14 $ 72.8 20.7 $ 3.52 $ 30.3 16.2 $ 1.57.
Effect of dilutive securities
Warrants.................... --- 0.1 --- 0.1 --- 0.3
Stock Options............... --- 0.8 --- 0.8 --- 0.7
Equity Rights --- 0.5 --- 0.8 --- 0.5
---------- ---------- ---------- ---------- ---------- ---------
Income applicable to common
stockholders before
extraordinary items.......... $ 172.9 25.6 $ 6.75 $ 72.8 22.4 $ 3.25 $ 30.3 17.7 $ 1.44
========== ========== ========== ========== ========== ========== ========== ========== ==========
NOTE E -- INVENTORIES
Inventories consist of the following:
December 31,
----------------------
1999 1998
---------- -----------
Finished equipment......................... $ 235.3 $ 148.9
Replacement parts.......................... 176.8 150.9
Work-in-process............................ 81.9 59.4
Raw materials and supplies................. 171.6 113.6
---------- -----------
Net inventories.......................... $ 665.6 $ 472.8
========== ===========
NOTE F -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
December 31,
-----------------------
1999 1998
---------- ------------
Property.................................... $ 23.3 $ 13.6
Plant....................................... 97.2 44.6
Equipment................................... 112.5 90.8
---------- ------------
233.0 149.0
Less: Accumulated depreciation............. (60.2) (49.5)
---------- ------------
Net property, plant and equipment......... $ 172.8 $ 99.5
========== ============
F-11
NOTE G -- LONG-TERM OBLIGATIONS
Long-term debt is summarized as follows:
December 31,
---------------------
1999 1998
----------- ---------
8-7/8% Senior Subordinated Notes due March 31, 2008...... $ 244.7 $ 149.4
1999 Bank Credit Facility................................ 450.0 ---
1998 Bank Credit Facility................................ 403.1 423.8
Notes payable............................................ 19.7 7.4
Capital lease obligations................................ 22.9 12.5
Other.................................................... 16.0 38.2
----------- ---------
Total long-term debt................................... 1,156.4 631.3
Less: Current portion of long-term debt................ (57.6) (44.7)
----------- ---------
Long-term debt, less current portion................... $ 1,098.8 $ 586.6
=========== =========
The Senior Subordinated Notes
On March 9, 1999, the Company issued and sold $100.0 aggregate principal amount
of 8-7/8% Series C Senior Subordinated Notes due 2008, discounted to yield 9.73%
(the "1999 Senior Subordinated Notes"). The 1999 Senior Subordinated Notes are
jointly and severally guaranteed by certain domestic subsidiaries (see Note O).
The net proceeds from the offering were used to repay a portion of the
outstanding indebtedness under Terex's credit facilities and for acquisitions.
On March 31, 1998, the Company issued and sold $150.0 aggregate principal amount
of 8-7/8% Senior Subordinated Notes due 2008, discounted to yield 8.94% (the
"1998 Senior Subordinated Notes"). The 1998 Senior Subordinated Notes are
jointly and severally guaranteed by certain domestic subsidiaries (see Note O).
The net proceeds from the offering were used to fund a portion of the aggregate
consideration for the acquisition of O&K Mining.
The 1999 Bank Credit Facility
On July 2, 1999, the Company entered into a credit agreement for a term loan of
up to $325 to provide the funds necessary to acquire the outstanding share
capital of Powerscreen and for other general corporate purposes. This credit
agreement was subsequently amended and restated on August 23, 1999 to provide an
additional term loan of up to $125 to acquire Cedarapids. As of December 31,
1999, the Company had borrowed $450.0 under this facility. The term loans under
this facility mature in March 2006 and bear interest, at the Company's option,
at a rate of 3.00% to 3.50% per annum in excess of the adjusted Eurodollar rate
or 2.00% to 2.50% in excess of the prime rate. The weighted average interest
rate on the 1999 Bank Credit Facility at December 31, 1999 was 9.17%.
The 1998 Bank Credit Facility
On March 6, 1998, the Company refinanced the 1997 Credit Facility (as defined
below) and redeemed or defeased all of its $166.7 principal amount of its then
outstanding 13-1/4% Senior Secured Notes due 2002 (the "Senior Secured Notes").
The refinancing included effectiveness of a revolving credit facility
aggregating up to $125.0 and term loan facilities providing for loans in an
aggregate principal amount of up to approximately $375.0 (collectively, the
"1998 Bank Credit Facility"). In connection with the refinancing of the
Company's 1997 Credit Facility and the repurchase of the Senior Secured Notes,
the Company incurred extraordinary losses of $1.9 and $36.4, respectively. These
extraordinary charges were recorded in the first quarter of 1998.
The 1998 Bank Credit Facility consists of a secured global revolving credit
facility aggregating up to $125.0 (the "Revolving Credit Facility") and two term
loan facilities (collectively, the "Term Loan Facilities") providing for loans
in an aggregate principal amount of up to approximately $375.0. The Revolving
Credit Facility will be used for working capital and general corporate purposes,
including acquisitions. With limited exceptions, the obligations of the Company
under the 1998 Bank Credit Facility are secured by (i) a pledge of all of the
capital stock of domestic subsidiaries of the Company, (ii) a pledge of 65% of
the stock of the foreign subsidiaries of the Company and (iii) a first priority
security interest in, and mortgages on, substantially all of the assets of Terex
and its domestic subsidiaries. The 1998 Bank Credit Facility contains covenants
limiting the Borrowers' activities, including, without limitation, limitations
on dividends and other payments, liens, investments, incurrence of indebtedness,
mergers and asset sales, related party transactions and capital expenditures.
F-12
The 1998 Bank Credit Facility also contains certain financial and operating
covenants, including a maximum leverage ratio, a minimum interest coverage ratio
and a minimum fixed charge coverage ratio.
Pursuant to the Term Loan Facilities, the Company has borrowed (i) $175.0 in
aggregate principal amount pursuant to a Term Loan A due March 2004 (the "Term A
Loan") and (ii) $200.0 in aggregate principal amount pursuant to a Term Loan B
due March 2005 (the "Term B Loan"). The outstanding principal amount of the Term
A Loan currently bears interest, at the Company's option, at an all-in drawn
cost of 1.25% per annum in excess of the adjusted eurodollar rate or, with
respect to U.S. dollar denominated alternate based rate loans, at an all-in
drawn cost of 0.25% per annum in excess of the prime rate. The outstanding
principal amount of the Term B Loan currently bears interest, at the Company's
option, at a rate of 2.75% per annum in excess of the adjusted eurodollar rate
or, with respect to U.S. Dollar denominated alternate base rate loans, 1.75% in
excess of the prime rate. The weighted average interest rate on the Term A Loan
and Term B Loan at December 31, 1999 was 7.16% and 8.38%, respectively. The Term
A Loan amortizes on a quarterly basis, in the annual percentages of 0%, 16%,
16%, 21%, 21% and 26%, respectively, during the six-year term of the loan. The
Term B Loan amortizes in an annual percentage of 1% during each of the first six
years of the term of the loan and 94% in the seventh year of the term of the
loan. The Term A Loan and Term B Loan are subject to mandatory prepayment in
certain circumstances and are voluntarily prepayable without payment of a
premium (subject to reimbursement of the lenders' costs in case of prepayment of
eurodollar loans other than on the last day of an interest period.)
Pursuant to the Revolving Credit Facility, the Company has available an
aggregate amount of up to $125.0. As of December 31, 1999, the Company's balance
outstanding under the Revolving Credit Facility totaled $64.0, letters of credit
issued under the Revolving Credit Facility totaled $40.9, and the additional
amount the Company could have borrowed was $20.1. The outstanding principal
amount of loans under the Revolving Credit Facility bears interest, at the
Company's option, at an all-in drawn cost of 1.25% per annum in excess of the
adjusted eurocurrency rate or, with respect to U.S. dollar denominated alternate
base rate loans, at an all-in drawn cost of 1.00% per annum in excess of the
prime rate. The weighted average interest rate on the Revolving Credit Facility
outstanding was 6.3% and 5.8% at December 31, 1999 and 1998, respectively. The
Revolving Credit Facility will terminate on March 6, 2004.
The Letter of Credit Facility
In conjunction with the 1999 Bank Credit Facility, in July 1999 the Company
received a separate $50 letter of credit facility (the "Letter of Credit
Facility"). Letters of credit issued under this facility do not decrease
availability under the Company's $125 million revolving credit facility.
The Senior Secured Notes
On May 9, 1995, the Company issued $250 of 13-1/4% Senior Secured Notes due May
15, 2002. The Senior Secured Notes were issued in conjunction with the
acquisition of PPM S.A. and PPM Cranes, Inc. and a refinancing of indebtedness.
On September 4, 1997, the Company used a portion of the proceeds from a common
stock offering to redeem $83.3 in principal of the Secured Senior Notes. In
accordance with the terms of the Indenture, the redemption of the Senior Secured
Notes was at a 9.46% redemption premium. The redemption premium plus the
pro-rata share of unamortized debt origination costs totaled $12.2 and were
reflected as extraordinary items in the third quarter of 1997.
The 1997 Credit Facility
On April 7, 1997, the Company and certain of its domestic subsidiaries
(collectively, the "Borrowers") entered a Revolving Credit Agreement with a
financial institution, as agent (the "Agent"), pursuant to which the Agent and
other financial institutions party thereto provided the Borrowers with a line of
credit of up to $125 (the "1997 Credit Facility"). A portion of the loans made
under the 1997 Credit Facility were used by the Borrowers to repay an existing
credit facility resulting in an extraordinary item of $2.6, which represented
$2.0 in termination fees and $0.6 of unamortized debt acquisition costs.
F-13
Schedule of Debt Maturities
Scheduled annual maturities of long-term debt outstanding at December 31, 1999
in the successive five-year period are summarized below. Amounts shown are
exclusive of minimum lease payments disclosed in Note G -- "Lease Commitments":
2000................................... $ 51.9
2001................................... 44.5
2002................................... 43.6
2003................................... 50.5
2004................................... 202.7
Thereafter............................. 740.3
-------------
Total.............................. $ 1,133.5
=============
Based on quoted market values, the Company believes that the fair value of the
1999 Senior Subordinated Notes and the 1998 Senior Subordinated Notes combined
was approximately $235.0 as of December 31, 1999. The Company believes that the
carrying value of its other borrowings approximates fair market value, based on
discounting future cash flows using rates currently available for debt of
similar terms and remaining maturities.
The Company paid $67.6, $42.5, and $39.8 of interest in 1999, 1998 and 1997,
respectively.
NOTE H -- LEASE COMMITMENTS
The Company leases certain facilities, machinery and equipment, and vehicles
with varying terms. Under most leasing arrangements, the Company pays the
property taxes, insurance, maintenance and expenses related to the leased
property. Certain of the equipment leases are classified as capital leases and
the related assets have been included in Property, Plant and Equipment. Net
assets under capital leases were $13.1 and $19.0, net of accumulated
amortization of $15.2 and $8.6, at December 31, 1999 and 1998, respectively.
Future minimum capital and noncancelable operating lease payments and the
related present value of capital lease payments at December 31, 1999 are as
follows:
Capital Operating
Leases Leases
------------- -------------
2000............................................ $ 6.0 $ 9.0
2001............................................ 8.4 7.7
2002............................................ 3.4 7.0
2003............................................ 2.5 6.0
2004............................................ 1.8 4.0
Thereafter...................................... 1.7 12.7
------------- -------------
Total minimum obligations .................. 23.8 $ 46.4
=============
Less amount representing interest............... (0.9)
-------------
Present value of net minimum obligations.... 22.9
Less current portion............................ (5.7)
-------------
Long-term obligations....................... $ 17.2
=============
Most of the Company's operating leases provide the Company with the option to
renew the leases for varying periods after the initial lease terms. These
renewal options enable the Company to renew the leases based upon the fair
rental values at the date of expiration of the initial lease. Total rental
expense under operating leases was $9.1, $9.3 and $6.8 in 1999, 1998 and 1997,
respectively.
F-14
NOTE I -- INCOME TAXES
In December 1994, the Company received an examination report from the Internal
Revenue Service ("IRS") proposing a tax deficiency of approximately $56 for 1987
through 1989. The examination report raised several issues including the
substantiation for certain tax deductions and whether the Company was able to
use certain net operatings losses ("NOLs") to offset taxable income. In April
1995, the Company filed an administrative appeal to the examination.
On November 18, 1999, Terex announced that it had resolved the IRS audit
regarding the Company's federal income tax returns for the years 1987 through
1989. As a result of the completion of the audit, the IRS will no longer
challenge the Company's right to use certain NOLs. Furthermore, because of the
existence of substantial NOLs, Terex will not owe any tax. However, due to
timing issues associated with NOL carrybacks and the substantial amount of time
which has elapsed since the years in question, Terex has recorded $7.7 in
interest expense, all of which will be tax deductible.
