As filed with the Securities and Exchange Commission on January 24, 1996.
Registration No. 33-52711
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1/A
AMENDMENT NO. 1
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 (Primary standard (I.R.S. employer
jurisdiction of industrial classification identification no.)
incorporation or code number)
organization)
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
1290 Avenue of the Americas
New York, New York 10104
Attention: Stuart A. Gordon, Esq., Eric I Cohen, Esq.
Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue
Los Angeles, California 90071
Attention: Michael A. Woronoff, 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. [ ]
CALCULATION OF REGISTRATION FEE
Title of Each Class of Amount to be Proposed Proposed Amount of
Securities to be Registered Maximum Maximum Registration
Registered Offering Price Aggregate Fee
per Share(1) Offering
Price(1)
Series A Cumulative 1,200,000 $23.00 $27,600,000 $9,517.24
Redeemable Convertible
Preferred Stock,
par value $.01
Common Stock, 2,700,000 --- (2) --- (2) --- (2)
par value $.01 (3)
(1) Estimated solely for purposes of calculation of the registration fee.
(2) Pursuant to Rule 457(i), no separate registration fee is required for
the Common Stock when the Preferred Stock convertible into such Common Stock
is being registered at the same time.
(3) Represents shares of Common Stock which may be received upon
conversion of the Preferred Stock from and after the effective date of
this Registration Statement. Pursuant to Rule 416, there are also
being registered such additional shares of Common Stock which may become
issuable pursuant to the anti-dilution provisions of such Preferred Stock.
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.
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 Outside Front Cover Page of the
and Outside Front Cover Page Prospectus
of Prospectus
2. Inside Front and Outside Back Inside Front and Outside Back
Cover Pages of Prospectus Cover Pages of the Prospectus,
Additional Information
3. Summary Information/Risk Factors/ Prospectus Summary/Risk Factors/
Ratio of Earnings to Fixed Charges 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 Description of Securities
to Be Registered
10. Interests of Named Experts Legal Matters; Experts
and Counsel
11. Information with Respect Outside Front Cover Page of the
to the Registrant 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 Not Applicable
on Indemnification for Securities
Act Liabilities
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.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JANUARY 24, 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 January 23, 1996, the closing price of the
Common Stock on the NYSE was $4.25 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.
- -------------------------------------------------------------------------------
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 to be 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."
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. The 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. Statements contained in this Prospectus
as to the contents of any contract or other document are not necessarily
complete, and in each instance reference is made to the full text of such
contract or document filed as an exhibit to the Registration Statement, each
such statement being qualified in all respects by such reference.
The Company furnishes stockholders with annual reports containing audited
financial statements. The Company also furnishes its stockholders with proxy
material for its annual meetings complying with the proxy requirements of the
Exchange Act.
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, industrial tow tractors 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 recently formed 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 the Company's new 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 this 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.
SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands 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
Nine Months Ended As of and for the
September 30, 1995 Year Ended December 31,
Actual 1994 1993 1992 1991 1990
Summary of Operations (1)
Net Sales $766,789 $786,781 $670,309 $523,355 $784,194$1,023,283
Income
(loss)
from
operations 11,381 3,361 (33,896) (4,125) (70,706) 12,193
Income
(loss) before
extraordinary
items (26,087) 1,170 (65,080) 2,915 (42,731) (39,243)
Per share:
Income
(loss) before
extraordinary
items (3.02) (0.46) (6.55) 0.29 (4.31) (3.97)
Ratio of
earnings to
combined
fixed
charges and
preferred
stock
accretion(2) (3) 1.0x (3) 1.2x (3) (3)
Total Assets $645,934 $401,616 $390,702 $477,356 $506,713 $584,352
Capitalization
Long-term debt
and notes
payable,
including
current
maturities $355,912 $190,871 $218,039 $217,605 $223,051 $269,186
Stockholders'
investment (94,157) (55,738) (62,261) (9,075) (4,141) 44,885
Dividends
per share $--- $--- $--- $--- $0.06 $0.05
(1) The Summary Consolidated Financial Data include the results of operations
of the Company's Clark Material Handling Subsidiary ("CMH") and the Company's
aerial lift division, Mark Industries ("Mark"), from the dates of their
acquisitions, 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. See a further discussion of these matters
in Note B -- "Acquisitions" and Note C -- "Investment in Fruehauf Trailer
Corporation" in the Notes to the Consolidated Financial Statements. Income
(loss) before extraordinary items in 1992 includes a $36.5 million gain on
deconsolidation of Fruehauf and in 1991 includes a $56.0 million 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
$25,954 for the nine months ended September 30, 1995, $64,245 for 1993, $46,021
for 1991 and $47,578 for 1990.
