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, 2000
or
[X] 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.
The aggregate market value of the voting and non-voting common equity stock held
by non-affiliates of the Registrant was approximately $496.4 million based on
the last sale price on March 13, 2001.
The number of shares of the Registrant's Common Stock outstanding was
26,810,105 as of March 13, 2001.
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 2001 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, 2000
Page
PART I
Item 1 Business........................................................... 3
Item 2 Properties......................................................... 17
Item 3 Legal Proceedings.................................................. 19
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........................................................... 19
Item 6 Selected Financial Data............................................ 20
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 21
Item 7A Quantitative and Qualitative Disclosure about Market Risk.......... 28
Item 8 Financial Statements and Supplementary Data........................ 29
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 Schedules and Reports on Form 8-K.... 30
* Incorporated by reference from Terex Corporation Proxy Statement to be filed
with the Securities and Exchange Commission with respect to the 2001 Annual
Meeting of Stockholders.
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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 primarily organizes itself into two business
segments, Terex Lifting and Terex Earthmoving. The Company's products are
manufactured at 39 plants in the United States, Europe, Australia and Asia, 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% of total costs; (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.
For financial information about the Company's industry and geographic segments,
see Note O --- "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, utility aerial devices (including digger derricks and articulated aerial
devices), telescopic material handlers (including container stackers and rough
terrain), truck mounted cranes (boom trucks), aerial work platforms (including
scissor, articulated boom and straight telescoping boom aerial work
platforms)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 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 (and
the Company believes it is the largest manufacturer of commercial hydraulic
mobile cranes in the United States). The Company also believes that it is the
second largest manufacturer in the United States of utility aerial devices and
the third largest manufacturer of tower cranes worldwide.
Terex Lifting has 15 significant manufacturing operations: (i) PPM S.A.S.
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
S.r.l., located in Crespellano, Italy, at which mobile cranes are manufactured
under the TEREX, BENDINI and PPM brand names; (iii) PPM Cranes, Inc. (also known
as Terex Cranes - Conway Operations), 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 (also known as
Koehring Cranes, Inc.), 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
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International B.V. ("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) Terexlift S.r.l. ("Terexlift"), 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 S.p.A. ("Comedil"), located in
Fontanafredda, Italy, at which tower cranes are manufactured under the COMEDIL
trade name; (xiv) Terex Lifting U.K. Limited ("Terex Lifting U.K."), located in
Tetbury, England, at which material handlers are manufactured under the MATBRO
trade name; and (xv) Terex Lifting Australia Pty. Ltd. ("Terex Lifting
Australia"), located in Brisbane, Australia, at which all terrain mobile cranes
are manufactured under the FRANNA trade name.
The Company has been actively involved in both acquiring and disposing of
operations with the Terex Lifting segment. In July 1999, as part of the
acquisition of Powerscreen International plc, the Company acquired the material
handling operations of Matbro Limited (now Terex Lifting U.K.) and Moffett
Engineering Limited ("Moffett"). Moffett, located in Dundalk, Ireland,
manufactures truck-mounted forklifts. On November 3, 1999, the Company completed
the acquisition of the Material Handling Division of Teledyne, Inc., which
included substantially all of the assets comprising the Princeton business and
all of the capital stock of Teledyne GmbH, the owner of Kooi B.V. (collectively,
"Princeton/Kooi"). Princeton/Kooi manufacture and market truck-mounted forklifts
at facilities in Canal Winchester, Ohio and Vrouwenparochie, The Netherlands. On
December 1, 1999, the Company completed the purchase of Terex Lifting Australia,
formerly known as Franna Cranes Pty. Ltd., a manufacturer of all-terrain "pick
and carry" cranes in Australia. See Note B - "Acquisitions" in the Notes to the
Consolidated Financial Statements for further information.
On September 30, 2000, the Company completed the sale of its truck-mounted
forklift businesses, consisting of Moffett and Princeton/Kooi, to various
subsidiaries of Partek Corporation of Finland for $144 million in cash, subject
to adjustment. See Note C - "Sale of Businesses" in the Notes to the
Consolidated Financial Statements for further information.
Terex Earthmoving
Terex Earthmoving manufactures and sells large hydraulic excavators, loader
backhoes, articulated and rigid off-highway trucks, high capacity surface mining
trucks, scrapers, crushing and screening equipment, asphalt pavers, asphalt
mixing plants, and related components and replacement parts. These products are
used primarily by construction, mining, quarrying and government customers. The
Company 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 since 1999.
Terex Earthmoving has 16 significant manufacturing operations: (i) Terex
Equipment Limited ("TEL"), located in Motherwell, Scotland; (ii) Unit Rig ("Unit
Rig") and Payhauler Corp. ("Payhauler"), located in Tulsa, Oklahoma; (iii) O&K
Mining GmbH ("O&K Mining"), located in Dortmund, Germany; (iv) Powerscreen
International Distribution Ltd. ("Powerscreen"), located in Dungannon, Northern
Ireland and Kilbeggan, Ireland; (v) Finlay Hydrascreens (Omagh) Limited
("Finlay"), located in Omagh, Ireland; (vi) BL-Pegson Ltd. ("B.L. Pegson"),
located in Coalville, England; (vii) Simplicity Engineering ("Simplicity"),
located in Durand, Michigan; (viii) Royer Industries, Inc. and Re-Tech
(collectively "Royer/Re-Tech"), located in Lebanon, Pennsylvania; (ix) Benford
Limited ("Benford"), located in Warwick, England; (x) Cedarapids, Inc.
("Cedarapids") located in Cedar Rapids, Iowa; (xi) Standard Havens, Inc.
("Standard Havens"), located in Glasgow, Missouri; (xii) Jaques International
("Jaques"), located in Melbourne, Australia; (xiii) Canica-Jaques, located in
Vancouver, Washington; (xiv) Jaques International Sdn Bhd ("Jaques Malaysia"),
located in Subang Jaya, Malaysia; (xv) Jaques (Thailand) Limited ("Jaques
Thailand"), located in Chomburi, Thailand; and (xvi) Fermec Manufacturing
Limited ("Fermec") located in Manchester, England.
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 360 tons and bottom dump haulers with
capacities ranging from 180 to 270 tons, principally sold to copper, gold, iron
ore, coal, borates and diamond 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, Royer/Re-Tech, Jaques, Jaques Malaysia, Jaques Thailand and
Canica-Jaques 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
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plants. Benford manufactures, sells and markets dumpers and compactors. Fermec
manufactures, sells and markets loader backhoes. These products are sold under
the Company's TEREX, UNIT RIG, LECTRA HAUL, O&K, PAYHAULER, POWERSCREEN, FINLAY,
SIMPLICITY, CEDARAPIDS, BENFORD, B.L. PEGSON, ROYER, RE-TECH,
CEDARAPIDS/STANDARD HAVENS, JAQUES, CANICA-JAQUES and FERMEC 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
("North Hauler Limited"), 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 manufactures and sells heavy trucks,
principally used in mining, at a facility in Baotou, Inner Mongolia, and the
People's Republic of China.
The Company has made a number of significant acquisitions in the Terex
Earthmoving segment in recent years as part of its continuing plan to diversify
its product offerings and the geographic range of its customers. In January
2001, the Company acquired Jaques, Canica-Jaques, Jaques Malaysia and Jaques
Thailand (collectively, the "Jaques Group"), manufacturers of crushing equipment
in Australia, Asia and North America. On December 28, 2000, the Company acquired
Fermec from CNH Global N.V., adding the loader backhoe product line to Terex
Earthmoving's offerings. The Company entered the aggregates industry with its
acquisitions of Powerscreen International plc in July 1999 for a purchase price
of approximately $294 million and Cedarapids on August 26, 1999 for
approximately $170 million, subject to adjustment. The acquisitions of
Powerscreen International plc and Cedarapids provided the Company with a
significant market position in the crushing and screening equipment markets. On
March 31, 1998, the Company acquired O&K Mining from O&K Orenstein & Koppel AG
for net aggregate consideration of approximately $168 million, subject to
adjustment. See Note B "Acquisitions" in the Notes to the Consolidated Financial
Statements for further information.
Other
Terex Light Construction manufactures and sells mobile and portable
floodlighting systems, concrete power trowels, concrete placement systems,
concrete finishing systems, concrete mixers, generators, traffic control
products, and related components and replacement parts. These products are
typically used for rental and construction applications.
Terex Light Construction has three significant manufacturing operations: (i)
Amida Industries, Inc. ("Amida"), located in Rock Hill, South Carolina, which
manufactures and sells portable floodlighting systems, concrete power trowels,
concrete placement systems, concrete finishing systems, concrete mixers and
traffic control products under the AMIDA, BARTELL, MORRISON, BENFORD, MULLER and
TEREX brand names; (ii) Terex Bartell, Ltd. ("Bartell"), located in Brampton,
Ontario, Canada, which manufactures and sells concrete power trowels and
concrete finishing systems under the BARTELL brand name and (iii) Coleman
Engineering, Inc. ("Coleman") located in Holly Springs, Mississippi, which
manufactures and sells portable floodlighting systems and generators under the
COLEMAN ENGINEERING brand name. Terex Light Construction also distributes
products in North America that are manufactured in the Benford facility in
Warwick, England, including dumpers and compaction equipment. These products are
sold under the Company's AMIDA, BENFORD, and TEREX brand names.
Terex Light Construction is structured to capitalize on the 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
intended to create 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 light equipment concept originated in April 1999 with the acquisition of
Amida. 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, the acquisition of
the Muller Mixer product line in February 2000 and the acquisition of Coleman in
October 2000. See Note B - "Acquisitions" in the Notes to the Consolidated
Financial Statements for further information.
In January 2001, the Company announced the launching of an Internet site by its
subsidiary EarthKing, Inc. ("Earthking"). In 2001, EarthKing is introducing its
e-commerce capabilities as an independent and unbiased Internet marketplace for
the construction and mining equipment industry. EarthKing's goal is to use the
Internet and technology to provide savings to users of construction and mining
equipment in the selection, acquisition, management and disposition of their
equipment and parts. EarthKing has developed agreements with several strategic
partners to participate within the EarthKing alliance to provide reliable
delivery of cost-effective services to its customers.
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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 and
Crespellano, Italy under the brand names TEREX, LORAIN, P&H, PPM
and BENDINI.
[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.
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, COMEDIL and TEREX 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.
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[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.
[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] Crawler-mounted lattice boom 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
crawler and truck mounted lattice boom 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.
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.
[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
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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 40 feet and lift capabilities of up to 56 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 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 166 feet and have a maximum lifting
capacity of up to 30 tons. Terex Lifting manufactures its
telescopic boom truck mounted cranes at its Olathe, Kansas
facility under the brand name RO-STINGER.
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 116 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.
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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 name TEREX.
[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 brand name and in Tulsa, Oklahoma,
under the PAYHAULER brand name.
High Capacity Surface Mining Trucks
Terex Earthmoving manufactures high capacity surface mining trucks, which are
off road dump trucks with capacities in excess of 120 tons used primarily for
surface mining.
[Graphic] Terex Earthmoving's high capacity surface mining 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 360 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, LECTRA HAUL and TEREX brand names.
Large Hydraulic Excavators
Terex Earthmoving sells hydraulic excavators, which are shovels primarily used
to load coal, copper ore, iron ore, diamonds, other mineral-bearing materials,
or rocks into trucks. These products are primarily utilized for quarrying
construction materials or digging in surface 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. Most
hydraulic excavators sold by Terex Earthmoving are manufactured
under the O&K brand name by O&K Mining in Dortmund, Germany.
[Graphic] Loader Backhoes Loader backhoes - incorporate a front-end loader
and rear excavator arm. They are used for loading, excavating and
lifting in many construction and agricultural related
applications. Terex Earthmoving's loader backhoes are
manufactured under the FERMEC brand name in Manchester, England.
-9-
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, trommels, 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.
Crushing Equipment
Terex Earthmoving manufactures crushing equipment under the PEGSON, CEDARAPIDS,
JAQUES AND CANICA-JAQUES brand names in Coalville, England, Cedar Rapids, Iowa,
Melbourne, Australia, Subang Jaya, Malaysia and Vancouver, Washington. 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, Cedar Rapids, Iowa, Lebanon, Pennsylvania, Melbourne,
Australia, Subang Jaya, Malaysia and Chomburi, Thailand under the brand names
POWERSCREEN, FINLAY, SIMPLICITY, CEDARAPIDS, ROYER, RE-TECH and JAQUES.
[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 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 quarried material 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.
-10-
[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.
[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 TEREX.
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.
-11-
Light Construction Equipment
Light construction equipment produced by Terex includes mobile and portable
floodlighting systems, concrete power trowels, concrete placement systems,
concrete finishing systems, generators 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. Light towers are manufactured under the AMIDA, COLEMAN
ENGINEERING and TEREX brand names.
[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.
Power trowels are manufactured under the BARTELL brand name in
Brampton, Ontario, Canada.
[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. Terex manufactures power buggies under the
AMIDA, MORRISION and TEREX brand names in Rock Hill, South
Carolina.
[Graphic] Generators - are used to provide electric power on construction
sites and other remote locations. Generators are manufactured
under the COLEMAN ENGINEERING brand name in Holly Springs,
Mississippi.
[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. Directional arrow boards are manufactured
under the TEREX and AMIDA brand names in Rock Hill, South
Carolina.
Backlog
The Company's backlog as of December 31, 2000 and 1999 was as follows:
December 31,
----------------------------
2000 1999
-------------- -------------
(in millions)
Terex Lifting......................$ 111.7 $ 167.0
Terex Earthmoving.................. 102.3 158.3
Other.............................. 5.8 1.2
-------------- -------------
Total.........................$ 219.8 $ 326.5
============== =============
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, 2000 decreased $55.3 million to $111.7
million as compared to $167.0 million at December 31, 1999. The decrease in
backlog was due to the continued slowdown in the mobile crane segment and the
effect of the sale of the Company's truck-mounted forklift businesses in
September 2000. The backlog at Terex Earthmoving decreased to $102.3 million at
December 31, 2000 from $158.3 million at December 31, 1999, principally due to
slowdowns in the mining business and improvements in delivery performance and
lead-times within the Company's crushing and screening business. Included in
Other backlog are backlog orders of Terex Light Construction.
-12-
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. Telescopic boom truck mounted cranes are distributed by Terex Lifting
under the RO-STINGER brand name. Terex Lifting sells its utility aerial devices
under the TEREX TELELECT and HI-RANGER brand names 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, COMEDIL and TEREX
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.
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
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. Fermec sells its loader backhoes through a network of
independent dealers and distributors throughout the world.
