As filed with the Securities and Exchange Commission on May 13, 1996.
Registration No. 33-52711
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1/A
AMENDMENT NO. 6
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
TEREX CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 3537 34-1531521
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification no.)
500 Post Road East
Westport, Connecticut 06880
(203) 222-7170
(Address, including zip code, and telephone
number, including area code, of Registrants'
principal executive offices)
--------------------------------------
Marvin B. Rosenberg, Esq.
TEREX CORPORATION
500 Post Road East
Westport, Connecticut 06880
(203) 222-7170
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------------------------
Copies To:
Robinson Silverman Pearce
Aronsohn & Berman LLP Skadden, Arps, Slate, Meagher & Flom
1290 Avenue of the Americas 300 South Grand Avenue
New York, New York 10104 Los Angeles, California 90071
Attention: Stuart A. Gordon, Esq. Attention: Michael A. Woronoff, Esq.
Eric I Cohen, Esq.
-------------------------------------
Approximate date of commencement of proposed sale to public: From time to time
after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1993, check the following box: |X|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act of 1933, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
<PAGE>
--------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine
<PAGE>
TEREX CORPORATION
Cross Reference Sheet
Pursuant to Item 501(b) of Regulation S-K Showing
Location in Prospectus of Information Required by Items in Form S-1
1. Forepart of Registration Statement
and Outside Front Cover Page
of Prospectus...........................Outside Front Cover Page of
the Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus...............Inside Front and Outside Back
Cover Pages of the
Prospectus, Additional
Information
3. Summary Information/Risk Factors/
Ratio of Earnings to
Fixed Charges...........................Prospectus Summary/Risk
Factors/Selected
Consolidated Financial
Data
4. Use of Proceeds..............................Use of Proceeds
5. Determination of Offering Price..............Plan of Distribution
6. Dilution.....................................Not Applicable
7. Selling Security Holders.....................Selling Security Holders
8. Plan of Distribution.........................Outside Front Cover Page of
the Prospectus; Plan of
Distribution
9. Description of Securities
to Be Registered........................Description of Securities
10. Interests of Named Experts and Counsel.......Legal Matters; Experts
11. Information with Respect
to the Registrant.......................Outside Front Cover Page of
the Prospectus;
Prospectus Summary; The
Company; Risk Factors;
Market for Common Stock
and Dividend Policy;
Capitalization; Selected
Consolidated Financial
Information; Management's
Discussion and Analysis
of Financial Condition
and Results of
Operations; Business;
Principal Stockholders;
Management; Certain
Transactions; Description
of Securities
12. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities..........Not Applicable
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 13, 1996
1,200,000 Shares of Preferred Stock
2,700,000 Shares of Common Stock
TEREX CORPORATION
Preferred Stock and Common Stock
---------------------------------
This Prospectus relates to the registration of (i) 1,200,000 shares of Series A
Cumulative Redeemable Convertible Preferred Stock, par value $.01 per share (the
"Preferred Stock"), of Terex Corporation, a Delaware corporation (the "Company")
and (ii) the shares of common stock, par value $.01 per share (the "Common
Stock"), issuable upon the conversion of the Preferred Stock (the "Conversion
Shares"). The Preferred Stock was issued by the Company, together with 1,300,000
of the Company's common stock purchase warrants (the "Warrants"), in a private
placement effected on December 20, 1993 (the "Issue Date"). All of the Preferred
Stock and Conversion Shares are being registered for resale by the holders
thereof (the "Selling Security Holders"). See "Selling Security Holders." The
Conversion Shares are also being registered for their issuance to persons who
acquire the Preferred Stock after the date hereof upon their conversion of the
Preferred Stock. The Company will not receive any of the proceeds from the
resale by the Selling Security Holders of the Preferred Stock or the Conversion
Shares nor from the issuance of Conversion Shares upon conversion of the
Preferred Stock.
Each share of Preferred Stock may be converted, at any time or from time to
time, at the option of the holder of such share, into that number of fully paid
and nonassessable Conversion Shares determined by dividing (i) $25.00 by (ii) a
price (the "Conversion Price") initially equal to $11.11 and subject to
adjustment upon the occurrence of certain dilutive events. The Company has
reserved 2,700,000 shares of Common Stock for issuance upon conversion of the
Preferred Stock, being the number of shares of Common Stock that will be
issuable based upon the initial Conversion Price. See "Description of Securities
- -- Preferred Stock."
The Preferred Stock is entitled to receive, when and as declared by the Board of
Directors of the Company, cumulative cash dividends on March 31, June 30,
September 30 and December 31 of each year (each a "Dividend Payment Date") at a
rate (the "Dividend Rate") of (a) 13% per annum from the Dividend Payment Date
immediately preceding the first Dividend Payment Date on which the Company is
permitted to declare and pay cash dividends on the Preferred Stock under the
indentures and loan agreements of the Company as were in effect on the Issue
Date (the "Accretion Termination Date") through December 20, 1998, and (b) 18%
thereafter. As of the date of this Prospectus, the Company would not be
permitted to declare and pay dividends on the Preferred Stock under the
indentures and loan agreements which were in effect on the Issue Date and,
accordingly, the Accretion Termination Date has not occurred. Until such time as
the Registration Statement of which this Prospectus is a part becomes effective,
were the Accretion Termination Date to occur, the Dividend Rate to which the
Preferred Stock would be entitled would be 13.5% per annum. See "Description of
Securities -- Preferred Stock -- Dividends."
Upon a liquidation of the Company, the holders of the Preferred Stock shall be
entitled to be paid out of the assets of the Company, subject to the prior
preferences and rights of any stock ranking senior to the Preferred Stock, a
liquidation preference (the "Liquidation Preference"), initially equal to $25.00
per share, plus all accrued and unpaid dividends to such date. During the period
commencing on the Issue Date and ending on the Accretion Termination Date, the
Liquidation Preference accretes at the applicable Dividend Rate, compounded
quarterly.
The Preferred Stock may be redeemed by the Company at any time in whole or in
part at a per share redemption price equal to the Liquidation Preference per
share on the date of redemption plus all accrued but unpaid dividends thereon
(the "Redemption Price") on such date. The Company is required to redeem all of
the then outstanding shares of Preferred Stock on or prior to December 31, 2000.
The Common Stock is listed on the New York Stock Exchange (the "NYSE") under the
trading symbol "TEX." On May 10, 1996, the closing price of the Common Stock on
the NYSE was $8.125 per share. See "Market for Common Stock and Dividend
Policy." The Conversion Shares have been approved for listing on the NYSE,
subject to issuance.
(continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is _______, 1996.
<PAGE>
Prior to this offering, there has been no public market for the Preferred Stock.
The Company does not intend to list the Preferred Stock on any securities
exchange or to seek approval for quotation of the Preferred Stock through any
automated quotation system. There can be no assurance that an active market for
the Preferred Stock will develop.
The Selling Security Holders directly, through agents designated from time to
time, or through dealers or underwriters also to be designated, may sell the
Preferred Stock and Conversion Shares from time to time on terms to be
determined at the time of sale through customary brokerage channels or private
sales at market prices then prevailing or at negotiated prices then obtainable.
To the extent required, the specific Preferred Stock or Conversion Shares to be
sold, names of the Selling Security Holders, purchase price, public offering
price, the names of any such agent, dealer or underwriter, amount of expenses of
the offering and any applicable commission or discount with respect to a
particular offer will be set forth in an accompanying Prospectus Supplement.
Each of the Selling Security Holders reserves the sole right to accept and,
together with its agents from time to time, to reject in whole or in part any
proposed purchase of Preferred Stock or Conversion Shares made directly or
through agents.
See "Plan of Distribution" for indemnification arrangements among the Company
and the Selling Security Holders.
For a discussion of certain matters which should be considered by prospective
investors, see "Risk Factors."
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith is required to file reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at its offices at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and at Northwestern Atrium Center, 500 West
Madison Street, 14th Floor, Chicago, Illinois 60661-2511. Copies of such
materials can be obtained by mail from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates.
The Common Stock is listed on the NYSE and reports, proxy statements and other
information concerning the Company may also be inspected at the NYSE.
The Company has filed with the Commission a Registration Statement on Form S-1
under the Securities Act with respect to the Preferred Stock and Conversion
Shares offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, as permitted by
the rules and regulations of the Commission. For further information with
respect to the Company and the Preferred Stock and Conversion Shares offered
hereby, reference is made to the Registration Statement, including the exhibits
thereto and the financial statements, notes and schedules filed as a part
thereof, which may be inspected and copied at the public reference facilities of
the Commission referred to above.
The Company furnishes stockholders with annual reports containing audited
financial statements. The Company also furnishes its common stockholders with
proxy material for its annual meetings complying with the proxy requirements of
the Exchange Act.
No material trends, events or transactions have occurred subsequent to December
31, 1995 that would materially affect the Company's financial position or
results of operations.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements and
notes thereto appearing elsewhere in this Prospectus. Investors should carefully
consider the information set forth under the caption "Risk Factors."
The Company
Terex Corporation ("Terex" or the "Company") is a global provider of capital
goods and equipment used in the mining, commercial building, infrastructure,
manufacturing and construction industries. The Company's Material Handling
Segment designs, manufactures and markets a complete line of internal combustion
("IC") and electric lift trucks, electric walkies, automated pallet trucks and
related components and replacement parts. The Heavy Equipment Segment designs,
manufactures and markets heavy-duty, off-highway, earthmoving and construction
equipment and related components and replacement parts. The Mobile Cranes
Segment designs, manufactures and markets mobile cranes, aerial platforms,
container stackers and scrap handlers and related components and replacement
parts. See "The Company" and "Business."
The Mobile Cranes Segment was established as a separate business segment as a
result of a significant acquisition in 1995. On May 9, 1995, the Company,
through Terex Cranes, Inc., a Delaware corporation which is a wholly owned
subsidiary of the Company ("Terex Cranes"), completed the acquisition (the "PPM
Acquisition") of substantially all of the shares of P.P.M. S.A., a societe
anonyme, and certain subsidiaries ("PPM Europe"), from Potain S.A., a societe
anonyme, and all 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;" and PPM North America together with
PPM Europe collectively referred to as "PPM"), from Legris Industries S.A., a
societe anonyme ("Legris France"). 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. Concurrently with the completion of the PPM Acquisition, the Company
contributed the assets (subject to liabilities) of its Koehring Cranes and
Excavators and Marklift division to Terex Cranes. The former division now
operates as Koehring Cranes, Inc., a wholly owned subsidiary of Terex Cranes
("Koehring"). Koehring manufactures mobile cranes under the LORAIN brand name
and aerial lift equipment under the MARKLIFT brand name. PPM and Koehring
comprise Terex Cranes, Inc., the Company's Mobile Cranes Segment.
The Offering
On December 20, 1993 (the "Issue Date"), the Company completed the private
placement of (i) 1,200,000 shares of the Company's Series A Cumulative
Redeemable Convertible Preferred Stock, par value $.01 per share (the "Preferred
Stock"), and (ii) 1,300,000 common stock purchase warrants (the "Warrants")
exercisable for shares of common stock, par value $.01 per share (the "Common
Stock"), of the Company, to institutional investors for aggregate gross proceeds
to the Company of $30.2 million. Jefferies & Company, Inc. ("Jefferies") was the
placement agent for the sale of the Preferred Stock and Warrants.
In connection with the sale of the Preferred Stock, the Company and the
purchasers of the Preferred Stock entered into a Registration Rights Agreement
dated as of December 20, 1993 (the "Preferred Stock Registration Rights
Agreement") relating to the Preferred Stock and the shares of Common Stock
issuable upon conversion of the Preferred Stock (the "Conversion Shares").
Pursuant to the terms of the Preferred Stock Registration Rights Agreement, the
Company agreed to file the Registration Statement of which this Prospectus forms
a part and is required to maintain the effectiveness of this Registration
Statement for 36 months from the date such Registration Statement is declared
effective or, if shorter, until all Preferred Stock and Conversion Shares have
been sold pursuant to an effective registration statement.
Summary of Terms of the Preferred Stock
Issuer................................Terex Corporation.
Issue.................................Series A Cumulative Redeemable
Convertible Preferred Stock, convertible into shares of Common
Stock.
Aggregate Number of Shares............1,200,000.
Conversion............................Each share of Preferred Stock
may be converted, at any time or from time to time, at the option
of the holder of such share, into that number of fully paid and
nonassessable Conversion Shares determined by dividing (i) $25.00
by (ii) a price (the "Conversion Price") initially equal to
$11.11 and subject to adjustment upon the occurrence of certain
dilutive events. See "Description of Securities -- Preferred
Stock -- Conversion Right."
Dividends.............................The Preferred Stock is entitled
to receive, when and as declared by the Board of Directors of the
Company, cumulative cash dividends on March 31, June 30,
September 30 and December 31 of each year (each a "Dividend
Payment Date") at a rate (the "Dividend Rate") of (a) 13% per
annum from the Dividend Payment Date immediately preceding the
first Dividend Payment Date on which the Company is permitted to
declare and pay cash dividends on the Preferred Stock under the
indentures and loan agreements of the Company as were in effect
on the Issue Date (the "Accretion Termination Date") through
December 20, 1998, and (b) 18% thereafter. As of the date of this
Prospectus, the Company would not be permitted to declare and pay
dividends on the Preferred Stock under the indentures and loan
agreements which were in effect on the Issue Date and,
accordingly, the Accretion Termination Date has not occurred.
Until such time as the Registration Statement of which this
Prospectus is a part becomes effective, were the Accretion
Termination Date to occur, the Dividend Rate to which the
Preferred Stock would be entitled would be 13.5% per annum. See
"Description of Securities -- Preferred Stock -- Dividends."
Liquidation Preference................Upon a liquidation of the
Company, the holders of the Preferred Stock shall be entitled to
be paid out of the assets of the Company, subject to the prior
preferences and rights of any stock ranking senior to the
Preferred Stock, a liquidation preference (the "Liquidation
Preference"), initially equal to $25.00 per share, plus all
accrued and unpaid dividends to such date. During the period
commencing on the Issue Date and ending on the Accretion
Termination Date, the Liquidation Preference accretes at the
applicable Dividend Rate, compounded quarterly. See "Description
of Securities -- Preferred Stock -- Liquidation Preference."
Optional Redemption...................The Preferred Stock is
redeemable, in whole or in part, at a per share redemption price
equal to the Liquidation Preference per share on the date of
redemption plus all accrued but unpaid dividends thereon (the
"Redemption Price"). See "Description of Securities -- Preferred
Stock -- Redemption."
Mandatory Redemption..................The Company is required to
redeem all of the then outstanding shares of Preferred Stock on
or prior to December 31, 2000 at the Redemption Price on such
redemption date. See "Description of Securities -- Preferred
Stock -- Redemption."
Voting................................So long as any Preferred Stock
is outstanding, the Company must obtain the approval of the
holders of not less than a majority of the then outstanding
shares of Preferred Stock to take certain actions, including (i)
authorizing or issuing any shares of any class of stock ranking
senior, or, in some cases, on a parity with, the Preferred Stock,
(ii) authorizing or entering into any transaction that would
constitute a deemed dividend to holders of the Preferred Stock
under United States Federal tax laws, or (iii) consolidating with
or merging into another corporation other than in a transaction
in which the Company is the surviving corporation. See
"Description of Securities -- Preferred Stock -- Voting."
In addition, from and after the Accretion Termination Date,(i) if
the Company fails to pay the entire amount of dividends payable
on the Preferred Stock on any two Dividend Payment Dates, the
holders of the Preferred Stock, voting separately as a class,
will be entitled to elect one director of the Company, and (ii)
if the Company fails to pay the entire amount of dividends
payable on the Preferred Stock on any four Dividend Payment
Dates, the holders of the Preferred Stock, voting separately as a
class, will be entitled to elect two directors of the Company.
See "Description of Securities -- Preferred Stock -- Voting."
Risk Factors
See "Risk Factors" for a discussion of certain factors that should be considered
in connection with an investment in the Preferred Stock and the Conversion
Shares.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY CONSOLIDATED FINANCIAL DATA
(in millions except per share amounts)
The following summary consolidated financial data is derived from the Selected
Consolidated Financial Data appearing elsewhere in this Prospectus.
As of and for the Year Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Summary of Operations (1)
Net Sales ................................... $ 1,030.2 $ 786.8 $ 670.3 $ 523.4 $ 784.2
Income (loss) from operations ............... 21.4 3.4 (33.9) (4.1) (70.7)
Income (loss) before extraordinary items..... (27.7) 1.2 (65.0) 2.9 (42.7)
Per share:
Income (loss) before extraordinary items .... (3.37) (0.46) (6.55) 0.29 (4.31)
Ratio of earnings to combined fixed
charges and preferred stock accretion (2).. (3) 1.0x (3) 1.2x (3)
Total Assets ................................ $ 626.9 $ 401.6 $ 390.7 $ 477.3 $ 506.7
Capitalization
Long-term debt and notes payable,
including current maturities .............. $ 337.5 $ 190.9 $ 218.0 $ 217.6 $ 223.0
Stockholders' deficit ....................... (98.8) (55.7) (62.3) (9.1) (4.1)
Dividends per share ......................... $ -- $ -- $ -- $ -- $ 0.06
<FN>
(1) The Summary Consolidated Financial Data include the results of operations of
PPM, the Clark Material Handling Company ("CMHC") and certain affiliated
companies (together with CMHC, "CMH") and the Company's aerial lift division,
Mark Industries ("Mark"), from the dates of their acquisitions, May 9, 1995,
July 31, 1992 and December 31, 1991, respectively, and reflect the
deconsolidation of a former subsidiary, Fruehauf Trailer Corporation
("Fruehauf"), as of January 1, 1992. Income (loss) before extraordinary items in
1992 includes a $36.5 gain on deconsolidation of Fruehauf and in 1991 includes a
$56.0 gain as a result of an initial public offering of Fruehauf common stock.
(2) For purposes of determining the ratio of earnings to combined fixed charges
and preferred stock accretion, earnings are defined as income from continuing
operations before income taxes, minority interest, extraordinary items and fixed
charges. Fixed charges consist of interest on indebtedness, preferred stock
accretion, amortization of debt issuance costs and rental expense representative
of the interest factor.
(3) The ratio of earnings to combined fixed charges and preferred stock
accretion is less than 1.0 for these periods. The deficiency amounts are $27.7
for 1995, $64.2 for 1993 and $46.0 for 1991.
</FN>
</TABLE>
<PAGE>
RISK FACTORS
In addition to other matters described in this Prospectus, the following should
be carefully considered in connection with an investment in the Preferred Stock
and the Conversion Shares:
Significant Leverage
The Company is highly leveraged. At December 31, 1995, the Company had
approximately $337.5 million of indebtedness and stockholders' deficit of $98.8
million.
On May 9, 1995, the Company completed the refinancing of substantially all of
its outstanding debt (the "Refinancing"). The Refinancing included the private
placement to institutional investors of $250 million of 13.25% Senior Secured
Notes due May 15, 2002 (the "Senior Secured Notes"), repayment of the Company's
existing senior secured notes and senior subordinated notes, totaling
approximately $152.6 million principal amount, and entry into a new credit
facility to replace the Company's existing lending facility in the U.S.
This substantial leverage has several important consequences, including the
following: (i) a substantial portion of the Company's cash flow from operations
will be dedicated to the payment of principal of, and interest on, its
indebtedness, (ii) the covenants contained in the Company's indebtedness impose
certain restrictions on the Company which, among other things, will limit its
ability to borrow additional funds or to dispose of assets, (iii) the Company's
ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions, general corporate purposes or other purposes
may be impaired, and (iv) the Company's ability to withstand competitive
pressures, adverse economic conditions and adverse changes in governmental
regulations, to make acquisitions, and to take advantage of significant business
opportunities that may arise, may be negatively impacted. The Company's ability
to meet its debt service obligations and to reduce its total indebtedness will
be dependent upon future performance, which will be subject to general economic
conditions, its ability to achieve cost savings and other financial, business
and other factors affecting the operations of the Company, many of which are
beyond its control. The Company has historically sustained significant losses
and, prior to the Refinancing, net cash from operating activities was
insufficient to meet the Company's debt service requirements, which the Company
funded primarily from asset sales. If the Company is unable to generate
sufficient cash flow from operations in the future to service its debt, it may
be required to refinance all or a portion of such debt, including the new Senior
Secured Notes, or to obtain additional financing. However, there can be no
assurance that any refinancing would be possible or that any additional
financing could be obtained.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" for discussion of the Company's
efforts to improve its capital structure and reduce its outstanding
indebtedness.
Absence of Public Market for the Preferred Stock
As of May 6, 1996 there were 26 holders of the Preferred Stock. There has
previously been no public market for the Preferred Stock. The Company does not
intend to list the Preferred Stock on any securities exchange or to seek
approval for quotation through any automated quotation system. There can be no
assurance that an active market for the Preferred Stock will develop. In
addition, resales of a substantial percentage of the outstanding Preferred Stock
could constrain the ability of any market maker to develop or maintain a market
for the Preferred Stock. To the extent that a market for the Preferred Stock
does develop, the market value of the Preferred Stock will depend on the price
of the Common Stock, general economic conditions, the Company's financial
condition and other conditions and may be subject to substantial price
volatility.
Effect of Future Sales of Common Stock on the Value of Preferred Stock
The Company is unable to predict the effect, if any, that any future sales of
Common Stock, including the shares of Common Stock covered hereby, will have on
the market price of the Common Stock and, therefore, indirectly, the value of
the Preferred Stock, prevailing from time to time.
As of March 31, 1996, Randolph W. Lenz, formerly Chairman of the Board and a
Director of the Company, is the beneficial owner, directly and indirectly, of
approximately 42% of the outstanding Common Stock of the Company. Mr. Lenz
currently pledges, and intends to pledge in the future, shares of Common Stock
owned by him as collateral for loans. See "Principal Stockholders." If Mr. Lenz
does not pay such loans when due, the pledgee may have the right to sell the
shares of Common Stock pledged to it in satisfaction of Mr. Lenz's obligations.
The sale or other disposition of a substantial amount of such shares of Common
Stock in the public market could adversely affect the prevailing market price
for the Common Stock and, therefore, indirectly, the value of the Preferred
Stock. Mr. Lenz retired as Chairman of the Board and a Director of the Company
on August 28, 1995, and currently serves as a consultant to the Company. See
"Management -- Retirement of Randolph W. Lenz."
Pursuant to the terms of a Registration Rights Agreement dated December 20, 1993
relating to the Warrants (the "Warrant Registration Rights Agreement"), the
Company filed with the Commission a shelf registration statement covering the
outstanding Warrants and the 3,900,000 shares of Common Stock which have been
previously issued or may be issuable upon exercise of the Warrants. The sale or
other disposition of a substantial number of such shares of Common Stock in the
public market could adversely affect the prevailing market price for the Common
Stock and, therefore, indirectly, the value of the Preferred Stock.
Restrictions on Dividends
Contractual restrictions exist which limit the Company's ability to pay
dividends on its capital stock. The terms of the Preferred Stock also limit the
Company's ability to pay cash dividends on any class of capital stock of the
Company junior to or on a parity with the Preferred Stock. See "Description of
Securities -- Series A Preferred Stock." The Company does not plan on paying
dividends on the Common Stock in the foreseeable future. In addition, under
Delaware law the Company's ability to pay dividends is subject to the statutory
limitation that such payment be either (i) out of its surplus (the excess of its
net assets over its total liabilities plus stated capital) or (ii) in the event
that there is no surplus, out of its net profits for the fiscal year in which
the dividend is declared and/or the preceding fiscal year. See "Market for
Common Stock and Dividend Policy."
Environmental and Related Matters
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 Company may also have contingent responsibility for
liabilities of certain of its subsidiaries with respect to environmental matters
if such subsidiaries were to fail to discharge their obligations to the extent
that such liabilities arose during the period in which the Company was a
controlling shareholder.
Net Operating Loss Carryovers and Other Tax Issues
The Internal Revenue Service (the "IRS") 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.
In addition, Randolph W. Lenz has retired as Chairman of the Company. Although
his retirement agreement places certain restrictions on his ability to sell his
shares of Common Stock in the Company, in the event that Mr. Lenz is able to
sell a substantial portion of his shares in the Company, such sale, in
combination with the issuance of the Warrants on December 20, 1993 and subject
to the effects of other changes in share ownership of the Company, could result
in a change in control for tax purposes. Such a change in control 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.
<PAGE>
SEC Investigation
The Securities and Exchange Commission (the "Commission") in March of 1994
initiated a private investigation, which included the Company and certain of its
then 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. During 1995 the Company incurred
$0.3 million of legal fees and expenses on behalf of the Company, directors and
executives of the Company and KCS. In general, under the Company's by-laws, the
Company is obligated to indemnify Officer and Directors, for all liabilities
arising in the course of their duties on behalf of the Company. To date, no
Officer or Director has had legal representation separate from the Company's
legal representation, and no allocation of the legal fees for such
representation has been made.
Industry Cyclicality and Substantial Competition
Sales of products to be manufactured and sold by the Company have historically
been subject to substantial cyclical variation extending over a number of years
based on general economic conditions. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
The markets in which the Company competes are highly competitive. The Company
must remain competitive in the areas of quality, price, product line, ease of
use, safety, comfort and customer service. Many of the Company's competitors
have greater financial resources than the Company. See "Business" for further
discussion.
Foreign Operations
The Company's products are sold in over 50 countries around the world and,
accordingly, a substantial portion of the revenues of the Company are generated
in foreign currencies, while the costs associated with these revenues are only
partially incurred in the same currencies. Consequently, the Company has a net
exposure to fluctuations between the U.S. dollar and such foreign currencies,
which impacts the financial performance of the Company. Although revenues and
costs of the Company may be partially hedged, currency movements will impact the
Company's financial performance in the future. In addition, international
operations are subject to a number of potential risks, including, among others,
currency exchange controls, transfer restrictions and rate fluctuations, trade
barriers, the effects of income and withholding tax, and governmental
expropriation.
THE COMPANY
Terex is a global provider of capital goods and equipment used in the mining,
commercial building, infrastructure, manufacturing and construction industries.
The Company's operations began in 1983 with the purchase of Northwest
Engineering Company, the Company's original business and name. Since 1983,
management has expanded the Company's business through a series of acquisitions.
In 1988, Northwest Engineering Company merged into a subsidiary acquired in 1986
named Terex Corporation, with Terex Corporation as the surviving corporation.
The Company's Material Handling Segment designs, manufactures and markets a
complete line of internal combustion ("IC") and electric lift trucks, electric
walkies, automated pallet trucks and related components and replacement parts.
The Heavy Equipment Segment designs, manufactures and markets heavy-duty,
off-highway, earthmoving and contruction equipment and related components and
replacement parts. The Mobile Cranes Segment designs, manufactures and markets
mobile cranes, aerial platforms, container stackers and scrap holders and
related components and replacement parts.
The Mobile Cranes Segment was established as a separate business segment as a
result of a significant acquisition in 1995. On May 9, 1995, the Company,
through Terex Cranes, a recently formed wholly owned subsidiary of the Company,
completed the PPM Acquisition. 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. Concurrently with the completion of the PPM Acquisition, the Company
contributed the assets (subject to liabilities) of its Koehring and Marklift
division to Terex Cranes. The former division now operates as Koehring, a wholly
owned subsidiary of Terex Cranes. Koehring manufactures mobile cranes under the
LORAIN brand name and aerial lift equipment under the MARKLIFT brand name. PPM
and Koehring comprise Terex Cranes, Inc., the Company's Mobile Cranes Segment.
The Company has grown through acquisitions and has had considerable experience
in restructuring and operating capital goods manufacturers, particularly in the
off-road truck and construction and industrial equipment industries. Following
an acquisition, in order to improve profitability, the Company traditionally (i)
consolidates manufacturing operations, (ii) adjusts new equipment production
capacity to meet the actual level of demand in the marketplace, (iii) reduces
corporate overhead and (iv) emphasizes that portion of the business that yields
the highest margins, particularly the replacement parts business. More
specifically, this strategy involves elimination of marginally profitable or
unprofitable product lines, closing underutilized and inefficient plants,
liquidating excess inventories and substantially reducing personnel.
The principal executive offices of the Company are located at 500 Post Road
East, Westport, Connecticut 06880 and its telephone number is (203) 222-7170.
USE OF PROCEEDS
All Preferred Stock and Conversion Shares covered hereby being registered for
resale are being so registered for the account of the Selling Security Holders
and, accordingly, the Company will not receive any of the proceeds from the
resale of the Preferred Stock or Conversion Shares by the Selling Security
Holders. The Company will not receive any proceeds from the issuance of
Conversion Shares upon conversion of the Preferred Stock.
MARKET FOR COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock is listed on the NYSE under the symbol "TEX."
Quarterly Market Prices
1995 1994
--------------------------------- ---------------------------------
Fourth Third Second First Fourth Third Second First
------ ------ ------- ------- ------- ------- ------- ------
High...$ 5.25 $ 5.38 $ 6.63 $ 7.13 $ 8.75 $ 7.38 $ 8.00 $ 9.88
Low.... 4.13 4.88 4.63 5.88 6.00 4.25 5.13 6.13
No dividends were declared or paid in 1994 or in 1995. Certain of the Company's
debt agreements contain restrictions as to the payment of cash dividends. Under
the most restrictive of these agreements, $3.0 million was available for
dividends at December 31, 1995. In addition, the Company's debt agreements
generally limit payment of cash dividends by the Company in excess of $3.0
million to 40% of the Company's net income, if any. The terms of the Preferred
Stock and Series B Cumulative Redeemable Convertible Preferred Stock, par value
$.01 per share (the "Series B Preferred Stock") also restrict the Company's
ability to pay cash dividends on the Common Stock. The Company intends generally
to retain earnings, if any, to fund the development and growth of its business.
The Company does not plan on paying dividends on the Common Stock in the
foreseeable future. Any future payments of cash dividends will depend upon the
financial condition, capital requirements and earnings of the Company, as well
as other factors that the Board of Directors may deem relevant.
As of March 31, 1996, there were 783 stockholders of record of the Company's
Common Stock.
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company as
of December 31, 1995. The table should be read in conjunction with the
consolidated financial statements of the Company and the related notes thereto
included elsewhere in this Prospectus. See "The Company" and "Selected
Consolidated Financial Information."
(in millions)
Notes payable and long-term debt
(including current portion):
Senior Secured Notes due May 15, 2002 (1).........$ 247.0
Credit Facility maturing May 9, 1998 (2).......... 66.8
Other debt, including notes payable (3)........... 23.7
----------
Total notes payable and long term debt................. 337.5
----------
Minority interest, including redeemable
preferred stock of a subsidiary...................... 9.4
----------
Redeemable Convertible Preferred Stock
(including the Preferred Stock registered hereby).... 24.6
----------
Stockholders' Deficit
Common Stock Purchase Warrants.................... 17.2
Common Stock ..................................... 0.1
Additional paid-in capital........................ 40.5
Accumulated deficit............................... (150.9)
Pension liability adjustment...................... (2.7)
Unrealized holding gain on equity securities...... 1.0
Foreign currency translation adjustment........... (4.0)
----------
Total stockholders' deficit..................... (98.8)
----------
Total capitalization...................................$ 272.7
==========
- ----------------
(1) Represents $250.0 million principal amount of Senior Secured Notes. See "The
Senior Secured Notes," below.
(2) The Credit Facility currently provides for revolving credit loans and
guarantees of letters of credit of up to $100 million and matures on May 9,
1998. The Credit Facility bears interest at a fluctuating rate based on 1.75%
per annum in excess of the prime rate or 3.75% per annum in excess of the
adjusted eurodollar rate at the Company's option. Borrowings under the Credit
Facility are secured by a lien on substantially all of the Company's domestic
accounts receivable and inventory. See "The Credit Facility," below.
(3) See Note F -- "Long Term Obligations" of the Notes to Consolidated Financial
Statements, included elsewhere in this Prospectus, for a description of the
Company's other debt.
The Senior Secured Notes
On May 9, 1995, the Company issued $250 million of Senior Secured Notes due May
15, 2002. Except in the event of certain asset sales, there are no principal
repayment or sinking fund requirements prior to maturity. Interest on the Senior
Secured Notes is payable semi-annually on May 15 and November 15 of each year,
commencing on November 15, 1995, to holders of record on the immediately
preceding May 1 and November 1, respectively. The Senior Secured Notes bear
interest at 13.75% per annum. Upon the earlier of (i) the consummation of an
Exchange Offer (as defined in the Senior Secured Notes) and (ii) the
effectiveness of a Shelf Registration Statement (as defined in the Senior
Secured Notes), the interest rate on the Senior Secured Notes will decrease to
13.25% per annum. Interest is computed on the basis of a 360-day year comprised
of twelve 30-day months.
The Senior Secured Notes are senior obligations of the Company, pari passu in
right of payment with all existing and future senior indebtedness and senior to
all subordinated indebtedness. Repayment of the Senior Secured Notes are
guaranteed by certain domestic wholly-owned subsidiaries of the Company (the
"Guarantors"). The Senior Secured Notes are secured by a first priority security
interest on substantially all of the assets of the Company and the Guarantors,
other than cash and cash equivalents, except that as to accounts receivable and
inventory and proceeds thereof, and certain related rights, such security shall
be subordinated to liens securing obligations outstanding under any working
capital or revolving credit facility secured by such accounts receivable and
inventory, including the Credit Facility. The Senior Secured Notes are also
secured by a lien on certain assets of the Company's foreign subsidiaries. The
Indenture for the Senior Secured Notes places certain limits on the Company's
ability to incur additional indebtedness; permit the existence of liens; issue,
pay dividends on or redeem equity securities; sell assets; consolidate, merge or
transfer assets to another entity; and enter into transactions with affiliates.
In connection with the issuance of the Senior Secured Notes, the Company issued
one million stock appreciation rights ("SARs") entitling the holders to receive
cash or Common Stock, at the option of the Company, in an amount equal to the
average closing sale price of the Common Stock for 60 trading days prior to the
date of exercise less $7.288 for each SAR.
The foregoing description is a summary of the terms of the Senior Secured Notes
and Indenture and is qualified in its entirety by reference to such documents,
copies of which are filed as Exhibits to the Registration Statement of which
this Prospectus is a part.
The Credit Facility
The Company currently has a secured revolving credit facility (the "Credit
Facility") with certain institutional lenders (the "Lenders"). Under the terms
of the Credit Facility, the Company and Clark Material Handling Company
("CMHC"), Koehring and PPM North America, each a subsidiary of the Company,
(collectively, the "Borrowers") will have availability, subject to the borrowing
base limitations set forth below, in an aggregate amount of up to $100 million.
