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, 1996
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 1-10702
Terex Corporation
(Exact name of registrant as specified in 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)
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: 13.2 million as of September 30,
1996.
The Exhibit Index appears on page 32.
INDEX
TEREX CORPORATION AND SUBSIDIARIES
GENERAL
This Quarterly Report on Form 10-Q filed by Terex Corporation (the "Company")
includes financial information with respect to the following Subsidiaries of the
Company, which are guarantors (the "Guarantors") of the Company's $250 million
principal amount of 13.25% Senior Secured Notes due 2002 (the "Senior Secured
Notes"). See Note F -- Consolidating Financial Statements.
State or other
jurisdiction of I.R.S. employer
Guarantor incorporation or identification
organization number
Clark Material Handling Company * Kentucky 61-1107574
Terex Cranes, Inc. * Delaware 06-1423889
PPM Cranes, Inc. Delaware 39-1611683
Koehring Cranes, Inc. * Delaware 06-1423888
CMH Acquisition Corp. * Delaware 39-1738520
CMH Acquisition International Corp. * Delaware 39-1738521
* Wholly-owned subsidiaries
Page No.
PART I FINANCIAL INFORMATION
Item 1 Condensed Consolidated Financial Statements
TEREX CORPORATION:
Condensed Consolidated Statements of Operations --
Three months and nine months ended September 30, 1996 and 1995........ 4
Condensed Consolidated Balance Sheets --
September 30, 1996 and December 31, 1995.............................. 6
Condensed Consolidated Statements of Cash Flows --
Nine months ended September 30, 1996 and 1995......................... 7
Notes to Condensed Consolidated Financial Statements --
September 30, 1996.................................................... 8
PPM CRANES, INC.:
Condensed Consolidated Statements of Operations -- Three months
ended September 30, 1996 and 1995, Nine months ended September
30, 1996, and
Five months ended September 30, 1995..................................17
Condensed Consolidated Balance Sheets --
September 30, 1996 and December 31, 1995..............................18
Condensed Consolidated Statements of Cash Flows --
Nine months ended September 30, 1996
and Five months ended September 30, 1995..............................19
Notes to Condensed Consolidated Financial Statements --
September 30, 1996....................................................20
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................23
PART II OTHER INFORMATION
Item 1 Legal Proceedings................................................30
Item 5 Other Information................................................30
Item 6 Exhibits and Reports on Form 8-K.................................30
SIGNATURES..................................................................31
PART 1. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share data)
For the For the
Three Months Nine Months
Ended Ended
September 30, September 30,
1996 1995 1996 1995
Net sales ................................$ 165.7 $ 148.8 $ 521.7 $ 362.3
Cost of goods sold ....................... 142.0 128.9 447.6 312.8
Gross profit ............................. 23.7 19.9 74.1 49.5
Engineering, selling and
administrative expenses .................. 14.8 17.0 47.3 41.1
Income from operations ................... 8.9 2.9 26.8 8.4
Other income (expense):
Interest income .......................... 0.5 0.5 0.6 1.0
Interest expense ......................... (11.8) (11.4) (34.6) (27.4)
Other income (expense) - net ............. (1.0) (4.3) (0.6) (6.8)
Income (loss) from continuing
operations before income taxes
and extraordinary items .................. (3.4) (12.3) (7.8) (24.8)
Provision for income taxes ............... -- -- -- --
Income (loss) from continuing
operations before extraordinary items .... (3.4) (12.3) (7.8) (24.8)
Income (loss) from discontinued operations 4.8 4.5 14.2 (1.1)
Income (loss) before extraordinary items . 1.4 (7.8) 6.4 (25.9)
Extraordinary loss on retirement of debt . -- -- -- (7.5)
Net income (loss) ........................ 1.4 (7.8) 6.4 (33.4)
Less preferred stock accretion ........... (2.3) (1.8) (6.0) (5.2)
Income (loss) applicable to common stock .$ (0.9) $ (9.6) $ 0.4 $ (38.6)
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share data)
For the For the
Three Months Nine Months
Ended Ended
September 30, September 30,
1996 1995 1996 1995
PER COMMON AND COMMON EQUIVALENT SHARE:
Primary:
Income (loss) from continuing operations .. $ (0.40) $ (1.36) $ (1.06) $ (2.91)
Income (loss) from discontinued operations 0.34 0.43 1.09 (0.11)
Income (loss) before extraordinary items .. (0.06) (0.93) 0.03 (3.02)
Extraordinary items ....................... -- -- -- (0.73)
Net income (loss) ......................... $ (0.06) $ (0.93) $ 0.03 $ (3.75)
Fully diluted:
Income (loss) from continuing operations .. $ (0.40) $ (1.36) $ (1.06) $ (2.91)
Income (loss) from discontinued operations 0.34 0.43 1.09 (0.11)
Income (loss) before extraordinary items .. (0.06) (0.93) 0.03 (3.02)
Extraordinary items ....................... -- -- -- (0.73)
Net income (loss) ......................... $ (0.06) $ (0.93) $ 0.03 $ (3.75)
Weighted average common shares
outstanding including dilutive
securities (See Exhibit 11.1)
Primary ................................... 14.2 10.3 13.0 10.3
Fully diluted ............................. 14.2 10.3 13.0 10.3
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
September 30, December 31,
1996 1995
ASSETS
Current assets
Cash and cash equivalents ............................ $ 9.0 $ 7.8
Cash securing letters of credit ...................... 1.5 7.7
Trade receivables
(less allowance of $5.9 at September 30, 1996
and $9.8 at December 31, 1995) ...................... 118.0 127.1
Customer deposit ..................................... -- 19.1
Net inventories ...................................... 179.5 249.3
Other current assets - net ........................... 14.1 15.2
Total current assets ................................. 322.1 426.2
Long-term assets
Property, plant and equipment - net .................. 35.3 101.3
Goodwill - net ....................................... 57.8 65.8
Other assets - net ................................... 19.1 33.6
Net assets of discontinued operations ................ 47.4 --
Total assets ......................................... $ 481.7 $ 626.9
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Notes payable ........................................ $ 5.5 $ 1.9
Current portion of capital lease obligations ......... 10.5 7.2
Trade accounts payable ............................... 101.6 161.0
Accrued compensation and benefits .................... 13.8 16.8
Accrued warranties and product liability ............. 20.7 38.6
Accrued interest ..................................... 12.9 4.7
Accrued income taxes ................................. 0.4 1.4
Customer deposit ..................................... -- 19.1
Other current liabilities ............................ 32.4 44.0
Total current liabilities ............................ 197.8 294.7
Long-term liabilities
Long-term debt and capital lease
obligations less current portion .................... 320.1 328.4
Other long-term liabilities .......................... 18.7 68.6
Minority interest, including redeemable
preferred stock of a subsidiary
(liquidation preference $21.5, subject to adjustment) 9.6 9.4
Redeemable convertible preferred stock
(liquidation preference $44.4 at September 30, 1996
and $41.2 at December 31, 1995) ..................... 29.6 24.6
Commitments and contingencies
Stockholders' deficit
Warrants to purchase common stock .................... 3.2 17.2
Common stock, $.01 par value - authorized 30.0 shares;
issued and outstanding 13.2 at September 30, 1996
and 10.6 at December 31, 1995 ........................ 0.1 0.1
Additional paid-in capital ........................... 55.6 40.5
Accumulated deficit .................................. (150.5) (150.9)
Pension liability adjustment ......................... (2.7) (2.7)
Unrealized holding gain on equity securities ......... 0.1 1.0
Cumulative translation adjustment .................... 0.1 (4.0)
Total stockholders' deficit .......................... (94.1) (98.8)
Total liabilities and stockholders' deficit .......... $ 481.7 $ 626.9
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
For the Nine Months Ended
September 30,
1996 1995
OPERATING ACTIVITIES
Net income (loss) ................................. $ 6.4 $ (33.4)
Adjustments to reconcile net income
(loss) to cash used in operating
activities:
Depreciation and amortization ..................... 11.6 21.2
Gain on sale of assets ................. .......... (2.4) (1.2)
Property impairment charge ........................ -- 3.0
Other ............................................. 0.4 0.3
Changes in operating assets and
liabilities:
Restricted cash ................................... 5.4 3.0
Trade receivables ................................. (32.5) (15.5)
Net inventories ................................... 1.3 (4.6)
Net assets of discontinued operations ............. -- (5.6)
Trade accounts payable ............................ 2.1 (20.6)
Accrued interest .................................. 8.1 7.6
Other, net ........................................ (1.6) 12.3
Net cash used in operating activities ............. (6.8) (27.9)
INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired ... -- (92.4)
Capital expenditures .............................. (2.2) (7.1)
Proceeds from sale of assets ...................... 4.5 3.6
Other ............................................. -- 0.1
Net cash provided by (used in)
investing activities ............................. 2.3 (95.8)
FINANCING ACTIVITIES
Net incremental borrowings under
revolving line of credit agreements .............. 4.8 42.1
Principal repayments of long-term debt ............ (1.0) (153.9)
Issuance of long-term debt, net of issuance costs . -- 239.8
Other ............................................. 1.6 (0.5)
Net cash provided by financing activities ......... 5.4 127.5
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS ...................... 1.1 (1.0)
NET INCREASE IN CASH AND CASH EQUIVALENTS ......... 2.0 2.8
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .. 7.0 9.7
CASH AND CASH EQUIVALENTS AT END OF PERIOD ........ $ 9.0 $ 12.5
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(in millions, unless otherwise denoted)
NOTE A -- BASIS OF PRESENTATION
Basis of Presentation. As set forth in Note B below, the Company has announced
the signing of a definitive agreement to sell its Material Handling business for
$139.5. It is anticipated that the sale will result in a gain which will be
recognized in the period of the closing. The Material Handling business is
accounted for as a discontinued operation in the September 30, 1996 balance
sheet, in the statement of cash flows for the nine months ended September 30,
1996, and in the statements of operations for the three and nine month periods
ended September 30, 1996 and September 30, 1995.