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
Royer/Re-Tech's business is in the United States and their products are sold by
distributors. Benford sells its products primarily through dealers and
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. The Jaques Group distributes its crushing
and screening equipment principally through a worldwide network of independent
distributors and dealers.
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, MULLER, COLEMAN ENGINEERING 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, $9.1 and $8.2 million in 2000, 1999 and 1998,
respectively.
-13-
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 most of the Unit Rig product line are currently supplied
exclusively by General Electric Company. The Company has endeavored to develop
alternative sources and has entered into a contract with General Atomics, a
former defense contractor, who has developed electric wheel motors for the
largest 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.
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.
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.
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 (Textron),
Caterpillar and Gradall (JLG) 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.
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, UpRight and OmniQuip (Textron). The Company believes that its market
share in boom lifts is greater than its market share in scissor lifts.
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 since
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. The Company 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
-14-
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.
Loader Backhoes -- The loader backhoe industry is a competitive market
reflecting a large number of competitors. The largest competitors are
Caterpillar, CNH (including both its Case and New Holland brands), JCB,
Fiat-Hitachi and John Deere. The Company believes that it is the fifth largest
of these manufacturers in Europe and in the United States.
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 manufacturers: 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 four principal
manufacturers: Blaw-Knox (Ingersoll-Rand), Barber Greene (Caterpillar), Roadtec
(Astec Industries) and the Company. 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 it is the largest manufacturer followed
by Allmand Bros. and Ingersoll-Rand.
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.
Employees
As of December 31, 2000, the Company had approximately 6,150 employees. The
Company considers its relations with its personnel to be good. Approximately 34%
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, MARKLIFT, P&H, PPM, TELELECT, SQUARE SHOOTER,
PAYHAULER, O&K, HOLLAND LIFT, AMERICAN, ITALMACCHINE, PEINER, COMEDIL, FRANNA,
POWERSCREEN, CEDARAPIDS, FINLAY, SIMPLICITY, B.L. PEGSON, MATBRO, BENFORD,
MULLER, RE-TECH, JAQUES, CANICA-JAQUES, AMIDA, MORRISON, BRIMONT, EARTHKING,
FERMEC, COLEMAN ENGINEERING and BARTELL 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. 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 trade names 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
-15-
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) and EarthKing.....Westport, Connecticut (1) Office; 19,898 sq. ft.
Terex (Distribution Center).................Southaven, Mississippi (1) Office and warehouse;
505,000 sq. ft. (2)
Amida.......................................Rock Hill, South Carolina Office, manufacturing and warehouse;
121,020 sq. ft.
Bartell.....................................Brampton, Ontario, Canada Office, manufacturing and warehouse;
32,509 sq. ft.
Coleman.....................................Holly Springs, Mississippi Office, manufacturing and warehouse;
100,000 sq. ft.
Coleman.....................................Memphis, Tennessee (1) Warehouse and manufacturing;
50,000 sq. ft.
Terex Lifting
Terex Lifting - Waverly Operations..........Waverly, Iowa Office, manufacturing and warehouse;
311,920 sq. ft.
Terex Lifting - Conway Operations...........Conway, South Carolina (1) Office, manufacturing and warehouse;
153,716 sq. ft.
PPM S.A.S. .................................Montceau-les-Mines, France Office, manufacturing and warehouse;
418,376 sq. ft.
Terex Italia................................Crespellano, Italy Office, manufacturing and warehouse;
68,501 sq. ft.
Terex Lifting Espana .......................Cabanillas Del Campo, Spain (1) Office and warehouse; 26,900 sq. ft.
PPM S.A.S. subsidiary.......................Dortmund, Germany (1) Office and warehouse; 129,180 sq. ft.
PPM S.A.S. subsidiary.......................Rethel, France Office, manufacturing and warehouse;
213,058 sq. ft.
Telelect....................................Watertown, South Dakota (3) Office, manufacturing and warehouse;
237,900 sq. ft.
Telelect (Terex Manufacturing)..............Huron, South Dakota Manufacturing; 88,000 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.
Terexlift...................................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.
Terex Lifting Australia.....................Brisbane, Australia (1) Office, manufacturing and warehouse;
42,495 sq. ft.
Terex Lifting U.K...........................Tetbury, England (1) Office, manufacturing and warehouse;
80,000 sq. ft.
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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.................................Dungannon, Northern Ireland Office, manufacturing and warehouse;
330,000 sq. ft.
Powerscreen.................................Kilbeggan, Ireland Manufacturing; 70,000 sq. ft.
Finlay......................................Omagh, Northern Ireland Office, manufacturing and warehouse;
152,863 sq. ft.
Benford.....................................Warwick, England Office, manufacturing and warehouse;
210,000 sq. ft.
Simplicity..................................Durand, Michigan Office, manufacturing and warehouse;
167,000 sq. ft.
B. L. Pegson................................Coalville, England Office, manufacturing and warehouse;
204,486 sq. ft.
Cedarapids..................................Cedar Rapids, Iowa Office, manufacturing and warehouse;
608,423 sq. ft.
Standard Havens ............................Glasgow, Missouri Office, manufacturing and warehouse;
140,000 sq. ft.
Royer/Re-Tech...............................Lebanon, Pennsylvania (1) Office, manufacturing and warehouse;
148,800 sq. ft.
Fermec......................................Manchester, England Office, manufacturing and warehouse;
371,683 sq. ft.
Jaques......................................Melbourne, Australia (1) Office, manufacturing and warehouse;
36,000 sq. ft.
Canica-Jaques...............................Vancouver, Washington (1) Office, manufacturing and warehouse;
41,000 sq. ft.
Jaques Malaysian............................Subang Jaya, Malaysia (1) Manufacturing and warehouse;
111,200 sq. ft.
Jaques Thailand.............................Chomburi, Thailand Manufacturing; 79,500 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 O -- "Business Segment
Information" in the Notes to the Consolidated Financial Statements.
-18-
ITEM 3. LEGAL PROCEEDINGS
As described in Note M -- "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 connection with the Company's sale of the Clark material handling business to
Clark Material Handling Company ("CMHC") in November 1996, CMHC assumed
liabilities from Terex arising from product liability claims dealing with Clark
material handling products manufactured prior to the date of the divestiture. In
connection with CMHC's voluntary filing for bankruptcy in 2000, CMHC has
defaulted on its obligations to indemnify and defend the Company from such
product liability claims. As a result of this situation, the Company recorded an
expense of $7.3 million, net of income taxes, in the fourth quarter of 2000
representing the Company's estimated liability for known product liability
claims.
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.
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:
2000 1999
------------------------------ --------------------------------
Fourth Third Second First Fourth Third Second First
High.......... $17.19 $19.50 $17.25 $28.88 $31.50 $31.88 $35.50 $28.50
Low........... 11.56 12.00 12.38 11.13 24.81 24.25 23.25 22.13
No dividends were declared or paid in 1999 or in 2000. Certain of the Company's
debt agreements contain restrictions as to the payment of cash dividends. In
addition, payment of dividends is limited by Delaware law. The Company intends
generally to retain earnings, if any, to fund the development and growth of its
business and to pay down debt. The Company does not plan on paying dividends on
the Common Stock in the near term. Any future payments of cash dividends will
depend upon the financial condition, capital requirements and earnings of the
Company, as well as other factors that the Board of Directors may deem relevant.
As of March 13, 2001, there were 717 stockholders of record of the Company's
Common Stock.
(b) Not Applicable.
-19-
ITEM 6. SELECTED FINANCIAL DATA
(in millions except per share amounts and employees)
As of or for the Year Ended December 31,
-------------------------------------------------------------
2000 1999 1998 1997 1996
----------- ----------- ------------- ----------- -----------
Summary of Operations
Net sales....................................................$ 2,068.7 $ 1,856.6 $ 1,233.2 $ 842.3 $ 678.5
Income from operations....................................... 198.3 178.3 122.0 71.1 5.1
Income (loss) from continuing operations before
extraordinary items........................................ 103.9 172.9 72.8 30.3 (54.3)
Income (loss) from discontinued operations................... (7.3) --- --- --- 102.0
Income before extraordinary items............................ 96.6 172.9 72.8 30.3 47.7
Net income................................................... 95.1 172.9 34.5 15.5 47.7
Income applicable to common stock............................ 95.1 172.9 34.5 10.7 24.8
Per Common and Common Equivalent Share:
Basic
Income (loss) from continuing operations.................$ 3.82 $ 7.14 $ 3.52 $ 1.57 $ (6.54)
Income (loss) from discontinued operations............... (0.27) --- --- --- 8.64
Income before extraordinary items........................ 3.55 7.14 3.52 1.57 2.10
Net income............................................... 3.50 7.14 1.67 0.66 2.10
Diluted
Income (loss) from continuing operations.................$ 3.72 $ 6.75 $ 3.25 $ 1.44 $ (5.81)
Income (loss) from discontinued operations............... (0.26) --- --- --- 7.67
Income before extraordinary items........................ 3.46 6.75 3.25 1.44 1.86
Net income............................................... 3.41 6.75 1.54 0.60 1.86
Working Capital
Current assets...............................................$ 1,242.4 $ 1,315.3 $ 771.6 $ 426.5 $ 390.2
Current liabilities.......................................... 575.6 579.5 425.4 236.1 195.0
Working capital.............................................. 666.8 735.8 346.2 190.4 195.2
Property, Plant and Equipment
Net property, plant and equipment............................$ 153.9 $ 172.8 $ 99.5 $ 47.8 $ 31.7
Capital expenditures......................................... 24.2 21.4 13.1 9.9 8.1
Depreciation................................................. 23.0 17.6 10.1 8.2 7.0
Total Assets...................................................$ 1,983.7 $ 2,177.5 $ 1,151.2 $ 588.5 $ 471.2
Capitalization
Long-term debt and notes payable, including current
maturities.................................................$ 902.5 $ 1,156.4 $ 631.3 $ 300.1 $ 281.3
Minority interest, including redeemable preferred stock of a
subsidiary................................................ --- --- 0.6 0.6 10.0
Redeemable convertible preferred stock....................... --- --- --- --- 46.2
Stockholders' equity (deficit)............................... 451.5 432.8 98.1 59.6 (71.7)
Dividends per share of Common Stock..........................$ --- $ --- $ --- $ --- $ ---
Shares of Common Stock outstanding at year end............... 26.8 27.5 20.8 20.5 13.2
Employees...................................................... 6,150 6,650 4,142 2,950 2,270
The Selected Financial Data include the results of operations of Coleman,
Fermec, Amida, Powerscreen, Cedarapids, Bartell, Re-Tech, Princeton/Kooi, Franna
(now known as Terex Lifting Australia), Payhauler, O&K Mining, Holland Lift,
American Crane, Italmacchine (now known as Terexlift S.r.l.), Peiner, Comedil,
the Simon Access Companies, Terex Handlers and PPM from October 23, 2000,
December 28, 2000, 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 year ended December 31, 2000, includes the results of
operations of Princeton/Kooi and Moffett (a division of Powerscreen) through
September 30, 2000, the date these units were sold. See Note C - "Sale of
Businesses" in the Notes to the Consolidated Financial Statements for further
information. The Selected Financial Data for the year ended December 31, 1996
includes the results of operations of Clark Material Handling Company ("CMHC")
as discontinued operations. CMHC was sold by the Company in November 1996.
-20-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
The Company organizes itself primarily in two industry segments: Terex Lifting
and Terex Earthmoving. The 2000 results for Terex Lifting include the operations
of Moffett and Princeton/Kooi through September 30, 2000, their date of sale.
The 1999 results for Terex Lifting include the operations of Moffett, Terex
Lifting U.K., Princeton/Kooi and Terex Lifting Australia 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, Terexlift, 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 1999 results for Terex Earthmoving include the operations of
Powerscreen (excluding Moffett and Terex Lifting U.K.), 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 2000 Other are the results of the
operations of Coleman from October 23, 2000, its date of acquisition, along with
the results of operations of Amida and Bartell, as well as general and corporate
items. 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.
2000 Compared with 1999
The table below is a comparison of net sales, gross profit, selling, general and
administrative expenses and income (loss) from operations, by segment, for 2000
and 1999.
Year Ended
December 31,
-------------------- Increase
2000 1999 (Decrease)
---------- --------- ----------
(in millions of dollars)
NET SALES
Terex Lifting................................. $ 924.0 $ 944.9 $ (20.9)
Terex Earthmoving............................. 1,099.5 878.9 220.6
Other......................................... 45.2 32.8 12.4
---------- ---------- ---------
Total...................................... $ 2,068.7 $ 1,856.6 $ 212.1
========== ========== =========
GROSS PROFIT
Terex Lifting................................. $ 155.2 $ 146.0 $ 9.2
Terex Earthmoving............................. 201.1 164.0 37.1
Other......................................... 7.3 6.7 0.6
---------- ---------- ---------
Total...................................... $ 363.6 $ 316.7 $ 46.9
========== ========== =========
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Terex Lifting................................. $ 60.4 $ 59.6 $ 0.8
Terex Earthmoving............................. 96.5 76.5 20.0
Other......................................... 8.4 2.3 6.1
---------- ---------- ---------
Total...................................... $ 165.3 $ 138.4 $ 26.9
========== ========== =========
INCOME FROM OPERATIONS
Terex Lifting................................. $ 94.8 $ 86.4 $ 8.4
Terex Earthmoving............................. 104.6 87.5 17.1
Other......................................... (1.1) 4.4 (5.5)
---------- ---------- ---------
Total...................................... $ 198.3 $ 178.3 $ 20.0
========== ========== =========
-21-
Net Sales
Sales increased $212.1 million, or approximately 11.4%, to $2,068.7 million in
2000 from $1,856.6 million in 1999. This revenue increase was due to the effect
of a full year of inclusion of companies acquired in 1999, offset partially by
declining revenues at existing businesses.
Terex Lifting's sales were $924.0 million for 2000, a decrease of $20.9 million,
or 2.2%, from $944.9 million in 1999. The decrease can be attributed to the
continued decline in the hydraulic mobile crane market and the aerial work
platform business, which was de-emphasized during the fourth quarter of 1999
with the closing of the Company's Milwaukee facility. These items were offset
partially by the contribution from companies acquired in 1999 and the Company's
performance in its utility aerial device business. Machine sales decreased $33.0
million to $762.0 million while part sales increased $4.3 million to $100.8
million. Terex Lifting's backlog decreased $55.3 million to $111.7 million,
attributable primarily to a decline in the hydraulic mobile crane business and
the sale of the truck-mounted forklift businesses in the third quarter of 2000.