Subject to the terms and conditions set forth in the Credit Facility, the
Borrowers may borrow (in the form of revolving loans and up to $15 million in
outstanding letters of credit) an amount at any time outstanding initially
equalling the sum of the following: (i) 75% of the net amount of eligible
receivables (as defined in the Credit Facility) of the Company, Koehring and PPM
North America, plus (ii) 70% of the net amount of eligible receivables of CMHC,
plus (iii) the lesser of (a) 45% of the value of eligible inventory (as defined
in the Credit Facility) of the Borrowers or (b) 80% of the appraised orderly
liquidation value of eligible inventory.
Each Borrower guarantees, on a joint and several basis, all of the obligations
of the other Borrowers under the Credit Facility, which obligations will
generally be secured by a first priority security interest in favor of the
Lenders in all of the receivables and inventory and certain related rights of
the Borrowers.
The outstanding principal amount of prime rate loans initially bears interest at
the rate of 1.75% per annum in excess of the prime rate and the outstanding
principal amount of Eurodollar rate loans initially bears interest at the rate
of 3.75% per annum in excess of the adjusted Eurodollar rate. The Credit
Facility contains covenants limiting the Borrowers' activities, including,
without limitation, limitations on the incurrence of indebtedness, liens, asset
sales, dividends and other payments, investments, mergers and related party
transactions.
The Credit Facility matures on May 9, 1998. The Lenders, at their option, may
extend the facility for one additional year. In the event that for any reason
the facility is terminated prior to the maturity date, the Borrowers must pay to
the Lenders a termination fee.
The foregoing description is a summary of the terms of the Credit Facility and
does not purport to be complete and is qualified in its entirety by reference to
the Loan and Security Agreement dated as of May 9, 1995 between the Lenders and
the Borrowers, a copy of which is filed as an Exhibit to the Registration
Statement of which this Prospectus is a part.
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA
(in millions except per share amounts and employees)
Selected Financial Data
The Selected Financial Data include the results of operations of PPM, CMH and
Mark from the dates of their acquisitions, May 9, 1995, July 31, 1992 and
December 31, 1991, respectively, and reflect the deconsolidation of Fruehauf
Trailer Corporation ("Fruehauf") as of January 1, 1992. Income (loss) before
extraordinary items and net income (loss) in 1992 include a $36.5 gain on
deconsolidation of Fruehauf, and in 1991 include a $56.0 gain as a result of an
initial public offering of Fruehauf common stock.
The following data should be read in conjunction with the historical financial
statements of the Company and the related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein.
As of and for the Year Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Summary of Operations
Net Sales ............................ $ 1,030.2 $ 786.8 $ 670.3 $ 523.4 $ 784.2
Income (loss) from operations ........ 21.4 3.4 (33.9) (4.1) (70.7)
Income (loss) before
extraordinary items ................ (27.7) 1.2 (65.0) 2.9 (42.7)
Net income (loss) .................... (35.2) 0.5 (66.5) 2.9 (42.7)
Net income (loss) applicable
to common stock..................... (42.5) (5.5) (66.7) 2.9 (42.7)
Per Common and Common Equivalent Share:
Income (loss) before extraordinary
items .............................. (3.37) (0.46) (6.55) 0.29 (4.31)
Net income (loss) .................... (4.09) (0.53) (6.70) 0.29 (4.31)
Ratio of earnings to combined fixed charges
and preferred stock accretion (1) ....... (2) 1.0x (2) 1.0x (2)
Total Assets .............................. $ 626.9 $ 401.6 $ 390.7 $ 477.3 $ 506.7
Capitalization
Long-term debt and notes payable,
including current maturities ....... $ 337.5 $ 190.9 $ 218.0 $ 217.6 $ 223.0
Minority interest, including redeemable
preferred stock of a subsidiary .... 9.4 -- -- -- --
Redeemable convertible preferred stock 24.6 17.3 10.5 -- --
Stockholders' deficit ................ (98.8) (55.7) (62.3) (9.1) (4.1)
Dividends per share of Common Stock .. $ -- $ -- $ -- $ -- $ 0.06
Shares of Common Stock outstanding
at period end ...................... 10.6 10.3 10.3 9.9 9.9
Employees ................................. 3,600 2,851 2,930 3,056 6,980
- ------------------------
<FN>
Notes to Selected Consolidated Financial Data
(1) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as income from continuing operations before income
taxes, minority interest, extraordinary items and fixed charges. Fixed
charges consist of interest on indebtedness, preferred stock accretion,
amortization of debt issuance costs and rental expense representative of
the interest factor.
(2) The ratio of earnings to fixed charges is less than 1.0 for these periods. The deficiency amounts are $27.7 for
1995, $64.2 for 1993 and $46.0 for 1991.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Unaudited Quarterly Financial Data
(amounts, except per share amounts, in millions unless otherwise designated)
Summarized quarterly financial data for 1995 and 1994 are as follows:
1995 1994
Fourth Third Second First Fourth Third Second First
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ................ $ 263.3 $ 283.3 $ 269.4 $ 214.2 $ 213.4 $ 207.1 $ 198.3 $ 168.0
Gross profit ............. 32.0 30.8 24.2 21.2 25.7 22.8 19.5 15.2
Income (loss) before
extraordinary items .... (1.8) (7.8) (16.4) (1.9) 0.5 1.2 10.3 (10.8)
Net income (loss) ........ (1.8) (7.8) (23.9) (1.9) 0.2 1.0 10.0 (10.8)
Income (loss) applicable
to common stock ........ (3.7) (9.6) (25.7) (3.6) (1.4) (0.5) 8.6 (12.2)
Per share:
Primary
Income (loss) before
extraordinary items $ (0.35)$ (0.93) $ (1.76)$ (0.35)$ (0.10)$ (0.03)$ 0.64 $ (1.18)
Net income (loss) (0.35) (0.93) (2.48) (0.35) (0.13) (0.05) 0.62 (1.18)
Fully diluted
Income (loss) before
extraordinary items $ (0.35)$ (0.93) $ (1.76)$ (0.35)$ (0.10)$ (0.03)$ 0.60 $ (1.18)
Net income (loss) ... (0.35) (0.93) (2.48) (0.35) (0.13) (0.05) 0.59 (1.18)
</TABLE>
The accompanying unaudited quarterly financial data of the Company have been
prepared in accordance with generally accepted accounting principles for interim
financial information. In the opinion of management, all adjustments considered
necessary for a fair presentation have been made and were of a normal recurring
nature except for those discussed below.
In 1995, the Company recognized a gain of $1.0 in the first quarter as a result
of the sale of 486.6 thousand shares of Fruehauf common stock and recorded
severance and exit costs of $3.5 and an extraordinary loss of $7.5 on the
retirement of debt in the second quarter.
In 1994, the Company recognized gains of $4.6 in the first quarter, $15.5 in the
second quarter, $4.3 in the third quarter and $1.6 in the fourth quarter as a
result of the sale of a total of 5.9 million shares of Fruehauf common stock.
The Company recognized a gain of $4.7 from the sale of its Drexel Industries
subsidiary in the second quarter of 1994. The Company recorded severance charges
of $4.5 in the second quarter of 1994 and $2.9 in the fourth quarter of 1994,
and a related pension curtailment gain of $0.9 in the fourth quarter of 1994.
Net income (loss) has been reduced by Preferred Stock accretion for purposes of
calculating earnings per share amounts. See Note I -- "Preferred Stock" in the
Notes to the Company's Consolidated Financial Statements.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollar amounts except per share are in millions unless otherwise designated.)
RESULTS OF OPERATIONS
1995 Compared with 1994
The table below is a comparison of net sales, gross profit, selling, general and
administrative expenses, severance and exit costs, and income (loss) from
operations, by segment, for 1995 and 1994.
Year Ended
December 31, Increase
1995 1994 (Decrease)
(in millions of dollars)
NET SALES
Material Handling ......... $ 528.8 $ 472.7 $ 56.1
Heavy Equipment ........... 250.3 226.8 23.5
Terex Cranes .............. 252.3 90.4 161.9
Eliminations .............. (1.2) (3.1) 1.9
Total .................. $ 1,030.2 $ 786.8 $ 243.4
GROSS PROFIT
Material Handling ......... $ 37.6 $ 35.2 $ 2.4
Heavy Equipment ........... 35.9 33.8 2.1
Terex Cranes .............. 35.2 14.2 21.0
Eliminations .............. (0.5) -- (0.5)
Total .................. $ 108.2 $ 83.2 $ 25.0
ENGINEERING, SELLING AND
ADMINISTRATIVE EXPENSES
Material Handling ......... $ 31.1 $ 42.4 $ (11.3)
Heavy Equipment ........... 22.9 22.0 0.9
Terex Cranes .............. 28.0 6.3 21.7
General/Corporate ......... 1.3 1.7 (0.4)
Total .................. $ 83.3 $ 72.4 $ 10.9
SEVERANCE AND EXIT COSTS
Material Handling ......... $ 3.5 $ 6.8 $ (3.3)
Heavy Equipment ........... -- 0.6 (0.6)
Total .................. $ 3.5 $ 7.4 $ (3.9)
INCOME (LOSS) FROM OPERATIONS
Material Handling ......... $ 3.0 $ (13.9) $ 16.9
Heavy Equipment ........... 13.0 11.1 1.9
Terex Cranes .............. 7.2 7.9 (0.7)
General/Corporate ......... (1.8) (1.7) (0.1)
Total .................. $ 21.4 $ 3.4 $ 18.0
<PAGE>
Prior to the PPM Acquisition on May 9, 1995, the Company operated in two
industry segments during the periods presented herein: material handling and
heavy equipment. The addition of the PPM business to the Company's existing
crane and aerial lift business has created combined mobile crane operations
sufficient in size to constitute a third industry segment. The 1994 amounts
presented above have been reclassified to a three segment basis for consistency.
The Terex Cranes results for periods prior to May 1995 consist solely of
Koehring's operations.
Net Sales
Sales increased $243.4 to $1,030.2, or approximately 31%, for 1995 versus 1994.
Material Handling Segment sales were $528.8 for 1995, an increase of $56.1 from
$472.7 in 1994. The sales mix was approximately 18% parts in 1995 compared to
19% in 1994. Machine sales increased 12%, primarily because of increased output
resulting from actions taken by management during 1994 and shipments of the new
Genesis line of IC trucks, introduced in December 1994. The light IC market, in
which this product competes, represents approximately 60% of the rider lift
truck industry. Management believes this product is superior to competitors'
products in performance, reliability and operator comfort, and is designed to
achieve reduced production costs. Parts sales increased 6% because of improved
parts inventory availability partially offset by the adverse effects of a labor
strike at the Company's parts distribution center. The strike has not had a
material continuing effect on parts sales.
Material Handling Segment bookings for 1995 were $471.8, an increase of $13.0,
or 3%, from 1994. Backlog at the Material Handling Segment fell from $135.9 at
December 31, 1994 to $78.9 at December 31, 1995 as the Company maintained full
production in the Material Handling Segment United States operations and parts
availability returned to normal levels. As a result, the backlog of both
machines orders and parts orders was reduced during 1995.
Heavy Equipment Segment sales increased $23.5 for 1995 over 1994. Machines sales
increased 8%, and parts sales increased 7%. The sales mix was approximately 35%
parts for 1995 compared to 36% parts for 1994. Heavy Equipment Segment parts
sales were also adversely affected by the strike at the parts distribution
center, but to a lesser degree than the Material Handling Segment.
Heavy Equipment Segment bookings for 1995 were $271.3, an increase of $39.1, or
17%, from 1994. Heavy Equipment Segment backlog was $88.8 at December 31, 1995
compared to $67.8 at December 31, 1994.
Terex Cranes sales were $252.3 for 1995, an increase of $161.9 from $90.4 in
1994 due primarily to the PPM Acquisition in May 1995. Terex Cranes backlog was
$85.3 at December 31, 1995, reflecting the additional PPM backlog, compared to
$11.7 at December 31, 1994.
Gross Profit
Gross profit of $108.2 for 1995 was $25.0, or 30%, higher than gross profit of
$83.2 for 1994.
The Material Handling Segment's gross profit increased $2.4 to $37.6 for 1995
compared to $35.2 for 1994. The gross profit percentage in the Material Handling
Segment was 7% for both 1995 and 1994. Favorable efficiencies due to higher
production and sales volumes and the effects of 1994 severance actions were
offset by additional costs associated with the start-up of production of the new
Genesis product line and manufacturing inefficiencies related to vendors'
continuing inability to meet demand.
The Heavy Equipment Segment's gross profit increased $2.1 to $35.9 for 1995
compared to $33.8 for 1994. The gross profit percentage in the Heavy Equipment
Segment was 14% for 1995 and 15% for 1994.
Terex Cranes gross profit increased $21.0 to $35.2 for 1995, compared to $14.2
for 1994, primarily reflecting the addition of the May through December 1995
results of the PPM businesses. The gross profit percentage for Terex Cranes was
14% for 1995 and 16% for 1994. The gross profit percentage decrease was
primarily due to costs related to integrating the PPM Acquisition into Terex
Cranes.
Engineering, Selling and Administrative Expenses
Engineering, selling and administrative expenses increased to $83.3 for 1995
from $72.4 for 1994. Material Handling Segment engineering, selling and
administrative expenses decreased to $31.1 for 1995 from $42.4 for 1994,
primarily as a result of severance actions taken by management during the second
half of 1994. Heavy Equipment Segment engineering, selling and administrative
expenses increased to $22.9 for 1995 from $22.0 for 1994 as a result of costs
associated with the start-up of a new parts service business. Terex Cranes
engineering, selling and administrative expenses increased to $28.0 for 1995
from $6.3 for 1994 reflecting the PPM Acquisition in May 1995. Corporate
administrative expenses in 1994 included a charge of $2.2 in connection with the
termination of a management contract with KCS Industries, L.P. ("KCS"), a
Connecticut limited partnership principally owned by certain present and former
officers of the Company, offset by allocations to operating segments. See Note M
- -- "Related Party Transactions" in the Notes to the Consolidated Financial
Statements for further information.
Severance and Exit Costs
The Company announced personnel reductions totaling approximately 134 employees
in the Material Handling Segment's North American operations during the second
quarter of 1995 as a continuation of the Company's programs to increase
manufacturing efficiency, reduce costs and improve liquidity. The Company
recorded a combined charge of $3.5 in the second quarter of 1995 for severance
costs associated with these actions and additional costs associated with the
closing of certain administrative and warehouse facilities.
During the second quarter of 1994, the Company recorded a charge of $4.5
principally related to severance costs in the Material Handling Segment's North
American and European operations. In June 1994, the Company announced personnel
reductions in plant supervision, engineering, marketing and administration
totaling approximately 160 employees. The $4.5 charge represents severance costs
associated with these actions. The Company also reorganized certain marketing
activities and closed several of its regional sales offices in the United
States. In December 1994, the Company announced additional personnel reductions
totaling approximately 90 employees in conjunction with the closing of the
Material Handling Segment's Korean plant and certain branch sales offices in
France. An additional $2.9 charge was recorded for costs, principally severance
costs, associated with these actions.
Income (Loss) from Operations
The Material Handling Segment income from operations of $3.0 for 1995 represents
a $16.9 improvement over the $13.9 loss in 1994. As discussed above, increased
sales and reduced costs contributed to the improvement.
Heavy Equipment Segment income from operations improved by $1.9 to $13.0 for
1995 from $11.1 in 1994, primarily as a result of reduced costs, offset by costs
associated with the start up of a new parts service business.
Terex Cranes income from operations of $7.2 for 1995 decreased by $0.7 versus
1994, primarily due to losses of the PPM businesses acquired in May 1995. As a
result of cost reductions, improvements in inventory management and
consolidation of model offerings, Koehring was profitable in 1994 and 1995 after
several years of losses.
On a consolidated basis, the Company realized operating income of $21.4 for
1995, compared to $3.4 for 1994.
Other Income (Expense)
Net interest expense increased to $38.7 for 1995 from $29.9 in 1994 as a result
of incremental borrowings associated with the PPM Acquisition in May 1995. The
Company realized gains of $1.0 and $26.0 from sales of Fruehauf common stock
during 1995 and 1994, respectively. The Company owns 250 thousand shares of
Fruehauf common stock which it received in settlement of certain obligations of
Fruehauf.
The Company recorded a charge of $3.0 in 1995 to recognize the impairment in
value of certain properties held for sale.
The Company also incurred net foreign exchange losses of $1.9, trademark-related
expenses of $1.3, and $0.6 of group retiree expenses during 1995.
The Company recorded a charge of $2.5 in 1995 for payments related to the
retirement of its former Chairman of the Board in August 1995, and future
payments related to the consulting obligations under the retirement agreement of
the former Chairman.
During 1995, the Company recorded no provision for income taxes. In 1994, the
Company recorded a provision for state income taxes of $0.5 in connection with
the sale of Drexel, in addition to the taxes on foreign royalties.
<PAGE>
Extraordinary Items
The Company recorded a charge of $7.5 in 1995 to recognize a loss on the early
extinguishment of debt in connection with the May 1995 refinancing. During 1994,
the Company recognized extraordinary losses totaling $0.7 to write-off
unamortized discount and debt issuance costs when it repurchased $27.3 of its
old senior secured debt.
1994 Compared with 1993
The table below is a comparison of net sales, gross profit, engineering,
selling, and administrative expenses, severance and exit costs and goodwill
write-off and income (loss) from operations, by segment, for 1994 and 1993.
Year Ended December 31, Increase
1994 1993 (Decrease)
(in millions of dollars)
NET SALES
Material Handling ......... $ 472.7 $ 395.6 $ 77.1
Heavy Equipment ........... 226.8 203.8 23.0
Terex Cranes .............. 90.4 71.4 19.0
Eliminations .............. (3.1) (0.5) (2.6)
Total .................. $ 786.8 $ 670.3 $ 116.5
GROSS PROFIT
Material Handling ......... $ 35.2 $ 16.0 $ 19.2
Heavy Equipment ........... 33.8 30.5 3.3
Terex Cranes .............. 14.2 2.0 12.2
Total .................. $ 83.2 $ 48.5 $ 34.7
ENGINEERING, SELLING AND
ADMINISTRATIVE EXPENSES
Material Handling ......... $ 42.4 $ 44.6 $ (2.2)
Heavy Equipment ........... 22.0 19.5 2.5
Terex Cranes .............. 6.3 10.1 (3.8)
General/Corporate ......... 1.7 3.5 (1.8)
Total .................. $ 72.4 $ 77.7 $ (5.3)
SEVERANCE AND EXIT COSTS AND
GOODWILL WRITE-OFF
Material Handling ......... $ 6.8 $ -- $ 6.8
Heavy Equipment ........... 0.6 -- 0.6
Terex Cranes .............. -- 4.7 (4.7)
Total .................. $ 7.4 $ 4.7 $ 2.7
INCOME (LOSS) FROM OPERATIONS
Material Handling ......... $ (13.9) $ (28.6) $ 14.7
Heavy Equipment ........... 11.1 11.0 0.1
Terex Cranes .............. 7.9 (12.8) 20.7
General/Corporate ......... (1.7) (3.5) 1.8
Total .................. $ 3.4 $ (33.9) $ 37.3
<PAGE>
Net Sales
Sales in 1994 increased $116.5, or approximately 17%, over 1993.
Material Handling Segment sales were $472.7 for 1994, an increase of $77.1, or
19%, from $395.6 for 1993. Machine sales increased $81.0 and parts sales
decreased $3.9. As a result, the sales mix was approximately 19% parts in 1994
compared to 24% parts in 1993. Machine sales improved due to increased industry
demand and increased output resulting from production improvements and the
easing of capital constraints. Cash constraints in the second half of 1993
resulted in production problems caused by a lack of supplies and materials
during the last half of 1993 and the opening months of 1994. Production improved
in 1994 because of reorganization of work flows and other actions taken by
manufacturing management and because a working capital infusion in December 1993
allowed management to improve relations and schedule payment terms with its key
suppliers. Parts sales were affected by the cash constraints previously
discussed and by difficulties in assimilating the Material Handling Segment's
parts business into the Terex Parts Distribution Center during the first half of
1994, leading to decreased parts availability. Parts sales improved during the
last half of 1994 as these difficulties were mitigated.
Material Handling Segment bookings for 1994 were $470.6, an increase of $5.6
from 1993. Machine order bookings for 1994 of $381.2 increased $17.3 or 5%
compared to $364.0 in 1993. Bookings for parts sales for 1994, from which the
Company generally realizes higher margins than machine sales, decreased $11.6,
or 12%, from 1993, primarily because of decreased parts availability as
discussed above. Material Handling Segment backlog was $135.9 at December 31,
1994 compared to $152.7 at December 31, 1993. This change reflects the
improvement in second through fourth quarter sales resulting from the upward
trend in production and improved parts availability levels. The Company
maintained full production in the Material Handling Segment United States
operations and parts availability returned to normal levels. As a result, the
backlog of both machines orders and parts orders was reduced during 1995.
Heavy Equipment Segment sales increased $23.0, or 11%, to $226.8 in 1994 from
$203.8 in 1993. Machine sales increased $21.6 and parts sales increased $1.4.
The sales mix was approximately 36% parts in 1994 compared to 39% parts in 1993.
Machine sales increased at all of the Heavy Equipment Segment divisions,
reflecting increased domestic construction industry demand and improved sales
volume outside the United States.
Heavy Equipment Segment bookings for 1994 were $232.2, an increase of $38.1, or
20%, from 1993. Bookings for parts sales of $77.6, from which the Company
generally realizes higher margins than machine sales, were comparable to
bookings for 1993. Machine bookings for 1994 increased $42.2, or 38%, from 1993,
reflecting the factors discussed above. Heavy Equipment Segment backlog was
$67.8 at December 31, 1994 compared to $62.3 at December 31, 1993, reflecting
the improved shipments in 1994. Parts backlog was $6.1 at December 31, 1994
compared to $8.6 at December 31, 1993. This decrease resulted from increased
parts availability during 1994. As a result of the working capital infusion in
December 1993, the inventory availability for parts sales increased during 1994
and the backlog of parts orders was reduced as working capital continues to be
applied to improve parts inventory availability.
Terex Cranes sales were $90.4 for 1994, an increase of $19.0 from $71.4 in 1993.
Machine sales increased 43% and parts sales increased 3%. The sales mix was
approximately 27% parts in 1994 compared to 33% parts in 1993.
Terex Cranes bookings were $83.6 for 1994, an increase of 9% from 1993. Machine
bookings increased 16%, and parts bookings increased by 1%.
Gross Profit
Gross profit for 1994 increased $34.7 compared to 1993.
The Material Handling Segment's gross profit increased $19.2 to $35.2 for 1994
compared to $16.0 for 1993. The gross profit percentage in the Material Handling
Segment increased to 7.4% for 1994 from 4.0% for 1993, reflecting cost reduction
initiatives and production improvements in the second through fourth quarters of
1994, somewhat offset by comparatively lower sales and decreased manufacturing
efficiency due to shortages in manufacturing supplies and materials during the
first quarter of the year and the decrease in sales of replacement parts.
The Heavy Equipment Segment's gross profit increased $3.3 to $33.8 for 1994
compared to $30.5 for 1993. Improved gross profit from machine sales accounted
for substantially all of the increase. The gross profit percentage in the Heavy
Equipment Segment remained at 15.0% for 1994 and 1993, reflecting the continuing
effects of cost reduction initiatives and improved manufacturing efficiency
offset by a decrease in the parts sale mix during 1994.
Terex Cranes gross profit increased $12.2 to $14.2 for 1994, compared to $2.0
for 1993. The gross profit percentage for Terex Cranes increased to 15.7% for
1994 from 2.8% in 1993 reflecting the continuing effects of cost reductions and
improved manufacturing efficiency.
Engineering, Selling and Administrative Expenses
Engineering, selling and administrative expenses decreased to $72.4 for 1994
from $77.7 for 1993 as a result of cost reduction initiatives throughout the
Company. Material Handling Segment engineering, selling and administrative
expenses totaled $42.4 for 1994 compared to $44.6 for 1993. Heavy Equipment
Segment engineering, selling and administrative expenses increased to $22.0 for
1994 from $19.5 for 1993. Terex Cranes engineering, selling and administrative
expenses decreased to $6.3 for 1994 compared to $10.1 for 1993. Corporate
administrative expense in 1994 includes a charge of $2.2 in connection with the
termination, as of January 1, 1994, of the Company's management contract with
KCS, offset by allocations to operating segments. See Note M -- "Related Party
Transactions" in the Notes to the Consolidated Financial Statements for further
information.
Severance and Exit Costs and Goodwill Write-off
In June 1994, the Company announced personnel reductions in plant supervision,
engineering, marketing and administration totaling approximately 160 employees
at the Material Handling Segment's North American and European operations. A
charge of $4.5 was recorded related to these actions. The Company also
reorganized certain marketing activities and closed several of its regional
sales offices in the United States. In December 1994, the Company announced
additional personnel reductions totaling approximately 90 employees in
conjunction with the closing of the Material Handling Segment's Korean plant and
certain branch sales offices in France. An additional $2.9 charge was recorded
for costs, principally severance costs, associated with these actions. As a
result of changing Mark's product offerings and distribution, Terex Cranes
recognized a charge to income of $4.7 in the fourth quarter of 1993 to write-off
the remaining unamortized goodwill from the acquisition of Mark.
Income (Loss) from Operations
The Material Handling Segment incurred a loss from operations of $7.1 for 1994,
excluding the severance charge discussed above ($13.9 including the severance
charge), compared to a loss of $28.6 for 1993. As discussed above, the decreases
in sales and gross profit in the opening months of 1994 reflected the
difficulties in restoring full production due to supplier problems. Income from
operations was $3.5 in the fourth quarter of 1994, excluding the severance
charge ($1.1 including the severance charge), compared to a loss of $10.7 in the
fourth quarter of 1993.
Heavy Equipment Segment income from operations improved by $0.1 to $11.1 for
1994 compared to $11.0 for 1993. This improvement resulted from the increase in
gross profit offset by the increase in engineering, selling and administrative
expenses described above.
Terex Cranes income from operations of $7.9 for 1994 improved by $20.7 over 1993
due to increased sales and cost reductions outlined above. As a result of cost
reductions, improvements in inventory management and consolidation of model
offerings, Koehring was profitable in 1994 after several years of losses.
Additionally, as discussed above, Terex Cranes recognized a charge to income of
$4.7 to write-off the remaining unamortized goodwill from the Mark acquisition.
On a consolidated basis, the Company achieved operating income of $10.8,
excluding the severance charge discussed above, for 1994 ($3.4 income including
the severance charge) compared to an operating loss of $33.9 for 1993.
Other Income (Expense)
Interest expense on a consolidated basis was $30.5 for 1994 compared to $31.2
for 1993. The decrease in interest expense was primarily the result of
repayments of the then outstanding senior and subordinated debt partially offset
by increased borrowings under the Company's lending facilities.
The Company recognized equity in the net loss of Fruehauf of $0.7 in 1993. In
December 1993, the Company sold 1.0 million shares of Fruehauf common stock and
realized a gain of $3.0. During 1994 the Company sold a total of 5.9 million
shares of Fruehauf common stock and realized a gain of $26.0.
In 1994, the Company recorded a provision for state income taxes of $0.5 in
connection with the sale of its former subsidiary, Drexel. The balance of the
provision for income taxes generally represents taxes withheld on foreign
royalties and dividends. As such, any fluctuation in the provision for income
tax is due to fluctuations in these items.
Extraordinary Items
During 1994, the Company repurchased a total of $27.3 of its old senior secured
notes. The Company recognized extraordinary losses totaling $0.7 from these
transactions to write off unamortized discount and debt issuance costs.
In connection with terminating its previous bank lending agreement, the Company
recognized a charge of approximately $2.0 in the second quarter of 1993 to write
off unamortized debt issuance costs.
In December 1993, the Company repurchased $5.0 of its old senior secured notes
for approximately $4.5, including accrued interest. The Company recognized an
extraordinary gain on this transaction of approximately $0.5, net of write-off
of unamortized discount and debt issuance costs.
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 and dealers. The Company has significant
debt service requirements including semi-annual interest payments on senior debt
and monthly interest payments on its credit facility. 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 refinancings, issuance of equity,
asset sales, the sales 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. It is the Company's intention that certain assets be sold during 1996,
provided that favorable terms and conditions can be attained.
Net cash of $21.9 was used in operating activities during 1995. Net cash used by
investing activities in 1995 was $98.9, principally due to the PPM Acquisition.
Net cash provided by financing activities during 1995 was $120.1, primarily from
the Refinancing discussed below. Cash and cash equivalents totaled $7.8 at
December 31, 1995.
Factors affecting future liquidity
The Company announced personnel reductions totaling approximately 134 employees
in the Material Handling Segment's North American operations during the second
quarter of 1995 as a continuation of the Company's programs to increase
manufacturing efficiency, reduce costs and improve liquidity. The Company
recorded a combined charge of $3.5 for costs associated with these actions and
additional costs associated with the closing of certain administrative and
warehouse facilities.
On May 9, 1995, the Company completed the Refinancing and the PPM Acquisition.
The Refinancing included the private placement to institutional investors of
$250 of the Senior Secured Notes, repayment of the Company's its old senior
secured notes and senior subordinated notes, totaling approximately $152.6
principal amount, and entry into a $100 revolving credit facility (the "Credit
Facility") to replace the Company's existing lending facility in the U.S. Until
such time as the Company completes an exchange of the Senior Secured Notes for
an equivalent issue of registered notes, or a shelf registration statement for
the Senior Secured Notes is effective, the interest rate on the Senior Secured
Notes will be 13.75%. The Indenture for the Senior Secured Notes places certain
limits on the Company's ability to incur additional indebtedness; permit the
existence of liens; issue, pay dividends on or redeem equity securities; utilize
the proceeds of assets sales; consolidate, merge or transfer assets to another
entity; and enter into transactions with affiliates. In connection with the May
1995 issuance of the Senior Secured Notes, the Company issued 1.0 million stock
appreciation rights (the "1995 SARs") entitling the holders to receive cash or
Common Stock, at the option of the Company, in an amount equal to the average
closing sale price of the Common Stock for 60 trading days prior to the date of
exercise less $7.288 for each 1995 SAR.
Approximately $92.6 of the proceeds of the Senior Secured Notes was used for the
PPM Acquisition, including the repayment of certain indebtedness of PPM required
to be repaid in connection with the acquisition. In addition, the acquisition
costs totaled approximately $5.0. The remainder of the purchase price consisted
of the issuance to the seller of redeemable preferred stock of Terex Cranes
having an aggregate liquidation preference of 127 French francs (approximately
$26.1), subject to adjustment. The purchase price is subject to adjustment
calculated by reference to the consolidated net asset value of PPM as determined
by an audit as of the date of closing. The preferred stock does not bear a
dividend and, accordingly, the Company has valued this stock at approximately
$8.8 (discounted at 15%). The Company has not yet reached agreement with the
seller about the amount of purchase price adjustment but, based on work
performed, the Company believes that the amount of the preferred stock could
ultimately be reduced.
The Company's Credit Facility provides the Company with the ability to borrow up
to $100 (in the form of revolving loans and up to $15 in outstanding letters of
credit). The Credit Facility is secured by substantially all of the Company's
domestic receivables and inventory (including PPM). The amount of borrowings is
limited to the sum of the following: (i) 75% of the net amount of eligible
receivables, as defined, of the Company's U.S. businesses other than 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 the
Company, revolving loans may be in the form of prime rate loans initially
bearing interest at the rate of 1.75% per annum in excess of the prime rate and
Eurodollar rate loans initially bearing interest at the rate of 3.75% per annum
in excess of the adjusted Eurodollar rate.
The Company made an interest payment of $17.7 on November 15, 1995 on the Senior
Secured Notes. The Company's debt service obligations for 1996 include
approximately $17.1 on May 15 and November 15, 1996 on the Senior Secured Notes
and approximately $0.6 monthly on the Credit Facility. Management believes that,
absent significant unanticipated declines in operating performance, cash
generated from operations and the Refinancing provide the Company with adequate
liquidity to meet the Company's operating and debt service requirements. The
balance outstanding under the Credit Facility as of December 31, 1995 was $66.8,
and the additional amount the Company could have borrowed was $8.8 as of that
date. TEL entered into a new bank working capital facility in 1995, and PPM
Europe is in negotiations to secure a working capital facility in 1996.
Management intends to seek additional working capital financing facilities for
the Company's international operations to provide additional liquidity
worldwide.
CONTINGENCIES AND UNCERTAINTIES
The IRS 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 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.
In addition, Randolph W. Lenz retired as Chairman of the Board of the Company.
Although his retirement agreement places certain restrictions on his ability to
sell his shares of Common Stock in the Company, in the event that Mr. Lenz is
able to sell a substantial portion of his shares in the Company, such sale, in
combination with the issuance by Terex of certain Common Stock Purchase Warrants
on December 20, 1993 and subject to the effects of other changes in share
ownership of the Company, could result in a change in control for tax purposes.
Such a change in control 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 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.
BUSINESS
General
Terex is a global provider of capital goods and equipment used in the
manufacturing, distribution, mining, construction and infrastructure industries.
The Company's operations began in 1983 with the purchase of Northwest
Engineering Company, the Company's original business and name. Since 1983,
management has expanded the Company's business through a series of acquisitions.
In 1988, Northwest Engineering Company merged into a subsidiary acquired in 1986
named Terex Corporation, with Terex Corporation as the surviving corporation.
For 1995, consolidated revenues of the Company amounted to approximately
$1,030.2. Prior to May 1995, the Company's operations were divided into two
principal segments: Material Handling and Heavy Equipment. On May 9, 1995, the
Company completed the PPM Acquisition. Together with Koehring, these businesses
form Terex Cranes, Inc., the Company's Mobile Cranes Segment.
The Material Handling Segment designs, manufactures and markets a complete line
of IC and electric lift trucks, electric walkies, automated pallet trucks and
related components and replacement parts under the Clark trademark. These
products are used in material handling applications in a broad array of
manufacturing, distribution and transportation industries. The Material Handling
Segment consists of Clark Material Handling Company ("CMHC") and certain
affiliated companies (together with CMHC, "CMH") which were acquired by the
Company in July 1992 from Clark Equipment Company (the "CMH Acquisition").
The Heavy Equipment Segment designs, manufactures and markets heavy-duty,
off-highway earthmoving and construction equipment and related components and
replacement parts. These products are used primarily by construction, mining,
logging, industrial and government customers in building roads, dams and
commercial and residential buildings and in supplying coal, minerals, sand and
gravel. The Heavy Equipment Segment consists of two operating businesses: (i)
the Terex Business (defined below), which manufactures off-highway rigid and
articulated haulers, scrapers and wheel loaders and (ii) the Unit Rig Division,
which manufactures electric rear and bottom dump haulers, as well as mechanical
drive haulers and wheel loaders principally sold to the mining industry.