Generally accepted accounting principles permit, but do not require, the
allocation of interest expense between continuing and discontinued operations.
Because the methods allowed under generally accepted accounting principles for
calculating interest expense to be allocated to discontinued operations are not
necessarily indicative of the use of proceeds from the sale of the Material
Handling business by the Company, and the effect on interest expense of the
continuing operations of the Company, the Company has elected not to allocate
interest expense to discontinued operations. The results of this election is
that loss from continuing operations includes substantially all of the interest
expense of the Company, and income from discontinued operations does not include
any material interest expense.
The assets and liabilities of the Material Handling business as of September 30,
1996 have been segregated in the balance sheet and are shown under "Net assets
of discontinued operations." In accordance with generally accepted accounting
principles, such segregation was not made in the December 31, 1995 balance
sheet.
The accompanying condensed consolidated financial statements of Terex
Corporation and subsidiaries as of September 30, 1996 and for the three and nine
months ended September 30, 1996 and 1995 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, 1995,
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
presentation have been made. Such adjustments consist only of those of a normal
recurring nature. Certain 1995 amounts have been reclassified to conform with
the 1996 presentation. Operating results for the three and nine months ended
September 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. 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, 1995.
NOTE B -- DISCONTINUED OPERATIONS
The Company has announced the signing of a definitive agreement to sell its
worldwide Material Handling business ("CMHC") for $139.5. CMHC comprises the
Company's Material Handling Segment. The accompanying condensed consolidated
statement of operations for the three months and nine months ended September 30,
1996 and 1995 include the results of CMHC in "Income (Loss) from Discontinued
Operations." Net assets of the discontinued operations at September 30, 1996
have been segregated in the Condensed Consolidated Balance Sheet. Please refer
to Note A - Basis of Presentation for a discussion of allocation of interest
expense. Summary operating results of discontinued operations are as follows:
Three Months Nine Months
Ended Ended
September 30, September 30,
1996 1995 1996 1995
Net Sales .................................$ 110.7 $ 134.5 $ 334.9 $ 404.6
Income (loss) before income taxes ......... 4.8 4.4 14.2 (1.1)
Provision for income taxes ................ -- 0.1 -- --
Income (loss) from discontinued operations 4.8 4.5 14.2 (1.1)
NOTE C -- INVENTORIES
Net inventories consist of the following:
September 30, December 31,
1996 1995
Finished equipment ....................................$ 46.2 $ 53.1
Replacement parts ..................................... 61.2 94.5
Work-in-process ....................................... 14.6 26.0
Raw materials and supplies ............................ 60.1 78.9
182.1 252.5
Less: Excess of FIFO inventory value over LIFO cost ... (2.6) (3.2)
Net inventories .......................................$ 179.5 $ 249.3
NOTE D -- PROPERTY, PLANT AND EQUIPMENT
Net property, plant and equipment consists of the following:
September 30, December 31,
1996 1995
Property, plant and equipment ................... $ 63.6 $ 153.9
Less: Accumulated depreciation .................. (28.3) (52.6)
Net property, plant and equipment ............... $ 35.3 $ 101.3
NOTE E -- 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
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, 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 Internal Revenue Service is currently examining the Company's federal tax
returns for the years 1987 through 1989. In December 1994, the Company received
an examination report from the IRS proposing a substantial tax deficiency based
on this examination. The examination report raises a variety of issues,
including the Company's substantiation for certain deductions taken during this
period, the Company's utilization of certain net operating loss carryovers
("NOL's") and the availability of such NOL's to offset future taxable income. If
the IRS were to prevail on all the issues raised, the amount of the tax
assessment would be approximately $56 plus interest and penalties. If the
Company were required to pay a significant portion of the assessment, it could
have a material adverse impact on the Company and could exceed the Company's
resources. The Company has filed its administrative appeal to the examination
report. Although management believes that the Company will be able to provide
adequate documentation for a substantial portion of the deductions questioned by
the IRS and that there is substantial support for the Company's past and future
utilization of the NOL's, the ultimate outcome of this matter is subject to the
resolution of significant legal and factual issues. If the Company's positions
prevail on the most significant issues, management believes that the amounts due
would not exceed amounts previously paid or provided; however, even under such
circumstances, it is possible that the Company's NOL's could be reduced to some
extent. No additional accruals have been made for any amounts which might be due
as a result of this matter because the possible loss ranges from zero to $56
plus interest and penalties and the ultimate outcome cannot presently be
determined or estimated. Additionally, if a change in control for tax purposes
were to occur, such a change in control could possibly result in a significant
reduction in the amount of NOL's available to the Company to offset future
taxable income.
NOTE F -- CONSOLIDATING FINANCIAL STATEMENTS
On May 9, 1995, the Company completed the refinancing of substantially all of
its outstanding debt (the "Refinancing") and, through Terex Cranes, Inc. ("Terex
Cranes"), a wholly-owned subsidiary, completed the acquisition of substantially
all of the outstanding stock of PPM. S.A. and Legris Industries, Inc.
Clark Material Handling Company, Terex Cranes, Inc., Koehring Cranes, Inc., CMH
Acquisition Corp., CMH Acquisition International Corp. (the "Wholly-owned
Guarantors"), and PPM Cranes, Inc. (collectively, the "Guarantors"), all
subsidiaries of Terex, provide a joint and several, unconditional guarantee of
the obligations under the Senior Secured Notes and provide the same guarantee
for the obligations of the registered notes exchanged for the Senior Secured
Notes.
With the exception of PPM Cranes, Inc. and Clark Material Handling Company, each
of the Guarantors is a corporation organized and existing under the laws of the
state of Delaware and is a wholly-owned subsidiary of the Company. PPM Cranes,
Inc. is a corporation organized and existing under the laws of the state of
Delaware and is 92.4% owned by Terex. Clark Material Handling Company is a
corporation organized and existing under the laws of the Commonwealth of
Kentucky and is wholly-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 (Clark Material Handling Company, Terex Cranes, Inc., Koehring
Cranes, Inc., CMH Acquisition Corp. and CMH Acquisition International Corp.).