Terex Earthmoving's sales were $1,099.5 million in 2000, an increase of $220.6
million, or 25%, from $878.9 million in 1999. This increase was primarily due to
the impact of companies acquired in 1999, offset partially by declining revenues
in the Company's mining business. Machine sales increased $187.1 million to
$831.2 million while part sales increased $33.0 million to $233.4 million.
Backlog decreased to $102.3 million at December 31, 2000 from $158.3 million at
December 31, 1999 due to slowdowns in the mining business and improvements in
delivery performance and lead-times within the Company's crushing and screening
business.
Net sales for Other represent sales from Amida, Bartell and Coleman from their
date of acquisition and service revenues generated by Terex's parts distribution
center for services provided to a third party. Amida, Bartell and Coleman were
acquired by Terex on April 1, 1999, September 20, 1999 and October 23, 2000,
respectively.
Gross Profit
Gross profit for 2000 increased $46.9 million to $363.6 million as a result of
1999 acquisitions. Gross profit as a percentage of net sales for 2000 increased
to 17.6% as compared to 17.1% for 1999. This increase was related primarily to
margin improvements in the Terex truck and the utility aerial device businesses,
driven by increased volumes and manufacturing efficiencies, and a full year of
inclusion of companies acquired in 1999. In 2000, the Company recorded special
charges of $10.1 million related to the closure of the Company's distribution
facility in the United Kingdom, the impact of an aggregates customer that filed
for bankruptcy and the further integration of the Company's mining division. In
1999, the Company recorded special charges of $9.9 million related to the
closure of the Company's Milwaukee aerial work platform facility and head count
reductions at O&K Mining. Excluding the special charges, gross margin was 18.1%
in 2000 compared to 17.6% in 1999.
Terex Lifting's gross profit increased $9.2 million, or 6.3%, to $155.2 million,
compared to $146.0 million in 1999. Gross profit as a percentage of sales
increased to 16.8% from 15.5% in 1999, due to product mix, the impact of
companies acquired in 1999 and the effect of the 1999 special charges for the
closure of the Company's Milwaukee aerial work platform facility. Excluding the
1999 special charges, the gross profit percentage for 1999 was 16.5%.
Terex Earthmoving's gross profit increased $37.1 million, or 22.6%, to $201.1
million, compared to $164.0 million in 1999. The decrease in gross profit as a
percentage of sales, 18.3% compared to 18.7% in 1999, is primarily related to
the special charges noted above. Excluding special charges, gross profit as a
percentage of sales increased to 19.2% as a result of margin improvements in the
Terex truck business and a full year of inclusion of companies acquired in 1999.
Gross profit for Other increased to $7.3 million in 2000 from $6.7 million in
1999 primarily due to the increased sales from the businesses acquired in 2000
and 1999.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (which include the Company's
research and development expenses) increased to $165.3 million in 2000 from
$138.4 million for 1999, reflecting the effects of a full year of inclusion of
the companies acquired in 1999 and the special charges recorded during the year.
In 2000, the Company recorded special charges of $2.7 million related to the
closure of the Company's distribution facility in the United Kingdom, the
further integration of the Company's mining division and due diligence costs
associated with a large potential acquisition which did not come to fruition,
offset partially by a curtailment gain related to one of the Company's pension
plans. In 1999, the Company recorded special items of ($1.4) million related to
-22-
headcount reductions at the Company's manufacturing facility in Germany, offset
by a favorable legal settlement. As a percentage of sales, selling, general and
administrative expenses increased to 8.0% in 2000 from 7.5% in 1999.
Terex Lifting's selling, general and administrative expenses increased to $60.4
million from $59.6 million in 1999, due to a full year of inclusion of companies
acquired in 1999 and additional investments in sales and marketing support.
Selling, general and administrative expenses as a percentage of sales increased
to 6.5% from 6.3% in 1999. Excluding the impact of acquisitions, selling,
general and administrative expenses as a percentage of sales decreased to 6.0%
from 6.2% in 1999.
Terex Earthmoving's selling, general and administrative expenses increased $20.0
million to $96.5 million for 2000 as compared to $76.5 million in 1999. This
increase is primarily due to the effect of acquired companies and the special
charges noted above. As a percentage of sales, however, selling, general and
administrative expenses increased slightly to 8.8% in 2000 from 8.7% in 1999.
Selling, general and administrative expenses for Other increased to $8.4 million
in 2000 as compared to $2.3 million in 1999. The increase in 2000 is primarily
the result of the inclusion of Coleman in 2000 and of Amida and Bartell for all
of 2000, the special charges noted above and the Company's investment in its new
EarthKing subsidiary, an independent e-commerce company that will provide new
tools for equipment owners and operators to maximize their return on investment.
In 1999, selling, general and administrative expenses were lower due to the
effect of a favorable legal settlement to the Company during the fourth quarter
of 1999. See "Business--Research and Development" for a discussion of the
Company's engineering expenses.
Income from Operations
Income from operations for the Company increased $20.0 million, or 11.2%, to
$198.3 million, compared to $178.3 million in 1999. Income from operations as a
percentage of sales remained at 9.6% in 2000 and 1999. Excluding the special
charges, income from operations as a percentage of sales was 10.2% in
2000 as compared to 10.1% in 1999.
Terex Lifting's income from operations increased $8.4 million, or 9.7%, to $94.8
million, as compared to $86.4 million in 1999. The increase can be attributed to
the contributions from acquired companies in 1999 and the performance of the
Company's utility aerial devices business, offset somewhat by a decline in the
hydraulic mobile crane business. Included in income from operations in 1999 were
special charges related to the closing of the Company's Milwaukee facility.
Income from operations as a percentage of sales, excluding the special charges,
increased to 10.3% in 2000 from 10.2% in 1999.
Terex Earthmoving's income from operations increased $17.1 million, or 19.5%, to
$104.6 million, compared to $87.5 million in 1999. As a percentage of sales,
income from operations decreased to 9.5% from 10.0% in 1999. Excluding special
charges, operating margin improved to 10.4% in 2000 from 10.2% in 1999.
Income from operations for Other decreased $5.5 million in 2000 to an operating
loss of $1.1 million, compared to income of $4.4 million in 1999. This decrease
was a result of the impact in 2000 of due diligence costs associated with a
large potential acquisition which did not come to fruition and the Company's
investment in EarthKing, partially offset by the inclusion of the Amida, Bartell
and Coleman acquisitions for all or a portion of 2000. Further, the 1999 results
benefited from the one-time impact of a favorable legal settlement.
Interest Expense
Net interest expense increased to $94.3 million for 2000 from $77.5 million in
1999 as a result of higher average debt levels due to debt incurred to finance
the 1999 acquisitions as well as higher interest rates.
Income Taxes
During 2000, the Company recognized an income tax expense of $55.7 million as
compared to an income tax benefit of $74.5 million in 1999. 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. The
1999 income tax benefit resulted from the capitalization of certain deferred
taxes. See Note J - "Income Taxes" in the Notes to the Consolidated Financial
Statements.
Loss from Discontinued Operations
In connection with the Company's sale of the Clark material handling business to
CMHC in November 1996, CMHC assumed liabilities from Terex arising from product
liability claims dealing with Clark material handling products manufactured
prior to the date of the divestiture. In connection with CMHC's voluntary filing
for bankruptcy in 2000, CMHC has defaulted on its obligations to indemnify and
defend the Company from such product liability claims. As a result of this
situation, the Company recorded an expense of $7.3 million, net of income taxes,
in the fourth quarter of 2000 representing the Company's estimated liability for
known product liability claims.
-23-
Extraordinary Items
During 2000, the Company recorded a charge of $1.5 million, net of income taxes,
to recognize a loss on the early extinguishment of debt in connection with the
prepayment of principal of the Company's bank credit facilities.
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 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
========== ========== ==========
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
-24-
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 $157 million order for 160 trucks from Coal India, 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.
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 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.
-25-
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 its IRS audit.
(See Note J - "Income Taxes" in the Notes to the Consolidated Financial
Statements).
Income Taxes
During 1999, the Company recognized an income tax benefit of $74.5 million as
compared to an income tax expense of $1.7 million in 1998. 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 deferred taxes. (See Note J
- - "Income Taxes" in the Notes to the Consolidated Financial Statements).
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.
LIQUIDITY AND CAPITAL RESOURCES
Net cash of $200.6 million was provided by operating activities during the year
ended December 31, 2000, approximately $120 million of which was provided by
reductions in working capital. Net cash provided by investing activities was
$110.9 million during the year ended December 31, 2000, primarily related to the
receipt of $144 million in proceeds from the sale of the Company's truck-mounted
forklift businesses in September 2000. Net cash used in financing activities was
$261.2 million during the year ended December 31, 2000. As described below, cash
was used to repay debt (approximately $241 million) and purchase shares of the
Company's common stock (approximately $20 million). Cash and cash equivalents
totaled $181.4 million at December 31, 2000.
Including the January 2001 acquisition of the Jaques Group and the 2000
acquisitions of Fermec and Coleman (see Note B --"Acquisitions" in the Notes to
the Consolidated Financial Statements), since the beginning of 1995 Terex has
invested approximately $1 billion to strengthen and expand its core businesses
through more than 20 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
and offer cost reduction opportunities, distribution and purchasing synergies
and product diversification.
Debt reduction and an improved capital structure are major focal points for the
Company. In the first quarter of 2000, the Company announced its intention to
repay $200 million of debt by the end of 2000 from working capital reduction and
free cash flow. During 2000, the Company met these goals by repaying
approximately $241 million of its debt. On March 9, 2000, the Company also
announced that its Board of Directors had authorized the repurchase of up to 2
million shares of the Company's common stock over the next 12 months from cash
on hand. During 2000, the Company purchased 1.3 million shares of its common
stock. 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 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
-26-
credit facilities. Management believes that cash generated from operations,
together with the Company's bank credit facilities and cash on hand, provides
the Company with adequate liquidity to meet the Company's operating and debt
service requirements. No principal payments are required under the Company's
bank facility or subordinated notes until June 2003.
The Company continues to explore ways to improve its liquidity and capital
structure. In this regard, the Company announced on March 14, 2001 that it
intends to issue approximately $200 million principal amount of Senior
Subordinated Notes Due 2011 ("New Notes") and increase the availability under
its existing revolving bank credit facility maturing March 2004 from $125
million to $300 million. The Company also announced at that time that it is
negotiating an amendment to its existing bank credit agreements to provide the
Company with greater operating flexibility. The Company intends to use the net
proceeds from the offering of the New Notes to prepay a portion of its existing
term loans. It is intended that the Company will offer the New Notes pursuant to
Rule 144A promulgated under the Securities Act of 1933, as amended (the "Act"),
and that the New Notes will not initially be registered under the Act.
Accordingly, the New Notes will not be able to be offered or sold in the United
States absent registration under the Act or an applicable exemption from the
registration requirements. There can be no assurances as to whether these
transactions, or any other financing transaction, will occur, or as to the
timing or definitive terms of any such transaction.
CONTINGENCIES AND UNCERTAINIES
Clark Material Handling Company
In connection with the Company's sale of the Clark material handling business to
CMHC in November 1996, CMHC assumed liabilities from Terex arising from product
liability claims dealing with Clark material handling products manufactured
prior to the date of the divestiture. In connection with CMHC's voluntary filing
for bankruptcy in 2000, CMHC has defaulted on its obligations to indemnify and
defend the Company from such product liability claims. As a result of this
situation, the Company recorded an expense of $7.3 million, net of income taxes,
in the fourth quarter of 2000 representing the Company's estimated liability for
known product liability claims.
Euro
Currently, 12 of the 15 member countries of the European Union have established
fixed conversion rates between their existing currencies ("legacy currencies")
and one common currency, the euro. The euro now trades on currency exchanges and
may be used in business transactions. Beginning in January 2002, new
euro-denominated bills and coins will be issued, and legacy currencies will be
withdrawn from circulation. The Company's operating subsidiaries affected by the
euro conversion are assessing the systems and business issues raised by the euro
currency conversion. These issues include, among others, (1) the need to adapt
computer and other business systems and equipment to accommodate
euro-denominated transaction and (2) the competitive impact of cross-border
price transparency, which may make it more difficult for businesses to charge
different prices for the same products on a country-by-country basis,
particularly once the euro currency is issued in 2002. The Company believes that
the euro conversion has not and will not have a material adverse impact on its
financial condition or results of operations.
Foreign Currencies and Interest Rate Risk
The Company's products are sold in over 100 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 Euro, the British Pound, the French Franc, the German
Mark, the Irish Punt, the Italian Lira and the Australian Dollar. 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 $257 million of the
principal amount of its indebtedness under its bank credit facility fixing
interest at various rates between 5.44% and 9.66%.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("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. 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
-27-
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. SFAS No. 133 is effective for the Company beginning
in 2001. Upon adoption of this statement on January 1, 2001, the Company did not
experience a significant impact on its financial position or results of
operations.
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: competitive pressures and
adverse economic conditions are more likely to have a negative effect on the
Company's business, 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.
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 -
"Significant Accounting Policies" 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 Euro, the British Pound, the German Mark, the French
Franc, the Irish Punt, the Italian Lira and the Australian Dollar. 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, 2000, the Company had foreign exchange
contracts with a notional value of $20.3 million. The fair market value of these
arrangements, which represents the cost to settle these contracts, was an asset
of approximately $1.3 million at December 31, 2000.
-28-
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, 2000, the Company had approximately $257
million of interest rate swaps fixing interest rates between 5.44% and 9.66%.
The fair market value of these arrangements, which represents the cost to settle
these contracts, was a liability of approximately $0.4 million at December 31,
2000.
At December 31, 2000, 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, 2000 would have increased interest expense by
approximately $4 million in 2000.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Unaudited Quarterly Financial Data
Summarized quarterly financial data for 2000 and 1999 are as follows (in
millions, except per share amounts):
2000 1999
------------------------------------ --------------------------------------
Fourth Third Second First Fourth Third Second First
------------------------------------ --------------------------------------
Net sales $ 446.6 $ 475.1 $ 593.5 $ 553.5 $ 489.6 $ 495.6 $ 448.1 $ 423.3
Gross profit 73.6 86.7 106.6 96.7 80.6 88.5 76.7 70.9
Income before extraordinary items 0.8 49.7 26.0 20.1 86.6 29.9 30.4 26.0
Net income (loss) (0.7) 49.7 26.0 20.1 86.6 29.9 30.4 26.0
Per share:
Basic
Income before extraordinary items $ 0.03 $ 1.84 $ 0.95$ 0.73 $ 3.15 $ 1.12 $ 1.40$ 1.25
Net income (loss) (0.03) 1.84 0.95 0.73 3.15 1.12 1.40 1.25
Diluted
Income before extraordinary items $ 0.03 $ 1.79 $ 0.93$ 0.71 $ 3.04 $ 1.07 $ 1.30$ 1.16
Net income (loss) (0.03) 1.79 0.93 0.71 3.04 1.07 1.30 1.16
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 2000, the Company recorded expenses of $9.8 million
related to the closing of its distribution facility in the United Kingdom, the
impact of an aggregates customer that filed for bankruptcy and a one-time charge
related to due diligence costs associated with a large potential acquisition
which did not come to fruition. These expenses have been included in cost of
sales and selling, general and administrative expenses in the statement of
income in the amounts of $6.9 million and $2.9 million, respectively.