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 September 30, 1995 the Company had
approximately $355.9 million of indebtedness and negative stockholders' equity
of $94.2 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.
Integration of PPM
The acquisition of PPM by the Company will require the integration of the
administrative, finance, sales and marketing organizations of PPM, as well as
the integration of and coordination of PPM's manufacturing and sales
activities. This will require substantial attention from the Company's
management team. The diversion of management attention and any other
difficulties encountered in the integration process could have an adverse
impact on the revenue and operating results of the Company. There also can be
no assurance that unforeseen costs and expenses or other factors may not
adversely affect the integration of PPM and thereby adversely affect the
business of the Company.
Absence of Public Market for the Preferred Stock
As of December 1, 1995 there were 25 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 December 1, 1995, Randolph W. Lenz, formerly Chairman of the Board and a
Director of the Company, is the beneficial owner, directly and indirectly, of
approximately 44% 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, but will continue 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 which has
not yet become effective covering the outstanding Warrants and the 3,900,000
shares of Common Stock which 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 provide that
no dividends will accrue on the Preferred Stock until the Accretion Termination
Date, the determination of which is based upon and is subject to all of such
restrictions and other provisions of the indentures and loan agreements of the
Company which were in effect on December 20, 1993. Pursuant to the terms of
the provisions of the indentures and loan agreements of the Company which were
in effect on December 23, 1993, the Company is restricted from paying dividends
on the Preferred Stock unless at the time of the declaration of any dividend on
the Preferred Stock (i) the Company has a Tangible Net Worth (as defined in
such indentures and loan agreements) of in excess of $50.0 million, (ii) the
Company has Pre-Tax Cash Flow (as defined in such indentures and loan
agreements) equal to or greater than 2.0 to 1 and (iii) the amount of all
Restricted Payments (as defined in such indentures and loan agreements) made by
the Company since the date such indentures and loan agreements were entered
into do not exceed the sum of (a) 50% of Consolidated Net Income (as defined in
such indentures and loan agreements) from and after the date on which items (i)
and (ii) are satisfied, plus (b) 75% of Consolidated Net Income from and after
the date on which the Company's Tangible Net Worth exceeds $100 million, plus
(c) 100% of the net cash proceeds from the sale of capital stock of the
Company. The Company does not believe that it will be able to pay dividends on
the Preferred Stock in the foreseeable future. In addition, under Delaware law
the Company's ability to pay dividends on the Preferred Stock and the Common
Stock 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." 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, including the Common Stock. See "Description of
Securities -- Preferred Stock."
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 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 in 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.
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.
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 and electric
lift trucks, electric walkies, automated pallet trucks, industrial tow tractors
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 the Company's new 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 $ 5.23 $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. As discussed in
Note F -- "Long-Term Obligations" in the Notes to the Consolidated Financial
Statements, certain of the Company's debt agreements contain restrictions as
to the payment of cash dividends. Under the most restrictive of these
agreements, no retained earnings were available for dividends at September 30,
1995. The terms of the Company's outstanding Series A Cumulative Redeemable
Convertible Preferred Stock, par value $.01 per share (the "Series A 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 December 1, 1995, there were 796 stockholders of record of the Company's
Common Stock.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company
as of September 30, 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 thousands)
Notes payable and long-term debt
(including current portion):
Senior Secured Notes due May 15, 2002 (1) $ 246,919
Credit Facility maturing May 9, 1998 (2) 72,335
Other debt, including notes payable (3) 36,658
Total notes payable and long term debt 355,912
Minority interest, including redeemable
preferred stock of a subsidiary 10,028
Redeemable Convertible Preferred Stock
(including the Preferred Stock
registered hereby) 22,462
Stockholders' investment
Common Stock Purchase Warrants 17,240
Common Stock 104
Additional paid-in capital 40,451
Accumulated deficit (147,872)
Pension liability adjustment (1,778)
Unrealized holding gain on equity securities 938
Foreign currency translation adjustment (3,240)
Total stockholders' investment (94,157)
Total capitalization $ 294,245
(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) Includes $16.1 million of notes payable to banks, capital leases and term
debt assumed in the PPM Acquisition. 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
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 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 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 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 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 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.