Non-guarantor subsidiaries of Wholly-owned Guarantors are reported on the equity
basis.
PPM Cranes, Inc. presents the operations of PPM Cranes, Inc. and its
subsidiaries (PPM Pty Ltd and PPM Far East Ltd) reported on an equity basis.
Non-Guarantor Subsidiaries combine the operations of subsidiaries which have not
provided a guarantee of the obligations of Terex Corporation under the Senior
Secured Notes. These subsidiaries include Terex Equipment Limited, Unit Rig
Australia (Pty) Ltd., Unit Rig South Africa (Pty) Ltd., Unit Rig (Canada) Ltd.,
Clark Material Handling GmbH, Clark Forklift Korea, PPM S.A., Bendini S.P.A.,
Brimont Agraire, PPM Kranes, Baulift, PPM Pty Ltd., and PPM Far East Ltd.
Debt and Goodwill allocated to subsidiaries is presented on an accounting
"push-down" basis.
TEREX CORPORATION
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 1996
(in millions)
Wholly- PPM Non-
Terex owned Cranes, guarantor Intercompany
Corporation Guarantors Inc. Subsidiaries Eliminations Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents .............. $ 6.7 $ --- $ --- $ 2.3 $ --- $ 9.0
Cash securing letters of credit ........ 0.9 --- --- 0.6 --- 1.5
Trade receivables - net ................ 19.7 15.9 12.8 69.6 --- 118.0
Intercompany receivables ............... 0.7 2.6 8.1 32.8 (44.2) ---
Inventories - net ...................... 47.9 21.2 33.5 77.2 (0.3) 179.5
Other current assets ................... 1.2 0.1 0.1 12.7 --- 14.1
Total current assets ................... 77.1 39.8 54.5 195.2 (44.5) 322.1
Property, plant & equipment - net ...... 8.3 4.6 3.2 19.2 --- 35.3
Investment in and advances
to (from) subsidiaries ................ 117.1 (43.7) (6.1) (135.9) (68.6) ---
Goodwill - net ......................... --- --- 27.7 30.1 --- 57.8
Net assets of discontinued operations .. --- 0.6 --- 46.8 --- 47.4
Other assets ........................... 10.9 1.0 2.6 4.6 --- 19.1
TOTAL ASSETS ............................ $ 213.4 $ 2.3 $ 81.9 $ 160.0 $ 24.1 $ 481.7
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes payable and current portion of
capital lease obligations ............. $ --- $ --- $ 0.8 $ 15.2 $ --- $ 16.0
Trade accounts payable ................ 14.9 12.3 8.2 66.2 --- 101.6
Intercompany payables ................. 20.2 7.6 10.8 6.0 (44.6) ---
Accruals and other current liabilities 39.5 3.5 12.5 24.9 (0.2) 80.2
Total current liabilities ............. 74.6 23.4 32.3 112.3 (44.8) 197.8
Long-term debt and capital lease
obligations less current portion ..... 183.3 17.8 52.7 66.3 --- 320.1
Other long-term liabilities ........... 12.7 2.6 (0.1) 3.5 --- 18.7
Minority interest and redeemable
preferred stock ...................... --- 9.0 0.6 --- --- 9.6
Redeemable convertible preferred stock 29.6 --- --- --- --- 29.6
Stockholders' deficit ................. (86.8) (50.5) (3.6) (22.1) 68.9 (94.1)
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT .................. $ 213.4 $ 2.3 $ 81.9 $ 160.0 $ 24.1 $ 481.7
TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1995
(in millions)
Wholly- PPM Non-
Terex owned Cranes, guarantor Intercompany
Corporation Guarantors Inc. Subsidiaries Eliminations Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents ............. $ 3.1 $ 3.2 $ 0.3 $ 1.2 $ --- $ 7.8
Cash securing letters of credit ....... 2.1 0.2 --- 5.4 --- 7.7
Trade receivables - net ............... 19.6 28.6 10.7 68.2 --- 127.1
Intercompany receivables .............. 0.3 2.6 1.5 26.3 (30.7) ---
Customer deposit ...................... --- --- --- 19.1 --- 19.1
Inventories - net ..................... 46.1 71.2 23.5 108.8 (0.3) 249.3
Other current assets .................. 1.1 0.2 0.2 13.7 --- 15.2
Total current assets .................. 72.3 106.0 36.2 242.7 (31.0) 426.2
Property, plant & equipment - net ..... 11.1 24.5 3.6 62.1 --- 101.3
Investment in and advances to (from) .. 30.8 (97.2) (0.5) (125.1) 192.0 ---
subsidiaries
Goodwill - net ........................ --- 4.3 29.4 32.1 --- 65.8
Debt issuance costs and intangible
assets - net ........................ 3.3 2.8 2.8 5.6 --- 14.5
Other assets .......................... 3.7 5.6 --- 9.8 --- 19.1
TOTAL ASSETS $121.2 $ 46.0 $ 71.5 $227.2 $161.0 $626.9
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes payable and current portion of
capital lease obligations ............ $ --- $ --- $ 0.9 $ 8.2 $ --- $ 9.1
Trade accounts payable ................ 14.5 50.2 5.4 90.9 --- 161.0
Intercompany payables ................. 12.3 10.4 3.9 4.1 (30.7) ---
Customer deposit ...................... --- --- --- 19.1 --- 19.1
Accruals and other current liabilities 25.9 30.3 12.0 37.3 --- 105.5
Total current liabilities ............. 52.7 90.9 22.2 159.6 (30.7) 294.7
Long-term debt and capital lease
obligations less current portion ..... 127.9 48.0 51.5 101.0 --- 328.4
Other long-term liabilities ........... 12.5 33.9 1.0 21.2 --- 68.6
Minority interest and redeemable ...... --- 9.4 --- --- --- 9.4
preferred stock
Redeemable convertible preferred stock 24.6 --- --- --- --- 24.6
Stockholders' deficit ................. (96.5) (136.2) (3.2) (54.6) 191.7 (98.8)
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT ............................... $ 121.2 $ 46.0 $ 71.5 $227.2 $161.0 $626.9
TEREX CORPORATION
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996
(in millions)
Wholly- PPM Non-
Terex owned Cranes, guarantor Intercompany
Corporation Guarantors Inc. Subsidiaries Eliminations Consolidated
NET SALES ............................... $ 48.2 $ 29.4 $ 19.4 $ 89.9 $(21.2) $165.7
Cost of goods sold ..................... 42.3 24.7 15.8 79.2 (20.0) 142.0
GROSS PROFIT ............................ 5.9 4.7 3.6 10.7 (1.2) 23.7
Engineering, selling &
administrative expenses ............... 4.5 1.6 1.7 7.1 (0.1) 14.8
INCOME (LOSS) FROM OPERATIONS ........... 1.4 3.1 1.9 3.6 (1.1) 8.9
Interest income ........................ 0.5 --- --- --- --- 0.5
Interest expense ....................... (6.0) (0.5) (1.7) (3.6) --- (11.8)
Income (loss) from equity investees .... 16.2 0.3 0.3 --- (16.8) ---
Other income (expense) - net ........... (0.4) (0.3) (0.2) (0.2) 0.1 (1.0)
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES ......... 11.7 2.6 0.3 (0.2) (17.8) (3.4)
Provision for income taxes ............. --- --- --- --- --- ---
INCOME (LOSS) FROM
CONTINUING OPERATIONS .................. 11.7 2.6 0.3 (0.2) (17.8) (3.4)
Income (loss) from discontinued
operations, net of tax benefits ....... --- 4.3 --- 0.5 --- 4.8
NET INCOME (LOSS) ....................... 11.7 6.9 0.3 0.3 (17.8) 1.4
Less preferred stock accretion ......... (2.1) (0.2) --- --- --- (2.3)
INCOME (LOSS) APPLICABLE TO
COMMON STOCK ........................... $ 9.6 $ 6.7 $ 0.3 $ 0.3 $(17.8) $ (0.9)
TEREX CORPORATION
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995
(in millions)
Wholly- PPM Non-
Terex owned Cranes, guarantor Intercompany
Corporation Guarantors Inc. Subsidiaries Eliminations Consolidated
NET SALES ............................... $ 38.3 $ 26.5 $ 19.8 $ 73.4 $ (9.2) $148.8
Cost of goods sold ..................... 33.5 23.2 16.3 64.6 (8.7) 128.9
GROSS PROFIT ............................ 4.8 3.3 3.5 8.8 (0.5) 19.9
Engineering, selling &
administrative expenses ............... 5.1 1.9 2.2 7.8 --- 17.0
INCOME (LOSS) FROM OPERATIONS ........... (0.3) 1.4 1.3 1.0 (0.5) 2.9
Interest income ........................ 0.5 --- --- --- --- 0.5
Interest expense ....................... (6.0) (0.5) (1.6) (3.3) --- (11.4)
Income (loss) from equity investees .... 16.9 3.7 0.2 --- (20.8) ---
Other income (expense) - net ........... (7.2) 2.1 (0.1) 0.9 --- (4.3)
