UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
F O R M 10 - Q
(Mark One)
|X| Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2001
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-10702
Terex Corporation
(Exact name of registrant as specified in its charter)
Delaware 34-1531521
(State of Incorporation) (IRS Employer Identification No.)
500 Post Road East, Suite 320, Westport, Connecticut 06880
(Address of principal executive offices)
(203) 222-7170
(Registrant's telephone number, including area code)
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
----- ------
Number of outstanding shares of common stock: 31.7 million as of November 12,
2001.
The Exhibit Index appears on page 38.
INDEX
TEREX CORPORATION AND SUBSIDIARIES
GENERAL
This Quarterly Report on Form 10-Q filed by Terex Corporation ("Terex" or the
"Company") includes financial information with respect to the following
subsidiaries of the Company (all of which are wholly-owned except PPM Cranes,
Inc.) which are guarantors (the "Guarantors") of the Company's $300 million
principal amount of 10-3/8% Senior Subordinated Notes due 2011 (the "10-3/8%
Notes") and $250 million principal amount of 8-7/8% Senior Subordinated Notes
due 2008 (the "8-7/8% Notes"). See Note K to the Company's September 30, 2001
Condensed Consolidated Financial Statements.
State or other jurisdiction of I.R.S. employer
Guarantor incorporation or organization identification number
--------- ----------------------------- ---------------------
Terex Cranes, Inc. Delaware 06-1513089
PPM Cranes, Inc. Delaware 39-1611683
Koehring Cranes, Inc. Delaware 06-1423888
Terex-Telelect, Inc. Delaware 41-1603748
Terex-RO Corporation Kansas 44-0565380
Terex Paving, Inc. Delaware 06-1503634
Payhauler Corp. Illinois 36-3195008
The American Crane Corporation North Carolina 56-1570091
O & K Orenstein & Koppel, Inc. Delaware 58-2084520
Amida Industries, Inc. South Carolina 57-0531390
Cedarapids, Inc. Iowa 42-0332910
Standard Havens, Inc Delaware 43-0913249
Standard Havens Products, Inc. Delaware 43-1435208
BL-Pegson USA, Inc. Connecticut 31-1629830
Benford America, Inc. Delaware 76-0522879
Coleman Engineering, Inc. Tennessee 62-0949893
EarthKing, Inc. Delaware 06-1572433
Finlay Hydrascreen USA, Inc. New Jersey 22-2776883
Powerscreen Holdings USA Inc. Delaware 61-1265609
Powerscreen International LLC Delaware 61-1340898
Powerscreen North America Inc. Delaware 61-1340891
Powerscreen USA, LLC Kentucky 31-1515625
Royer Industries, Inc. Pennsylvania 24-0708630
Terex Bartell, Inc. Delaware 34-1325948
CMI Terex Corporation Oklahoma 73-0519810
Page No.
PART I FINANCIAL INFORMATION
Item 1 Condensed Consolidated Financial Statements
TEREX CORPORATION
Condensed Consolidated Statement of Operations --
Three months and nine months ended September 30, 2001 and 2000......4
Condensed Consolidated Balance Sheet - September 30, 2001 and
December 31, 2000...................................................5
Condensed Consolidated Statement of Cash Flows --
Nine months ended September 30, 2001 and 2000.......................6
Notes to Condensed Consolidated Financial Statements --
September 30, 2001..................................................7
PPM CRANES, INC.
Condensed Consolidated Statement of Operations --
Three months and nine months ended September 30, 2001 and 2000.....20
Condensed Consolidated Balance Sheet - September 30, 2001 and
December 31, 2000..................................................21
Condensed Consolidated Statement of Cash Flows --
Nine months ended September 30, 2001 and 2000......................22
Notes to Condensed Consolidated Financial Statements --
September 30, 2001.................................................23
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................25
Item 3 Quantitative and Qualitative Disclosures About Market Risk...........33
Page No.
PART II OTHER INFORMATION
Item 1 Legal Proceedings..................................................35
Item 2 Changes in Securities and Use of Proceeds..........................35
Item 3 Defaults Upon Senior Securities....................................35
Item 4 Submission of Matters to a Vote of Security Holders................35
Item 5 Other Information..................................................35
Item 6 Exhibits and Reports on Form 8-K...................................36
SIGNATURES....................................................................37
- ----------
EXHIBIT INDEX.................................................................38
- -------------
PART 1. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(in millions, except per share data)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------------- ---------------------------
2001 2000 2001 2000
------------- ------------- ------------- -------------
Net sales.....................................................$ 453.7 $ 475.1 $ 1,370.4 $ 1,622.1
Cost of goods sold............................................ 408.2 388.4 1,166.1 1,332.1
------------- ------------- ------------- -------------
Gross profit............................................. 45.5 86.7 204.3 290.0
Selling, general and administrative expenses.................. 41.8 39.3 123.4 124.1
------------- ------------- ------------- -------------
Income from operations................................... 3.7 47.4 80.9 165.9
Other income (expense):
Interest income.......................................... 2.8 1.6 6.6 4.1
Interest expense......................................... (21.9) (26.0) (66.1) (77.7)
Gain on sale in businesses............................... --- 57.2 --- 57.2
Other income (expense) - net............................. (0.6) (0.2) (1.5) (1.8)
------------- ------------- ------------- -------------
Income (loss) before income taxes and extraordinary items (16.0) 80.0 19.9 147.7
Provision for income taxes.................................... 5.1 (30.3) (6.4) (51.9)
------------- ------------- ------------- -------------
Income (loss) before extraordinary items................. (10.9) 49.7 13.5 95.8
Extraordinary loss on retirement on debt...................... --- --- (2.3) ---
------------- ------------- ------------- -------------
Net income (loss).............................................$ (10.9) $ 49.7 $ 11.2 $ 95.8
============= ============= ============= =============
Per common share:
Basic:
Income (loss) before extraordinary items................$ (0.41) $ 1.84 $ 0.50 $ 3.51
Extraordinary loss on retirement of debt................ --- --- (0.08) ---
------------- ------------- ------------- -------------
Net income (loss).....................................$ (0.41) $ 1.84 $ 0.42 $ 3.51
============= ============= ============= =============
Diluted:
Income (loss) before extraordinary items................$ (0.41) $ 1.79 $ 0.48 $ 3.41
Extraordinary loss on retirement of debt................ --- --- (0.08) ---
------------- ------------- ------------- -------------
Net income (loss).....................................$ (0.41) $ 1.79 $ 0.40 $ 3.41
============= ============= ============= =============
Weighted average number shares outstanding in per share calculation:
Basic................................................. 26.9 27.0 26.9 27.3
Diluted............................................... 26.9 27.8 27.7 28.1
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
(in millions, except par value)
September 30, December 31,
2001 2000
----------------- -----------------
Assets
Current assets
Cash and cash equivalents................................................... $ 260.8 $ 181.4
Trade receivables (net of allowance of $7.3 at September 30, 2001
and $6.3 at December 31, 2000)............................................ 349.8 360.2
Inventories................................................................. 656.6 598.1
Deferred taxes.............................................................. 51.5 51.0
Other current assets........................................................ 54.1 51.7
----------------- -----------------
Total current assets.................................................... 1,372.8 1,242.4
Long-term assets
Property, plant and equipment............................................... 137.0 153.9
Goodwill.................................................................... 484.1 491.4
Deferred taxes.............................................................. 27.2 21.2
Other assets................................................................ 104.9 74.8
----------------- -----------------
Total assets.................................................................. $ 2,126.0 $ 1,983.7
================= =================
Liabilities and Stockholders' Equity
Current liabilities
Notes payable and current portion of long-term debt......................... $ 28.9 $ 20.5
Trade accounts payable...................................................... 322.5 311.2
Accrued compensation and benefits........................................... 28.7 25.9
Accrued warranties and product liability.................................... 63.1 65.2
Other current liabilities................................................... 168.4 152.8
----------------- -----------------
Total current liabilities............................................... 611.6 575.6
Non-current liabilities
Long-term debt, less current portion........................................ 1,009.2 882.0
Other....................................................................... 63.3 74.6
Commitments and contingencies
Stockholders' equity
Equity rights............................................................... 0.7 0.7
Common stock, $.01 par value - authorized 150.0 shares; issued 28.0 and 27.9
shares at September 30, 2001 and December 31, 2000, respectively.......... 0.3 0.3
Additional paid-in capital.................................................. 360.9 358.9
Retained earnings........................................................... 198.3 187.1
Accumulated other comprehensive income...................................... (100.8) (78.5)
Less cost of shares of common stock in treasury (1.1 shares)................ (17.5) (17.0)
----------------- -----------------
Total stockholders' equity.............................................. 441.9 451.5
----------------- -----------------
Total liabilities and stockholders' equity.................................... $ 2,126.0 $ 1,983.7
================= =================
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(in millions)
For the Nine Months
Ended September 30,
---------------------------
2001 2000
---------------------------
Operating Activities
Net income.................................................................. $ 11.2 $ 95.8
Adjustments to reconcile net income to cash provided by (used in) operating
activities:
Depreciation........................................................... 16.2 16.6
Amortization........................................................... 13.0 14.8
Extraordinary loss on retirement of debt............................... 2.3 ---
Gain on sale of businesses............................................. --- (34.2)
Gain on sale of fixed assets........................................... (1.3) (0.4)
Restructuring charges.................................................. 19.5 ---
Changes in operating assets and liabilities (net of effects of
acquisitions):
Trade receivables.................................................... 13.8 5.9
Inventories.......................................................... (56.4) 32.5
Trade accounts payable............................................... 5.4 34.7
Other, net........................................................... (47.7) (34.0)
-------------- -------------
Net cash provided by (used in) operating activities............... (24.0) 131.7
-------------- -------------
Investing Activities
Acquisition of businesses, net of cash acquired............................. (10.4) (4.1)
Proceeds from sale of businesses............................................ --- 144.3
Capital expenditures........................................................ (9.3) (17.7)
Proceeds from sale of assets................................................ 3.7 9.2
Other....................................................................... (3.4) ---
-------------- -------------
Net cash provided by (used in) investing activities............... (19.4) 131.7
-------------- -------------
Financing Activities
Proceeds from issuance of long-term debt, net of issuance costs............. 287.9 ---
Principal repayments of long-term debt...................................... (194.2) (58.3)
Net borrowings (repayments) under revolving line of credit agreements....... 29.2 (56.0)
Purchase of common stock held in treasury................................... --- (14.7)
Other....................................................................... (1.0) (3.3)
-------------- -------------
Net cash provided by (used in) financing activities............... 121.9 (132.3)
-------------- -------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents................... 0.9 (3.6)
-------------- -------------
Net Increase in Cash and Cash Equivalents...................................... 79.4 127.5
Cash and Cash Equivalents at Beginning of Period............................... 181.4 133.3
-------------- -------------
Cash and Cash Equivalents at End of Period..................................... $ 260.8 $ 260.8
============== =============
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
(unaudited)
(in millions, unless otherwise noted)
NOTE A -- BASIS OF PRESENTATION
Basis of Presentation. The accompanying unaudited condensed consolidated
financial statements of Terex Corporation and subsidiaries as of September 30,
2001 and for the three months and nine months ended September 30, 2001 and 2000
have been prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles to be
included in full year financial statements. The accompanying condensed
consolidated balance sheet as of December 31, 2000 has been derived from the
audited consolidated balance sheet as of that date.
The condensed 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.
In the opinion of management, all adjustments considered necessary for a fair
statement have been made. Such adjustments consist only of those of a normal
recurring nature. Operating results for the three months and nine months ended
September 30, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.