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands except per share amounts and employees)
Selected Financial Data
The Selected Financial Data include the results of operations of CMH and of
Mark from the dates of their acquisitions, July 31, 1992 and December 31, 1991,
respectively, and reflect the deconsolidation of Fruehauf as of January 1,
1992. For a further discussion of these matters, see Note B -- "Acquisitions"
and Note C -- "Investment in Fruehauf Trailer Corporation" in the Notes to the
Consolidated Financial Statements. Income (loss) before extraordinary
items and net income (loss) in 1992 include a $36.5 million gain on
deconsolidation of Fruehauf, and in 1991 include a $56.0 million 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. Operating results for interim periods are not
necessarily indicative of results for the entire fiscal year.
Nine Months Ended As of and for the
September 30, 1995 Year Ended December 31,
Actual 1994 1993 1992 1991 1990
Summary of Operations
Net Sales $766,789 $786,781 $670,309 $523,355 $784,194$1,023,283
Income (loss)
from operations 11,381 3,361 (33,896) (4,125) (70,706) 12,193
Income (loss)
before
extraordinary
items (26,087) 1,170 (65,080) 2,915 (42,731) (39,243)
Net income (loss) (33,539) 461 (66,544) 2,915 (42,731) (42,837)
Net income (loss)
applicable to
common stock (38,739) (5,468) (66,696) 2,915 (42,731) (42,837)
Per Common
and Common
Equivalent
Share:
Income (loss)
before
extraordinary
items (3.02) (0.46) (6.55) 0.29 (4.31) (3.97)
Net income (loss) (3.75) (0.53) (6.70) 0.29 (4.31) (4.33)
Ratio of
earnings to
fixed charges(1) (2) 1.0x (2) 1.0x (2) (2)
Total Assets $645,934 $401,616 $390,702 $477,356 $506,713 $584,352
Capitalization
Long-term
debt and
notes payable,
including
current
maturities $355,912 $190,871 $218,039 $217,605 $223,051 $269,186
Minority
interest,
including
redeemable
preferred
stock of
a subsidiary $10,028 --- --- --- --- ---
Redeemable
convertible
preferred
stock 22,462 17,262 10,480 --- --- ---
Stockholders'
investment (94,157) (55,738) (62,261) (9,075) (4,141) 44,885
Dividends per
share of
Common Stock --- --- --- --- $0.06 $0.05
Shares of
Common Stock
outstanding
at period end 10,359 10,303 10,303 9,949 9,923 9,893
Employees 3,670 2,851 2,930 3,056 6,980 8,000
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 $25,954 for the nine months ended September 30,
1995, $64,245 for 1993, $46,021 for 1991 and $47,578 for 1990.
Unaudited Quarterly Financial Data
Summarized quarterly financial data for the nine months ended September 30,
1995 and for the years 1994 and 1993 are as follows (in thousands, except per
share amounts):
1995
Third Second First
Net sales $283,304 $269,409 $214,076
Gross profit 30,814 24,234 21,212
Income (loss) before
extraordinary items (7,768) (16,416) (1,885)
Net income (loss) (7,786) (23,868) (1,885)
Net income (loss) applicable
to common stock (9,639) (25,657) (3,614)
Per share:
Primary
Income (loss) before
extraordinary items $(0.93) $(1.76) $(0.35)
Net income (loss) (0.93) (2.48) (0.35)
Fully diluted
Income (loss)
before extraor-
dinary items $(0.93) $(1.76) $(0.35)
Net income (loss) (0.93) (2.48) (0.35)
1994
Fourth Third Second First
Net sales $213,431 $207,062 $198,250 $168,038
Gross profit 25,698 22,782 19,502 15,177
Income (loss) before
extraordinary items 531 1,209 10,254 (10,824)
Net income (loss) 219 1,045 10,021 (10,824)
Net income (loss)
applicable to common stock (1,369) (472) 8,577 (12,204)
Per share:
Primary
Income (loss) before
extraordinary items $(0.10) $(0.03) $0.64 $(1.18)
Net income (loss) (0.13) (0.05) 0.62 (1.18)
Fully diluted
Income (loss) before
extraordinary items $(0.10) $(0.03) $0.60 $(1.18)
Net income (loss) (0.13) (0.05) 0.59 (1.18)
1993
Fourth Third Second First
Net sales $150,799 $164,052 $172,261 $183,197
Gross profit 7,499 11,545 13,257 16,192
Income (loss) before
extraordinary items (21,988) (15,046) (15,647) (12,399)
Net income (loss) (21,449) (15,046) (17,650) (12,399)
Net income (loss)
applicable to common stock (21,601) (15,046) (17,650) (12,399)
Per share:
Primary
Income (loss) before
extraordinary items $(2.22) $(1.51) $(1.57) $(1.25)
Net income (loss) (2.17) (1.51) (1.77) (1.25)
Fully diluted
Income (loss) before
extraordinary items $(2.22) $(1.51) $(1.57) $(1.25)
Net income (loss) (2.17) (1.51) (1.77) (1.25)
The accompanying unaudited quarterly financial data of the Company have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with Item 302 of Regulation S-K. In the
opinion of management, all adjustments considered necessary for a fair
presentation have been made and were of a normal recurring nature except for
those discussed below.