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES ......... 3.9 6.7 (0.2) (1.4) (21.3) (12.3)
Provision for income taxes ............. --- --- --- --- --- ---
INCOME (LOSS) FROM
CONTINUING OPERATIONS .................. 3.9 6.7 (0.2) (1.4) (21.3) (12.3)
Income (loss) from discontinued
operations, net of tax benefits ....... --- 4.4 --- 0.7 (0.6) 4.5
NET INCOME (LOSS) ....................... 3.9 11.1 (0.2) (0.7) (21.9) (7.8)
Less preferred stock accretion ........ (1.8) --- --- --- --- (1.8)
INCOME (LOSS) APPLICABLE TO
COMMON STOCK ........................... $ 2.1 $ 11.1 $ (0.2) $ (0.7) $(21.9) $ (9.6)
TEREX CORPORATION
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(in millions)
Wholly- PPM Non-
Terex owned Cranes, guarantor Intercompany
Corporation Guarantors Inc. Subsidiaries Eliminations Consolidated
NET SALES ............................... $133.8 $105.3 $ 65.8 $276.3 $(59.5) $521.7
Cost of goods sold ..................... 118.7 89.4 55.9 241.6 (58.0) 447.6
GROSS PROFIT ............................ 15.1 15.9 9.9 34.7 (1.5) 74.1
Engineering, selling &
administrative expenses ............... 13.5 5.3 5.5 23.0 --- 47.3
INCOME (LOSS) FROM OPERATIONS ........... 1.6 10.6 4.4 11.7 (1.5) 26.8
Interest income ........................ 0.6 --- --- --- --- 0.6
Interest expense ....................... (18.3) (1.5) (4.9) (9.9) --- (34.6)
Income (loss) from equity investees .... 32.4 (0.4) 0.4 --- (32.4) ---
Other income (expense) - net ........... (0.8) (1.1) (0.3) 1.6 --- (0.6)
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES ......... 15.5 7.6 (0.4) 3.4 (33.9) (7.8)
Provision for income taxes ............. --- --- --- --- --- ---
INCOME (LOSS) FROM
CONTINUING OPERATIONS .................. 15.5 7.6 (0.4) 3.4 (33.9) (7.8)
Income (loss) from discontinued
operations, net of tax benefits ....... --- 12.2 --- 2.1 (0.1) 14.2
NET INCOME (LOSS) ....................... 15.5 19.8 (0.4) 5.5 (34.0) 6.4
Less preferred stock accretion ......... (5.8) (0.2) --- --- --- (6.0)
INCOME (LOSS) APPLICABLE TO
COMMON STOCK ........................... $ 9.7 $ 19.6 $ (0.4) $ 5.5 $(34.0) $ 0.4
TEREX CORPORATION
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995
(in millions)
Wholly- PPM Non-
Terex owned Cranes, guarantor Intercompany
Corporation Guarantors Inc. Subsidiaries Eliminations Consolidated
NET SALES ............................... $112.8 $ 77.4 $ 33.4 $167.0 $(28.3) $362.3
Cost of goods sold ..................... 100.0 66.6 28.0 147.1 (28.9) 312.8
GROSS PROFIT ............................ 12.8 10.8 5.4 19.9 0.6 49.5
Engineering, selling &
administrative expenses ............... 16.4 4.7 3.5 16.5 --- 41.1
INCOME (LOSS) FROM OPERATIONS ........... (3.6) 6.1 1.9 3.4 0.6 8.4
Interest income ........................ 1.0 --- --- --- --- 1.0
Interest expense ....................... (14.5) (1.2) (3.9) (7.8) --- (27.4)
Income (loss) from equity investees .... 8.1 0.5 0.2 --- (8.8) ---
Other income (expense) - net ........... (8.3) 1.7 (0.2) --- --- (6.8)
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS .................... (17.3) 7.1 (2.0) (4.4) (8.2) (24.8)
Provision for income taxes ............. --- --- --- --- --- ---
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE EXTRAORDINARY ITEMS .. (17.3) 7.1 (2.0) (4.4) (8.2) (24.8)
Income (loss) from discontinued
operations, net of tax benefits ....... --- 0.2 --- (0.7) (0.6) (1.1)
Extraordinary loss on retirement of debt (3.7) (2.3) --- (1.5) --- (7.5)
NET INCOME (LOSS) ....................... (21.0) 5.0 (2.0) (6.6) (8.8) (33.4)
Less preferred stock accretion ......... (5.2) --- --- --- --- (5.2)
INCOME (LOSS) APPLICABLE TO COMMON STOCK $(26.2) $ 5.0 $ (2.0) $ (6.6) $ (8.8) $(38.6)
TEREX COPORATION
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(in millions)
Wholly- PPM Non-
Terex owned Cranes, guarantor Intercompany
Corporation Guarantors Inc. Subsidiaries Eliminations Consolidated
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES .................. $ 5.9 $ --- $ 0.9 $ (13.6) $ --- $ (6.8)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ................... (0.4) (0.1) (0.3) (1.4) --- (2.2)
Proceeds from sale of assets ........... 0.3 0.1 0.1 4.0 --- 4.5
Net cash provided by (used in)
investing activities .................. (0.1) --- (0.2) 2.6 --- 2.3
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under
revolving line of credit agreements ... (2.6) --- --- 7.4 --- 4.8
Principal repayments of long-term debt . --- --- (1.0) --- --- (1.0)
Other .................................. --- --- --- 1.6 --- 1.6
Net cash provided by (used in)
financing activities .................. (2.6) --- (1.0) 9.0 --- 5.4
Effect of exchange rates on cash and
cash equivalents ...................... 0.3 --- --- 0.8 --- 1.1
Net increase (decrease) in cash and
cash equivalents ...................... 3.5 --- (0.3) (1.2) --- 2.0
Cash and cash equivalents, beginning
of period ............................. 3.1 --- 0.3 3.6 --- 7.0
Cash and cash equivalents, end of period $ 6.6 $ --- $ --- $ 2.4 $ --- $ 9.0
TEREX COPORATION
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995
(in millions)
Wholly- PPM Non-
Terex owned Cranes, guarantor Intercompany
Corporation Guarantors Inc. Subsidiaries Eliminations Consolidated
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES .................. $ 60.5 $ 1.7 $(47.2) $(42.9) $ --- $(27.9)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of business,
net of cash acquired .................. (92.4) --- --- --- --- (92.4)
Capital expenditures ................... (0.9) (1.9) (0.1) (4.2) --- (7.1)
Proceeds from sale of assets............ 2.7 0.3 --- 0.6 --- 3.6
Other - net ............................ 0.1 --- --- --- --- 0.1
Net cash provided by (used in)
investing activities .................. (90.5) (1.6) (0.1) (3.6) --- (95.8)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under
revolving line of credit agreements ... 37.6 --- 0.3 4.2 --- 42.1
Principal repayments of long-term debt . (49.2) (48.5) --- (56.2) --- (153.9)
Proceeds from issuance of long-term
debt, net of issuance costs ........... 44.3 48.5 47.1 99.9 --- 239.8
Other .................................. --- --- --- (0.5) --- (0.5)
Net cash provided by (used in)
financing activities .................. 32.7 --- 47.4 47.4 --- 127.5
Effect of exchange rates on cash and
cash equivalents ...................... (0.1) --- --- (0.9) --- (1.0)
Net increase (decrease) in cash and
cash equivalents ...................... 2.6 0.1 0.1 --- --- 2.8
Cash and cash equivalents, beginning
of period ............................. 3.7 --- --- 6.0 --- 9.7
Cash and cash equivalents, end of period $ 6.3 $ 0.1 $ 0.1 $ 6.0 $ --- $ 12.5
PPM CRANES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions)
For the For the For the
Three Months Nine Months Five Months
Ended Ended Ended
September 30, September 30, September 30,
1996 1995 1996 1995
Net sales ................... $ 20.4 $ 21.3 $ 71.1 $ 35.9
Cost of goods sold .......... 17.0 17.9 61.6 30.6
Gross profit ................ 3.4 3.4 9.5 5.3
Engineering, selling and
administrative expenses ..... 1.9 2.5 6.2 4.1
Income from operations ...... 1.5 0.9 3.3 1.2
Other income (expense):
Interest expense ............ (1.9) (1.9) (5.7) (3.1)
Amortization of
debt issuance costs . ...... (0.1) (0.1) (0.3) (0.2)
Loss before income taxes .... (0.5) (1.1) (2.7) (2.1)
Provision for income taxes .. -- -- -- --
Net loss .................... $ (0.5) $ (1.1) $ (2.7) $ (2.1)
The accompanying notes are an integral part of these financial statements.