Cash and cash equivalents at September 30, 2001 and December 31, 2000 include
$7.9 and $11.7, respectively, which was not immediately available for use.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 141 "Business Combinations" and SFAS
No. 142 "Goodwill and Other Intangible Assets." SFAS No. 141 addresses financial
accounting and reporting for business combinations and requires all business
combinations to be accounted for using one method, the purchase method. SFAS No.
142 addresses financial accounting for acquired goodwill and other intangible
assets and how such assets should be accounted for in financial statements upon
their acquisition and after they have been initially recognized in the financial
statements. The Company will adopt SFAS No. 141 and SFAS No. 142 beginning
January 1, 2002. The Company is currently evaluating the impact of these
pronouncements to determine the effect they will have on the Company's
consolidated financial position and results of operations. During the nine
months ended September 30, 2001, the Company incurred goodwill amortization
expenses of $9.8.
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
was issued in October 2001. SFAS No. 144 provides new guidance on the
recognition of impairment losses on long-lived assets to be held and used or to
be disposed of and also broadens the definition of what constitutes a
discontinued operation and how the results of a discontinued operation are to be
measured and presented. The provisions of SFAS No. 144 are effective for
financial statements issued for fiscal years beginning after December 15, 2001,
and must be applied at the beginning of a fiscal year. The Company is currently
evaluating SFAS No. 144 to assess its impact on the Company's consolidated
financial statements.
NOTE B -- ACCOUNTING CHANGE - DERIVATIVE FINANCIAL INSTRUMENTS
Effective January 1, 2001, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," and its related amendment, SFAS
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities." These standards require that all derivative financial instruments
be recorded on the consolidated balance sheets at their fair value as either
assets or liabilities. Changes in the fair value of derivatives will be recorded
each period in earnings or accumulated other comprehensive income, depending on
whether a derivative is designated and effective as part of a hedge transaction
and, if it is, the type of hedge transaction. Gains and losses on derivative
instruments reported in accumulated other comprehensive income will be included
in earnings in the periods in which earnings are affected by the hedged item. As
of January 1, 2001, the adoption of these new standards resulted in no
cumulative effect of an accounting change on net earnings. The cumulative effect
of the accounting change increased accumulated other comprehensive income by
$0.9, net of income taxes.
The Company operates internationally, with manufacturing and sales facilities in
various locations around the world, and utilizes certain financial instruments
to manage its foreign currency and interest rate exposures, primarily related to
forecasted transactions. To qualify a derivative as a hedge at inception and
throughout the hedge period, the Company formally documents the nature and
relationships between the hedging instruments and hedged items, as well as its
risk-management objectives, strategies for undertaking the various hedge
transactions and method of assessing hedge effectiveness. Additionally, for
hedges of forecasted transactions, the significant characteristics and expected
terms of a forecasted transaction must be specifically identified, and it must
be probable that each forecasted transaction would occur. If it were deemed
probable that the forecasted transaction will not occur, the gain or loss would
be recognized in earnings currently. Financial instruments qualifying for hedge
accounting must maintain a specified level of effectiveness between the hedging
instrument and the item being hedged, both at inception and throughout the
hedged period. The Company does not engage in trading or other speculative use
of financial instruments.
The Company uses forward contracts and options to mitigate its exposure to
changes in foreign currency exchange rates on third-party and inter-company
forecasted transactions. The primary currencies to which the Company is exposed
include the Euro, British Pound, German Mark, French Franc, Irish Punt, Italian
Lira and Australian Dollar. When using options as a hedging instrument, the
Company excludes the time value from the assessment of effectiveness. The
effective portion of unrealized gains and losses associated with forward
contracts and the intrinsic value of option contracts are deferred as a
component of accumulated other comprehensive income until the underlying hedged
transactions are reported on the Company's consolidated statement of operations.
The Company uses interest rates swaps to mitigate its exposure to changes in
interest rates related to existing issuances of variable rate debt. Primary
exposure includes movements in the U.S. prime rate and London Interbank Offer
Rate ("LIBOR").
During the three months and nine months ended September 30, 2001,
ineffectiveness related to cash flow hedges was not material. The Company is
hedging forecasted transactions for periods not exceeding the next eighteen
months. The Company expects $4.0 reported in accumulated other comprehensive
income to be reclassified to the consolidated statement of operations within the
next twelve months.
During the three months and nine months ended September 30, 2001, accumulated
other comprehensive income increased by $5.2 and $3.9, respectively, net of
income taxes, which was all due to hedging transactions; there were no amounts
reclassified to the consolidated statement of operations.
For further information on accounting policies related to derivative financial
instruments, refer to the Company's Annual Report on Form 10-K for the year
ended December 31, 2000.
NOTE C - RESTRUCTURING AND OTHER CHARGES
During the third quarter of 2001, the Company announced that a number of its
production facilities would reduce staff, seven facilities would be closed and
that other additional non-recurring expenses would be incurred. The
restructuring program is designed to maximize factory utilization and to
leverage common purchasing, engineering and marketing operations in the Americas
and Europe. The majority of facility closures will occur in 2001 and the plan is
expected to be fully implemented by the end of the first quarter of 2002.
The Company recorded costs of $28.7 during the third quarter of 2001 for
severance and closing costs related to these actions as well as other
non-recurring expenses. The severance costs, totaling approximately $6, are for
the elimination of approximately 725 positions in connection with the
aforementioned plant closures and staff reductions. Other costs, totaling
approximately $23, include asset write-offs and plant closure costs of which
approximately $19 represents non-cash charges. These costs have been included in
cost of sales ($24.8) and selling, general and administrative expenses ($3.9) in
the condensed consolidated statement of operations. As of September 30, 2001,
approximately $10 representing future cash costs have been accrued; cash
payments will take place primarily in the fourth quarter of 2001 and are
expected to be completed by the end of the first quarter of 2002.
NOTE D -- DEBT ISSUANCE
On March 29, 2001, the Company sold and issued $300 aggregate principal amount
of 10-3/8% Senior Subordinated Notes Due 2011 (the "10-3/8% Notes").
Additionally, on March 29, 2001, the Company increased its availability under
its revolving bank credit facilities from $125 to $300. The Company used
approximately $194 of the net proceeds from the offering of the 10-3/8% Notes to
prepay a portion of its existing term loans. The Company recorded a charge of
$2.3, net of income taxes, to recognize a loss on the write-off of unamortized
debt acquisition costs for the early extinguishment of debt in connection with
the prepayment of such existing term loans. The 10-3/8% Notes were issued in a
private placement made in reliance upon an exemption from registration under the
Securities Act of 1933, as amended (the "Securities Act"). During the third
quarter of 2001, the outstanding unregistered 10-3/8% Notes were exchanged for
10-3/8% Notes registered under the Securities Act.
NOTE E -- INVENTORIES
Inventories consist of the following:
September 30, December 31,
2001 2000
----------------- ----------------
Finished equipment........................ $ 220.6 $ 215.1
Replacement parts......................... 173.9 161.9
Work-in-process........................... 86.9 63.9
Raw materials and supplies................ 175.2 157.2
---------------- -----------------
Inventories............................... $ 656.6 $ 598.1
================ =================
NOTE F -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
September 30, December 31,
2001 2000
----------------- -----------------
Property................................... $ 18.7 $ 20.8
Plant...................................... 91.3 87.9
Equipment.................................. 109.1 118.6
---------------- -----------------
219.1 227.3
Less: Accumulated depreciation............ (82.1) (73.4)
---------------- -----------------
Net property, plant and equipment.......... $ 137.0 $ 153.9
================ =================
NOTE G -- EARNINGS PER SHARE
Three Months Ended September 30,
(in millions, except per share data)
-------------------------------------------------------------------------
2001 2000
-------------------------------------------------------------------------
Per-Share Per-Share
Income Shares Amount Income Shares Amount
---------- ----------- ------------ ----------- ----------- ------------
Basic earnings per share
Income (loss) before extraordinary
items................................. $ (10.9) 26.9 $ (0.41) $ 49.7 27.0 $ 1.84
Effect of dilutive securities
Warrants..............................s --- --- --- 0.1
Stock Options.......................... --- --- --- 0.5
Equity Rights.......................... --- --- --- 0.2
---------- ----------- ----------- -----------
Income (loss) before extraordinary items
- diluted.............................. $ (10.9) 26.9 $ (0.41) $ 49.7 27.8 $ 1.79
========== =========== ============ =========== =========== ============
Nine Months Ended September 30,
(in millions, except per share data)
-------------------------------------------------------------------------
2001 2000
-------------------------------------------------------------------------
Per-Share Per-Share
Income Shares Amount Income Shares Amount
---------- ----------- ------------ ----------- ----------- ------------
Basic earnings per share
Income (loss) before extraordinary
items................................ $ 13.5 26.9 $ 0.50 $ 95.8 27.3 $ 3.51
Effect of dilutive securities
Warrants............................... --- --- --- 0.1
Stock Options.......................... --- 0.7 --- 0.5
Equity Rights.......................... --- 0.1 --- 0.2
---------- ----------- --------- -----------
Income (loss) before extraordinary items
- diluted.............................. $ 13.5 27.7 $ 0.48 $ 95.8 28.1 $ 3.41
========== =========== ============ =========== =========== ============
Options to purchase 1,288 thousand, 542 thousand, 795 thousand and 561 thousand
shares of common stock were outstanding during the three months and nine months
ended September 30, 2001 and 2000, respectively, but were not included in the
computation of diluted earnings per share because the exercise price of options
was greater than the average market price of the common stock and, therefore,
the effect would be anti-dilutive.
NOTE H -- STOCKHOLDER'S EQUITY
Total non-shareowner changes in equity (comprehensive income) include all
changes in equity during a period except those resulting from investments by,
and distributions to, shareowners. The specific components include: net income,
deferred gains and losses resulting from foreign currency translation, deferred
gains and losses resulting from derivative hedging transactions and minimum
pension liability adjustments. For the three months and nine months ended
September 30, 2001 and 2000, total non-shareowner changes in equity were as
follows.
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
---------------------------- ----------------------------
2001 2000 2001 2000
------------- -------------- --------------- ------------
Net income (loss)..........................$ (10.9) $ 49.7 $ 11.2 $ 95.8
Other comprehensive income:
Translation adjustment................ 23.3 (24.1) (26.2) (69.4)
Pension liability adjustment.......... --- --- --- ---
Derivative hedging adjustment......... 5.2 --- 3.9 ---
-------------- ------------- ------------- -------------
Comprehensive income.......................$ 17.6 $ 25.6 $ (11.1) $ 26.4
============== ============= ============= =============
In March 2000, the Company's Board of Directors authorized the purchase of up to
2.0 shares of the Company's outstanding common stock. No shares were purchased
during the nine months ended September 30, 2001. As of September 30, 2001, the
Company had acquired 1.3 shares at a total cost of $20.2. During the fourth
quarter of 2000, the Company reissued from Treasury 0.2 shares of its common
stock as partial payment for an acquired company. As of September 30, 2001, the
Company held 1.1 shares of its common stock in Treasury.
NOTE I -- LITIGATION AND CONTINGENCIES
The Company is subject to a number of contingencies and uncertainties including
product liability claims, self-insurance obligations, tax examinations and
guarantees. Many of the exposures are unasserted or proceedings are at a
preliminary stage, and it is not presently possible to estimate the amount or
timing of any cost to the Company. However, management does not believe that
these contingencies and uncertainties will, in the aggregate, have a material
adverse effect on the Company. When it is probable that a loss has been incurred
and possible to make reasonable estimates of the Company's liability with
respect to such matters, a provision is recorded for the amount of such estimate
or for the minimum amount of a range of estimates when it is not possible to
estimate the amount within the range that is most likely to occur.