The components of Income (Loss) From Continuing Operations Before Income Taxes
and Extraordinary Items are as follows:
Year ended December 31,
----------------------------
1999 1998 1997
--------- --------- --------
United States...................................... $ 26.5 $ 57.4 $ 16.1
Foreign............................................ 71.9 17.1 14.9
--------- --------- --------
Income (loss) from continuing operations
before income taxes and extraordinary items...... $ 98.4 $ 74.5 $ 31.0
========= ========= ========
The major components of the Company's provision for income taxes are summarized
below:
Year ended December 31,
-----------------------------
1999 1998 1997
--------- --------- ---------
Current:
Federal.......................................... $ 0.8 $ --- $ ---
State............................................ 0.4 --- ---
Foreign.......................................... 7.1 1.7 0.7
--------- --------- ---------
Current income tax provision................... 8.3 1.7 0.7
--------- --------- ---------
Deferred:
Tax benefits reducing goodwill................... 15.5 --- ---
Adjustment for release of valuation allowance.... (98.3) --- ---
--------- --------- ---------
Deferred income tax provision (82.8) --- ---
--------- --------- ---------
Total (benefit) provision for income taxes... $ (74.5) $ 1.7 $ 0.7
========= ========= =========
Deferred tax assets and liabilities result from differences in the basis of
assets and liabilities for tax and financial statement purposes. A valuation
allowance has been recognized for $32.2 of the deferred tax assets for certain
foreign and U.S. net operating loss carryforwards. The tax effects of the basis
differences and net operating loss carryforward as of December 31, 1999 and 1998
are summarized below for major balance sheet captions:
1999 1998
------------- -------------
Intangibles................................ $ (4.6) $ (2.8)
Workers' compensation...................... (1.1) ---
Other...................................... (0.4) (0.5)
------------- -------------
Total deferred tax liabilities........ (6.1) (3.3)
------------- -------------
Receivables................................ 2.2 1.1
Net inventories............................ 13.5 15.2
Fixed assets............................... 1.3 0.5
Workers' compensation...................... --- 1.5
Warranties and product liability........... 10.4 8.2
Net operating loss and credit carryforwards 113.3 120.9
Other...................................... 0.1 8.6
------------- -------------
Total deferred tax assets............. 140.8 156.0
------------- -------------
Deferred tax assets valuation allowance.... (32.2) (152.7)
------------- -------------
Net deferred tax assets............... $ 102.5 $ ---
============= =============
F-15
The valuation allowance for deferred tax assets as of January 1, 1998 was
$158.3. The net change in the total valuation allowance for the years ended
December 31, 1998 and 1999 were a decrease of $5.6 and a decrease of $120.5,
respectively. In 1999, Company released $98.3 of valuation allowances related to
deferred tax assets as in the judgement of management, it is more likely than
not that the benefit of such deferred tax assets will be realized.
The Company's Provision for Income Taxes is different from the amount which
would be provided by applying the statutory federal income tax rate to the
Company's Income (Loss) From Continuing Operations Before Income Taxes and
Extraordinary Items. The reasons for the difference are summarized below:
Year ended December 31,
------------------------------------------
1999 1998 1997
------------- ------------- --------------
Tax at statutory federal income tax rate.......................... $ 34.4 $ 26.1 $ 10.9
Recognition of fully reserved preacquisition deferred tax asset... 15.5 --- ---
Change in valuation allowance relating to NOL and temporary
differences.................................................... (124.5) (21.1) (6.6)
Foreign tax differential on income/losses of foreign subsidiaries. (2.8) (4.4) (4.5)
Goodwill.......................................................... 0.5 1.0 0.9
Other............................................................. 2.4 0.1 ---
------------- ------------- --------------
Total (benefit) provision for income taxes................... $ (74.5) $ 1.7 $ 0.7
============= ============= ==============
United States income taxes have not been provided on undistributed earnings of
foreign subsidiaries. The Company's intention is to reinvest these earnings
indefinitely or to repatriate when it is tax effective to do so. Accordingly,
the Company believes that any U.S. tax on unrepatriated earnings would be
substantially offset by foreign tax credits.
At December 31, 1999, the Company had domestic federal net operating loss
carryforwards of $231.8. The tax basis of U. S. federal net operating loss
carryforwards expire as follows:
Tax Basis Net
Operating Loss
Carryforwards
----------------
2000................................. $ 13.0
2001................................. 4.8
2003................................. 0.5
2004................................. 22.4
2005................................. 0.8
2006................................. 5.8
2007................................. 6.4
2008................................. 102.3
2009................................. 35.5
2010................................. 40.3
----------------
Total............................ $ 231.8
================
If a change of control of the Company, as defined by the Tax Reform Act of 1986,
were to occur, the Company's utilization of the U.S. net operating loss and
credit carryforwards would be subject to annual limitation in future periods.
The Company also has various state net operating loss carryforwards expiring at
various dates through 2013 available to reduce future state taxable income and
income taxes. In addition, the Company's foreign subsidiaries have approximately
$108.0 of loss carryforwards, $22.9 in the United Kingdom, $9.4 in France, $55.4
in Germany, and $20.3 in other countries, which are available to offset future
foreign taxable income. The tax loss carryforwards in the United Kingdom,
Germany and France are available without expiration. Tax loss carryforwards in
other countries of $0.1 expire in 2000 through 2003, with the remaining $20.2
available without expiration. The company also has tax credit carryforwards of
$0.8 in the U.S. and $1.8 in the Untied Kingdom which have no expiration.
The Company made income tax payments of $2.6, $0.7, and $1.8 in 1999, 1998 and
1997, respectively.
F-16
NOTE J -- STOCKHOLDERS' EQUITY
Common Stock. The Company's certificate of incorporation was amended in June
1998 to increase the number of authorized shares of common stock, par value
$0.01 (the "Common Stock"), to 150.0 million. On June 22, 1999, the Company
issued 3.5 million shares of Common Stock in a public offering for net proceeds
to the Company of $103.7. On July 28, 1999, the Company issued 2 million shares
of Common Stock for net proceeds to the Company of $59.1. The shares were sold
in a transaction initiated by a fund manager on behalf of one of its funds. As
of December 31, 1999, there were 27.5 million shares issued and outstanding. Of
the 122.5 million unissued shares at that date, 2.2 million shares were reserved
for issuance for the exercise of stock options and Series A Warrants.
Preferred Stock. The Company's certificate of incorporation was amended in June
1998 to authorize 50.0 million shares of preferred stock, $0.01 par value per
share. As of December 31, 1999, no shares of preferred stock were outstanding.
Equity Rights. On May 9, 1995, the Company sold one million equity rights
securities (the "Equity Rights") along with a $250 debt offering. The portion of
the proceeds related to the Equity Rights ($3.2) has been recorded in the
stockholders' equity section of the balance sheet, because they can be satisfied
in Common Stock or cash at the option of the Company. The Equity Rights entitle
the holders, upon exercise at any time on or prior to May 15, 2002, to receive
cash or, at the election of the Company, Common Stock in an amount equal to the
average closing sale price of the Common Stock for the 60 consecutive trading
days prior to the date of exercise (the "Current Price"), less $7.288 per share,
subject to adjustment in certain circumstances. Changes in the Current Price do
not affect the net income or loss reported by the Company; however, changes in
the Current Price vary the amount of cash that the Company would have to pay or
the number of shares of Common Stock that would have to be issued in the event
holders exercise the Equity Rights. During 1999 and 1998 holders exercised 721.4
thousand and 35.6 thousand rights, respectively. As of December 31, 1999, 243.0
thousand Equity Rights were outstanding and the Current Price of the Common
Stock was $27.507. Accordingly, the Company would have been required to either
pay $4.9 or issue 177.0 thousand shares of Common Stock, at the Company's
option, in the event that all of the holders had exercised their Equity Rights.
Series A Warrants. In connection with the December 1993 private placement of
Series A Preferred Stock, the Company issued 1.3 million Series A Warrants of
which 60.1 thousand warrants were outstanding at December 31, 1999. Each Series
A Warrant may be exercised, in whole or in part, at the option of the holder at
any time before the expiration date on December 31, 2000 and is redeemable by
the Company under certain circumstances. As of December 31, 1999, upon the
exercise or redemption of a Warrant, the holder thereof was entitled to receive
2.41 shares of Common Stock. The exercise price for the Warrants is $0.01 for
each share of Common Stock. The number of shares of Common Stock issuable upon
exercise or redemption of the Warrants is subject to adjustment in certain
circumstances.
Stock Options. The Company maintains a qualified incentive stock option ("ISO")
plan covering certain officers and key employees. The exercise price of the ISO
is the fair market value of the shares at the date of grant. The ISO allows the
holder to purchase shares of Common Stock, commencing one year after grant. ISO
expire after ten years. At December 31, 1999, 12.8 thousand stock options were
available for grant under the ISO.
Long-Term Incentive Plans. In May 1996, the stockholders approved the 1996 Terex
Corporation Long-Term Incentive Plan (the "1996 Plan"). The 1996 Plan authorizes
the granting, among other thngs, of (i) options ("Stock Option Awards") to
purchase shares of Common Stock, (ii) shares of Common Stock, including
Restricted Stock ("Stock Awards"), and (iii) cash bonus awards based upon a
participant's job performance ("Performance Awards"). In May 1998, the
stockholders approved an increase in the aggregate number of shares of Common
Stock (including Restricted Stock, if any) optioned or granted under the 1996
Plan to 2.0 million shares. At December 31, 1999, 370.5 thousand shares were
available for grant under the 1996 Plan. The 1996 Plan provides that a committee
(the "Committee") of the Board of Directors consisting of two or more members
thereof who are non-employee directors shall administer the 1996 Plan and has
provided the Committee with the flexibility to respond to changes in the
competitive and legal environments, thereby protecting and enhancing the
Company's current and future ability to attract and retain directors and
officers and other key employees and consultants. The 1996 Plan also provides
for automatic grants of Stock Option Awards to non-employee directors.
In 1994, the stockholders approved the 1994 Terex Corporation Long-Term
Incentive Plan (the "1994 Plan") covering certain managerial, administrative and
professional employees and outside directors. The 1994 Plan provides for awards
to employees, from time to time and as determined by a committee of outside
directors, of cash bonuses, stock options, stock and/or restricted stock. The
F-17
total number of shares of the Company's Common Stock available to be awarded
under the 1994 Plan is 750 thousand, subject to certain adjustments. At December
31, 1999, 22.7 thousand shares were available for grant under the 1994 Plan.
F-18
The following table is a summary of stock options under all three of the
Company's plans.
Weighted
Average Exercise
Number of Price per Share
Options
------------- -----------------
Outstanding at December 31, 1996................ 843,425 $ 5.73
Granted...................................... 176,750 $ 13.93
Exercised.................................... (184,988) $ 6.04
Canceled or expired.......................... (103,600) $ 5.69
-------------
Outstanding at December 31, 1997................ 731,587 $ 7.64
Granted...................................... 547,851 $ 22.02
Exercised.................................... (100,900) $ 6.72
Canceled or expired.......................... (17,329) $ 15.00
-------------
Outstanding at December 31, 1998................ 1,161,209 $ 14.39
Granted...................................... 204,574 $ 25.93
Exercised.................................... (145,583) $ 6.73
Canceled or expired.......................... (12,958) $ 22.14
-------------
Outstanding at December 31, 1999................ 1,207,242 $ 16.76
============= ================
Exercisable at December 31, 1999................ 641,235 $ 12.35
============= ================
Exercisable at December 31, 1998................ 579,595 $ 10.00
============= ================
Exercisable at December 31, 1997................ 473,340 $ 6.92
============= ================
The following table summarizes information about stock options outstanding and
exercisable at December 31, 1999:
Options Outstanding Options Exercisable
------------------------------------ ----------------------
Weighted Weighted
Weighted Average Average
Average Exercise Exercise
Range of Number of Life Price per Number of Price per
Exercise Prices Options (in years) Share Options Share
- --------------------- ------------ ---------- ----------- ---------- -----------
$ 3.50 - $ 6.00 225,422 3.9 $ 4.39 224,922 $ 4.39
$ 6.01 - $ 10.00 113,700 3.9 $ 6.68 111,200 $ 6.68
$ 10.01 - $ 15.00 331,508 7.1 $ 13.61 148,500 $ 13.43
$ 15.01 - $ 20.00 26,875 8.6 $ 18.69 5,875 $ 18.63
$ 20.01 $ 25.00 136,988 7.0 $ 22.68 46,232 $ 22.58
$ 25.01 $ 30.00 355,726 7.6 $ 27.67 95,608 $ 28.90
$ 30.01 - $ 34.38 17,023 8.5 $ 30.96 8,898 $ 31.51
------------ ----------
1,207,242 6.4 $ 16.76 641,235 $ 12.35
============ ==========
In accordance with the provisions of SFAS 123, "Accounting for Stock-Based
Compensation," the Company applies APB Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations in accounting for its plans
and does not recognize compensation expense for its stock-based compensation
plans other than for restricted stock. If the Company had elected to recognize
compensation expense based upon the fair value at the grant date for awards
under these plans consistent with the methodology prescribed by SFAS No. 123,
the Company's net income would have been reduced by $2.9 ($0.12 (basic) and
$0.11 (diluted) per share), $3.4 ($0.16 (basic) and $0.15 (diluted) per share),
and $1.1 ($0.07 (basic) and $0.06 (diluted) per share) in 1999, 1998 and 1997,
respectively.