PPM CRANES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions, except share amounts)
September 30, December 31,
1996 1995
ASSETS
Current assets:
Cash and cash equivalents .............................$ 0.5 $ 0.5
Trade accounts receivables
(less allowance of $0.6 in 1996
and $0.5 in 1995) .................................... 15.0 11.9
Net inventories ....................................... 34.4 25.0
Due from affiliates ................................... 8.3 1.0
Prepaid expenses and other current assets ............. 0.2 0.6
Total current assets .................................. 58.4 39.0
Property, plant and equipment - net ................... 3.5 3.9
Goodwill - net ........................................ 29.3 30.9
Other identified intangible assets - net .............. 2.5 2.8
Total assets ..........................................$ 93.7 $ 76.6
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Trade accounts payable ................................$ 8.6 $ 5.5
Accrued product liability and product warranty ........ 8.7 8.2
Accrued expenses ...................................... 4.1 4.1
Due to affiliates ..................................... 12.1 3.9
Due to Terex Corporation .............................. 10.8 2.1
Current portion of long-term debt ..................... 1.2 0.9
Total current liabilities ............................. 45.5 24.7
Non-current liabilities:
Long-term debt, less current portion .................. 53.6 54.0
Other non-current liabilities ......................... 0.5 1.0
Total non-current liabilities ......................... 54.1 55.0
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, $.01 par value -
authorized 2,000 shares;
issued and outstanding 413 shares .................... -- --
Accumulated deficit ................................... (5.9) (3.2)
Foreign currency translation adjustment ............... -- 0.1
Total shareholders' deficit ........................... (5.9) (3.1)
Total liabilities and shareholders' deficit ...........$ 93.7 $ 76.6
The accompanying notes are an integral part of these financial statements.
PPM CRANES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
For the For the
Nine Months Five Months
Ended Ended
September 30, September 30,
1996 1995
OPERATING ACTIVITIES
Net loss ..............................................$ (2.7) $ (2.1)
Adjustments to reconcile net income (loss)
to cash used in operating activities:
Depreciation and amortization ......................... 2.4 1.3
Changes in operating assets and liabilities:
Trade accounts receivable ............................. (3.1) (1.2)
Net inventories ....................................... (9.4) 1.4
Prepaid expenses and other current assets ............. 0.1 (0.1)
Trade accounts payable ................................ 3.1 (2.5)
Net amounts due to affiliates ......................... 9.6 3.7
Accrued product liability and product warranty ........ 0.5 (0.3)
Accrued expenses ...................................... -- 0.6
Other, net ............................................ 0.3 (0.9)
Net cash used in operating activities ................. 0.8 (0.1)
INVESTING ACTIVITIES
Capital expenditures .................................. (0.2) (0.1)
Proceeds from sale of property,
plant and equipment ......... ........................ 0.1 --
Net cash used in investing activities ................. (0.1) (0.1)
FINANCING ACTIVITIES
Net borrowings under revolving
line of credit agreements .... ....................... 0.4 --
Principal repayments of long-term debt ................ (1.0) --
Net cash provided by financing activities ............. (0.6) --
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS ............................ (0.1) --
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .. -- (0.2)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ...... 0.5 0.3
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............$ 0.5 $ 0.1
The accompanying notes are an integral part of these financial statements.
PPM Cranes, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 1996
(In millions unless otherwise denoted)
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 and lattice boom cranes and related spare parts.
On May 9, 1995 (the "date of acquisition"), Terex Corporation, through its
wholly-owned subsidiary Terex Cranes, Inc., completed the acquisition of all of
the capital stock of Legris Industries, Inc., a Delaware Corporation which owns
92.4% of the capital stock of PPM Cranes, Inc. Terex Corporation and Terex
Cranes, Inc., are both Delaware corporations.
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
presentation have been made. Such adjustments consist only of those of a
recurring nature. Operating results for the nine months ended September 30, 1996
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1996.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries; PPM of Australia Pty. Ltd., and PPM Far East
Private Ltd., a Singapore company. All material intercompany transactions and
profits have been eliminated. During 1995, management closed the operations in
PPM Far East Private Ltd.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the
last-in, first-out (LIFO) method for domestic inventories and by the first-in,
first-out (FIFO) method for inventories of foreign subsidiaries.
Property, Plant and Equipment
Additions and major replacements or improvements to property, plant and
equipment are recorded at cost. Maintenance, repairs and minor replacements are
charged to expense when incurred. Assets of the Company are depreciated using
the straight-line method over their estimated useful lives, which range from
three to twenty years.
Excess of Cost Over Net Assets
Goodwill, representing the difference between the total purchase price and the
fair value of assets (tangible and intangible) and liabilities at the date of
acquisition, is amortized on a straight-line basis over fifteen years. It is the
Company's policy to periodically evaluate the carrying value of goodwill, and to
recognize impairments when the estimated related future net operating cash flows
is less than its carrying value. The amount of any impairment then recognized
would be calculated as the difference between estimated future discounted cash
flows and the carrying value of the goodwill.
Debt Issuance Costs
Debt issuance costs incurred by Terex Corporation in securing the financing
related to acquiring the Company have been capitalized and are reflected in the
financial statements. Capitalized debt issuance costs are amortized over the
term of the related debt.
Product Liability and Warranty
The Company records accruals for potential warranty and product liability claims
based on the Company's claim experience. Warranty costs are accrued at the time
revenue is recognized. The Company provides accruals for estimated product
liability experience on claims and for claims anticipated to have been incurred
which have not yet been reported. The Company maintains product liability
insurance; therefore, the product liability accrual equals the estimated product
liability less expected recoveries under insurance policies.
Income Taxes
Income taxes are provided using the liability method in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
The Company is a part of a group that files a consolidated income tax return.
The method used to allocate income taxes to members of the group is one in which
current and deferred income taxes are calculated on a separate return basis as
if the Company had not been included in a consolidated income tax return with
its parent. The tax benefit associated with the acquisition debt has been taken
into account in the Company's tax provision.
