SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) May 9, 1995
TEREX CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware 1-10702 13-1531521
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
500 Post Road East, Westport, Connecticut 06880
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (203) 222-7170
(Former Name or Former Address, if Changed Since Last Report)
The Registrant hereby amends Item 7 of its Current Report on Form 8-K dated May
9, 1995 as follows:
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
The following financial statements and pro forma financial information are
hereto attached and filed as part of this report:
a) Financial Statements of Business Acquired
- Report of Independent Auditors F-1
- Audited Combined Financial Statements of PPM S.A. and
Legris Industries, Inc.
- Combined Balance Sheets as of
December 31, 1994 and 1993 F-2
- Combined Statements of Operations for the years ended
December 31, 1994, 1993 and 1992 F-4
- Combined Statements of Shareholders' Equity for
the years ended December 31, 1994, 1993 and 1992 F-5
- Combined Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992 F-6
- Notes to Combined Financial Statements F-7
b) Pro Forma Financial Information F-22
- Unaudited Pro Forma Condensed Consolidated
Statement of Operations of Terex Corporation and
Subsidiaries for the year ended December 31, 1994 F-23
- Unaudited Pro Forma Condensed Consoliated Statement
of Operations of Terex Corporation and Subsidiaries
for the six months ended June 30, 1995 F-24
- Notes to Unaudited Pro Forma Financial Information F-25
c) Exhibits
10.1 Share Purchase Agreement, as amended.*
10.2 Certificate of Designation of Terex Cranes, Inc. with
respect to its Series A Redeemable Exchangeable Preferred Stock.*
10.3 Stockholders Agreement dated as of May 9, 1995 by and among
Terex Corporation, Legris Industries S.A., Potain S.A.
and Terex Cranes, Inc.*
23 Consent of Ernst & Young LLP.
* Previously filed.
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 hereunto duly authorized.
Date: August 28, 1995
TEREX CORPORATION
By:/s/ Richard L. Evans
Richard L. Evans
Controller, Principal Accounting Officer
Report of Independent Auditors
The Board of Directors and Shareholders
PPM S.A. and Legris Industries, Inc.
We have audited the accompanying combined balance sheets of PPM S.A. and Legris
Industries, Inc. as of December 31, 1994 and 1993, and the related combined
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, based on our audits, the financial statements referred to above
present fairly, in all material respects, the combined financial position of
PPM S.A. and Legris Industries, Inc. at December 31, 1994 and 1993, and the
combined results of their operations and their cash flows for each of the three
years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Greenville, South Carolina
August 22, 1995
PPM S.A. and Legris Industries, Inc.
Combined Balance Sheets
December 31
1994 1993
(In thousands except
share amounts)
Assets
Current assets:
Cash and cash equivalents $ 3,586 $ 2,152
Trade accounts receivable,
less allowances of $2,861 and
$2,181 in 1994 and 1993, respectively 35,173 25,868
Due from affiliates 1,705 1,869
Refundable taxes 5,946 5,257
Inventories 70,020 63,498
Prepaid expenses 5,525 4,758
Other current assets 32 81
Total current assets 121,987 103,483
Property, plant, and equipment, net 20,922 23,002
Intangible assets:
Cost in excess of net assets acquired,
less accumulated amortization of $8,567
and $6,871 in 1994 and 1993, respectively 34,951 36,540
Other identified intangible assets,
less accumulated amortization of $871 and
$597 in 1994 and 1993, respectively 462 715
35,413 37,255
Total assets $178,322 $163,740
PPM S.A. and Legris Industries, Inc.
Combined Balance Sheets
(continued)
December 31
1994 1993
(In thousands except
share amounts)
Liabilities and shareholders' equity
Current liabilities:
Trade accounts payable $ 43,963 $ 35,052
Due to affiliates 6,200 3,027
Product liability reserve 4,850 4,432
Product warranty reserve 1,526 753
Accrued expenses 15,215 16,352
Current portion of long-term debt
and other short-term borrowings 72,689 37,044
Current portion of obligations
under capital leases 925 731
Total current liabilities 145,368 97,391
Long-term debt, less current portion 5,851 28,331
Obligations under capital leases,
less current portion 2,896 3,308
Minority interest in subsidiaries 1,944 2,591
Shareholders' equity:
Common stock of Legris Industries, Inc.,
$100 par value -- authorized, issued
and outstanding 200 shares --- ---
Common stock of PPM S.A.,
100 French Francs ($19) par value --
authorized, issued and outstanding
1,265,544 shares --- ---
Paid-in capital 90,491 81,209
Accumulated deficit (65,079) (46,043)
Foreign currency translation
adjustments (3,149) (3,047)
Total shareholders' equity 22,263 32,119
Total liabilities and
shareholders' equity $178,322 $163,740
See accompanying notes.
PPM S.A. and Legris Industries, Inc.