F-19
The fair value for these options was estimated at the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions for 1999, 1998 and 1997, respectively: dividend yields of 0%, 0% and
0%; expected volatility of 51.47%, 54.86 % and 57.50% risk-free interest rates
of 5.64%, 5.26% and 6.34%; and expected life of 9.5 years, 9.3 years and 8.1
years. The aggregate fair value of options granted during 1999, 1998 and 1997
for which the exercise price equals the market price on the grant date was $3.6,
$8.1 and $1.7, respectively.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
Comprehensive Income. The following table reflects the accumulated balances of
other comprehensive income.
Accumulated
Pension Cumulative Other
Liability Translation Comprehensive
Adjustment Adjustment Income
------------- ------------- --------------
Balance at December 31, 1996........$ (2.0) $ (2.7) $ (4.7)
Current year change................. 0.2 (3.4) (3.2)
------------- ------------- --------------
Balance at December 31, 1997........ (1.8) (6.1) (7.9)
Current year change................. --- 3.8 3.8
------------- ------------- --------------
Balance at December 31, 1998........ (1.8) (2.3) (4.1)
Current year change................. 1.3 (13.3) (12.0)
------------- ------------- --------------
Balance at December 31, 1999........$ (0.5) $ (15.6) $ (16.1)
============= ============= ==============
NOTE K -- RETIREMENT PLANS
Pension Plans
US Plans - As of December 31, 1998, the Company maintained four defined benefit
pension plans covering certain domestic employees (the "Terex Plans"). During
1999 the Company added four additional defined benefit pension plans in
connection with the acquisitions of Powerscreen and Cedarapids. The benefits for
the plans covering the salaried employees are based primarily on years of
service and employees' qualifying compensation during the final years of
employment. Participation in the Terex Plans for salaried employees was frozen
as of May 7, 1993, and no participants will be credited with service following
such date except that participants not fully vested will be credited with
service for purposes of determining vesting only. The benefits for the plans
covering the hourly employees are based primarily on years of service and a flat
dollar amount per year of service. It is the Company's policy generally to fund
these plans based on the minimum requirements of the Employee Retirement Income
Security Act of 1974 (ERISA). Plan assets consist primarily of common stocks,
bonds, and short-term cash equivalent funds.
Other Postemployment Benefits
The Company provides postemployment health and life insurance benefits to
certain former salaried and hourly employees of Terex Cranes - Waverly
Operations and Cedarapids. The Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions," on January 1, 1993.
This statement requires accrual of postretirement benefits (such as health care
benefits) during the years an employee provides service. Terex adopted the
provisions of SFAS No. 106 using the delayed recognition method, whereby the
amount of the unrecognized transition obligation at January 1, 1993 is
recognized prospectively as a component of future years' net periodic
postretirement benefit expense. The unrecognized transition obligation at
F-20
January 1, 1993 was $4.5. Terex is amortizing this transition obligation over 12
years, the average remaining life expectancy of the participants.
The liability of the Company's U.S. Plans, as of December 31, was as follows:
Pension Benefits Other Benefits
------------------------- ---------------------------
1999 1998 1999 1998
------------- ------------ -------------- -------------
Change in benefit obligation:
Benefit obligation at beginning of year $ 37.0 $ 34.6 $ 2.5 $ 2.6
Benefits obligation of plans acquired
during the year...................... 56.1 --- 2.2 ---
Service cost.......................... 0.6 0.2 --- ---
Interest cost......................... 3.8 2.4 0.2 0.2
Impact of plan amendments............. 1.0 --- 0.5 ---
Actuarial (gain) loss................. (6.6) 2.2 (0.3) ---
Benefits paid......................... (3.4) (2.4) (0.3) (0.3)
------------- ------------- ------------- -------------
Benefit obligation end of year.......... 88.5 37.0 4.8 2.5
------------- ------------- ------------- -------------
Change in plan assets:
Fair value of plan assets at beginning
of year.............................. 36.1 32.0 --- ---
Fair value of plan assets acquired
during the year...................... 80.0 --- --- ---
Actual return on plan assets.......... 11.2 5.9 --- ---
Employer contribution................. 0.3 0.6 0.1 ---
Benefits paid......................... (3.4) (2.4) (0.1) ---
------------- ------------- ------------- -------------
Fair value of plan assets at end of year 124.2 36.1 --- ---
------------- ------------- ------------- -------------
Funded status........................... 35.7 (0.9) (4.8) (2.5)
Unrecognized actuarial (gain) loss..... (10.5) 2.0 (1.4) (1.2)
Unrecognized prior service cost......... 1.3 0.7 --- ---
Unrecognized transition obligation...... --- --- 1.5 1.8
------------- ------------- ------------- -------------
Net amount recognized................... $ 26.5 $ 1.8 $ (4.7) $ (1.9)
============= ============= ============= =============
Amounts recognized in the Consolidated
Balance Sheet consist of:
Prepaid benefit cost................. $ 27.6 $ 3.1 $ --- $ ---
Accrued benefit liability............ (1.6) (3.1) (4.7) (1.9)
Accumulated other comprehensive income
0.5 1.8 --- ---
------------- ------------- ------------- -------------
Net amount recognized................... $ 26.5 $ 1.8 $ 4.7 $ (1.9)
============= ============= ============= =============
Pension Benefits Other Benefits
-------------------------------------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
Weighted-average assumptions
as of December 31:
Discount rate........................ 7.75% 6.50% 7.75% 6.50%
Expected return on plan.............. 9.00% 9.00% 9.00% 9.00%
Rate of compensation increase........ 4.50% --- --- ---
F-21
Pension Benefits Other Benefits
-------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------ ----------- ------------
Components of net periodic benefit cost:
Service cost.......................... $ 0.6 $ 0.2 $ 0.2 $ --- $ --- $ ---
Interest cost......................... 3.8 2.4 2.4 0.2 0.2 0.2
Expected return on plan assets........ (5.5) (2.5) (2.2) --- --- ---
Amortization of prior service cost.... 0.1 0.1 0.1 --- --- ---
Amortization of transition obligation. --- --- --- 0.3 0.3 0.3
Recognized actuarial (gain)loss....... 0.1 0.2 0.3 (0.1) (0.1) (0.1)
------------ ------------ ------------ ------------ ----------- ------------
Net periodic benefit cost............... $ (0.9) $ 0.4 $ 0.8 $ 0.4 $ 0.4 $ 0.4
============ ============ ============ ============ =========== ============
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the pension plans with accumulated benefit obligations in
excess of plan assets were $12.2, $12.2 and $10.5, respectively, as of December
31, 1999, and $9.8, $9.8 and $7.1, respectively, as of December 31, 1998.
The Company has four nonpension postretirement benefit plans. The health care
plan is contributory with participants' contributions adjusted annually; the
life insurance plan is noncontributory. For measurement purposes, a 7.54 percent
annual rate of increase in the per capita cost of covered health care benefits
was assumed for 1999. The rate was assumed to decrease gradually to 5.75 percent
for 2005 and remain at that level thereafter. Assumed health care cost trend
rates have a significant effect on the amounts reported for the health care
plan. A one-percentage-point change in assumed health care cost trend rates
would have the following effects:
1-Percentage- 1-Percentage-
Point Increase Point Decrease
--------------- --------------
Effect on total service
and interest cost components 4.03% (3.71)%
Effect on postretirement benefit obligation 4.07% (3.79)%
International Plans - Terex Equipment Limited maintains a government-required
defined benefit plan (which includes certain defined contribution elements)
covering substantially all of its management employees. This plan is fully
funded. Pension expense relating to this plan was approximately $0.3, $0.4 and
$0.5 for the years ended December 31, 1999, 1998 and 1997, respectively.
Terex Aerials Limited (Ireland) maintains two voluntary defined benefit plans
covering its employees. These plans are fully funded. Pension expense relating
to these plans was approximately $0.1, $0.1 and $0.1 for the years ended
December 31, 1999, 1998 and 1997, respectively.
O & K Mining maintains an unfunded noncontributory defined benefit plan covering
substantially all of its employees. The projected benefit obligation,
accumulated benefit obligation and pension expense related to the plan was $5.3,
$5.3, and $0.5, respectively, for 1999 and $5.7, $5.7 and $0.4, respectively,
for 1998.
Saving Plans
The Company sponsors various tax deferred savings plans into which eligible
employees may elect to contribute a portion of their compensation. The Company
may, but is not obligated to, contribute to certain of these plans. Company
contributions to these plans were $1.7, $1.2 and $0.7 for the years ended
December 31, 1999, 1998 and 1997, respectively.
F-22
NOTE L -- LITIGATION AND CONTINGENCIES
In the Company's lines of business numerous suits have been filed alleging
damages for accidents that have arisen in the normal course of operations
involving the Company's products. The Company is 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. Insurance
coverage is obtained for catastrophic losses as well as those risks required to
be insured by law or contract. The Company has recorded and maintains an
estimated liability in the amount of management's estimate of the Company's
aggregate exposure for such self-insured risks.
The Company is involved in various other legal proceedings which have arisen in
the normal course of its operations. The Company has recorded provisions for
estimated losses in circumstances where a loss is probable and the amount or
range of possible amounts of the loss is estimable.
The Company's outstanding letters of credit totaled $60.6 at December 31, 1999.
The letters of credit generally serve as collateral for certain liabilities
included in the Consolidated Balance Sheet. Certain of the letters of credit
serve as collateral guaranteeing the Company's performance under contracts.
The Company has agreed to indemnify certain outside parties for losses related
to a former subsidiary's worker compensation obligations. Some of the claims for
which Terex is contingently obligated are also covered by bonds issued by an
insurance company. The Company recorded liabilities for these contingent
obligations representing management's estimate of the potential losses which the
Company might incur.
NOTE M -- RELATED PARTY TRANSACTIONS
On August 28, 1995, the Company's former chairman retired from his positions
with the Company and its Board of Directors. In connection with his retirement,
the Company (upon the recommendation of a committee comprised of its independent
Directors and represented by independent counsel) and the former chairman
executed a retirement agreement providing certain benefits to the former
chairman and the Company. The agreement provides, among other things, for a
five-year consulting engagement requiring the former chairman to make himself
available to the Company to provide consulting services for certain portions of
his time. The former chairman, or his designee, received a fee for consulting
services which included payments in an amount, and a rate, equal to his 1995
base salary until December 31, 1996. The agreement also provides for the (i)
granting of a five-year $1.8 million loan bearing interest at 6.56% per annum
which is subject to being forgiven in increments over the five-year term of the
agreement upon certain conditions, and (ii) equity grants having a maximum
potential of 200.0 thousand shares of Terex Common Stock conditioned upon the
Company achieving certain financial performance objectives in the future. During
1997 the former chairman received 150.0 thousand shares of common stock in
accordance with this agreement. In contemplation of the execution of this
retirement agreement, the Company advanced to the former chairman the principal
amount of the forgivable loan. During 1999, 1998 and 1997, the Company forgave
$0.2, $0.5 and $0.6, respectively, of principal on the loan along with the
current interest.
The Company, a director and certain former executives of the Company, and KCS,
have been named parties in various legal proceedings. During 1999, 1998 and
1997, the Company incurred $0.3, $0.3 and $0.2, respectively, of legal fees and
expenses on behalf of the Company, the director and former executives of the
Company, and KCS named in the lawsuits.
Ares Leverage Investment Fund L.P. ("Ares"), an affiliate of a director of the
Company, participated as a lender under the 1998 Bank Credit Facility for the
amount of $15.0. Ares received a fee of less than $0.1 for participating as a
lender under the 1998 Bank Credit Facility. Ares Leveraged Investment Fund II,
L.P. ("Ares II"), an affiliate of a director of the Company, and Ares
participated as lenders under the 1999 Bank Credit Facility for the amount of
$14.0. Ares and Ares II also received total fees of less than $0.1 for
participating lenders under the 1999 Bank Credit Facility. Participation by Ares
and Ares II as lenders under the 1999 Bank Credit Facility and the 1998 Bank
Credit Facility was made in the ordinary course of Ares' and Ares II's business
and on the same terms as all other lenders under the 1999 Bank Credit Facility
and the 1998 Bank Credit Facility.