Revenue Recognition
Revenue and costs are generally recorded when products are shipped and invoiced
to either independently owned and operated dealers or to customers. Certain new
units may be invoiced prior to the time customers take physical possession.
Revenue is recognized in such cases only when the customer has a fixed
commitment to purchase the units, the units have been completed, tested and made
available to the customer for pickup or delivery, and the customer has requested
that the Company hold the units for pickup or delivery at a time specified by
the customer in the sales documents. In such cases, the units are invoiced under
the Company's customary billing terms, title to the units and risks of ownership
pass to the customer upon invoicing, the units are segregated from the Company's
inventory and identified as belonging to the customer and the Company has no
further obligations under the order.
Foreign Currency Translation
Assets and liabilities of the Company's international operations are translated
at year-end exchange rates. Income and expenses are translated at average
exchange rates prevailing during the year. For operations whose functional
currency is the local currency, translation adjustments are accumulated in the
Cumulative Translation Adjustment component of Shareholders' Deficit.
Foreign Exchange Contracts
The Company uses foreign exchange contracts to hedge recorded balance sheet
amounts related to certain international operations and firm commitments that
create currency exposures. The Company does not enter into speculative
contracts. Gains and losses on hedges of assets and liabilities are recognized
in income as offsets to the gains and losses from the underlying hedged amounts.
Gains and losses on hedges of firm commitments are recorded on the basis of the
underlying transaction.
Environmental Policies
Environmental expenditures that relate to current operations are either expensed
or capitalized depending on the nature of the expenditure. Expenditures relating
to conditions caused by past operations that do not contribute to current or
future revenue generation are expensed. Liabilities are recorded when
environmental assessments and/or remedial actions are probable, and the costs
can be reasonably estimated.
Research and Development Costs
Research and development costs are expensed as incurred. Such costs incurred in
the development of new products or significant improvements to existing products
are included in Engineering, Selling and Administrative Expenses.
3. Inventories
Inventories consist of the following:
December 31, September 30,
1995 1996
Raw materials and supplies ..................... $ 17.2 $ 9.4
Work in process ................................ 0.2 2.5
Replacement parts .............................. 8.4 8.6
Finished goods equipment ....................... 8.6 4.5
$ 34.4 $ 25.0
The LIFO value is approximately equivalent to the corresponding FIFO value at
September 30, 1996.
4. Property, Plant and Equipment
Net property, plant and equipment consists of the following:
December 31, September 30,
1995 1996
Property, plant and equipment ...................... $ 4.2 $ 4.3
Less accumulated depreciation ...................... (0.7) (0.4)
Net property, plant and equipment .................. $ 3.5 $ 3.9
5. 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 materially adverse effect on the Company's financial position.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
The Company operates in two industry segments: Terex Trucks and Terex Cranes.
The Company previously operated a third industry segment, the Material Handling
segment, the results of which are now accounted for as Income (Loss) from
Discontinued Operations. See Notes A and B to the Condensed Consolidated
Financial Statements regarding the announcement of a definitive agreement to
sell the Material Handling segment. The Terex Cranes segment results for periods
prior to May 1995 consist solely of the Company's Waverly operations (previously
known as Koehring). Subsequent to that date, Terex Cranes results include the
results of the PPM business acquired in May of 1995. Terex Trucks consists of
the Terex business and Unit Rig division.
Quarter Ended September 30, 1996
The table below is a comparison of net sales, gross profit, engineering, selling
and administrative expenses, and income (loss) from continuing operations, by
segment, and income (loss) from discontinued operations, for the three months
ended September 30, 1996 and 1995.
Three Months
Ended
September 30, Increase
1996 1995 (Decrease)
(in millions of dollars)
NET SALES
Terex Trucks ............................... $ 83.4 $ 64.8 $ 18.6
Terex Cranes ............................... 82.5 84.0 (1.5)
Eliminations ............................... (0.2) -- (0.2)
Total ................................... $ 165.7 $ 148.8 $ 16.9
GROSS PROFIT
Terex Trucks ............................... $ 11.2 $ 9.3 $ 1.9
Terex Cranes ............................... 12.4 11.0 1.4
Eliminations ............................... 0.1 (0.4) 0.5
Total ................................... $ 23.7 $ 19.9 $ 3.8
ENGINEERING, SELLING
AND ADMINISTRATIVE EXPENSES
Terex Trucks ............................... $ 6.7 $ 5.7 $ 1.0
Terex Cranes ............................... 7.0 9.5 (2.5)
General/Corporate .......................... 1.1 1.8 (0.7)
Total ................................... $ 14.8 $ 17.0 $ (2.2)
INCOME (LOSS) FROM OPERATIONS
Terex Trucks ............................... $ 4.5 $ 3.6 $ 0.9
Terex Cranes ............................... 5.4 1.5 3.9
General/Corporate .......................... (1.0) (2.2) 1.2
Total ................................... $ 8.9 $ 2.9 $ 6.0
INCOME (LOSS) FROM DISCONTINUED OPERATIONS
Material Handling .......................... $ 4.8 $ 4.5 $ 0.3
Total ................................... $ 4.8 $ 4.5 $ 0.3
Net Sales
Sales increased $16.9 million, or approximately 11.4%, to $165.7 million for the
three months ended September 30, 1996 over the comparable 1995 period,
reflecting a strong sales quarter for Terex Trucks at both the Unit Rig and
Terex businesses.
Terex Trucks sales increased $18.6 million to $83.4 million for the three months
ended September 30, 1996 from $64.8 million for the three months ended September
30, 1995. Machines sales increased 62.5%, and parts sales increased 7.0%. The
sales mix was approximately 30% parts for the three months ended September 30,
1996 compared to 36% parts for the comparable 1995 period. Backlog was $71.8
million at September 30, 1996 compared to $64.1 million at June 30, 1996 and
$55.2 million at September 30, 1995.
Terex Cranes sales were $82.5 million for the three months ended September 30,
1996, a decrease of $1.5 million from $84.0 million in the year earlier period.
Terex Cranes backlog was $53.1 million at September 30, 1996, compared to $58.1
million at June 30, 1996 and $81.6 million at September 30, 1995. The decrease
in Terex Cranes sales was due to sales of excess and obsolete inventory in 1995,
which was not repeated in 1996, and sales in 1995 of a company that was sold in
December 1995. Excluding those two items, Terex Cranes revenue increased in 1996
versus 1995.
Gross Profit
Gross profit for the three months ended September 30, 1996 increased $3.8
million to $23.7 million as compared to the three months ended September 30,
1995.
Terex Trucks gross profit increased $1.9 million to $11.2 million for the three
months ended September 30, 1996 compared to $9.3 million for the comparable 1995
period. The increase in gross profit was primarily due to increased revenues.
The gross margin percentage at Terex Trucks was 13.4% for the three months ended
September 30, 1996 versus 14.4% for the three months ended September 30, 1995.
The decline in gross margin percentage was due to a higher percentage of Terex
Trucks revenue coming from lower margin sales at Unit Rig, and an increase of
unit sales versus parts sales as a percent of total sales. The gross margin on
parts sales is higher than on unit sales.
Terex Cranes gross profit increased $1.4 million to $12.4 million for the three
months ended September 30, 1996, compared to $11.0 million for the prior year's
period, due to the effect of cost reduction actions put in place at PPM and
improved performance at the Company's Waverly operations.
Engineering, Selling and Administrative Expenses
Engineering, selling and administrative expenses decreased to $14.8 million for
the three months ended September 30, 1996 from $17.0 million for the three
months ended September 30, 1995, reflecting the reductions at the corporate
level and at Cranes. Terex Trucks engineering, selling and administrative
expenses increased $1.0 million to $6.7 million for the three months ended
September 30, 1996 as compared to $5.7 million for the same period in 1995.