Combined Statements of Operations
Year Ended December 31
1994 1993 1992
(In thousands)
Net Sales $ 179,695 $ 191,236$ 236,088
Cost of products sold (155,129) (175,072)(197,243)
Selling, general and administrative expenses (35,673) (38,861) (49,862)
Amortization of intangible assets (1,970) (1,807) (2,074)
Loss from operations (13,077) (24,504) (13,091)
Other income (expense):
Interest income 48 11 30
Interest expense (6,668) (8,293) (6,421)
Insurance proceeds --- 6,177 1,122
(6,620) (2,105) (5,269)
Loss before income taxes and
minority interest (19,697) (26,609) (18,360)
Income tax (benefit) provision (14) 30 917
Loss before minority interest (19,683) (26,639) (19,277)
Minority interest in loss of
consolidated subsidiaries 647 946 424
Net loss $ (19,036) $(25,693)$(18,853)
See accompanying notes.
PPM S.A. and Legris Industries, Inc.
Combined Statements of Shareholders' Equity
Foreign
Accu- Currency
Common Stock Paid-In mulated Translation
Shares Amount Capital Deficit Adjustments Total
(In thousands except share amounts)
Balance at
December 31,
1991 1,265,744 $ --- $ 71,242 $ (1,497) $ (62) $69,683
Capital
contribution --- --- 3,500 --- --- 3,500
Conversion of
debt to paid-in
capital --- --- 6,467 --- --- 6,467
Net loss --- --- --- (18,853) --- (18,853)
Translation
adjustment --- --- --- --- (2,443) (2,443)
Balance at
December 31,
1992 1,265,744 --- 81,209 (20,350) (2,505) 58,354
Net loss --- --- --- (25,693) --- (25,693)
Translation
adjustment --- --- --- --- (542) (542)
Balance at
December 31,
1993 1,265,744 --- 81,209 (46,043) (3,047) 32,119
Conversion of
debt to paid-in
capital --- --- 9,282 --- --- 9,282
Net loss --- --- --- (19,036) --- (19,036)
Translation
adjustment --- --- --- --- (102) (102)
Balance at
December 31,
1994 1,265,744 $ --- $ 90,491 $(65,079) $(3,149) $ 22,263
See accompanying notes.
PPM S.A. and Legris Industries, Inc.
Combined Statements of Cash Flows
Year Ended December 31
1994 1993 1992
(In thousands)
Operating activities
Net loss $(19,036) $(25,693) $(18,853)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 6,088 5,661 6,013
Changes in operating assets and liabilities:
Accounts receivable (9,305) 11,824 13,992
Inventories (6,522) 20,562 513
Prepaid expenses and other (1,407) 3,450 3,328
Accounts payable 8,911 (14,911) (20,660)
Net amounts due to affiliates 3,009 (3,275) (6,257)
Product liability reserve 418 493 (3,123)
Accrued expenses and product
warranty reserve (364) (2,654) (208)
Net cash used in operating activities (18,208) (4,543) (25,255)
Investing activities
Purchases of property, plant and equipment (718) (1,683) (5,398)
Increase in other intangible assets (128) 86 (247)
Net cash used in investing activities (846) (1,597) (5,645)
Financing activities
Proceeds from revolving credit with
banks and from notes payable to an
affiliated company 27,141 51,280 28,573
Principal payments on revolving credit
with banks and on notes payable to an
affiliated company (5,688) (43,239) (2,967)
Proceeds on other long-term debt 347 76 749
Principal payments on other long-term debt --- (3,351) ---
Payments on capital leases (218) (160) ---
Capital contribution --- --- 3,500
Net cash provided by financing activities 21,582 4,606 29,855
Effect of exchange rate changes on cash (1,094) 942 (461)
Net increase (decrease) in cash and
cash equivalents 1,434 (592) (1,506)
Cash and cash equivalents at
beginning of period 2,152 2,744 4,250
Cash and cash equivalents at end of period $ 3,586 $ 2,152 $ 2,744
Supplemental disclosure of
cash flow information
Cash paid for interest $ 6,763 $ 9,811 $ 7,667
Cash paid for income taxes $ 74 $ 948 $ 2,015
See accompanying notes.
PPM S.A. and Legris Industries, Inc.
Notes to Combined Financial Statements
December 31, 1994
(In thousands)
1. Basis of Presentation and Description of Business
Basis of Presentation
As more fully described in Note 13, Terex Corporation ("Terex"), through its
wholly owned subsidiary Terex Cranes, Inc. ("Terex Cranes"), completed the
acquisition of substantially all of the common stock of PPM S.A. ("PPM Europe")
and Legris Industries, Inc. ("PPM North America") on May 9, 1995. PPM North
America together with PPM Europe collectively are referred to as "PPM" or "the
Company". Prior to the acquisition, Legris Industries, Inc. was a wholly owned
subsidiary of Groupe Legris Industries S.A., a French corporation, and PPM S.A.
was owned 99.13% by Potain S.A., a majority owned subsidiary of Groupe Legris
Industries S.A. ("Groupe Legris").