Canadian Imperial Bank of Commerce, an affiliate of CIBC Oppenheimer Corp., of
which a director (who has since resigned) of the Company is a managing director,
is a lender with a commitment of up to $37.5 and a Co-Documentation Agent under
the 1998 Bank Credit Facility. Canadian Imperial Bank of Commerce received a fee
of $0.8 for acting as Co-Documentation Agent under the 1998 Bank Credit
Facility. Participation by Canadian Imperial Bank of Commerce as a lender under
F-23
the 1998 Bank Credit Facility was made in the ordinary course of its business
and on the same terms as all other lenders under the 1998 Bank Credit Facility.
In addition, CIBC Oppenheimer Corp. was retained by the Company in connection
with the offering of the 1999 Senior Subordinated Notes. CIBC was paid $0.4 as
an underwriting discount upon issuance of the 1999 Senior Subordinated Notes on
the same terms as all other underwriters.
On December 31, 1997, a director of the Company retired as an officer of the
Company. In connection with his retirement, the Company and the former officer
entered into an agreement providing certain benefits to the former officer and
the Company. Pursuant to the agreement, the former officer received an award of
5.0 thousand shares of Common Stock in consideration of his years of service to
the Company. The agreement also provides for a two-year consulting engagement
requiring the former officer to make himself available to the Company to provide
consulting services for a certain portion of his time, for such services he
received a consulting fee of $0.1 and $0.3 for services provided in 1999 and
1998, respectively.
In 1997, the Company invested $0.1 in a company ("Investee") which was
reorganizing after declaring bankruptcy. Subsequent to the initial investment,
the Company was required to make an additional investment in Investee. As a
result, the Company elected not to continue its investment in Investee and not
to make the additional required investment. A director of the Company and one of
his business associates acquired the Company's investment in Investee for the
amount invested by the Company and assumed the Company's obligations to make
additional investments in Investee.
The Company requires that all transactions with affiliates be on terms no less
favorable to the Company than could be obtained in comparable transactions with
an unrelated person. The Board of Directors is advised in advance of any such
proposed transaction or agreement and utilizes such procedures in evaluating
their terms and provisions as are appropriate in light of the Board's fiduciary
duties under Delaware law. In addition, the Company has an Audit Committee
consisting solely of outside directors. One of the responsibilities of the Audit
Committee is to review related party transactions.
NOTE N-- BUSINESS SEGMENT INFORMATION
The Company operates primarily in two industry segments: Terex Earthmoving and
Terex Lifting.
Terex Earthmoving designs, manufactures and markets large hydraulic excavators,
articulated and rigid off-highway trucks, high capacity surface mining trucks,
mobile crushing and screening equipment, asphalt pavers, asphalt mixing plants
and related components and replacement parts. These products are used primarily
by construction, mining, logging, industrial and government customers in
building roads, dams and commercial and residential buildings and supplying
coal, minerals, sand and gravel.
Terex Lifting designs, manufactures and markets telescopic mobile cranes
(including rough terrain, truck and all-terrain mobile cranes), lattice boom
cranes, tower cranes, aerial platforms (including-scissors, articulated boom and
straight telescoping boom aerial work platforms), utility aerial devices
(including digger derricks and articulated aerial devices), telescopic materials
handlers (including container stackers and rough terrain lift trucks),
truck-mounted cranes (boom trucks) and related components and replacement parts.
These products are used primarily for construction, repair and maintenance of
infrastructure, buildings and manufacturing facilities, for material handling
applications in the distribution, transportation and utilities industries as
well as in the scrap, refuse and lumber industries.
Included in the 1999 Other are the results of operations of Amida and Bartell,
as well as general and corporate items for 1999, 1998 and 1997.
F-24
Industry segment information is presented below:
1999 1998 1997
------------ ------------- --------------
Sales
Terex Earthmoving................... $ 878.9 $ 456.4 $ 288.4
Terex Lifting....................... 944.9 770.9 548.0
Other............................... 32.8 5.9 5.9
------------ ------------- --------------
Total............................. $ 1,856.6 $ 1,233.2 $ 842.3
============ ============== =============
Income (Loss) from Operations
Terex Earthmoving................... $ 87.5 $ 41.7 $ 24.7
Terex Lifting....................... 86.4 82.1 47.2
Other............................... 4.4 (1.8) (0.8)
------------ ------------- --------------
Total............................. $ 178.3 $ 122.0 $ 71.1
============ ============= ==============
Depreciation and Amortization
Terex Earthmoving................... $ 15.6 $ 6.7 $ 2.3
Terex Lifting....................... 12.6 9.5 8.8
Other............................... 4.0 2.2 3.2
------------ ------------- --------------
Total............................. $ 32.2 $ 18.4 $ 14.3
============ ============= ==============
Capital Expenditures
Terex Earthmoving................... $ 12.0 $ 4.8 $ 4.5
Terex Lifting....................... 8.3 7.5 4.3
Other............................... 1.1 0.8 1.1
------------ ------------- --------------
Total............................. $ 21.4 $ 13.1 $ 9.9
============ ============= ==============
Identifiable Assets
Terex Earthmoving................... $ 1,158.4 $ 544.9
Terex Lifting....................... 781.6 574.3
Other............................... 237.5 32.0
------------ -------------
Total............................. $ 2,177.5 $ 1,151.2
============ =============
Sales between segments areas are generally priced to recover costs plus a
reasonable markup for profit.
Geographic segment information is presented below:
1999 1998 1997
------------ ------------- -------------
Sales
United States....................... $ 871.2 $ 600.6 $ 395.8
United Kingdom...................... 151.3 100.0 95.4
Other European countries............ 353.2 242.1 203.9
All other........................... 480.9 290.5 147.2
------------ ------------- --------------
Total............................. $ 1,856.6 $ 1,233.2 $ 842.3
============ ============= ==============
Long-lived Assets
United States....................... $ 68.5 $ 38.5
United Kingdom...................... 48.9 31.8
Other European Countries............ 47.9 27.9
All other........................... 7.5 1.3
------------ -------------
Total............................. $ 172.8 $ 99.5
============ =============
The Company attributes sales to unaffiliated customers in different geographical
areas on the basis of the location of the customer. Long-lived assets include
net fixed assets which can be attributed to the specific geographic regions.
F-25
The Company is not dependent upon any single customer.
NOTE O -- CONSOLIDATING FINANCIAL STATEMENTS
On March 31, 1998, the Company issued and sold $150.0 aggregate principal amount
of the 1998 Senior Subordinated Notes. On March 9, 1999, the Company issued and
sold $100.0 aggregate principal amount of the 1999 Senior Subordinated Notes.
The 1998 Senior Subordinated Notes and the 1999 Senior Subordinated Notes are
each jointly and severally guaranteed by the following wholly-owned subsidiaries
of the Company (the "Wholly-owned Guarantors"): Terex Cranes, Inc., Koehring
Cranes, Inc., Terex-Telelect, Inc., Terex-RO Corporation, Terex Aerials, Inc.,
Terex Mining Equipment, Inc., Payhauler Corp., O & K Orenstein & Koppel, Inc.,
The American Crane Corporation, Amida Industries, Inc. and Cedarapids, Inc. The
financial results of O & K Orenstein & Koppel, Inc., The American Crane
Corporation, Amida Industries, Inc. and Cedarapids, Inc. are included in the
results of the Wholly-owned Guarantors since March 31, 1998, July 31, 1998,
April 1, 1999, and August 26, 1999, their respective dates of acquisition. The
1998 Senior Subordinated Notes and the 1999 Senior Subordinated Notes are each
also jointly and severally guaranteed by PPM Cranes, Inc., which is 92.4% owned
by Terex.
The following subsidiaries of the Company have not provided a guarantee of
either the 1998 Senior Subordinated Notes nor the 1999 Senior Subordinated
Notes: Terex Equipment Limited, Unit Rig Australia (Pty) Ltd., Unit Rig South
Africa (Pty) Ltd., Unit Rig (Canada) Ltd., PPM S.A., PPM S.p.A., Brimont
Agraire, PPM Deutschland GmbH, PPM of Australia Pty Ltd., PPM Far East Private
Ltd, Terex Aerials Limited, Terex Italia, S.r.l., Sim-Tech Management Limited,
Simon-Tomen Engineering Company Limited, O&K Mining GmbH, Holland Lift
International B.V., American Crane International B.V., Italmacchine S.r.l.,
Terex-Peiner GmbH, Gru Comedil S.p.A., Powerscreen and Franna Cranes Pty Ltd
(collectively, the "Non-guarantor Subsidiaries"). The financial results of O & K
Mining GmbH, Holland Lift International B.V., American Crane International B.V.,
Italmacchine S.r.l., Terex-Peiner GmbH, Gru Comedil S.p.A., Powerscreen and
Franna Cranes Pty Ltd are included in the results of the Non-guarantor
Subsidiaries since March 31, 1998, May 4, 1998, July 31, 1998, November 3, 1998,
November 13, 1998, December 18, 1998, July 27, 1999, and December 1, 1999, their
respective dates of acquisition.
The following summarized condensed consolidating financial information for the
Company segregates the financial information of Terex Corporation, the
Wholly-owned Guarantors, PPM Cranes, Inc. and the Non-guarantor Subsidiaries.
Terex Corporation consists of parent company operations. Subsidiaries of the
parent company are reported on the equity basis.
Wholly-owned Guarantors combine the operations of the Wholly-owned Guarantor
subsidiaries. Subsidiaries of Wholly-owned Guarantors that are not themselves
guarantors are reported on the equity basis.
PPM Cranes, Inc. consists of the operations of PPM Cranes, Inc. Its subsidiaries
are reported on an equity basis.
Non-guarantor Subsidiaries combine the operations of subsidiaries which have not
provided a guarantee of the obligations of Terex Corporation under the 1998
Senior Subordinated Notes and the 1999 Senior Subordinated Notes.
Debt and goodwill allocated to subsidiaries is presented on an accounting
"push-down" basis.