In 1995, the Company recognized a gain of $1.0 million in the first quarter as
a result of the sale of 486,622 shares of Fruehauf common stock and recorded
severance and exit costs of $3.5 million in the second quarter.
In 1994, the Company recognized gains of $4.6 million in the first quarter,
$15.5 million in the second quarter, $4.3 million in the third quarter and $1.6
million in the fourth quarter as a result of the sale of a total of 5,900,000
shares of Fruehauf common stock. The Company recognized a gain of $4.7 million
from the sale of its Drexel Industries subsidiary in the second quarter of
1994. The Company recorded severance charges of $4.5 million in the second
quarter of 1994 and $2.8 million in the fourth quarter of 1994, and a related
pension curtailment gain of $0.9 million in the fourth quarter of 1994.
As a result of changing Mark's product offerings and distribution, the Company
recognized a charge to income of $4.7 million in the fourth quarter of 1993 to
write-off the remaining unamortized goodwill from the acquisition of Mark. The
Company recognized a gain of $3.0 million in the fourth quarter of 1993 as a
result of the sale of 1,000,000 shares of Fruehauf common stock.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
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 referred to herein as
"Mobile Cranes." The comparisons presented below have been reclassified to a
three segment basis for consistency. The Mobile Cranes segment results for
periods prior to May 1995 consist solely of Koehring's operations which were
formerly included in the results of the Heavy Equipment Segment.
Nine Months Ended September 30, 1995
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 the nine months ended September 30, 1995 and 1994.
Nine Months Ended
September 30, Increase
1995 1994 (Decrease)
(in millions of dollars)
NET SALES
Material Handling $ 404.4 $ 335.7 $ 68.7
Heavy Equipment 190.5 173.1 17.4
Mobile Cranes 172.7 66.9 105.8
Eliminations (0.8) (2.3) 1.5
Total $ 766.8 $ 573.4 $ 193.4
GROSS PROFIT
Material Handling $ 26.7 $ 22.4 $ 4.3
Heavy Equipment 26.4 24.6 1.8
Mobile Cranes 23.2 10.4 12.8
Total $ 76.3 $ 57.4 $ 18.9
ENGINEERING, SELLING AND
ADMINISTRATIVE EXPENSES
Material Handling $ 24.6 $ 33.2 $ (8.6)
Heavy Equipment 17.1 15.7 1.4
Mobile Cranes 18.7 4.9 13.8
General/Corporate 1.0 2.0 (1.0)
Total $ 61.4 $ 55.8 $ 5.6
SEVERANCE AND EXIT COSTS
Material Handling $ 3.5 $ 4.3 $ (0.8)
Heavy Equipment --- 0.2 (0.2)
Total $ 3.5 $ 4.5 $ (1.0)
INCOME (LOSS) FROM OPERATIONS
Material Handling $ (1.4) $ (15.1) $ 13.7
Heavy Equipment 9.3 8.7 0.6
Mobile Cranes 4.5 5.5 (1.0)
General/Corporate (1.0) (2.0) 1.0
Total $ 11.4 $ (2.9) $ 14.3
Net Sales
Sales increased $193.4 million to $766.8, or approximately 34%, for the nine
months ended September 30, 1995 over the comparable 1994 period.