The accompanying combined financial statements were prepared on the basis of
generally accepted accounting principles and include the combined financial
position, results of operations and cash flows of the businesses of PPM as
follows below (subsidiaries are 100% owned except as indicated). All
significant intercompany balances have been eliminated.
PPM S.A.
- Brimont Agraire S.A.
- Bendini SpA
- PPM Krane GmbH
- Baulift Baumaschiunen and Krane Handels GmbH
Legris Industries, Inc.
- Potain Tower Cranes, Inc. (inactive)
- PPM Cranes, Inc. (92.4%)
- PPM of Australia Pty. Ltd. (92.4%)
- PPM Far East Pte. Ltd. (92.4%)
Description of Business
PPM designs, manufactures and markets mobile cranes and container stackers
primarily in North America and Western Europe under the brand names of PPM, P&H
(trademark of Harnischfeger Corporation) and BENDINI.
2. Summary of Significant Accounting Policies
Cash and Cash Equivalents
For the purpose of reporting cash flows, cash and cash equivalents include cash
on hand and overnight investments. Included in cash and cash equivalents is
$512 at December 31, 1994 invested under repurchase agreements collateralized
by U. S. Treasury Notes. Securities pledged as collateral for repurchase
agreements are held by the Company's custodian bank until maturity of the
repurchase agreements. Provisions of the agreements ensure that the market
value of this collateral is sufficient in the event of default; however, in the
event of default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral may be subject to legal proceedings.
Accounts Receivable
The Company provides credit in the normal course of business and performs
ongoing credit evaluation on certain of its customers' financial condition, but
generally does not require collateral to support such receivable. Accounts
receivable potentially exposes the Company to concentration of credit risk,
because the Company's customers operate primarily in the construction industry.
The Company also establishes an allowance for doubtful accounts based upon
factors surrounding the credit risk of specific customers, historical trends
and other information.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by
the last-in, first-out (LIFO) method for inventories held in the United States,
by the first-in, first-out (FIFO) method for inventories of PPM of Australia
Pty. Ltd and PPM Far East Pte. Ltd., and by the weighted average method for
inventories of PPM S.A.
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 PPM are depreciated using the
straight-line method over their estimated useful lives.
Intangible Assets
The excess of cost over fair value of net assets of businesses acquired
("goodwill") is amortized on the straight-line method over a period of twenty
years for Legris Industries, Inc. and fifteen years for PPM S.A. Other
identified intangibles are primarily patents and organizational costs which are
amortized over five years. The lives established for these assets are a
composite of many factors; accordingly, the Company evaluates the continued
appropriateness of these lives based upon the latest available economic factors
and circumstances.
The carrying value of goodwill is reviewed if the facts and circumstances
suggest that it may be impaired. If this review indicates that goodwill will
not be recoverable, as determined based on the undiscounted cash flows of the
entity acquired over the remaining amortization period, the Company's carrying
value of the goodwill is reduced by the estimated shortfall of cash flows.
Product Warranty
PPM warrants that each finished machine is merchantable and free of defects in
workmanship and material for a period of up to one year or a specified period
of use. Warranty reserves have been established for estimated normal warranty
costs and for specific problems known to exist on products in use.
Product Liability
Reserves for product liability have been established based upon historical loss
experience for the estimated liability on incidents which have occurred but
have not yet been reported and for the estimated liability for reported
incidents.
Income Taxes
Income taxes are provided using the liability method in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("FAS 109O). Under FAS 109, the deferred tax liabilities and assets are
determined based on temporary differences between the bases of certain assets
and liabilities for income tax and financial reporting purposes. A valuation
allowance is recognized if it is more likely than not that some portion or all
of a deferred tax asset will not be ultimately realized.
Revenue Recognition
Sales are recorded upon shipment or designation of specific goods for later
shipment at customers' request with related risk of ownership passing to such
customers.
Research and Development Costs
Company sponsored research and development costs related to both present and
future products are expensed currently. Total expenditures for research and
development for 1994, 1993 and 1992 were $2,669, $3,751 and $3,440,
respectively.
Translation of Foreign Currencies
The local currencies of the Company's foreign operations have been determined
to be the functional currencies in accordance with Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation". Transactions in
foreign currencies are translated into United States dollars at average rates
of exchange prevailing during the period. Assets and liabilities denominated in
foreign currencies are translated at the year end exchange rates and resulting
translation adjustments are included as a separate component of shareholders'
equity. Gains and losses on foreign currency transactions are recognized in
earnings.
Shareholders' Equity
No amounts were paid as consideration for the issuance of common stock of PPM
S.A. and Legris Industries, Inc. Accordingly, no amounts have been assigned to
common stock in the financial statements.