F-26
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Net sales............................... $ 504.3 $ 580.8 $ 73.4 $ 889.2 $ (191.1) $ 1,856.6
Cost of goods sold.................... 440.4 499.6 64.4 725.0 (189.5) 1,539.9
------------- ------------- ------------- ------------- ------------- -------------
Gross profit............................ 63.9 81.2 9.0 164.2 (1.6) 316.7
Selling, general & administrative
expenses............................ 22.0 29.7 6.2 80.5 --- 138.4
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from operations........... 41.9 51.5 2.8 83.7 (1.6) 178.3
Interest income....................... 2.6 0.4 --- 2.3 --- 5.3
Interest expense...................... (27.6) (11.4) (2.4) (41.4) --- (82.8)
Income (loss) from equity investees... 79.6 --- (1.9) (2.6) (75.1) ---
Other income (expense) - net.......... 2.5 2.1 (1.0) (6.0) --- (2.4)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes and
extraordinary items................... 99.0 42.6 (2.5) 36.0 (76.7) 98.4
Benefit from (provision for) income
taxes............................... 73.9 --- --- 0.6 --- 74.5
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before extraordinary items 172.9 42.6 (2.5) 36.6 (76.7) 172.9
Extraordinary loss on retirement of
debt................................. --- --- --- --- --- ---
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss)....................... 172.9 42.6 (2.5) 36.6 (76.7) 172.9
Less preferred stock accretion........ --- --- --- --- --- ---
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) applicable to common stock $ 172.9 $ 42.6 $ (2.5) $ 36.6 $ (76.7) $ 172.9
============= ============= ============= ============= ============= =============
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Net sales............................... $ 208.9 $ 445.7 $ 84.9 $ 616.8 $ (123.1) $ 1,233.2
Cost of goods sold.................... 174.0 360.8 74.7 516.4 (118.5) 1,007.4
------------- ------------- ------------- ------------- ------------- -------------
Gross profit............................ 34.9 84.9 10.2 100.4 (4.6) 225.8
Selling, general & administrative
expenses............................ 20.5 24.5 3.4 55.4 --- 103.8
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from operations........... 14.4 60.4 6.8 45.0 (4.6) 122.0
Interest income....................... 1.0 0.5 --- 1.2 --- 2.7
Interest expense...................... (8.5) (8.0) (5.4) (25.3) --- (47.2)
Income (loss) from equity investees... 36.8 5.5 (1.1) --- (41.2) ---
Other income (expense) - net.......... (0.7) (0.4) (0.2) (1.7) --- (3.0)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes and
extraordinary items................... 43.0 58.0 0.1 19.2 (45.8) 74.5
Benefit from (provision for) income
taxes................................ --- --- --- (1.7) --- (1.7)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before extraordinary items 43.0 58.0 0.1 17.5 (45.8) 72.8
Extraordinary loss on retirement of
debt................................. (8.5) (5.0) (10.4) (14.4) --- (38.3)
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss)....................... 34.5 53.0 (10.3) 3.1 (45.8) 34.5
Less preferred stock accretion........ --- --- --- --- --- ---
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) applicable to common stock $ 34.5 $ 53.0 $ (10.3) $ 3.1 $ (45.8) $ 34.5
============= ============= ============= ============= ============= =============
F-27
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Net sales............................... $ 163.3 $ 304.3 $ 79.5 $ 398.6 $ (103.4) $ 842.3
Cost of goods sold.................... 136.0 248.8 70.0 349.4 (101.5) 702.7
------------- ------------- ------------- ------------- ------------- -------------
Gross profit............................ 27.3 55.5 9.5 49.2 (1.9) 139.6
Selling, general & administrative
expenses............................. 15.0 18.4 3.3 31.8 --- 68.5
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from operations........... 12.3 37.1 6.2 17.4 (1.9) 71.1
Interest income....................... 0.5 0.1 --- 0.3 --- 0.9
Interest expense...................... (14.2) (6.3) (6.7) (12.2) --- (39.4)
Income (loss) from equity investees... 29.3 (2.4) (0.3) --- (26.6) ---
Other income (expense) - net.......... (2.0) 0.4 (0.3) 0.3 --- (1.6)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes and
extraordinary items................... 25.9 28.9 (1.1) 5.8 (28.5) 31.0
Provision for income taxes............ --- --- --- (0.7) --- (0.7)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before extraordinary items 25.9 28.9 (1.1) 5.1 (28.5) 30.3
Extraordinary loss on retirement of
debt................................. (14.8) --- --- --- --- (14.8)
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss)....................... 11.1 28.9 (1.1) 5.1 (28.5) 15.5
Less preferred stock accretion........ (0.4) (4.4) --- --- --- (4.8)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) applicable to common stock $ 10.7 $ 24.5 $ (1.1) $ 5.1 $ (28.5) $ 10.7
============= ============= ============= ============= ============= =============
F-28
TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999
(in millions)
Wholly- Non-
Terex owned PPM Guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Assets
Current assets
Cash and cash equivalents.......... $ 64.3 $ 1.7 $ 0.1 $ 67.2 $ --- $ 133.3
Trade receivables - net............ 90.2 103.5 21.3 214.2 --- 429.2
Intercompany receivables........... 8.8 26.1 13.7 57.0 (105.6) ---
Net inventories.................... 130.3 190.2 18.2 330.7 (3.8) 665.6
Other current assets............... 50.2 8.8 --- 28.2 --- 87.2
------------- ------------- ------------- ------------- ------------- -------------
Total current assets............. 343.8 330.3 53.3 697.3 (109.4) 1,315.3
Property, plant & equipment - net.... 17.3 49.1 0.1 106.3 --- 172.8
Investment in and advances to
(from) subsidiaries.............. 311.4 (185.7) (20.6) (95.2) (9.9) ---
Goodwill - net....................... 28.7 151.5 12.0 362.5 --- 554.7
Other assets - net................... 74.5 28.0 0.4 31.8 --- 134.7
------------- ------------- ------------- ------------- ------------- -------------
Total assets............................ $ 775.7 $ 373.2 $ 45.2 $ 1,102.7 $ (119.3) $ 2,177.5
============= ============= ============= ============= ============= =============
Liabilities and stockholders' equity
(deficit)
Current liabilities
Notes payable and current portion
of long-term debt................ $ 16.6 $ (0.8) $ 0.8 $ 41.0 $ --- $ 57.6
Trade accounts payable............. 41.4 53.3 6.4 195.9 --- 297.0
Intercompany payables.............. 30.6 15.9 4.5 54.1 (105.1) ---
Accruals and other current
liabilities...................... 68.5 30.2 7.5 118.7 --- 224.9
------------- ------------- ------------- ------------- ------------- -------------
Total current liabilities........ 157.1 98.6 19.7 409.7 (105.1) 579.5
Long-term debt less current portion.. 170.8 223.7 59.8 644.5 --- 1,098.8
Other long-term liabilities.......... 15.0 9.3 0.4 41.7 --- 66.4
Stockholders' equity (deficit)....... 432.8 41.6 (34.2) 6.8 (14.2) 432.8
------------- ------------- ------------- ------------- ------------- -------------
Total liabilities and stockholders'
equity (deficit)..................... $ 775.7 $ 373.2 $ 45.2 $ 1,102.7 $ (119.3) $ 2,177.5
============= ============= ============= ============= ============= =============
F-29
TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Assets
Current assets
Cash and cash equivalents.......... $ 9.3 $ 0.5 $ 0.1 $ 15.2 $ --- $ 25.1
Trade receivables - net............ 19.7 51.9 18.0 160.2 --- 249.8
Intercompany receivables........... 7.0 16.9 12.8 96.5 (133.2) ---
Net inventories.................... 113.9 101.1 30.0 235.2 (7.4) 472.8
Other current assets............... 4.8 4.1 0.1 14.9 --- 23.9
------------- ------------- ------------- ------------- ------------- -------------
Total current assets............. 154.7 174.5 61.0 522.0 (140.6) 771.6
Property, plant & equipment - net.... 10.8 28.4 --- 60.3 --- 99.5
Investment in and advances to
(from) subsidiaries.............. 75.2 (92.7) (1.4) (49.0) 67.9 ---
Goodwill - net....................... 30.3 80.4 13.7 116.5 --- 240.9
Other assets - net................... 9.9 12.7 1.3 15.3 --- 39.2
------------- ------------- ------------- ------------- ------------- -------------
Total assets............................ $ 280.9 $ 203.3 $ 74.6 $ 665.1 $ (72.7) $ 1,151.2
============= ============= ============= ============= ============= =============
Liabilities and stockholders' equity
(deficit)
Current liabilities
Notes payable and current portion
of long-term debt................ $ 13.5 $ 3.4 $ 0.8 $ 27.0 $ --- $ 44.7
Trade accounts payable............. 29.4 53.7 8.4 135.4 --- 226.9
Intercompany payables.............. 13.1 15.2 26.5 78.4 (133.2) ---
Accruals and other current
liabilities...................... 44.8 22.6 9.3 77.1 --- 153.8
------------- ------------- ------------- ------------- ------------- -------------
Total current liabilities........ 100.8 94.9 45.0 317.9 (133.2). 425.4
Long-term debt less current portion.. 69.9 100.1 60.8 355.8 --- 586.6
Other long-term liabilities.......... 12.1 9.3 0.6 19.1 --- 41.1
Stockholders' equity (deficit)....... 98.1 (1.0) (31.8) (27.7) 60.5 98.1
------------- ------------- ------------- ------------- ------------- -------------
Total liabilities and stockholders'
equity (deficit)..................... $ 280.9 $ 203.3 ` $ 74.6 $ 665.1 $ (72.7) $ 1,151.2
============= ============= ============= ============= ============= =============
F-30
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1999
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
operating activities.................. $ 326.5 $ (124.8) $ 0.6 $ (197.3) $ --- $ 5.0
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from investing activities:
Acquisition of business, net of cash
acquired............................. (535.6) --- --- --- --- (535.6)
Capital expenditures.................. (3.3) (4.6) (0.2) (13.3) --- (21.4)
Proceeds from sale of excess assets... --- 2.6 0.4 1.0 --- 4.0
------------- ------------- ------------- ------------- ------------- -------------
Net cash used in investing
activities........................... (538.9) (2.0) 0.2 (12.3) --- (553.0)
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt, net of issuance costs.......... 123.7 128.0 --- 282.9 --- 534.6
Net borrowings (repayments) under
revolving line of credit agreements.. (1.5) --- --- (15.8) --- (17.3)
Principal repayments of long-term debt (18.7) (0.2) (0.8) (14.0) --- (33.7)
Payment of premiums on early
extinguishment of debt............... --- --- --- --- --- ---
Issuance of common stock.............. 162.8 --- --- --- --- 162.8
Other................................. 1.1 0.2 --- 9.5 --- 10.8
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by financing
activities........................... 267.4 128.0 (0.8) 262.6 --- 657.2
------------- ------------- ------------- ------------- ------------- -------------
Effect of exchange rates on cash and
cash equivalents...................... --- --- --- (1.0) --- (1.0)
------------- ------------- ------------- ------------- ------------- -------------
Net (decrease) increase in cash and cash
equivalents........................... 55.0 1.2 --- 52.0 --- 108.2
Cash and cash equivalents, beginning of
period................................ 9.3 0.5 0.1 15.2 --- 25.1
------------- ------------- ------------- ------------- ------------- -------------
Cash and cash equivalents, end of period $ 64.3 $ 1.7 $ 0.1 $ 67.2 $ --- $ 133.3
============= ============= ============= ============= ============= =============
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
operating activities.................. $ 6.6 $ (0.8) $ (1.4) $ (23.9) $ --- $ (19.5)
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from investing activities:
Acquisition of business, net of cash
acquired............................. (184.9) --- --- (26.4) --- (211.3)
Capital expenditures.................. (1.7) (4.1) (0.1) (7.2) --- (13.1)
Proceeds from sale of excess assets... --- 1.9 0.2 0.3 --- 2.4
------------- ------------- ------------- ------------- ------------- -------------
Net cash used in investing
activities........................... (186.6) (2.2) 0.1 (33.3) --- (222.0)
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt, net of issuance costs.......... 254.4 90.8 58.6 109.8 --- 513.6
Net borrowings (repayments) under
revolving line of credit agreements.. (24.9) (64.1) 0.5 17.0 --- (71.5)
Principal repayments of long-term debt (39.3) (20.1) (47.9) (63.5) --- (170.8)
Payment of premiums on early
extinguishment of debt............... (6.0) (3.7) (8.6) (10.7) --- (29.0)
Other................................. --- --- (1.2) (1.8) --- (3.0)
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by financing
activities........................... 184.2 2.9 1.4 50.8 --- 239.3
------------- ------------- ------------- ------------- ------------- -------------
Effect of exchange rates on cash and
cash equivalents...................... (0.5) 0.5 --- (1.4) --- (1.4)
------------- ------------- ------------- ------------- ------------- -------------
Net (decrease) increase in cash and cash
equivalents........................... 3.7 0.4 0.1 (7.8) --- (3.6)
Cash and cash equivalents, beginning of
period................................ 5.6 0.1 --- 23.0 --- 28.7
------------- ------------- ------------- ------------- ------------- -------------
Cash and cash equivalents, end of period $ 9.3 $ 0.5 $ 0.1 $ 15.2 $ --- $ 25.1
============= ============= ============= ============= ============= =============
F-31
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
operating activities.................. $ (7.2) $ (5.1) $ 1.4 $ 10.6 $ --- $ (0.3)
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from investing activities:
Acquisition of businesses, net of cash
acquired............................. (97.2) --- --- --- --- (97.2)
Capital expenditures.................. (1.2) (2.4) (0.7) (5.6) --- (9.9)
Proceeds from sale of excess assets... 0.1 7.5 0.7 0.2 --- 8.5
------------- ------------- ------------- ------------- ------------- -------------
Net cash (used in) provided by
investing activities.............. (98.3) 5.1 --- (5.4) --- (98.6)
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt, net of issuance costs.......... --- --- --- --- --- ---
Net borrowings (repayments) under
revolving line of credit agreements.. 94.9 --- (0.3) 5.1 --- 99.7
Principal repayments of long-term debt (83.0) --- (0.7) --- --- (83.7)
Redemption of preferred stock......... (45.4) --- --- --- --- (45.4)
Payment of premiums on early
extinguishment of debt............... (9.9) --- --- --- --- (9.9)
Issuance of common stock.............. 104.6 --- --- --- --- 104.6
Other................................. 2.5 --- --- (3.6) --- (1.1)
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
financing activities............... 63.7 --- (1.0) 1.5 --- 64.2
------------- ------------- ------------- ------------- ------------- -------------
Effect of exchange rates on cash and
cash equivalents...................... (6.0) --- (0.4) (2.2) --- (8.6)
------------- ------------- ------------- ------------- ------------- -------------
Net (decrease) increase in cash and cash
equivalents........................... (47.8) --- --- 4.5 --- (43.3)
Cash and cash equivalents, beginning of
period................................ 53.4 0.1 --- 18.5 --- 72.0
------------- ------------- ------------- ------------- ------------- -------------
Cash and cash equivalents, end of period $ 5.6 $ 0.1 $ --- $ 23.0 $ --- $ 28.7
============= ============= ============= ============= ============= =============
F-32
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of PPM Cranes, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in shareholders' deficit and
of cash flows present fairly, in all material respects, the financial position
of PPM Cranes, Inc. and its subsidiaries (the "Company") at December 31, 1999
and 1998, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Stamford, Connecticut
February 25, 2000
F-33
PPM Cranes, Inc.