The Company generates hazardous and nonhazardous wastes in the normal course of
its operations. As a result, the Company is subject to a wide range of federal,
state, local and foreign environmental laws and regulations, including the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
that (i) govern activities or operations that may have adverse environmental
effects, such as discharges to air and water, as well as handling and disposal
practices for hazardous and nonhazardous 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.
The Company is party to an action commenced in the United States District Court
for the District of Delaware by End of Road Trust, a creditor liquidating trust
formed to liquidate the assets of Fruehauf Trailer Corporation ("Fruehauf"), a
former subsidiary of the Company and currently a reorganized debtor in
bankruptcy, and Pension Transfer Corporation, as sponsor and administrator for
certain Fruehauf pension plans (collectively, the "Plaintiffs") against the
Company and certain former officers and directors of Fruehauf and Terex
(collectively, the "Defendants"). The Plaintiffs allege, in essence, that the
Defendants breached fiduciary duties owed to Fruehauf and made certain
misrepresentations in connection with certain accounting matters arising from
the Company's 1989 acquisition of Fruehauf and the 1991 initial public offering
of Fruehauf stock, and that the Defendants were unjustly enriched thereby.
Plaintiffs also allege that certain pension investments made on behalf of the
Fruehauf pension plans violated ERISA. The action is currently in the early
stages of discovery. The Company believes that it has meritorious defenses and
that the outcome of the case will not have a material adverse effect on the
Company's operations.
NOTE J -- BUSINESS SEGMENT INFORMATION
On April 23, 2001, the Company announced that it was implementing a new
organizational structure effective May 1, 2001. On May 1, 2001, the Company
began operating primarily in two business segments: (i) Terex Americas and
Mining and (ii) Terex Europe. Previously, the Company had reported its
operations as Terex Earthmoving and Terex Lifting. On August 28, 2001, the
Company announced that the Terex Americas and Mining group was being divided
into two separate business segments: (i) Terex Americas and (ii) Terex Mining.
Therefore, commencing in the third quarter of 2001, the Company began operating
primarily in three business segments: (i) Terex Americas, (ii) Terex Europe, and
(iii) Terex Mining. All prior periods have been restated to reflect results
based on the three current business segments.
Terex Americas includes the results of all business units located in North and
South America, Australia and Asia, with the exception of those business units
included within Terex Mining. The 2001 results for Terex Americas include the
operations of Jaques International and its affiliates since January 24, 2001,
its date of acquisition. The 2000 results for Terex Americas include the
operations of the Company's Princeton division which was sold on September 30,
2000. The results for the three months and nine months ended September 30, 2000
do not include the operations of Coleman Engineering, Inc., since it was
acquired on October 23, 2000.
Terex Europe includes the results of all business units located in Europe with
the exception of those business units included within Terex Mining. The 2001
results for Terex Europe include the operations of Fermec Manufacturing Limited
and its affiliates since December 28, 2000, its date of acquisition. The 2000
results for Terex Europe include the operations of Moffett Engineering Limited
and the Company's Kooi division, which were sold on September 30, 2000.
Terex Mining includes the results of the Terex Mining operations in Tulsa,
Oklahoma, the O&K Mining business located in Germany and certain sales offices
in Australia, South America and Africa.
Included in Other are the eliminations among the segments, as well as general
and corporate items for the three months and nine months ended September 30,
2001 and 2000. Industry segment information is presented below:
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- --------------------------
2001 2000 2001 2000
-------------- -------------- ------------ -------------
Sales
Terex Americas..................................... $ 187.8 $ 252.0 $ 661.6 $ 845.8
Terex Europe....................................... 214.1 205.3 669.0 716.7
Terex Mining....................................... 91.7 60.8 183.5 249.8
Other.............................................. (39.9) (43.0) (143.7) (190.2)
-------------- -------------- ------------ -------------
Total............................................ $ 453.7 $ 475.1 $ 1,370.4 $ 1,622.1
============== ============== ============ =============
Income (Loss) from Operations
Terex Americas..................................... $ 0.6 $ 29.2 $ 37.5 $ 85.6
Terex Europe....................................... (5.6) 21.2 33.6 74.0
Terex Mining....................................... 8.9 (4.8) 11.0 3.5
Other.............................................. (0.2) 1.8 (1.2) 2.8
-------------- -------------- ------------ -------------
Total............................................ $ 3.7 $ 47.4 $ 80.9 $ 165.9
============== ============== ============ =============
NOTE K -- CONSOLIDATING FINANCIAL STATEMENTS
On March 29, 2001, the Company issued and sold the 10-3/8% Notes. On March 31,
1998 and March 9, 1999, the Company issued and sold $150 aggregate principal
amount and $100 aggregate principal amount, respectively, of 8-7/8% Senior
Subordinated Notes due 2008 (the "8-7/8% Notes"). As of September 30, 2001, the
10-3/8% Notes and 8-7/8% Notes were each jointly and severally guaranteed by the
following wholly-owned subsidiaries of the Company (the "Wholly-owned
Guarantors"): Terex Cranes, Inc., Koehring Cranes, Inc., Terex-Telelect, Inc.,
Terex-RO Corporation, Terex Paving, Inc., Payhauler Corp., O & K Orenstein &
Koppel, Inc., The American Crane Corporation, Amida Industries, Inc.,
Cedarapids, Inc., Standard Havens, Inc., Standard Havens Products, Inc.,
BL-Pegson USA, Inc., Benford America, Inc., Coleman Engineering, Inc.,
EarthKing, Inc., Finlay Hydrascreen USA, Inc., Powerscreen Holdings USA Inc.,
Powerscreen International LLC, Powerscreen North America Inc., Powerscreen USA,
LLC, Royer Industries, Inc. and Terex Bartell, Inc. The 10-3/8% Notes and the
8-7/8% Notes are each also jointly and severally guaranteed by PPM Cranes, Inc.,
which is 92.4% owned by Terex.
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 subsidiary
is reported on the equity basis.
Non-guarantor Subsidiaries combine the operations of subsidiaries which have not
provided a guarantee of the obligations of Terex Corporation under the 10-3/8%
Notes and the 8-7/8% Notes.
Debt and Goodwill allocated to subsidiaries is presented on an accounting
"push-down" basis.
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2001
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Net sales............................... $ 74.3 $ 193.7 $ 10.2 $ 297.8 $ (122.3) $ 453.7
Cost of goods sold................... 68.4 177.1 10.5 272.3 (120.1) 408.2
------------- ------------- ------------- ------------- ------------- -------------
Gross profit............................ 5.9 16.6 (0.3) 25.5 (2.2) 45.5
Selling, general & administrative
expenses .......................... 4.5 11.4 1.6 24.3 --- 41.8
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from operations........... 1.4 5.2 (1.9) 1.2 (2.2) 3.7
Interest income....................... 0.9 (0.1) --- 2.0 --- 2.8
Interest expense...................... (6.8) (3.7) (0.9) (10.5) --- (21.9)
Income (loss) from equity investees... (16.9) --- --- --- 16.9 ---
Other income (expense) - net.......... (0.5) (2.5) --- 2.4 --- (0.6)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes and
extraordinary items................... (21.9) (1.1) (2.8) (4.9) 14.7 (16.0)
Provision for income taxes............ 11.0 (0.4) --- (5.5) --- 5.1
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before extraordinary items (10.9) (1.5) (2.8) (10.4) 14.7 (10.9)
Extraordinary loss on retirement of debt --- --- --- --- --- ---
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss)....................... $ (10.9) $ (1.5) $ (2.8) $ (10.4) $ 14.7 $ (10.9)
============= ============= ============= ============= ============= =============
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Net sales............................... $ 67.9 $ 158.9 $ 19.3 $ 264.9 $ (35.9) $ 475.1
Cost of goods sold................... 58.9 130.5 16.8 218.1 (35.9) 388.4
------------- ------------- ------------- ------------- ------------- -------------
Gross profit............................ 9.0 28.4 2.5 46.8 --- 86.7
Selling, general & administrative
expenses........................... 8.1 4.1 1.7 25.4 --- 39.3
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from operations........... 0.9 24.3 0.8 21.4 --- 47.4
Interest income....................... 1.3 (0.1) --- 0.4 --- 1.6
Interest expense...................... (4.6) (4.9) (1.5) (15.0) --- (26.0)
Gain on sale of businesses............ 10.3 --- --- 46.9 --- 57.2
Income (loss) from equity investees... 61.5 --- --- --- (61.5) ---
Other income (expense) - net.......... 1.3 (0.3) --- (1.2) --- (0.2)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes and 70.7 19.0 (0.7) 52.5 (61.5) 80.0
extraordinary items...................
Provision for income taxes............ (21.0) (0.1) --- (9.2) --- (30.3)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from continuing operations 49.7 18.9 (0.7) 43.3 (61.5) 49.7
before extraordinary items............