Also in the fourth quarter of 2000, the Company recorded a loss from
discontinued operations of $7.3 million, net of income taxes, representing the
Company's estimated liability for known product liability claims dealing with
Clark material handling products manufactured prior to November 1996. See Item
3. "Legal Proceedings"
During the third quarter of 2000, the Company recorded expenses of $3.0 related
to the further integration of the Company's surface mining truck and hydraulic
shovel business, partially offset by a curtailment gain recorded for one of the
Company's pension plans. These items have been reflected in cost of sales and
selling, general and administrative expenses in the statement of income in the
amounts of $3.2 million and $(0.2) million, respectively.
Also in the third quarter of 2000, the Company completed the sale of its
truck-mounted forklift business for a gain of $57.2 million before income taxes.
(See Note C - "Sale of Businesses" to the Notes to the Consolidated Financial
Statements.)
-29-
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 Note J - "Income Taxes" 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 fourth quarter of 2000, the Company recognized an extraordinary loss on
the early extinguishment of debt ($1.5 million) in connection with the
prepayment of principal on its existing credit facility.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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 "Exhibit Index" on Page E-1.
(b) Reports on Form 8-K
During the quarter ended December 31, 2000, the Company filed the following
Current Report on Form 8-K:
- - A report on Form 8-K dated September 30, 2000 was filed on October 4, 2000,
announcing the completion of the sale of the Company's truck-mounted
forklift businesses to subsidiaries of Partek Corporation.
-30-
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 21, 2001
----------------------------------
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 21, 2001
- ------------------------- and Director
Ronald M. DeFeo (Principal Executive Officer)
/s/ Joseph F. Apuzzo Chief Financial Officer March 21, 2001
- -------------------------
Joseph F. Apuzzo (Principal Financial Officer)
/s/ Kevin M. O'Reilly Controller March 21, 2001
- -------------------------
Kevin M. O'Reilly (Principal Accounting Officer)
/s/ G. Chris Andersen Director March 21, 2001
- -------------------------
G. Chris Andersen
/s/ Don DeFosset Director March 21, 2001
- -------------------------
Don DeFosset
/s/ Donald P. Jacobs Director March 21, 2001
- -------------------------
Donald P. Jacobs
/s/ William H. Fike Director March 21, 2001
- -------------------------
William H. Fike
/s/ Marvin B. Rosenberg Director March 21, 2001
- -------------------------
Marvin B. Rosenberg
/s/ David A. Sachs Director March 21, 2001
- -------------------------
David A. Sachs
-31-
THIS PAGE IS INTENTIONALLY BLANK
NEXT PAGE IS NUMBERED "F-1"
-32-
TEREX CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements and Financial Statement Schedule
Page
TEREX CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2000 AND 1999
AND FOR EACH OF THE THREE YEARS
IN THE PERIOD ENDED DECEMBER 31, 2000
Report of independent accountants......................................F - 2
Consolidated statement of income ......................................F - 3
Consolidated balance sheet.............................................F - 4
Consolidated statement of changes in stockholders' equity..............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, 2000 AND 1999
AND FOR EACH OF THE THREE YEARS
IN THE PERIOD ENDED DECEMBER 31, 2000
Report of independent accountants......................................F - 37
Consolidated statement of operations...................................F - 39
Consolidated balance sheet.............................................F - 39
Consolidated statement of changes in shareholders' deficit.............F - 40
Consolidated statement of cash flows...................................F - 41
Notes to consolidated financial statements.............................F - 42
FINANCIAL STATEMENT SCHEDULE
Schedule II -- Valuation and Qualifying Accounts and Reserves..........F - 49
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, 2000 and 1999, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States of
America. 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 of America, 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 our opinion.
PricewaterhouseCoopers LLP
Stamford, Connecticut
February 19, 2001
F-2
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share amounts)
Year Ended December 31,
--------------------------------
2000 1999 1998
---------- ---------- ----------
NET SALES................................................. $ 2,068.7 $ 1,856.6 $ 1,233.2
COST OF GOODS SOLD........................................ 1,705.1 1,539.9 1,007.4
---------- ---------- -----------
GROSS PROFIT........................................... 363.6 316.7 225.8
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.............. 165.3 138.4 103.8
---------- ---------- -----------
INCOME FROM OPERATIONS................................. 198.3 178.3 122.0
OTHER INCOME (EXPENSE)
Interest income........................................ 5.5 5.3 2.7
Interest expense....................................... (99.8) (82.8) (47.2)
Gain on sale of businesses............................. 57.2 --- ---
Amortization of debt issuance costs.................... (3.5) (2.6) (2.1)
Other income (expense) - net........................... 1.9 0.2 (0.9)
---------- ---------- -----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
AND EXTRAORDINARY ITEMS.............................. 159.6 98.4 74.5
(PROVISION FOR) BENEFIT FROM INCOME TAXES................. (55.7) 74.5 (1.7)
---------- ---------- -----------
INCOME FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY
ITEMS................................................ 103.9 172.9 72.8
LOSS FROM DISCONTINUED OPERATIONS......................... (7.3) --- ---
---------- ---------- -----------
INCOME BEFORE EXTRAORDINARY ITEMS......................... 96.6 172.9 72.8
EXTRAORDINARY LOSS ON RETIREMENT OF DEBT.................. (1.5) --- (38.3)
---------- ---------- -----------
NET INCOME ............................................ $ 95.1 $ 172.9 $ 34.5
========== ========== ===========
PER COMMON SHARE:
Basic
Income from continuing operations...................... $ 3.82 $ 7.14 $ 3.52
Loss from discontinued operations...................... (0.27) --- ---
---------- ---------- ---------
Income before extraordinary items.................... 3.55 7.14 3.52
Extraordinary loss on retirement of debt............... (0.05) --- (1.85)
---------- ---------- ---------
Net income............................................ $ 3.50 $ 7.14 $ 1.67
========== ========== =========
Income from continuing operations...................... $ 3.72 $ 6.75 $ 3.25
Loss from discontinued operations...................... (0.26) --- ---
---------- ---------- ---------
Income before extraordinary items.................... 3.46 6.75 3.25
Extraordinary loss on retirement of debt............... (0.05) --- (1.71)
---------- ---------- ---------
Net income........................................... $ 3.41 $ 6.75 $ 1.54
========== ========== =========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING IN PER SHARE CALCULATION:
Basic.............................................. 27.2 24.2 20.7
Diluted............................................ 27.9 25.6 22.4
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,
--------------------
2000 1999
---------- ---------
CURRENT ASSETS
Cash and cash equivalents.............................. $ 181.4 $ 133.3
Trade receivables (less allowance of $6.3 and $5.8
as of December 31, 2000 and 1999, respectively)...... 360.2 429.2
Net inventories........................................ 598.1 665.6
Deferred taxes......................................... 51.0 47.2
Other current assets................................... 51.7 40.0
---------- ---------
Total Current Assets................ 1,242.4 1,315.3
LONG-TERM ASSETS
Property, plant and equipment - net.................... 153.9 172.8
Goodwill............................................... 491.4 554.7
Deferred taxes......................................... 21.2 55.3
Other assets........................................... 74.8 79.4
---------- ---------
TOTAL ASSETS.............................................. $ 1,983.7 $ 2,177.5
========== =========
CURRENT LIABILITIES
Notes payable and current portion of long-term debt.... $ 20.5 $ 57.6
Trade accounts payable................................. 311.2 297.0
Accrued compensation and benefits...................... 25.9 27.3
Accrued warranties and product liability............... 65.2 55.9
Other current liabilities.............................. 152.8 141.7
---------- ----------
Total Current Liabilities............ 575.6 579.5
NON CURRENT LIABILITIES
Long-term debt, less current portion................... 882.0 1,098.8
Other.................................................. 74.6 66.4
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Warrants to purchase common stock...................... --- 0.8
Equity rights........................................... 0.7 0.8
Common Stock, $0.01 par value --
authorized 150.0 shares; issued 27.9 and 27.5
shares at December 31, 2000 and 1999, respectively.. 0.3 0.3
Additional paid-in capital............................. 358.9 355.0
Retained earnings...................................... 187.1 92.0
Accumulated other comprehensive income................. (78.5) (16.1)
Less cost of shares of common stock in treasury
(1.1 shares at December 31, 2000).................. (17.0) ---
---------- ---------
Total Stockholders' Equity............. 451.5 432.8
---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................ $ 1,983.7 $ 2,177.5
========== =========
The accompanying notes are an integral part of these financial statements.
F-4
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(in millions)
Retained
Earnings Accumulated
Additional (Accumu- Other Common
Equity Common Paid-in lated Comprehen- Stock in
Warrants Rights Stock Capital Deficit) sive Income Treasury Total
----------- ----------- ----------- ----------- --------- ------------- --------- ----------
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 --- --- --- --- --- 1.3 --- 1.3
adjustment.........
---------
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
Net Income................ --- --- --- --- 95.1 --- --- 95.1
Other Comprehensive Income:
Translation adjustment --- --- --- --- --- (62.6) --- (62.6)
Pension liability --- --- --- --- --- 0.2 --- 0.2
adjustment..........
---------
Comprehensive Income...... 32.7
---------
Exercise of Equity Rights. --- (0.1) --- (0.1) --- --- --- (0.2)
Issuance of Common Stock.. --- --- --- 3.0 --- --- --- 3.0
Exercise of Warrants...... (0.8) --- --- 0.8 --- --- --- ---
Acquisition of Businesses. --- --- --- 0.2 --- --- 3.2 3.4
Acquisition of Treasury --- --- --- --- --- --- (20.2) (20.2)
Shares
----------- ---------- ---------- ----------- ---------- ----------- ---------- -----------
BALANCE AT DECEMBER 31, 2000
$ --- $ 0.7 $ 0.3 $ 358.9 $ 187.1 $ (78.5) $ (17.0) $ 451.5
=========== ========== ========== =========== ========== =========== ========== ===========
The accompanying notes are an integral part of these financial statements.
F-5
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Year Ended December 31,
------------------------------------------
2000 1999 1998
-------------- -------------- ------------
OPERATING ACTIVITIES
Net income................................................................$ 95.1 $ 172.9 $ 34.5
Adjustments to reconcile net income to cash provided by (used in)
operating activities:
Depreciation .......................................................... 23.0 17.6 10.1
18.5 14.6 8.3
Amortization...........................................................
Gain on sale of businesses............................................. (34.2) --- ---
Deferred taxes......................................................... 33.5 (82.8) ---
Extraordinary loss on retirement of debt............................... 1.5 --- 38.3
Loss from discontinued operations..................................... 7.3 --- ---
Gain on sale of fixed assets........................................... (0.6) (0.1) ---
Impairment charges and asset writedowns............................... --- 9.9 ---
Changes in operating assets and liabilities (net of effects of
acquisitions):
Trade receivables.................................................. 64.2 (79.4) (45.5)
Net inventories.................................................... 43.6 (48.1) (106.1)
Trade accounts payable............................................. 12.8 7.1 35.7
Other.............................................................. (64.1) (6.7) 5.2
--------------- ------------- -------------
Net cash provided by (used in) operating activities.............. 200.6 5.0 (19.5)
--------------- ------------- -------------
INVESTING ACTIVITIES
Proceeds from sale of businesses....................................... 144.3 --- ---
Acquisition of businesses, net of cash acquired........................ (20.0) (535.6) (211.3)
Capital expenditures................................................... (24.2) (21.4) (13.1)
Proceeds from sale of assets........................................... 10.8 4.0 2.4
--------------- ------------- -------------
Net cash provided by (used in) investing activities.............. 110.9 (553.0) (222.0)
--------------- ------------- -------------
FINANCING ACTIVITIES
Principal repayments of long-term debt................................. (183.1) (33.7) (170.8)
Net repayments under revolving line of credit agreements............... (53.6) (17.3) (71.5)
Purchases of common stock held in treasury............................. (20.2) --- ---
Proceeds from issuance of long-term debt, net of issuance costs........ --- 534.6 513.6
Payment of premiums on early extinguishment of debt.................... --- --- (29.0)
Issuance of common stock............................................... --- 162.8 ---
Other.................................................................. (4.3) 10.8 (3.0)
--------------- ------------- -------------
Net cash provided by (used in) financing activities.............. (261.2) 657.2 239.3
--------------- ------------- -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS..............
(2.2) (1.0) (1.4)
--------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...................... 48.1 108.2 (3.6)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.......................... 133.3 25.1 28.7
--------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................................$ 181.4 $ 133.3 $ 25.1
=============== ============= =============
The accompanying notes are an integral part of these financial statements.
F-6
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
(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, 2000 and 1999 include $11.7 and $8.6, 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 $21.8 and $25.2 at December 31, 2000 and 1999,
respectively.
Intangible Assets. Intangible assets include purchased patents, trademarks and
other specifically identifiable assets 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 $39.9 and $27.1 at December
31, 2000 and 1999, 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,
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
F-7
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.
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 L -- "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.
Derivatives. 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, 2000 and 1999 the
Company had foreign exchange contracts with notional amounts totaling $20.3 and
$19.8, respectively. At December 31, 2000, the fair value of these contracts
approximates a $1.3 asset.
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 H -
"Long-Term Obligations"), bear interest at floating rates, the Company entered
into certain interest protection arrangements. At December 31, 2000, the Company
had approximately $257 of such interest protection arrangements fixing interest
at various rates between 5.44% and 9.66%. The differentials to be received or
paid are recognized as adjustments to interest expense. The fair market value of
these arrangements was a liability of approximately $0.4 at December 31, 2000.
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. 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. SFAS No. 133 is effective for the Company
beginning in 2001. Upon adoption of this statement on January 1, 2001, the
Company did not have a significant impact on its financial position or results
of operations.
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, 2000 and 1999.
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 J -- "Income Taxes").
F-8
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.