Consolidated Statement of Operations
(in millions)
Year Ended December 31,
------------------------------------------------------------
1999 1998 1997
----------------- ------------------- ------------------
Net sales............................................. $ 80.4 $ 92.4 $ 87.4
Cost of goods sold.................................... 70.2 81.2 76.5
----------------- ------------------- ------------------
Gross profit..................................... 10.2 11.2 10.9
Engineering, selling and administrative expenses...... 7.2 4.5 4.5
----------------- ------------------- ------------------
Income (loss) from operations.................... 3.0 6.7 6.4
Other income (expense):
Interest expense................................. (4.8) (5.8) (7.1)
Amortization of debt issuance costs.............. (0.2) (0.3) (0.5)
Other income (expense)........................... (0.5) --- 0.1
----------------- ------------------- ------------------
Income (loss) before income taxes................ (2.5) 0.6 (1.1)
Provision for income taxes............................ --- --- ---
----------------- ------------------- ------------------
Income (loss) before extraordinary items......... (2.5) 0.6 (1.1)
Extraordinary loss on retirement of debt.............. --- (10.9) ---
----------------- ------------------- ------------------
Net loss......................................... $ (2.5) $ (10.3) $ (1.1)
================= =================== ==================
The accompanying notes are an integral part of these financial statements.
F-34
PPM Cranes, Inc.
Consolidated Balance Sheet
(in millions, except share amounts)
December 31,
---------------------------
1999 1998
------------- -------------
Assets
Current assets:
Cash and cash equivalents.......................................................... $ 0.1 $ 0.2
Trade accounts receivable (net of allowance of $0.6 and $0.8 at
December 31, 1999 and 1998, respectively)......................................... 21.3 19.3
Net inventories.................................................................... 18.2 30.4
Due from affiliates................................................................ 14.5 15.1
Prepaid expenses and other current assets.......................................... --- 0.1
------------- -------------
Total current assets................................................................. 54.1 65.1
Property, plant and equipment - net.................................................. 0.2 ---
Intangible assets:
Goodwill - net..................................................................... 13.2 14.4
Other assets - net................................................................. 0.9 1.3
------------- -------------
Total assets......................................................................... $ 68.4 $ 80.8
============= =============
Liabilities and shareholders' deficit Current liabilities:
Trade accounts payable............................................................. $ 6.4 $ 10.6
Accrued warranties and product liability........................................... 6.9 8.0
Accrued expenses................................................................... 0.7 1.8
Due to affiliates.................................................................. 5.3 26.4
Due to Terex Corporation........................................................... 18.2 0.3
Current portion of long-term debt.................................................. 1.1 0.8
------------- -------------
Total current liabilities............................................................ 38.6 47.9
------------- -------------
Non-current liabilities:
Long-term debt, less current portion............................................... 62.8 63.9
Other non-current liabilities...................................................... 1.2 0.8
------------- -------------
Total non-current liabilities........................................................ 64.0 64.7
------------- -------------
Commitments and contingencies
Shareholders' deficit:
Common stock, Class A, $.01 par value --
authorized 8,000 shares; issued and outstanding 5,000 shares...................... --- ---
Common stock, Class B, $.01 par value --
authorized 2,000 shares; issued and outstanding 413 shares........................ --- ---
Accumulated deficit................................................................ (34.2) (31.7)
Accumulated other comprehensive income - foreign currency translation adjustments.. --- (0.1)
------------- -------------
Total shareholders' deficit.......................................................... (34.2) (31.8)
------------- -------------
Total liabilities and shareholders' deficit.......................................... $ 68.4 $ 80.8
============= =============
The accompanying notes are an integral part of these financial statements.
F-35
PPM Cranes, Inc.
Consolidated Statement of Changes of Shareholders' Deficit
(in millions)
Other
Accumulated
Common Stock Accumulated Comprehensive
Deficit Income Total
--------------- -------------- ------------------ ----------------
Balance at December 31, 1996.......... $ --- $ (20.3) $ 0.1 $ (20.2)
Net loss.......................... --- (1.1) --- (1.1)
Translation adjustment............ --- --- (0.4) (0.4)
----------------
Comprehensive loss............... (1.5)
--------------- -------------- ------------------ ----------------
Balance at December 31, 1997.......... --- (21.4) (0.3) (21.7)
Net loss.......................... --- (10.3) --- (10.3)
Translation adjustment............ --- --- 0.2 0.2
----------------
Comprehensive loss................ (10.1)
--------------- -------------- ------------------ ----------------
Balance at December 31, 1998 $ --- $ (31.7) $ (0.1) $ (31.8)
Net loss.......................... --- (2.5) --- (2.5)
Translation adjustment............ --- --- 0.1 0.1
----------------
Comprehensive loss............... (2.4)
--------------- -------------- ------------------ ----------------
Balance at December 31, 1999 $ --- $ (34.2) $ --- $ (34.2)
=============== ============== ================== ================
The accompanying notes are an integral part of these financial statements.
F-36
PPM Cranes, Inc.
Consolidated Statement of Cash Flows
(in millions)
Year Ended December 31,
-------------------------------------------
1999 1998 1997
------------- ------------- -------------
Operating activities
Net loss.........................................................$ (2.5) $ (10.3) $ (1.1)
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization................................ 1.5 1.6 1.8
Extraordinary loss on retirement of debt..................... --- 10.9 ---
Loss on sale of subsidiary................................... 0.7 --- ---
Gain on sale of property, plant and equipment................ (0.4) --- ---
Other........................................................ 0.1 --- 0.4
Changes in operating assets and liabilities:
Trade accounts receivable............................... (2.0) 2.1 (7.0)
Net inventories........................................ 12.2 (0.7) (0.5)
Trade accounts payable.................................. (4.2) 3.2 2.4
Net amounts due to affiliates........................... (2.6) (6.2) 6.8
Other - net............................................. (2.3) (0.1) (1.5)
------------ ------------ ------------
Net cash provided by (used in) operating activities............. 0.5 0.5 1.3
------------ ------------ ------------
Investing activities
Capital expenditures............................................. (0.2) (0.1) (0.7)
Proceeds from sale of excess assets............................. 0.4 0.2 0.7
------------ ------------ ------------
Net cash provided by investing activities........................ 0.2 0.1 ---
------------ ------------ ------------
Financing activities
Proceeds from issuance of long-term debt, net of issuance costs..
--- 60.0 ---
Net (repayments) borrowings under revolving line of credit
agreements..................................................... --- --- (0.3)
Principal repayments of long-term debt........................... (0.8) (50.8) (0.7)
Payment of premiums on early extinguishment of debt.............. --- (8.6) ---
Other............................................................ --- (1.2) (0.1)
------------ ------------ ------------
Net cash used in financing activities............................ (0.8) (0.6) (1.1)
------------ ------------ ------------
Effect of exchange rate changes on cash.......................... --- --- (0.4)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents............. (0.1) --- (0.2)
Cash and cash equivalents at beginning of period................. 0.2 0.2 0.4
------------ ------------ ------------
Cash and cash equivalents at end of period.......................$ 0.1 $ 0.2 $ 0.2
============ ============ ============
Supplemental disclosure of cash flow information
Cash paid for interest...........................................$ 0.4 $ 0.5 $ 0.4
============ ============ ============
Cash paid for income taxes...................................... $ --- $ --- $ ---
============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-37
PPM CRANES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(In millions of dollars)
NOTE 1 -- DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
PPM Cranes, Inc. (the "Company" or "PPM") is engaged in the design, manufacture,
marketing and worldwide distribution and support of construction equipment,
primarily hydraulic cranes and related spare parts.
On May 9, 1995 (the "date of acquisition"), Terex Corporation, through its
wholly-owned subsidiary Terex Cranes, Inc., completed the acquisition of all of
the capital stock of Legris Industries, Inc., a Delaware corporation which owns
92.4% of the capital stock of PPM Cranes, Inc. Terex Corporation and Terex
Cranes, Inc., are both Delaware corporations. Prior to the acquisition of Legris
Industries, Inc. by Terex Cranes, Inc. on May 9, 1995, Legris Industries, Inc.
was a holding company, with no assets, liabilities, or operations other than its
investment in PPM.
The financial statements reflect Terex Corporation's basis in the assets and
liabilities of the Company which was accounted for as a purchase transaction. As
a result, the debt and goodwill associated with the acquisition have been
"pushed down" to the Company's financial statements.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include the
accounts of the Company and its wholly-owned inactive subsidiary PPM Far East
Private Ltd. Prior to November 30, 1999 the accounts of the Company's other
wholly-owned subsidiary, PPM of Australia Pty. Ltd. ("PPM Australia"), were also
included. On November 30, 1999, the Company sold its ownership in PPM Australia
to Terex Corporation for $1.2 resulting in a loss of $0.7, which has been
included in other income (expense). All material intercompany transactions and
profits have been eliminated.
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Inventories. Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out (FIFO) method.
Property, Plant and Equipment. Additions and major replacements or improvements
to property, plant and equipment are recorded at cost. Maintenance, repairs and
minor replacements are charged to expense when incurred. Plant and equipment are
depreciated over the estimated useful lives of the assets under the
straight-line method of depreciation for financial reporting purposes and both
straight-line and other methods for tax purposes.
Goodwill. Goodwill, representing the difference between the total purchase price
and the fair value of assets (tangible and intangible) and liabilities at the
date of acquisition, is amortized on a straight-line basis over fifteen years.
Accumulated amortization is $6.0 and $4.8 at December 31, 1999 and 1998,
respectively.
Debt Issuance Costs. Debt issuance costs incurred by Terex Corporation in
securing the financing related to acquiring the Company have been capitalized
and are reflected in the financial statements. Capitalized debt issuance costs
are amortized over the term of the related debt. Accumulated amortization is
$0.4 and $0.2 at December 31, 1999 and 1998, respectively.
Impairment of Long Lived Assets. The Company's policy is to assess the
realizability of its long lived assets and to evaluate such assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets (or group of assets) may not be recoverable.
Impairment is determined to exist if the estimated future undiscounted cash
F-38
flows is less than its carrying value. The amount of any impairment then
recognized would be calculated as the difference between estimated future
discounted cash flows and the carrying value of the asset.
Product Liability and Warranty. The Company records accruals for potential
warranty and product liability claims based on the Company's claim experience.
Warranty costs are accrued at the time revenue is recognized. The Company
provides self-insurance accruals for estimated product liability experience on
claims and for claims anticipated to have been incurred which have not yet been
reported.
Income Taxes. Income taxes are provided using the liability method in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes." The Company is a part of a group that files a consolidated
income tax return. The method used to allocate income taxes to members of the
group is one in which current and deferred income taxes are calculated on a
separate return basis as if the Company had not been included in a consolidated
income tax return with its parent. The tax benefit associated with the 1998 Bank
Credit Facility (as defined in Note 5) has been taken into account in the
Company's tax provision.
Revenue Recognition. Revenue and costs are generally recorded when products are
shipped and invoiced to either independently owned and operated dealers or to
customers. Certain new units may be invoiced prior to the time customers take
physical possession. Revenue is recognized in such cases only when the customer
has a fixed commitment to purchase the units, the units have been completed,
tested and made available to the customer for pickup or delivery, and the
customer has requested that the Company hold the units for pickup or delivery at
a time specified by the customer. In such cases, the units are invoiced under
the Company's customary billing terms, title to the units and risks of ownership
pass to the customer upon invoicing, the units are segregated from the Company's
inventory and identified as belonging to the customer and the Company has no
further obligations under the order.
Foreign Currency Translation. Assets and liabilities of the Company's
international operations are translated at year-end exchange rates. Income and
expenses are translated at average exchange rates prevailing during the year.
For operations whose functional currency is the local currency, translation
adjustments are accumulated in the Cumulative Translation Adjustment component
of Stockholders' Deficit. Gains or (losses) resulting from foreign currency
transactions are recorded in the accounts based on the underlying transaction.
During 1999 the Company recognized a loss of $0.1 in other income (expense)
related to the cumulative translation adjustment of PPM Australia at the sale
date. The translation gain included in comprehensive loss represents a
reclassification adjustment.
Foreign Exchange Contracts. The Company may from time to time use foreign
exchange contracts to hedge recorded balance sheet amounts related to certain
international operations and firm commitments that create currency exposures.
The Company does not enter into speculative contracts. Gains and losses on
hedges of assets and liabilities are recognized in income as offsets to the
gains and losses from the underlying hedged amounts. Gains and losses on hedges
of firm commitments are recorded on the basis of the underlying transaction. At
December 31, 1999 the Company had no material outstanding foreign exchange
contracts.
Environmental Policies. Environmental expenditures that relate to current
operations are either expensed or capitalized depending on the nature of the
expenditure. Expenditures relating to conditions caused by past operations that
do not contribute to current or future revenue generation are expensed.
Liabilities are recorded when environmental assessments and/or remedial actions
are probable, and the costs can be reasonably estimated. Such amounts were not
material at December 31, 1999 and 1998.
Research and Development Costs. Research and development costs are expensed as
incurred. Such costs incurred in the development of new products or significant
improvements to existing products are included in Engineering, Selling and
Administrative Expenses and amounted to $0.0, $0.0 and $0.1 in 1999, 1998 and
1997, respectively.