On May 9, 1995, the Company, through Terex Cranes, Inc., a Delaware corporation
which is a wholly owned subsidiary of the Company ("Terex Cranes"), completed
the acquisition (the "PPM Acquisition") of substantially all of the shares of
P.P.M. S.A., a societe anonyme, and certain subsidiaries ("PPM Europe"), from
Potain S.A., a societe anonyme, and all 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;" and PPM North
America together with PPM Europe collectively referred to as "PPM") from Legris
Industries S.A., a societe anonyme ("Legris France"). 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. Concurrently with the completion of the PPM
Acquisition, the Company contributed the assets (subject to liabilities) of its
Koehring Cranes and Excavators and Marklift division to Terex Cranes. The former
division now operates as Koehring Cranes, Inc., a wholly owned subsidiary of
Terex Cranes ("Koehring"). Koehring manufactures mobile cranes under the LORAIN
brand name and aerial lift equipment under the MARKLIFT brand name.
For financial information about the Company's industry and geographic segments,
see Note N -- "Business Segment Information" in the Notes to the Consolidated
Financial Statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Company's strategy is to increase shareholder value through sustained and
growing earnings.
Material Handling Segment
CMH is a leading North American and European designer, manufacturer and marketer
of a complete line of IC and electric lift trucks, electric walkies, automated
pallet trucks and related replacement parts under the CLARK trademark. CMH's
products are distributed through an established global dealer network which
includes more than 440 locations. Management believes CMH has the largest
installed fleet in North America, with over 250,000 units, and that over 320,000
CLARK trucks are presently in operation worldwide. Historically, approximately
80% of CMH's revenues have been derived from new product sales and approximately
20% of revenues have been derived from the sale of replacement parts. CMH and
its independent dealers sell to a diversified base of customers in a variety of
industries. CMH's headquarters and U.S. manufacturing facilities are located in
Lexington, Kentucky. CMH's international manufacturing facilities are located in
Mulheim-Ruhr, Germany. CMH also owns a training and research center in
Lexington, Kentucky.
The Company acquired CMH in July 1992. Following the acquisition, CMH began
implementing initiatives intended to reduce its manufacturing and operating
costs. These initiatives have included consolidation of engineering,
manufacturing and parts facilities. In December 1993, CMH transferred its parts
supply operations to the Company's parts distribution center in Southaven,
Mississippi. During 1994, CMH completed the transfer of its light IC lift truck
chassis production from Korea to Lexington, Kentucky, closed its manufacturing
facility in Danville, Kentucky and closed its axle manufacturing facility in
Korea. In April 1994, the Company sold 100% of the stock of Drexel Industries,
Inc. ("Drexel"), which is located in Horsham, Pennsylvania. Drexel manufactures
very narrow-aisle lift trucks.
CMH currently offers 116 basic truck designs within five major product lines:
light IC trucks (1.0 to 5.0 tons), heavy IC trucks (5.5 to 47.5 tons),
narrow-aisle trucks, electric counterbalanced trucks (1.3 to 6.0 tons) and
electric walkies.
Light IC trucks are used for general warehousing needs and are generally powered
by liquid propane and well suited for manufacturing and distribution
applications which require a high degree of maneuverability. Heavy IC trucks are
specialty products designed for use in more demanding situations such as heavy
manufacturing or container handling applications. Narrow-aisle trucks provide
solutions for high density storage needs and operate in six-to-eight foot aisles
and reach heights of more than 30 feet. Electric counterbalanced trucks are
designed for indoor use in warehousing, manufacturing, distribution and other
applications and are powered by a rechargeable electric battery. For
environmental reasons, electric trucks are becoming more popular. Electric
walkies are generally used in transporting and order-selecting.
CMH is a leading manufacturer of lift trucks in North America, although the
brand names of Hyster and Yale combined, both owned by Nacco Industries, Inc.,
account for production of more lift trucks annually. Other major North American
competitors include Toyota, Mitsubishi and Komatsu in both IC and electric
riders, and Crown and Raymond in electric riders alone. In Europe, CMH competes
with the Linde Group, the European market leader, as well as Hyster-Yale, Toyota
and Jungheinreich. CMH also competes with a number of specialty firms.
Heavy Equipment Segment
The Company is recognized as a significant competitor in the market for large
capacity haulers and scrapers. However, the Company is not a dominant
manufacturer in the heavy equipment industry, which is dominated in most
segments by large, diversified firms, such as Caterpillar, Dresser Industries
and Komatsu, that have broader product lines and greater financial resources.
The Company also competes in this industry with a number of specialty firms,
whose products generally compete directly with one or more of the Company's
product lines.
<PAGE>
Terex Business
The Company acquired the Terex Corporation, whose operations were subsequently
carried out as the Terex Division, in December 1986 and acquired Terex Equipment
Limited ("TEL"), a subsidiary of the Company located in Scotland, in June 1987.
The Terex Division and TEL are jointly hereinafter referred to as the "Terex
Business," which is headquartered in Motherwell, Scotland. Terex Division's
marketing efforts in the United States serve the needs of North, Central and
South America, while TEL serves the remainder of the international market. TEL
manufactures the products of the Terex Business at its facility in Motherwell,
Scotland.
The Terex Business has two principal product lines: off-highway rigid and
articulated haulers and scrapers sold under the TEREX trademark and as original
equipment manufacturers to be sold under other brand names. A "hauler" is an
off-road dump truck with a capacity in excess of 25 tons. Haulers produced by
the Terex Business have capacities ranging from 25 to 85 tons. A "scraper" is an
off-road vehicle, commonly referred to as an "earth mover," that loads, moves
and unloads large quantities of soil for site preparations, including roadbeds.
The Terex Business product line also includes wheel loaders although these are
not presently being manufactured. A "wheel loader" is a vehicle that loads
materials onto trucks, conveyors and similar equipment. The Terex Business
products perform a wide range of earthmoving functions in quarry and open pit
mining and in many types of heavy construction, including highway, dam and
waterway construction; commercial and industrial site preparation; general land
improvement and real estate development; and structural renovation and
replacement. The Terex Business's main competitors are Caterpillar, VME Group,
Komatsu and Dresser.
In 1987, TEL entered into a joint venture agreement with Second Inner Mongolia
Machinery Company for the production of haulers in China. The joint venture
company, North Hauler Limited Liability Company, manufactures heavy trucks,
principally used in mining, at a facility in Baotou, Inner Mongolia, People's
Republic of China.
Unit Rig
In July 1988, the Company purchased certain domestic and foreign assets and
operations of the business that now operates as the Unit Rig Division ("Unit
Rig"). Unit Rig is headquartered in Tulsa, Oklahoma.
Unit Rig's predecessor pioneered the development of the diesel electric drive,
rear dump hauling truck for use in open pit mining operations. The truck is
powered by a diesel engine driving an electric generator that provides power to
individual electric motors in each of the rear wheels. Unit Rig's current LECTRA
HAUL product line consists of a series of rear dump hauler trucks with payload
capacities ranging from 100 to 260 tons, and bottom dump haulers with capacities
ranging from 180 to 270 tons.
Unit Rig also produces the Dart line of wheel loaders and mechanical drive
haulers. This product line consists of the Dart 600C mechanical drive wheel
loader with a bucket capacity up to 23 cubic yards and rear dump trucks ranging
in capacity from 85 to 130 tons. The Dart line also includes a tractor-trailer
bottom dump hauler with capacities from 120 to 160 tons.
The present principal markets for Unit Rig products are copper, gold, coal and
iron mines. Unit Rig's major customers are mining companies in North and South
America, Asia, Africa and Australia. Approximately 70% of Unit Rig's sales are
export sales. Unit Rig's largest competitors are Caterpillar and
Komatsu/Dresser.
Terex Cranes, Inc.
Koehring
In January 1987, the Company purchased certain assets and operations of the
business that operated prior to the PPM Acquisition as the Koehring Cranes &
Excavators Division, which assets and operations were contributed to Koehring in
connection with the PPM Acquisition. Koehring, headquartered in Waverly, Iowa,
designs, manufactures and markets a broad line of hydraulic telescoping cranes
sold under the well recognized trade names of KOEHRING and LORAIN. Hydraulic
telescoping cranes are primarily used for construction and industrial
applications. Koehring has three principal competitors in the mobile crane
market: Grove Manufacturing, Liebherr Werk Ehingen and Link-Belt.
In December 1991, the Company acquired substantially all operating assets of the
business that operates as the Marklift Division ("Mark"). Mark relocated to the
Koehring facilities in Waverly, Iowa during 1992 in order to more effectively
utilize existing capabilities and manufacturing facilities at the Waverly
location. Mark is engaged in the manufacture and sale of aerial lift equipment,
including scissor lifts, boom lifts and a full line of replacement parts.
Scissor lifts and boom lifts are used for the repair, maintenance and
construction of buildings, manufacturing facilities and equipment. These lifts
are used in a wide variety of industrial applications, such as installing and
repairing electrical and plumbing fixtures; installing drywall and ceilings;
cleaning, repairing and painting production equipment; maintaining refineries,
chemical plants and aircraft; and performing common construction tasks such as
siding, insulation and structural member installation. Mark's largest competitor
in the aerial lift industry is JLG Industries.
The Company currently manages the Northwest Engineering and BCP Construction
Products ("BCP," acquired in 1985) businesses from Koehring's location in
Waverly, Iowa. The sale of replacement parts for Northwest Engineering and BCP
products, including the Dynahoe backhoe/loader, constitutes the most important
part of these businesses.
PPM Europe
On May 9, 1995, the Company acquired substantially all of the capital stock of
PPM Europe. PPM Europe was formed in 1966 by Potain, S.A., and is a leading
European designer, manufacturer and marketer of mobile cranes and container
stackers. PPM Europe consists of several subsidiaries throughout Europe,
including: PPM S.A. in France, Bendini SpA, an Italian rough terrain crane
producer, Brimont Agraire S.A., a specialized trailer manufacturer in France,
PPM Krane GmbH, a sales organization in Germany, and Baulift Baumaschinen Und
Krane Handels GmbH, a parts distributor in Germany. PPM Europe operates two
manufacturing facilities, its PPM manufacturing facility at Montceau les Mines
in central France and its Bendini manufacturing facility in northern Italy. PPM
Europe markets its products primarily in Europe, Africa and the Middle East
under the PPM and BENDINI brand names. PPM Europe's major competitors in mobile
cranes are Krupp Mobilkran, Grove Cranes Ltd. and Liebherr Werk Ehingen. PPM
Europe's major competitors in the container stacker market are Kalmar, Valmet
Belloti and Taylor.
PPM North America
On May 9, 1995, the Company acquired substantially all of the capital stock of
PPM North America. PPM North America, headquartered in Conway, South Carolina,
designs, manufactures and markets rough terrain cranes, truck cranes and
container stackers under the P&H brand name which is licensed from Harnischfeger
Corporation. PPM North America also markets mobile cranes and container stackers
in the Far East through its Singapore subsidiary and in Australia through its
Australian subsidiary. PPM North America has three main competitors in the
mobile crane market: Grove Manufacturing, Liebherr Werk Ehingen and Link-Belt.
Environmental Considerations
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.
Research and Development
The Company maintains engineering staffs at several of its locations which
design new products and improvements in existing product lines. Such costs
incurred in the development of new products or significant improvements to
existing products amounted to $11.2 million, $10.5 million and $11.8 million in
1995, 1994 and 1993, respectively.
Materials
Principal materials used by the Company in its various manufacturing processes
include steel, castings, engines, tires, electric controls and motors, and a
variety of other fabricated or manufactured items. In the absence of labor
strikes or other unusual circumstances, substantially all materials are normally
available from multiple suppliers. Current and potential suppliers are evaluated
on a regular basis on their ability to meet the Company's requirements and
standards. During the first half of 1994, certain of CMH's suppliers experienced
difficulties in meeting CMH's production schedules. Such difficulties, while not
eliminated, were substantially alleviated in the second half of 1994. Electric
wheel motors and controls used in the Unit Rig product line are currently
supplied exclusively by General Electric Company.
Seasonal Factors
The Company markets a large portion of its products in North America and Europe,
and its sales of heavy equipment and cranes during the fourth quarter of each
year (i.e., October through December) to the construction industry are usually
lower than sales of such equipment during each of the first three quarters of
the year because of the normal winter slowdown of construction activity.
However, sales of heavy equipment to the mining industry, as well as sales of
lift trucks, are generally less affected by such seasonal factors.
Distribution
CMH markets original equipment and repair parts through a worldwide dealer
network. CMH currently has 94 independent North American dealers who operate
approximately 233 outlets, with all such dealer outlets providing both sales and
service. CMH's European distribution network consists of approximately 93
independent dealers and three company-owned dealers operating in 29 countries.
CMH dealers generally market the full CMH product line and maintain
comprehensive service capabilities. CMH operates a dealer service organization
designed to coordinate sales and promotional activities, provide ongoing dealer
training and facilitate dealer communications.
CMH products are sold through a system which enables customers to specify a
truck which meets their particular materials handling needs. Customers can add
attachments such as container handlers, side shifters, roll clamps, block
handlers, carton clamps, push-pulls (slip-sheet) and fork positioners. CMH and
its dealers sell to a diversified customer base with no single customer
accounting for more than 4% of CMH's revenues.
The Terex Business markets original equipment and repair parts through worldwide
dealership networks. Unit Rig distributes its products and services directly to
customers primarily through its own distribution system. The Company's heavy
equipment dealers are independent businesses which generally serve the
construction, mining, timber and/or scrap industries. Although these dealers
carry products of a variety of manufacturers, and may or may not carry more than
one of the Company's products, each dealer generally carries only one
manufacturer's "brand" of each particular type of product. The Company employs
sales representatives who service these dealers from offices located throughout
the world.
Terex Cranes distributes its products through a global network of over 300
independent dealers organized by product line. With respect to mobile cranes, in
North America both Koehring and PPM North America maintain extensive dealer
networks. The geographic strength of Koehring, which markets its mobile cranes
under the LORAIN brand name, centers in the midwest and mid-Atlantic regions of
the U.S. and the geographic strength of PPM North America, which markets its
mobile cranes under the P&H brand, centers in the southern and western regions.
PPM Europe's distribution is carried out under two brand names, PPM and BENDINI,
through a single distribution network comprised of both distributors and a
direct sales force.
Backlog
The Company's backlog as of December 31, 1995 and 1994 was as follows:
December 31,
1995 1994
(in millions of dollars)
Material Handling ......... $ 78.9 $ 135.9
Heavy Equipment ........... 88.8 67.8
Terex Cranes .............. 85.3 11.7
Total ................ $ 253.0 $ 215.4
Substantially all of the Company's backlog orders are expected to be filled
within one year, although there can be no assurance that all such backlog orders
will be filled within that time period. The Company's backlog orders represent
primarily new equipment orders. Parts orders are generally filled on an
as-ordered basis. Backlog in Terex Cranes increased in 1995 primarily due to the
effect of the PPM Acquisition.
Backlog at the Material Handling Segment fell from $135.9 million at December
31, 1994 to $78.9 million at December 31, 1995 as the Company maintained full
production in the Material Handling Segment United States operations and parts
availability returned to normal levels. As a result, the backlog of both
machines orders and parts orders was reduced during 1995.
Patents, Licenses and Trademarks
Several of the trademarks and trade names of the Company, in particular the
TEREX, CLARK, KOEHRING, LORAIN, UNIT RIG, MARKLIFT, DYNAHOE, POWERWORKER, P&H
(licensed by PPM North America from Harnischfeger Corporation), PPM,
HYPERSTACKER, SUPERSTACKER, BENDINI and GENESIS trademarks, are important to the
business of the Company. The Company owns and maintains trademark registrations
and patents in countries where it conducts business, and monitors the status of
its trademark registrations and patents to maintain them in force and renews
them as required. The Company also takes steps, including legal action, to
protect its trademark, trade name and patent rights when circumstances warrant
such action.
Employees
As of December 31, 1995, the Company had approximately 3,600 employees. The
Company considers its relations with its personnel to be good. Approximately 33%
of the Company's employees are represented by labor unions which have entered
into various separate collective bargaining agreements with the Company. The
Company experienced a labor strike at its parts distribution center in
Southaven, Mississippi during the second quarter of 1995 which is ongoing, and a
strike at its Koehring facility in Waverly, Iowa in December 1995, which has
been settled. The strike at Southaven has had no appreciable effect on the
conduct of business or financial results of that operation.
Financial Information about Industry and Geographic Segments,
Export Sales and Major Customers
Information regarding foreign and domestic operations, export sales, segment
information and major customers is included in Note N -- "Business Segment
Information" in the Notes to the Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
PROPERTIES
The following table outlines the principal manufacturing, warehouse and office
facilities owned or leased by the Company and its subsidiaries:
Entity Facility Location Type and Size of Facility
<S> <C> <C>
Terex (Corporate Offices)................ Westport, Connecticut (1) Office 14,898 sq. ft.
Terex (Distribution Center)............. Southaven, Mississippi (1) Warehouse and light manufacturing
505,000 sq. ft. (2)
Material Handling Segment
CMHC ................................ Lexington, Kentucky (1) Manufacturing, warehouse and
office 372,600 sq. ft.
CMHC ................................ Lexington, Kentucky Training and research and
development 43,000 sq. ft.
CMHC ................................ Lexington, Kentucky (1) Office 64,600 sq. ft.
CMHC ................................ Lexington, Kentucky (1) Manufacturing, warehouse and
test facility 59,500 sq. ft.
CMH Germany.............................. Mulheim-Ruhr, Germany Manufacturing, engineering, power
generation, maintenance and office
241,350 sq. ft.
CMH Germany.............................. Mulheim-Ruhr, Germany (1) Office 61,360 sq. ft.
CMH Germany.............................. Saarn, Germany (1) Warehouse 150,700 sq. ft.
Heavy Equipment Segment
Unit Rig ................................ Tulsa, Oklahoma Manufacturing and office
325,000 sq. ft.
TEL...................................... Motherwell, Scotland Manufacturing, warehouse and
office 714,000 sq. ft. (3)
Mobile Cranes Segment
Koehring & Mark.......................... Waverly, Iowa (4) Office, manufacturing and warehouse
383,000 sq. ft.
PPM North America........................ Conway, South Carolina (1) Office, manufacturing and warehouse
257,040 sq. ft.
PPM Europe............................... Montceau les Mines, France Office, manufacturing and warehouse
419,764 sq. ft.
PPM Europe............................... Crespellano, Italy Office, manufacturing and warehouse
92,750 sq. ft.
PPM Europe............................... Dortmund, Germany (1) Office and warehouse 129,180 sq. ft.
PPM Europe............................... Rethel, France Office, manufacturing and warehouse
<FN>
215,300 sq. ft.
- ------------------------------
(1) These facilities are either leased or subleased by the indicated entity.
(2) Includes 239,400 sq. ft. of warehouse space currently leased to others.
(3) Includes 148,500 sq. ft. of manufacturing space currently leased to others.
(4) Koehring also owns a 66,000 sq. ft. facility in Waterloo, Iowa which is
currently leased to others.
</FN>
</TABLE>
<PAGE>
CMH also operates seven sales and service branch locations, all of which are
leased. The branch facilities consist of office and service space and generally
range in size from 1,500 to 3,100 square feet per facility. CMH also owns
manufacturing and office facilities in Seoul and Banwael, Korea which were
closed in the fourth quarter of 1994 and are presently held for sale.
Unit Rig also has 10 owned or leased locations for parts distribution and
rebuilding of components, of which two are in the United States, two are in
Canada and six are abroad.
The properties listed above are suitable and adequate for the Company's use. The
Company has determined that certain of its properties exceed its requirements.
Such properties may be sold, leased or utilized in another manner and have been
excluded from the above list.
LEGAL PROCEEDINGS
The Company is involved in various legal proceedings, including product
liability and workers' compensation liability matters, which have arisen in the
normal course of its operations and to which the Company is self-insured for up
to $5.0 million. Management believes that the final outcome of such matters will
not have a material adverse effect on the Company's consolidated financial
position. See Note L -- "Litigation and Contingencies" in the Notes to the
Consolidated Financial Statements.
For information concerning other contingencies and uncertainties, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Contingencies and Uncertainties."
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following individuals are currently directors of the Company:
Name Age Positions and First Year
Offices with Company Elected Director
Ronald M. DeFeo 44 President, Chief Executive 1993
Officer, Chief Operating Officer
and Director
Marvin B. Rosenberg 55 Senior Vice President, General 1992
Counsel, Secretary and Director
G. Chris Andersen 58 Director 1992
William H. Fike 59 Director 1995
Bruce I. Raben 42 Director 1992
David A. Sachs 36 Director 1992
Adam E. Wolf 82 Director 1983
Mr. DeFeo became a director of the Company in 1993 and was appointed President
and Chief Operating Officer of the Company on October 4, 1993 and Chief
Executive Officer of the Company on March 24, 1995. Prior to joining Terex on
May 1, 1992 as President of the Company's Heavy Equipment Group, Mr. DeFeo was a
Senior Vice President of J.I. Case Company, the farm and construction equipment
division of Tenneco Inc., and also served as a Managing Director of Case
Construction Equipment throughout Europe. While at J.I. Case, Mr. DeFeo was also
a Vice President of North American Construction Equipment Sales and General
Manager of Retail Operations.
Mr. Rosenberg was appointed a director of the Company in 1992 and was appointed
a Senior Vice President of the Company effective January 1, 1994. He has served
as Secretary and General Counsel of the Company since 1987. Mr. Rosenberg is a
director of Fruehauf and served as Secretary of Fruehauf since it was organized
in March 1989 until August 1993. From 1987 until December 31, 1993, he was
employed as General Counsel of KCS, an entity that, until December 31, 1993,
provided administrative, financial, marketing, technical, real estate and legal
services to the Company and its subsidiaries.
Mr. Andersen was appointed a director of the Company in 1992 and served as a
director of Fruehauf from July 1991 until August 1993. Mr. Andersen was a Vice
Chairman of PaineWebber Incorporated ("PaineWebber") from March 1990 through
1995. Mr. Andersen is currently a partner of Andersen Weinroth & Co. L.P.,
serves as a consultant to PaineWebber Incorporated and also serves as a director
of AFGL International, Inc., Sunshine Mining Company and United Waste Systems,
Inc.
Mr. Fike was appointed a director of the Company in April 1995. Mr. Fike is the
Vice Chairman and Executive Vice President of Magna International, Inc., an
automotive parts manufacturer based in Ontario, Canada ("Magna"). Prior to
joining Magna in September 1994, Mr. Fike was employed by Ford Motor Company
from 1966 to 1994, where he served in various capacities, most recently as
President of Ford Europe. Mr. Fike serves as a director to Magna and AGCO
Corporation.
Mr. Raben was appointed a director of the Company in 1992. Mr. Raben is a
managing director of CIBC Wood Gundy. Prior to joining CIBC Wood Gundy in
February 1996, Mr. Raben was employed as an Executive Vice President of
Jefferies & Company, Inc. Mr. Raben is also a director of Optical Securities
Group and Equity Marketing.
Mr. Sachs was appointed a director of the Company in 1992 and served as a
director of Fruehauf from November 1992 to March 1993. Mr. Sachs is President of
Alpha Onyx Asset Management, LLC, an investment advisory firm, and is a
principal at Onyx Partners, Inc., a merchant banking firm. From 1990 to 1994,
Mr. Sachs was employed at TMT-FW, Inc., an affiliate of Taylor & Co., a private
investment firm based in Fort Worth, Texas.
Mr. Wolf became a director of the Company in 1983. Mr. Wolf has been principally
self-employed as an attorney throughout his career. He has previously served on
several boards of directors, including those of a telephone company, a bank and
a hospital.
The following table sets forth, as of May 1, 1996, the respective names and ages
of the Company's executive officers indicating all positions and offices held by
each such person. Each officer is elected by the Board to hold office for one
year or until his successor is duly elected and qualified.
Name Age Positions and Offices Held
Ronald M. DeFeo 44 President, Chief Executive Officer and
Chief Operating Officer
David J. Langevin 45 Executive Vice President
Marvin B. Rosenberg 55 Senior Vice President, General Counsel and Secretary
Ralph T. Brandifino 51 Senior Vice President and Chief Financial Officer
Brian J. Henry 37 Vice President, Treasurer and Director of
Investor Relations
Joseph F. Apuzzo 40 Vice President, Corporate Controller
Steven E. Hooper 43 Vice President, Human Resources
For information regarding Messrs. DeFeo and Rosenberg, refer to the table
listing directors above.
Mr. Langevin became Executive Vice President of the Company effective January 1,
1994 and was Acting Chief Financial Officer of the Company from March to
December, 1993. He was employed as a Vice President of KCS from 1988 until
December 31, 1993.
Mr. Brandifino was appointed to the position of Senior Vice President and Chief
Financial Officer on December 6, 1993. Mr. Brandifino was previously the Chief
Financial Officer at the Long Island Lighting Company from 1987 through 1993.
Mr. Henry was appointed Vice President and Treasurer of the Company on July 11,
1995. Mr. Henry also serves at the Company's Director of Investor Relations. Mr.
Henry formerly held the position of the Company's Vice President - Corporate
Development and Acquisitions and has been employed by the Company since 1993. He
was employed by KCS from 1990 to 1993.
Mr. Apuzzo was appointed Vice President, Corporate Controller of the Company on
October 9, 1995. Mr. Apuzzo was Vice President of Corporate Finance at D'Arcy
Masius Benton & Bowles, Inc. from September 1994 until October 1995 when he
joined the Company. Mr. Apuzzo was employed by Price Waterhouse LLP in various
capacities from 1983 until September 1994.
Mr. Hooper was appointed Vice President, Human Resources of the Company on
September 15, 1995, after serving as Director of Human Resources of the Company
since January 1994. He was previously a Human Resources Director at Allied
Signal Aerospace from October 1992 to December 1993. Prior to October 1992, Mr.
Hooper was with Tenneco Inc. for eight years in various senior level human
resources positions.
<PAGE>
Executive Compensation
<TABLE>
<CAPTION>
Summary Compensation Table
The Summary Compensation Table below shows the compensation for the
past three fiscal years of the Company's Chief Executive Officer and its four
highest paid executive officers with 1995 earned qualifying compensation in
excess of $100,000 (the "Named Executive Officers").
Long-Term
Annual Compensation Compensation
Other Restricted Securities All Other
Annual Stock Underlying Compen-
Name and Salary Bonus Compen- Awards Options/ sation
Principal Position Year ($) ($) sation ($) ($) SARS (#) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald M. DeFeo 1995 $ 350,000 $ 250,000 $ --- $ 237,500(1) 40,000 $ 3,080(6)
President, Chief Executive 1994 350,000 225,000 --- 84,700(2) 30,800 3,080(6)
Officer and Chief Operating 1993 237,500 100,000 222,693(7) --- 10,000 3,148(6)
Officer (3)
Randolph W. Lenz 1995 384,750 --- --- --- --- ---
Chairman of the Board(4)(5) 1994 486,000 243,000 --- 118,250(2) 43,000 ---
1993 483,508 --- --- --- --- ---
David J. Langevin 1995 303,600 150,000 --- --- 10,000 3,080(6)
Executive Vice President(4)(8) 1994 303,600 150,000 --- 75,350(2) 27,400 ---
1993 --- --- --- --- --- ---
Marvin B. Rosenberg 1995 250,000 75,000 --- --- 5,000 ---
Senior Vice President, 1994 250,000 75,000 --- 62,150(2) 22,600 ---
Secretary and General 1993 --- --- --- --- --- ---
Counsel(4)(9)
Ralph T. Brandifino 1995 235,000 100,000 --- --- --- 3,080(6)
Senior Vice President, Chief 1994 235,000 100,000 --- 58,300(2) 21,200 ---
Financial Officer and 1993 16,913 --- --- --- --- ---
Treasurer(10)
Brian J. Henry 1995 165,000 33,000 --- --- 10,000 3,080(6)
Vice President and Treasurer (11) 1994 150,000 33,000 --- 13,750(2) 5,000 3,080(6)
1993 70,000 50,000 --- --- --- 1,500(6)
- -----------------------------
<FN>
(1) As part of Mr. DeFeo's 1995 long term incentive compensation, on
February 15, 1996, Mr. DeFeo was granted 5,000 shares of
Restricted Stock under the Company's 1994 Long Term Incentive
Plan (the "1994 Plan") and conditionally granted 45,000 shares of
Restricted Stock under the Company's 1996 Long Term Incentive
Plan (the "1996 Plan"), subject to stockholder approval. The
value of the Restricted Stock granted to Mr. DeFeo set forth in
the table above for 1995 is based on the closing stock price of
$5.00 per share as of February 15, 1996, the date of grant. The
shares of Restricted Stock awarded to Mr. DeFeo for 1995 become
vested to the extent of one-fourth of the shares covered thereby
on each of the first four anniversaries of February 15, 1996;
however, upon the earliest to occur of a change in control of the
Company and the death or disability of Mr. DeFeo, any unvested
portion of such Restricted Stock shall vest immediately.
Dividends, if any, are paid on Restricted Stock awards at the
same rate as paid to all stockholders.
(2) As part of their 1994 long term incentive compensation, on June
23, 1994 the Named Executive Officers were granted shares of
Restricted Stock under the Company's 1994 Plan. The value of the
Restricted Stock set forth in the table above is based on the
closing stock price of $5.50 per share on June 23, 1994, the date
of grant. Dividends, if any, are paid on Restricted Stock awards
at the same rate as paid to all stockholders. The number and
market value, based on the closing stock price of $4.75 of the
Restricted Stock awards set forth in the table above as of
December 31, 1995 for Messrs. DeFeo, Lenz, Langevin, Rosenberg,
Brandifino and Henry are: Mr. DeFeo, 15,400 shares, $73,150; Mr.
Lenz, 21,500 shares, $102,125; Mr. Langevin, 13,700 shares,
$65,075; Mr. Rosenberg, 11,300 shares, $53,675; Mr. Brandifino,
10,600 shares, $50,350; and Mr. Henry, 2,500 shares, $11,875. The
shares of Restricted Stock covered by the Restricted Stock awards
of each of the Named Executive Officers become vested to the
extent of one-fourth of the shares of covered thereby on each of
the first four anniversaries of June 23, 1994; however, upon the
earliest to occur of a change of control of the Company and the
death or disability of such Named Executive Officer, any unvested
portion of such Restricted Stock will vest immediately.
(3) Mr. DeFeo became Chief Executive Officer on March 24, 1995.
(4) In conjunction with the termination of the Company's management
agreement with KCS, Mr. Lenz, together with Messrs. Langevin and
Rosenberg (who became employees of the Company on January 1,
1994), received cash and certain securities of the Company in
1994. Such payments are not included as part of Messrs. Lenz's,
Langevin's and Rosenberg's 1994 annual compensation.
(5) Mr. Lenz was Chief Executive Officer of the Company from 1993
through March 24, 1995 when Mr. DeFeo was appointed CEO. Mr. Lenz
retired as Chairman of the Board and a Director of the Company as
of August 28, 1995 (see "Retirement of Randolph W. Lenz" below).
Mr. Lenz was paid his salary through the date of his retirement.
(6) Company's matching contribution to defined contribution plan
account.
(7) Includes relocation payments of $214,604.
(8) Mr. Langevin was acting Chief Financial Officer of the Company
from March 9, 1993 through December 5, 1993, but did not receive
compensation from the Company until he became Executive Vice
President of the Company effective January 1, 1994. Prior to
1994, Mr. Langevin was employed as an executive officer of KCS
and received compensation from KCS.
(9) Although Mr. Rosenberg has acted as Secretary and General Counsel
of the Company since 1987, he did not receive compensation from
the Company until he was appointed Senior Vice President of the
Company effective January 1, 1994. Prior to 1994, Mr. Rosenberg
was employed as an executive officer of KCS and received
compensation from KCS.
(10) Mr. Brandifino joined the Company on December 6, 1993.
(11) Mr. Henry joined the Company on July 1, 1993. Prior to July 1,
1993, Mr. Henry was employed by KCS and received compensation
from KCS.
</FN>
</TABLE>
Option Grants in 1995
In May 1986, the stockholders approved an incentive stock option plan covering
key management employees (the "1988 Incentive Plan"). As further amended by
action of the stockholders and the Board, 108,228 shares of Common Stock are
currently available for purchase pursuant to incentive stock options granted or
to be granted under the 1988 Incentive Plan, subject to adjustment in the event
of changes in the outstanding Common Stock by reason of certain corporate events
such as stock splits and mergers. The exercise price of the options equals or
exceeds the fair market value of the Common Stock at the time of the grant.
Options granted under the 1988 Incentive Plan vest ratably over three years from
the date of grant. During 1995, options for 28,000 shares were granted to Named
Executive Officers under the 1988 Incentive Plan.
The Board of Directors adopted the 1994 Plan on June 23, 1994, subject to
stockholder approval which was obtained on June 23, 1995. The 1994 Plan
provides for the grant of stock options (both incentive stock options and
nonqualified stock options), shares of stock (including restricted stock)
and performance awards. Subject to adjustment in the event of certain
changes in the outstanding Common Stock, 750,000 shares of Common Stock
have been reserved for issuance under the 1994 Plan. The exercise price of
stock options generally will be no less than the fair market value of the
Common Stock at the time of grant unless otherwise determined by a
committee of two or more outside directors (the "Plan Committee"). The
options will vest as determined by the Plan Committee (but no less than one
year from the date of grant), provided that the options will vest
immediately in the event of a Change in Control (as defined in the 1994
Plan). During 1995, options for 65,000 shares were granted to Named
Executive Officers under the 1994 Plan.
In December 1995, the Board of Directors approved, subject to shareholder
approval, the 1996 Plan. The 1996 Plan authorizes the granting of (i) options
("Stock Option Awards") to purchase shares of Common Stock, including Restricted
Stock, (ii) shares of Common Stock, including Restricted Stock ("Stock Awards"),
and (iii) cash bonus awards based upon a participant's job performance
("Performance Awards"). Subject to adjustment as described below under
"Adjustments," the aggregate number of shares of Common Stock (including
Restricted Stock, if any) optioned or granted under the 1996 Plan shall not
exceed 300,000 shares. The 1996 Plan provides that a committee (the "Committee")
of the Board of Directors consisting of two or more members thereof who are
non-employee directors, shall administer the 1996 Plan and has provided the
Committee with the flexibility to respond to changes in the competitive and
legal environments, thereby protecting and enhancing the Company's current and
future ability to attract and retain directors and officers and other key
employees and consultants. The 1996 Plan also provides for automatic grants of
Stock Option Awards to non-employee directors.
<TABLE>
<CAPTION>
The table below summarizes options granted during 1995 to the Named Executive
Officers.
Option/SAR Grants in Last Fiscal Year
Individual Grants
Number of % of Total Potential Realizable
Securities Options/SARs Value at Assumed Annual
Underlying Granted to Exercise Rates of Stock Price
Options/SARs Employees in or Base Expiration Appreciation for
Name Granted Fiscal Year Price Date Option Term (3)
(#)(1) 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Ronald M. DeFeo 40,000 12.2% $4.250 12/13/05 $106,912 $270,930
Randolph W. Lenz (2) -0- 0% -0- --- -0- -0-
David J. Langevin 10,000 3.0% 4.250 12/13/05 26,995 68,411
Marvin B. Rosenberg 5,000 1.5% 4.250 12/13/05 13,364 33,867
Ralph T. Brandifino -0- 0% -0- --- -0- -0-
Brian J. Henry 10,000 3.0% 4.875 07/10/05 30,659 77,695
- -------------------
<FN>
(1) Of the options listed above, 19,709, 4,927 and 2,464 for Messrs.