Extraordinary loss on retirement of debt --- --- --- --- --- ---
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss)....................... $ 49.7 $ 18.9 $ (0.7) $ 43.3 $ (61.5) $ 49.7
============= ============= ============= ============= ============= =============
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2001
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Net sales............................... $ 154.7 $ 515.4 $ 36.8 $ 826.7 $ (163.2) $ 1,370.4
Cost of goods sold................... 147.4 445.1 33.1 701.5 (161.0) 1,166.1
------------- ------------- ------------- ------------- ------------- -------------
Gross profit............................ 7.3 70.3 3.7 125.2 (2.2) 204.3
Selling, general & administrative
expenses........................... 14.3 30.5 7.2 71.4 --- 123.4
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from operations........... (7.0) 39.8 (3.5) 53.8 (2.2) 80.9
Interest income....................... 2.9 0.2 --- 3.5 --- 6.6
Interest expense...................... (18.2) (10.2) (3.7) (34.0) --- (66.1)
Income (loss) from equity investees... 28.9 --- --- (0.1) (28.8) ---
Other income (expense) - net.......... 0.4 (3.1) (0.1) 1.3 --- (1.5)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes and
extraordinary items................... 7.0 26.7 (7.3) 24.5 (31.0) 19.9
Provision for income taxes............ 5.2 (0.8) --- (10.8) --- (6.4)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before extraordinary items 12.2 25.9 (7.3) 13.7 (31.0) 13.5
Extraordinary loss on retirement of debt (1.0) (0.6) --- (0.7) --- (2.3)
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss)....................... $ 11.2 $ 25.3 $ (7.3) $ 13.0 $ (31.0) $ 11.2
============= ============= ============= ============= ============= =============
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Net sales............................... $ 289.0 $ 504.6 $ 51.8 $ 955.6 $ (178.9) $ 1,622.1
Cost of goods sold................... 255.7 421.9 45.1 786.7 (177.3) 1,332.1
------------- ------------- ------------- ------------- ------------- -------------
Gross profit............................ 33.3 82.7 6.7 168.9 (1.6) 290.0
Selling, general & administrative
expenses........................... 17.5 24.8 4.8 77.0 --- 124.1
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from operations........... 15.8 57.9 1.9 91.9 (1.6) 165.9
Interest income....................... 2.8 0.2 --- 1.1 --- 4.1
Interest expense...................... (15.2) (14.8) (4.3) (43.4) --- (77.7)
Gain on sale of businesses............ 10.3 --- --- 46.9 --- 57.2
Income (loss) from equity investees... 121.1 --- --- --- (121.1) ---
Other income (expense) - net.......... 1.7 (0.9) (0.1) (2.5) --- (1.8)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes and
extraordinary expenses................ 136.5 42.4 (2.5) 94.0 (122.7) 147.7
Provision for income taxes............ (40.7) (0.3) --- (10.9) --- (51.9)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before extraordinary items 95.8 42.1 (2.5) 83.1 (122.7) 95.8
Extraordinary loss on retirement of debt --- --- --- --- --- ---
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss)....................... $ 95.8 $ 42.1 (2.5) 83.1 (122.7) $ 95.8
============= ============= ============= ============= ============= =============
TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2001
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
-------------- ------------- ------------- --------------------------- ---------------
Assets
Current assets
Cash and cash equivalents.......... $ 146.8 $ 1.2 $ 0.1 $ 112.7 $ --- $ 260.8
Trade receivables.................. 17.2 94.6 10.1 227.9 --- 349.8
Intercompany receivables........... 17.1 24.8 3.1 63.8 (108.8) ---
Inventories........................ 82.7 191.9 25.7 369.2 (12.9) 656.6
Current deferred tax assets........ 51.1 0.4 --- --- --- 51.5
Other current assets............... 16.0 1.8 0.8 35.5 --- 54.1
------------- ------------- ------------- ------------- ------------- -------------
Total current assets............. 330.9 314.7 39.8 809.1 (121.7) 1,372.8
Long-term assets
Property, plant and equipment...... 8.8 45.4 0.3 82.5 --- 137.0
Investment in and advances to
(from) subsidiaries.............. 414.1 (154.8) 2.1 (169.1) (92.3) ---
Goodwill........................... 4.4 172.5 11.0 296.2 --- 484.1
Deferred taxes..................... 26.6 --- --- 0.6 --- 27.2
Other assets....................... 17.7 42.6 0.8 43.8 --- 104.9
------------- ------------- ------------- ------------- ------------- -------------
Total assets............................ $ 802.5 $ 420.4 $ 54.0 $ 1,063.1 $ (214.0) $ 2,126.0
============= ============= ============= ============= ============= =============
Liabilities and stockholders' equity
(deficit)
Current liabilities
Notes payable and current portion
of long-term debt................ $ 0.4 $ 0.6 $ 0.3 $ 27.6 $ --- $ 28.9
Trade accounts payable............. 35.9 59.0 9.3 218.3 --- 322.5
Intercompany payables.............. 12.7 8.1 14.3 73.7 (108.8) ---
Accruals and other current
liabilities...................... 67.7 43.2 10.8 138.5 --- 260.2
------------- ------------- ------------- ------------- ------------- -------------
Total current liabilities........ 116.7 110.9 34.7 458.1 (108.8) 611.6
Non-current liabilities
Long-term debt, less current portion 228.8 172.1 62.5 545.8 --- 1,009.2
Other.............................. 15.1 11.1 0.7 36.4 --- 63.3
Stockholders' equity (deficit)....... 441.9 126.3 (43.9) 22.8 (105.2) 441.9
------------- ------------- ------------- ------------- ------------- -------------
Total liabilities and stockholders'
equity (deficit)..................... $ 802.5 $ 420.4 $ 54.0 $ 1,063.1 $ (214.0) $ 2,126.0
============= ============= ============= ============= ============= =============
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.................. 22.2 70.7 8.7 258.6 --- 360.2
Intercompany receivables........... 36.4 28.9 17.5 60.7 (143.5) ---
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
Long-term assets
Property, plant and 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) ---
Goodwill........................... 11.1 168.1 11.9 300.3 --- 491.4
Deferred taxes..................... 21.2 --- --- --- --- 21.2
Other assets....................... 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) ---
Accruals and other current
liabilities...................... 74.8 35.7 7.4 126.0 --- 243.9
------------- ------------- ------------- ------------- ------------- -------------
Total current liabilities........ 112.1 107.9 27.4 471.7 (143.5) 575.6
Non-current liabilities
Long-term debt, less current portion 117.0 163.9 62.6 538.5 --- 882.0
Other.............................. 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'
equity (deficit)..................... $ 697.2 $ 384.9 $ 54.6 $ 1,091.0 $ (244.0) $ 1,983.7
============= ============= ============= ============= ============= =============
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2001
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------ ------------------------------
Net cash provided by (used in)
operating activities................. $ (41.1) $ (17.4) $ 0.5 $ 34.0 $ --- $ (24.0)
------------- ------------- ------------- ------------ -------------- -------------
Investing activities
Acquisition of businesses, net of
cash acquired...................... (5.3) --- --- (5.1) --- (10.4)
Capital expenditures................. (0.9) (3.1) --- (5.3) --- (9.3)
Proceeds from sale of businesses..... --- --- --- --- --- ---
Proceeds from sale of assets......... 0.3 --- --- 3.4 --- 3.7
Other................................ --- --- --- (3.4) --- (3.4)
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
investing activities........... (5.9) (3.1) --- (10.4) --- (19.4)
------------- ------------- ------------- ------------- ------------- -------------
Financing activities
Proceeds from issuance of long-term
debt, net of issuance costs....... 123.8 74.9 --- 89.2 --- 287.9
Principal repayments of long-term debt (38.5) (53.4) (0.5) (101.8) --- (194.2)
Net borrowings (repayments) under
revolving line of credit agreements --- --- -- 29.2 --- 29.2
Purchase of common stock held in
treasury........................... --- --- --- --- --- ---
Other................................ (0.2) (0.1) --- (0.7) --- (1.0)
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
financing activities............ 85.1 21.4 (0.5) 15.9 --- 121.9
------------- ------------- ------------- ------------- ------------- -------------
Effect of exchange rates on cash and --- --- --- 0.9 0.9
cash equivalents..................... ---
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) in cash and cash 38.1 0.9 --- 40.4 79.4
equivalents.......................... ---
Cash and cash equivalents, beginning of
period............................... 108.7 0.3 0.1 72.3 --- 181.4
------------- ------------- ------------- ------------- ------------- -------------
Cash and cash equivalents,
end of period........................ $ 146.8 $ 1.2 $ 0.1 $ 112.7 $ --- $ 260.8
============= ============= ============= ============= ============= =============
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 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................. $ 61.4 $ 1.1 $ 1.1 $ 68.1 $ --- $ 131.7
------------- ------------- ------------- ------------ -------------- --------------
Investing activities
Acquisition of businesses, net of
cash acquired...................... --- (0.5) --- (3.6) --- (4.1)
Capital expenditures................. (2.2) (8.1) (0.3) (7.1) --- (17.7)
Proceeds from sale of businesses..... 51.8 --- --- 92.5 --- 144.3
Proceeds from sale of assets......... --- 6.6 --- 2.6 --- 9.2
Other................................ --- --- --- --- --- ---
------------- ------------- ------------- ------------ ------------- ---------------
Net cash provided by (used in)
investing activities........... 49.6 (2.0) (0.3) 84.4 --- 131.7
------------- ------------- ------------- ------------ ------------- ---------------
Financing activities
Proceeds from issuance of long-term
debt, net of issuance costs....... --- --- --- --- --- ---
Principal repayments of long-term debt (45.6) --- (0.8) (11.9) --- (58.3)
Net borrowings (repayments) under
revolving line of credit agreements --- --- --- (56.0) --- (56.0)
Purchase of common stock held in
treasury........................... (14.7) --- --- --- --- (14.7)
Other................................ (0.8) --- --- (2.5) --- (3.3)
------------- ------------- ------------- ------------ ------------- ---------------
Net cash provided by (used in)
financing activities............ (61.1) --- (0.8) (70.4) --- (132.3)
------------- ------------- ------------- ------------ ------------- ---------------
Effect of exchange rates on cash and --- --- --- (3.6) (3.6)
cash equivalents..................... ---
------------- ------------- ------------- ------------ ------------- ---------------
Net increase (decrease) in cash and cash 49.9 (0.9) --- 78.5 127.5
equivalents.......................... ---
Cash and cash equivalents, beginning of
period............................... 64.3 1.7 0.1 67.2 --- 133.3
------------- ------------- ------------- ------------ ------------- ---------------
Cash and cash equivalents,
end of period........................ $ 114.2 $ 0.8 $ 0.1 $ 145.7 $ --- $ 260.8
============= ============= ============= ============ ============= ===============
NOTE L - SUBSEQUENT EVENT
On October 1, 2001, the Company completed the acquisition of CMI Corporation,
now known as CMI Terex Corporation, and its affiliates ("CMI"). CMI, located in
Oklahoma City, Oklahoma, is a manufacturer and marketer of mobile equipment and
materials processing equipment used in the road building and heavy construction
industry. The merger agreement provided for an exchange of all of the
outstanding shares of CMI common stock for shares of Terex common stock, at an
exchange rate of 0.16 of a share of Terex common stock for each share of CMI
common stock. Accordingly, the Company has issued approximately 3.6 shares of
Terex common stock in connection with the merger. CMI now operates as a
subsidiary of the Company and has become a Wholly-owned Guarantor of the 10-3/8%
Notes and the 8-7/8% Notes.
The Company has announced its intention to close four of CMI's existing
facilities and consolidate the work in CMI's Oklahoma City location. These
closures will eliminate approximately 500 positions and are expected to be
completed during the first quarter of 2002.
PPM CRANES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(in millions)
For the Three Months Ended For the Nine Months
September 30, Ended September 30,
--------------------------- ----------------------------
2001 2000 2001 2000
------------- ------------- ------------- --------------
Net sales............................................$ 10.2 $ 19.3 $ 36.8 $ 51.8
Cost of goods sold................................... 10.5 16.8 33.1 45.1
------------- ------------- ------------- --------------
Gross profit.................................... (0.3) 2.5 3.7 6.7
Selling, general and administrative expenses......... 1.6 1.7 7.2 4.8
------------- ------------- ------------- --------------
Income (loss) from operations................... (1.9) 0.8 (3.5) 1.9
Other income (expense):
Interest expense................................ (0.9) (1.5) (3.7) (4.3)
Amortization of debt issuance costs............. --- --- (0.1) (0.1)
------------- ------------- ------------- --------------
Loss before income taxes............................. (2.8) (0.7) (7.3) (2.5)
Provision for income taxes........................... --- --- --- ---
------------- ------------- ------------- --------------
Net loss.............................................$ (2.8) $ (0.7) $ (7.3) $ (2.5)
============= ============= ============= ==============
The accompanying notes are an integral part of these financial statements.
PPM CRANES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
(in millions, except share amounts)
September 30, December 31,
2001 2000
-------------- -------------
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 0.1 $ 0.1
Trade accounts receivables (net of allowance of $0.7 at September
30, 2001 and $0.7 at December 31, 2000)........................... 10.1 8.7
Inventories......................................................... 25.7 16.3
Due from affiliates................................................. 3.1 17.5
Due from Terex Corporation.......................................... 2.1 ---
Other current assets ............................................... 0.8 0.3
-------------- --------------
Total current assets.............................................. 41.9 42.9
Long-term assets:
Property, plant and equipment....................................... 0.3 0.6
Goodwill............................................................ 11.0 11.9
Other assets........................................................ 0.8 0.7
-------------- --------------
Total assets........................................................... $ 54.0 $ 56.1
============== ==============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Trade accounts payable.............................................. $ 9.3 $ 10.2
Accrued warranties and product liability............................ 4.9 5.5
Accrued expenses.................................................... 5.9 1.9
Due to affiliates................................................... 14.3 9.3
Due to Terex Corporation............................................ --- 1.7
Current portion of long-term debt................................... 0.3 0.5
-------------- --------------
Total current liabilities......................................... 34.7 29.1
Non-current liabilities:
Long-term debt, less current portion................................ 62.5 62.6
Other............................................................... 0.7 1.0
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................................................. (43.9) (36.6)
Accumulated other comprehensive income.............................. --- ---
-------------- --------------
Total shareholders' deficit...................................... (43.9) (36.6)
-------------- --------------
Total liabilities and shareholders' deficit............................ $ 54.0 $ 56.1
============== ==============
The accompanying notes are an integral part of these financial statements.