NOTE B -- ACQUISITIONS
On October 23, 2000, the Company completed the purchase of Coleman Engineering,
Inc. ("Coleman"). Coleman manufactures and markets light construction equipment
consisting of light towers and generators at its facilities in Memphis,
Tennessee and Holly Springs, Mississippi.
On December 28, 2000, the Company acquired Fermec Manufacturing Limited
("Fermec"). Fermec, headquartered in Manchester, England, is a manufacturer and
marketer of loader backhoes.
The Coleman and Fermec 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 Company is in the process of completing certain valuations, appraisals and
actuarial and other studies for purposes of determining certain fair values with
respect to the Acquired Businesses. 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 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
H - "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 H - "Long-Term
Obligations"). The Company is negotiating with the seller to finalize
adjustments to the purchase price. Any adjustment will be reflected in goodwill.
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 manufactures and markets truck mounted lift
trucks at its facilities in Canal Winchester, Ohio and Vrouwenparochie, The
Netherlands. (See Note C - "Sale of Businesses".)
On December 1, 1999, the Company completed the purchase of Franna Cranes Pty.
Ltd., now known as Terex Lifting Australia Pty. Ltd. ("Terex Lifting
Australia"). Terex Lifting Australia manufactures and markets mobile cranes at
its facility in Brisbane, Australia.
F-9
The Amida, Powerscreen, Cedarapids, Bartell, Re-Tech, Princeton/Kooi and Terex
Lifting Australia 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 $302) is being amortized on a straight-line basis over 40 years.
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 1999 Senior Subordinated Notes (as defined in Note H - "Long-Term
Obligations") and borrowings under the Company's 1999 Bank Credit Facility (as
defined in Note H - "Long-Term Obligations"). 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
S.p.A., now known as Terexlift S.r.l. ("Terexlift"). Terexlift, 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, now
known as Terex Peiner GmbH ("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 Comedil
S.p.A. ("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, Terexlift, 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.
The operating results of the acquired businesses are included in the Company's
consolidated results of operations since the date of acquisition.
F-10
NOTE C - SALE OF BUSINESSES
On September 30, 2000, the Company completed the sale of its truck-mounted
forklift businesses to various subsidiaries of Partek Corporation of Finland for
$144 in cash, subject to adjustment. During the year ended December 31, 2000 and
1999, total net sales for the Company's truck-mounted forklift businesses were
approximately $68 and $23, respectively, and were included in the Terex Lifting
segment. The Company used approximately $125 of net after-tax proceeds from this
transaction to repay long-term bank debt. These businesses sold included
Princeton/Kooi and the Moffett subsidiary of Powerscreen.
NOTE D -- SPECIAL CHARGES
During the fourth quarter of 2000, the Company recorded expenses of $9.8 related
to the closing of its distribution facility in the United Kingdom, the impact of
an aggregates customer that filed for bankruptcy and a one-time charge related
to due diligence costs associated with a large potential acquisition which did
not come to fruition. These expenses have been included in cost of sales and
selling, general and administrative expenses in the statement of income in the
amounts of $6.9 and $2.9, respectively.
During the third quarter of 2000, the Company recorded expenses of $3.0 related
to further the integration of the Company's surface mining truck and hydraulic
shovel businesses, partially offset by a curtailment gain related to one of the
Company's pension plans. These items have been reflected in cost of sales and
selling, general and administrative expenses in the statement of income in the
amounts of $3.2 and $(0.2), respectively.
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 $1.4 related
to a favorable legal settlement, partially offset by the cost of a headcount
reduction at its manufacturing facility in Germany. These items have been
reflected in selling, general and administrative expenses in the statement of
income.
NOTE E -- EARNINGS PER SHARE
(in millions, except per share data)
----------------------------------------------------------------------------------------------
2000 1999 1998
------------------------------ ---------------------------- ---------------------------------
Per-Share Per-Share
Amount Amount Per-Share
Income Shares Income Shares Income Shares Amount
---------- -------- ---------- --------- -------- ---------- ---------- --------- ----------
Basic earnings per share
Income from continuing
operations before
extraordinary items.......$ 103.9 27.2 $ 3.82 $ 172.9 24.2 $ 7.14 $ 72.8 20.7 $ 3.52
Effect of dilutive securities
Warrants...................s --- 0.1 --- 0.1 --- 0.1
Stock Options............... --- 0.5 --- 0.8 --- 0.8
Equity Rights............... --- 0.1 --- 0.5 --- 0.8
---------- -------- --------- -------- ---------- ---------
Income from continuing
operations before
extraordinary items..........$ 103.9 27.9 $ 3.72 $ 172.9 25.6 $ 6.75 $ 72.8 22.4 $ 3.25
========== ======== ========== ========= ======== ========== ========== ========= ============
Options to purchase 548 thousand, 198 thousand and 201 thousand shares of common
stock were outstanding during 2000, 1999 and 1998, respectively, but were not
included in the computation of diluted earnings per share because the exercise
price of the options was greater than the average market price of the common
shares and therefore, the effect would be anti dilutive.
F-11
NOTE F -- INVENTORIES
Inventories consist of the following:
December 31,
----------------------
2000 1999
---------- -----------
Finished equipment........................ $ 215.1 $ 235.3
Replacement parts......................... 161.9 176.8
Work-in-process........................... 63.9 81.9
Raw materials and supplies................ 157.2 171.6
---------- -----------
Net inventories......................... $ 598.1 $ 665.6
========== ===========
NOTE G -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
December 31,
-----------------------
2000 1999
---------- ------------
Property................................ $ 20.8 $ 23.3
Plant................................... 87.9 97.2
Equipment............................... 118.6 112.5
----------- ------------
227.3 233.0
Less: Accumulated depreciation......... (73.4) (60.2)
----------- ------------
Net property, plant and equipment..... $ 153.9 $ 172.8
=========== ============
NOTE H -- LONG-TERM OBLIGATIONS
Long-term debt is summarized as follows:
December 31,
----------------------
2000 1999
------------ ---------
8-7/8% Senior Subordinated Notes due March 31, 2008..... $ 245.2 $ 244.7
1999 Bank Credit Facility............................... 398.9 450.0
1998 Bank Credit Facility............................... 208.3 403.1
Notes payable........................................... 10.6 19.7
Capital lease obligations............................... 14.8 22.9
Other................................................... 24.7 16.0
------------ ---------
Total long-term debt.................................. 902.5 1,156.4
Less: Current portion of long-term debt............... (20.5) (57.6)
============ =========
Long-term debt, less current portion.................. $ 882.0 $1,098.8
============ =========
The Senior Subordinated Notes
On March 9, 1999 and March 31, 1998, the Company issued and sold $100.0 and
$150.0 aggregate principal amount of 8-7/8% Senior Subordinated Notes due 2008,
discounted to yield 9.73% and 8.94%, respectively (the "Senior Subordinated
Notes"). The Senior Subordinated Notes are jointly and severally guaranteed by
certain domestic subsidiaries (see Note P "Consolidating Financial Statements").
The net proceeds from the offering were used to repay a portion of the
outstanding indebtedness under Terex's credit facilities, to fund a portion of
the aggregate consideration for the acquisition of O&K Mining and for other
acquisitions.
F-12
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. The term loans under
this facility (the "1999 Bank Credit 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, 2000 was 9.66%. During 2000, the Company made principal prepayments
of $50.0 on the 1999 Bank Credit Facility such that the next scheduled principal
payment is due in June 2003.
The 1998 Bank Credit Facility
On March 6, 1998, the Company refinanced its then outstanding credit facility
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 1998 refinancing of the
Company's then outstanding 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 is 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.
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 0.875% 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 0.125% per annum below 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, 2000 was 7.19% and 9.06%, 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). During 2000,
the Company made principal prepayments of $124.4 on the Term A Loan and Term B
Loan such that the next scheduled principal payments are due in June 2003.
Pursuant to the Revolving Credit Facility, the Company has available an
aggregate amount of up to $125.0. As of December 31, 2000, the Company had no
balance outstanding under the Revolving Credit Facility, letters of credit
issued under the Revolving Credit Facility totaled $13.3, and the additional
amount the Company could have borrowed under the Revolving Credit Facility was
$111.7. 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
0.875% 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
0.125% per annum below the prime rate. The weighted average interest rate on the
Revolving Credit Facility outstanding was 6.3% at December 31, 1999. The
Revolving Credit Facility will terminate on March 6, 2004.
F-13
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 the Letter of Credit Facility do not
decrease availability under the Company's $125 million Revolving Credit
Facility. At December 31, 2000, letters of credit issued under the Letter of
Credit Facility totaled $27.2.
Schedule of Debt Maturities
Scheduled annual maturities of long-term debt outstanding at December 31, 2000
in the successive five-year period are summarized below. Amounts shown are
exclusive of minimum lease payments disclosed in Note I -- "Lease Commitments":
2001................................... $ 15.7
2002................................... 2.7
2003................................... 23.8
2004................................... 141.1
2005................................... 346.9
Thereafter............................. 357.5
-------------
Total.............................. $ 887.7
=============
Based on quoted market values, the Company believes that the fair value of the
Senior Subordinated Notes was approximately $215 as of December 31, 2000. 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 $94.9, $67.6, and $42.5 of interest in 2000, 1999 and 1998,
respectively.
NOTE I -- 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 $2.5 and $13.1, net of accumulated amortization
of $15.5 and $15.2, at December 31, 2000 and 1999, respectively.
F-14
Future minimum capital and noncancelable operating lease payments and the
related present value of capital lease payments at December 31, 2000 are as
follows:
Capital Operating
Leases Leases
------------- -------------
2001............................................ $ 4.8 $ 8.2
2002............................................ 3.7 7.5
2003............................................ 2.4 6.3
2004............................................ 1.6 4.6
2005............................................ 1.3 4.2
Thereafter...................................... 1.8 7.4
-------------
-------------
Total minimum obligations .................. 15.6 $ 38.2
=============
Less amount representing interest............... (0.8)
-------------
Present value of net minimum obligations.... 14.8
Less current portion............................ (4.8)
-------------
Long-term obligations....................... $ 10.0
=============
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 $8.7, $9.1 and $9.3 in 2000, 1999 and 1998,
respectively.
NOTE J -- 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 interest
expense of $0.9 and $7.7 in 2000 and 1999, respectively, all of which will be
tax deductible.
The components of Income From Continuing Operations Before Income Taxes and
Extraordinary Items are as follows:
Year ended December 31,
-----------------------------
2000 1999 1998
--------- --------- ---------
United States.................................... $ 91.2 $ 26.5 $ 57.4
Foreign.......................................... 68.4 71.9 17.1
--------- --------- ---------
Income from continuing operations
before income taxes
and extraordinary items...................... $ 159.6 $ 98.4 $ 74.5
========= ========= =========
F-15
The major components of the Company's provision for income taxes are summarized
below:
Year ended December 31,
-------------------------
2000 1999 1998
-------- -------- -------
Current:
Federal............................................. $ 2.1 $ 0.8 $---
State............................................... 0.7 0.4 ---
Foreign............................................. 17.4 7.1 1.7
-------- -------- -------
Current income tax provision.................... 20.2 8.3 1.7
-------- -------- -------
Deferred:
Federal............................................. 32.1 --- ---
State............................................... (0.3) --- ---
Foreign............................................. 13.8 --- ---
Tax benefits reducing goodwill...................... 8.3 15.5 ---
Adjustment for release of valuation allowance....... (18.4) (98.3) ---
-------- -------- -------
Deferred income tax provision 35.5 (82.8) ---
-------- -------- -------
Total (benefit) provision for income taxes... $ 55.7 $(74.5) $ 1.7
======== ======== =======
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 $30.6 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, 2000 and 1999
are summarized below for major balance sheet captions:
2000 1999
------------- -------------
Intangibles................................ $ (2.7) $ (4.6)
Workers' compensation...................... --- (1.1)
Other...................................... (0.4) (0.4)
------------- -------------
Total deferred tax liabilities........ (3.1) (6.1)
------------- -------------
Receivables................................ 2.0 2.2
Net inventories............................ 7.9 13.5
Fixed assets............................... 1.6 1.3
Workers' compensation...................... 0.8 ---
Warranties and product liability........... 13.8 10.4
Net operating loss carryforwards........... 75.4 113.3
Other...................................... 1.3 0.1
------------- -------------
Total deferred tax assets............. 102.8 140.8
------------- -------------
Deferred tax assets valuation allowance.... (30.6) (32.2)
------------- -------------
Net deferred tax assets............... $ 69.1 $ 102.5
============= =============
The valuation allowance for deferred tax assets as of January 1, 1999 was
$152.7. The net change in the total valuation allowance for the years ended
December 31, 1999 and 2000 were decreases of $120.5 and $1.6, 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.
F-16
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 From Continuing Operations Before Income Taxes and
Extraordinary Items.
The reasons for the difference are summarized below:
Year ended December 31,
------------------------------------------
2000 1999 1998
------------- ------------- --------------
Tax at statutory federal income tax rate.......................... $ 55.9 $ 34.4 $ 26.1
Recognition of fully reserved preacquisition deferred tax asset... 8.3 15.5 ---
Change in valuation allowance relating to NOL and temporary
differences.................................................... (14.4) (124.5) (21.1)
Foreign tax differential on income/losses of foreign subsidiaries. 1.4 (2.8) (4.4)
Goodwill.......................................................... 1.9 0.5 1.0
Other............................................................. 2.6 2.4 0.1
------------- ------------- --------------
Total (benefit) provision for income taxes................... $ 55.7 $ (74.5) $ 1.7
============= ============= ==============
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, 2000, the Company had domestic federal net operating loss
carryforwards of $110.1. The tax basis of U. S. federal net operating loss
carryforwards expire as follows:
Tax Basis Net
Operating Loss
Carryforwards
----------------
2008................................. $ 24.4
2009................................. 36.5
2010................................. 44.4
2011................................. 1.5
2012................................. 1.3
2018................................. 0.5
2019................................. 1.5
================
Total............................ $ 110.1
================
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
$142.3 of loss carryforwards, $63.1 in the United Kingdom, $8.0 in France, $54.3
in Germany, and $16.9 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 $1.8 expire in 2002 through 2004, with the remaining $15.1
available without expiration. The Company also has tax credit carryforwards of
$3.8 in the U.S., $0.8 of which expire in 2006 and the remaining $3.0 is
available without expiration.
The Company made income tax payments of $2.9, $2.6, and $0.7 in 2000, 1999 and
1998, respectively.
NOTE K -- 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. As of December 31,
2000, there were 27.9 million shares issued and 26.8 million shares outstanding.
Of the 122.1 million unissued shares at that date, 3.8 million shares were
reserved for issuance for the exercise of stock options and restricted stock.