DeFeo, Langevin and Rosenberg, respectively, were granted under
the 1994 Plan and become vested to the extent of one-fourth of
the shares of Common Stock covered thereby on each of the first
four anniversaries of December 13, 1995, the date of grant; and
20,291, 5,173 and 2,536 for Messrs. DeFeo, Langevin and
Rosenberg, respectively, were granted under the 1988 Plan and
become vested to the extent of one-third of the shares of Common
Stock covered thereby on each of the first three anniversaries of
December 31, 1995, the date of grant. Mr. Henry's option to
purchase 10,000 shares of Common Stock was granted to him under
the 1994 Plan in connection with his promotion to Vice President
and Treasurer on July 10, 1995, and becomes vested to the extent
of one-fourth of the shares of Common Stock covered thereby on
each of the first four anniversaries of July 10, 1995, the date
of grant.
(2) Mr. Lenz retired as Chairman on August 28, 1995. (See "Retirement
of Randolph W. Lenz" below.)
(3) The potential gains shown are net of the option exercise price
and do not include the effect of any taxes associated with
exercise. The amounts are for the assumed rates of appreciation
only, do not constitute projections of future stock price
performance, and may not necessarily be realized. Actual gains,
if any, on stock option exercises depend on the future
performance of the Common Stock, continued employment of the
optionee through the term of the option, and other factors.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option Exercises in 1995 and Year-End Option Values
The table below summarizes options exercised during 1995 and year-end option
values of the Named Executive Officers.
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at In-the-Money Options/SARs
Fiscal Year-end at Fiscal Year-end ($)(1)
Name Acquired on Realized
Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
Ronald M. DeFeo - - 34,366/66,434 0/190,000
Randolph W. Lenz (2) - - 10,750/32,250 0/0
David J. Langevin - - 6,850/30,550 0/47,500
Marvin B. Rosenberg - - 5,650/21,950 0/23,750
Ralph T. Brandifino - - 5,300/15,900 0/0
Brian J. Henry - - 1,250/13,750 0/0
- ------------------
<FN>
(1) Based on the closing price of the Company's Common Stock on the
New York Stock Exchange ("NYSE") on December 31, 1995 of $4.75.
(2) Mr. Lenz retired as Chairman on August 28, 1995. (See "Retirement
of Randolph W. Lenz" below.)
</FN>
</TABLE>
Pension Plans
The Company maintains four defined benefit pension plans covering certain
domestic employees, including, as described below, certain officers of the
Company. Retirement benefits for the plans covering the salaried employees are
based primarily on years of service and employees' qualifying compensation
during the final years of employment.
Mr. DeFeo participates in the Terex Corporation Salaried Employees'
Retirement Plan (the "Retirement Plan"). Messrs. Brandifino, Langevin and
Rosenberg do not participate because participation in the Retirement Plan was
frozen as of May 7, 1993, prior to their employment with the Company.
Participants of the Retirement Plan with five or more years of eligible service
are fully vested and entitled to annual pension benefits beginning at age 65.
Retirement benefits under the Retirement Plan are equal to the product of (i)
the participant's years of service (as defined in the Retirement Plan) and (ii)
1.02% of final average earnings (as defined in the Retirement Plan) plus 0.71%
of such compensation in excess of amounts shown on the applicable Social
Security Integration Table for participants born prior to 1938. For participants
born during 1938-1954, the formula is modified by replacing the 1.02% and 0.71%
figures with 1.08% and 0.65%, respectively. For participants born after 1954,
the formula is modified by replacing the 1.02% and 0.71% figures with 1.13% and
0.60%, respectively. Service in excess of 25 years is not recognized. There is
no offset for primary Social Security.
Participation in the Retirement Plan was frozen as of May 7, 1993, and no
participants, including Mr. DeFeo, will be credited with service following such
date. However, participants not currently fully vested, including Mr. DeFeo,
will be credited with service for purposes of determining vesting only. The
annual retirement benefits payable at normal retirement age under the Retirement
Plan will be $4,503 for Mr. DeFeo (assuming full vesting).
Compensation of Directors
The directors who are employees of the Company receive no additional
compensation by virtue of their being directors of the Company. Non-employee
directors receive an annual fee of $24,000. All directors of the Company are
reimbursed for travel, lodging and related expenses incurred in attending Board
and committee meetings.
In addition, subject to stockholder approval of the 1996 Plan, outside directors
shall, in lieu of compensation payable under the 1994 Plan:
(i) be awarded on the date of appointment as an outside director, an option
to purchase 25,000 shares of Common Stock;
(ii) provided such outside directors are serving as of the date of
stockholder approval of the 1996 Plan, be awarded an option to purchase the
number of shares of Common Stock necessary to bring the total number of shares
of Common Stock for which the director has or had an option, granted by the
Company during his tenure as a director, to 25,000 shares, at a price of $4.25
per share;
(iii) in consideration of services to the Board during 1995 and each year
thereafter, as applicable, be awarded annually an option to purchase 7,500
shares of Common Stock five business days after the date on which the Company
files its Annual Report on Form 10-K with the Commission, at the closing price
of a share of Common Stock on the NYSE on such date, except that the exercise
price of options granted in consideration of services rendered during 1995 shall
be $4.25 per share;
(iv) in consideration of services to the Board during 1995 and each year
thereafter, as applicable, (a) if such outside directors are serving as a
chairperson of a committee to the Board of Directors five business days after
the date on which the Company files its Annual Report on Form 10-K with the
Commission, be awarded an option to purchase 5,000 shares of Common Stock at
$4.25 per share for the options granted in consideration of services rendered
during 1995 and at the closing price of a share of Common Stock on the NYSE on
the date of all other annual awards, or (b) if such outside directors are
serving as a member of a committee (and not as a chairperson of such committee)
of the Board of Directors five business days after the date on which the Company
files its Annual Report on Form 10-K with the Commission, be awarded an option
to purchase 2,500 shares of Common Stock at $4.25 per share for the options
granted in consideration of services rendered during 1995 and at the closing
price of Common Stock on the NYSE on the date of all other annual awards;
provided, however, that an individual outside director shall not be awarded an
option to purchase more than 7,500 shares of Common Stock per year for service
as a committee chairperson and/or member, regardless of the number of positions
held.
The outside director options described above shall have a term of five years and
the exercise price of the options shall be equal to the fair market value of the
Common Stock on the date preceding the day the grant is authorized, unless
otherwise provided. The options shall vest immediately. On December 13, 1995,
pursuant to such provisions of the 1996 Plan, (i) G. Chris Andersen was
conditionally granted an option to purchase 30,000 shares of Common Stock; (ii)
William H. Fike was conditionally granted an option to purchase 25,000 shares of
Common Stock; (iii) Bruce I. Raben was conditionally granted an option to
purchase 30,000 shares of Common Stock; (iv) David A. Sachs was conditionally
granted an option to purchase 27,500 shares of Common Stock; and (v) Adam E.
Wolf was conditionally granted an option to purchase 17,500 shares of Common
Stock, in each case at an option price of $4.25 per share. In addition, on
December 13, 1995, pursuant to the provisions of the 1996 Plan; (i) G. Chris
Andersen was conditionally granted an option to purchase 15,000 shares of Common
Stock; (ii) William H. Fike was conditionally granted an option to purchase
12,500 shares of Common Stock; (iii) each of Bruce I. Raben and David A. Sachs
was conditionally granted an option to purchase 15,000 shares of Common Stock;
and (iv) Adam E. Wolf was conditionally granted an option to purchase 10,000
shares of Common Stock, in each case at an option price of $6.75 per share. At
the time of the Board of Directors' approval of the 1996 Plan and the initial
awards to outside directors, the Board of Directors noted the increased workload
of the outside directors during 1995 as a result of negotiations relating to Mr.
Lenz's retirement as well as the lack of a permanent Chairman since the date of
Mr. Lenz's retirement. See "Retirement of Randolph W. Lenz" below. In the event
that the stockholders do not ratify the Board of Directors' approval of the 1996
Plan, the outside directors shall receive compensation under the 1994 Plan.
Retirement of Randolph W. Lenz
On August 28, 1995, the Company announced that its Chairman, Randolph W. Lenz,
had retired from his position with the Company and its Board of Directors. In
connection with his retirement, the Company (acting upon the recommendation of a
committee comprised of its independent Directors and represented by independent
counsel) and Mr. Lenz have entered into a retirement agreement providing certain
benefits to Mr. Lenz and the Company. The agreement provides, among other
things, for a five-year consulting engagement requiring Mr. Lenz to make himself
available to the Company to provide consulting services for certain portions of
his time. Mr Lenz, or his designee, will receive a fee for consulting services
which will include payments in an amount, and a rate, equal to his 1995 base
salary until December 31, 1996. The agreement also provides for the granting of
a five-year $1.8 million loan bearing interest at 6.56% per annum which is
subject to being forgiven in increments over the five-year term of the agreement
upon certain conditions and equity grants having a maximum potential of 200,000
shares of Common Stock conditioned upon the Company achieving certain financial
performance objectives in the future. In contemplation of the execution of this
retirement agreement, the Company advanced to Mr. Lenz the principal amount of
the forgivable loan. Mr. Lenz has also agreed not to compete with the Company,
to vote his Terex shares in the manner recommended by the Company's Board of
Directors, not to acquire any additional shares of the Common Stock, and, except
under certain circumstances, not to sell his shares of common stock.
The foregoing description is a summary of the terms of the retirement agreement
and does not purport to be complete and is qualified in its entirety by
reference to the Agreement dated as of November 2, 1995 between the Company and
Randolph W. Lenz, a copy of which is filed as an Exhibit to the Registration
Statement of which this Prospectus is a part.
Employment Contracts, Termination of Employment
and Change-in-Control Arrangements
The Company has agreed with Ronald M. DeFeo that in the event of a change in
ownership of the Company which prevents him from continuing in his position as
President and Chief Executive Officer, the Company will provide for a
continuance of his income for a period of 24 months.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board recommending compensation for executive
officers, including the Named Executive Officers, during the Company's 1995
fiscal year consisted of G. Chris Andersen, William H. Fike and David A. Sachs.
There are no compensation Committee interlocks or insider participation with
respect to such individuals.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock by each person known by the Company to own
beneficially more than 5% of Common Stock, by each director, by each executive
officer of the Company named in "Management -- Executive Compensation," and by
all directors and executive officers as a group, as of March 31, 1996. Each
person named in the following table has sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by such
person, except as otherwise set forth in the notes to the table. Shares of
Common Stock that any person has a right to acquire within 60 days after March
31, 1996 pursuant to an exercise of options, warrants or other rights or
conversion of preferred stock or otherwise are deemed to be outstanding for the
purpose of computing the percentage ownership of such person, but are not deemed
to be outstanding for computing the percentage ownership of any other person
shown in the table.
Name and Address of Amount Percent
Beneficial Owner Beneficially of Class
Owned
Randolph W. Lenz (1) 4,425,701 (2) 41.76%
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
G. Chris Andersen 34,900 (3) *
821 West Shore Drive
Kinnelon, NJ 07405
Ronald M. DeFeo 54,732 (4) *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
William H. Fike 0 *
Magna International, Inc.
26200 Lahser Road
Suite 300
Southfield, MI 48034
Bruce I. Raben 67,663 (5) *
CIBC Wood Gundy
1999 Avenue of the Stars, Suite 1910
Los Angeles, CA 90067
Marvin B. Rosenberg 111,475 (6) 1.05%
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
David A. Sachs 32,800 (7) *
Onyx Partners
9595 Wilshire Boulevard, Suite 700
Beverly Hills, CA 90212
Adam E. Wolf 28,100 (8) *
875 East Donges Lane
Milwaukee, WI 53217
Ralph T. Brandifino 9,050 (9) *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
Brian J. Henry 5,875 (10) *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
David J. Langevin 128,675 (11) 1.21%
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
All directors and executive officers
as a group (12 persons) 475,145 (12) 4.48%
- ------------------------------
* Amount owned does not exceed one percent (1%) of the class so owned.
(1) Mr. Lenz currently pledges, and intends to pledge in the
future, shares of the Common Stock owned by him as
collateral for loans. If Mr. Lenz does not pay such loans
when due, the pledgee may have the right to sell the shares
of the Common Stock pledged to it in satisfaction of Mr.
Lenz's obligations. The sale of a significant amount of such
pledged shares could result in a change of control of the
Company. Pursuant to a retirement agreement between the
Company and Mr. Lenz, Mr. Lenz has agreed to vote his shares
of the Company's Common Stock in the manner recommended by
the Company's Board of Directors.
(2) Includes (a) 3,738,537 shares of Common Stock directly owned
by Mr. Lenz, (b) 10,750 shares of Common Stock issuable upon
the exercise of options exercisable within 60 days and held
by Mr. Lenz, (c) 573,414 shares of Common Stock indirectly
owned by Mr. Lenz through four corporations that he
indirectly owns and controls, (d) 38,800 shares of Series B
Cumulative Redeemable Convertible Preferred Stock (the
"Series B Preferred Stock") convertible into 87,300 shares
of Common Stock and (e) Series B Common Stock Purchase
Warrants (the "Series B Warrants") exercisable into 15,700
shares of Common Stock.
(3) Includes 10,000 shares of Common Stock issuable upon the
exercise of options exercisable within 60 days.
(4) Includes 34,366 shares of Common Stock issuable upon the
exercise of options exercisable within 60 days.
(5) Includes 10,000 shares owned by Mr. Raben's wife as to which
Mr. Raben does not have dispositive or voting power and
disclaims beneficial ownership. Also includes 10,000 shares
of Common Stock issuable upon the exercise of options held
by Mr. Raben and which are exercisable within 60 days.
(6) Includes 5,650 shares of Common Stock issuable upon the
exercise of options exercisable within 60 days.
(7) Includes 3,300 shares of Common Stock owned by Mr. Sach's
wife. Mr. Sachs disclaims the beneficial ownership of such
shares. Also includes 10,000 shares of Common Stock issuable
upon the exercise of options held by Mr. Sachs which are
exercisable within 60 days.
(8) Includes 20,000 shares of Common Stock issuable upon the
exercise of options held by Mr. Wolf which are exercisable
within 60 days. Also includes 800 shares of Common Stock
held in a testamentary trust for which Mr. Wolf has shared
voting power and shared investment power and 200 shares of
Common Stock held by Mr. Wolf's wife for which he claims
beneficial ownership.
(9) Includes 5,300 shares of Common Stock issuable upon the
exercise of options exercisable within 60 days
(10) Includes 1,250 shares of Common Stock issuable upon the
exercise of options exercisable within 60 days.
(11) Includes 6,850 shares of Common Stock issuable upon the
exercise of options exercisable within 60 days.
(12) Includes 115,416 shares of Common Stock issuable upon the
exercise of options exercisable within 60 days.
<PAGE>
SELLING SECURITY HOLDERS
The following table sets forth certain information, as of May 6, 1996, regarding
the Preferred Stock held by the Selling Security Holders covered by this
Prospectus. The exact number of Conversion Shares issuable upon conversion of a
share of Preferred Stock cannot be determined until the date of such conversion,
as the Conversion Price is subject to adjustment upon the occurrence of certain
dilutive events. See "Description of Securities -- Preferred Stock -- Conversion
Right." At the initial Conversion Price of $11.11, each share of Preferred Stock
can be converted into 2.25 Conversion Shares. Because the Selling Security
Holders may offer all or some part of the Preferred Stock and Conversion Shares
which they hold from time to time pursuant to the offering contemplated by this
Prospectus, and because this offering is not being underwritten on a firm
commitment basis, no estimate can be given as to the amount of Preferred Stock
or Conversion Shares that will be held by the Selling Security Holders upon
termination of this offering. See "Plan of Distribution."
Number of
Name of Selling Shares of
Security Holder Preferred Stock Held
The Airlie Group LP 40,000
Baninsa International 5,000
Bear Stearns Securities Corp. 203,500
Cumberland Partners 40,000
Donaldson Lufkin & Jenrette Securities Corp. 10,000
FAMCO Capital Partners 32,000
FAMCO Income Partners, LP 37,000
Gerlach & Co. 97,000
Hare & Co. 40,000
J. Romeo & Co. 80,000
J. Romeo & Co. 16,800
JEFCO 48,000
Lewco Securities Corp. 120,550
Lewco Securities Corp. 1,200
Lewco Securities Corp. 5,250
Merrill Lynch Pierce Fenner & Smith Incorporated 173,500
Merrill Lynch Pierce Fenner & Smith Incorporated 25,000
Morgan Stanley & Co. 15,000
Neuberger & Berman 51,200
Polly & Co. 1,000
Prudential Securities Incorporated 11,000
SC Fundamental Value Fund LP 22,000
SP Investment International NVB 20,000
Scattered Corp. 20,000
Strome Susskind Hedgecap Fund, L.P. 80,000
Taft Securities 5,000
The Preferred Stock and Conversion Shares are being registered for resale solely
for the account of the Selling Security Holders. None of the Selling Security
Holders and none of their respective officers, directors or stockholders has had
any material relationship with the Company within the past three years, except
as set forth in "Certain Transactions."
It is anticipated that each of the Selling Security Holders named herein will
offer and sell the shares of Preferred Stock which may be sold by such person
hereunder from time to time in ordinary transactions to go through one or more
brokers or dealers in the over-the-counter market or in private transactions at
such prices as may be obtainable.
<PAGE>
CERTAIN TRANSACTIONS
On August 28, 1995, Randolph W. Lenz retired as Chairman of the Board and a
Director of the Company. Mr. Lenz remains the Company's principal stockholder.
As of March 31, 1996 he beneficially owned, directly and indirectly,
approximately 42% of the outstanding Common Stock of the Company. In connection
with his retirement, the Company entered into an agreement with Mr. Lenz which
provides certain benefits to Mr. Lenz and the Company. See "Management --
Retirement of Randolph W. Lenz." In addition to indebtedness pursuant to the
retirement agreement, an affiliate of Mr. Lenz is indebted to the Company in the
approximate amount of $33,450 representing shipping charges incurred by such
affiliate to the Company during 1994. The affiliate of Mr. Lenz has not paid
such charges to date.
The Company, certain directors and executives of the Company, and KCS are named
parties in various legal proceedings. During 1995, the Company incurred $0.3
million of legal fees and expenses on behalf of the Company, directors and
executives of the Company, and KCS named in the lawsuits.
In 1995, the Company retained Jefferies, of which a director of the Company was
then an officer, in connection with the offering of the Company's Senior Secured
Notes and the Acquisition of PPM which was completed in May 1995. Jefferies was
paid $9.338 million as an underwriting discount and for services rendered.
Jefferies has previously rendered financial advisory and other services to the
Company. JEFCO, one of the Selling Security Holders, is an affiliate of
Jefferies. In addition, certain of the Selling Security Holders are officers
and/or employees of Jefferies.
The Company intends that all transactions with affiliates be on terms no less
favorable to the Company than could be obtained in comparable transactions with
an unrelated person. The Board will be advised in advance of any such proposed
transaction or agreement and will utilize such procedures in evaluating their
terms and provisions as are appropriate in light of the Board's fiduciary duties
under Delaware law. In addition, the Company has an Audit Committee consisting
solely of outside directors. One of the responsibilities of the Audit Committee
is to review related party transactions.
DESCRIPTION OF SECURITIES
The Company's authorized capital stock consists of 40 million shares of capital
stock, $.01 par value, consisting of 30 million shares of Common Stock and 10
million shares of preferred stock. As of March 31, 1996, 10.6 million shares of
Common Stock and 1.2 million shares of preferred stock (including the Preferred
Stock registered hereby) were issued and outstanding.
Common Stock
Each outstanding share of Common Stock entitles the holder to one vote, either
in person or by proxy, on all matters submitted to a vote of stockholders,
including the election of directors. There is no cumulative voting in the
election of directors, which means that the holders of a majority of the
outstanding shares of Common Stock can elect all of the directors then standing
for election. Subject to preferences which may be applicable to any outstanding
shares of preferred stock, holders of Common Stock have equal ratable rights to
such dividends as may be declared from time to time by the Board of Directors
out of funds legally available thereof. See "Market for Common Stock and
Dividend Policy."
Holders of Common Stock have no conversion, redemption or preemptive rights to
subscribe to any securities of the Company. All outstanding shares of Common
Stock are fully paid and nonassessable. In the event of any liquidation,
dissolution or winding-up of the affairs of the Company, holders of Common Stock
will be entitled to share ratably in the assets of the Company remaining after
provision for payment of liabilities to creditors and preferences applicable to
outstanding shares of preferred stock. The rights, preferences and privileges of
holders of Common Stock are subject to the rights of the holders of any
outstanding shares of preferred stock. See "-- Preferred Stock."
The Certificate of Incorporation provides that directors of the Company shall
not be personally liable to the Company or its stockholders for monetary damages
for breach of fiduciary duties as a director except to the extent otherwise
required by Delaware law. The by-laws of the Company provide for indemnification
of the officers and directors of the Company to the fullest extent permitted by
Delaware law.
The transfer agent and registrar for the Common Stock is Chemical Mellon
Shareholder Services L.L.C., 111 Founders Plaza, Suite 1100, East Hartford,
Connecticut 06108.
<PAGE>
Preferred Stock
The Board of Directors of the Company is authorized to issue up to 10,000,000
shares of preferred stock, par value $.01 per share, in one or more series, with
such designations, powers, preferences and rights of such series and the
qualifications, limitations or restrictions thereon, including, but not limited
to, the fixing of dividend rights, dividend rates, conversion rights, voting
rights, rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences, in each case, if
any, as the Board of Directors of the Company may by resolution determine,
without any further vote or action by the Company's stockholders.
Series A Cumulative Redeemable Convertible Preferred Stock. By resolution
adopted December 17, 1993, the Board of Directors of the Company authorized the
issuance of a series of preferred stock consisting of 1,200,000 shares,
designated Series A Cumulative Redeemable Convertible Preferred Stock, par value
$.01 per share, and fixed the terms of such Preferred Stock. The following
summary of the terms and provisions of the Preferred Stock does not purport to
be complete and is qualified in its entirety by reference to the relevant
sections of the Company's Restated Certificate of Incorporation, a copy of which
is filed as an exhibit to the Registration Statement.
The registrar and transfer agent for the Preferred Stock is Chemical Mellon
Shareholder Services L.L.C., 111 Founders Plaza, Suite 1100, East Hartford, CT
06108.
Liquidation Preference. In the event of the voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company (a
"Liquidation"), subject to the prior preferences and other rights of any stock
ranking senior to the Preferred Stock in respect of the right to receive assets
upon liquidation, but before any distribution or payment shall be made to the
holders of Common Stock or any other stock ranking junior to the Preferred Stock
upon liquidation, the holders of the Preferred Stock shall be entitled to be
paid, out of the assets of the Company available for distribution to its
stockholders, a liquidation preference, initially equal to $25.00 per share,
plus all accrued and unpaid dividends thereon to such date, in cash. During the
period commencing on the Issue Date and ending on the Accretion Termination
Date, the Liquidation Preference accretes and accrues daily at the rate of 13%
per annum from the Issue Date through December 20, 1998 (the "Fifth
Anniversary") and 18% per annum thereafter. Until the shelf Registration
Statement of which this Prospectus is a part (the "Registration Statement")
shall become effective or if, prior to the end of the period during which a
registration statement relating to the shares of Preferred Stock is required to
be maintained effective pursuant to the Preferred Stock Registration Rights
Agreement, the Commission issues a stop order suspending the effectiveness of
the Registration Statement, then for each day on which any of the foregoing
events occurred and are continuing, the rate increases by (a) 0.25% per annum
from February 18, 1994 through June 18, 1994 (the "Initial Event Period") and
(b) 0.50% per annum on each such day thereafter. Such accretion shall be
computed on the basis of a 360-day year and shall compound quarterly on each
Dividend Payment Date.
Dividends. Subject to the prior preferences and other rights of any stock
ranking senior to the Preferred Stock with respect to the payment of dividends,
holders of shares of the Preferred Stock are entitled to receive, when and as
declared by the Board of Directors, out of funds legally available for the
payment of dividends, cumulative cash dividends that will accrue from the
Accretion Termination Date at the rate of 13% per annum through the Fifth
Anniversary and 18% per annum thereafter. Until the Registration Statement shall
become effective or in the event that, prior to the end of the period during
which a registration statement relating to the shares of Preferred Stock is
required to be maintained effective pursuant to the Preferred Stock Registration
Rights Agreement, the Commission issues a stop order suspending the
effectiveness of such registration statement, then for each day on which any of
the foregoing events occurred and are continuing, the rate will increase by (a)
0.25% per annum during the Initial Event Period and (b) 0.50% per annum on each
such day thereafter. Such accretion shall be computed on the basis of a 360-day
year and shall compound quarterly on each Dividend Payment Date. Such dividends
are cumulative and shall be payable in cash, quarterly, in arrears, when and as
declared by the Board of Directors, on March 31, June 30, September 30 and
December 31 of each year commencing on the first Dividend Payment Date following
the Accretion Termination Date. Each such dividend shall be paid to the holders
of record of the Preferred Stock as their names appear on the share register of
the Company at the close of business on the applicable record date, which shall
be the 15th day of the calendar month in which the applicable Dividend Payment
Date falls or such other record date designated by the Board of Directors of the
Company with respect to the dividend payable on such respective Dividend Payment
Date.
If full cash dividends are not paid or made available to the holders of all
outstanding shares of Preferred Stock and of any stock ranking on a parity with
the Preferred Stock in respect of the right to receive dividends, and funds
available are insufficient to permit payment in full in cash to all such holders
of the preferential amounts to which they are then entitled, the entire amount
available for payment of cash dividends shall be distributed among the holders
of the Preferred Stock and of any such parity stock, ratably in proportion to
the full amount to which they would otherwise be respectively entitled, and any
remainder not paid in cash to the holders of the Preferred Stock shall cumulate,
whether or not earned or declared, with additional dividends thereon for each
succeeding full quarterly dividend period during which such dividends shall
remain unpaid. Unpaid dividends for any period less than a full quarterly
dividend period shall cumulate on a day-to-day basis and shall be computed on
the basis of a 360-day year.
So long as any shares of Preferred Stock shall be outstanding, the Company shall
not declare or pay on any stock ranking junior to the Preferred Stock in respect
of the right to receive dividends any dividend whatsoever, whether in cash,
property or otherwise (other than dividends payable in shares of the class or
series upon which such dividends are declared or paid), nor shall the Company
make any distribution on any such junior stock, nor shall any such junior stock
be purchased or redeemed by the Company or any subsidiary of the Company, nor
shall any monies be paid or made available for a sinking fund for the purchase
or redemption of any such junior stock; provided that from and after the
Accretion Termination Date, the Company may declare and pay cash dividends on
such junior stock so long as (i) all dividends to which the holders of Preferred
Stock shall have been entitled for all previous dividend periods shall have been
declared and paid and (ii) on or prior to the later of (x) the first anniversary
of the Accretion Termination Date and (y) the third anniversary of the Issue
Date, the Company will not pay dividends on the Common Stock during any 12 month
period exceeding 4% of the Current Market Price (as defined below in "--
Warrants -- Warrant Ratio") per share of the Common Stock on the trading day
immediately prior to the declaration of any cash dividend.
Redemption. The Preferred Stock may be redeemed by the Company at any time in
whole or (except as noted below) from time to time, in part, at the option of
the Company, at a per share redemption price equal to the Liquidation Preference
per share on the date of redemption plus all accrued but unpaid dividends
thereon to and including the date of redemption. If less than all of the
outstanding shares of Preferred Stock are to be redeemed, such shares shall be
redeemed pro rata or by lot as determined by the Board of Directors in its sole
discretion. The Company shall not redeem less than all of the outstanding shares
of Preferred Stock unless all cumulative dividends on the Preferred Stock for
all previous dividend periods have been paid or declared and funds therefor set
apart for payment.
The Company is required to redeem all of the then outstanding shares of
Preferred Stock on or prior to December 31, 2000 at a per share redemption price
equal to the Liquidation Preference per share on the date of redemption plus all
accrued but unpaid dividends thereon to and including the date of redemption.
Notice of every proposed redemption of Preferred Stock shall be sent by or on
behalf of the Company, by first class mail, postage prepaid, to the holders of
record of the shares of Preferred Stock so to be redeemed at their respective
addresses as they shall appear on the records of the Company, not less than
thirty (30) days nor more than sixty (60) days prior to the date fixed for
redemption (the "Redemption Date") (i) notifying such holders of the election or
obligation of the Company to redeem such shares of Preferred Stock and of the
Redemption Date, (ii) stating the place or places at which the shares of
Preferred Stock called for redemption shall, upon presentation and surrender of
the certificates evidencing such shares of Preferred Stock, be redeemed, and the
redemption price therefor, and (iii) stating the name and address of any
redemption agent selected by the Company and the name and address of the
Corporation's transfer agent for the Preferred Stock.
Voting. Except as set forth below or as otherwise required by law, the holders
of the issued and outstanding shares of Preferred Stock shall have no voting
rights.
So long as any Preferred Stock is outstanding, the Company, without first
obtaining the affirmative vote or written consent of the holders of not less
than a majority of the then outstanding shares of Preferred Stock, voting
separately as a class, will not: (i) amend or repeal any provision of, or add
any provision to, the Company's Restated Certificate of Incorporation or
Restated By-laws if such action would alter adversely or change the preferences,
rights, privileges or powers of, or the restrictions provided for the benefit
of, any Preferred Stock, or increase or decrease the number of shares of
Preferred Stock authorized; (ii) authorize or issue shares of any class or
series of stock ranking senior to the Preferred Stock in respect of the right to
receive dividends or assets upon liquidation; (iii) reclassify any class or
series of any junior stock into such parity stock or senior stock or reclassify
any series of parity stock into senior stock; (iv) authorize, enter into, or
consummate any transaction that would constitute a deemed dividend to holders of
the Preferred Stock under United States Federal tax laws; or (v) consolidate
with or merge with or into another corporation, other than in a transaction in
which the Company is the surviving corporation.
From and after the Accretion Termination Date, (i) if and whenever the Company
fails to declare and pay in cash the entire amount of dividends payable on the
Preferred Stock on any two Dividend Payment Dates, then the holders of the
Preferred Stock, voting separately as a class, will be entitled at the next
annual meeting of the stockholders of the Company or at any special meeting to
elect one director, and (ii) if and whenever the Company shall have failed to
declare and pay in cash the entire amount of dividends payable on the Preferred
Stock on any four Dividend Payment Dates, then the holders of the Preferred
Stock, voting separately as a class, will be entitled at the next annual meeting
of the stockholders of the Company or at any special meeting to elect two
directors. Upon election, such directors will become additional directors of the
Company and the authorized number of directors of the Company will thereupon be
automatically increased by such number of directors. Such right of the holders
of Preferred Stock to elect directors may be exercised until all dividends in
default on the Preferred Stock have been paid in full, and dividends for the
current dividend period declared and funds therefor set apart or paid, and when
so paid and set apart or paid, the right of the holders of Preferred Stock to
elect such number of directors shall cease and the term of such directors shall
terminate, but subject always to the same provisions for the vesting of such
special voting rights in the case of any such future dividend default or
defaults.
Conversion Right. Each holder of shares of Preferred Stock has the right, at
such holder's option, at any time or from time to time, to convert any of such
shares of Preferred Stock into the number of fully paid and nonassessable shares
of Common Stock determined by dividing (i) $25.00 by (ii) the Conversion Price,
initially $11.11 and subject to adjustment as set forth below, in effect on the
date of conversion. The Conversion Price is subject to adjustment to prevent
dilution in the event of (i) dividends or other distributions of Common Stock,
(ii) subdivision and combinations of outstanding shares of Common Stock, (iii)
dividends or other distributions of rights or warrants entitling the holders
thereof to subscribe for or purchase, during a period not exceeding 45 days from
the date of such dividend or other distribution, Common Stock at a price per
share less than the Current Market Price of the Common Stock, (iv) dividends or
other distributions of other securities, evidences of its indebtedness or other
assets, excluding any cash dividend or cash distribution payable out of earned
surplus of the Company if the per share amount of such dividend or distribution,
together with the aggregate per share amount of all other cash dividends and
cash distributions declared or paid during the one year period ending on the
date such dividend is declared (the "Declaration Date") does not exceed 4% of
the Current Market Price per share of Common Stock on the trading day
immediately prior to the Declaration Date, or (v) issuances by the Company of
any Common Stock (or securities convertible into or exercisable for Common
Stock) for a consideration per share less than the Current Market Price per
share of Common Stock on the date of such issuance, subject to certain
exceptions.
Reorganizations. In case of (a) any consolidation with or merger of the Company
with or into another corporation, (b) the occurrence of any other transaction or
event pursuant to which all or substantially all of the Common Stock is
exchanged for, converted into, or acquired for, or constitutes solely the right
to receive, cash securities, property or other assets (whether by exchange
offer, liquidation, tender offer or otherwise) or (c) the sale, lease or other
transfer of all or substantially all of the assets of the Company, each share of
Preferred Stock shall after the date of such transaction be convertible into the
number of shares of stock or other securities or property (including cash) to
which the Common Stock issuable (at the time of such transaction) upon
conversion of such share of Preferred Stock would have been entitled upon such
transaction.
Reservation of Shares; Valid Issuance; Approvals. The Company shall (i) reserve
at all times so long as any shares of Preferred Stock remain outstanding, free
from preemptive rights, out of its treasury stock (if applicable) or its
authorized but unissued shares of Common Stock, or both, solely for the purpose
of effecting the conversion of the shares of Preferred Stock, sufficient shares
of Common Stock to provide for the conversion of all outstanding shares of
Preferred Stock, (ii) take all necessary action so that all shares of Common
Stock that are issued upon conversion of the shares of the Preferred Stock will,
upon issuance, be duly and validly issued, fully paid and nonassessable, and
(iii) take no action which will cause a contrary result (including, without
limitation, any action that would cause the Conversion Price to be less than the
par value, if any, of the Common Stock).
If any shares of Common Stock reserved for the purpose of conversion of shares
of Preferred Stock require registration with or approval of any governmental
authority under any Federal or state law before such shares may be validly
issued or delivered upon conversion, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If, and so long as, any Common Stock into which the shares of
Preferred Stock are then convertible is listed on any national securities
exchange, the Company will, if permitted by the rules of such exchange, list and
keep listed on such exchange, upon official notice of issuance, all shares of
such Common Stock issuable upon conversion.