3. Inventories
Inventories at December 31, 1994 and 1993 consist of the following:
1994 1993
Raw materials and parts $ 41,018 $ 37,767
Work in process 15,139 11,275
Finished goods and subassemblies 13,091 14,103
Consigned inventory 772 353
$ 70,020 $ 63,498
At December 31, 1994 and 1993, approximately $26,308 and $24,618 of inventories
were valued using the LIFO method. These amounts are approximately equivalent
to the corresponding FIFO values at December 31, 1994 and 1993.
4. Property, Plant and Equipment
Property, plant and equipment at December 31, 1994 and 1993 consists of the
following:
1994 1993
Land and improvements $ 2,080 $ 2,242
Buildings 21,273 20,181
Machinery and equipment 31,504 29,083
54,857 51,506
Less accumulated depreciation (33,935) (28,504)
$ 20,922 $ 23,002
Depreciation expense for 1994, 1993 and 1992 was $4,118, $3,854 and $3,939,
respectively.
5. Debt
Debt at December 31, 1994 and 1993 consists of the following:
1994 1993
Non-interest bearing promissory note payable to Harnischfeger
Corporation with annual payments of $1,000,000
through April 10, 1996, annual payments of
$750,000 beginning April 10, 1997 through April 10, 2001
and quarterly payments of $125,000 beginning April 10,
2001 through maturity on April 10, 2011 $ 6,331 $ 6,776
Letter of credit with Credit Lyonnais bearing interest
at U.S. Prime (8.5% at December 31, 1994) payable
on demand. 4,700 7,100
Indebtedness to Groupe Legris bearing interest at 9%
annually maturing May 31, 1996 with no scheduled
principal payments prior to that date. 686 686
Indebtedness to Groupe Legris bearing interest at the
Euro dollar rate plus .5% (6.875% at December 31,
1994) payable on demand 11,500 ---
Indebtedness to Groupe Legris bearing interest at the
Euro dollar rate plus .5% (6.875% at December 31,
1994) maturing December 31, 1996 with no scheduled
principal payments prior to that date. 6,000 6,000
Indebtedness to Groupe Legris bearing interest at the
Euro dollar rate plus .5% (6.875% at December 31,
1994) maturing April 10, 1996 with no scheduled
principal payments prior to that date. 3,000 3,000
Bank debt bearing interest at 10.75% --- 179
Notes payable to Credit National bearing interest at rates
ranging from 8% to 15.5% with maturities ranging from
10 to 15 years. 815 1,154
Note payable to Credit CECA over 5 years at 9.32% 2,170 1,968
Notes payable to Solirem bearing interest at 8.5% and
10.24%, payable over 6 years 557 843
Note payable to Ministero del'Industria over 10 years
at 8.37% 366 373
Note payable to Credito Romagnolo over 8 years at 10.93% 295 292
Lines of credit due on demand with various banks, bearing
interest at rates ranging from 5.8% to 7.4% 37,857 33,753
Other 4,263 3,251
78,540 65,375
Less current portion 72,689 37,044
$ 5,851 $28,331
Other than the note payable to Harnischfeger Corporation, all debt obligations
were satisfied in connection with the acquisition by Terex in May of 1995 (see
Note 13). Accordingly, all debt obligations other than the long-term portion
of the note payable to Harnischfeger Corporation have been classified as
current.
The maturities of the note payable to the Harnischfeger Corporation for the
five years following December 31, 1994 and thereafter are as follows:
Year Payments
1995 $ 480
1996 520
1997 312
1998 338
1999 366
Thereafter 4,315
$ 6,331
6. Employee Benefit Plan
Domestically, PPM Cranes, Inc. has a defined contribution plan covering its
U.S. employees. Under this plan, the Company matches a portion of an employee's
contribution to the plan. PPM Europe also maintains government required fully
funded retirement plans for its employees in France and Italy. For purposes of
these financial statements, all domestic and PPM Europe employees are
considered to have participated in a multi-employer pension plan as defined in
Statement of Financial Accounting Standards No. 87 "Employer's Accounting for
Pensions". For multi-employer plans, employers are required to recognize as
net pension expense total contributions for the period. With respect to these
plans, PPM recorded a net pension expense of $289 for 1994, $118 for 1993 and
$82 for 1992.
7. Income Taxes
Effective January 1, 1992, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". The adoption had no impact on the financial statements of the Company.
(Loss) income before income taxes and minority interest consisted of the
following:
1994 1993 1992
Domestic $ (7,346) $ (11,179) $ (4,269)
Foreign (12,351) (15,430) (14,091)
$ (19,697) $ (26,609) $ (18,360)
Significant components of the provision for income taxes are as follows:
1994 1993 1992
Current
Federal $ --- $ (5) $ 147
Foreign 5 72 836
5 67 983
Deferred:
Federal --- --- ---
Foreign (19) (37) (66)
$ (14) $ 30 $ 917
PPM has not provided U.S. and foreign income taxes on foreign undistributed
earnings which are being retained indefinitely for reinvestment. The
distribution of these earnings would result in additional foreign withholding
taxes and additional U.S. Federal income taxes to the extent they are not
offset by foreign tax credits, but it is not practicable to estimate the total
tax liability that would be incurred upon such a distribution.