F-17
Common Stock in Treasury. In March 2000, the Company's Board of Directors
authorized the purchase of up to 2.0 million shares of the Company's outstanding
Common Stock over the following twelve months. As of December 31, 2000, the
Company had acquired 1.3 million shares of Common Stock at a total cost of
$20.2. During the fourth quarter of 2000, the Company reissued 0.2 million
shares of Common Stock as partial payment for an acquired company. As of
December 31, 2000, the Company held 1.1 million shares of Common Stock in
treasury.
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, 2000, 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 2000 and 1999 holders exercised 23.2
thousand and 721.4 thousand rights, respectively. As of December 31, 2000, 219.8
thousand Equity Rights were outstanding and the Current Price of the Common
Stock was $16.188. Accordingly, the Company would have been required to either
pay $1.3 or issue 80.0 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. Each
Series A Warrant could have been exercised, in whole or in part, at the option
of the holder at any time before the expiration date on December 31, 2000 and
was redeemable by the Company under certain circumstances. All Series A Warrants
were exercised prior to the December 31, 2000 expiration date.
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, 2000, 12.9 thousand stock options were
available for grant under the ISO plan.
Long-Term Incentive Plans. In May 2000, the stockholders approved the Terex
Corporation 2000 Incentive Plan (the "2000 Plan"). The purpose of the 2000 Plan
is to assist the Company in attracting and retaining selected individuals to
serve as directors, officers, consultants, advisors and employees of the Company
and its subsidiaries and affiliates who will contribute to the Company's success
and to achieve long-term objectives which will inure to the benefit of all
stockholders of the Company through the additional incentive inherent in the
ownership of the Common Stock. The 2000 Plan authorizes the granting of (i)
options ("Options") to purchase shares of Common Stock, (ii) stock appreciation
rights ("SARs"), (iii) stock purchase awards, (iv) restricted stock awards and
(v) performance awards. There are 2.0 million shares of Common Stock available
for grant under the 2000 Plan. As of December 31, 2000, no shares have been
granted under the 2000 Plan.
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 things, of (i) Options to purchase shares of Common Stock, (ii) shares of
Common Stock, including restricted stock, and (iii) cash bonus awards based upon
a participant's job performance. In May 1999, 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, 2000, 75.0 thousand shares were available for grant under the 1996
Plan. The 1996 Plan also provides for automatic grants of Options 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
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, 2000, 4.3 thousand shares were available for grant under the 1994 Plan.
F-18
The following table is a summary of stock options under all four of the
Company's plans.
Weighted
Average
Number of Exercise Price
Options per Share
------------- ---------------
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
Granted...................................... 224,030 $ 13.33
Exercised.................................... (121,550) $ 4.65
Canceled or expired.......................... (12,325) $ 18.97
-------------
Outstanding at December 31, 2000................ 1,297,397 $ 17.29
============= ===============
Exercisable at December 31, 2000................ 713,246 $ 15.78
============= ===============
Exercisable at December 31, 1999................ 641,235 $ 12.35
============= ===============
Exercisable at December 31, 1998................ 579,595 $ 10.00
============= ===============
F-19
The following table summarizes information about stock options outstanding and
exercisable at December 31, 2000:
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 - $ 6.00 108,672 4.7 $ 4.51 108,672 $ 4.51
$ 6.01 - $ 10.00 119,090 4.4 $ 6.68 119,090 $ 6.68
$ 10.01 - $ 15.00 503,383 7.5 $ 13.24 211,883 $ 13.50
$ 15.01 - $ 20.00 55,625 8.4 $ 17.35 23,125 $ 17.37
$ 20.01 - $ 25.00 135,738 6.1 $ 22.69 77,712 $ 22.63
$ 25.01 - $ 30.00 357,866 6.9 $ 27.67 161,491 $ 28.45
$ 30.01 - $ 34.88 17,023 8.2 $ 30.96 11,273 $ 31.26
----------- ----------
1,297,397 6.7 $ 17.29 713,246 $ 15.78
=========== ==========
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 $2.2 ($0.08 (basic) and
$0.08 (diluted) per share), $2.9 ($0.12 (basic) and $0.11 (diluted) per share),
and $3.4 ($0.16 (basic) and $0.15 (diluted) per share), in 2000, 1999 and 1998,
respectively.
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 2000, 1999 and 1998, respectively: dividend yields of 0%, 0% and
0%; expected volatility of 49.46%, 51.47% and 54.86% risk-free interest rates of
6.23%, 5.64% and 5.26%; and expected life of 9.7 years, 9.5 years and 9.3 years.
The aggregate fair value of options granted during 2000, 1999 and 1998 for which
the exercise price equals the market price on the grant date was $1.9, $3.6 and
$8.1, respectively.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
Comprehensive Income. The following table reflects the accumulated balances of
other comprehensive income.
Accumulated
Pension Cumulative Other
Liability Translation Comprehensive
Adjustment Adjustment Income
------------- -------------- ----------------
Balance at December 31, 1997................$ (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)
Current year change......................... 0.2 (62.6) (62.4)
------------- -------------- ----------------
Balance at December 31, 2000................$ (0.3) $ (78.2) $ (78.5)
============= ============== ================
F-20
NOTE L -- 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. On June 30,
2000, four of the Company's defined benefit pension plans merged into one of the
Company's other defined benefit pension plans. As a result of the merger, as of
December 31, 2000, the Company maintained four defined benefit pension plans.
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 and the Cedarapids pension
plan for salaried employees was frozen as of May 7, 1993 and October 15, 2000,
respectively, 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 (also known as Koehring Cranes, Inc.), Cedarapids and Simplicity
Engineering. 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 January 1, 1993 was
$4.5. Terex is amortizing this transition obligation over 12 years, the average
remaining life expectancy of the participants.
F-21
The liability of the Company's U.S. Plans, as of December 31, was as follows:
Pension Benefits Other Benefits
--------------------------- --------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
Change in benefit obligation:
Benefit obligation at beginning of year $ 88.5 $ 37.0 $ 4.8 $ 2.5
Benefits obligation of plans acquired
during the year...................... --- 56.1 0.5 2.2
Service cost.......................... 1.3 0.6 0.2 ---
Interest cost......................... 7.3 3.8 0.5 0.2
Impact of plan amendments............. 0.9 1.0 1.2 0.5
Actuarial (gain) loss................. 6.1 (6.6) 0.4 (0.3)
Benefits paid......................... (7.1) (3.4) (0.7) (0.3)
------------- ------------- ------------- -------------
Benefit obligation end of year.......... 97.0 88.5 6.9 4.8
------------- ------------- ------------- -------------
Change in plan assets:
Fair value of plan assets at beginning
of year.............................. 124.2 36.1 --- ---
Fair value of plan assets acquired
during the year...................... --- 80.0 --- ---
Actual return on plan assets.......... (13.4) 11.2 --- ---
Employer contribution................. --- 0.3 0.7 0.3
Benefits paid......................... (7.1) (3.4) (0.7) (0.3)
------------- ------------- ------------- -------------
Fair value of plan assets at end of year 103.7 124.2 --- ---
------------- ------------- ------------- -------------
Funded status........................... 6.7 35.7 (6.9) (4.8)
Unrecognized actuarial (gain) loss..... 19.8 (10.5) (1.1) (1.4)
Unrecognized prior service cost......... 4.3 1.3 1.1 ---
Unrecognized transition obligation...... --- --- 1.2 1.5
------------- ------------- ------------- -------------
Net amount recognized................... $ 30.8 $ 26.5 $ (5.7) $ (4.7)
============= ============= ============= =============
Amounts recognized in the Consolidated
Balance Sheet consist of:
Prepaid benefit cost................. $ 33.0 $ 27.6 $ --- $ ---
Accrued benefit liability............ (2.5) (1.6) (5.7) (4.7)
Accumulated other comprehensive income 0.3 0.5 --- ---
------------- ------------- ------------- -------------
Net amount recognized................... $ 30.8 $ 26.5 $ (5.7) $ (4.7)
============= ============= ============= =============
Pension Benefits Other Benefits
---------------------------- ---------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
Weighted-average assumptions as of
December 31:
Discount rate........................ 7.75% 7.75% 7.75% 7.75%
Expected return on plan.............. 9.00% 9.00% 9.00% 9.00%
Rate of compensation increase........ 4.50% 4.50% --- ---
F-22
Pension Benefits Other Benefits
-------------------------------------- ------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ----------- ---------- ------------
Components of net periodic cost:
Service cost.......................... $ 1.3 $ 0.6 $ 0.2 $ 0.2 $ --- $ ---
Interest cost......................... 7.3 3.8 2.4 0.5 0.2 0.2
Expected return on plan assets........ (10.6) (5.5) (2.5) --- --- ---
Amortization of prior service cost.... 0.4 0.1 0.1 --- --- ---
Amortization of transition obligation. --- --- --- 0.4 0.3 0.3
Recognized actuarial (gain)loss....... (0.1) 0.1 0.2 (0.1) (0.1) (0.1)
Curtailment (gain)loss................ (2.6) --- --- --- --- ---
------------ ------------ ------------ ----------- ----------- -----------
Net periodic cost(benefit).............. $ (4.3) $ (0.9) $ 0.4 $ 1.0 $ 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 $14.3, $14.3 and $8.7, respectively, as of December
31, 2000, $12.2 , $12.2 and $10.5, respectively, as of December 31, 1999.
The Company has five nonpension postretirement benefit plans. The health care
plans are contributory with participants' contributions adjusted annually; the
life insurance plan is noncontributory. For measurement purposes, a 7.55 percent
annual rate of increase in the per capita cost of covered health care benefits
was assumed for 2000. 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 5.06% (5.16)%
Effect on postretirement benefit obligation 8.18% (7.83)%
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. Terex Aerials Limited
(Ireland) maintains two voluntary defined benefit plans covering its employees.
O & K Mining maintains an unfunded noncontributory defined benefit plan covering
substantially all of its employees. Fermec maintains a voluntary defined benefit
pension plan covering substantially all of its employees.
F-23
The liability of the Company's International Plans as of December 31, was as
follows:
Pension Benefits
---------------------------
2000 1999
------------- -------------
Change in benefit obligation:
Benefit obligation at beginning of year $ 13.0 $ 12.4
Benefits obligation of plans acquired
during the year...................... 41.3 ---
Service cost.......................... 0.7 0.8
Interest cost......................... 0.8 0.7
Actuarial (gain) loss................. (0.9) (0.8)
Benefits paid......................... (0.7) (0.1)
------------- -------------
Benefit obligation end of year.......... 54.2 13.0
------------- -------------
Change in plan assets:
Fair value of plan assets at beginning
of year.............................. 8.9 7.6
Fair value of plan assets acquired
during the year...................... 37.6 ---
Actual return on plan assets.......... (0.2) 0.7
Employer contribution................. 0.8 0.7
Benefits paid......................... (0.7) (0.1)
------------- -------------
Fair value of plan assets at end of year 46.4 8.9
------------- -------------
Funded status........................... (7.8) (4.1)
Unrecognized actuarial (gain) loss..... 2.8 (0.1)
Unrecognized transition obligation..... (0.1) (0.3)
------------- -------------
Net amount recognized................... $ (5.1) $ (4.5)
============= =============
Amounts recognized in the Consolidated Balance Sheet consist of:
Prepaid benefit cost................. $ 1.2 $ 0.8
Accrued benefit liability............ (6.3) (5.3)
------------- -------------
Net amount recognized................... $ (5.1) $ (4.5)
============= =============
Pension Benefits
---------------------------
2000 1999
------------- -------------
The range of assumptions
as of December 31:
Discount rate........................ 6.00%-8.00% 6.00%-8.00%
Expected return on plan.............. 6.25%-9.50% 6.00%-8.00%
Rate of compensation increase........ 3.75%-6.00% 3.75%-6.00%
F-24
Pension Benefits
-------------------------------------
2000 1999 1998
------------ ------------ -----------
Components of net periodic benefit cost:
Service cost.......................... $ 0.7 $ 0.8 $ 0.7
Interest cost......................... 0.8 0.7 0.8
Expected return on plan assets........ (0.6) (0.5) (0.5)
Amortization of prior service cost.... --- --- ---
Amortization of transition obligation. --- --- ---
Recognized actuarial (gain)loss....... --- --- ---
------------ ------------ -----------
Net periodic benefit cost............... $ 0.9 $ 1.0 $ 1.0
============ ============ ===========
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 $46.8, $46.8 and $37.6, respectively, as of December
31, 2000, $5.3, $5.3 and $0, respectively, as of December 31, 1999.
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 $2.5, $1.7 and $1.2 for the years ended
December 31, 2000, 1999 and 1998, respectively.
NOTE M -- 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 $45.9 at December 31, 2000.
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.
In connection with the Company's sale of the Clark material handling business to
Clark Material Handling Company ("CMHC") in November 1996, CMHC assumed
liabilities from Terex arising from product liability claims dealing with Clark
material handling products manufactured prior to the date of the divestiture. In
connection with CMHC's voluntary filing for bankruptcy in 2000, CMHC has
defaulted on its obligations to indemnify and defend the Company from such
product liability claims. As a result of this situation, the Company recorded an
expense of $7.3, net of income taxes, in the fourth quarter of 2000 representing
the Company's estimated liability for known product liability claims.
NOTE N -- 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
F-25
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
1998 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 2000, 1999 and 1998, the Company forgave
$0.1, $0.2 and $0.5, respectively, of principal on the loan along with the
current interest.
The Company, a director, certain former executives of the Company and a limited
partnership that formerly provided certain administrative and other services to
the Company, have been named parties in various legal proceedings. During 2000,
1999 and 1998, the Company incurred $0.5, $0.3 and $0.3, respectively, of legal
fees and expenses on behalf of the Company, the director and former executives
of the Company and the limited partnership that formerly provided certain
administrative and other services to the Companynamed 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
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 Senior Subordinated Notes. CIBC Oppenheimer Corp. was
paid $0.4 as an underwriting discount upon issuance of the 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 provided 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 for services provided in 1999.
On March 2, 2000, the Company made a loan to a director and officer of the
Company for $3.0. The loan bears interest at 9% per annum and matures on March
31, 2005. The loan is full recourse to the director and officer and is secured
by shares of the Common Stock owned by the director/officer and other employee
benefits. During the year, the director and officer repaid $1.0 of the loan and
the principal amount due to the Company was $2.0 at December 31, 2000.
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.
F-26
NOTE O-- 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,
loader backhoes, 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, 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),
aerial work platforms (including scissors, articulated boom lifts and straight
telescopic boom lifts) 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 2000 and 1999 Other are the results of operations of Amida,
Bartell and Coleman since their date of acquisition, as well as general and
corporate items for 2000, 1999 and 1998.