NOTE 3 -- INVENTORIES
Inventories at December 31, 1999 and 1998 consist of the following:
1999 1998
--------- ----------
Raw materials and supplies....................... $ 5.9 $ 10.4
Work in process.................................. 1.9 1.6
Replacement parts................................ 6.8 9.1
Finished goods equipment......................... 3.6 9.3
--------- ----------
$ 18.2 $ 30.4
========= ==========
F-39
NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1999 and 1998 consists of the
following:
1999 1998
---------- ---------
Property.......................................... $ 0.2 $ 0.2
Plant............................................. --- ---
Machinery and equipment........................... 0.2 ---
---------- ---------
0.4 0.2
Less accumulated depreciation..................... (0.2) (0.2)
---------- ---------
$ 0.2 $ ---
========== =========
Depreciation expense for 1999, 1998 and 1997 was $0.0, $0.1 and $0.1,
respectively.
NOTE 5 - LONG-TERM DEBT
Long-term debt at December 31, 1999 and 1998 is summarized as follows:
1999 1998
------------- -------------
1998 Bank Credit Facility................... $ 60.0 $ 60.0
Note payable................................ 3.9 4.4
Other....................................... --- 0.3
------------- -------------
Total long-term debt................... 63.9 64.7
Less: Current portion long-term debt... (1.1) (0.8)
------------- -------------
Long-term debt less current portion.... $ 62.8 $ 63.9
============= =============
On May 9, 1995, Terex Corporation issued $250 of 13-1/4% Senior Secured Notes
due May 15, 2002 (the "Senior Secured Notes"). The Senior Secured Notes were
issued in conjunction with Terex Corporation's acquisition of substantially all
of the capital stock of PPM Cranes, Inc. and P.P.M. S.A. and the refinancing of
Terex Corporation's debt. Of the total principal amount, $50 related to the
acquisition of substantially all of the capital stock of PPM Cranes, Inc. and
was included in the Company's consolidated balance sheet prior to March 6, 1998.
On March 6, 1998, Terex Corporation redeemed or defeased all of its $166.7
principal amount of its then outstanding Senior Secured Notes. The Company had
$50.0 in principal of the Senior Secured Notes that were redeemed. Concurrently
therewith, Terex Corporation also refinanced substantially all of its then
existing domestic and foreign revolving credit debt. The proceeds for the offer
to purchase and the repayment of its then existing revolving credit facility
were obtained from borrowings under Terex Corporation's new $500.0 global bank
credit facility ("1998 Bank Credit Facility"). In connection with the repurchase
of the Senior Secured Notes, the Company incurred an extraordinary loss of
$10.9. This extraordinary loss was recorded in the first quarter of 1998.
The 1998 Bank Credit Facility consists of a new secured global revolving credit
facility aggregating up to $125.0 (the "1998 Revolving Credit Facility") and two
term loan facilities (collectively, the "Term Loan Facilities") providing for
loans in an aggregate principal amount of up to approximately $375.0. With
limited exceptions, the obligations under the New Bank Credit Facility are
secured by (i) a pledge of all of the capital stock of domestic subsidiaries of
Terex Corporation, (ii) a pledge of 65% of the stock of the foreign subsidiaries
of Terex Corporation and (iii) a first priority security interest in, and
mortgages on, substantially all of the assets of Terex and its domestic
subsidiaries. The 1998 Bank Credit Facility contains covenants limiting Terex
Corporation's activities, including, without limitation, limitations on
dividends and other payments, liens, investments, incurrence of indebtedness,
mergers and asset sales, related party transactions and capital expenditures.
The 1998 Bank Credit Facility also contains certain financial and operating
covenants, including a maximum leverage ratio, a minimum interest coverage ratio
and a minimum fixed charge coverage ratio.
Pursuant to the Term Loan Facilities, Terex Corporation has borrowed (i) $175.0
in aggregate principal amount pursuant to a Term Loan A due March 2004 (the
"Term A Loan") and (ii) $200.0 in aggregate principal amount pursuant to a Term
Loan B due March 2005 (the "Term B Loan") of which $60.0 was pushed down to the
Company. The outstanding principal amount of the Term B Loan currently bears
interest, at Terex Corporation's option, at a rate of 2.75% per annum in excess
F-40
of the adjusted eurodollar rate or, with respect to U.S. Dollar denominated
alternate base rate loans, 1.75% in excess of the prime rate. The weighted
average interest rate on the Term B Loan at December 31, 1999 was 8.38%. The
Term B Loan amortizes in an annual percentage of 1% during each of the first six
years of the term of the loan and 94% in the seventh year of the term of the
loan. The Term A Loan and Term B Loan are subject to mandatory prepayment in
certain circumstances and are voluntarily prepayable without payment of a
premium (subject to reimbursement of the lenders' costs in case of prepayment of
eurodollar loans other than on the last day of an interest period.)
Note payable
The note payable is to Harnischfeger Corporation and is not interest bearing.
Schedule of Debt Maturities
Scheduled annual maturities of long-term debt outstanding at December 31, 1999
in the successive five-year period are summarized as follows:
Note Payable -
Harnischfeger Other Total
---------------- -------------- -------------
2000...........................$ 0.8 $ 0.3 $ 1.1
2001........................... 0.8 --- 0.8
2002........................... 0.5 --- 0.5
2003........................... 0.5 --- 0.5
2004........................... 0.5 --- 0.5
Thereafter..................... 3.5 60.0 63.5
---------------- -------------- -------------
6.6 60.3 66.9
Imputed Interest............... (2.7) --- (2.7)
---------------- -------------- -------------
$ 3.9 $ 60.3 $ 64.2
================ ============== =============
The Company believes that the carrying value of other borrowings approximates
fair market value, based on discounting future cash flows using rates currently
available for debt of similar terms and remaining maturities.
NOTE 6 -- EMPLOYEE BENEFIT PLAN
The Company participates in a defined contribution plan which is sponsored by
Terex Corporation. The plan covers U.S. employees. Under the plan, the Company
matches a portion of an employee's contribution to the plan. The related expense
to the Company was $0.1, $0.1 and $0.1 for 1999, 1998 and 1997, respectively.
NOTE 7 -- INCOME TAXES
The components of income (loss) from continuing operations before income taxes
and extraordinary items consisted of the following:
Year Ended December 31,
-------------------------------------
1999 1998 1997
------------ ----------- -----------
Domestic....................................$ (2.8) $ 0.4 $ (1.1)
Foreign..................................... 0.4 0.2 ---
------------ ----------- -----------
$ (2.4) $ 0.6 $ (1.1)
============ =========== ===========
The Company has no provision (benefit) for federal, foreign and state income
taxes.
F-41
Deferred tax assets and liabilities result from differences in the basis of
assets and liabilities for tax and financial statements purposes. In accordance
with SFAS No. 109, "Accounting for income taxes," a valuation allowance fully
offsetting the net deferred tax asset, has been recognized. The tax effects of
the basis differences and Net Operating Loss ("NOL") carryforward as of December
31, 1999 and 1998 are summarized below:
Year Ended December 31,
-------------------------------
1999 1998
--------------- ---------------
Total deferred tax liabilities................. $ --- $ ---
--------------- ---------------
Receivables.................................... $ 0.1 0.1
Inventory...................................... 0.2 0.7
Fixed Assets................................... (0.5) 0.8
Product liability.............................. 5.1 2.1
Warranty....................................... 1.8 0.7
Other.......................................... --- ---
NOL carryforwards.............................. 22.3 20.7
--------------- ---------------
Total deferred tax assets...................... 29.0 25.1
Deferred tax asset valuation allowance......... (29.0) (25.1)
--------------- ---------------
Net deferred taxes............................. $ --- $ ---
=============== ===============
The valuation allowance for deferred tax assets at acquisition date, May 9,
1995, was $19.0. Any future reduction of this valuation allowance attributable
to the pre-acquisition period will reduce goodwill. The net change in the
valuation allowance for 1999, 1998 and 1997 was an increase of $3.9, an increase
of $3.6 and a decrease of $3.1, respectively.
At December 31, 1999, the Company has loss carryforwards for federal income tax
purposes of approximately $59.1 available to offset future taxable income. The
expiration of the Company's loss carryforwards are as follows:
Year
Expiring Amount
- ------------ -------------
2004 ................. $ 21.7
2005 ................. 0.8
2006 ................. 5.8
2007 ................. 8.9
2008 ................. 3.1
2009 ................. 2.4
2010 ................. 0.2
2011 ................. 5.4
2018 ................. 10.8
2019 ................. 4.6
-------------
Total ................. $ 63.7
=============
The utilization of approximately $42.7 of loss carryforwards is limited
annually, as a result of an "ownership change" (as defined by Section 382 of the
Internal Revenue code), which occurred in 1995. Further, the use of these
pre-acquisition losses is limited to future taxable income of PPM Cranes, Inc.
The Company's provision for income taxes from continuing operations is different
from the amount which would be provided by applying the statutory federal income
tax rate to the Company's loss before income taxes. The reasons for the
difference are summarized below:
Year Ended December 31,
--------------------------------
1999 1998 1997
---------- ---------- ----------
Statutory federal income tax rate............ $ (0.8) $ 0.2 $ (0.4)
Goodwill..................................... 0.4 0.4 0.5
NOL and basis differences
with no current benefit................... 0.4 (0.6) (0.1)
---------- ---------- ----------
Total provision for income taxes............. $ --- $ --- $ ---
========== ========== ==========
F-42
There were no income taxes paid during 1999, 1998 and 1997.
NOTE 8 -- COMMITMENTS AND CONTINGENCIES
The Company has various lease agreements, primarily related to office space,
production facilities, and office equipment, which are accounted for as
operating leases. Certain leases have renewal options and provisions requiring
the Company to pay maintenance, property taxes and insurance. Rent expense for
1999, 1998 and 1997 was $0.3, $0.3 and $0.4, respectively.
Future minimum payments under noncancelable operating leases at December 31,
1999 are as follows:
2000...................................... $ 0.2
2001...................................... 0.2
2002...................................... 0.2
2003...................................... 0.2
2004...................................... 0.1
Thereafter................................ ---
--------------
$ 0.9
==============
The Company is involved in product liability and other lawsuits incident to the
operation of its business. Insurance with third parties is maintained for
certain of these items. It is management's opinion that none of these lawsuits
will have a materially adverse effect on the Company's financial position.
NOTE 9 - BUSINESS SEGMENT INFORMATION
The Company operates in one industry segment, that being the designing,
manufacturing, and marketing of telescopic mobile cranes. These products are
used primarily in the construction industry.
Geographic segment information is presented below:
1999 1998 1997
----------- ----------- -----------
Sales
United States..................$ 65.4 $ 66.6 $ 54.3
All Other...................... 15.0 25.8 33.1
----------- ----------- -----------
$ 80.4 $ 92.4 $ 87.4
=========== =========== ===========
The Company attributes sales to unaffiliated customers in different geographical
areas on the basis of the location of the customer.
Sales to the Company's largest customer comprised 12%, 12% and 12% of the
Company's net sales in the years ended December 31, 1999, 1998 and 1997,
respectively.
F-43
NOTE 10 -- RELATED PARTY TRANSACTIONS
During the years ended December 31, 1999, 1998 and 1997, the Company had
transactions with various unconsolidated affiliates as follows:
1999 1998 1997
--------- ---------- ---------
Product sales and service revenues.......... $ --- $ 1.3 $ 2.5
Management fee expense...................... $ 1.0 $ 1.0 $ 1.1
Interest expense............................ $ 5.2 $ 5.3 $ 6.5
Included in management fee expense are expenses paid by Terex Corporation on
behalf of the Company (e.g. legal, treasury and tax services expense).
F-44
TEREX CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Amounts in millions)
Additions
-------------------------
Balance
Beginning Charges to Balance End
of Year Earnings Other Deductions (1) of Year
------------ ------------ ------------- ---------------- ------------
Year ended December 31, 1999 Deducted from asset accounts:
Allowance for doubtful accounts............. $ 5.6 $ 0.4 $ --- $ (0.2) $ 5.8
Reserve for excess and obsolete inventory... 24.0 4.7 --- (6.2) 22.5
------------ ------------ ------------- ---------------- ------------
Totals..................................... $ 29.6 $ 5.1 $ --- $ (6.4) $ 28.3
============ ============ ============= ================ ============
Year ended December 31, 1998: Deducted from asset accounts:
Allowance for doubtful accounts............. $ 4.5 $ 1.8 $ --- $ (0.7) $ 5.6
Reserve for excess and obsolete inventory... 24.0 5.6 --- (5.6) 24.0
------------ ------------ ------------- ---------------- ------------
Totals..................................... $ 28.5 $ 7.4 $ --- $ (6.3) $ 29.6
============ ============ ============= ================ ============
Year ended December 31, 1997: Deducted from asset accounts:
Allowance for doubtful accounts............. $ 7.0 $ 0.4 $ --- $ (2.9) $ 4.5
Reserve for excess and obsolete inventory... 18.7 8.1 --- (2.8) 24.0
------------ ------------ ------------- ---------------- ------------
Totals..................................... $ 25.7 $ 8.5 $ --- $ (5.7) $ 28.5
============ ============ ============= ================ ============
(1) Primarily represents the utilization of established reserves, net of
recoveries.