Material Handling Segment sales were $404.4 million for the nine months ended
September 30, 1995, an increase of $68.7 million from $335.7 million in the
year earlier period. The sales mix was approximately18% parts in the nine
months ended September 30, 1995 compared to 20% in the comparable 1994 period.
Machine sales increased 22%, 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. Parts sales increased 7%
because of improved parts inventory availability partially offset by the
adverse effects of a labor strike at the Company's parts distribution center
during the second quarter of 1995. The strike has not had a material
continuing effect on parts sales.
Material Handling Segment bookings for the nine months ended September 30, 1995
were $368.7 million, an increase of $59.8 million, or 19%, from the year
earlier period, on strong customer demand early in the year for the new Genesis
line. Bookings for parts sales for the nine months ended September 30, 1995,
from which the Company generally realized higher margins than machine sales,
increased 6% from the year earlier period. Machine order bookings for the nine
months ended September 30, 1995 increased 17% from the year earlier period,
reflecting the favorable acceptance of the Company's new Genesis line.
Material Handling Segment backlog was $100.1 million at September 30, 1995
compared to $135.9 million at December 31, 1994 and $119.8 million at September
30, 1994.
Heavy Equipment Segment sales increased $17.4 million for the nine months ended
September 30, 1995 from the nine months ended September 30, 1994. Machines
sales increased 9%, and parts sales increased 10%. The sales mix was
approximately 35% parts for the nine months ended September 30, 1995 compared
to 35% parts for the comparable 1994 period. Heavy Equipment Segment parts
sales were also adversely affected by the strike at the parts distribution
center during the second quarter of 1995, but to a lesser degree than the
Material Handling Segment.
Heavy Equipment Segment bookings for the nine months ended September 30, 1995
were $171.3 million, an increase of $12.3 million, or 8%, from the year earlier
period. Bookings for parts sales, from which the Company generally realizes
higher margins than machine sales, increased 12% from the nine months ended
September 30, 1994. Machine bookings for the nine months ended September 30,
1995 increased 5% from the comparable 1994 period. Heavy Equipment Segment
backlog was $55.2 million at September 30, 1995 compared to $67.8 million at
December 31, 1994 and $48.2 million at September 30, 1994.
Mobile Crane segment sales were $172.7 million for the nine months ended
September 30, 1995, an increase of $105.8 million from $66.9 million in the
year earlier period due to the PPM Acquisition in May 1995. Mobile Crane
Segment backlog was $81.6 million at September 30, 1995, reflecting the
additional PPM backlog acquired, compared to $11.7 million at December 31, 1994
and $11.9 million at September 30, 1994.
Gross Profit
Gross profit of $76.3 million for the nine months ended September 30, 1995 was
$18.9 million, or 33%, higher than gross profit of $57.5 million for the nine
months ended September 30, 1994.
The Material Handling Segment's gross profit increased $4.3 million to $26.7
million for the nine months ended September 30, 1995 compared to $22.4 million
for the prior year's period. The gross profit percentage in the Material
Handling Segment was 7% for the nine months ended September 30, 1995 and for
the comparable 1994 period. 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 $1.8 million to $26.4
million for the nine months ended September 30, 1995 compared to $24.6 million
for the comparable 1994 period. The gross profit percentage in the Heavy
Equipment Segment was 14% for the nine months ended September 30, 1995 and for
the nine months ended September 30, 1994.
Mobile Crane Segment's gross profit increased $12.8 million to $23.2 million
for the nine months ended September 30, 1995, compared to $10.4 million for the
prior year's period reflecting the addition of the May through September 1995
results of the PPM businesses.
Engineering, Selling and Administrative Expenses
Engineering, selling and administrative expenses increased to $61.4 million
for the nine months ended September 30, 1995 from $55.8 million for the nine
months ended September 30, 1994. Material Handling Segment engineering,
selling and administrative expenses decreased to $24.6 million for the nine
months ended September 30, 1995 from $33.2 million for the comparable 1994
period, 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 $17.1 million for the nine months ended
September 30, 1995 from $15.7 million for the comparable 1994 period as a
result of costs associated with the start-up of a new parts service business.
Mobile Crane Segment engineering, selling and administrative expenses increased
to $18.7 million for the nine months ended September 30, 1995 from $4.9 million
for the comparable 1994 period reflecting the PPM Acquisition in May 1995.
Corporate administrative expenses in 1994 included a charge of $2.2 million in
connection with the termination of a management contract with a related party.
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 million 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
million 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 million charge
represents severance costs associated with these actions.