Terex Cranes engineering, selling and administrative expenses decreased to $7.0
million for the three months ended September 30, 1996 from $9.5 million for the
comparable 1995 period, reflecting the effect of cost reduction actions put in
place at PPM.
Income (Loss) from Operations
Terex Trucks income from operations increased by $0.9 million to $4.5 million
for the three months ended September 30, 1996 from $3.6 million in the
comparable 1995 period, primarily due to the realization of increased revenues.
Terex Cranes income from operations of $5.4 million for the three months ended
September 30, 1996 increased by $3.9 million over the comparable 1995 period,
primarily due to the effect of cost control initiatives implemented at PPM and
continued strong performance by the Company's Waverly operations.
On a consolidated basis, the Company had operating income from continuing
operations of $8.9 million for the three months ended September 30, 1996,
compared to operating income of $2.9 million for the comparable 1995 period, for
the reasons mentioned above. For the three months ended September 30, 1996,
unallocated corporate expense declined by $1.2 million versus the same period in
1995.
Other Income (Expense)
Other income (expense) for the three months ended September 30, 1996 was
primarily amortization of debt issue costs. The 1995 period also included
certain costs related to the retirement of the former chairman of the Company
Income (Loss) from Discontinued Operations
Income from discontinued operations in the Company's Material Handling Segment
increased $0.3 million to $4.8 million for the three months ended September 30,
1996 as compared to $4.5 million for the same period in 1995. The increased
income was primarily due to the success of the cost reduction programs put in
place in the latter half of 1995, as well as some improvements in pricing. As a
result, gross profit for the three months ended September 30, 1996 increased
$0.3 million to $12.9 as compared to the same period in 1995 even though net
sales decreased $23.8 million or 17%.
Nine Months Ended September 30, 1996
The table below is a comparison of net sales, gross profit, engineering, selling
and administrative expenses, income (loss) from operations, and income (loss)
from discontinued operations, by segment, for the nine months ended September
30, 1996 and 1995.
Nine Months
Ended
September 30, Increase
1996 1995 (Decrease)
(in millions of dollars)
NET SALES
Terex Trucks .......................... $ 236.3 $ 190.5 $ 45.8
Terex Cranes .......................... 286.0 172.6 113.4
Eliminations .......................... (0.6) (0.8) 0.2
Total .............................. $ 521.7 $ 362.3 $ 159.4
GROSS PROFIT
Terex Trucks .......................... $ 31.5 $ 26.6 $ 4.9
Terex Cranes .......................... 43.1 23.3 19.8
Eliminations .......................... (0.5) (0.4) (0.1)
Total .............................. $ 74.1 $ 49.5 $ 24.6
ENGINEERING, SELLING
AND ADMINISTRATIVE EXPENSES
Terex Trucks .......................... $ 19.0 $ 17.2 $ 1.8
Terex Cranes .......................... 24.7 18.8 5.9
General/Corporate ..................... 3.6 5.1 (1.5)
Total .............................. $ 47.3 $ 41.1 $ 6.2
INCOME (LOSS) FROM OPERATIONS
Terex Trucks .......................... $ 12.5 $ 9.4 $ 3.1
Terex Cranes .......................... 18.4 4.5 13.9
General/Corporate ..................... (4.1) (5.5) 1.4
Total .............................. $ 26.8 $ 8.4 $ 18.4
INCOME (LOSS) FROM
DISCONTINUED OPERATIONS
Material Handling ..................... $ 14.2 $ (1.1) $ 15.3
Total .............................. $ 14.2 $ (1.1) $ 15.3
Net Sales
Sales increased $159.4 million, or approximately 44%, to $521.7 million for the
nine months ended September 30, 1996 over the comparable 1995 period, reflecting
the acquisition of PPM Cranes in the second quarter of 1995, strong sales for
Terex Cranes overall, and increased revenue at Terex Trucks.
Terex Trucks sales increased $45.8 million for the nine months ended September
30, 1996 from the nine months ended September 30, 1995. Machines sales increased
35.6%, and parts sales increased 8.2%. The sales mix was approximately 30.3%
parts for the nine months ended September 30, 1996 compared to 34.8% parts for
the comparable 1995 period. Backlog was $71.8 million at September 30, 1996
compared to $64.1 million at June 30, 1996 and $55.2 million at September 30,
1995.
Terex Cranes sales were $286.0 million for the nine months ended September 30,
1996, an increase of $113.4 million from $172.6 million in the year earlier
period which did not include the PPM business prior to its acquisition in May
1995. Terex Cranes backlog was $53.1 million at September 30, 1996, compared to
$58.1 million at June 30, 1996 and $81.6 million at September 30, 1995. The
increase in Terex Cranes sales was due to the addition of the PPM business,
growth in sales at the PPM business, and continued strong performance by
the Company's Waverly operations.
Gross Profit
Gross profit for the nine months ended September 30, 1996 increased $24.6
million to $74.1 million compared to the nine months ended September 30, 1995.
The improvement in gross profit was primarily due to an increased gross profit
percentage on increased net sales in 1996 compared to 1995. The gross profit
percentage for the nine months ended September 30, 1996 increased to 14.2% from
13.7% for the same period in 1995.
Terex Trucks gross profit increased $4.9 million to $31.5 million for the nine
months ended September 30, 1996 compared to $26.6 million for the comparable
1995 period. The gross profit percentage in the Terex Trucks decreased to 13.3%
for the nine months ended September 30, 1996 from 14.0% for the nine months
ended September 30, 1995, primarily due to an increase in the proportion of unit
sales versus part sales. Part sales have higher margins than unit sales.
Terex Cranes gross profit increased $19.8 million to $43.1 million for the nine
months ended September 30, 1996, compared to $23.3 million for the prior year's
period, reflecting the PPM acquisition, the effect of cost reduction actions put
in place at PPM, and improved performance at the Company's Waverly operations.
The gross profit percentage at Terex Cranes increased to 15.1% for the nine
months ended September 30, 1996 compared to 13.5% for the same period of 1995.
Engineering, Selling and Administrative Expenses
Engineering, selling and administrative expenses increased to $47.3 million for
the nine months ended September 30, 1996 from $41.1 million for the nine months
ended September 30, 1995, reflecting the effects of the PPM acquisition in May
1995. However, engineering, selling and administrative expenses as a percentage
of net sales decreased to 9.1% for the nine months ended September 30, 1996 from
11.3% for the same period in 1995. Terex Trucks engineering, selling and
administrative expenses increased to $19.0 million for the nine months ended
September 30, 1996 from $17.2 million for the comparable 1995 period primarily
due to costs associated with a new parts sales office and a new U.K. dealership.
Terex Cranes engineering, selling and administrative expenses increased to $24.7
million for the nine months ended September 30, 1996 from $18.8 million for the
comparable 1995 period, reflecting the PPM acquisition in May 1995.
Income (Loss) from Operations
Terex Trucks income from operations increased by $3.1 million to $12.5 million
for the nine months ended September 30, 1996 from $9.4 million in the comparable
1995 period, primarily due to the factors mentioned above under "Gross Profit".
Terex Cranes income from operations of $18.4 million for the nine months ended
September 30, 1996 increased by $13.9 million over the comparable 1995 period,
primarily due to the increased net sales and the effect of cost control
initiatives implemented at PPM during Terex's ownership of that business, and
continued strong performance by the Company's Waverly operations.
On a consolidated basis, the Company had operating income from continuing
operations of $26.8 million for the nine months ended September 30, 1996,
compared to operating income of $8.4 million for the comparable 1995 period, for
the reasons mentioned above.
Other Income (Expense)
Interest expense increased to $34.6 million for the nine months ended September
30, 1996 from $27.4 million in the comparable 1995 period as a result of
incremental borrowings associated with the PPM acquisition in May 1995. The
Company realized a gain in the nine months ended September 30, 1996 of $2.4
million from the sale of excess property in Scotland. In 1995, the Company had a
gain of $1.0 million from the sale of Fruehauf stock and recorded a charge of
$0.5 to recognize the impairment in value of certain properties held for sale,
and recognized certain costs related to the retirement of its former chairman.