The income tax (benefit) provision at the effective tax rate differed from the
benefit at the statutory rate as follows:
1994 1993 1992
Computed tax (benefit) at expected
statutory rate $ (6,697) $ (9,047) $ (4,074)
State taxes (315) (480) (183)
Valuation allowance 4,695 8,823 4,431
Nondeductible goodwill 837 837 837
Adjustment of prior years' accruals 1,548 --- ---
Foreign tax rate differential (82) (103) (94)
Income tax (benefit) provision $ (14) $ 30 $ 917
At December 31, 1994, PPM North America has net operating loss carryforwards
for Federal income tax purposes of approximately $50,550 available to offset
future taxable income, expiring from 1997 to 2008 if not used. PPM Europe has
loss carryforwards of approximately $21,665 at December 31, 1994, including
approximately $11,023 of carryforwards which have no fixed expiration date.
The remaining carryforwards will expire beginning in 1995.
The differences between the loss carryforwards for financial reporting and
income tax purposes result principally from differences between the income tax
basis and the financial reporting basis allocated to the net assets acquired
and differences in the methods of depreciating property, plant, and equipment.
For financial reporting purposes, a valuation allowance equal to the entire
benefit of the cumulative temporary differences and net operating loss
carryforwards has been recognized to offset the net deferred tax assets. For
substantially all of the valuation allowance for deferred tax assets,
subsequently recognized tax benefits will be allocated to reduce goodwill
resulting from the acquisition of PPM by Terex. Components of the Company's
deferred taxes are as follows:
1994 1993
Total deferred tax liabilities $ (3,030) $ (1,113)
Total deferred tax assets, principally
net operating loss carryforwards 43,454 36,179
Total valuation allowance (40,424) (35,066)
Net deferred taxes $ --- $ ---
8. Fair Value of Financial Instruments
The Company has estimated the fair value amounts of financial instruments as
required by Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments", using available market information
and appropriate valuation methodologies. The carrying amount of cash and cash
equivalents, accounts receivable, other current assets, accounts payable and
long-term debt are reasonable estimates of their fair value at December 31,
1994. However, considerable judgment is required in interpreting market data
to develop the carrying amounts of fair value. Accordingly, the carrying
amounts presented herein are not necessarily indicative of the amounts that
the Company would realize in a current market exchange.
9. Leases
PPM has various lease agreements, primarily related to office space, production
facilities, and office equipment, which are accounted for as operating leases.
Certain leases have renewal options and provisions requiring PPM to pay
maintenance, property taxes and insurance. Rent expense for 1994, 1993 and 1992
was $2,977, $2,433 and $3,401, respectively.
PPM Europe also leases buildings and machinery and equipment under capital
leases with terms of 1 to 10 years. Capitalized lease obligations are
calculated using interest rates appropriate at the inception of the lease.
Amortization of assets under capital leases is included with depreciation
expense. Property, plant and equipment includes the following amounts for
leases that have been capitalized:
1994 1993
Buildings $ 1,810 $ 1,642
Machinery and equipment 5,124 3,700
6,934 5,342
Less accumulated depreciation (3,030) (1,603)
Property, plant and equipment, net $ 3,904 $ 3,739
Future minimum rental payments, by year and in the aggregate, under capital
leases and noncancellable operating leases as of December 31, 1994 are as
follows:
Capital Operating
Year Leases Leases
1995 $ 1,365 $ 1,796
1996 1,297 1,242
1997 1,248 890
1998 664 788
1999 380 505
2000 and thereafter 2,847 272
Total minimum
lease payments $ 7,801 $ 5,493
Amount representing
interest (3,980)
Present value of minimum
lease payments $ 3,821
10. Commitments and Contingencies
PPM is involved in product liability and other lawsuits incident to the
operation of its business. Insurance coverages are maintained for claims and
lawsuits of this nature. At December 31, 1994 and 1993, the Company had a
reserve of $4,850 and $4,432 related to product liability matters, including
$200 at December 31, 1994 related to unasserted claims. Actual costs to be
incurred in the future may vary from the estimates, given the inherent
uncertainties in evaluating the outcome of claims and lawsuits of this nature.
Although it is difficult to estimate the liability of the Company related to
these matters, it is management's opinion that none of these lawsuits will have
a materially adverse effect on the Company's combined financial position.
PPM North America is a defendant in a lawsuit initiated by the bankruptcy
trustee for Century II GmbH, a former subsidiary of the Company, related to an
increase in capital. The amount of the claim is for $6,000. Groupe Legris has
indemnified the Company against all losses related to this claim.