PPM CRANES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(in millions)
For the Nine Months
Ended September 30,
--------------------
2001 2000
---------- --------
OPERATING ACTIVITIES
Net loss................................................ $ (7.3) $ (2.5)
Adjustments to reconcile net loss to cash provided
by operating activities:
Depreciation and amortization....................... 1.1 1.1
Changes in operating assets and liabilities:
Trade accounts receivable......................... (1.4) 6.7
Inventories....................................... (9.4) 2.3
Trade accounts payable............................ (0.9) 1.0
Net amounts due to affiliates..................... 15.9 (8.1)
Other, net........................................ 2.5 0.6
---------- ---------
Net cash provided by operating activities....... 0.5 1.1
---------- ---------
INVESTING ACTIVITIES
Capital Expenditures..................................... --- (0.3)
---------- ---------
Net cash used in investing activities................. --- (0.3)
---------- ---------
FINANCING ACTIVITIES
Principal repayments of long-term debt................... (0.5) (0.8)
---------- ---------
Net cash used in financing activities................. (0.5) (0.8)
---------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS............................... --- ---
---------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS.................... --- ---
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........... 0.1 0.1
---------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................. $ 0.1 $ 0.1
========== =========
The accompanying notes are an integral part of these financial statements.
PPM CRANES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
(unaudited)
(in millions unless otherwise denoted)
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., a Delaware corporation, completed the acquisition of all of the
capital stock of Legris Industries, Inc., a Delaware corporation, which then
owned 92.4% of the capital stock of PPM Cranes, Inc.
The condensed consolidated 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.
In the opinion of management, all adjustments considered necessary for a fair
statement have been made. Such adjustments consist only of those of a normal
recurring nature. Operating results for the three months and nine months ended
September 30, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001. For further information, refer
to the Company's consolidated financial statements and footnotes thereto for the
year ended December 31, 2000.
The condensed consolidated financial statements include the accounts of the
Company and its wholly owned inactive subsidiary, PPM Far East Pte. Ltd. All
material intercompany transactions and profits have been eliminated.
NOTE 2 - RESTRUCTURING AND OTHER CHARGES
During the third quarter of 2001, the Terex Corporation announced that a number
of its production facilities would be consolidated, and some facilities would be
closed (including PPM's Conway facility) and that other additional non-recurring
expenses would be incurred. PPM will transfer its operations to Terex
Corporation's Waverly, Iowa location. These actions are designed to maximize
factory utilization and to leverage common purchasing, engineering and marketing
operations. The PPM facility closure is expected to occur in 2001.
PPM recorded costs of $2.7 during the third quarter of 2001 for severance and
closing costs related to these actions as well as other non-recurring expenses.
The severance costs, totaling $0.5, are for the elimination of approximately 42
positions in connection with the plant closure. Other costs totaling $2.2
include asset write offs and plant closing costs of which approximately $0.9
represents non-cash charges. These costs have been included in cost of sales
($24.8) and selling, general and administrative expenses ($0.5) in the condensed
consolidated statement of operations. As of September 30, 2001, all of these
costs have been accrued; cash payments will take place primarily in the fourth
quarter of 2001 and are expected to be completed by the end of the first quarter
of 2002.
NOTE 3 -- Inventories
Inventories consist of the following:
September 30, December 31,
2001 2000
----------------- ---------------
Finished equipment............................ $ 13.4 $ 4.4
Replacement parts............................. 6.2 6.2
Work in process............................... 0.7 0.7
Raw materials and supplies.................... 5.4 5.0
--------------- ---------------
Inventories................................... $ 25.7 $ 16.3
=============== ===============
NOTE 4 -- Property, Plant and Equipment
Property, plant and equipment consists of the following:
September 30, December 31,
2001 2000
----------------- ---------------
Property, plant and equipment................. $ 0.8 $ 0.8
Less: Accumulated depreciation............... (0.5) (0.2)
--------------- ----------------
Net property, plant and equipment............. $ 0.3 $ 0.6
=============== ================
NOTE 5 - COMMITMENTS AND Contingencies
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 material adverse effect on the Company's financial position.
On March 29, 2001, Terex Corporation issued and sold $300 aggregate principal
amount of 10-3/8% Senior Subordinated Notes Due 2011, which notes were exchanged
by Terex Corporation for 10-3/8% Senior Subordinated Notes Due 2011 registered
under the Securities Act of 1933, as amended (the "10-3/8% Notes"). On March 31,
1998 and March 9, 1999, Terex Corporation issued and sold $150 aggregate
principal amount and $100 aggregate principal amount, respectively, of 8-7/8%
Senior Subordinated Notes due 2008 (the "8-7/8% Notes"). The 10-3/8% Notes and
the 8-7/8% Notes are each jointly and severally guaranteed by certain domestic
subsidiaries of Terex Corporation, including PPM.
NOTE 6 - RELATED PARTY TRANSACTIONS
During the three months and nine months ended September 30, 2001 and 2000, the
Company had transactions with various unconsolidated affiliates as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
2001 2000 2001 2000
--------- --------- --------- -------
Product sales and service revenues $ --- $ 0.4 $ --- $ 1.4
Management fee expense $ 0.3 $ 0.3 $ 0.8 $ 0.8
Interest expense $ 1.2 $ 1.2 $ 4.0 $ 4.0
Included in management fee expenses are expenses paid by Terex Corporation on
behalf of the Company (e.g. legal, treasury and tax services expense).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
On April 23, 2001, the Company announced that it was implementing a new
organizational structure effective May 1, 2001. On May 1, 2001, the Company
began operating primarily in two business segments: (i) Terex Americas and
Mining and (ii) Terex Europe. Previously, the Company had reported its
operations as Terex Earthmoving and Terex Lifting. On August 28, 2001, the
Company announced that the Terex Americas and Mining group was being divided
into two separate business segments: (i) Terex Americas and (ii)Terex Mining.
Therefore, commencing in the third quarter of 2001, the Company began operating
primarily in three business segments: (i) Terex Americas, (ii) Terex Europe, and
(iii) Terex Mining. All prior periods have been restated to reflect results
based on the three current business segments.
The Company implemented its new organizational structure in response to the
growth and diversity of the Company's business. While the product focus
represented by having earthmoving and lifting segments assisted the Company's
growth, both in the U.S. and internationally, it resulted in customers in many
cases having to deal with different product groups within the Company. This made
the Company's objective of satisfying its customers more difficult to achieve.
The Company, while increasingly global, believes that ultimately its business is
a local one that can best be developed and served by focusing its operations
geographically, rather than by product, and developing local relationships among
equipment users, distribution channels and the manufacturer. For that reason,
the Company created the Terex Americas and Terex Europe segments. The Terex
Mining business remains organized under product, and not geographic, lines
because of the worldwide scope of the mining business. In the mining industry,
manufacturers and customers are located in various areas around the globe, with
many customers operating multiple sites in widely dispersed locations, with the
result that local geographic concerns are far less significant than a
manufacturer's global range.
Terex Americas includes the results of all business units located in North and
South America, Australia and Asia, with the exception of those business units
included within Terex Mining. The 2001 results for Terex Americas include the
operations of Jaques International and its affiliates (collectively the "Jaques
Group") since January 24, 2001, its date of acquisition. The results for the
three months and nine months ended September 30, 2001 do not include the
operations of CMI Corporation (now CMI Terex Corporation) and its affiliates
("CMI"), since they were acquired on October 1, 2001. The 2000 results for Terex
Americas include the operations of the Company's Princeton division which was
sold on September 30, 2000. The results for the three months and nine months
ended September 30, 2000 do not include the operations of Coleman Engineering,
Inc., since it was acquired on October 23, 2000.
Terex Europe includes the results of all business units located in Europe with
the exception of those business units included within Terex Mining. The 2001
results for Terex Europe include the operations of Fermec Manufacturing Limited
and its affiliates (collectively, "Fermec") since December 28, 2000, its date of
acquisition. The 2000 results for Terex Europe include the operations of Moffett
Engineering Limited and the Company's Kooi division (collectively the "European
Truck-mounted Forklift Business" and along with Princeton, the "Truck-mounted
Forklift Business"), which were sold on September 30, 2000.
Terex Mining includes the results of the Terex Mining operations in Tulsa,
Oklahoma, the O&K Mining business located in Germany and certain sales offices
in Australia, South America and Africa.
Included in Other are the eliminations among the segments, as well as general
and corporate items for the three months and nine months ended September 30,
2001 and 2000.
During the third quarter of 2001, the Company announced that a number of its
production facilities would reduce staffing, seven facilities would be closed
and that other additional non-recurring expenses would be incurred. The
restructuring program is designed to maximize factory utilization and to
leverage common purchasing, engineering and marketing operations in the Americas
and Europe. The majority of facility closures will occur in 2001 and the plan is
expected to be fully implemented by the end of the first quarter of 2002.
The Company recorded costs of $28.7 million during the third quarter of 2001 for
severance and closing costs related to these actions as well as other
non-recurring expenses. The severance costs totaling approximately $6 million
are for the elimination of approximately 725 positions in connection with the
aforementioned plant closures and staff reductions. Other costs totaling
approximately $23 million, include asset write-offs and plant closure costs of
which approximately $19 million represents non-cash charges. These costs have
been included in cost of sales ($24.8 million) and selling, general and
administrative expenses ($3.9) in the condensed consolidated statement of
operations. As of September 30, 2001, approximately $10 million representing
future cash costs have been accrued; cash payments will take place primarily in
the fourth quarter of 2001 and are expected to be completed by the end of the
first quarter 2002. The Company has estimated that an additional charge of
approximately $6 million will be recorded in the fourth quarter of 2001 for
costs relating to this restructuring.
The Company has announced its intention to close four of CMI's existing
facilities and consolidate the work in CMI's Oklahoma City location. These
closures will eliminate approximately 500 positions and are expected to be
completed during the first quarter of 2002.
Three Months Ended September 30, 2001 Compared with the Three Months Ended
September 30, 2000
The table below is a comparison of net sales, gross profit, selling, general and
administrative expenses, and income from operations, by segment, for the three
months ended September 30, 2001 and 2000.
Three Months Ended
September 30,
---------------------------- Increase
2001 2000 (Decrease)
------------- -------------- --------------
NET SALES
Terex Americas...................$ 187.8 $ 252.0 $ (64.2)
Terex Europe..................... 214.1 205.3 8.8
Terex Mining..................... 91.7 60.8 30.9
Other............................ (39.9) (43.0) 3.1
------------- -------------- --------------
Total..........................$ 453.7 $ 475.1 $ (21.4)
============= ============== ==============
GROSS PROFIT
Terex Americas...................$ 17.7 $ 44.1 $ (26.4)
Terex Europe..................... 12.7 35.3 (22.6)
Terex Mining..................... 14.7 6.2 8.5
Other............................ 0.4 1.1 (0.7)
------------- -------------- --------------
Total..........................$ 45.5 $ 86.7 $ (41.2)
============= ============== ==============
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Terex Americas...................$ 17.1 $ 14.9 $ 2.2
Terex Europe..................... 18.3 14.1 4.2
Terex Mining..................... 5.8 11.0 (5.2)
Other............................ 0.6 (0.7) 1.3
------------- -------------- --------------
Total..........................$ 41.8 $ 39.3 $ 2.5
============= ============== ==============
INCOME (LOSS) FROM OPERATIONS
Terex Americas...................$ 0.6 $ 29.2 $ (28.6)
Terex Europe..................... (5.6) 21.2 (26.8)
Terex Mining..................... 8.9 (4.8) 13.7
Other............................ (0.2) 1.8 (2.0)
------------- -------------- -------------
Total..........................$ 3.7 $ 47.4 $ (43.7)
============= ============== =============
Net Sales
Sales decreased $21.4 million, or approximately 5%, to $453.7 million for the
three months ended September 30, 2001 as compared with the comparable 2000
period. The net impact of acquisitions and divestitures were minimal on the
comparison, as the second quarter of 2001 included approximately $32 million of
sales related to businesses acquired since the third quarter of 2000 and the
three months ended September 30, 2000 included approximately $23 million of
sales related to the Truck-mounted Forklift Business which was divested in
September 2000.