F-27
Industry segment information is presented below:
2000 1999 1998
------------- ------------- ------------
Sales
Terex Earthmoving.................... $ 1,099.5 $ 878.9 $ 456.4
Terex Lifting........................ 924.0 944.9 770.9
Other................................ 45.2 32.8 5.9
------------- ------------- ------------
Total.............................. $ 2,068.7 $ 1,856.6 $ 1,233.2
============= ============= ============
Income from Operations
Terex Earthmoving.................... $ 104.6 $ 87.5 $ 41.7
Terex Lifting........................ 94.8 86.4 82.1
Other................................ (1.1) 4.4 (1.8)
------------- ------------- ------------
Total.............................. $ 198.3 $ 178.3 $ 122.0
============= ============= ============
Depreciation and Amortization
Terex Earthmoving.................... $ 21.4 $ 15.6 $ 6.7
Terex Lifting........................ 14.4 12.6 9.5
Other................................ 5.7 4.0 2.2
------------- ------------- ------------
Total.............................. $ 41.5 $ 32.2 $ 18.4
============= ============= ============
Capital Expenditures
Terex Earthmoving.................... $ 8.9 $ 12.0 $ 4.8
Terex Lifting........................ 14.2 8.3 7.5
Other................................ 1.1 1.1 0.8
------------- ------------- ------------
Total.............................. $ 24.2 $ 21.4 $ 13.1
============= ============= ============
Identifiable Assets
Terex Earthmoving.................... $ 1,114.0 $ 1,158.4
Terex Lifting........................ 652.9 781.6
Other................................ 825.4 772.7
Eliminations......................... (608.6) (535.2)
------------- ------------
Total.............................. $ 1,983.7 $ 2,177.5
============= ============
Sales between segments areas are generally priced to recover costs plus a
reasonable markup for profit.
Geographic segment information is presented below:
2000 1999 1998
------------- ------------- -----------
Sales
United States......................... $ 1,048.9 $ 871.2 $ 600.6
United Kingdom........................ 213.1 151.3 100.0
Other European countries.............. 384.3 353.2 242.1
All other............................. 422.4 480.9 290.5
------------- ------------- -----------
Total............................... $ 2,068.7 $ 1,856.6 $ 1,233.2
============= ============= ===========
Long-lived Assets
United States......................... $ 58.5 $ 68.5
United Kingdom........................ 44.0 48.9
Other European Countries.............. 49.7 47.9
All other............................. 1.7 7.5
------------- --------------
Total............................... $ 153.9 $ 172.8
============= ==============
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-28
The Company is not dependent upon any single customer.
NOTE P -- CONSOLIDATING FINANCIAL STATEMENTS
On March 31, 1998 and March 9, 1999, the Company issued and sold $150.0 and
$100.0 aggregate principal amount, respectively, of the Senior Subordinated
Notes. The Senior Subordinated Notes are 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 Senior Subordinated Notes are also jointly
and severally guaranteed by PPM Cranes, Inc., which is 92.4% owned by Terex.
All subsidiaries of the Company except the Wholly-owned Guarantors and PPM
Cranes, Inc. have not provided a guarantee of the Senior Subordinated Notes.
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-29
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Net sales............................... $ 371.9 $ 657.1 $ 69.5 $ 1,190.0 $ (219.8) $ 2,068.7
Cost of goods sold.................... 329.1 548.6 58.2 988.4 (219.2) 1,705.1
------------- ------------- ------------- ------------- ------------- -------------
Gross profit............................ 42.8 108.5 11.3 201.6 (0.6) 363.6
Selling, general & administrative
expenses............................. 27.1 31.1 7.7 99.4 --- 165.3
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from operations........... 15.7 77.4 3.6 102.2 (0.6) 198.3
Interest income....................... 3.7 0.1 --- 1.7 --- 5.5
Interest expense...................... (19.8) (16.9) (5.9) (57.2) --- (99.8)
Income (loss) from equity investees... 105.2 --- 0.1 --- (105.3) ---
Gain on sale of businesses............ 39.0 --- --- 18.2 --- 57.2
Other income (expense) - net.......... 2.5 (0.9) (0.2) (3.0) --- (1.6)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes and
extraordinary items................... 146.3 59.7 (2.4) 61.9 (105.9) 159.6
Benefit from (provision for) income
taxes................................ (42.4) (0.3) --- (13.0) --- (55.7)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from continuing operations
before extraordinary items............ 103.9 59.4 (2.4) 48.9 (105.9) 103.9
Loss from discontinued operations..... (7.3) --- --- --- --- (7.3)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before extraordinary items 96.6 59.4 (2.4) 48.9 (105.9) 96.6
Extraordinary loss on retirement of
debt................................. (1.5) --- --- --- --- (1.5)
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss)....................... $ 95.1 $ 59.4 $ (2.4) $ 48.9 $ (105.9) $ 95.1
============= ============= ============= ============= ============= =============
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
============= ============= ============= ============= ============= =============
F-30
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
============= ============= ============= ============= ============= =============
F-31
TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2000
(in millions)
Wholly- Non-
Terex Owned PPM Guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Assets
Current assets
Cash and cash equivalents.......... $ 108.7 $ 0.3 $ 0.1 $ 72.3 $ --- $ 181.4
Trade receivables - net............ 22.2 70.7 8.7 258.6 --- 360.2
Intercompany receivables........... 36.4 28.9 17.5 60.7 (143.5) ---
Net inventories.................... 75.2 157.0 16.3 360.4 (10.8) 598.1
Current deferred tax assets........ 51.0 --- --- --- --- 51.0
Other current assets............... 4.5 1.6 0.3 45.3 --- 51.7
------------- ------------- ------------- ------------- ------------- -------------
Total current assets............. 298.0 258.5 42.9 797.3 (154.3) 1,242.4
Property, plant & equipment - net.... 12.7 40.7 0.6 99.9 --- 153.9
Investment in and advances to
(from) subsidiaries.............. 346.1 (117.6) (1.5) (137.3) (89.7) ---
Long-term deferred tax assets........ 21.2 --- --- --- --- 21.2
Goodwill - net....................... 11.1 168.1 11.9 300.3 --- 491.4
Other assets - net................... 8.1 35.2 0.7 30.8 --- 74.8
------------- ------------- ------------- ------------- ------------- -------------
Total assets............................ $ 697.2 $ 384.9 $ 54.6 $ 1,091.0 $ (244.0) $ 1,983.7
============= ============= ============= ============= ============= =============
Liabilities and stockholders' equity
(deficit)
Current liabilities
Notes payable and current portion
of long-term debt................ $ 0.8 $ --- $ 0.5 $ 19.2 $ --- $ 20.5
Trade accounts payable............. 32.7 57.0 10.2 211.3 --- 311.2
Intercompany payables.............. 3.8 15.2 9.3 115.2 (143.5) ---
Current deferred tax liabilities... --- --- --- --- --- ---
Accruals and other current 74.8 35.7 7.4 126.0 --- 243.9
liabilities......................
------------- ------------- ------------- ------------- ------------- -------------
Total current liabilities........ 112.1 107.9 27.4 471.7 (143.5) 575.6
Long-term debt less current portion.. 117.0 163.9 62.6 538.5 --- 882.0
Other long-term liabilities.......... 16.6 12.1 1.2 44.7 --- 74.6
Stockholders' equity (deficit)....... 451.5 101.0 (36.6) 36.1 (100.5) 451.5
------------- ------------- ------------- ------------- ------------- -------------
Total liabilities and stockholders' $ 697.2 $ 384.9 $ 54.6 $ 1,091.0 $ (244.0) $ 1,983.7
equity (deficit).....................
============= ============= ============= ============= ============= =============
F-32
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 68.5 30.2 7.5 118.7 ---- 224.9
liabilities......................
------------- ------------- ------------- ------------- ------------- -------------
Total current liabilities........ 157.1 98.6 19.2 409.7 (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' $ 775.7 $ 373.2 $ 45.2 $ 1,102.7 $ (119.3) $ 2,177.5
equity (deficit).....................
============= ============= ============= ============= ============= =============
F-33
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2000
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
operating activities $ 180.2 $ 4.9 $ 1.1 $ 14.4 $ --- $ 200.6
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from investing activities:
Proceeds from sale of business........ 51.8 --- --- 92.5 --- 144.3
Acquisition of business, net of cash
acquired............................. (2.9) (0.5) --- (16.6) --- (20.0)
Capital expenditures.................. (2.5) (12.6) (0.3) (8.8) --- (24.2)
Proceeds from sale of assets.......... --- 6.8 --- 4.0 --- 10.8
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
investing activities............... 46.4 (6.3) (0.3) 71.1 --- 110.9
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from financing activities:
Principal repayments of long-term debt (161.0) --- (0.8) (21.3) --- (183.1)
Net borrowings (repayments) under
revolving line of credit agreements.. --- --- --- (53.6) (53.6)
Purchases of common stock held in
treasury............................. (20.2) --- --- --- --- (20.2)
Proceeds from issuance of long-term
debt, net of issuance costs.......... --- --- --- --- --- ---
Payment of premiums on early
extinguishment of debt............... --- --- --- --- --- ---
Issuance of common stock.............. --- --- --- --- --- ---
Other................................. (1.0) --- --- (3.3) (4.3)
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
financing activities............... (182.2) --- (0.8) (78.2) --- (261.2)
------------- ------------- ------------- ------------- ------------- -------------
Effect of exchange rates on cash and
cash equivalents...................... --- --- --- (2.2) --- (2.2)
------------- ------------- ------------- ------------- ------------- -------------
Net (decrease) increase in cash and cash
equivalents........................... 44.4 (1.4) --- 5.1 48.1
Cash and cash equivalents, beginning of
period................................ 64.3 1.7 0.1 67.2 --- 133.3
------------- ------------- ------------- ------------- ------------- -------------
Cash and cash equivalents, end of period $ 108.7 $ 0.3 $ 0.1 $ 72.3 $ --- $ 181.4
============= ============= ============= ============= ============= =============
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 assets.......... --- 2.6 0.4 1.0 --- 4.0
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (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 (used in)
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
============= ============= ============= ============= ============= =============
F-34
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 assets.......... --- 1.9 0.2 0.3 --- 2.4
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (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 (used in)
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-35
NOTE Q - SUBSEQUENT EVENT (UNAUDITED)
On March 14, 2000, the Company announced that it intends to issue approximately
$200 principal amount of Senior Subordinated Notes Due 2011 ("New Notes") and
increase the availability under its existing revolving bank credit facility
maturing March 2004 from $125 to $300. The Company also announced at that time
that it is negotiating an amendment to its existing bank credit agreements to
provide the Company with greater operating flexibility. The Company intends to
use the net proceeds from the offering of the New Notes to prepay a portion of
its existing term loans. It is intended that the Company will offer the New
Notes pursuant to Rule 144A promulgated under the Securities Act of 1933, as
amended (the "Act"), and that the New Notes will not initially be registered
under the Act. Accordingly, the New Notes will not be able to be offered or sold
in the United States absent registration under the Act or an applicable
exemption from the registration requirements. There can be no assurances as to
whether these transactions, or any other financing transaction, will occur, or
as to the timing or definitive terms of any such transaction.
F-36
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, 2000
and 1999, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States of America. 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 of America, 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 our opinion.
PricewaterhouseCoopers LLP
Stamford, Connecticut
February 19, 2001
F-37
PPM Cranes, Inc.
Consolidated Statement of Operations
(in millions)
Year Ended December 31,
------------------------------------------------------------
2000 1999 1998
----------------- ------------------- ------------------
Net sales..............................................$ 69.5 $ 80.4 $ 92.4
Cost of goods sold..................................... 58.2 70.2 81.2
----------------- ------------------- ------------------
Gross profit...................................... 11.3 10.2 11.2
Selling, general and administrative expenses........... 7.7 7.2 4.5
----------------- ------------------- ------------------
Income (loss) from operations..................... 3.6 3.0 6.7
Other income (expense):
Interest expense.................................. (5.8) (4.8) (5.8)
Amortization of debt issuance costs............... (0.2) (0.2) (0.3)
Other income (expense)............................ --- (0.5) ---
----------------- ------------------- ------------------
Income (loss) before income taxes................. (2.4) (2.5) 0.6
Provision for income taxes............................. --- --- ---
----------------- ------------------- ------------------
Income (loss) before extraordinary items.......... (2.4) (2.5) 0.6
Extraordinary loss on retirement of debt............... --- --- (10.9)
----------------- ------------------- ------------------
Net loss..........................................$ (2.4) $ (2.5) $ (10.3)
================= =================== ==================
The accompanying notes are an integral part of these financial statements.
F-38
PPM Cranes, Inc.
Consolidated Balance Sheet
(in millions, except share amounts)
December 31,
---------------------------
2000 1999
------------- -------------
Assets
Current assets:
Cash and cash equivalents.......................................................... $ 0.1 $ 0.1
Trade accounts receivable (net of allowance of $0.7 and $0.6 at
December 31, 2000 and 1999, respectively)......................................... 8.7 21.3
Net inventories.................................................................... 16.3 18.2
Due from affiliates................................................................ 17.5 14.5
Prepaid expenses and other current assets.......................................... 0.3 ---
------------- -------------
Total current assets................................................................. 42.9 54.1
Property, plant and equipment - net.................................................. 0.6 0.2
Intangible assets:
Goodwill - net..................................................................... 11.9 13.2
Other assets - net................................................................. 0.7 0.9
------------- -------------
Total assets......................................................................... $ 56.1 $ 68.4
============= =============
Liabilities and shareholders' deficit Current liabilities:
Trade accounts payable............................................................. $ 10.2 $ 6.4
Accrued warranties and product liability........................................... 5.5 6.9
Accrued expenses................................................................... 1.9 0.7
Due to affiliates.................................................................. 9.3 5.3
Due to Terex Corporation........................................................... 1.7 18.2
Current portion of long-term debt.................................................. 0.5 1.1
------------- -------------
Total current liabilities............................................................ 29.1 38.6
------------- -------------
Non-current liabilities:
Long-term debt, less current portion............................................... 62.6 62.8
Other non-current liabilities...................................................... 1.0 1.2
------------- -------------
Total non-current liabilities........................................................ 63.6 64.0
------------- -------------
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................................................................ (36.6) (34.2)
Accumulated other comprehensive income - foreign currency translation adjustments.. --- ---
------------- -------------
Total shareholders' deficit.......................................................... (36.6) (34.2)
------------- -------------
Total liabilities and shareholders' deficit.......................................... $ 56.1 $ 68.4
============= =============
The accompanying notes are an integral part of these financial statements.