Series B Cumulative Redeemable Convertible Preferred Stock. By resolution
adopted January 24, 1994, the Board of Directors of the Company authorized the
issuance of a series of preferred stock consisting of 89,800 shares of Series B
Preferred Stock, and fixed the terms of such Series B Preferred Stock. The
following summary of the terms and provisions of the Series B Preferred Stock
does not purport to be complete and is qualified in its entirety by reference to
the relevant sections of the Company's Restated Certificate of Incorporation.
Liquidation Preference. In the event of the Liquidation of the Company, subject
to the prior preferences and other rights of any stock ranking senior to the
Series B Preferred Stock in respect of the right to receive assets upon
liquidation (including the Preferred Stock registered hereby), but before any
distribution or payment shall be made to the holders of Common Stock or any
other stock ranking junior to the Series B Preferred Stock upon liquidation, the
holders of the Series B Preferred Stock shall be entitled to be paid, out of the
assets of the Company available for distribution to its stockholders, a
liquidation preference (the "Series B Liquidation Preference"), initially equal
to $25.00 per share, plus all accrued and unpaid dividends thereon to such date,
in cash. During the period commencing on December 9, 1994 (the "Series B Issue
Date") and ending on the Series B Dividend Payment Date (as defined herein)
immediately preceding the first Series B Dividend Payment Date on which the
Company is permitted to declare and pay cash dividends on the Series B Preferred
Stock under the Company's indentures and loan agreements as were in effect on
the Series B Issue Date (the "Series B Accretion Termination Date"), the Series
B Liquidation Preference will accrete and accrue daily at the rate of 13% per
annum from the Series B Issue Date through December 9, 1999 and 18% per annum
thereafter. Such accretion shall be computed on the basis of a 360-day year and
shall compound quarterly on each March 31, June 30, September 30 and December 31
of each year (each, a "Series B Dividend Payment Date").
Dividends. Subject to the prior preferences and other rights of any stock
ranking senior to the Series B Preferred Stock with respect to the payment of
dividends (including the Preferred Stock registered hereby), holders of shares
of the Series B Preferred Stock are entitled to receive, when and as declared by
the Board of Directors, out of funds legally available for the payment of
dividends, cumulative cash dividends that will accrue from the Series B
Accretion Termination Date at the rate of (a) 13% per annum from the Series B
Accretion Termination Date through December 9, 1999 and (b) 18% per annum
thereafter. Such dividends are cumulative and shall be payable in cash,
quarterly, in arrears, when and as declared by the Board of Directors, on each
Series B Dividend Payment Date commencing on the first Series B Dividend Payment
Date following the Series B Accretion Termination Date.
So long as any shares of Series B Preferred Stock shall be outstanding, the
Company shall not declare or pay on any stock ranking junior to the Series B
Preferred Stock in respect of the right to receive dividends any dividend
whatsoever, whether in cash, property or otherwise (other than dividends payable
in shares of the class or series upon which such dividends are declared or
paid), nor shall the Company make any distribution on any such junior stock, nor
shall any such junior stock be purchased or redeemed by the Company or any
subsidiary of the Company, nor shall any monies be paid or made available for a
sinking fund for the purchase or redemption of any such junior stock; provided
that from and after the Series B Accretion Termination Date, the Company may
declare and pay cash dividends on such junior stock so long as (i) all dividends
to which the holders of Series B Preferred Stock shall have been entitled for
all previous dividend periods shall have been declared and paid and (ii) on or
prior to the later of (x) the third year anniversary of the Series B Issue Date
and (y) the one year anniversary of the Series B Accretion Termination Date, the
Company will not pay dividends on the Common Stock during any 12 month period
exceeding 4% of the Current Market Price per share of the Common Stock on the
trading day immediately prior to the declaration of any cash dividend.
Redemption. The Series B Preferred Stock may be redeemed by the Company in cash
at any time in whole or (except as noted below), from time to time, in part, at
the option of the Company, at a per share redemption price equal to the Series B
Liquidation Preference per share on the date of redemption plus all accrued but
unpaid dividends thereon to and including the date of redemption. If less than
all of the outstanding shares of Series B Preferred Stock are to be redeemed,
such shares shall be redeemed pro rata or by lot as determined by the Board of
Directors in its sole discretion. The Company shall not redeem less than all of
the outstanding shares of Series B Preferred Stock unless all cumulative
dividends on the Series B Preferred Stock for all previous dividend periods have
been paid or declared and funds therefor set apart for payment.
The Company is required to redeem all of the then outstanding shares of Series B
Preferred Stock on or prior to December 31, 2001 at a per share redemption price
equal to the Series B Liquidation Preference per share on the date of redemption
plus all accrued but unpaid dividends thereon to and including the date of
redemption; provided, that the Series B Preferred Stock may be redeemed only if
all of the outstanding Preferred Stock has been redeemed prior to such proposed
redemption of the Series B Preferred Stock.
Voting. Except as set forth below or as otherwise required by law, the holders
of the issued and outstanding shares of Series B Preferred Stock shall have no
voting rights.
So long as any Series B Preferred Stock is outstanding, the Company, without
first obtaining the affirmative vote or written consent of the holders of not
less than a majority of the then outstanding shares of Series B Preferred Stock,
voting separately as a class, will not: (i) amend or repeal any provision of, or
add any provision to, the Restated Certificate of Incorporation or Restated
By-Laws if such action would alter adversely or change the preferences, rights,
privileges or powers of, or the restrictions provided for the benefit of, any
Series B Preferred Stock, or increase or decrease the number of shares of Series
B Preferred Stock authorized; (ii) authorize or issue shares of any class or
series of stock ranking senior to the Series B Preferred Stock in respect of the
right to receive dividends or assets upon liquidation; (iii) reclassify any
class or series of any junior stock into such parity stock or senior stock or
reclassify any series of parity stock into senior stock; or (iv) authorize,
enter into, or consummate any transaction that would constitute a deemed
dividend to holders of the Series B Preferred Stock under United States Federal
tax laws.
Conversion Right. Each holder of shares of Series B Preferred Stock has the
right, at such holder's option, at any time or from time to time, to convert any
of such shares of Series B Preferred Stock into the number of fully paid and
nonassessable shares of Common Stock determined by dividing (i) $25.00 by (ii)
the conversion price, initially $11.11 and subject to adjustment (the "Series B
Conversion Price"), in effect on the date of conversion. The Series B Conversion
Price is subject to adjustment to prevent dilution in the event of (i) dividends
or other distributions of Common Stock, (ii) subdivision and combinations of
outstanding shares of Common Stock, (iii) dividends or other distributions of
rights or warrants entitling the holders thereof to subscribe for or purchase,
during a period not exceeding 45 days from the date of such dividend or other
distribution, Common Stock at a price per share less than the Current Market
Price of the Common Stock, (iv) dividends or other distributions of other
securities, evidences of its indebtedness or other assets, excluding any cash
dividend or cash distribution payable out of earned surplus of the Company if
the per share amount of such dividend or distribution, together with the
aggregate per share amount of all other cash dividends and cash distributions
declared or paid during the one year period ending on the date such dividend is
declared the "Series B Declaration Date" does not exceed 4% of the Current
Market Price per share of Common Stock on the trading day immediately prior to
the Series B Declaration Date, or (v) issuances by the Company of any Common
Stock (or securities convertible into or exercisable for Common Stock) for a
consideration per share less than the Current Market Price per share of Common
Stock on the date of such issuance, subject to certain exceptions.
Reorganizations. In case of (a) any consolidation with or merger of the Company
with or into another corporation, (b) the occurrence of any other transaction or
event pursuant to which all or substantially all of the Common Stock is
exchanged for, converted into, or acquired for, or constitutes solely the right
to receive, cash securities, property or other assets (whether by exchange
offer, liquidation, tender offer or otherwise) or (c) the sale, lease or other
transfer of all or substantially all of the assets of the Company, each share of
Series B Preferred Stock shall after the date of such transaction be convertible
into the number of shares of stock or other securities or property (including
cash) to which the Common Stock issuable (at the time of such transaction) upon
conversion of such share of Series B Preferred Stock would have been entitled
upon such transaction.
Reservation of Shares; Valid Issuance; Approvals. The Company shall (i) reserve
at all times so long as any shares of Preferred Stock remain outstanding, free
from preemptive rights, out of its treasury stock (if applicable) or its
authorized but unissued shares of Common Stock, or both, solely for the purpose
of effecting the conversion of the shares of Preferred Stock, sufficient shares
of Common Stock to provide for the conversion of all outstanding shares of
Preferred Stock, (ii) take all necessary action so that all shares of Common
Stock that are issued upon conversion of the shares of the Preferred Stock will,
upon issuance, be duly and validly issued, fully paid and nonassessable, and
(iii) take no action which will cause a contrary result (including, without
limitation, any action that would cause the Conversion Price to be less than the
par value, if any, of the Common Stock).
If any shares of Common Stock reserved for the purpose of conversion of shares
of Series B Preferred Stock require registration with or approval of any
governmental authority under any Federal or state law before such shares may be
validly issued or delivered upon conversion, then the Company will in good faith
and as expeditiously as possible endeavor to secure such registration or
approval, as the case may be. If, and so long as, any Common Stock into which
the shares of Preferred Stock are then convertible is listed on any national
securities exchange, the Company will, if permitted by the rules of such
exchange, list and keep listed on such exchange, upon official notice of
issuance, all shares of such Common Stock issuable upon conversion.
Warrants
In addition to the Common Stock, the Preferred Stock and the Series B Preferred
Stock, as of March 31, 1996 the Company has outstanding 1,264,756 of Series A
Warrants and 15,700 of Series B Warrants. The Series A Warrants and the Series B
Warrants are collectively referred to as the "Warrants". The following is a
summary of the terms and provisions of the Warrants. This summary does not
purport to be complete and is qualified in its entirety by reference to the
detailed provisions of the Warrants.
Term. As of the date of this Prospectus, each Series A Warrant may be exercised
by the registered holder thereof for 2.41 shares of Common Stock, subject to
adjustment. Each Series B Warrant may be exercised by the registered holder
thereof for one share of Common Stock. The Warrants may be exercised at any time
in whole and from time to time in part, at the option of the holder, until 5:00
p.m. New York City time on December 31, 2000. The shares of Common Stock
issuable upon exercise or redemption of the Warrants shall be the "Warrant
Shares."
Exercise Price. The Warrants are exercisable for $.01 per Warrant Share in the
case of Common Stock and in the case of all other securities issuable upon
exercise of the Warrants, for the lowest exercise price permitted by law.
Redemption. The Series A Warrants may be redeemed by the Company in whole, but
not in part, in exchange for Series A Warrant Shares at any time; provided, that
concurrently with such redemption the Company redeems all then outstanding
shares of Preferred Stock. Each Series A Warrant will be redeemable for a number
of Series A Warrant Shares equal to the Series A Warrant Ratio on the date of
redemption. The Series B Warrants are not redeemable.
Adjustments. The Warrants contain certain provisions that protect the holders
thereof against dilution in the event of (i) dividends or other distributions of
Common Stock, (ii) subdivisions and combinations of outstanding shares of Common
Stock, (iii) dividends or other distributions of rights or warrants entitling
the holders thereof to subscribe for or purchase, during a period not exceeding
45 days from the date of such dividend or other distribution, shares of Common
Stock at a price per share less than the Current Market Price per share of
Common Stock, or (iv) issuances by the Company of any Common Stock (or
securities convertible into or exercisable for Common Stock) for a consideration
per share less than the Current Market Price of the Common Stock on the date of
such issuance, subject to certain exceptions. "Current Market Price" per share
of the Common Stock on any day means the average of the daily closing prices
with respect to the Common Stock for the 30 consecutive trading days ending on
such date (or, if such date is not a trading day, on the trading day immediately
preceding such date); provided, that if the Common Stock is not publicly traded,
the Current Market Price per share shall be determined by a nationally
recognized investment banking firm selected by the Board of Directors of the
Company.
In addition, if the Company shall declare a dividend or other distribution on
its Common Stock that would not cause such an adjustment consisting of (i)
securities other than Common Stock, (ii) evidences of its indebtedness, or (iii)
assets (including cash dividends or distributions) (collectively, "Assets"),
then in each such case adequate provision shall be made so that each holder of
Warrants shall receive, without charge, concurrently with the making of such
dividend or distribution, the amount and kind of such Assets that such holder
would have received if such holder had, immediately prior to the relevant record
date, exercised its Warrants.
On or prior to each day on which an adjustment is to be made, the Company shall
promptly direct the Warrant Agent, and the Warrant Agent shall send to each
holder, notice of such adjustment and shall deliver to the Warrant Agent a
certificate of a firm of independent public accountants selected by the Board of
Directors (who may be the regular accountants employed by the Company) setting
forth the Warrant Shares purchasable upon the exercise of each Warrant and with
respect to the Series A Warrants, the Warrant Ratio after such adjustment, a
brief statement of the facts requiring such adjustment, and the computation by
which such adjustment was made.
Reorganizations. In case of (a) any consolidation or merger of the Company with
or into another corporation, (b) the occurrence of any other transaction or
event pursuant to which all or substantially all of the Common Stock is
exchanged for, converted into, or acquired for, or constitutes solely the right
to receive, cash securities, property or other assets (whether by exchange
offer, liquidation, tender offer or otherwise) or (c) the sale, lease or other
transfer of all or substantially all of the assets of the Company, there shall
thereafter be deliverable upon exercise of each Series A Warrant (in lieu of the
Series A Warrant Shares theretofore deliverable), at the lowest exercise price
permitted by law, the number of shares of stock or other securities or property
to which a holder of the Series A Warrant Shares that would otherwise have been
deliverable upon the exercise of such Series A Warrant would have been entitled
upon such transaction if such Series A Warrant had been exercised in full
immediately prior to such transaction.
No Rights as Stockholders. Nothing contained in the Warrant Agreement relating
to the Warrants or in any of the Warrants confers upon the holders thereof or
their transferees the right to vote or to receive dividends or to consent or to
receive notice as stockholders in respect of any meeting of stockholders for the
election of directors of the Company or any other matter, or any rights
whatsoever as stockholders of the Company.
Reservation of Shares; Governmental Approvals and Stock Exchange Listings. The
Company shall reserve at all times so long as any Warrants remain outstanding,
free from preemptive rights, out of its treasury stock (if applicable) or its
authorized but unissued shares of Common Stock, or both, solely for the purpose
of effecting the exercise of the Warrants, sufficient Warrant Shares to provide
for the exercise of all outstanding Warrants, and take all necessary action so
that all Warrant Shares that are issued upon exercise of the Warrants will, upon
issuance, be duly and validly issued, fully paid and nonassessable.
The Warrant Agent for the Warrants is Chemical Mellon Shareholder Services
L.L.C., 111 Founders Plaza, Suite 1100, East Hartford, Connecticut 06108.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain Federal income tax consequences to
the initial holders of the Preferred Stock under existing Federal income tax
law, which is subject to change, possibly retroactively. This summary does not
discuss all aspects of Federal income taxation that may be relevant to a
particular investor in light of his personal investment circumstances or to
certain types of investors subject to special treatment under the Federal income
tax laws (for example, financial institutions, insurance companies, tax-exempt
organizations, broker-dealers, and foreign taxpayers), and it does not discuss
any aspects of state, local, or foreign tax laws. This summary assumes that
investors will hold their Preferred Stock as a "capital asset" (generally
property held for investment) under the Internal Revenue Code of 1986, as
amended (the "Code"). Holders are urged to consult their tax advisors as to the
specific tax consequences of holding and disposing of the Preferred Stock,
including the application and effect of Federal, state, local and foreign income
and other tax laws.
This summary is based on the Company's understanding of the Federal income tax
laws, which in turn is in part based on discussions with the Company's
professional advisers. It is the Company's belief that all material Federal
income tax consequences are addressed.
Dividends
Accretions on the Liquidation preference of, and distributions (including
constructive distributions) with respect to, the Preferred Stock will be treated
as dividends for Federal income tax purposes to the extent of the current and
accumulated earnings and profits of the Company, and such dividends will be
subject to tax as ordinary income. The amount included in income for accreted
amounts should equal the fair market value of such amounts at the time such
amounts accrete, which will require the holder to include in income the accreted
amounts prior to the date in which any cash is paid. To the extent that the
amount of a distribution, whether paid in cash or through accretion, exceeds a
holder's allocable share of current and accumulated earnings and profits, such
excess will be treated as a non-taxable return of capital to the extent of a
holder's basis in the Preferred Stock and thereafter as a gain from the sale or
exchange of a capital asset. For Federal income tax purposes, earnings and
profits will be allocated to distributions with respect to the Preferred Stock
before they are allocated to distributions with respect to the Common Stock.
Distributions out of current and accumulated earnings and profits paid to a
corporate holder will generally qualify for the 70% intercorporate
dividends-received deduction provided that such holder satisfies certain minimum
holding period requirements and other applicable requirements. The
intercorporate dividends-received deduction will be reduced to the extent that
the holder of the Preferred Stock has incurred indebtedness to finance its
purchase. Generally, regular quarterly dividends on the Preferred Stock will not
be subject to the extraordinary dividend provisions of section 1059 of the Code.
The amount of the Company's earnings and profits for Federal income tax purposes
will depend upon, among other things, the Company's future financial
performance. Accordingly, no assurances can be given that the Company will have
earnings and profits over the life of the Preferred Stock sufficient to assure
that distributions paid thereon will be treated as dividends for Federal income
tax purposes.
The Preferred Stock was issued with an "unreasonable redemption premium" and
holders will be required to include a portion of such premium in ordinary income
for each taxable year during which such stock is held to the extent of the
Company's current and accumulated earnings and profits. The portion of the
redemption premium included in income for each taxable year will be determined
on the basis of a constant yield to maturity method, which will result in a
greater portion of such premium being included in income in the later part of
the term of the Preferred Stock. If the Internal Revenue Service were to assert
successfully that the amount of the aggregate purchase price of the Preferred
Stock and Warrants that is allocable to the Warrants is greater than the amount
allocated in the Purchase Agreement, the Preferred Stock could be deemed to be
issued with a greater amount of an unreasonable redemption premium
Conversion of the Preferred Stock
If shares of the Preferred Stock are converted into shares of Common Stock, no
gain or loss will generally be recognized for Federal income tax purposes,
except as set forth below. The tax basis for the Common Stock received upon
conversion will be equal to the tax basis of the Preferred Stock converted
(reduced by the portion of such basis allocable to any fractional interest
exchanged for cash). The holding period of the Common Stock will include the
holding period of the Preferred Stock converted. Gain or loss may be recognized
at the time of conversion, however, upon the receipt of cash paid in lieu of
fractional shares of the Common Stock or in respect of constructive dividends.
See "Constructive Dividends" below.
Redemption or Sale of the Preferred Stock
A redemption or sale of shares of the Preferred Stock will be a taxable
transaction for the holders of the Preferred Stock. Assuming that, after the
redemption or sale, the holder has no other direct or indirect stock interest in
the Company, such a redemption or sale will result in the recognition of gain or
loss equal to the difference between the amount received and the holder's tax
basis in the Preferred Stock that is redeemed or sold. Such gain or loss will be
a capital gain or loss, unless it is determined that a portion of the proceeds
is attributable to a constructive dividend. Such a gain or loss will be
long-term if the Preferred Stock has been held for more than one year.
Constructive Dividends
Under section 305 of the Code, adjustments in the Conversion Price of the
Preferred Stock to reflect distributions to holders of Common Stock, or the
omission to make such adjustments, may in certain circumstances result in
constructive distributions to holders of the Preferred Stock that could be
subject to tax as dividends to the extent of the Company's current and
accumulated earnings and profits.
PLAN OF DISTRIBUTION
The Company will issue Conversion Shares upon the conversion of Preferred Stock
by Selling Security Holders from time to time pursuant to the terms of the
Preferred Stock. See "Description of Securities -- Preferred Stock." The Company
will receive no proceeds from the issuance of Conversion Shares upon conversion
of Preferred Stock nor from the resale of the Preferred Stock and the Conversion
Shares by the Selling Security Holders pursuant to this offering. The Preferred
Stock and Conversion Shares offered for resale hereby may be sold from time to
time by the Selling Security Holders in one or more transactions (which may
involve block transactions) on the NYSE or in the over-the-counter market (to
the extent that such securities are listed or traded on such markets), in
negotiated transactions or in a combination of such methods of sale, at fixed
prices, at market prices prevailing at the time of sale, at prices relating to
prevailing market prices or at negotiated prices. The Selling Security Holders
may effect such transactions directly to purchasers or to or through
broker-dealers which may act as agents or principals. Such broker-dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Security Holders and/or the purchasers of Preferred
Stock and Conversion Shares for which broker-dealers may act as agent or to whom
they may sell as principal or both (which compensation as to a particular
broker-dealer may be less than or in excess of customary commissions). In
addition, any Common Stock covered by this Prospectus that subsequently
qualifies for sale pursuant to Rule 144 of the Securities Act may be sold under
Rule 144 rather than pursuant to this Prospectus.
The Preferred Stock was issued to the original purchasers on December 20, 1993
in a private placement. Pursuant to the Preferred Stock Registration Rights
Agreement, the Company agreed to file the Registration Statement of which this
Prospectus forms a part with the Commission, and to keep the Registration
Statement effective for 36 months from the date the Registration Statement is
declared effective, or, if shorter, until all of the Preferred Stock and
Conversion Shares are sold pursuant to an effective registration statement.
There is no established trading market for the Preferred Stock. The Company does
not intend to list the Preferred Stock on any securities exchange or to seek
approval for quotation through any automated quotation system. There is no
dealer which is obligated to make a market in the Preferred Stock and, if any
dealer or dealers should do so, they may discontinue any market making at any
time without notice. No assurance can be given as to the liquidity of any
trading market for the Preferred Stock.
At the time a particular offer of Preferred Stock or Conversion Shares is made,
a Prospectus Supplement, to the extent required, will be distributed which will
set forth the Preferred Stock or Conversion Shares being offered, the names of
the selling security holders, the purchase price, the amount of expenses of the
offering and the terms of the offering, including the name or names of any
underwriters, dealers or agents, any discounts, commissions and other items
constituting compensation from such selling security holders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers.
To comply with certain states' securities laws, if applicable, the Preferred
Stock and Conversion Shares will be sold in such states only through brokers or
dealers. In addition, in certain states the Preferred Stock and Conversion
Shares may not be sold unless they have been registered or qualify for sale in
such states or an exemption from registration or qualification is available and
is complied with. The Company is obligated pursuant to the Preferred Stock
Registration Rights Agreement to use its best efforts to register or qualify the
Preferred Stock and Conversion Shares under the securities or blue sky laws of
such jurisdictions as any Selling Security Holder reasonably requests.
Any broker-dealers who participate in a sale of their Preferred Stock and
Conversion Shares may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any commissions received by them, and
proceeds of any such sales as principal, may be deemed to be underwriting
discounts and commissions under the Securities Act.
Since the Selling Security Holders will be subject to the antimanipulation rules
promulgated under the Exchange Act, including Rule 10b-2, 10b-6 and 10b-7, in
connection with transactions in the Preferred Stock and Conversion Shares during
the effectiveness of the Registration Statement of which this Prospectus is a
part, the Company advises the Selling Security Holders to consult competent
securities counsel prior to initiating any such transaction.
Pursuant to the Preferred Stock Registration Rights Agreement, the Company has
paid or will pay any and all expenses incident to the performance of such
agreement including filing fees, fees and expenses incurred in connection with
compliance with the securities or blue sky laws of the applicable states, and
fees and disbursements of counsel and independent public accountants for the
Company and the reasonable fees and disbursements of one counsel retained by the
Selling Security Holders in connection with the Registration Statement. Such
expenses are estimated to be approximately $255,000. As and when the Company is
required to update this Prospectus, it may incur additional expenses in excess
of this estimated amount. Normal commission expenses and brokerage fees, as well
as any applicable underwriting discounts or transfer taxes, are payable
individually by the Selling Security Holders.
In the Preferred Stock Registration Rights Agreement, the Company agreed to
indemnify and hold harmless, to the extent permitted by law, the Selling
Security Holders, the officers, directors, shareholders, agents, affiliates and
partners of the Selling Security Holders, any person who participates as an
underwriter in the offering and sale of the Preferred Stock and Conversion
Shares and any person who controls any of such sellers or any of such
underwriters against losses, claims and expenses arising out of any false or
misleading statements contained in this Prospectus or the Registration Statement
of which it is a part. The Selling Security Holders have agreed to indemnify the
Company against certain liabilities and expenses arising out of statements made
by them for reliance by the Company in connection with the Registration
Statement or this Prospectus.
LEGAL MATTERS
Certain legal matters in connection with the sale of the Preferred Stock and the
Conversion Shares offered hereby will be passed upon for the Company by Robinson
Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas, New York,
New York 10104.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1995 and
1994 and for each of the three years in the period ended December 31, 1995
included in this Prospectus have been so included in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
The combined financial statements of P.P.M. S.A. and Legris Industries, Inc. at
December 31, 1994 and 1993, and for each of the three years in the period ended
December 31, 1994, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
<PAGE>
TEREX CORPORATION
INDEX TO FINANCIAL STATEMENTS
Page
TEREX CORPORATION (REGISTRANT)
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995
AND 1994 AND FOR EACH OF THE THREE YEARS
IN THE PERIOD ENDED DECEMBER 31, 1995
Report of independent accountants.........................................F - 2
Consolidated statement of operations .....................................F - 3
Consolidated balance sheet................................................F - 4
Consolidated statement of changes in stockholders' deficit................F - 5
Consolidated statement of cash flows......................................F - 6
Notes to consolidated financial statements................................F - 7
PPM S.A. AND LEGRIS INDUSTRIES, INC.
(BUSINESS ACQUIRED FROM LEGRIS INDUSTRIES, S. A.
BY TEREX CORPORATION)
COMBINED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1994
AND 1993 AND FOR EACH OF THE THREE YEARS
IN THE PERIOD ENDED DECEMBER 31, 1994
Report of independent auditors............................................F - 30
Combined balance sheets...................................................F - 31
Combined statements of operations.........................................F - 33
Combined statements of shareholders' equity...............................F - 34
Combined statements of cash flows.........................................F - 35
Notes to combined financial statements....................................F - 36
PPM S.A. AND LEGRIS INDUSTRIES, INC.
(BUSINESS ACQUIRED FROM LEGRIS INDUSTRIES, S.A. BY TEREX CORPORATION)
UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS AS OF MAY 9, 1995 AND 1994
AND FOR THE PERIODS ENDED MAY 9, 1995 AND 1994
Unaudited condensed combined statement of operations......................F - 47
Unaudited condensed combined balance sheet................................F - 48
Unaudited condensed combined statement of cash flows......................F - 50
Notes to unaudited condensed combined financial information...............F - 51
PRO FORMA FINANCIAL INFORMATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION OF TEREX CORPORATION AND SUBSIDIARIES.
Pro forma financial information...........................................F - 52
Unaudited pro forma condensed consolidated statement of operations for the
year ended December 31, 1995..........................................F - 53
Notes to unaudited pro forma financial information........................F - 54
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of Terex Corporation
In our opinion, the Terex Corporation consolidated financial statements listed
in the accompanying index on page F-1 present fairly, in all material respects,
the financial position of Terex Corporation and its subsidiaries at December 31,
1995 and 1994, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Stamford, Connecticut
March 22, 1996
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in millions except per share amounts)
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
NET SALES ....................................... $ 1,030.2 $ 786.8 $ 670.3
COST OF GOODS SOLD .............................. 922.0 703.6 621.8
Gross Profit ................................. 108.2 83.2 48.5
ENGINEERING, SELLING AND ADMINISTRATIVE EXPENSES
Third parties ................................ 83.3 70.2 74.8
Related parties .............................. -- 2.2 2.9
Write-off of Mark goodwill ................... -- -- 4.7
83.3 72.4 82.4
SEVERANCE AND EXIT CHARGES ...................... 3.5 7.4 --
Income (loss) from operations ................ 21.4 3.4 (33.9)
OTHER INCOME (EXPENSE)
Interest income .............................. 0.8 0.6 1.2
Interest expense ............................. (39.5) (30.5) (31.2)
Amortization of debt issuance costs .......... (2.3) (2.3) (3.4)
Gain on sale of Fruehauf stock ............... 1.0 26.0 3.0
Gain on sale of Drexel business .............. -- 4.7 --
Property impairment charge ................... (3.0) -- --
Gain on sale of property, plant and equipment 0.2 0.3 2.6
Other income (expense) - net ................. (6.3) (0.2) (3.2)
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS ....................... (27.7) 2.0 (64.9)
PROVISION FOR INCOME TAXES ...................... -- (0.8) (0.1)
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS ..... (27.7) 1.2 (65.0)
EXTRAORDINARY LOSS ON RETIREMENT OF DEBT ........ (7.5) (0.7) (1.5)
NET INCOME (LOSS) ............................ (35.2) 0.5 (66.5)
LESS PREFERRED STOCK ACCRETION .................. (7.3) (6.0) (0.2)
INCOME (LOSS) APPLICABLE TO COMMON STOCK ..... $ (42.5) $ (5.5) $ (66.7)
PER COMMON AND COMMON EQUIVALENT SHARE:
Loss before extraordinary items .............. $ (3.37)$ (0.46)$ (6.55)
Extraordinary loss on retirement of debt ..... (0.72) (0.07) (0.15)
Net income (loss) ............................ $ (4.09)$ (0.53)$ (6.70)
AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING IN PER SHARE CALCULATION 10.4 10.3 10.0
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
December 31,
1995 1994
CURRENT ASSETS
Cash and cash equivalents ....................... $ 7.8 $ 9.7
Cash securing letters of credit ................. 7.7 6.7
Trade receivables (less allowance of $9.8 in 1995
and $6.1 in 1994) ............................ 127.1 91.7
Customer deposit ................................ 19.1 --
Net inventories ................................. 249.3 164.2
Other current assets ............................ 15.2 5.8
Total Current Assets ......... 426.2 278.1
LONG-TERM ASSETS
Property, plant and equipment - net ............. 101.3 86.2
Goodwill - net .................................. 65.8 5.3
Debt issuance costs - net ....................... 14.5 3.3
Other assets .................................... 19.1 28.7
TOTAL ASSETS ....................................... $ 626.9 $ 401.6
CURRENT LIABILITIES
Notes payable ................................... $ 1.9 $ 2.1
Current portion of long-term debt ............... 7.2 25.8
Trade accounts payable .......................... 161.0 112.2
Accrued compensation and benefits ............... 16.8 10.8
Accrued warranties and product liability ........ 38.6 27.6
Accrued interest ................................ 4.7 9.0
Accrued income taxes ............................ 1.4 1.3
Customer deposit ................................ 19.1 --
Other current liabilities ....................... 44.0 32.8
Total Current Liabilities ..... 294.7 221.6
NON CURRENT LIABILITIES
Long-term debt, less current portion ............ 328.4 163.0
Accrued warranties and product liability ........ 33.1 31.8
Accrued pension ................................. 18.9 16.4
Other ........................................... 16.6 7.2
MINORITY INTEREST, INCLUDING REDEEMABLE
PREFERRED STOCK OF A SUBSIDIARY
Liquidation preference $26.1,
subject to adjustment ........................ 9.4 --
REDEEMABLE CONVERTIBLE PREFERRED STOCK
Liquidation preference $41.2, in 1995
and $36.6 in 1994 ............................ 24.6 17.3
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Warrants to purchase common stock ............... 17.2 17.6
Common Stock, $0.01 par value--
authorized 30.0 shares;
issued and outstanding 10.6 in 1995
and 10.3 in 1994 ............................ 0.1 0.1
Additional paid-in capital
40.5 40.1
Accumulated deficit
(150.9) (108.4)
Pension liability adjustment
(2.7) (1.8)
Unrealized holding gain on equity securities .... 1.0 1.8
Cumulative translation adjustment ............... (4.0) (5.1)
Total Stockholders' Deficit ..... (98.8) (55.7)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT ........ $ 626.9 $ 401.6
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(in millions)
Additional Pension Unrealized Cumulative
Common Paid-in Accumulated Liability Holding Translation
Warrants Stock Capital Deficit Adjustment Gain Adjustment Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992 $--- $0.1 $37.8 $(36.2) $(4.5) $--- $(6.2) $(9.0)
Issuance of Warrants 16.9 --- --- --- --- --- --- 16.9
Pension Contribution --- --- 2.3 --- --- --- --- 2.3
Net loss --- --- --- (66.5) --- --- --- (66.5)
Accretion of carrying
value of redeemable
preferred stock to
redemption value --- --- --- (0.2) --- --- --- (0.2)
Pension liability
adjustment --- --- --- --- 0.3 --- --- 0.3
Translation adjustment --- --- --- --- --- --- (6.0) (6.0)
BALANCE AT DECEMBER 31, 1993 16.9 0.1 40.1 (102.9) (4.2) --- (12.2) (62.2)
Issuance of Warrants 0.7 --- --- --- --- --- --- 0.7
Net income --- --- --- 0.5 --- --- --- 0.5
Accretion of carrying
value of redeemable
preferred stock to
redemption value --- --- --- (6.0) --- --- --- (6.0)
Pension liability
adjustment --- --- --- --- 2.4 --- --- 2.4
Unrealized holding gain on
equity securities --- --- --- --- --- 1.8 --- 1.8
Translation adjustment --- --- --- --- --- --- 7.1 7.1
BALANCE AT DECEMBER 31, 1994 17.6 0.1 40.1 (108.4) (1.8) 1.8 (5.1) (55.7)
Conversion of Warrants (0.4) --- 0.4 --- --- --- --- ---
Net loss --- --- --- (35.2) --- --- --- (35.2)
Accretion of carrying
value of redeemable
preferred stock to
redemption value --- --- --- (7.3) --- --- --- (7.3)
Pension liability
adjustment --- --- --- --- (0.9) --- --- (0.9)
Unrealized holding gain on
equity securities --- --- --- --- --- (0.8) --- (0.8)
Translation adjustment --- --- --- --- --- --- 1.1 1.1
BALANCE AT DECEMBER 31, 1995 $17.2 $0.1 $40.5 $(150.9) $(2.7) $1.0 $(4.0) $(98.8)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Year Ended December 31,
1995 1994 1993
OPERATING ACTIVITIES
Net Income (Loss) ............................... $ (35.2) $ 0.5 $ (66.5)
Adjustments to reconcile
net income (loss) to cash used in
operating activities:
Depreciation .................................. 21.4 13.7 12.1
Amortization .................................. 6.3 3.4 10.3
Extraordinary loss on retirement of debt ...... 7.5 0.7 1.5
Gain on sale of Fruehauf stock ................ (1.0) (26.0) (3.0)
Gain on sale of Drexel business ............... -- (4.7) --
Gain on sale of property, plant and equipment . (0.2) (0.3) (2.6)
Property impairment charge .................... 3.0 -- --
Other ......................................... 0.3 (0.8) 0.1
Changes in operating assets and
liabilities (net of effects
of acquisitions):
Restricted cash ............................. (1.0) (0.4) 5.2
Trade receivables ........................... 6.9 (17.6) 1.7
Net inventories ............................. (10.6) 0.1 30.3
Trade accounts payable ...................... (3.8) 24.4 (5.2)
Accrued compensation and benefits ........... 5.5 3.3 (3.6)
Accrued warranties and product liability .... 2.4 0.3 (3.4)
Accrued interest ............................ (4.1) (1.7) (1.1)
Accrued income taxes ........................ (1.9) (0.1) (0.6)
Other, net .................................. (17.4) (4.1) (21.4)
Net cash used in operating activities ..... (21.9) (9.3) (46.2)
INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired (92.4) -- --
Capital expenditures .......................... (10.5) (12.7) (11.5)
Proceeds from sale of excess assets ........... 1.1 3.3 11.3
Proceeds from sale of Fruehauf stock .......... 2.7 24.9 2.5
Proceeds from sale of Drexel business ......... -- 10.3 --
Proceeds from sale-leaseback of Saarn property -- 10.0 --
Other ......................................... 0.2 1.0 1.1
Net cash provided by (used in)
investing activities ...................... (98.9) 36.8 3.4
FINANCING ACTIVITIES
Net borrowings under revolving
line of credit agreements ................... 34.7 13.0 11.9
Principal repayments of long-term debt ........ (153.9) (41.5) (12.4)
Proceeds from issuance of
preferred stock and warrants ................ -- -- 27.2
Proceeds from issuance of long-term debt,
net of issuance costs ....................... 239.8 -- --
Other ......................................... (0.5) 0.2 --
Net cash provided by (used in)
financing activities ...................... 120.1 (28.3) 26.7
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS .......................... (1.2) 1.3 (0.4)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS .......................... (1.9) 0.5 (16.5)
CASH AND CASH EQUIVALENTS ....................... 9.7 9.2 25.7
AT BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS
AT END OF PERIOD .............................. $ 7.8 $ 9.7 $ 9.2
The accompanying notes are an integral part of these financial statements.