Terex Americas sales were $187.8 million for the three months ended September
30, 2001, a decrease of $64.2 million or approximately 25% from $252.0 million
for the three months ended September 30, 2000. Excluding the impact of
acquisitions and divestitures, sales decreased approximately $67 million, which
was due primarily to the decline in the articulated and rigid truck and lifting
businesses and the performance of the Cedarapids business. Backlog was $56.5
million at September 30, 2001 compared to $148.0 million at September 30, 2000.
The decrease in backlog is primarily due to the decline in the articulated and
rigid truck businesses, the crushing and screening business, and the decline in
orders at the Company's utility aerial device business. The sales mix was
approximately 21% parts for the three months ended September 30, 2001 compared
to 15% parts for the comparable 2000 period, reflecting the decrease in machine
sales.
Terex Europe's sales were $214.1 million for the three months ended September
30, 2001, an increase of $8.8 million or approximately 4% from $205.3 million
for the three months ended September 30, 2000. Excluding the impact of the
companies acquired and divested since September 30, 2000, net sales in the third
quarter of 2001 were down approximately 1% from the third quarter of 2000. The
decline in sales was due primarily to the decline in the sale of articulated and
rigid trucks in North America as well as a decline in the sales of lifting
products. Terex Europe's backlog was $71.5 million at September 30, 2001 and
$72.2 million at September 30, 2000. The slight decrease in backlog is
consistent with the weak performance in the material handler and aerial work
platform businesses, partially offset by the inclusion of Fermec since its
acquisition at the end of 2000. Backlog does not include any significant parts
orders, which are normally filled in the period ordered. The sales mix was
approximately 13% parts for the three months ended September 30, 2001 compared
to 11% parts for the comparable 2000 period. Parts sales increased $3.8 million
in the quarter versus the comparable 2000 period.
Terex Mining's sales were $91.7 million for the three months ended September 30,
2001, an increase of $30.9 million or approximately 51% from the same period in
the prior year. The increase in sales was primarily due to an increase in sales
of new surface mining trucks and spare parts for the mining truck and hydraulic
shovel businesses. Terex Mining's backlog was $30.2 million at September 30,
2001 and $37.1 million at September 30, 2000. The decrease in backlog was due
primarily to a decline in orders for large hydraulic mining shovels. The sales
mix was approximately 46% parts for the three months ended September 30, 2001 as
compared to 45% for the comparable 2000 period.
Net sales for Other in the three months ended September 30, 2001 primarily
consists of the elimination of sales among the three segments. The primary
reason for the decrease in the third quarter of 2001 from the third quarter of
2000 is the decline in the sales of articulated and rigid trucks from Terex
Europe to Terex Americas.
Gross Profit
Gross profit for the three months ended September 30, 2001 decreased
approximately 48%, or $41.2 million, versus the comparable 2000 period to $45.5
million. The decrease in gross profit is primarily due to the inclusion of $24.8
million of restructuring costs, as well as the overall decrease in sales. Gross
profit as a percentage of sales decreased to 10.0% in the three months ended
September 30, 2001 as compared to 18.2% in the prior year period.
Terex Americas' gross profit decreased approximately 60%, or $26.4 million, to
$17.7 million for the three months ended September 30, 2001, compared to $44.1
million for the three months ended September 30, 2000. The decrease in gross
profit is due primarily to the inclusion of $8.8 million of restructuring costs,
as well as the decline in sales in the Cedarapids and the articulated and rigid
truck businesses. The gross margin percentage decreased to 9.4% in the three
months ended September 30, 2001 as compared to 17.5% in 2000. Excluding the
impact of the restructuring costs and the acquisitions and divestitures, gross
margin percentage decreased to 14.4% in the three months ended September 30,
2001 from 17.4% for the comparable 2000 period.
Terex Europe's gross profit decreased $22.6 million, or approximately 64%, to
$12.7 million for the three months ended September 30, 2001, compared to $35.3
million for the three months ended September 30, 2000. The decrease in gross
profit was a result primarily of the inclusion of $15.3 million of restructuring
costs, as well as weak performance in the material handler business and the
aerial work platform business. Excluding the impact of the restructuring costs
and the results of the European Truck-mounted Forklift Business in the third
quarter of 2000 and Fermec in the third quarter of 2001, gross profit in the
third quarter of 2001 decreased $6.0 million from the third quarter of 2000.
Gross profit as a percentage of sales decreased to 13.3% from 16.7% in 2000,
excluding the impact of the restructuring costs and the results of the
acquisitions and divestitures.
Terex Mining's gross profit increased $8.5 million, or approximately 137%, to
$14.7 million for the three months ended September 30, 2001, compared to $6.2
million for the three months ended September 30, 2000. The increase in gross
profit was a result primarily of the 51% increase in sales. Gross profit as a
percentage of sales increased to 16.0% from 10.2% in 2000.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $41.8 million for the
three months ended September 30, 2001 from $39.3 million for the three months
ended September 30, 2000, principally due to $3.9 million of restructuring
charges and the Company's investments in its EarthKing subsidiary. EarthKing is
an independent e-commerce company that provides new tools for equipment owners
and operators to maximize their return on investment. As a percentage of sales,
selling, general and administrative expenses increased to 9.2% for the three
months ended September 30, 2001 as compared to 8.3% for the three months ended
September 30, 2000, primarily as a result of decreased sales.
Terex Americas' selling, general and administrative expenses increased to $17.1
million for the three months ended September 30, 2001, from $14.9 million for
the comparable period in 2000, principally due to the inclusion of $2.1 million
of restructuring costs. As a percentage of sales, selling, general and
administrative expenses increased to 9.1% for the three months ended September
30, 2001, as compared to 5.9% in the comparable 2000 period, principally due to
the inclusion of the restructuring costs, as well as lower sales volume. Absent
the restructuring costs and excluding the impact of the acquisitions and
divestitures, selling, general and administrative expenses in the three months
ended September 30, 2001 were $13.8 million as compared to $14.0 million for the
comparable period in 2000, or 7.7% and 5.7% as a percentage of sales,
respectively.
Terex Europe's selling, general and administrative expenses increased to $18.3
million for the three months ended September 30, 2001 from $14.1 million for the
three months ended September 30, 2000. This increase in selling, general and
administrative expenses was principally due to the inclusion of $1.8 million of
restructuring costs as well as increased costs in the European lifting
businesses. As a percentage of sales, selling, general and administrative
expenses for the quarter increased to 8.5% in the three months ended September
30, 2001 from 6.9% in the prior year period, principally due to the inclusion of
the restructuring costs.
Terex Mining's selling, general and administrative expenses decreased to $5.8
million for the three months ended September 30, 2001 as compared to $11.0
million for the three months ended September 30, 2000. This decline was due
primarily to cost savings from restructuring actions undertaken in the third
quarter of 2000. As a percentage of sales, selling, general and administrative
expenses decreased to 6.3% in the three months ended September 30, 2001 as
compared to 18.1% in the prior year's period. The primary reason for the decline
was the decrease in costs and increase in sales.
Income from Operations
On a consolidated basis, the Company had income from operations of $3.7 million,
or 0.8% of sales, for the three months ended September 30, 2001, compared to
income from operations of $47.4 million, or 10.0% of sales, for the three months
ended September 30, 2000. The primary reason for the decline in income from
operations was the $28.7 million in restructuring charges incurred during the
third quarter of 2001 and the decrease in sales.
Terex Americas' income from operations decreased by $28.6 million to $0.6
million, or 0.3% of sales, for the three months ended September 30, 2001 from
$29.2 million, or 11.6% of sales, for the three months ended September 30, 2000.
The decrease in income from operations and operating margins is primarily due to
the restructuring charge of $10.9 million and the decline in sales in the
construction truck, lifting and Cedarapids businesses. Excluding the
restructuring charge and the impact of the businesses acquired in late 2000 and
early 2001, as well as those divested in September 2000, operating margin was
6.7% for the three months ended September 30, 2001, as compared to 11.7% in the
prior year period.
Terex Europe's loss from operations of $5.6 million for the three months ended
September 30, 2001 was a decrease of $26.8 million from income of $21.2 million
for the three months ended September 30, 2000. The decrease was due to the
restructuring charge of $17.1 million, the impact on operating income of the
divestiture of the European Truck-mounted Forklift Business and weak performance
in the articulated and rigid truck business, the material handler business and
the aerial work platform business, offset somewhat by the improvement in the
tower crane and crushing and screening business and the acquisition of Fermec in
December 2000. Income (loss) from operations as a percentage of sales decreased
to (2.6)% for the three months ended September 30, 2001, from 10.3% for the
comparable 2000 period. Excluding the restructuring charge and the impact of the
business acquired in late 2000, as well as those divested in September 2000,
operating margin was 5.4% for the three months ended September 30, 2001, as
compared to 9.8% in the prior year period.
Terex Mining's income from operations increased to $8.9 million for the three
months ended September 30, 2001 as compared to an operating loss of $4.8 million
for the three months ended September 30, 2000. As a percentage of sales,
operating income was 9.7% in the three months ended September 30, 2001 as
compared to a loss of 7.9% in the comparable 2000 period. The primary reason for
the increase was the increase in sales.
Net Interest Expense
During the three months ended September 30, 2001, the Company's net interest
expense decreased $5.3 million to $19.1 million from $24.4 million for the
comparable 2000 period. This decrease was primarily due to lower interest rates
in the three months ended September 30, 2001 versus the comparable period in
2000.
Gain on Sale of Businesses
During the three months ended September 30, 2000, the Company recognized a $57.2
million gain on the sale of the Truck-mounted Forklift Businesses to various
subsidiaries of Partek Corporation of Finland for $145 million in cash.
Nine Months Ended September 30, 2001 Compared with the Nine Months Ended
September 30, 2000
The table below is a comparison of net sales, gross profit, selling, general and
administrative expenses, and income from operations, by segment, for the nine
months ended September 30, 2001 and 2000.