EXHIBIT INDEX
3.1 Restated Certificate of Incorporation of Terex Corporation (incorporated
by reference to Exhibit 3.1 to the Form S-1 Registration Statement of
Terex Corporation, Registration No. 33-52297).
3.2 Certificate of Elimination with respect to the Series B Preferred Stock
(incorporated by reference to Exhibit 4.3 to the Form 10-K for the year
ended December 31, 1998 of Terex Corporation, Commission File No.
1-10702).
3.3 Certificate of Amendment to Certificate of Incorporation of Terex
Corporation dated June 5, 1998 (incorporated by reference to Exhibit 3.3
to the Form 10-K for the year ended December 31, 1998 of Terex
Corporation, Commission File No. 1-10702).
3.4 Amended and Restated Bylaws of Terex Corporation (incorporated by
reference to Exhibit 3.2 to the Form 10-K for the year ended December 31,
1998 of Terex Corporation, Commission File No. 1-10702).
4.1 Warrant Agreement dated as of December 20, 1993 between Terex Corporation
and Mellon Securities Trust Company, as Warrant Agent (incorporated by
reference to Exhibit 4.40 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52297).
4.2 Form of Series A Warrant (incorporated by reference to Exhibit 4.41 to
the Form S-1 Registration Statement of Terex Corporation, Registration
No. 33-52297).
4.3 Indenture dated as of March 31, 1998 among Terex Corporation, the
Guarantors named therein and United States Trust Company of New York, as
Trustee (incorporated by reference to Exhibit 4.6 of Amendment No. 1 to
the Form S-4 Registration Statement of Terex Corporation, Registration
No. 333-53561).
4.4 First Supplemental Indenture, dated as of September 23, 1998, between
Terex Corporation and United States Trust Company of New York, as Trustee
(to Indenture dated as of March 31, 1998) (incorporated by reference to
Exhibit 4.4 to the Form 10-Q for the quarter ended June 30, 1999 of Terex
Corporation, Commission File No. 1-10702).
4.5 Second Supplemental Indenture, dated as of April 1, 1999, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of March 31, 1998) (incorporated by reference to
Exhibit 4.5 to the Form 10-Q for the quarter ended June 30, 1999 of Terex
Corporation, Commission File No. 1-10702).
4.6 Third Supplemental Indenture, dated as of July 29, 1999, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of March 31, 1998) (incorporated by reference to
Exhibit 4.6 to the Form 10-Q for the quarter ended June 30, 1999 of Terex
Corporation, Commission File No. 1-10702).
4.7 Fourth Supplemental Indenture, dated as of August 26, 1999, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of March 31, 1999) (incorporated by reference to
Exhibit 4.7 to the Form 10-Q for the quarter ended September 30, 1999 of
Terex Corporation, Commission File No. 1-10702).
4.8 Indenture dated as of March 9, 1999 among Terex Corporation, the
Guarantors named therein and United States Trust Company of New York, as
Trustee (incorporated by reference to Exhibit 4.4 to the Form 10-K for
the year ended December 31, 1998 of Terex Corporation, Commission File
No. 1-10702).
4.9 First Supplemental Indenture, dated as of April 1, 1999, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of March 9, 1999) (incorporated by reference to
Exhibit 4.8 to the Form 10-Q for the quarter ended June 30, 1999 of Terex
Corporation, Commission File No. 1-10702).
4.10 Second Supplemental Indenture, dated as of July 30, 1999, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of March 9, 1999) (incorporated by reference to
Exhibit 4.9 to the Form 10-Q for the quarter ended June 30, 1999 of Terex
Corporation, Commission File No. 1-10702).
4.11 Third Supplemental Indenture, dated as of August 26, 1999, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of March 9, 1999) (incorporated by reference to
Exhibit 4.11 to the Form 10-Q for the quarter ended September 30, 1999 of
Terex Corporation, Commission File No. 1-10702).
10.1 Terex Corporation Incentive Stock Option Plan, as amended (incorporated
by reference to Exhibit 4.1 to the Form S-8 Registration Statement of
Terex Corporation, Registration No. 33-21483).
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10.2 1994 Terex Corporation Long Term Incentive Plan (incorporated by
reference to Exhibit 10.2 to the Form 10-K for the year ended December
31, 1994 of Terex Corporation, Commission File No. 1-10702).
10.3 Terex Corporation Employee Stock Purchase Plan (incorporated by reference
to Exhibit 10.3 to the Form 10-K for the year ended December 31, 1994 of
Terex Corporation, Commission File No. 1-10702).
10.4 1996 Terex Corporation Long Term Incentive Plan (incorporated by
reference to Exhibit 10.1 to Form S-8 Registration Statement of Terex
Corporation, Registration No. 333-03983).
10.5 Amendment No. 1 to 1996 Terex Corporation Long Term Incentive Plan. *
10.6 Amendment No. 2 to 1996 Terex Corporation Long Term Incentive Plan. *
10.7 Common Stock Appreciation Rights Agreement dated as of May 9, 1995
between the Company and United States Trust Company of New York, as
Rights Agents (incorporated by reference to Exhibit 10.29 of the
Amendment No. 1 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52711).
10.8 SAR Registration Rights Agreement dated as of May 9, 1995 among the
Company and the Purchasers, as defined therein (incorporated by reference
to Exhibit 10.31 of the Amendment No. 1 to the Form S-1 Registration
Statement of Terex Corporation, Registration No. 33-52711).
10.9 Credit Agreement dated as of March 6, 1998 among Terex Corporation,
certain of its subsidiaries, the lenders named therein, Credit Suisse
First Boston, as Administrative Agent, Bank Boston N.A., as Syndication
Agent and Canadian Imperial Bank of Commerce and First Union National
Bank, as Co-Documentation Agents (incorporated by reference to Exhibit
10.13 to the Form 10-K for the year ended December 31, 1998 of Terex
Corporation, Commission File No. 1-10702).
10.10 Guarantee Agreement dated as of March 6, 1998 of Terex Corporation and
Credit Suisse First Boston, as Collateral Agent (incorporated by
reference to Exhibit 10.14 to the Form 10-K for the year ended December
31, 1998 of Terex Corporation, Commission File No. 1-10702).
10.11 Guarantee Agreement dated as of March 6, 1998 of Terex Corporation, each
of the subsidiaries of Terex Corporation listed therein and Credit Suisse
First Boston, as Collateral Agent (incorporated by reference to Exhibit
10.15 to the Form 10-K for the year ended December 31, 1998 of Terex
Corporation, Commission File No. 1-10702).
10.12 Security Agreement dated as of March 6, 1998 of Terex Corporation, each
of the subsidiaries of Terex Corporation listed therein and Credit Suisse
First Boston, as Collateral Agent (incorporated by reference to Exhibit
10.16 to the Form 10-K for the year ended December 31, 1998 of Terex
Corporation, Commission File No. 1-10702).
10.13 Pledge Agreement dated as of March 6, 1998 of Terex Corporation, each of
the subsidiaries of Terex Corporation listed therein and Credit Suisse
First Boston, as Collateral Agent (incorporated by reference to Exhibit
10.17 to the Form 10-K for the year ended December 31, 1998 of Terex
Corporation, Commission File No. 1-10702).
10.14 Form Mortgage, Leasehold Mortgage, Assignment of Leases and Rents,
Security Agreement and Financing entered into by Terex Corporation and
certain of the subsidiaries of Terex Corporation, as Mortgagor, and
Credit Suisse First Boston, as Mortgagee (incorporated by reference to
Exhibit 10.18 to the Form 10-K for the year ended December 31, 1998 of
Terex Corporation, Commission File No. 1-10702).
10.15 Amendment No. 1 to Credit Agreement dated as of March 6, 1998 among Terex
Corporation, certain of its subsidiaries, the lenders named therein,
Credit Suisse First Boston, as Administrative and Collateral Agent
(incorporated by reference to Exhibit 10.17 to the Form 10-K for the year
ended December 31, 1998 of Terex Corporation, Commission File No.
1-10702).
10.16 Amendment No. 2 to Credit Agreement dated as of March 6, 1998 among Terex
Corporation, certain of its subsidiaries, the lenders named therein,
Credit Suisse First Boston, as Administrative and Collateral Agent
(incorporated by reference to Exhibit 10.18 to the Form 10-K for the year
ended December 31, 1998 of Terex Corporation, Commission File No.
1-10702).
10.17 Amendment No. 3 to Credit Agreement dated as of March 6, 1998 among Terex
Corporation, certain of its subsidiaries, the lenders named therein,
Credit Suisse First Boston, as Administrative and Collateral Agent
(incorporated by reference to Exhibit 10.19 to the Form 10-K for the year
ended December 31, 1998 of Terex Corporation, Commission File No.
1-10702).
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10.18 Amendment No. 4 to Credit Agreement dated as of March 6, 1998 among Terex
Corporation, certain of its subsidiaries, the lenders named therein, and
Credit Suisse First Boston, as Administrative and Collateral Agent
(incorporated by reference to Exhibit 10.1 to the Form 8-K Current
Report, Commission File No.1-10702, dated July 27, 1999 and filed with
the Commission on August 10, 1999).
10.19 Amendment No. 5 to Credit Agreement dated as of March 6, 1998 among Terex
Corporation, certain of its subsidiaries, the lenders named therein, and
Credit Suisse First Boston, as Administrative and Collateral Agent
(incorporated by reference to Exhibit 10.2 to the Form 8-K Current
Report, Commission File No. 1-10702, dated July 27, 1999 and filed with
the Commission on August 10, 1999).
10.20 Amendment No. 6 to Credit Agreement dated as of March 6, 1998 among Terex
Corporation, certain of its subsidiaries, the lenders named therein, and
Credit Suisse First Boston, as Administrative and Collateral Agent
(incorporated by reference to Exhibit 10.22 to the Form 10-Q for the
quarter ended September 30, 1999 of Terex Corporation, Commission File
No. 1-10702).
10.21 Amendment No. 7 to Credit Agreement dated as of March 6, 1998 among Terex
Corporation, certain of its subsidiaries, the lenders named therein and
Credit Suisse First Boston, as Administrative and Collateral Agent. *
10.22 Tranche C Credit Agreement, dated as of July 2, 1999, as amended and
restated as of August 23, 1999, among Terex Corporation, the lenders
named therein, and Credit Suisse First Boston, as Administrative and
Collateral Agent (incorporated by reference to Exhibit 10.23 to the Form
10-Q for the quarter ended September 30, 1999 of Terex Corporation,
Commission File No. 1-10702).
10.23 Purchase Agreement dated as of March 9, 1999 among the Company and the
Initial Purchasers, as defined therein (incorporated by reference to
Exhibit 10.20 to the Form 10-K for the year ended December 31, 1998 of
Terex Corporation, Commission File No. 1-10702).
10.24 Registration Rights Agreement dated as of March 9, 1999 among the Company
and the Purchasers, as defined therein (incorporated by reference to
Exhibit 10.21 to the Form 10-K for the year ended December 31, 1998 of
Terex Corporation, Commission File No. 1-10702).
10.25 Underwriting Agreement, dated as of June 17, 1999, between Terex
Corporation and Salomon Smith Barney Inc. (incorporated by reference to
Exhibit 1 of the Form 8-K Current Report, Commission File No. 1-10702,
dated and filed with the Commission on June 18, 1999).
10.26 Stock Purchase Agreement between Raytheon Engineers & Constructors
International, Inc. and Terex Corporation, dated as of July 19, 1999
(incorporated by reference to Exhibit 10.27 to the Form 10-Q for the
quarter ended June 30, 1999 of Terex Corporation, Commission File No.
1-10702).
10.27 Stock Purchase Agreement between Terex Corporation and Hartford Capital
Appreciation Fund, Inc., dated July 23, 1999 (incorporated by reference
to Exhibit 10.28 to the Form 10-Q for the quarter ended June 30, 1999 of
Terex Corporation, Commission File No. 1-10702).
10.28 Contract of Employment, dated as of September 1, 1999, between Terex
Corporation and Filip Filipov (incorporated by reference to Exhibit 10.29
to the Form 10-Q for the quarter ended September 30, 1999 of Terex
Corporation, Commission File No. 1-10702).
10.29 Employment and Compensation Agreement, dated as of January 1, 1999,
between Terex Corporation and Ronald M. DeFeo (incorporated by reference
to Exhibit 10.30 to the Form 10-Q for the quarter ended September 30,
1999 of Terex Corporation, Commission File No. 1-10702).
12.1 Calculation of Ratio of Earnings to Fixed Charges. *
21.1 Subsidiaries of Terex Corporation. *
23.1 Consent of Independent Accountants - PricewaterhouseCoopers LLP,
Stamford, Connecticut. *
24.1 Power of Attorney. *
27.1 Financial Data Schedule.*
* Exhibit filed with this document.
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