PPM is contingently liable up to $1,027 with respect to financing arrangements
and performance guarantees entered into with banks and between certain banks
and certain dealers or customers of PPM.
11. Segment and Geographic Information
The Company operates in one business segment, designing, manufacturing and
marketing mobile cranes and container stackers primarily in North America and
Western Europe. Geographic data for the Company's operations are presented in
the following table. Intercompany sales and expenses are eliminated in
determining results for each operation.
1994 1993 1992
Net sales to unaffiliated customers:
North America $ 72,409 $ 71,984 $ 65,459
Europe 92,175 112,673 155,587
164,584 184,657 221,046
Sales to affiliates 15,111 6,579 15,042
$ 179,695 $191,236 $ 236,088
(Loss) from operations:
North America $ (5,466) $(9,729) $ (3,130)
Europe (7,611) (14,775) (9,961)
$(13,077) $(24,504) $(13,091)
Identifiable assets:
North America $ 80,179 $ 74,710 $ 87,900
Europe 98,143 89,030 122,683
$ 178,322 $ 163,740 $ 210,583
12. Related Party Transactions
PPM had transactions with Groupe Legris and certain of its subsidiaries as
follows:
1994 1993 1992
Product sales and service revenues $ 15,111 $ 6,579 $ 15,042
Purchases of inventory 23,613 17,860 13,515
Interest expense 3,230 2,529 3,038
Other charges 4,493 2,772 4,333
13. Subsequent Events -- Acquisition by Terex and Financing Arrangements
(unaudited)
On May 9, 1995, Terex, through its wholly-owned subsidiary Terex Cranes,
completed the acquisition of 99.18% of the shares of PPM S.A., a societe
anonyme ("PPM Europe"), from Potain S.A., a societe anonyme, and 100% of the
capital stock of Legris Industries, Inc., a Delaware corporation which owns
92.4% of the capital stock of PPM Cranes, Inc., a Delaware corporation ("PPM
North America") from Legris Industries S.A., a societe anonyme ("Legris
France"). PPM North America together with PPM Europe collectively are referred
to as "PPM". PPM designs, manufactures and markets mobile cranes and container
stackers primarily in North America and Western Europe under the brand names of
PPM, P&H (trademark of Harnischfeger Corporation) and BENDINI.
The purchase price, together with amounts needed to repay indebtedness of PPM
required to be repaid in connection with the Acquisition, consisted of (i)
approximately $92.6 million in cash and (ii) shares of Series A Redeemable
Exchangeable Preferred Stock of Terex Cranes having an aggregate liquidation
preference of approximately $25.9 million, subject to adjustment (the "Seller
Preferred Stock"). The Seller Preferred Stock bears no dividend and is
mandatorily redeemable in seven years and three months from the date of
issuance. The Seller Preferred Stock may be redeemed at any time for cash (to
the extent permitted pursuant to the provisions of the Indenture for Terex's 13
1/4% Senior Secured Notes due 2002) or, under certain circumstances for shares
of common stock, par value $.01 per share (the "Cranes Common Stock"), of Terex
Cranes. The purchase price is subject to adjustment calculated by reference to
the consolidated net asset value of PPM as determined by an audit to be
conducted following the consummation of the Acquisition. Terex Cranes has not
yet reached agreement with the sellers about the amount of purchase price
adjustment but, based on work performed, Terex Cranes believes that the amount
of the Seller Preferred Stock could ultimately be reduced. In addition, the
liquidation preference and the redemption price of the Seller Preferred Stock
may be adjusted based upon the unit shipments of the mobile crane industry in
Western Europe during the second and third years following the consummation of
the Acquisition.
The funds for the cash portion of the purchase price and the repayment of debt
of the acquired businesses were obtained from the private placement on May 9,
1995 to institutional investors of units consisting of Terex's 13 1/4% Senior
Secured Notes due 2002 and common stock appreciation rights. The Senior
Secured Notes are secured by substantially all of the assets of Terex and its
domestic subsidiaries, including PPM North America, subject to security
interests granted under the Credit Facility as described below, and by liens
on certain assets of Terex's foreign subsidiaries, including PPM Europe.
Simultaneously with the acquisition, Terex, PPM North America and certain other
domestic subsidiaries of Terex entered into a Credit Facility which provides
that the companies will be able to borrow (in the form of revolving loans and
up to $15 million in outstanding letters of credit) up to $100 million, subject
to borrowing base limitations. The Credit Facility is secured by substantially
all of the companies domestic receivables and inventory (including PPM North
America). The amount of borrowings is limited to the sum of the following: (i)
75% of the net amount of eligible receivables, as defined, of Terex's U.S.
businesses other than Clark Material Handling Company ("CMHC") plus (ii) 70% of
the net amount of CMHC eligible receivables, plus (iii) the lesser of 45% of
the value of eligible inventory, as defined, or 80% of the appraised orderly
liquidation value of eligible inventory, less (iv) any availability reserves
established by the lenders. The Credit Facility expires May 9, 1998 unless
extended by the lenders for one additional year. At the option of Terex,
revolving loans may be in the form of prime rate loans bearing interest at the
rate of l.75% per annum in excess of the prime rate and eurodollar rate loans
bearing interest at the rate of 3.75% per annum in excess of the adjusted
eurodollar rate.