<PAGE>
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
(dollar amounts in millions, unless otherwise noted, except per share amounts)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The Consolidated Financial Statements include the
accounts of Terex Corporation and its majority owned subsidiaries ("Terex" or
the "Company"). All material intercompany balances, transactions and profits
have been eliminated. The equity method is used to account for investments in
affiliates in which the Company has an ownership interest between 20% and 50%.
Investments in entities in which the Company has an ownership interest of less
than 20% are accounted for on the cost method or at fair value in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 115 "Accounting
for Certain Investments in Debt and Equity Securities."
Cash and Cash Equivalents. Cash equivalents consist of highly liquid investments
with original maturities of three months or less. The carrying amount of cash
and cash equivalents approximates their fair value.
Cash Securing Letters of Credit. The Company has certain cash and cash
equivalents that are not fully available for use in its operations. Certain
international operations collateralize letters of credit and performance bonds
with cash deposits. In addition, certain provisions of the Company's previous
lending agreement with a commercial bank required that amounts be deposited in a
cash collateral account to collateralize letters of credit issued by that bank.
Customer Deposits. The customer deposit asset and liability in 1995 represent a
deposit made by an Australian customer on a large order placed with Unit Rig.
Inventories. Inventories are stated at the lower of cost or market value. Cost
is determined by the last-in, first-out ("LIFO") method for certain domestic
inventories and by the first-in, first-out ("FIFO") method for inventories of
international subsidiaries and certain domestic inventories. Approximately 32%
and 50% of consolidated inventories at December 31, 1995 and 1994, respectively,
are accounted for under the LIFO method.
Debt Issuance Costs. Debt issuance costs incurred in securing the Company's
financing arrangements are capitalized and amortized over the term of the
associated debt. Capitalized debt issuance costs related to debt that is retired
early are charged to expense at the time of retirement. Unamortized debt
issuance costs totaled $14.5 and $3.3 at December 31, 1995 and 1994,
respectively. During 1995, 1994 and 1993, the Company amortized $2.3, $2.3 and
$3.4, respectively, of capitalized debt issuance costs; in addition, $7.5, $0.7
and $2.2 of such costs were charged to extraordinary loss on retirement of debt
in 1995, 1994 and 1993, respectively.
Intangible Assets. Intangible assets include purchased patents and trademarks.
Costs allocated to patents, trademarks and other specifically identifiable
assets arising from business combinations are amortized on a straight-line basis
over the respective estimated useful lives not exceeding seven years.
Goodwill. Goodwill, representing the difference between the total purchase price
and the fair value of assets (tangible and intangible) and liabilities at the
date of acquisition, is being amortized on a straight-line basis over between
fifteen and forty years. Accumulated amortization is $4.2 and $0.7 at December
31, 1995 and 1994, respectively. 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.
Property, Plant and Equipment. Property, plant and equipment are stated at cost.
Expenditures for major renewals and improvements are capitalized while
expenditures for maintenance and repairs not expected to extend the life of an
asset beyond its normal useful life are charged to expense when incurred. Plant
and equipment are depreciated over the estimated useful lives of the assets
under the straight-line method of depreciation for financial reporting purposes
and both straight-line and other methods for tax purposes.
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.
Accrued Warranties and Product Liability. The Company records accruals for
potential warranty and product liability claims based on the Company's claim
experience. Warranty costs are accrued at the time revenue is recognized. The
Company provides self-insurance accruals for estimated product liability
experience on known claims and for claims anticipated to have been incurred
which have not yet been reported. The Company's product liability accruals are
presented on a gross settlement basis. Product liability payments, including
expenses, are estimated to approximate $10.0 per year.
Non Pension Postretirement Benefits. The Company adopted SFAS No. 106 "Employers
Accounting for Postretirement Benefits other than Pensions" on January 1, 1993.
The statement requires accrual of the obligation to provide future benefits to
employees during the years that the employees provide service. The Company
provides postretirement benefits to certain former salaried and hourly employees
and certain hourly employees covered by bargaining unit contracts that provide
such benefits. The Company elected the delayed recognition method of adoption,
and the effect of adoption of the new standard was not material to the Company's
financial statements. (See Note K -- "Retirement Plans.")
Foreign Currency Translation. Assets and liabilities of the Company's
international operations are translated at year-end exchange rates. Income and
expenses are translated at average exchange rates prevailing during the year.
For operations whose functional currency is the local currency, translation
adjustments are accumulated in the Cumulative Translation Adjustment component
of Stockholders' Deficit. Gains or losses resulting from foreign currency
transactions are included in Other income (expense) -- net.
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. At December 31, 1995 the Company had
foreign exchange contracts, which were hedges of firm commitments, totaling
$21.8 whose fair value approximates its carrying value. These contracts related
primarily to the customer deposit discussed above. At December 31, 1994, the
Company had no material outstanding foreign exchange contracts.
Environmental Policies. Environmental expenditures that relate to current
operations are either expensed or capitalized depending on the nature of the
expenditure. Expenditures relating to conditions caused by past operations that
do not contribute to current or future revenue generation are expensed.
Liabilities are recorded when environmental assessments and/or remedial actions
are probable, and the costs can be reasonably estimated. Such amounts were not
material at December 31, 1995 and 1994.
Research and Development Costs. Research and development costs are expensed as
incurred. Such costs incurred in the development of new products or significant
improvements to existing products are included in Engineering, Selling and
Administrative Expenses and amounted to $11.2 in 1995, $10.5 in 1994 and $11.8
in 1993.
Income Taxes. The Company adopted SFAS No. 109, "Accounting for Income Taxes" on
January 1, 1993. SFAS No. 109 provides that deferred tax assets and liabilities
be recorded based upon the difference between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes. SFAS
No. 109 further requires that the Company record a valuation allowance for
deferred tax assets if realization of such assets is dependent on future taxable
income. The effect of adoption of the new standard was not material to the
Company's financial statements. (See Note H -- "Income Taxes.")
Net Income (Loss) Per Share. Net income (loss) per share is based on the
weighted average number of common and common equivalent shares outstanding
during the year. The dilutive effect of common stock equivalents (if applicable)
is calculated using the treasury stock method.
Reclassifications. Certain amounts shown for 1993 and 1994 have been
reclassified to conform to the 1995 presentation.
<PAGE>
NOTE B -- ACQUISITIONS
PPM, Inc. - On May 9, 1995, the Company, through Terex Cranes, Inc., a Delaware
corporation which is a wholly owned subsidiary of the Company ("Terex Cranes"),
completed the acquisition (the "PPM Acquisition") of substantially all of the
shares of P.P.M. S.A., a societe anonyme ("PPM Europe"), from Potain S.A., a
societe anonyme, and all 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;" and PPM North America together with
PPM Europe collectively referred to as "PPM") from Legris Industries S.A., a
societe anonyme ("Legris France"). 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. Concurrently with the completion of the PPM Acquisition, the Company
contributed the assets (subject to liabilities) of its Koehring Cranes and
Excavators and Marklift division to Terex Cranes. The former division now
operates as Koehring Cranes, Inc., a wholly owned subsidiary of Terex Cranes
("Koehring"). Koehring manufactures mobile cranes under the LORAIN brand name
and aerial lift equipment under the MARKLIFT brand name. PPM and Koehring
comprise Terex Cranes, Inc., the Company's Mobile Cranes Segment.
The purchase price of PPM, including acquisition costs, was approximately
$104.5. Approximately $92.6 of the purchase price was paid in cash, including
the repayment of certain indebtedness of PPM required to be repaid in connection
with the acquisition. The remainder of the purchase price consisted of the
issuance of redeemable preferred stock of Terex Cranes having an aggregate
liquidation preference of 127 million French francs (approximately $26.1),
subject to adjustment. The purchase price is subject to adjustment calculated by
reference to the consolidated net asset value of PPM as determined by an audit
as of the date of closing. The preferred stock does not bear a dividend and,
accordingly, the Company has valued this stock at approximately $8.8 (discounted
at 15%). The Company has not yet reached agreement with the sellers about the
amount of purchase price adjustment but, based on work performed, the Company
believes that the amount of the preferred stock could ultimately be reduced.
The PPM Acquisition was accounted for as a purchase, with the purchase price
allocated to the assets acquired and liabilities assumed based upon their
respective estimated fair values at the date of acquisition. The excess of
purchase price over the net assets acquired is being amortized on a
straight-line basis over 15 years. The estimated fair values of assets and
liabilities acquired in the PPM Acquisition are summarized as follows:
Cash $ 1.0
Accounts receivable 33.8
Inventories 69.1
Other current assets 11.9
Property, plant and equipment 20.5
Other assets 0.3
Goodwill 68.0
Accounts payable and other current liabilities (86.6)
Other liabilities (13.5)
$ 104.5
<PAGE>
The operating results of PPM are included in the Company's consolidated results
of operations since May 9, 1995. The following pro forma summary presents the
consolidated results of operations as though the Company completed the PPM
Acquisition on January 1, 1994, after giving effect to certain adjustments,
including amortization of goodwill, interest expense and amortization of debt
issuance costs on the debt issued in the Refinancing:
Unaudited Pro Forma
for the Year Ended
December 31,
1995 1994
Net sales ................................. $ 1,095.1 $ 966.5
Income (loss) from operations ............. 4.9 (12.9)
Loss before extraordinary items ........... (53.0) (19.3)
Loss before extraordinary items, per share $ (5.89)$ (2.45)
The pro forma information is not necessarily indicative of what the actual
results of operations of the Company would have been for the periods indicated,
nor does it purport to represent the results of operations for future periods.
NOTE C -- SALE OF FRUEHAUF STOCK
In December 1993, the Company, which owned 26% of Fruehauf Trailer Corporation
("FTC" or "Fruehauf") before the sale, sold one million shares of FTC Common
Stock. The Company realized a gain of $3.0. In 1994, the Company sold 5.9
million shares of FTC stock for $24.9. In January 1995, the Company sold its
remaining shares of FTC for $1.0. In June 1995, the Company received 250
thousand shares of Fruehauf stock in settlement of certain obligations of
Fruehauf.
NOTE D -- INVENTORIES
Inventories consist of the following:
December 31,
1995 1994
Finished equipment ................................. $ 53.1 $ 26.8
Replacement parts .................................. 94.5 68.9
Work-in-process .................................... 26.0 13.5
Raw materials and supplies ......................... 78.9 57.9
252.5 167.1
Less: Excess of FIFO inventory value over LIFO cost (3.2) (2.9)
Net inventories .................................... $ 249.3 $ 164.2
In 1994, certain inventory quantities were reduced, resulting in the liquidation
of LIFO inventory quantities carried at lower costs prevailing in prior years.
The effects of such liquidations were to decrease cost of goods sold by $2.1 in
1994.
<PAGE>
NOTE E -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
December 31,
1995 1994
Property ........................ $ 11.0 $ 8.4
Plant ........................... 41.7 32.2
Equipment ....................... 101.2 83.4
153.9 124.0
Less: Accumulated depreciation . (52.6) (37.8)
Net property, plant and equipment $ 101.3 $ 86.2
NOTE F -- LONG-TERM OBLIGATIONS
Long-term debt is summarized as follows:
December 31,
1995 1994
13.25% Senior Secured Notes
due May 15, 2002 ("Senior Secured Notes") ... $ 247.0 $ --
Credit Facility maturing May 9, 1998 ........... 66.8 --
13.0% Senior Secured Notes
due August 1, 1996
("Old Senior Secured Notes") ............... -- 127.2
13.5% Secured Senior Subordinated Notes
due July 1, 1997
("Subordinated Notes") ....................... -- 24.5
Lending Facility maturing August 24, 1997 ...... -- 24.1
Secured term note bearing interest
at 9.0% payable in equal semiannual
installments from August 1994 to February 1998 -- 0.6
Note payable ................................... 4.5 --
Capital lease obligations ...................... 14.9 12.4
Other .......................................... 2.4 --
Total long-term debt ......................... 335.6 188.8
Current portion of long-term debt ............ 7.2 25.8
Long-term debt, less current portion ......... $ 328.4 $ 163.0
The Senior Secured Notes
On May 9, 1995, the Company issued $250 of Senior Secured Notes due May 15,
2002. The Senior Secured Notes were issued in conjunction with the PPM
Acquisition and a refinancing of the Old Senior Secured Notes, and Subordinated
Notes. Except in the event of certain asset sales, there are no principal
repayment or sinking fund requirements prior to maturity. Interest on the Notes
is payable semi-annually on May 15 and November 15 of each year, commencing on
November 15, 1995, to holders of record on the immediately preceding May 1 and
November 1, respectively. The Notes bear interest at 13 3/4% per annum. Upon the
earlier of (i) the consummation of an exchange offer and (ii) the effectiveness
of a Shelf Registration Statement, the interest rate on the Notes will decrease
to 13 1/4% per annum. Interest is computed on the basis of a 360-day year
comprised of twelve 30-day months.
The Senior Secured Notes are senior obligations of the Company, pari passu in
right of payment with all existing and future senior indebtedness and senior to
all subordinated indebtedness. Repayment of the Senior Secured Notes are
guaranteed by certain domestic subsidiaries of the Company (the "Guarantors").
The Senior Secured Notes are secured by a first priority security interest on
substantially all of the assets of the Company and the Guarantors, other than
cash and cash equivalents, except that as to accounts receivable and inventory
and proceeds thereof, and certain related rights, such security shall be
subordinated to liens securing obligations outstanding under any working capital
or revolving credit facility secured by such accounts receivable and inventory,
including the Credit Facility. The Senior Secured Notes are also secured by a
lien on certain assets of the Company's foreign subsidiaries. The indenture for
the Senior Secured Notes places certain limits on the Company's ability to incur
additional indebtedness; permit the existence of liens; issue, pay dividends on
or redeem equity securities; sell assets; consolidate, merge or transfer assets
to another entity; and enter into transactions with affiliates.
In connection with the issuance of the Senior Secured Notes, the Company issued
one million stock appreciation rights ("1995 SARs") entitling the holders to
receive cash or Terex Corporation common stock, at the option of the Company, in
an amount equal to the average closing sale price of the common stock for 60
trading days prior to the date of exercise less $7.288 for each SAR.
The Credit Facility
The Company currently has a secured revolving credit facility (the "Credit
Facility") with certain institutional lenders (the "Lenders"). Under the terms
of such facility, the Company and Clark Material Handling Company ("CMHC"),
Koehring and PPM North America, each a subsidiary of the Company, (collectively,
the "Borrowers") will have availability, subject to the borrowing base
limitations set forth below, in an aggregate amount of up to $100. Subject to
the terms and conditions set forth in the Credit Facility, the Borrowers may
borrow (in the form of revolving loans and up to $15 in outstanding letters of
credit) an amount at any time outstanding initially equalling the sum of the
following: (i) 75% of the net amount of eligible receivables (as defined in the
Credit Facility) of the Company, Koehring and PPM North America, plus (ii) 70%
of the net amount of eligible receivables of CMHC, plus (iii) the lesser of (a)
45% of the value of eligible inventory (as defined in the Credit Facility) of
the Borrowers or (b) 80% of the appraised orderly liquidation value of eligible
inventory.
Each Borrower guarantees, on a joint and several basis, all of the obligations
of the other Borrowers under the Credit Facility, which obligations will
generally be secured by a first priority security interest in favor of the
Lenders in all of the receivables and inventory and certain related rights of
the Borrowers.
The outstanding principal amount of prime rate loans initially bears interest at
the rate of 1.75% per annum in excess of the prime rate and the outstanding
principal amount of Eurodollar rate loans initially bears interest at the rate
of 3.75% per annum in excess of the adjusted Eurodollar rate. The Company must
pay a fee of 0.25% per annum on the unused portion of the Credit Facility. The
Credit Facility contains covenants limiting the Borrowers' activities,
including, without limitation, limitations on the incurrence of indebtedness,
liens, asset sales, dividends and other payments, investments, mergers and
related party transactions.
The Credit Facility matures on May 9, 1998. The Lenders, at their option, may
extend the facility for one additional year. In the event that for any reason
the facility is terminated prior to the maturity date, the Borrowers must pay to
the Lenders a termination fee.
Old Senior Secured Notes and Subordinated Notes
The Old Senior Secured Notes and Subordinated Notes were retired on May 9, 1995
in conjunction with the PPM Acquisition and the issuance of the Senior Secured
Notes. The Company realized an extraordinary loss of $5.7 and $1.6 on the early
extinguishment of the Old Senior Secured Notes and the Subordinated Notes,
respectively. The Old Senior Secured Notes, were issued during July 1992 for a
total of $160.0 in conjunction with the CMH Acquisition and a refinancing of the
Company's bank debt. Proceeds from the issuance of the Old Senior Secured Notes
were used for the cash portion of the CMH Acquisition purchase price ($85.0),
for the settlement of all amounts outstanding under its previous credit facility
($58.0), and for working capital and transaction costs. Interest on the Senior
Secured Notes was due semiannually on February 1 and August 1.
The indenture for the Old Senior Secured Notes required that proceeds from the
sale of collateral be used to make an offer to repurchase, at par, an equivalent
amount of Old Senior Secured Notes. During 1994, as a result of sales of 5.4
million shares of Fruehauf common stock during 1994 and 1.0 million shares in
the last quarter of 1993, the Company repurchased $27.3 principal amount of the
Old Senior Secured Notes. The Company realized an extraordinary loss of $0.7 on
the repurchases in conjunction with the accelerated write off of related
discount and debt issuance costs.
In December 1993, the Company repurchased in the open market $5.0 principal
amount of Old Senior Secured Notes for approximately $4.5, including accrued
interest, and had such notes cancelled as of December 31, 1993. The Company
realized an extraordinary gain from the early extinguishment of debt of $0.5,
net of unamortized debt discount and debt issuance costs.
The Subordinated Notes were initially issued as unsecured subordinated notes for
a total amount of $50.0. Interest on the Subordinated Notes was due semiannually
on January 2 and July 1.
Lending Facility
The Lending Facility was terminated in May 1995 in conjunction with the PPM
Acquisition and entering into the Credit Facility. The Company realized an
extraordinary loss of $0.2 to write-off the unamortized debt issuance cost at
termination. In May 1993, Terex entered into an agreement with a new lender
which initially provided short-term financing and currently provides long term
financing (the "Lending Facility"). The Lending Facility was secured by
substantially all the Company's domestic receivables and proceeds thereof.
Interest on Lending Facility borrowings was payable monthly at variable rates
generally equal to 2.75% above the prime rate. During 1994, the agreement was
amended to extend the maturity date from August 24, 1995 to August 24, 1997. The
agreement provided for up to $30.0 of cash advances and guarantees through April
30, 1995, and $25.0 thereafter through the extended maturity date. The balance
outstanding under the Lending Facility at December 31, 1994 was $24.1.
Accordingly, all outstanding borrowings are classified as Long Term Debt in the
accompanying Balance Sheet.
In conjunction with entering into the Lending Facility, the Company terminated a
former bank lending agreement and recognized, as an extraordinary item, a charge
of $2.0 to write off the unamortized debt issuance costs.
TEL Facility
In 1995, the Company's subsidiary, Terex Equipment Limited ("TEL") located in
Motherwell, Scotland, entered into a bank facility (the "TEL Facility") which
provides up to (pound)30.5 ($47.4) including up to (pound)10.0 ($15.5)
non-recourse discounting of accounts receivable which meet certain credit
criteria, plus additional facilities for tender and performance bonds and
foreign exchange contracts. Interest rates vary between 1.0% - 1.5% above the
financial institution's Published Base Rate or LIBOR. The TEL Facility is
collateralized primarily by the related accounts receivable. The TEL Facility
requires no performance covenants. Proceeds from the TEL Facility are primarily
used for working capital purposes. Amounts discounted under this and the prior
facility were $11.7 and $11.9 at December 31, 1995 and 1994, respectively.
In 1993, the Company's subsidiary, Terex Equipment Limited ("TEL") located in
Motherwell, Scotland, entered into a bank facility (the "Old TEL Facility")
which provides up to (pound)28.0 ($42.0) including up to (pound)13.0 ($19.5)
non-recourse discounting of accounts receivable which meet certain credit
criteria, plus additional facilities for tender and performance bonds and
foreign exchange contracts. Interest rates vary between 1.0% - 1.5% above the
financial institution's Published Base Rate or LIBOR. The Old TEL Facility is
collateralized primarily by the related accounts receivable. The Old TEL
Facility requires no performance covenants. Proceeds from the Old TEL Facility
are primarily used for working capital purposes.
Note Payable
As part of the PPM Acquisition, the Company assumed the obligation for a note
payable to Harnischfeger Corporation. The note is non-interest bearing.
Schedule of Debt Maturities
Scheduled annual maturities of long-term debt outstanding at December 31, 1995
in the successive five-year period are summarized below. Amounts shown are
exclusive of minimum lease payments disclosed in Note G -- "Lease Commitments":
1996 $ 1.8
1997 0.7
1998 67.2
1999 0.4
2000 0.3
Thereafter 250.2
Total $ 320.6
<PAGE>
Based on quoted market values, the Company believes that the fair value of the
Senior Secured Notes was approximately $218.8 as of December 31, 1995. The
Company believes that, based on quoted market values, the carrying value of its
other borrowings approximates fair market value, based on discounting future
cash flows using rates currently available for debt of similar terms and
remaining maturities.
The Company paid $43.1, $32.2 and $31.8 of interest in 1995, 1994 and 1993,
respectively.
The weighted average interest rate on short term borrowings outstanding was
10.0% at December 31, 1995 and 10.2% at December 31, 1994.
NOTE G -- LEASE COMMITMENTS
The Company leases certain facilities, machinery and equipment, and vehicles
with varying terms. Under most leasing arrangements, the Company pays the
property taxes, insurance, maintenance and expenses related to the leased
property. Certain of the equipment leases are classified as capital leases and
the related assets have been included in Property, Plant and Equipment. Net
assets under capital leases were $20.4 and $5.9 at December 31, 1995 and 1994,
respectively, net of accumulated amortization of $3.5 and $2.9 at December 31,
1995 and 1994, respectively.
The Company's Material Handling Segment also routinely enters into
sale-leaseback arrangements for certain equipment, which is later sold to
third-party customers under sales-type lease agreements. The Company maintains a
net investment in these leases, represented by the present value of payments due
under the leases of $6.6 of which $2.4 is current at December 31, 1995.
In connection with the original sale-leaseback arrangements underlying the
customer leasing program, the Company has an outstanding rental installment
obligation which is recorded based on the present value of minimum payments due
under the leases.
Future minimum capital and noncancelable operating lease payments and the
related present value of capital lease payments at December 31, 1995 are as
follows:
Capital Operating
Leases Leases
1996 $ 6.9 $ 6.6
1997 4.8 5.3
1998 2.9 2.1
1999 1.3 1.7
2000 0.5 1.2
Thereafter 0.2 1.1
Total minimum obligations 16.6 $ 18.0
Less amount representing interest 1.7
Present value of net minimum obligations 14.9
Less current portion 5.8
Long-term obligations $ 9.1
Most of the Company's operating leases provide the Company with the option to
renew the leases for varying periods after the initial lease terms. These
renewal options enable the Company to renew the leases based upon the fair
rental values at the date of expiration of the initial lease. Total rental
expense under operating leases was $6.5, $7.4 and $6.3 in 1995, 1994, and 1993,
respectively.
In November 1994, the Company entered into a sale-leaseback transaction for
CMH's parts distribution center in Germany. The Company received net proceeds of
$11.0 and will lease the facility under the terms of a five year lease for a
total rental of $1.9 per year. The Company realized a gain of $4.0 which was
deferred and will be amortized as a reduction of rental expense over the lease
term ($0.8 per year).
NOTE H -- INCOME TAXES
The components of Income (Loss) Before Income Taxes and Extraordinary Items are
as follows:
Year ended December 31,
1995 1994 1993
United States ................... $ (30.8) $ 12.4 $ (67.5)
Foreign ......................... 3.1 (10.4) 2.5
Income (loss) before income taxes
and extraordinary items ....... $ (27.7) $ 2.0 $ (65.0)
The major components of the Company's provision for income taxes are summarized
below:
Year ended December 31,
1995 1994 1993
Current:
Federal ........................... $ -- $ -- $ --
State ............................. -- 0.5 --
Foreign ........................... 4.6 2.1 1.3
Utilization of foreign net
operating loss ("NOL")
carryforward .................... (4.6) (1.8) (1.2)
Current income tax provision ........ -- 0.8 0.1
Deferred:
Deferred federal income tax benefit -- -- --
Total provision for income taxes .. $ -- $ 0.8 $ 0.1
Deferred tax assets and liabilities result from differences in the basis of
assets and liabilities for tax and financial statement purposes. In accordance
with SFAS No. 109, "Accounting for Income Taxes," a valuation allowance has been
recognized. The tax effects of the basis differences and net operating loss
carryforward as of December 31, 1995 and 1994 are summarized below for major
balance sheet captions:
1995 1994
Net inventories .......................... $ (5.6) $ (7.1)
Fixed assets ............................. (3.0) (9.6)
Other .................................... (1.0) (0.5)
Total deferred tax liabilities ...... (9.6) (17.2)
Receivables .............................. 1.7 1.4
Warranties and product liability ......... 24.6 20.8
Investments .............................. -- 1.0
All other items .......................... 4.4 6.1
Benefit of net operating loss carryforward 136.9 126.5
Total deferred tax assets ........... 167.6 155.8
Deferred tax assets valuation allowance .. (158.0) (138.6)
Net deferred tax liabilities ........ $ -- $ --
The valuation allowance for deferred tax assets as of January 1, 1994 was
$137.1. The net change in the total valuation allowance for the years ended
December 31, 1994 and 1995 were increases of $1.5 and $19.4, respectively.
<PAGE>
The Company's Provision for Income Taxes is different from the amount which
would be provided by applying the statutory federal income tax rate to the
Company's Loss Before Income Taxes and Extraordinary Items. The reasons for the
difference are summarized below:
Year ended December 31,
1995 1994 1993
Statutory federal income tax rate ..... $ (9.7) $ 0.7 $ (22.7)
Recognition of previously
unrecognized tax assets ............. -- (4.3) --
NOL with no current benefit ........... 9.5 -- 21.6
Foreign tax differential on
income/losses of foreign subsidiaries (1.2) 3.7 (0.6)
Goodwill .............................. 1.1 -- 1.8
State tax ............................. -- 0.5 --
Other ................................. 0.3 0.2 0.1
Total provision for income taxes ...... $ -- $ 0.8 $ 0.2
The Company has not provided for U.S. federal and foreign withholding taxes on
$19.0 of foreign subsidiaries' undistributed earnings as of December 31, 1995,
because such earnings are intended to be reinvested indefinitely. Any income tax
liability that would result had such earnings actually been repatriated would
likely be offset by utilization of NOL's. On repatriation, certain foreign
countries impose withholding taxes. The amount of withholding tax that would be
payable on remittance of the entire amount of undistributed earnings would
approximate $3.4.
At December 31, 1995, the Company had domestic federal net operating loss
carryforwards of $297.7. Approximately $69.7 of the remaining net operating loss
carryforwards are subject to special limitations under the Internal Revenue
Code, and the NOL's may be affected by the current IRS examination discussed
below.
The tax basis net operating loss carryforwards expire as follows:
Tax Basis Net
Operating Loss
Carryforwards
1996 $ 45.2
1997 8.0
1998 11.9
1999 ---
2000 4.6
2006 20.7
2007 35.7
2008 97.3
2009 34.2
2010 40.1
Total $ 297.7
The Company also has various state net operating loss and tax credit
carryforwards expiring at various dates through 2010 available to reduce future
state taxable income and income taxes. In addition, the Company's foreign
subsidiaries have approximately $62.5 of loss carryforwards, $36.1 in Germany,
$11.9 in U.K. and $14.5 in other countries, which are available to offset future
foreign taxable income. The loss carryforwards in Germany and U.K. are available
without expiration. The loss carryforwards in other countries of $10.7 are
available without expiration, with the remaining $3.8 expiring in the years 1996
through 2001.
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.
The Company made income tax payments of $0.0, $0.8 and $0.1 in 1995, 1994 and
1993, respectively.
NOTE I -- PREFERRED STOCK
The Company's certificate of incorporation was amended in October 1993 to
authorize 10.0 million shares of preferred stock, $.01 par value per share. As
of December 31, 1995, a total of 1.2 million shares of preferred stock are
issued and outstanding as described below.
Series A Cumulative Redeemable Convertible Preferred Stock
As of December 31, 1995, the Company had 1.2 million issued and outstanding
shares of Series A Cumulative Redeemable Convertible Preferred Stock (the
"Series A Preferred Stock"). These shares were issued as part of a private
placement on December 20, 1993 which also included the issuance of 1.3 million
Common Stock Purchase Warrants (the "Series A Warrants," see Note J --
"Stockholders' Deficit"). The Series A Preferred Stock has a par value of $.01
per share and an initial liquidation preference of $25.00 per share (the
"Liquidation Preference"). During the period from the issue date and ending at
the Accretion Termination Date (as defined below), the Liquidation Preference
will accrete at the rate of 13% per year until December 20, 1998, and 18% per
year thereafter. The Liquidation Preference totaled $39.2 at December 31, 1995.
After the Accretion Termination Date, the holders of the Series A Preferred
Stock are entitled to cumulative dividends, payable quarterly, as described
below. Each share of Series A Preferred Stock is convertible into 2.25 shares of
the Company's common stock (subject to adjustment in certain circumstances), and
is redeemable at the option of the Company on or after December 31, 1994 at a
price equal to the Liquidation Preference plus unpaid dividends provided that a
concurrent redemption of all outstanding Series A Warrants is made. The Series A
Preferred Stock is subject to a mandatory redemption requirement on or before
December 31, 2000 at a per share redemption price equal to the Liquidation
Preference on the date of redemption plus accrued but unpaid dividends. The
Series A Preferred Stock has no voting rights except when and if dividends are
in arrears as described below.
Commencing three months prior to the date the Company's indentures and loan
agreements allow the Company to declare and pay cash dividends on the Series A
Preferred Stock ("the Accretion Termination Date"), dividends will begin to
accrue at the rate of 13% per year through December 20, 1998, and at the rate of
18% per year thereafter. After the Accretion Termination Date the holders of the
Series A Preferred Stock will be entitled to elect one additional director of
the Company if the Company fails to declare and pay the full amount of dividends
payable on any two dividend payment dates. Such holders will have a right to
elect two additional directors of the Company if the Company misses four
dividend payment dates.
The aggregate net proceeds to the Company for the Series A Preferred Stock and
the Series A Warrants issued on December 20, 1993 were $27.2. The Company
allocated $10.3 and $16.9 of this amount to the Series A Preferred Stock and the
Series A Warrants, respectively, based on management's estimate of the relative
fair values of these securities at the time of their issuance, using information
provided by the Company's investment bankers. The difference between the
initially recorded amount and the redemption amount will be accreted to the
carrying value of the Series A Preferred Stock using the interest method over
the period from issuance to the mandatory redemption date, December 31, 2000. In
addition, the carrying value of the Series A Preferred Stock will be further
adjusted for increases in the Liquidation Preference prior to the Accretion
Termination Date as described above. The total accretion recorded in 1995 and
1994 was $7.3 and $6.0, respectively.
Series B Cumulative Redeemable Convertible Preferred Stock
As of December 31, 1995, the Company had 38.8 thousand issued and outstanding
shares of Series B Cumulative Redeemable Convertible Preferred Stock (the
"Series B Preferred Stock"). These shares constitute the remaining balance
outstanding of the Series B Preferred Stock issued to certain individuals on
December 9, 1994 in consideration for the early termination of a contract
between the Company and KCS Industries, L.P., a Connecticut limited partnership
("KCS"), a related party (see Note M -- "Related Party Transactions"). The
Series B Preferred Stock has a par value of $.01 per share and an initial
liquidation preference of $25.00 per share (the "Liquidation Preference").
During the period from the issue date and ending at the Accretion Termination
Date (as defined below), the Liquidation Preference will accrete at the rate of
13% per year until December 20, 1999, and 18% per year thereafter. The
Liquidation Preference totaled $2.0 at December 31, 1995.
After the Accretion Termination Date, the holders of the Series B Preferred
Stock are entitled to cumulative dividends, payable quarterly, as described
below. Each share of Series B Preferred Stock is convertible into 2.25 shares of
the Company's common stock (subject to adjustment in certain circumstances), and
is redeemable at the option of the Company on or after December 31, 1995 at a
price equal to the Liquidation Preference plus unpaid dividends provided that a
concurrent redemption of all outstanding Series B Warrants, as described below,
is made. The Series B Preferred Stock is subject to a mandatory redemption
requirement on or before December 31, 2001 at a per share redemption price equal
to the Liquidation Preference on the date of redemption plus accrued but unpaid
dividends. The Series B Preferred Stock has no voting rights except when and if
dividends are in arrears as described below.