Income (Loss) from Operations
The Material Handling Segment loss from operations of $1.4 million for the nine
months ended September 30, 1995 represents a $13.7 million improvement over the
$15.1 million loss in the comparable 1994 period. As discussed above,
increased sales and reduced costs contributed to the improvement in income from
operations for the nine months ended September 30, 1995.
Heavy Equipment Segment income from operations improved by $0.6 million to $9.3
million for the nine months ended June 30, 1995 from $8.7 million in the
comparable 1994 period, primarily as a result of reduced costs, offset by costs
associated with the start up of a new parts service business.
Mobile Crane Segment income from operations of $4.5 million for the nine months
ended September 30, 1995 decreased by $1.0 over the comparable 1994 period,
primarily due to losses of the PPM businesses acquired in May 1995.
On a consolidated basis, the Company realized operating income of $11.4 million
for the nine months ended September 30, 1995, compared to an operating loss of
$2.9 million for the comparable 1994 period.
Other Income (Expense)
Net interest expense increased to $27.3 million for the nine months ended
September 30, 1995 from $22.9 million in the comparable 1994 period as a result
of incremental borrowings associated with the PPM Acquisition in May 1995. The
Company realized gains of $24.4 million from sales of Fruehauf common stock
during the nine months ended September 30, 1994. The Company owns 250,000
shares of Fruehauf common stock which it received in settlement of certain
obligations of Fruehauf.
The Company recorded a charge of $3.0 million in the nine months ended
September 30, 1995 to recognize the impairment in value of certain properties
held for sale.
The Company also incurred net foreign exchange losses of $1.9 million,
trademark related expenses of $1.0 million, and $0.5 million of Group Retiree
expenses during the nine months ended September 30, 1995.
The Company recorded a charge of $1.8 million in the nine months ended
September 30, 1995 for payments related to the retirement of its former
chairman in August 1995, as described more fully in "Management -- Retirement
of Randolph W. Lenz." The balance of the provision for income taxes generally
represents taxes withheld on foreign royalties and dividends, and the
fluctuation in the provision for income tax is due to fluctuations in these
items.
1994 Compared with 1993
The table below is a comparison of net sales, gross profit, engineering,
selling, and administrative expenses, severance charges and income (loss) from
operations, by segment, for the years ended December 31, 1994 and 1993. As
described in Note A -- "Significant Accounting Policies -- Restatements and
Reclassifications" of the Notes to the Consolidated Financial Statements, the
1993 amounts have been restated.
Year Ended
December 31, Increase
1995 1994 (Decrease)
(in millions of dollars)
NET SALES
Material Handling $ 472.7 $ 395.6 $ 77.1
Heavy Equipment 226.8 203.8 23.0
Mobile 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
Mobile 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 22.1 24.2 (2.1)
Mobile Cranes 6.3 10.1 (3.8)
General/Corporate 1.7 3.5 (1.8)
Total $ 72.5 $ 82.4 $ (9.9)
SEVERANCE CHARGES
Material Handling $ 6.7 $ --- $ 6.7
Heavy Equipment 0.6 --- 0.6
Total $ 7.3 $ --- $ 7.3
INCOME (LOSS) FROM OPERATIONS
Material Handling $ (13.9) $ (28.6) $ 14.7
Heavy Equipment 11.1 6.3 4.8
Mobile Cranes 7.9 (8.1) 16.0
General/Corporate (1.7) (3.5) 1.8
Total $ 3.4 $ (33.9) $ 37.3
Net Sales
Sales in 1994 increased $116.5 million, or approximately 17%, over 1993.
Material Handling Segment sales were $472.7 million for 1994, an increase of
$77.1 million, or 19%, from $395.6 million for the prior year. Machine sales
increased $81.0 million and parts sales decreased $3.9 million. 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 million, an increase of
$5.6 million from 1993. Machine order bookings for the year ended December
31, 1994 of $381.2 million increased $17.3 million or 5% compared to $364.0
million in the year earlier period. Bookings for parts sales for 1994, from
which the Company generally realizes higher margins than machine sales,
decreased $11.6 million, or 12%, from the year earlier period, primarily
because of decreased parts availability as discussed above. Material Handling
Segment backlog was $135.9 million at December 31, 1994 compared to $152.7
million 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. As the Company maintains full production
in the Material Handling Segment United States operations and as parts
availability returns to normal levels, management expects that the backlog of
both machines orders and parts orders will be reduced during 1995.