TEREX CORPORATION
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial information
of the Company gives effect to the acquisition of P.P.M. S.A. ("PPM Europe")
and Legris Industries, Inc. ("PPM North America," together with PPM Europe,
"PPM") by the Company's wholly owned subsidiary, Terex Cranes, Inc. ("Terex
Cranes") on May 9, 1995 (the "PPM Acquisition") as described in Item 2 of this
Form 8-K. The pro forma information is based on the historical statements of
operations of the Company for the year ended December 31, 1994 and for the six
months ended June 30, 1995, giving effect to the PPM Acquisition and related
financing transactions and adjustments as reflected in the accompanying notes.
On May 9, 1995, the Company completed the PPM Acquisition. The purchase price,
together with amounts needed to repay indebtedness of PPM required to be repaid
in connection with the PPM Acquisition, consisted of (i) approximately $92.6
million in cash and (ii) shares of Series A Redeemable Exchangeable Preferred
Stock of Terex Cranes having an aggregate liquidation preference of
approximately $26.1 million, subject to adjustment calculated by reference to
the consolidated net asset value of PPM on the closing date of the PPM
Acquisition. A private placement of $250 million of the Company's 13.25%
Senior Secured Notes due 2002 provided the financing for the cash portion of
the purchase price. Proceeds of the Senior Secured Notes and of a new domestic
Credit Facility also provided funds for the refinancing of certain existing
Company debt (the "Refinancing"), for transaction and acquisition costs and for
working capital purposes.
The acquisition was accounted for using the purchase method, with the purchase
price of the PPM Acquisition allocated to the assets acquired and liabilities
assumed based upon their respective estimated fair values at the date of
acquisition. The pro forma consolidated financial information reflects the
Company's initial estimates of the purchase price allocation.
The unaudited pro forma consolidated financial information is not necessarily
indicative of what the actual results of operations of the Company would have
been for the periods indicated, nor does it purport to represent the results of
operations for future periods.
TEREX CORPORATION
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(in thousands except per share amounts)
Terex
Corporation Pro Forma Pro Forma
and BusinessAcquisition Refinancing
Subsidiaries AcquiredAdjustments Adjustments Pro Forma
NET SALES $ 786,781 $ 179,695 $ 0 $ 0 $966,476
COST OF GOODS SOLD 703,622 157,099 2,288 (2a) 0 863,009
Gross Profit 83,159 22,596 (2,288) 0 103,467
ENGINEERING, SELLING
AND ADMINISTRATIVE
EXPENSES 72,445 35,673 0 0 108,118
SEVERANCE CHARGES 7,353 0 0 0 7,353
Income (loss) from
operations 3,361 (13,077) (2,288) 0 (12,004)
OTHER INCOME (EXPENSE):
Interest income 587 48 0 0 635
Interest expense (30,492) (6,668) 5,329 (2b)(12,388)(2d)(44,219)
Amortization of debt
issuance costs (2,300) 0 0 (129)(2d) (2,429)
Gain on sale
of Fruehauf 26,043 0 0 0 26,043
Gain on sale of
Drexel business 4,742 0 0 0 4,742
Other income
(expense) - net 15 0 0 0 15
Income (loss) before
extraordinary items
and income taxes 1,956 (19,697) 3,041 (12,517) (27,217)
PROVISION FOR
INCOME TAXES (786) 14 0 0 (772)
Income (loss) before
extraordinary
items 1,170 (19,683) 3,041 (12,517) (27,989)
Minority interest in
loss of subsidiary 0 647 0 0 647
LESS PREFERRED STOCK
ACCRETION (5,929) 0 (1,421) (2c) 0 (7,350)
LOSS BEFORE
EXTRAORDINARY
ITEMS APPLICABLE TO
COMMON STOCK $ (4,759) $(19,036) $ 1,620 $(12,517) $(34,692)
PER SHARE $ (.46) $ (3.37)
AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING IN PER
SHARE CALCULATION 10,303 10,303
TEREX CORPORATION
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(in thousands except per share amounts)
Terex
Corporation Pro Forma Pro Forma
and BusinessAcquisition Refinancing
Subsidiaries AcquiredAdjustments Adjustments Pro Forma
NET SALES $ 483,485 $ 64,840 $ 0 $ 0 $548,325
COST OF GOODS SOLD 438,039 66,618 672 (2a) 0 505,329
Gross Profit 45,446 (1,778) (672) 0 42,996
ENGINEERING, SELLING
AND ADMINISTRATIVE
EXPENSES 38,400 14,053 0 0 52,453
SEVERANCE CHARGES 3,478 0 0 0 3,478
Income (loss) from
operations 3,568 (15,831) (672) 0 (12,935)
OTHER INCOME (EXPENSE):
Interest income 499 0 0 0 499
Interest expense (16,582) (2,305) 1,858 (2b) (5,744)(2d)(22,773)
Amortization of
debt issuance