Commencing three months prior to the date the Company's indentures and loan
agreements allow the Company to declare and pay cash dividends on the Series B
Preferred Stock ("the Accretion Termination Date"), dividends will begin to
accrue at the rate of 13% per year through December 20, 1999, and at the rate of
18% per year thereafter.
The Company allocated $0.9 and $0.7 to the Series B Preferred Stock and the
Series B Warrants, respectively, based on management's estimate of the relative
fair values of these securities at the time of their issuance (equivalent to the
allocation used for the Series A Preferred Stock and Series A Warrants). The
difference between the initially recorded amount and the redemption amount will
be accreted to the carrying value of the Series B Preferred Stock using the
interest method over the period from issuance to the mandatory redemption date,
December 31, 2001. In addition, the carrying value of the Series B Preferred
Stock will be further adjusted for increases in the Liquidation Preference prior
to the Accretion Termination Date as described above.
NOTE J -- STOCKHOLDERS' DEFICIT
Common Stock. The Company's certificate of incorporation was amended in October
1993 to increase the number of authorized shares of common stock, par value $.01
(the "Common Stock"), to 30.0 million. As of December 31, 1995, there were 10.6
million shares issued and outstanding. Of the 19.4 million unissued shares at
that date, 6.7 million shares were reserved for issuance for conversion of
Series A and B Preferred Stock (Note I) and the exercise of stock options and
Series A and B Warrants.
In December 1993, the Company issued 0.4 million shares of Common Stock as a
contribution to two of the Company's pension plans. The Company valued these
shares at $2.3, based on 96.5% of the market price of the Common Stock on the
date of issuance.
Series A Warrants. In connection with the private placement of the Series A
Preferred Stock (see Note I -- "Series A Preferred Stock"), the Company issued
1.3 million Series A Warrants. Each Series A Warrant may be exercised, in whole
or in part, at the option of the holder at any time before the expiration date
on December 31, 2000 and is redeemable by the Company under certain
circumstances. As of December 31, 1995, upon the exercise or redemption of a
Warrant, the holder thereof was entitled to receive 2.35 shares of Common Stock.
The exercise price for the Warrants is $.01 for each share of Common Stock. The
number of shares of Common Stock issuable upon exercise or redemption of the
Warrants is subject to adjustment in certain circumstances.
Series B Warrants. In connection with the issuance of the Series B Preferred
Stock (see Note I -- "Series B Preferred Stock"), the Company issued 107.0
thousand Series B Warrants. Each Series B Warrant may be exercised, in whole or
in part, at the option of the holder at any time before the expiration date on
December 31, 2001 and is redeemable by the Company under certain circumstances.
Upon the exercise or redemption of a Warrant, the holder thereof shall be
entitled to receive one share of Common Stock. The exercise price for the
Warrants is $.01 for each share of Common Stock. At December 31, 1995,
approximately 16 thousand warrants remain unexercised.
Stock Options. The Company maintains a qualified incentive stock option ("ISO")
plan covering certain officers and key employees. The exercise price of the ISO
is the fair market value of the shares at the date of grant. The ISO allows the
holder to purchase shares of common stock, commencing one year after grant. ISO
expire after ten years. At December 31, 1995, 4.8 thousand stock options were
available for grant under the plan.
The following table is a summary of stock options:
Number of Exercise Price per
Options Option
Outstanding at December 31, 1992 59,666 $ 6.40 to 14.80
Granted 23,750 7.13 to 10.50
Exercised (3,750) 10.2
Canceled or expired (3,750) 14.8
Outstanding at December 31, 1993 75,916 $ 6.40 to 14.80
Granted 10,000 6.63
Exercised ---
Canceled or expired (3,750) 14.8
Outstanding at December 31, 1994 82,166 $ 6.40 to 14.80
Granted 27,900 4.25
Exercised ---
Canceled or expired (6,666) 7.13 to 14.80
Outstanding at December 31, 1995 103,400 $ 4.25 to 14.80
Exercisable at December 31, 1995 62,168 $ 6.40 to 14.80
Long-Term Incentive Plans. In December 1995, the Board of Directors approved,
subject to shareholder approval, the 1996 Terex Corporation Long-Term Incentive
Plan (the "1996 Plan"). The 1996 Plan authorizes the granting of (i) options
("Stock Option Awards") to purchase shares of Common Stock, including Restricted
Stock, (ii) shares of Common Stock, including Restricted Stock ("Stock Awards"),
and (iii) cash bonus awards based upon a participant's job performance
("Performance Awards"). Subject to adjustment as described below under
"Adjustments," the aggregate number of shares of Common Stock (including
Restricted Stock, if any) optioned or granted under the 1996 Plan shall not
exceed 300 thousand shares. The 1996 Plan provides that a committee (the
"Committee") of the Board of Directors consisting of two or more members thereof
who are non-employee directors, shall administer the 1996 Plan and has provided
the Committee with the flexibility to respond to changes in the competitive and
legal environments, thereby protecting and enhancing the Company's current and
future ability to attract and retain directors and officers and other key
employees and consultants. The 1996 Plan also provides for automatic grants of
Stock Option Awards to non-employee directors. In June 1994, the Company's board
of directors approved a Long-Term Incentive Plan (the "Plan") covering certain
managerial, administrative and professional employees and outside directors. The
Plan was approved by Stockholders at the 1994 annual meeting. The Plan provides
for awards to employees, from time to time and as determined by a committee of
outside directors, of cash bonuses, stock options, stock and/or restricted
stock. The total number of shares of the Company's common stock available to be
awarded under the Plan is 750 thousand, subject to certain adjustments. In 1995,
options to purchase a total of 290.7 thousand shares of common stock at $4.25 to
$7.00 per share and a total of 50.0 thousand shares of restricted stock were
granted to employees. In June 1994, options to purchase a total of 308.8
thousand shares of common stock at $5.50 per share and a total of 129.4 thousand
shares of restricted common stock were granted to employees and outside
directors.
Stock Appreciation Rights. In connection with the July 1992 sale of the Old
Senior Secured Notes and obtaining the consent of the holders of the Company's
existing Subordinated Notes to modify the Subordinated Notes, the Company issued
658.4 thousand common stock appreciation rights ("1992 SARs"). As of December
31, 1995, there were 624.8 thousand 1992 SARs outstanding. Of the outstanding
1992 SARs, 552.0 thousand may be exercised at the option of the holder thereof
at any time through July 31, 1996, at which time they expire. The remaining 72.8
thousand SARs may be exercised through July 1, 1997, at which time they expire.
The 1992 SARs entitle the holder to receive the market appreciation in the
Company's Common Stock between $11.00 per share, subject to adjustment, and the
average price per share for the 30 consecutive trading days prior to the date of
exercise. At December 31, 1995, there was no reserve requirement necessary
because the Company's Common Stock price was below $11.00 per share.
In connection with the May 1995 issuance of the Senior Secured Notes, the
Company issued 1.0 million stock appreciation rights (the "1995 SARs") entitling
the holders to receive cash or Common Stock, at the option of the Company, in an
amount equal to the average closing sale price of the common stock for 60
trading days prior to the date of exercise less $7.288 for each 1995 SAR. The
1995 SARs expire on May 15, 2002. At December 31, 1995 there was no reserve
requirement necessary because the Company's Common Stock price was below $7.288
per share.
NOTE K -- RETIREMENT PLANS
Pension Plans
US Plans
The Company maintains four defined benefit pension plans covering certain
domestic employees. The benefits for the plans covering the salaried employees
are based primarily on years of service and employees' qualifying compensation
during the final years of employment. Participation in the plan for salaried
employees was frozen as of May 7, 1993, and no participants will be credited
with service following such date except that participants not fully vested will
be credited with service for purposes of determining vesting only. The benefits
for the plans covering the hourly employees are based primarily on years of
service and a flat dollar amount per year of service. It is the Company's policy
generally to fund these plans based on the minimum requirements of the Employee
Retirement Income Security Act of 1974 (ERISA). Plan assets consist primarily of
common stocks, bonds, and short-term cash equivalent funds.
Pension expense includes the following components for 1995, 1994 and 1993:
Year ended December 31,
1995 1994 1993
Service cost for benefits earned during period $ 0.1 $ 0.2 $ 0.4
Interest cost on projected benefit obligation 2.2 2.2 2.4
Actual (return) loss on plan assets (3.8) (0.4) (2.1)
Net amortization and deferral 2.0 (1.2) 0.9
Curtailment (gain) loss --- --- (0.3)
Net pension expense $ 0.5 $ 0.8 $ 1.3
<PAGE>
<TABLE>
<CAPTION>
The following table sets forth the US plans' funded status and the amounts
recognized in the Company's financial statements at December 31:
1995 1994 1993
Overfunded Underfunded Overfunded Underfunded Overfunded Underfunded
Plans Plans Plans Plans Plans Plans
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value of:
Vested benefits ............... $ 9.4 $ 20.9 $ 8.0 $ 19.0 $ 9.3 $ 22.5
Accumulated benefits .......... $ 9.9 $ 20.9 $ 8.1 $ 19.1 $ 9.5 $ 22.7
Projected benefits ............ $ 9.9 $ 20.9 $ 8.1 $ 19.1 $ 9.5 $ 22.7
Fair value of plan assets ..... 10.2 16.5 9.2 14.7 9.7 14.7
Projected benefit obligation
(in excess of) less than
plan assets ................ 0.4 (4.4) 1.1 (4.4) 0.2 (8.0)
Unrecognized net loss from past
experience different than
assumed ..................... 2.6 2.7 2.5 1.8 3.7 4.2
Unrecognized prior service cost 0.9 -- 0.5 -- 0.5 --
Adjustment to recognize minimum
liability ................... -- (2.7) -- (1.8) -- (4.2)
Pension asset (liability)
recognized in the balance
sheet ....................... $ 3.9 $ (4.4) $ 4.1 $ (4.4) $ 4.4 $ (8.0)
</TABLE>
The expected long-term rate of return on plan assets was 9% for the periods
presented. The discount rate assumption was 7.5% for 1995, 8.5% for 1994 and
7.0% for 1993. The assumption for the rate of compensation increase, if
applicable per plan provisions, was 5.5% for 1993 (until May 7, 1993).
In accordance with the provisions of the SFAS No. 87, "Employers' Accounting for
Pensions," the Company has recorded an adjustment of $2.7 and $1.8 to recognize
a minimum pension liability at December 31, 1995 and 1994, respectively. This
liability is offset by a direct reduction of stockholders' deficit.
In December 1993, Terex contributed 350.0 thousand shares of Terex Common Stock
to the Master Trust for the benefit of two of the Terex plans, which were valued
by the Company at $2.3 based upon 96.5% of the market value of Terex Common
Stock as quoted on the New York Stock Exchange on the day of contribution. The
market value of this investment was $1.7 at December 31, 1995.
In addition, the Master Trust held 6.0 thousand 1992 SARs, valued at $0.10 per
right (total value of less than $0.1) at December 31, 1995 and 6.0 thousand
Terex SARs, valued at $1.00 per right (less than $0.1) at December 31, 1994.
International Plans
TEL maintains a government-required defined benefit plan (which includes certain
defined contribution elements) covering substantially all of its management
employees. This plan is fully funded. Pension expense relating to this plan was
approximately $0.3, $0.3 and $0.2 for the years ended December 31, 1995, 1994
and 1993, respectively.
Certain of CMH's German employees are covered by noncontributory defined benefit
pension plans. CMH also maintains separate pension benefit plans for certain
German executive employees and for other staff. The executive pension plans are
based on final pay and service, and, in some cases, are dependent on social
security pensions while the other staff plans are based on fixed amounts applied
to the number of years service rendered. The plans are unfunded.
<PAGE>
The components of consolidated pension expense for each of the reporting periods
covered by these financial statements is as follows:
Year Ended December 31,
1995 1994 1993
Current service cost $ 0.1 $ 0.2 $ 0.2
Interest cost 0.9 0.9 0.9
Net amortization and deferrals (0.9) (0.8) 0.1
Defined benefit pension expense $ 0.1 $ 0.3 $ 1.2
The following table reconciles the funded status of the Company's defined
benefit pension plans to the amounts recognized on the Company's Consolidated
Balance Sheet:
December 31,
1995 1994
Accumulated benefit obligation,
including nonvested benefits
of $0.2 and $0.2 at
December 31, 1995 and 1994 ..................... $ 12.8 $ 11.1
Projected benefit obligations .................... $ 12.8 $ 11.2
Unrecognized net gain/(loss) ..................... (0.9) 1.9
Unrecognized prior service cost .................. 0.4 --
Unrecognized transition asset (liability) ........ 0.6 (0.7)
Adjustment required to recognize minimum liability -- --
Accrued pension cost ............................. $ 12.9 $ 12.4
The discount rate of 7.5% was used in 1995 and 1994 to determine the projected
benefit obligation. During 1994, the Company significantly reduced its German
work force in connection with restructuring of its operations. As a result, the
Company realized a curtailment gain with respect to these plans, which was
recognized as a reduction of the unrecognized transition liability in accordance
with the provisions of SFAS 88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Plans and for Termination of Benefits." In 1994
the Company changed certain assumptions used in the actuarial valuation of the
plans. These changes in assumptions reflected the reductions in personnel and
other changes in the Company's operations, including changes in compensation
arrangements, implemented during 1994. These changes resulted in an actuarial
gain of $2.7. The gain in excess of 10% of the projected benefit obligation is
being amortized over 2 years.
Saving Plans
The Company sponsors various tax deferred savings plans into which eligible
employees may elect to contribute a portion of their compensation. The Company
can, but is not obligated to, contribute to certain of these plans.
Other Postemployment Benefits
The Company provides postemployment health and life insurance benefits to
certain former salaried and hourly employees of Koehring. The Company adopted
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions," on January 1, 1993. This statement requires accrual of postretirement
benefits (such as health care benefits) during the years an employee provides
service.
<PAGE>
Terex adopted the provisions of SFAS No. 106 using the delayed recognition
method, whereby the amount of the unrecognized transition obligation at January
1, 1993 is recognized prospectively as a component of future years' net periodic
postretirement benefit expense. The unrecognized transition obligation at
January 1, 1993 was $4.5. Terex is amortizing this transition obligation over 12
years, the average remaining life expectancy of the participants. The liability
of the Company, as of December 31, was as follows:
1995 1994
Actuarial present value of accumulated
postretirement benefit obligation:
Retirees ................................ $ 4.4 $ 4.6
Active participants ..................... -- --
Total accumulated postretirement
benefit obligation .................... 4.4 4.6
Unamortized transition obligation ....... (3.4) (3.7)
Liability recognized in the balance sheet $ 1.0 $ 0.9
Health care trend rates used in the actuarial assumptions range from 12.0% to
13.5%. These rates decrease to 6.5% over a period of 8 to 10 years. The effect
of a one percentage-point change in the health care cost trend rates would
change the accumulated postretirement benefit obligation approximately 7%. The
discount rate used in determining the accumulated postretirement benefit
obligation was 7.5% and 8.25% for the years ended December 31, 1995 and 1994,
respectively.
Net periodic postretirement benefit expense includes the following components
for 1995 and 1994:
Year Ended December 31,
1995 1994
Service cost ........................... $ --- $ ---
Interest cost .......................... 0.3 0.4
Net amortization ....................... 0.4 0.4
Total .................................. $ 0.7 $ 0.8
The Company's postretirement benefit obligations are not funded. Net periodic
postretirement benefit expense for the years ended December 31, 1995, 1994 and
1993 was approximately $0.6, $0.5 and $0.4 greater on the accrual basis than it
would have been on the cash basis.
NOTE L -- LITIGATION AND CONTINGENCIES
In December 1992, a Class Action complaint was filed against Fruehauf, the
Company, certain of Fruehauf's then officers and directors and certain of the
underwriters of the initial public offering of Fruehauf, in the United States
District Court for the Eastern District of Michigan, Southern Division,
alleging, among other things, violations of certain provisions of the federal
securities laws, and seeking unspecified compensatory and punitive damages. The
Company has settled this litigation, with court approval, and recorded a
provision of $0.3 million in the quarter ended March 31, 1995.
In the Company's lines of business, but primarily in the Material Handling
Segment, numerous suits have been filed alleging damages for accidents that have
arisen in the normal course of operations involving the Company's products. As
part of the acquisition of CMH, the Company and CMH assumed both the outstanding
and future product liability exposures related to such operations. As of
December 31, 1995, CMH had approximately 120 lawsuits outstanding alleging
damages for injuries or deaths arising from accidents involving CMH products.
Most of the foregoing suits are in various stages of pretrial completion, and
certain plaintiffs are seeking punitive as well as compensatory damages. The
Company is self-insured, up to certain limits, for these product liability
exposures, as well as for certain exposures related to general, workers'
compensation and automobile liability. Insurance coverage is obtained for
catastrophic losses as well as those risks required to be insured by law or
contract. The Company has recorded and maintains an estimated liability, based
in part upon actuarial determinations, in the amount of management's estimate of
the Company's aggregate exposure for such self-insured risks.
The Company is involved in various other legal proceedings which have arisen in
the normal course of its operations. The Company has recorded provisions for
estimated losses in circumstances where a loss is probable and the amount or
range of possible amounts of the loss is estimable.
The Company is contingently liable as a guarantor for certain customers' floor
plan obligations with financial institutions. As a guarantor, the Company is
obligated to purchase equipment which has been repossessed by the financial
institution based upon the unamortized principal balance outstanding. The
Company records the repossessed inventory at its estimated net realizable value.
Any resultant losses are charged against related reserves. The guarantee under
such floor plans aggregated approximately $30.0 at December 31, 1995. The
Company has recorded reserves based on management's estimates of potential
losses arising from these guarantees. Historically, the Company has incurred
only minimal losses relating to these arrangements.
CMH has also given guarantees to financial institutions relating to capital
loans, residual guarantees and other dealer and customer obligations arising in
the ordinary conduct of its business. Such guarantees approximated $3.8 at
December 31, 1995. Estimated losses, if any, on such guarantees are accrued as a
component of the Allowance for Doubtful Accounts.
To enhance its marketing effort and ensure continuity of its dealer network, CMH
has also agreed as part of its dealer sales agreements to repurchase certain new
and unused equipment in the event of a dealer termination. Repurchase agreements
included in operating agreements with an independent financial institution have
been patterned after those included in the dealer sales agreements, and provide
for repurchase of inventory in certain circumstances of dealer default on
financing provided by the financial institution to the dealer. Dealer inventory
of approximately $200.0 at December 31, 1995 were covered by those operating
agreements. Under these agreements, when dealer terminations do occur, a newly
selected dealer generally assumes the assets of the prior dealer and any related
financial obligations.
Historically, CMH has incurred only minimal losses relating to these
arrangements.
The Company's outstanding letters of credit totaled $7.7. The letters of credit
generally serve as collateral for certain liabilities included in the
Consolidated Balance Sheet. Certain of the letters of credit serve as collateral
guaranteeing the Company's performance under contracts.
As described in Note H -- "Income Taxes," the Internal Revenue Service is
currently examining the Company's federal tax returns for the years 1987 through
1989.
The Company has agreed to indemnify certain outside parties for losses related
to Fruehauf's worker compensation obligations. Some of the claims for which
Terex is contingently obligated are also covered by bonds issued by an insurance
company. In 1993, the Company recorded liabilities for these contingent
obligations representing management's estimate of the maximum potential losses
which the Company might incur.
NOTE M -- RELATED PARTY TRANSACTIONS
On August 28, 1995, the Company announced that its Chairman, Randolph W. Lenz,
had retired from his position with the Company and its Board of Directors. In
connection with his retirement, the Company (upon the recommendation of a
committee comprised of its independent Directors and represented by independent
counsel) and Mr. Lenz have executed a retirement agreement providing certain
benefits to Mr. Lenz and the Company. The agreement provides, among other
things, for a five-year consulting engagement requiring Mr. Lenz to make himself
available to the Company to provide consulting services for certain portions of
his time. Mr. Lenz, or his designee, will receive a fee for consulting services
which will include payments in an amount, and a rate, equal to his 1995 base
salary until December 31, 1996. The agreement also provides for the granting of
a five-year $1.8 million loan bearing interest at 6.56% per annum which is
subject to being forgiven in increments over the five-year term of the agreement
upon certain conditions and equity grants having a maximum potential of 200.0
thousand shares of Terex common stock conditioned upon the Company achieving
certain financial performance objectives in the future. In contemplation of the
execution of this retirement agreement, the Company advanced to Mr. Lenz the
principal amount of the forgivable loan. Mr. Lenz has also agreed not to compete
with the Company, to vote his Terex shares in the manner recommended by the
Company's Board of Directors, not to acquire any additional shares of the
Company's common stock, and, except under certain circumstances, not to sell his
shares of common stock. In addition to indebtedness pursuant to the retirement
agreement, an affiliate of Mr. Lenz is indebted to the Company in the
approximate amount of $33.45 thousand representing shipping charges incurred by
the Company for such affiliate during 1994. The affiliate of Mr. Lenz has not
paid such charges to date.
Under a contract dated July 1, 1987, as amended, KCS Industries, L.P., a
Connecticut limited partnership ("KCS"), principally owned by Mr. Lenz provided
administrative, financial, marketing, technical, real estate and legal services
to the Company and its subsidiaries. For the services of KCS, the Company paid
KCS an annual fee plus the reimbursement for all out-of-pocket expenses incurred
by KCS in fulfilling the contract. During 1993 the Company made payments to KCS
of $2.9.
During 1993, the Board of Directors of the Company concluded that it would be in
the Company's best interest to terminate the Company's contract with KCS and
integrate the management services of KCS directly into the Company. Pursuant to
an agreement between the Company and KCS, the contract between the Company and
KCS was terminated as of the close of business on December 31, 1993. Certain
employees of KCS, became salaried employees of the Company effective January 1,
1994, with the titles of Executive Vice President and Senior Vice President,
respectively. In consideration of the termination of the contract, the Company
issued 89.8 thousand shares of the Company's Series B Cumulative Redeemable
Convertible Preferred Stock (valued at $0.9) and 106.95 thousand Series B
Warrants (valued at $0.7), the terms of which are substantially similar to the
terms of the Company's outstanding Series A Preferred Stock and Series A
Warrants, respectively. Of such amounts, Mr. Lenz received 38.8 thousand shares
of preferred stock and warrants exercisable for 15.7 thousand shares of Terex
Common Stock and other KCS employees each received 25.5 thousand shares of
preferred stock and warrants exercisable for 45.6 thousand shares of Terex
Common Stock. The employees converted their shares and warrants to Common Stock
in 1995. In addition, Mr. Lenz received cash payments of approximately $0.5.
The Company, certain directors and executives of the Company, and KCS have been
named parties in various legal proceedings. During 1995, 1994 and 1993, the
Company incurred $0.3, $0.3 and $0.4 of legal fees and expenses on behalf of the
Company, directors and executives of the Company, and KCS named in the lawsuits.
In conjunction with the CMH Acquisition, the Company financed the acquisition
and refinanced a major component of its previously outstanding bank debt through
a private placement of Secured Notes and 1992 SARs, and the establishment of the
Bank Lending Agreement. A director of the Company was at the time an employee
and officer of Jefferies & Company, Inc. ("Jefferies"), the investment banking
firm which acted as an exclusive placement agent for the Company in the offering
of the Old Senior Secured Notes and 1992 SARs. Jefferies was paid fees of $6.5
in 1992 for services performed as placement agent. Jefferies was also the
Company's placement agent for the December 1993 sale of the Series A Preferred
Stock and Series A Warrants for which Jefferies received fees totalling $2.5 in
1993. Jefferies was also the agent for the Company for certain sales by the
Company of its common stock of Fruehauf in 1993. Jefferies purchased 250.0
thousand Series A Warrants and 180.0 thousand shares of Series A Preferred Stock
from the Company in connection with the Company's private placement on December
20, 1993.
In 1995, the Company retained Jefferies & Company, Inc., of which a director of
the Company was then Executive Vice President, in connection with the offering
of the Company's $250 million Senior Secured Notes and acquisition of PPM which
was completed in May 1995. Jefferies & Company, Inc. was paid $9.2 as an
underwriting discount and for services rendered.
A director of the Company was affiliated with the Airlie Group L.P. ("Airlie"),
a limited partnership which owned approximately 9% of the Company's Common Stock
(including Common Stock issuable upon conversion of Series A Preferred Stock)
and 40 thousand Warrants. Until May 1994, this director was an employee of the
investment firm of TMT-FW, Inc. which is one of two general partners of the
general partner of Airlie. During the time the director was affiliated with
Airlie, Airlie received all director fees to which the director was entitled by
reason of his service as a director of the Company. On December 20, 1993, Airlie
purchased 40 thousand Warrants and 40 thousand shares of Series A Preferred
Stock from the Company as part of the Company's private placement.
The Company requires that all transactions with affiliates be on terms no less
favorable to the Company than could be obtained in comparable transactions with
an unrelated person. The Board is advised in advance of any such proposed
transaction or agreement and utilizes such procedures in evaluating their terms
and provisions as are appropriate in light of the Board's fiduciary duties under
Delaware law. In addition, the Company has an Audit Committee consisting solely
of outside directors. One of the responsibilities of the Audit Committee is to
review related party transactions.
<PAGE>
NOTE N-- BUSINESS SEGMENT INFORMATION
The Company operates in three industry segments: Material Handling, Heavy
Equipment and Terex Cranes.
The Material Handling Segment designs, manufactures and markets a complete line
of internal combustion ("IC") and electric lift trucks, electric walkies,
automated pallet trucks and related components and replacement parts. These
products are used in material handling applications in a broad array of
manufacturing, distribution and transportation industries. The Material Handling
Segment consists of CMH, which was acquired by the Company on July 31, 1992 from
Clark Equipment Company.
The Heavy Equipment Segment designs, manufactures and markets heavy-duty,
off-highway earthmoving and construction equipment and related components and
replacement parts. These products are used primarily by construction, mining,
logging, industrial and government customers in building roads, dams and
commercial and residential buildings; supplying coal, minerals, sand and gravel.
The Heavy Equipment Segment consists of two operating businesses: (i) the Terex
Business, which manufactures off-highway rigid and articulated haulers, scrapers
and wheel loaders and (ii) Unit Rig, which manufactures electric rear and bottom
dump haulers, as well as mechanical drive haulers and wheel loaders principally
sold to the mining industry.
Terex Cranes designs, manufactures and markets mobile cranes, aerial platforms,
container stackers and scrap handlers and related components and replacement
parts. These products are used primarily for construction, repair and
maintenance of infrastructure, buildings and manufacturing facilities, for
material handling applications in the distribution and transportation industries
as well as in the scrap, refuse and lumber industries. Terex Cranes consists of
three operating businesses: (i) Koehring, which manufactures mobile cranes,
aerial lift platforms and scrap handlers, (ii) PPM North America, which
manufactures mobile cranes and container stackers under the brand name P&H (a
trademark of Harnischfeger) primarily in North America and (iii) PPM Europe,
which manufactures mobile cranes and container stackers primarily in Europe.
<PAGE>
Industry segment information is presented below:
1995 1994 1993
Sales
Material Handling .............. $ 528.8 $ 472.7 $ 395.6
Heavy Equipment ................ 250.3 226.8 203.8
Terex Cranes ................... 252.3 90.4 71.4
Eliminations ................... (1.2) (3.1) (0.5)
Total .......................... $ 1,030.2 $ 786.8 $ 670.3
Income (Loss) from Operations
Material Handling .............. $ 3.0 $ (13.9) $ (28.6)
Heavy Equipment ................ 13.0 11.1 11.0
Terex Cranes ................... 7.2 7.9 (12.8)
General/Corporate .............. (1.8) (1.7) (3.5)
Total .......................... $ 21.4 $ 3.4 $ (33.9)
Depreciation and Amortization
Material Handling .............. $ 14.8 $ 11.0 $ 9.7
Heavy Equipment ................ 2.3 2.2 7.2
Terex Cranes ................... 7.6 1.0 1.5
General/Corporate .............. 3.0 2.9 4.0
Total .......................... $ 27.7 $ 17.1 $ 22.4
Capital Expenditures
Material Handling .............. $ 5.3 $ 7.8 $ 8.9
Heavy Equipment ................ 2.7 4.2 2.1
Terex Cranes ................... 2.4 0.4 0.5
General/Corporate .............. 0.1 0.3 --
Total .......................... $ 10.5 $ 12.7 $ 11.5
Identifiable Assets
Material Handling .............. $ 191.0 $ 195.0 $ 205.6
Heavy Equipment ................ 169.4 147.4 130.4
Terex Cranes ................... 239.9 40.3 37.8
General/Corporate .............. 26.6 18.9 16.9
Total .......................... $ 626.9 $ 401.6 $ 390.7
<PAGE>
Geographic segment information is presented below:
1995 1994 1993
Sales
North America ...........................$ 677.9 $ 557.1 $ 466.9
Europe .................................. 385.4 240.7 211.7
All other ............................... 13.0 34.0 19.4
Eliminations ............................ (46.1) (45.0) (27.7)
Total ...................................$ 1,030.2 $ 786.8 $ 670.3
Income (Loss) from Operations
North America ...........................$ 12.2 $ 6.3 $ (36.7)
Europe .................................. 17.4 (4.5) (0.7)
All other ............................... (4.6) 0.4 2.3
Eliminations ............................ (3.6) 1.2 1.2
Total ...................................$ 21.4 $ 3.4 $ 33.9)
Identifiable Assets
North America ...........................$ 275.0 $ 250.6 $ 241.6
Europe .................................. 294.4 167.5 150.0
All other ............................... 30.1 8.8 10.8
Eliminations ............................ 27.4 (25.3) (11.7)
Total ...................................$ 626.9 $ 401.6 $ 390.7
Sales between segments and geographic areas are generally priced to recover
costs plus a reasonable markup for profit. Operating income equals net sales
less direct and allocated operating expenses, excluding interest and other
nonoperating items. Corporate assets are principally cash, marketable securities
and administration facilities.
The Company is not dependent upon any single customer.
Export sales from U.S. operations were as follows:
Year Ended December 31,
1995 1994 1993
North and South America .................. $ 57.4 $ 34.9 $ 28.8
Europe, Africa and Middle East ........... 26.2 15.1 20.7
Asia and Australia ....................... 38.5 39.6 32.8
$ 122.1 $ 89.6 $ 82.3
NOTE O -- LIQUIDITY, FINANCING AND SEVERANCE ACTIONS
The Company's businesses are working capital intensive and require funding for
purchases of production and replacement parts inventories, capital expenditures
for repair, replacement and upgrading of existing facilities as well as
financing of receivables from customers and dealers. The Company has significant
debt service requirements including semi-annual interest payments on senior debt
and monthly interest payments on its credit facility. Debt reduction and an
improved capital structure are major focal points for the Company. In this
regard, the Company reviews on a regular basis its alternatives to improve its
capital structure and to reduce debt through debt refinancings, issuance of
equity, asset sales, the sales of business units or any combination thereof.
Net cash of $21.9 was used in operating activities during the year ended
December 31, 1995. Net cash used by investing activities was $98.9 during the
year ended December 31, 1995 principally due to the PPM Acquisition as described
below. Net cash provided by financing activities during the year ended December
31, 1995 was $120.1, primarily from the Refinancing discussed below. Cash and
cash equivalents totaled $7.8 at December 31, 1995.
The Company announced personnel reductions totaling approximately 134 employees
in the Material Handling Segment's North American operations during the second
quarter of 1995 as a continuation of the Company's programs to increase
manufacturing efficiency, reduce costs and improve liquidity. The Company
recorded a combined charge of $3.5 in the second quarter of 1995 for severance
costs associated with these actions and additional costs associated with the
closing of certain administrative and warehouse facilities.
As discussed below, the Company has refinanced its senior and subordinated debt,
established new credit facilities and borrowed additional funds to complete the
PPM Acquisition which will impact future operating results, sources of liquidity
and debt service requirements.
On May 9, 1995, the Company completed the Refinancing and the PPM Acquisition.
The Refinancing included the private placement to institutional investors of
$250 of the Senior Secured Notes, repayment of the Company's Old Senior Secured
Notes and Senior Subordinated Notes, totaling approximately $152.6 principal
amount, and entry into the Credit Facility to replace the Company's existing
Lending Facility in the U.S. Until such time as the Company completes an
exchange of the Senior Secured Notes for an equivalent issue of registered
notes, or a shelf registration statement for the Senior Secured Notes is
effective, the interest rate on the Senior Secured Notes will be 13.75%. The
Indenture for the Senior Secured Notes places certain limits on the Company's
ability to incur additional indebtedness; permit the existence of liens; issue,
pay dividends on or redeem equity securities; utilize the proceeds of assets
sales; consolidate, merge or transfer assets to another entity; and enter into
transactions with affiliates. In connection with the issuance of the Senior
Secured Notes, the Company issued 1.0 million stock appreciation rights ("SARs")
entitling the holders to receive cash or Common Stock, at the option of the
Company, in an amount equal to the average closing sale price of the common
stock for 60 trading days prior to the date of exercise less $7.288 for each
SAR.
Approximately $92.6 of the proceeds of the Senior Secured Notes was used for the
PPM Acquisition, including the repayment of certain indebtedness of PPM required
to be repaid in connection with the acquisition. In addition, the Company
estimates that the acquisition costs incurred will total approximately $5.0. The
remainder of the purchase price consisted of the issuance of redeemable
preferred stock of Terex Cranes having an aggregate liquidation preference of
127 French francs (approximately $26.1), subject to adjustment. The purchase
price is subject to adjustment calculated by reference to the consolidated net
asset value of PPM as determined by an audit as of the date of closing. The
preferred stock does not bear a dividend and, accordingly, the Company has
valued this stock at approximately $8.8 (discounted at 15%). The Company has not
yet reached agreement with the sellers about the amount of purchase price
adjustment but, based on work performed, the Company believes that the amount of
the preferred stock could ultimately be reduced.
The Company's Credit Facility provides the Company with the ability to borrow
(in the form of revolving loans and up to $15 in outstanding letters of credit)
up to $100. The Credit Facility is secured by substantially all of the Company's
domestic receivables and inventory (including PPM). The amount of borrowings is
limited to the sum of the following: (i) 75% of the net amount of eligible
receivables, as defined, of the Company's U.S. businesses other than 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 the
Company, revolving loans may be in the form of prime rate loans initially
bearing interest at the rate of 1.75% per annum in excess of the prime rate and
Eurodollar rate loans initially bearing interest at the rate of 3.75% per annum
in excess of the adjusted Eurodollar rate.
The Company made an interest payment of $17.7 on November 15, 1995 on the Senior
Secured Notes. The Company's debt service obligations for 1996 include
approximately $17.1 on May 15 and November 15, 1996 on the Senior Secured Notes
and approximately $0.6 monthly on the Credit Facility. Management believes that,
absent significant unanticipated declines in operating performance, cash
generated from operations and the Refinancing provide the Company with adequate
liquidity to meet the Company's operating and debt service requirements. The
balance outstanding under the Credit Facility as of December 31, 1995 was $66.8,
and the additional amount the Company could have borrowed was $8.8 as of that
date. As of March 20, 1996, the amount available to the Company under the Credit
Facility was approximately $13.0. TEL entered into a new bank working capital
facility in 1995, and PPM Europe is in negotiations to secure a working capital
facility in 1996. Management intends to seek additional working capital
financing facilities for the Company's international operations to provide
additional liquidity worldwide.