F-39
PPM Cranes, Inc.
Consolidated Statement of Changes of Shareholders' Deficit
(in millions)
Accumulated
Other
Common Stock Accumulated Comprehensive
Deficit Income (Loss) Total
--------------- --------------- ----------------- ----------------
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)
Net loss.......................... --- (2.4) --- (2.4)
Translation adjustment............ --- --- --- ---
----------------
Comprehensive loss............... --- --- --- (2.4)
--------------- --------------- ----------------- ----------------
Balance at December 31, 2000 $ --- $ (36.6) $ --- $ (36.6)
=============== =============== ================= ================
The accompanying notes are an integral part of these financial statements.
F-40
PPM Cranes, Inc.
Consolidated Statement of Cash Flows
(in millions)
Year Ended December 31,
---------------------------------------------------------
2000 1999 1998
------------------ ------------------ ----------------
Operating activities
Net loss........................................................$ (2.4) $ (2.5) $ (10.3)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization............................... 1.5 1.5 1.6
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 ---
Changes in operating assets and liabilities:
Trade accounts receivable.............................. 12.6 (2.0) 2.1
Net inventories........................................ 1.9 12.2 (0.7)
Trade accounts payable................................. 3.8 (4.2) 3.2
Net amounts due to affiliates.......................... (15.5) (2.6) (6.2)
Other - net............................................ (0.8) (2.3) (0.1)
------------------ ------------------ ----------------
Net cash provided by operating activities....................... 1.1 0.5 0.5
------------------ ------------------ ----------------
Investing activities
Capital expenditures............................................ (0.3) (0.2) (0.1)
Proceeds from sale of excess assets............................. --- 0.4 0.2
------------------ ------------------ ----------------
Net cash provided by (used in) investing activities............. (0.3) 0.2 0.1
------------------ ------------------ ----------------
Financing activities
Proceeds from issuance of long-term debt, net of issuance costs. --- --- 60.0
Principal repayments of long-term debt.......................... (0.8) (0.8) (50.8)
Payment of premiums on early extinguishment of debt............. --- --- (8.6)
Other........................................................... --- --- (1.2)
------------------ ------------------ ----------------
Net cash used in financing activities........................... (0.8) (0.8) (0.6)
------------------ ------------------ ----------------
Effect of exchange rate changes on cash......................... --- --- ---
------------------ ------------------ ----------------
Net increase (decrease) in cash and cash equivalents............ --- (0.1) ---
Cash and cash equivalents at beginning of period................ 0.1 0.2 0.2
------------------ ------------------ ----------------
Cash and cash equivalents at end of period......................$ 0.1 $ 0.1 $ 0.2
================== ================== ================
Supplemental disclosure of cash flow information
Cash paid for interest..........................................$ 0.4 $ 0.4 $ 0.5
================== ================== ================
Cash paid for income taxes......................................$ --- $ --- $ ---
================== ================== ================
The accompanying notes are an integral part of these financial statements.
F-41
PPM CRANES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(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, 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 $7.3 and $6.0 at December 31, 2000 and 1999,
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
$0.6 and $0.4 at December 31, 2000 and 1999, 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
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.
F-42
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
known claims.
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, 2000 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, 2000 and 1999.
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.
F-43
NOTE 3 -- INVENTORIES
Inventories consist of the following:
December 31,
--------------------
2000 19959
--------- ----------
Raw materials and supplies....................... $ 5.0 $ 5.9
Work in process.................................. 0.7 1.9
Replacement parts................................ 6.2 6.8
Finished goods equipment......................... 4.4 3.6
--------- ----------
$ 16.3 $ 18.2
========= ==========
NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
December 31,
--------------------
2000 1999
---------- ----------
Property.......................................... $ 0.2 $ 0.2
Plant............................................. --- ---
Machinery and equipment........................... 0.6 0.2
---------- ----------
0.8 0.4
Less accumulated depreciation..................... (0.2) (0.2)
---------- ----------
$ 0.6 $ 0.2
========== ==========
Depreciation expense for 2000, 1999 and 1998 was $0.0, $0.0 and $0.1,
respectively.
NOTE 5 - LONG-TERM DEBT
Long-term debt at is summarized as follows:
December 31,
---------------------------
2000 1999
------------- --------------
1998 Bank Credit Facility...................... $ 60.0 $ 60.0
Note payable................................... 3.1 3.9
Other.......................................... --- ---
------------- --------------
Total long-term debt...................... 63.1 63.9
Less: Current portion of long-term debt... (0.5) (1.1)
------------- --------------
Long-term debt, less current portion...... $ 62.6 $ 62.8
============= ==============
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 1998 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
F-44
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
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, 2000 was 9.06%. 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.) As of
December 31, 2000, the Term A Loan and Term B Loan have been prepaid such that
the next scheduled principal payment is due in June 2003.
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, 2000
in the successive five-year period are summarized as follows:
Note Payable -
Harnischfeger Other Total
------------------------------- -------------
2001........................... 0.8 --- 0.8
2002........................... 0.5 --- 0.5
2003........................... 0.5 --- 0.5
2004........................... 0.5 --- 0.5
2005........................... 0.5 --- 0.5
Thereafter..................... 2.7 60.0 62.7
------------------------------- -------------
5.5 60.0 65.5
Imputed Interest............... (2.4) --- (2.4)
=============================== =============
$ 3.1 $ 60.0 $ 63.1
=============================== =============
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 $0.1 for 2000, 1999 and 1998, respectively.
F-45
NOTE 7 -- INCOME TAXES
The components of income (loss) from continuing operations before income taxes
and extraordinary items consisted of the following:
Year Ended December 31,
-------------------------------------
2000 1999 1998
----------- ------------ ------------
Domestic......................$ (2.4) $ (2.9) $ 0.4
Foreign....................... --- 0.4 0.2
----------- ------------ ------------
$ (2.4) $ (2.5) $ 0.6
=========== ============ ============
The Company has no provision (benefit) for federal, foreign and state income
taxes.
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, 2000 and 1999 are summarized below:
Year Ended December 31,
----------------------------------
2000 1999
----------------- ----------------
Total deferred tax liabilities............ $ --- $ ---
----------------- ----------------
Receivables............................... $ 0.1 0.1
Inventory................................. --- 0.2
Fixed assets.............................. (0.2) (0.5)
Product liability......................... 1.8 5.1
Warranty.................................. 0.5 1.8
NOL carryforwards......................... 23.2 22.3
----------------- ----------------
Total deferred tax assets................. 25.4 29.0
Deferred tax asset valuation allowance.... (25.4) (29.0)
----------------- ----------------
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 2000, 1999 and 1998 was a decrease of $3.6, an increase
of $3.9 and an increase of $3.6, respectively.
At December 31, 2000, the Company has loss carryforwards for federal income tax
purposes of approximately $66.4 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
2020 ................. 2.7
-------------
Total ................. $ 66.4
=============
F-46
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.
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,
--------------------------
2000 1999 1998
-------- -------- --------
Statutory federal income tax rate................... $ (0.8) $ (0.8) $ 0.2
Goodwill............................................ 0.4 0.4 0.4
NOL and basis differences with no current benefit... 0.4 0.4 (0.6)
-------- -------- --------
Total provision for income taxes.................... $ --- $ --- $ ---
======== ======== ========
There were no income taxes paid during 2000, 1999 and 1998.
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
2000, 1999 and 1998 was $0.3, $0.3 and $0.3, respectively.
Future minimum payments under noncancelable operating leases at December 31,
2000 are as follows:
2001...................................... 0.2
2002...................................... 0.2
2003...................................... 0.2
2004...................................... 0.1
2005...................................... ---
Thereafter................................. ---
==============
$ 0.7
==============
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.
On March 31, 1998 and March 9, 1999, Terex Corporation issued and sold $150.0
and $100.0 aggregate principal amount, respectively, of 8-7/8% Senior
Subordinated Notes due 2008 (the "Senior Subordinated Notes"). The Senior
Subordinated Notes are each jointly and severally guaranteed by certain domestic
subsidiaries of Terex Corporation, including PPM.
NOTE 9 - BUSINESS SEGMENT INFORMATION
The Company operates in one industry segment, that being the designing,
manufacturing, and marketing of telescopic mobile cranes. These products are
used primarily in the construction industry.
Geographic segment information is presented below:
2000 1999 1998
------------ ------------- --------------
Sales
United States..............$ 57.8 $ 65.4 $ 66.6
All Other.................. 11.7 15.0 25.8
------------ ------------- --------------
$ 69.5 $ 80.4 $ 92.4
============ ============= ==============
F-47
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% and 12% of the Company's
net sales in the years ended December 31, 1999 and 1998, respectively. During
2000, no customer exceeded 10% of the Company's net sales.
NOTE 10 -- RELATED PARTY TRANSACTIONS
During the years ended December 31, 2000, 1999 and 1998, the Company had
transactions with various unconsolidated affiliates as follows:
2000 1999 1998
------------ ------------ -------------
Product sales and service revenues.......$ 1.4 $ --- $ 1.3
Management fee expense...................$ 1.0 $ 1.0 $ 1.0
Interestexpense..........................$ 5.2 $ 5.2 $ 5.3
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-48
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, 2000
Deducted from asset accounts:
Allowance for doubtful accounts............. $ 5.8 $ 2.4 $ --- $ (1.9) $ 6.3
Reserve for excess and obsolete inventory... 22.5 8.1 --- (4.5) 26.1
------------- ------------- ------------- ----------------- -------------
Totals..................................... $ 28.3 $ 10.5 $ --- $ (6.4) $ 32.4
============= ============= ============= ================= =============
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
============= ============= ============= ================= =============
(1) Primarily represents the utilization of established reserves, net of
recoveries.
F-49
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 September 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 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).
4.2 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 September 30, 1999 of
Terex Corporation, Commission File No. 1-10702).
4.3 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 September 30, 1999 of
Terex Corporation, Commission File No. 1-10702).
4.4 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 September 30, 1999 of
Terex Corporation, Commission File No. 1-10702).
4.5 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).
4.6 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).
4.7 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 September 30, 1999 of
Terex Corporation, Commission File No. 1-10702).
4.8 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 September 30, 1999 of
Terex Corporation, Commission File No. 1-10702).
4.9 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).
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
(incorporated by reference to Exhibit 10.5 to the Form 10-K for the year
ended December 31, 1999 of Terex Corporation, Commission File No.
1-10702).
10.6 Amendment No. 2 to 1996 Terex Corporation Long Term Incentive Plan
(incorporated by reference to Exhibit 10.6 to the Form 10-K for the year
ended December 31, 1999 of Terex Corporation, Commission File No.
1-10702).
10.7 Terex Corporation 1999 Long-Term Incentive Plan (incorporated by
reference to Exhibit 10.7 to the Form 10-Q for the quarter ended March
31, 2000 of Terex Corporation, Commission File No. 1-10702).
10.8 Terex Corporation 2000 Incentive Plan (incorporated by reference to
Exhibit 10.8 to the Form 10-Q for the quarter ended June 30, 2000 of
Terex Corporation, Commission File No. 1-10702).
10.9 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).
10.10 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).
10.11 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).
10.12 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).
10.13 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).
10.14 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).
10.15 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).
10.16 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).
10.17 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).
10.18 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).
10.19 AmendmentNo. 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).
10.20 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).
10.21 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).
10.22 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).
10.23 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
(incorporated by reference to Exhibit 10.21 to the Form 10-K for the year
ended December 31, 1999 of Terex Corporation, Commission File No.
1-10702).
10.24 Amendment No. 8 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 10.24 to the Form 10-Q for the
quarter ended June 30, 2000 of Terex Corporation, Commission File No.
1-10702).
10.25 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).
10.26 Amendment No. 1 to 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
10.26 to the Form 10-Q for the quarter ended June 30, 2000 of Terex
Corporation, Commission File No. 1-10702).
10.27 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).
10.28 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).
10.29 Underwriting Agreement, dated as of September 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 September 18, 1999).
10.30 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 September 30, 1999 of Terex Corporation, Commission File
No. 1-10702).
10.31 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 September 30,
1999 of Terex Corporation, Commission File No. 1-10702).
10.32 Asset Purchase and Sale Agreement between Terex Corporation and Partek
Acquisition Company, Inc., dated as of July 20, 2000 (incorporated by
reference to Exhibit 1 of the Form 8-K Current Report, Commission File
No. 1-10702, dated September 30, 2000 and filed with the Commission on
October 5, 2000).
10.33 Share Purchase and Sale Agreement among Powerscreen International plc,
Partek Cargotec Holding Ltd and, for purposes of Article 9 only, Moffett
Engineering Limited, dated as of July 20, 2000 (incorporated by reference
to Exhibit 2 of the Form 8-K Current Report, Commission File No. 1-10702,
dated September 30, 2000 and filed with the Commission on October 5,
2000).
10.34 Share Purchase and Sale Agreement among Holland Lift International B.V.,
Partek Cargotec Holding Netherlands B.V. and, for purposes of Article 9
only, Kooi B.V., dated as of July 20, 2000 (incorporated by reference to
Exhibit 3 of the Form 8-K Current Report, Commission File No. 1-10702,
dated September 30, 2000 and filed with the Commission on October 5,
2000).
10.35 Asset Purchase and Sale Agreement among PPM Deutschland GmbH Terex
Cranes, Hiab GmbH and, for purposes of Section 2.3 only, Holland Lift
International B.V., Partek Cargotec Holding Netherlands B.V. and Kooi
B.V., dated as of September 29, 2000 (incorporated by reference to
Exhibit 4 of the Form 8-K Current Report, Commission File No. 1-10702,
dated September 30, 2000 and filed with the Commission on October 5,
2000).
10.36 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).
10.37 Supplement to Contract of Employment, dated as of April 1, 2000, between
Terex Corporation and Filip Filipov (incorporated by reference to Exhibit
10.37 to the Form 10-Q for the quarter ended September 30, 2000 of Terex
Corporation, Commission File No. 1-10702).
10.38 Amended and Restated Employment and Compensation Agreement, dated as of
April 1, 2000, between Terex Corporation and Ronald M. DeFeo
(incorporated by reference to Exhibit 10.38 to the Form 10-Q for the
quarter ended September 30, 2000 of Terex Corporation, Commission File No
1-10702).
10.39 Form of Change in Control and Severance Agreement dated as of April 1,
2000 between Terex Corporation and certain executive officers
(incorporated by reference to Exhibit 10.34 to the Form 10-Q for the
quarter ended June 30, 2000 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. *
* Exhibit filed with this document.