costs (1,053) 0 0 (161)(2d) (1,214)
Gain on sale
of Fruehauf 1,032 0 0 0 1,032
Other income
(expense) - net (5,650) (2,355) 0 0 (8,005)
Loss before
extraordinary
items and
income taxes (18,186) (20,491) 1,186 (5,905) (43,396)
PROVISION FOR
INCOME TAXES (115) 0 0 0 (115)
loss before
extraordinary
items (18,301) (20,491) 1,186 (5,905) (43,511)
LESS PREFERRED STOCK
ACCRETION (3,518) 0 (794) (2c) 0 (4,312)
LOSS BEFORE
EXTRAORDINARY ITEMS
APPLICABLE TO
COMMON STOCK $(21,819) $(20,491) $ 392 $ (5,905) $(47,823)
PER SHARE $ (2.12) $ (4.64)
AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING IN PER
SHARE CALCULATION 10,316 10,316
TEREX CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
1) The unaudited pro forma condensed consolidated financial information is
presented for the year ended December 31, 1994 and the six months ended June
30, 1995. The pro forma statements of operations reflect the consolidated
operations of the Company combined with those of the acquired business assuming
the PPM Acquisition and the Refinancing were consummated on January 1, 1994.
2) The pro forma statement of operations adjustments are summarized as
follows:
a) Pro forma acquisition adjustments to "Cost of goods sold" represent
the elimination of goodwill amortization of the business acquired and the
amortization of goodwill resulting from the PPM Acquisition over 15 years.
b) Pro forma acquisition adjustments to "Interest expense" represent the
elimination of interest expense relating to debt repaid in connection with the
PPM Acquisition or forgiven by the seller.
c) Pro forma acquisition adjustments to "Preferred stock accretion"
represent accretion on Terex Cranes redeemable preferred stock issued in the
PPM Acquisition, assuming issuance as of January 1, 1994.
d) The Refinancing provided the funds to finance the PPM Acquisition, as
well as funds to refinance certain existing Company debt and pay refinancing
and acquisition costs. The new Senior Secured Notes bear interest at 13.25%
and are due May 15, 2002. The Credit Facility loans bear interest at 1.75% in
excess of the prime rate or at 3.75% in excess of the adjusted eurodollar rate,
at the Company's option (interest rate of 11%, including fees, assumed for pro
forma presentation); the Credit Facility expires May 9, 1998. The pro forma
adjustments to "Interest expense" and "Amortization of debt issuance costs"
represent the incremental effects of the Refinancing:
- The Company's old 13% senior secured notes and 13.5% senior
subordinated notes are assumed to be repaid as of January 1, 1994, and the
interest expense and related amortization of discount and issuance costs is
eliminated.
- The 13.25% new Senior Secured Notes are assumed to be issued and
registered as of January 1, 1994 and interest expense and related amortization
of discount and issuance costs is included.
- The incremental amount borrowed under the Credit Facility at the
time of the Refinancing is assumed to be outstanding from January 1, 1994 and
interest is included thereon.
3) A pro forma condensed balance sheet is not presented herein because the
PPM Acquisition is reflected in the Company's Condensed Consolidated Balance
Sheet as of June 30, 1995 filed on Form 10-Q. The estimated fair values of
assets and liabilities acquired in the PPM Acquisition are summarized as
follows:
Cash $ 974
Accounts receivable 33,816
Inventories 69,107
Other current assets 11,866
Property, plant and equipment 20,516
Other assets 268
Goodwill 63,864
Accounts payable and other
current liabilities (84,458)
Other liabilities (11,501)
$ 104,452
The Company is in the process of obtaining certain evaluations, estimations,
appraisals and actuarial and other studies for purposes of determining certain
values. The Company has also estimated costs related to plans to integrate the
activities of PPM into the Company, including plans to terminate excess
employees, exit certain activities and consolidate and restructure certain
functions. The Company may revise the estimates as additional information is
obtained.
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-21483) pertaining to the Terex Corporation Incentive Stock
Option Plan of our report dated August 22, 1995, with respect to the combined
financial statements of PPM S.A. and Legris Industries, Inc. included in
Amendment No. 1 to Form 8-K/A dated August 28, 1995.
ERNST & YOUNG LLP
Greenville, South Carolina
August 28, 1995