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
<PAGE>
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 an $597 in 1994 and 1993, respectively 462 715
-------- --------
35,413 37,255
-------- --------
Total assets ................................ $178,322 $163,740
======== ========
<PAGE>
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.
<PAGE>
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.
<PAGE>
<TABLE>
<CAPTION>
PPM S.A. and Legris Industries, Inc.
Combined Statements of Shareholders' Equity
Foreign
Currency
Common Stock Paid-In Accumulated Translation
Shares Amount Capital Deficit Adjustments Total
(In thousands except share amounts)
<S> <C> <C> <C> <C> <C> <C>
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
========= ===== ========= ========= ========= =========
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
PPM S.A. and Legris Industries, Inc.
Combined Statements of Cash Flows
Year Ended December 31
1994 1993 1992
----------- ----------- -----------
(In thousands)
<S> <C> <C> <C>
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) decrease 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
======== ======== ========
</TABLE>
See accompanying notes.
<PAGE>
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.
<PAGE>
PPM S.A. and Legris Industries, Inc.
Notes to Combined Financial Statements (continued)
(In thousands)
2. Summary of Significant Accounting Policies (continued)
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.
<PAGE>
PPM S.A. and Legris Industries, Inc.
Notes to Combined Financial Statements (continued)
(In thousands)
2. Summary of Significant Accounting Policies (continued)
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 109"). 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.
<PAGE>
PPM S.A. and Legris Industries, Inc.
Notes to Combined Financial Statements (continued)
(In thousands)
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 through April 10, 1996, annual payments
of $750 beginning April 10, 1997 through
April 10, 2001 and quarterly payments of
$125 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 Eurodollar rate plus .5% (6.875% at December 31,
1994) payable on demand .................................... 11,500 --
Indebtedness to Groupe Legris bearing interest at
the Eurodollar 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
Eurodollar 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
Notespayable 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
==========
<PAGE>
PPM S.A. and Legris Industries, Inc.
Notes to Combined Financial Statements (continued)
(In thousands)
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.
<PAGE>
PPM S.A. and Legris Industries, Inc.
Notes to Combined Financial Statements (continued)
(In thousands)
7. Income Taxes (continued)
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 ................................. $ -- $ --
======== ========
<PAGE>
PPM S.A. and Legris Industries, Inc.
Notes to Combined Financial Statements (continued)
(In thousands)
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
=======
<PAGE>
PPM S.A. and Legris Industries, Inc.
Notes to Combined Financial Statements (continued)
(In thousands)
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
========= ========= =========
<PAGE>
PPM S.A. and Legris Industries, Inc.
Notes to Combined Financial Statements (continued)
(In thousands)
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
certain of Terex's foreign subsidiaries, including PPM Europe.
<PAGE>
PPM S.A. and Legris Industries, Inc.
Notes to Combined Financial Statements (continued)
(In thousands)
13. Subsequent Events -- Acquisition by Terex and Financing Arrangements
(unaudited) (continued)
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.
<PAGE>
PPM S.A. AND LEGRIS INDUSTRIES, INC.
UNAUDITED CONDENSED COMBINED
STATEMENT OF OPERATIONS
(in millions)
January 1 through May 9,
1995 1994
NET SALES ............................................ $ 64.9 $ 46.9
COST OF GOODS SOLD ................................... 66.6 40.1
Gross Profit ......................................... (1.7) 6.8
ENGINEERING, SELLING AND ADMINISTRATIVE EXPENSES ..... 14.1 10.7
Income (loss) from operations ........................ (15.8) (3.9)
OTHER INCOME (EXPENSE):
Interest expense ..................................... (2.3) (2.2)
Other income (expense) - net ......................... (2.3) --
Loss before income taxes and minority interest ....... (20.4) (6.1)
PROVISION FOR INCOME TAXES ........................... -- --
Loss before minority interest ........................ (20.4) (6.1)
Minority interest in loss of consolidated subsidiaries -- 0.2
NET LOSS ............................................. $ (20.4) $ (5.9)
<PAGE>
PPM S.A. AND LEGRIS INDUSTRIES, INC.
UNAUDITED CONDENSED COMBINED
BALANCE SHEETS
(in millions except share amounts)
May 9,
1995 1994
Assets:
Current assets:
Cash and cash equivalents .......................... $ 1.4 $ 3.8
Trade accounts receivable, less allowances of
$3.1 and $2.3 in 1995 and 1994, respectively ..... 33.8 26.8
Due from affiliates ................................ 1.6 1.8
Refundable taxes ................................... 6.1 5.5
Inventories, net ................................... 69.1 68.6
Other current assets ............................... 12.1 13.0
Total current assets ............................... 124.1 119.5
Property, plant and equipment, net ................. 20.3 22.3
Intangible assets:
Cost in excess of net assets acquired, less
accumulated amortization of $9.1 and $7.4 in
1995 and 1994, respectively ...................... 34.4 36.0
Other identified intangible assets, less accumulated
amortization of $1.0 and $0.7 in 1995 and
1994, respectively ............................... 0.4 0.6
34.8 36.6
Total assets ....................................... $ 179.2 $ 178.4
<PAGE>
PPM S.A. AND LEGRIS INDUSTRIES, INC.
UNAUDITED CONDENSED COMBINED
BALANCE SHEETS
(in millions except share amounts)
(continued)
May 9,
1995 1994
Liabilities and shareholders' equity
Current liabilities:
Trade accounts payable .................... $ 41.7 $ 34.1
Due to affiliates ......................... 27.3 7.8
Product liability reserve ................. 5.9 4.5
Product warranty reserve .................. 2.4 1.4
Accrued expenses .......................... 15.2 16.1
Current portion of long-term debt and
other short-term borrowings ............. 72.7 50.9
Other current liabilities ................. 1.0 0.7
Total current liabilities ................. 166.2 115.5
Long-term debt, less current portion ...... 5.9 28.3
Other liabilities and obligations under
capital leases, less current portion .... 3.4 6.0
Minority interest in subsidiaries ......... 1.9 2.4
Total liabilities ......................... 177.4 152.2
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 ........................... 90.5 81.2
Accumulated deficit ....................... (85.5) (51.9)
Foreign currency translation adjustments .. (3.2) (3.1)
Total shareholders' equity ................ 1.8 26.2
Total liabilities and shareholders' equity $ 179.2 $ 178.4
<PAGE>
PPM S.A. AND LEGRIS INDUSTRIES, INC.
UNAUDITED CONDENSED COMBINED
STATEMENT OF CASH FLOWS
(in millions except share amounts)
January 1 through May 9,
1995 1994
Net cash provided by operating activities ....... $ (1.9) $(12.0)
Investing activities
Purchases of property, plant and equipment ...... 0.3 0.2
Financing activities
Proceeds from revolving credit with banks
and from notes payable to an
affiliated company, net ...................... -- 13.9
Payments on capital leases ...................... (0.1) (0.1)
Net cash provided by financing activities ....... (0.1) 13.8
Effect of exchange rate changes on cash ......... (0.5) (0.4)
Net increase (decrease) in cash
and cash equivalents .......................... (2.2) 1.6
Cash at beginning of period ..................... 3.6 2.2
Cash at end of period ........................... $ 1.4 $ 3.8
Supplemental disclosure of cash flow information
Cash paid for interest .......................... $ 2.3 $ 2.3
Cash paid for income taxes ...................... $ -- $ --
<PAGE>
PPM S.A. AND LEGRIS INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED COMBINED
FINANCIAL INFORMATION
Basis of Presentation
The accompanying unaudited condensed combined financial information of PPM S.A.
and Legris Industries, Inc. (collectively, "PPM") 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 Baumaschinen 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%)
<PAGE>
TEREX CORPORATION
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial information
of the Company gives effect to the PPM Acquisition and the Refinancing as
described elsewhere in this Prospectus. The pro forma information is based on
the historical statements of operations of the Company for the year ended
December 31, 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 period indicated, nor does it purport to represent the results of
operations for future periods.
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(in millions except per share amounts)
Terex
Corporation Pro Forma Pro Forma
and Business Acquisition Refinancing
Subsidiaries Acquired Adjustments Adjustments Pro Forma
<S> <C> <C> <C> <C> <C>
NET SALES ........................................ $ 1,030.2 $ 64.9 $ 0 $ 0 $ 1,095.1
COST OF GOODS SOLD ............................... 922.0 66.6 0.7(2a) 0 989.3
Gross Profit ................................ 108.2 (1.7) (0.7) 0 105.8
ENGINEERING, SELLING AND
ADMINISTRATIVE EXPENSES ..................... 83.3 14.1 0 0 97.4
SEVERANCE AND EXIT
CHARGES ..................................... 3.5 0 0 0 3.5
Income (loss) from operations ............... 21.4 (15.8) (0.7) 0 4.9
OTHER INCOME (EXPENSE):
Interest income ............................. 0.8 0 0 0 0.8
Interest expense ............................ (39.5) (2.3) 1.8(2b) (5.7)(2d) (45.7)
Amortization of debt issuance costs ......... (2.3) 0 0 (0.2)(2d) (2.5)
Gain on sale of Fruehauf stock .............. 1.0 0 0 0 1.0
Other income (expense) - net ................ (9.1) (2.4) 0 0 (11.5)
Loss before extraordinary items
and income taxes ........................ (27.7) (20.5) 1.1 (5.9) (53.0)
PROVISION FOR INCOME TAXES ....................... 0 0 0 0 0
Loss before
extraordinary items ..................... (27.7) (20.5) 1.1 (5.9) (53.0)
LESS PREFERRED STOCK
ACCRETION ................................... (7.3) 0 (0.8)(2c) 0 (8.1)
LOSS BEFORE EXTRAORDINARY
ITEMS APPLICABLE TO
COMMON STOCK ................................ $ (35.0) $ (20.5) $ 0.3 $(5.9) $ (61.1)
PER SHARE ........................................ $ (3.37) $ (5.89)
AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING IN
PER SHARE CALCULATION ....................... 10.4 10.4
</TABLE>
<PAGE>
TEREX CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
1) The unaudited pro forma condensed consolidated financial information is
presented for the years ended December 31, 1994 and 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 Consolidated Balance Sheet as of
December 31, 1995. The estimated fair values of assets and liabilities acquired
in the PPM Acquisition are summarized as follows (in millions):
Cash ......................................... $ 1.0
Accounts receivable .......................... 33.8
Inventories .................................. 69.1
Other current assets ......................... 11.9
Property, plant and equipment ................ 20.5
Other assets ................................. 0.3
Goodwill ..................................... 68.0
Accounts payable and other current liabilities (86.6)
Other liabilities ............................ (13.5)
------
$ 104.5
======
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company. Neither the delivery of
this Prospectus nor any sale hereunder shall, under any circumstances, create
any implication that the information contained herein is correct as of any time
subsequent to its date. This Prospectus does not constitute an offer or
solicitation by anyone in any jurisdiction in which such offer or solicitation
is not authorized or in which the person making such offer or solicitation is
not qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation.
-----------------------------------
Page
Available Information..................................3
Prospectus Summary.....................................4
Risk Factors...........................................8
The Company...........................................10
Use of Proceeds.......................................11
Market for Common Stock and Dividend Policy...........11
Capitalization........................................12
Selected Consolidated Financial Data..................14
Management's Discussion and Analysis of
Financial Condition and Results of Operations.......16
Business..............................................24
Management............................................32
Security Ownership of Management and
Certain Beneficial Owners...........................40
Selling Security Holders..............................42
Certain Transactions..................................43
Description of Securities.............................43
Certain Federal Income Tax Considerations.............50
Plan of Distribution..................................51
Legal Matters.........................................52
Experts...............................................52
Index to Financial Statements........................F-1
-----------------------------------
Until __________ __, 1996, all dealers effecting transactions in the Preferred
Stock and Conversion Shares, whether or not participating in this offering, may
be required to deliver a Prospectus.
1,200,000 Shares of Preferred Stock
2,700,000 Shares of Common Stock
of
TEREX CORPORATION
Preferred Stock
and
Common Stock
-------------
PROSPECTUS
________, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table itemizes the expenses incurred by the Company in connection
with the offering of the shares of Preferred Stock and shares of Common Stock
being registered. All the amounts shown are estimates except the SEC
registration fee.
Item Amount
Registration Fee - SEC ................$ 9,517.24
Transfer Agent Fees and Expenses........... 5,000.00
Printing and Engraving Expenses............ 5,000.00
Legal Fees and Expenses ................ 150,000.00
Accounting Fees and Expenses............... 75,000.00
Blue Sky Fees and Expenses ................ 5,000.00
Miscellaneous Expenses ................ 5,000.00
TOTAL...........$ 254,517.24
- --------------------
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law ("DGCL") and Article IX of
the Company's By-laws provide for the indemnification of the Company's directors
and officers in a variety of circumstances, which may include liabilities under
the Securities Act of 1933, as amended (the "Securities Act").
Article IX of the Company's Restated By-laws generally requires the Company to
indemnify its directors and officers against all liabilities (including
judgments, settlements, fines and penalties) and reasonable expenses incurred in
connection with the investigation, defense, settlement or appeal of any type of
action, whether instituted by a third party or a stockholder (either directly or
derivatively) and including specifically, but without limitation, actions
brought under the Securities Act and/or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); provided that no such indemnification will be
allowed if such director or officer was not successful in defending against any
such action and it is determined that the director or officer engaged in
misconduct which constitutes (i) a willful breach of his or her "duty of
loyalty" (as further defined therein) to the Company or its stockholders; (ii)
acts or omissions not in "good faith" (as further defined therein) or which
involve intentional misconduct or a knowing violation of law; (iii) the payment
of an illegal dividend or the authorization of an unlawful stock repurchase in
violation of Delaware law; or (iv) a transaction from which the executive
derived a material improper personal financial profit.
The Company's Restated Certificate of Incorporation, as amended, contains a
provision which eliminates the personal liability of a director to the Company
and its stockholders for certain breaches of his or her fiduciary duty of care
as a director. This provision does not, however, eliminate or limit the personal
liability of a director (i) for any breach of such director's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
the Delaware statutory provision making directors personally liable, under a
negligence standard, for unlawful dividends of unlawful stock repurchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. This provision offers persons who serve on the Board
of Directors of the Company protection against awards of monetary damages
resulting from negligent (except as indicated above) and "grossly" negligent
actions taken in the performance of their duty of care, including grossly
negligent business decisions made in connection with takeover proposals for the
Company. As a result of this provision, the ability of the Company or a
stockholder thereof to successfully prosecute an action against a director for a
breach of his duty of care has been limited. However, the provision does not
affect the availability of equitable remedies such as an injunction or
rescission based upon a director's breach of his duty of care. The Securities
and Exchange Commission (the "Commission") has taken the position that the
provision will have no effect on claims arising under the Federal securities
laws.
The Company maintains a directors' and officers' insurance policy which insures
the officers and directors of the Company from any claim arising out of an
alleged wrongful act by such persons in their respective capacities as officers
and directors of the Company.
<PAGE>
Item 15. Recent Sales of Unregistered Securities
On December 20, 1993, the Company completed the private placement of (i)
1,300,000 common stock purchase warrants and (ii) the 1,200,000 shares of
Preferred Stock being registered hereby to 22 institutional investors for
aggregate proceeds to the Company of $30.2 million. This private placement was
effected pursuant to Section 4(2) of the Securities Act.
On December 29, 1993, the Company issued and contributed 350,000 shares of its
Common Stock to the Terex Corporation Master Retirement Plan Trust (the "Plan")
in satisfaction of certain outstanding obligations of the Company to the Plan.
This private placement was effected pursuant to Section 4(2) of the Securities
Act.
On December 9, 1994, the Company issued in a private placement (i) 89,800 shares
of Series B Preferred Stock and 106,950 common stock purchase warrants, to three
individuals in consideration for the early termination of a contract between the
Company and KCS Industries, Inc., a related party. The private placement was
effected pursuant to Section 4(2) of the Securities Act.
On May 9, 1995, the Company completed the private placement of $250 million
aggregate principal amount of its 13-1/4% Senior Secured Notes due 2002 and one
million of its common stock appreciation rights to institutional investors. This
private placement was effected pursuant to Section 4(2) of the Securities Act.
Item 16. Exhibits and Financial Statement Schedules
3.1 Restated Certificate of Incorporation of Terex Corporation (incorporated by
reference to Exhibit 3.1 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52297).
3.2 Restated Bylaws of Terex Corporation (incorporated by reference to Exhibit
3.2 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52297).
3.3 Certificate of Designation of Preferences and Rights of Series B Cumulative
Redeemable Convertible Preferred Stock ("Series B Preferred Stock") of
Terex Corporation (incorporated by reference to Exhibit 3.3 to the Form
10-K for the year ended December 31, 1994 of Terex Corporation, Commission
File No. 1-10702).
4.1 Warrant Agreement dated as of December 20, 1993 between Terex Corporation
and Mellon Securities Trust Company, as Warrant Agent (incorporated by
reference to Exhibit 4.40 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52297).
4.2 Form of Series A Warrant (incorporated by reference to Exhibit 4.41 to the
Form S-1 Registration Statement of Terex Corporation, Registration No.
33-52297).
4.3 Form of Series A Preferred Stock certificate (incorporated by reference to
Exhibit 4.42 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52711).
4.4 Form of Series B Warrant (incorporated by reference to Exhibit 4.43 to the
Form 10-K for the year ended December 31, 1994 of Terex Corporation,
Commission File No. 1-10702).
4.5 Form of Series B Preferred Stock Certificate (incorporated by reference to
Exhibit 4.44 to the Form 10-K for the year ended December 31, 1994 of Terex
Corporation, Commission File No. 1-10702).
4.6 Form of 13-1/4% Senior Secured Notes Due 2002 of Terex Corporation
(incorporated by reference to Exhibit 4.6 of the Amendment No. 1 to the
Form S-1 Registration Statement of Terex Corporation, Registration No.
33-52711).
4.7 Indenture dated as of May 9, 1995 among the Company, the Guarantors
referred to therein and United States Trust Company of New York, as Trustee
(incorporated by reference to Exhibit 4.7 of the Amendment No. 1 to the
Form S-1 Registration Statement of Terex Corporation, Registration No.
33-52711).
5.1 Opinion of Robinson Silverman Pearce Aronsohn & Berman LLP as to the
legality of the shares being registered.*
10.1 Terex Corporation Incentive Stock Option Plan, as amended (incorporated by
reference to Exhibit 4.1 to the Form S-8 Registration Statement of Terex
Corporation, Registration No. 33-21483).
10.2 1994 Terex Corporation Long Term Incentive Plan (incorporated by reference
to Exhibit 10.2 to the Form 10-K for the year ended December 31, 1994 of
Terex Corporation, Commission File No. 1-10702).
10.3 Terex Corporation Employee Stock Purchase Plan (incorporated by reference
to Exhibit 10.3 to the Form 10-K for the year ended December 31, 1994 of
Terex Corporation, Commission File No. 1-10702).
10.4 Common Stock Appreciation Rights Agreement dated as of July 31, 1992
between Terex Corporation and United States Trust Company of New York, as
SAR Agent (incorporated by reference to Exhibit 10.36 to the Form 10-K for
the year ended December 31, 1992 of Terex Corporation, Commission file No.
1-10702).
10.5 SAR Registration Rights Agreement dated as of July 31, 1992 between Terex
Corporation and the purchasers who are signatories thereto (incorporated by
reference to Exhibit 10.37 to the Form 10-K for the year ended December 31,
1992 of Terex Corporation, Commission file No. 1-10702).
10.6 Stock Purchase Agreement dated as of May 27, 1992 between Clark Equipment
Company and Terex Corporation (incorporated by reference to Exhibit 10.27
to the Form 10-K for the year ended December 31, 1992 of Terex Corporation,
Commission File No. 1-10702).
10.7 First Amendment to Stock Purchase Agreement dated as of July 31, 1992
between Terex Corporation and Clark Equipment Company (incorporated by
reference to Exhibit 10.28 to the Form 10-K for the year ended December 31,
1992 of Terex Corporation, Commission File No. 1-10702).
10.9 Tax Agreement dated as of July 31, 1992 between Terex Corporation in favor
of Clark Equipment Company (incorporated by reference to Exhibit 10.30 to
the Form 10-K for the year ended December 31, 1992 of Terex Corporation,
Commission File No. 1-10702).
10.10Trademark Assignment Agreement dated as of July 31, 1992 between Clark
Equipment Company and Clark Material Handling Company (incorporated by
reference to Exhibit 10.31 to the Form 10-K for the year ended December 31,
1992 of Terex Corporation, Commission File No. 1-10702).
10.11Trademark Assignment dated as of July 31, 1992 executed by Clark Equipment
Company in favor of Clark Material Handling Company (incorporated by
reference to Exhibit 10.32 to the Form 10-K for the year ended December 31,
1992 of Terex Corporation, Commission File No. 1-10702).
10.12License Agreement dated as of July 31, 1992 between Clark Equipment
Company and Clark Material Handling Company (incorporated by reference to
Exhibit 10.33 to the Form 10-K for the year ended December 31, 1992 of
Terex Corporation, Commission File No. 1-10702).
10.14Termination, General Release and Waiver Agreement, dated as of June 29,
1993, between Clark Material Handling Company and Gary D. Bello
(incorporated by reference to Exhibit 10.21 to the Form S-1 Registration
Statement of Terex Corporation, Registration No. 33-52297).
10.15Form of Purchase Agreement dated as of December 20, 1993 between Terex
Corporation and the purchasers of Series A Warrants and shares of Series A
Preferred Stock of Terex Corporation (incorporated by reference to Exhibit
10.22 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52297).
10.16Registration Rights Agreement dated as of December 20, 1993 between Terex
Corporation and the purchasers of Series A Warrants (incorporated by
reference to Exhibit 10.23 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52297).
10.17Registration Rights Agreement dated as of December 20, 1993 between Terex
Corporation and the purchasers of shares of Series A Preferred Stock of
Terex Corporation (incorporated by reference to Exhibit 10.24 to the Form
S-1 Registration Statement of Terex Corporation, Registration No.
33-52297).
10.18Series B Preferred Stock and Warrants Registration Rights Agreement
(incorporated by reference to Exhibit 10.27 to the Form 10-K for the year
ended December 31, 1994 of Terex Corporation, Commission File No. 1-10702).
10.19Agreement dated July 1, 1987, between KCS Industries, Inc. and Northwest
Engineering Company (incorporated by reference to Exhibit 10.2 to the Form
S-4 Registration Statement of Terex Corporation, Registration No.
33-20737).
10.20Management Agreement Amendment, dated January 1, 1993, between KCS
Industries, Inc. and Terex Corporation (incorporated by reference to
Exhibit 10.26 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52297).
10.21Management Agreement Termination Agreement, dated January 1, 1994, between
KCS Industries, L.P. and Terex Corporation (incorporated by reference to
Exhibit 10.27 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52297).
10.22Amendment to Management Agreement Termination Agreement, dated October 17,
1994, between KCS Industries , L.P. and Terex Corporation (incorporated by
reference to Exhibit 10.31 to the Form 10-K for the year ended December 31,
1994 of Terex Corporation, Commission File No. 1-10702).
10.23Credit Facility, dated December 23, 1993, among Terex Equipment Limited,
Terex Corporation and Standard Chartered Bank (incorporated by reference to
Exhibit 10.28 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52297).
10.24Amended and Restated Stock Purchase Agreement by and between CMH
Acquisition Corp. and DAC Acquisition Corp. with respect to the sale of the
outstanding stock of Drexel Industries dated as of April 15, 1994
(incorporated by reference to Exhibit 10.33 to the Form 10-K for the year
ended December 31, 1994 of Terex Corporation, Commission File No. 1-10702).
10.25Share Purchase Agreement, as amended, between Terex Cranes, Inc. and
Legris Industries, S.A. and Potain, S.A. (incorporated by reference to
Exhibit 10.1 to the Form 8-K for May 9, 1995, Commission File No. 1-10702).
10.26Certificate of Designation of Terex Cranes, Inc. with respect to its
Series A Redeemable Exchangeable Preferred Stock (incorporated by reference
to Exhibit 10.2 to the Form 8-K for May 9, 1995, Commission File No.
1-10702).
10.27Stockholders Agreement dated as of May 9, 1995 by and among Terex
Corporation, Legris Industries S.A., Potain S.A. and Terex Cranes, Inc.
(incorporated by reference to Exhibit 10.3 to the Form 8-K for May 9, 1995,
Commission File No. 1-10702).
10.28Purchase Agreement, dated as of April 27, 1995, among Terex Corporation
(the "Company"), certain of its subsidiaries and Jefferies & Company, Inc.
("Jefferies") and Dillon, Read & Co. Inc. (together with Jefferies, the
"Purchasers") (incorporated by reference to Exhibit 10.28 of the Amendment
No. 1 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52711).
10.29Common Stock Appreciation Rights Agreement dated as of May 9, 1995 between
the Company and United States Trust Company of New York, as Rights Agents
(incorporated by reference to Exhibit 10.29 of the Amendment No. 1 to the
Form S-1 Registration Statement of Terex Corporation, Registration No.
33-52711).
10.30Debt Registration Rights Agreement dated as of May 9, 1995 among the
Company and the Purchasers (incorporated by reference to Exhibit 10.30 of
the Amendment No. 1 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52711).
10.31SAR Registration Rights Agreement dated as of May 9, 1995 among the
Company and the Purchasers (incorporated by reference to Exhibit 10.31 of
the Amendment No. 1 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52711).
10.32Security and Pledge Agreement dated as of May 9, 1995 between the Company
and United States Trust Company of New York, as Collateral Agent
(incorporated by reference to Exhibit 10.32 of the Amendment No. 1 to the
Form S-1 Registration Statement of Terex Corporation, Registration No.
33-52711).
10.33Subsidiary Security and Pledge Agreement dated as of May 9, 1995 between
certain subsidiaries of the Company and United States Trust Company of New
York, as Collateral Agent (incorporated by reference to Exhibit 10.33 of
the Amendment No. 1 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52711).
10.34Loan and Security Agreement dated as of May 9, 1995 among Terex
Corporation, Clark Material Handling Company, Koehring Cranes, Inc. and PPM
Cranes, Inc. and Congress Financial Corporation and Foothill Capital
Corporation, for itself and as agent (incorporated by reference to Exhibit
10.34 of the Amendment No. 1 to the Form S-1 Registration Statement of
Terex Corporation, Registration No. 33-52711).
10.35Guarantee dated as of May 9, 1995 from Terex Corporation, Koehring Cranes,
Inc., PPM Cranes, Inc. and CMH Acquisition Corp. and Legris Industries,
Inc. (incorporated by reference to Exhibit 10.35 of the Amendment No. 1 to
the Form S-1 Registration Statement of Terex Corporation, Registration No.
33-52711).
10.36Guarantee dated as of May 9, 1995 from Terex Corporation, Clark Material
Handling Company, PPM Cranes, Inc. and CMH Acquisition Corp. and Legris
Industries, Inc. (incorporated by reference to Exhibit 10.36 of the
Amendment No. 1 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52711).
10.37Guarantee dated as of May 9, 1995 from Terex Corporation, Clark Material
Handling Company, Koehring Cranes, Inc. and CMH Acquisition Corp. and
Legris Industries, Inc. (incorporated by reference to Exhibit 10.37 of the
Amendment No. 1 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52711).
10.38Guarantee dated as of May 9, 1995 from Clark Material Handling Company,
Koehring Cranes, Inc., PPM Cranes, Inc. and CMH Acquisition Corp. and
Legris Industries, Inc. (incorporated by reference to Exhibit 10.38 of the
Amendment No. 1 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52711).
10.39Agreement dated as of November 2, 1995 between Terex Corporation, a
Delaware corporation, and Randolph W. Lenz (incorporated by reference to
Exhibit 10 to the Form 10-Q for the quarter ended September 30, 1995,
Commission File No. 1-10702).
10.401996 Terex Corporation Long-Term Incentive Plan (incorporated by reference
to Exhibit 10.40 of the Amendment No. 5 to the Form S-1 Registration
Statement of Terex Corporation, Registration No. 33-52711) .
11.1 Computation of per share earnings (incorporated by reference to Exhibit
11.1 of the Amendment No. 5 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52711)
12.1 Computation of ratio of earnings to fixed charges (incorporated by
reference to Exhibit 12.1 of the Amendment No. 5 to the Form S-1
Registration Statement of Terex Corporation, Registration No. 33-52711)
21.1 Subsidiaries of Terex Corporation (incorporated by reference to Exhibit
21.1 of the Amendment No. 5 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52711).
23.1 Independent Accountants' Consent of Price Waterhouse LLP - Stamford,
Connecticut.*
23.2 Independent Auditors' Consent of Ernst & Young LLP -- Greenville, South
Carolina. *
23.3 Consent of Robinson Silverman Pearce Aronsohn & Berman LLP (included as
part of the Exhibit 5.1). *
24.1 Power of Attorney. *
- --------------------
* Filed herewith.
<PAGE>
(b) Financial Statement Schedules Page
Terex Corporation
Report of Price Waterhouse (included as part of Exhibit 23.1)
Report of Ernst & Young LLP (included as part of Exhibit 23.2)
Schedule II -- Valuation and Qualifying Accounts and Reserves......... S-1
All other schedules are omitted as the required information is inapplicable or
the information is presented in the consolidated financial statements or related
notes.
Item 17. Undertakings
The Company hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act; (ii) to
reflect in the prospectus any facts or events arising after the effective
date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration
Statement; (iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration Statement.
(b) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 6 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Westport, State of Connecticut, on May 13, 1996.
TEREX CORPORATION
By: /s/ Ronald M. DeFeo *
Ronald M. DeFeo,
President and Chief Executive Officer
and Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment Number 6 to the Registration Statement has been signed by the
following persons in the capacities and on the date(s) indicated.
Name Title Date
/s/ Ronald M. DeFeo * President, Chief Executive May 13, 1996
Ronald M. DeFeo Officer and Director
(Principal Executive Officer)
and Chief Operating Officer
/s/ Ralph T. Brandifino * Senior Vice President and May 13, 1996
Ralph T. Brandifino Chief Financial Officer
(Principal Financial Officer and
acting Principal Accounting Officer)
/s/ Marvin B. Rosenberg Senior Vice President, May 13, 1996
Marvin B. Rosenberg General Counsel, Secretary
and Director
/s/ G. Chris Andersen * Director May 13, 1996
G. Chris Andersen
/s/ William H. Fike * Director May 13, 1996
William H. Fike
/s/ Bruce I. Raben * Director May 13, 1996
Bruce I. Raben
/s/ David A. Sachs * Director May 13, 1996
David A. Sachs
/s/ Adam E. Wolf * Director May 13, 1996
Adam E. Wolf
* By: /s/ Marvin B. Rosenberg
Marvin B. Rosenberg
Attorney-in-fact
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Amounts in millions)
Additions
Balance Balance
Beginning Charges to End of
of Year Earnings Other Deductions(1) Year
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts .......................... $ 6.1 $ 6.3 $-- $ (2.6) $ 9.8
Reserve for excess and obsolete inventory ................ 21.1 8.7 0.3(2) (9.5) 20.6
Totals ................................................... $ 27.2 $ 15.0 $ 0.3 $ (12.1) $ 30.4
Year ended December 31, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts .......................... $ 7.5 $ 1.0 $-- $ (2.4) $ 6.1
Reserve for excess and obsolete inventory ................ 20.7 7.6 -- (7.2) 21.1
Totals ................................................... $ 28.2 $ 8.6 $-- $ (9.6) $ 27.2
Year ended December 31, 1993:
Deducted from asset accounts:
Allowance for doubtful accounts ....................... $ 6.3 $ 1.7 $-- $ (0.5) $ 7.5
Reserve for excess and obsolete inventory ............. 22.4 7.5 -- (9.2) 20.7
Totals .................................................... $ 28.7 $ 9.2 $-- $ (9.7) $ 28.2
<FN>
(1) Utilization of established reserves, net of recoveries.
(2) Added with the acquisition of businesses.
</FN>
</TABLE>
EXHIBIT 23.1
Consent of Independent Accountants
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1/A (Amendment No. 6 to Form S-1) of our report
dated March 22, 1996, relating to the consolidated financial statements of Terex
Corporation, which appears in such Prospectus. We also consent to the
application of such report to the Financial Statement Schedule for the three
years ended December 31, 1995 listed under Item 16(b) of this Registration
Statement when such schedule is read in conjunction with the consolidated
financial statements referred to in our report. The audits referred to in such
report also included this schedule. We also consent to the reference to us under
the heading "Experts" in such Prospectus.
Price Waterhouse LLP
Stamford, Connecticut
May 10, 1996
Exhibit 23.2
Consent Of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated August 22, 1995, in Amendment No. 6 to the
Registration Statement (Form S-1 No. 33-52711) and related Prospectus of
Terex Corporation for the Registration of 1,200,000 shares of its Series A
Cumulative Redeemable Convertible Preferred Stock (the "Preferred Stock")
and the shares of its common stock issuable upon the conversion of the
Preferred Stock.
ERNST & YOUNG LLP
Greenville, South Carolina
May 13, 1996
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below hereby constitutes and appoints Ronald M. DeFeo and Marvin B.
Rosenberg, or either of them, as his true and lawful attorneys-in-fact and
agents with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any an all amendments
(including, without limitation, post-effective amendments) to Form S-1/A
Registration Statements for Preferred Stock and Common Stock and Common Stock
Purchase Warrants and Common Stock, and to file the same with all exhibits
thereto, and all document in connection therewith, with the Securities and
Exchange Commission, granting said attorney-in-fact and agent, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof, during 1996.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
/s/ Ronald M. DeFeo President, Chief Executive Officer, April 26, 1996
Ronald M. DeFeo Chief Operating Officer and Director
(Principal Executive Officer)
/s/ Ralph T. Brandifino Senior Vice President and April 26, 1996
Ralph T. Brandifino Chief Financial Officer
(Principal Financial Officer)
/s/ Marvin B. Rosenberg Senior Vice President, General Counsel, April 26, 1996
Marvin B. Rosenberg Secretary and Director
/s/ Joseph F. Apuzzo Vice President and Controller April 26, 1996
Joseph F. Apuzzo (Principal Accounting Officer)
/s/ G. Chris Andersen Director April 26, 1996
G. Chris Andersen
/s/ William H. Fike Director April 26, 1996
William H. Fike
/s/ Bruce I. Raben Director April 26, 1996
Bruce I. Raben
/s/ David A. Sachs Director April 26, 1996
David A. Sachs
/s/ Adam E. Wolf Director April 26, 1996
Adam E. Wolf