Nine Months Ended
September 30,
---------------------------- Increase
2001 2000 (Decrease)
------------- -------------- --------------
NET SALES
Terex Americas...................$ 661.6 $ 845.8 $ (184.2)
Terex Europe..................... 669.0 716.7 (47.7)
Terex Mining..................... 183.5 249.8 (66.3)
Other............................ (143.7) (190.2) 46.5
------------- -------------- --------------
Total..........................$ 1,370.4 $ 1,622.1 $ (251.7)
============= ============== ==============
GROSS PROFIT
Terex Americas...................$ 87.7 $ 133.8 $ (46.1)
Terex Europe..................... 83.3 121.4 (38.1)
Terex Mining..................... 34.2 32.9 1.3
Other............................ (0.9) 1.9 (2.8)
------------- -------------- --------------
Total..........................$ 204.3 $ 290.0 $ (85.7)
============= ============== ==============
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Terex Americas...................$ 50.2 $ 48.2 $ 2.0
Terex Europe..................... 49.7 47.4 2.3
Terex Mining..................... 23.2 29.4 (6.2)
Other............................ 0.3 (0.9) 1.2
------------- -------------- --------------
Total..........................$ 123.4 $ 124.1 $ (0.7)
============= ============== =============
INCOME (LOSS) FROM OPERATIONS
Terex Americas...................$ 37.5 $ 85.6 $ (48.1)
Terex Europe..................... 33.6 74.0 (40.4)
Terex Mining..................... 11.0 3.5 7.5
Other............................ (1.2) 2.8 (4.0)
------------- -------------- --------------
Total..........................$ 80.9 $ 165.9 $ (85.0)
============= ============== ==============
Net Sales
Sales decreased $251.7 million, or approximately 16%, to $1,370.4 million for
the nine months ended September 30, 2001 from $1,622.1 million for the
comparable 2000 period. The net impact of acquisitions and divestitures were
minimal on the comparison as the nine months ended September 30, 2001 included
approximately $97 million of sales related to businesses acquired since the
third quarter of 2000 and the nine months ended September 30, 2000 included
approximately $75 million of sales related to the Truck-mounted Forklift
Business which was divested in September 2000.
Terex Americas' sales were $661.6 million for the nine months ended September
30, 2001, a decrease of $184.2 million or approximately 22% from $845.8 million
for the nine months ended September 30, 2000. Excluding the impact of
acquisitions and divestitures, sales decreased approximately $187 million, which
was due primarily to the decline in the articulated and rigid truck and lifting
businesses and the performance of the Cedarapids business. The sales mix was
approximately 18% parts for the nine months ended September 30, 2001 compared to
14% parts for the comparable 2000 period, reflecting the decrease in machine
sales.
Terex Europe's sales were $669.0 million for the nine months ended September 30,
2001, a decrease of $47.7 million or approximately 7% from $716.7 million for
the nine months ended September 30, 2000. Excluding the impact of the European
Truck-mounted Forklift Business in the nine months ended September 30, 2000 and
Fermec in the comparable 2001 period, net sales in the nine months ended
September 30, 2001 were down approximately 10% from the comparable period in
2000. The decline in sales was due largely to weaker performance in the
articulated and rigid truck business, the material handler business and the
aerial work platform business. The sales mix was approximately 12% parts for the
nine months ended September 30, 2001 and 10% in the comparable period in 2000,
partially due to lower machine sales. Parts sales in the nine months ended
September 30, 2001 were $8.9 million higher than the comparable period in 2000.
Terex Mining's sales were $183.5 million for the nine months ended September 30,
2001, a decrease of $66.3 million or approximately 27% from $249.8 for the same
period in the prior year. The decrease in sales was primarily due to a decrease
in sales of surface mining trucks and large hydraulic excavators. Terex Mining's
backlog was $30.2 million at September 30, 2001 and $37.1 million at September
30, 2000. The decrease in backlog was due primarily to a decline in orders for
large hydraulic mining shovels. The sales mix was approximately 50% parts for
the nine months ended September 30, 2001 compared to 35% for the comparable 2000
period. Parts sales in the nine months ended September 30, 2000, were $4.2
million higher than the comparable period in 2000.
Net sales for Other in the nine months ended September 30, 2001 primarily
consists of the elimination of sales among the three segments. The primary
reason for the decrease from the nine months ended September 30, 2000 to the
comparable period in 2001 is the decline in the sales of articulated and rigid
trucks from Terex Europe to Terex Americas.
Gross Profit
Gross profit for the nine months ended September 30, 2001 decreased $85.7
million, or approximately 30%, versus the comparable 2000 period to $204.3
million. The decrease in gross profit is primarily due to the decrease in sales
and the inclusion of $24.8 million of restructuring charges in cost of goods
sold. Gross profit as a percentage of sales decreased to 14.9% in the nine
months ended September 30, 2001 as compared to 17.9% in the prior year period.
Terex Americas' gross profit decreased approximately 35%, or $46.1 million, to
$87.7 million for the nine months ended September 30, 2001, compared to $133.8
million for the nine months ended September 30, 2000. The decrease in gross
profit is due primarily to the inclusion of $8.8 million of restructuring
charges, as well as the decline in sales in the Cedarapids and the articulated
and rigid truck businesses. The gross margin percentage decreased to 13.3% in
the nine months ended September 30, 2001 as compared to 15.8% in 2000. Excluding
the impact of the restructuring charges and the acquisitions and divestitures,
gross margin percentage decreased to 14.5% in the nine months ended September
30, 2001 from 15.6% in the comparable 2000 period.
Terex Europe's gross profit decreased $38.1 million, or approximately 31%, to
$83.3 million for the nine months ended September 30, 2001, compared to $121.4
million for the nine months ended September 30, 2000. The decrease in gross
profit was a result primarily of the inclusion of $15.3 million of restructuring
charges, as well as weak performance in the articulated and rigid truck
business, the material handler business and the aerial work platform business.
Excluding the impact of the restructuring charges and the results of the
acquisitions and divestitures, gross profit in the nine months ended September
30, 2001 decreased approximately $19 million from the comparable period in 2000.
Gross profit as a percentage of sales decreased to 12.5% from 16.9% in 2000.
Excluding the impact of the restructuring charges and the results of the
European Truck-mounted Forklift Business in 2000 and the results of Fermec in
2001, gross profit as a percentage of sales decreased to 15.1% in the nine
months ended September 30, 2001 from 16.4% in the comparable 2000 period.
Terex Mining's gross profit increased $1.3 million, or approximately 4%, to
$34.2 million for the nine months ended September 30, 2001, compared to $32.9
million for the nine months ended September 30, 2000. The increase in gross
profit was a result of the increase in parts sales in both absolute terms and as
a percentage of total sales, as well as the realization of cost savings from
restructuring actions taken in the third quarter of 2000. Gross profit as a
percentage of sales increased to 18.6% from 13.2% in 2000.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased to $123.4 million for the
nine months ended September 30, 2001 from $124.1 million for the nine months
ended September 30, 2000, principally reflecting the effect of the divestiture
of the Truck-mounted Forklift Business and continued cost control within all
businesses, offset somewhat by the impact of the businesses acquired in late
2000 and early 2001, the inclusion of $3.9 million of restructuring charges, and
the Company's investments in its EarthKing subsidiary. As a percentage of sales,
selling, general and administrative expenses increased to 9.0% for the nine
months ended September 30, 2001 as compared to 7.7% for the nine months ended
September 30, 2000, as a result of decreased sales.
Terex Americas' selling, general and administrative expenses increased to $50.2
million for the nine months ended September 30, 2001, from $48.2 million for the
comparable period in 2000, principally due to the inclusion of $1.2 million of
restructuring charges, as well as the Company's investments in EarthKing. Absent
the restructuring charges and acquisitions and divestitures, selling, general
and administrative expenses in the nine months ended September 30, 2001 were
approximately $1 million less than the comparable period in 2000. As a
percentage of sales, selling, general and administrative expenses increased to
7.6% for the nine months ended September 30, 2001, as compared to 5.7% in the
comparable 2000 period, principally due to lower sales volume.
Terex Europe's selling, general and administrative expenses increased $2.3
million to $49.7 million for the nine months ended September 30, 2001 from $47.4
million for the nine months ended September 30, 2000. This increase in selling,
general and administrative expenses was principally due to the inclusion of $1.8
million of restructuring charges. As a percentage of sales, selling, general and
administrative expenses increased to 7.4% in the nine months ended September 30,
2001 from 6.6% in the prior year period primarily due to lower sales volume.
Terex Mining's selling, general and administrative expenses decreased to $23.2
million for the nine months ended September 30, 2001 as compared to $29.4
million for the nine months ended September 30, 2000. This decline was due
primarily to cost savings from restructuring actions undertaken in the third
quarter of 2000. As a percentage of sales, selling, general and administrative
expenses increased to 12.6% in the nine months ended September 30, 2001 as
compared to 11.8% in the prior year's period. The primary reason for the
increase was the decline in sales.
Income from Operations
On a consolidated basis, the Company had income from operations of $80.9
million, or 5.9% of sales, for the nine months ended September 30, 2001,
compared to income from operations of $165.9 million, or 10.2% of sales, for the
nine months ended September 30, 2000.
Terex Americas' income from operations decreased by $48.1 million to $37.5
million, or 5.7% of sales, for the nine months ended September 30, 2001 from
$85.6 million, or 10.1% of sales, for the nine months ended September 30, 2000.
The decrease in income from operations and operating margins is primarily due to
the decline in sales and the inclusion of $10.9 million of restructuring
charges. Excluding the impact of the restructuring charges and the businesses
acquired in late 2000 and early 2001, as well as those divested in September
2000, operating margin was 7.5% for the nine months ended September 30, 2001, as
compared to 10.0% in the prior year period.
Terex Europe's income from operations of $33.6 million for the nine months ended
September 30, 2001 was a decrease of $40.4 million from $74.0 million for the
nine months ended September 30, 2000. The decrease was due to the impact on
operating income of lower sales as well as restructuring charges of $17.1
million. Income from operations as a percentage of sales decreased to 5.0% for
the nine months ended September 30, 2001 from 10.3% for the comparable period in
2000. Excluding the impact of restructuring charges and acquisitions and
divestitures, income from operations was 7.9% of sales in the nine months ended
September 30, 2001 as compared to 9.9% in the comparable period in 2000.
Terex Mining's income from operations increased to $11.0 million for the nine
months ended September 30, 2001 as compared to $3.5 million for the nine months
ended September 30, 2000. As a percentage of sales, operating income was 6.0% in
the nine months ended September 30, 2001 as compared to 1.4% in the prior year
period. The primary reason for the increase was the decrease in operating
expenses resulting from a restructuring in the third quarter of 2000.
Net Interest Expense
During the nine months ended September 30, 2001, the Company's net interest
expense decreased $14.1 million to $59.5 million from $73.6 million for the
comparable 2000 period. This decrease was primarily due to lower interest rates
and lower debt levels in the nine months ended September 30, 2001 versus the
comparable period in 2000.
Gain on Sale of Businesses
During the nine months ended September 30, 2000, the Company recognized a $57.2
million gain on the sale of the Truck-mounted Forklift Businesses to various
subsidiaries of Partek Corporation of Finland for $145 million in cash.
Extraordinary Items
During the nine months ended September 30, 2001, the Company recorded a charge
of $2.3 million, net of income taxes, to recognize a loss on the write-off of
unamortized debt acquisition costs for the early extinguishment of debt in
connection with the prepayment of principal of certain term loans under the
Company's bank credit facilities.
LIQUIDITY AND CAPITAL RESOURCES
Net cash of $24.0 million was used in operating activities during the nine
months ended September 30, 2001. Approximately $37 million was invested in
working capital, primarily in the mining, tower crane and crushing and screening
businesses. Net cash used in investing activities was $19.4 million during the
nine months ended September 30, 2001 and primarily represents the acquisition of
the Jaques Group and capital expenditures. Net cash provided by financing
activities was $121.9 million during the nine months ended September 30, 2001,
which primarily represents the net proceeds from the issuance of $300 million
aggregate principal amount of 10-3/8% Senior Subordinated Notes due 2011 (the
"10-3/8% Notes"), net of approximately $194 million of principal repayments of
the Company's long-term debt. Cash and cash equivalents totaled $260.8 million
at September 30, 2001.
Including the October 2001 acquisition of CMI Corporation and its affiliates,
the January 2001 acquisition of the Jaques Group and the 2000 acquisitions of
Fermec and Coleman, since the beginning of 1995 Terex has invested approximately
$1.1 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.