Income (Loss) from Discontinued Operations
Income from discontinued operations in the Company's Material Handling Segment
increased $15.3 million to $14.2 million for the nine months ended September 30,
1996 as compared to a loss of $1.1 million for the same period in 1995. The
increased income was primarily due to the success of the cost reduction programs
put in place in the latter half of 1995, as well as some improvements in
pricing. As a result, gross profit for the nine months ended September 30, 1996
increased $5.6 million to $37.6 million as compared to the same period in 1995
even though net sales decreased $69.7 million or 17.2%. Additionally, in 1995
the Material Handling Segment recorded charges of $6.0 million related to
charges for severance costs, exit costs and the impairment in value of certain
properties held for sale.
Extraordinary Items
The Company recorded a charge of $7.5 million in 1995 to recognize a loss on the
early extinguishment of debt in connection with the May 1995 refinancing of its
debt as part of the acquisition of PPM.
LIQUIDITY AND CAPITAL RESOURCES
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. The Company has significant debt
service requirements including semi-annual interest payments on senior debt and
monthly interest payments on its credit facility. As a result of a consummation
of an exchange offer and the registration of the Senior Secured Notes in
November 1996, the interest rate on the Notes has been reduced by 0.5% per annum
to 13.25%, reducing interest expense by approximately $1.3 million per year.
Debt reduction and an improved capital structure are major focal points for the
Company. In this regard, the Company regularly reviews its alternatives to
improve its capital structure and to reduce debt through debt financings,
issuance of equity, assets sales, including the sale of business units, or any
combination thereof. Currently, the Company has focused its attention on the
sale of assets, including business units, and has taken steps to explore the
opportunities available to it in this regard. As part of its strategy to
strengthen its capital structure and reduce debt, the Company in November 1996
entered into a sale agreement to sell its world wide Material Handling business
for $139.5 million. See Notes A and B to the Condensed Consolidated Financial
Statements. In addition to asset sales, the Company is focused on generating
cash from operations, through earnings and reductions in working capital. In
accordance with the Indenture governing the Company's 13.25% Senior Secured
Notes, the Company plans to use the portion of the proceeds applicable to the
Notes to offer to purchase the Notes and reduce its overall debt level. The
holders of the Notes are not required to sell the Notes upon the Company's offer
to repurchase. Under the indenture, proceeds in excess of the amount of Notes
tendered pursuant to an offer to repurchase may be used for general corporate
purposes.
Net cash of $6.8 million was used in operating activities during the nine months
ended September 30, 1996. The use of cash was primarily due to an increase in
accounts receivable of $32.5 million resulting from the $159.4 million increase
in revenues. Net cash provided by investing activities was $2.3 million during
the nine months ended September 30, 1996 principally due to the sale of excess
property. Net cash provided by financing activities during the nine months ended
September 30, 1996 was $5.4 million, primarily from use of the lending
facilities in the U.K ($5.5 million). Cash and cash equivalents totaled $9.0
million at September 30, 1996.
The balance outstanding under the Company's Credit Facility as of September 30,
1996 was $64.2 million, and the additional amount the Company could have
borrowed was $10.5 million as of that date. As of October 31, 1996 the balance
outstanding was $52.7 million and the additional amount the Company could have
borrowed was $20.8 million. To the extent borrowings under the Credit Facility
are secured by working capital of CMHC, proceeds will be used to reduce the
Credit Facility. Based on October 31, 1996 borrowing levels, approximately $28.2
million available to be borrowed under the Credit Facility is secured by CMHC
working capital. Management intends to seek additional working capital financing
facilities for the Company's international operations to provide additional
liquidity worldwide.
CONTINGENCIES AND UNCERTAINTIES
The Internal Revenue Service is currently examining the Company's federal tax
returns for the years 1987 through 1989. In December 1994, the Company received
an examination report from the IRS proposing a substantial tax deficiency based
on this examination. The examination report raises a variety of issues,
including the Company's substantiation for certain deductions taken during this
period, the Company's utilization of certain net operating loss carryovers
("NOL's") and the availability of such NOL's to offset future taxable income. If
the IRS were to prevail on all the issues raised, the amount of the tax
assessment would be approximately $56 million plus interest and penalties. If
the Company were required to pay a significant portion of the assessment, it
could have a material adverse impact on the Company and could exceed the
Company's resources. The Company has filed its administrative appeal to the
examination report. Although management believes that the Company will be able
to provide adequate documentation for a substantial portion of the deductions
questioned by the IRS and that there is substantial support for the Company's
past and future utilization of the NOL's, the ultimate outcome of this matter is
subject to the resolution of significant legal and factual issues. If the
Company's positions prevail on the most significant issues, management believes
that the amounts due would not exceed amounts previously paid or provided;
however, even under such circumstances, it is possible that the Company's NOL's
could be reduced to some extent. No additional accruals have been made for any
amounts which might be due as a result of this matter because the possible loss
ranges from zero to $56 million plus interest and penalties and the ultimate
outcome cannot presently be determined or estimated. A change in control of the
Company for tax purposes could possibly result in a significant reduction in the
amount of NOL's available to the Company to offset future taxable income.
The Securities and Exchange Commission (the "Commission") in March of 1994
initiated a private investigation, which included the Company and certain of its
affiliates, to determine whether violations of certain aspects of the Federal
securities laws have taken place. The Company is cooperating with the Commission
in its investigation and it is not possible at this time to determine the
outcome of the Commission's investigation.
The Company received a letter from the Department of Labor (the "DOL") in May of
1995, alleging that the Company's former Chairman of the Board, at the time a
fiduciary for the Company's retirement plans, violated certain provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") in making
certain investments which may have been imprudent and by possibly engaging in
prohibited transactions under ERISA. The Company and its former Chairman of the
Board are currently in discussions with the DOL concerning the allegations and
it is not possible at this time to determine the outcome of this matter;
however, the Company does not believe that the resolution of the allegations
will have a material adverse effect on the Company.
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
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, 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.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
For information concerning other contingencies see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Contingencies and
Uncertainties."
Item 5. Other Information
Recent Developments
As part of its strategy to strengthen its capital structure and reduce debt, the
Company in November 1996 entered into a definitive agreement to sell its world
wide Material Handling business for $139.5 million. The Material Handling
business is a leading North American and European designer, manufacturer and
marketer of a complete line of lift trucks, electric walkies and related
components and replacement parts under the Clark trademark. CMHC is
headquartered in Lexington, Kentucky and its manufacturing facilities are
located in Lexington, Kentucky and Mulheim-Ruhr, Germany.
For further information concerning CMHC, the accounting treatment of the sale
and use of proceeds thereof, reference is made to Notes A and B to the Condensed
Consolidated Financial Statements included elsewhere herein and to "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Forward Looking Information
Certain information in this report includes forward looking statements regarding
future events or the future financial performance of the Company that involve
certain risks and uncertainties discussed in "Management's Discussion and
Analysis of Financial Condition and Results of Operations." In addition, the
Company's expectations are predominantly based on what it considers key economic
assumptions. Construction and mining activity are sensitive to interest rates,
government spending and general economic conditions. Some of the other
significant factors for the Company include foreign currency movements,
political uncertainty in various areas of the world, pricing product initiatives
and other actions taken by competitors, disruptions in production capacity,
excess inventory levels, the effects of changes in laws and regulations,
employee relations and other factors. Actual events or the actual future results
of the Company may differ materially from any forward looking statement due to
such risks, uncertainties and significant factors.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits have been filed as part of this Form 10-Q:
Exhibit No.
11.1 Computation of earnings per share
27 Financial data schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended September
30, 1996.
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, 1996 /s/ Joseph F. Apuzzo
Joseph F. Apuzzo
Vice President Finance and Controller
(Principal Accounting Officer)
EXHIBIT INDEX
Exhibit No.
11.1 Computation of Earnings per Share
27 Financial Data Schedule