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 the 10-3/8%
Notes and on its 8-7/8% senior subordinated notes and monthly interest payments
on the Company's bank credit facilities. Management believes that cash generated
from operations, together with the Company's bank credit facilities and cash on
hand, provides the Company with adequate liquidity to meet the Company's
operating and debt service requirements.
The Company continues to explore ways to improve its liquidity and capital
structure. In this regard, on March 29, 2001, the Company issued the 10-3/8%
Notes in the principal amount of $300 million. Additionally, on March 29, 2001,
the Company increased the availability under its revolving bank credit
facilities maturing March 2004 from $125 million to $300 million and amended its
existing bank credit agreements to provide the Company with greater operating
flexibility. The Company used approximately $194 million of the net proceeds
from the offering of the 10-3/8% Notes to prepay a portion of its existing term
loans.
CONTINGENCIES AND UNCERTAINTIES
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 have assessed 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 transactions 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 $90 million of the
principal amount of its indebtedness under its bank credit facility fixing
interest at various rates between 9.23% and 9.44%. Additionally, the Company has
entered into interest rate arrangements with respect to approximately $175
million of the principal amount of its senior subordinated notes, switching the
fixed rates to floating rates at London Interbank Offer Rate ("LIBOR") plus
2.91% to 2.94%.
Other
The Company is subject to a number of contingencies and uncertainties including
product liability claims, self-insurance obligations, tax examinations and
guarantees. Many of the exposures are unasserted or proceedings are at a
preliminary stage, and it is not presently possible to estimate the amount or
timing of any cost to the Company. However, the Company does not believe that
these contingencies and uncertainties will, in the aggregate, have a material
adverse effect on the Company. When it is probable that a loss has been incurred
and possible to make reasonable estimates of the Company's liability with
respect to such matters, a provision is recorded for the amount of such estimate
or for the minimum amount of a range of estimates when it is not possible to
estimate the amount within the range that is most likely to occur.
The Company generates hazardous and nonhazardous wastes in the normal course of
its manufacturing operations. As a result, Terex is subject to a wide range of
federal, state, local and foreign environmental laws and regulations. These laws
and regulations govern actions that may have adverse environmental effects and
also require compliance with certain practices when handling and disposing of
hazardous and nonhazardous wastes. These laws and regulations also impose
liability for the costs of, and damages resulting from, cleaning up sites, past
spills, disposals and other releases of hazardous substances. Compliance with
these laws and regulations has, and will continue to require, the Company to
make expenditures. The Company does not expect that these expenditures will have
a material adverse effect on its business or profitability.
The Company is party to an action commenced in the United States District Court
for the District of Delaware by End of Road Trust, a creditor liquidating trust
formed to liquidate the assets of Fruehauf Trailer Corporation ("Fruehauf"), a
former subsidiary of the Company and currently a reorganized debtor in
bankruptcy, and Pension Transfer Corporation, as sponsor and administrator for
certain Fruehauf pension plans (collectively, the "Plaintiffs") against the
Company and certain former officers and directors of Fruehauf and Terex
(collectively, the "Defendants"). The Plaintiffs allege, in essence, that the
Defendants breached fiduciary duties owed to Fruehauf and made certain
misrepresentations in connection with certain accounting matters arising from
the Company's 1989 acquisition of Fruehauf and the 1991 initial public offering
of Fruehauf stock, and that the Defendants were unjustly enriched thereby.
Plaintiffs also allege that certain pension investments made on behalf of the
Fruehauf pension plans violated ERISA. The action is currently in the early
stages of discovery. The Company believes that it has meritorious defenses and
that the outcome of the case will not have a material adverse effect on the
Company's operations.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 141 "Business Combinations" and SFAS
No. 142 "Goodwill and Other Intangible Assets." SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets," was issued in October 2001.
See Note A -- "Basis of Presentation" in the Notes to the Condensed Consolidated
Financial Statements for further information on these pronouncements The Company
is currently evaluating the impact of these pronouncements to determine the
effect they will have on the Company's consolidated financial position and
results of operations.
ITEM 3. 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. For further
information on accounting policies related to derivative financial instruments,
refer to the Company's Annual Report on Form 10-K for the year ended December
31, 2000.
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, British Pound, German Mark, French Franc, Irish
Punt, Italian Lira and 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
September 30, 2001, the Company had foreign currency contracts with a notional
value of $89.7 million. The fair market value of these arrangements, which
represents the cost to settle these contracts, was an asset of approximately
$2.6 million at September 30, 2001.
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 LIBOR. The
Company uses interest rate swaps to reduce interest rate volatility. At
September 30, 2001, the Company had approximately $90 million of interest rate
swaps fixing interest rates between 9.23% and 9.44%. The fair market value of
these arrangements, which represents the costs to settle these contracts, was a
liability of approximately $2.5 million at September 30, 2001. Additionally, the
Company has entered into interest rate arrangements with respect to
approximately $175 million of the principal amount of its senior subordinated
notes, switching the fixed rates to floating rates at LIBOR plus 2.91% to 2.94%.
The fair market value of these fixed to floating rate arrangements, which
represents the costs to settle these contracts, was an asset of approximately
$5.7 million at September 30, 2001.
At September 30, 2001, 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 September 30, 2001 would have increased interest expense by
approximately $3 million in the nine months ended September 30, 2001.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
The Company is involved in certain claims and litigation arising in the ordinary
course of business, which are not considered material to the financial
operations or cash flow of the Company. For information concerning litigation
and other contingencies see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Contingencies and Uncertainties."
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
On October 1, 2001, the Company completed the acquisition of CMI Corporation,
now known as CMI Terex Corporation, and its affiliates ("CMI"). CMI, located in
Oklahoma City, Oklahoma, is a manufacturer and marketer of mobile equipment and
materials processing equipment used in the road building and heavy construction
industry. The merger agreement provided for an exchange of all of the
outstanding shares of CMI common stock for shares of Terex common stock, at an
exchange rate of 0.16 of a share of Terex common stock for each share of CMI
common stock. Accordingly, the Company has issued approximately 3.6 million
shares of Terex common stock in connection with the merger. CMI now operates as
a subsidiary of the Company and has become a wholly-owned guarantor of the
10-3/8% Notes and the Company's 8-7/8% Senior Subordinated Notes.
Forward Looking Information
- ---------------------------
Certain information in this Quarterly 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 "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Contingencies and Uncertainties." In
addition, when included in this Quarterly 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; 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 Quarterly 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 Quarterly 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 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) The exhibits set forth on the accompanying Exhibit Index have
been filed as part of this Form 10-Q.
(b) Reports on Form 8-K.
- - No reports on Form 8-K were filed during the quarter ended September 30, 2001.
SIGNATURES
Pursuant to the requirements 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
-----------------
(Registrant)
Date: November 14, 2001 /s/ Joseph F. Apuzzo
Joseph F. Apuzzo
Chief Financial Officer
(Principal Financial Officer)
Date: November 14, 2001 /s/ Mark T. Cohen
Mark T. Cohen
Controller
(Principal Accounting Officer)
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 September 30, 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 September 30, 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 September 30, 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 September 30, 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 September 30, 1998) (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 Fifth Supplemental Indenture, dated as of March 29, 2001, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of September 30, 1998) (incorporated by reference to
Exhibit 4.6 to the Form 10-Q for the quarter ended March 31, 2001 of
Terex Corporation, Commission File No. 1-10702).
4.7 Sixth Supplemental Indenture, dated as of October 1, 2001, between
Terex Corporation and United States Trust Company of New York, as
Trustee (to Indenture dated as of September 30, 1998).*
4.8 Indenture dated as of March 9, 1999 among Terex Corporation, the
Guarantors named therein and United States Trust Company of New York,
as Trustee (incorporated by reference to Exhibit 4.4 to the Form 10-K
for the year ended December 31, 1998 of Terex Corporation, Commission
File No. 1-10702).
4.9 First Supplemental Indenture, dated as of April 1, 1999, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of March 9, 1999) (incorporated by reference to
Exhibit 4.8 to the Form 10-Q for the quarter ended September 30, 1999
of Terex Corporation, Commission File No. 1-10702).
4.10 Second Supplemental Indenture, dated as of July 30, 1999, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of March 9, 1999) (incorporated by reference to
Exhibit 4.9 to the Form 10-Q for the quarter ended September 30, 1999
of Terex Corporation, Commission File No. 1-10702).
4.11 Third Supplemental Indenture, dated as of August 26, 1999, between
Terex Corporation and United States Trust Company of New York, as
Trustee (to Indenture dated as of March 9, 1999) (incorporated by
reference to Exhibit 4.11 to the Form 10-Q for the quarter ended
September 30, 1999 of Terex Corporation, Commission File No. 1-10702).
4.12 Fourth Supplemental Indenture, dated as of March 29, 2001, 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 March
31, 2001 of Terex Corporation, Commission File No. 1-10702).
4.13 Fifth Supplemental Indenture, dated as of October 1, 2001, between
Terex Corporation and United States Trust Company of New York, as
Trustee (to Indenture dated as of March 9, 1999).*
4.14 Indenture, dated as of March 29, 2001, between Terex Corporation and
United States Trust Company of New York, as Trustee (incorporated by
reference to Exhibit 4.12 to the Form 10-Q for the quarter ended March
31, 2001 of Terex Corporation, Commission File No. 1-10702).
4.15 First Supplemental Indenture, dated as of October 1, 2001, between
Terex Corporation and United States Trust Company of New York, as
Trustee (to Indenture dated as of March 29, 2001).*
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
September 30, 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 September 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 Amended and Restated Credit Agreement, dated as of March 29, 2001,
among Terex Corporation, certain of its Subsidiaries, the Lenders named
therein, and Credit Suisse First Boston, as Administrative Agent
(incorporated by reference to Exhibit 10.11 to the Form 10-Q for the
quarter ended March 31, 2001 of Terex Corporation, Commission File No.
1-10702).
10.12 Amended and Restated Tranche C Credit Agreement, dated as of March 29,
2001, among Terex Corporation, the Lenders named therein, and Credit
Suisse First Boston, as Administrative Agent and Collateral Agent
(incorporated by reference to Exhibit 10.12 to the Form 10-Q for the
quarter ended March 31, 2001 of Terex Corporation, Commission File No.
1-10702).
10.13 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).
10.14 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).
10.15 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).
10.16 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).
10.17 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).
10.18 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).
10.19 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).
10.20 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).
10.21 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).
10.22 Purchase Agreement dated as of March 22, 2001 among the Company and the
Purchasers, as defined therein (incorporated by reference to Exhibit
10.27 to the Form 10-Q for the quarter ended March 31, 2001 of Terex
Corporation, Commission File No. 1-10702).
10.23 Registration Rights Agreement dated as of March 29, 2001 among the
Company and the Initial Purchasers, as defined therein (incorporated by
reference to Exhibit 10.28 to the Form 10-Q for the quarter ended March
31, 2001 of Terex Corporation, Commission File No. 1-10702).
10.24 Agreement and Plan of Merger, dated as of June 27, 2001, by and among
CMI Corporation, Terex Corporation and Claudius Acquisition Corp.
(incorporated by reference to Exhibit 2.1 of the Form 8-K Current
Report, Commission File No. 1-10702, dated June 27, 2001 and filed with
the Commission on June 28, 2001).
10.25 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).
10.26 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).
10.27 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).
10.28 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 September 30, 2000 of Terex Corporation, Commission File
No. 1-10702).
12 Calculation of Ratio of Earnings to Fixed Charges. *
* Exhibit filed with this document.