In December 1994 CMHC introduced the Genesis 2- to 4-ton IC truck. 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.
Heavy Equipment Segment sales increased $23.0 million, or 11%, to $226.8
million in 1994 from $203.8 million in 1993. Machine sales increased $21.6
million and parts sales increased $1.4 million. 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 million, an increase of
$38.1 million, or 20%, from 1993. Bookings for parts sales of $77.6 million,
from which the Company generally realizes higher margins than machine sales,
were comparable to bookings for 1993. Machine bookings for 1994 increased
$42.2 million, or 38%, from 1993, reflecting the factors discussed above.
Heavy Equipment Segment backlog was $67.8 million at December 31, 1994 compared
to $62.3 million at December 31, 1993, reflecting the improved shipments in
1994. Parts backlog was $6.1 million at December 31, 1994 compared to $8.6
million 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 management expects that the backlog of parts orders will continue to be
reduced as working capital continues to be applied to improve parts inventory
availability.
Mobile Crane segment sales were $90.4 million for 1994, an increase of $19.0
million from $71.4 million 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.
Mobile Crane Segment bookings were $83.6 million 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 million compared to 1993.
The Material Handling Segment's gross profit increased $19.2 million to $35.2
million for 1994 compared to $16.0 million 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 million to $33.8
million for 1994 compared to $30.5 million 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.
Mobile Crane Segment's gross profit increased $12.2 million to $14.2 million
for 1994, compared to $2.0 million for 1993. The gross profit percentage in
the Mobile Crane segment increased to 15.7% for 1994 from 2.8% in the prior
years period reflecting the continuing effects of cost reductions and improved
manufacturing efficiency.
Engineering, Selling and Administrative Expenses
Engineering, selling and administrative expenses decreased to $72.5 million for
1994 from $82.4 million for 1993 as a result of cost reduction initiatives
throughout the Company. Material Handling Segment engineering, selling and
administrative expenses totaled $42.4 million for 1994 compared to $44.6
million for the prior year. Heavy Equipment Segment engineering, selling and
administrative expenses decreased to $22.1 million for 1994 from $24.2 million
for the prior year. As a result of changing Mark's product offerings and
distribution, the Heavy Equipment Segment recognized a charge to income of
$4.7 million in the fourth quarter of 1993 to write-off the remaining
unamortized goodwill from the acquisition of Mark. Mobile Crane Segment
engineering, selling and administrative expenses decreased to $6.3 million
for 1994 compared to $10.1 million for 1993. Corporate administrative
expense in 1994 includes a charge of $2.2 million in connection with the
termination, as of January 1, 1994, of the Company's 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. Charges under the KCS contract would have
totaled approximately $2.7 million for the year ended December 31, 1994 if it
had not been terminated, and would have continued at such rate until at least
June 30, 1995. See "Certain Transactions" and Note M -- "Related Party
Transactions" in the Notes to the Consolidated Financial Statements for
further information.
Severance Charges
During the second quarter of 1994, the Company recorded a charge of $4.5
million related principally 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 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 $2.8 million charge
was recorded for costs, principally severance costs, associated with these
actions.
Income (Loss) from Operations
The Material Handling Segment incurred a loss from operations of $7.2 million
for 1994, excluding the severance charge discussed above ($13.9 million
including the severance charge), compared to a loss of $28.6 million 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 million in the fourth
quarter of 1994, excluding the severance charge ($1.1 million including the
severance charge), compared to a loss of $10.7 million in the fourth quarter of
1993. Because of the production improvements achieved during 1994 and the
reduced operating expenses resulting from the actions described above,
management expects continued improvement in the Material Handling Segment's
income from operations during 1995.
Heavy Equipment Segment income from operations improved by $4.8 million to
$11.1 million for 1994 compared to $6.3 million in the prior year. As a
result of changing Mark's product offerings and distribution, the Heavy
Equipment Segment recognized a charge to income of $4.7 million in the fourth
quarter of 1993 to write-off the remaining unamortized goodwill from the
acquisition of Mark. This improvement resulted from the increase in gross
profit offset by the increase in engineering, selling and administrative
expenses described above.
Mobile Crane Segment income from operations of $7.9 million for 1994 improved
by $16.0 million over the comparable 1994 period 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.
On a consolidated basis, the Company achieved operating income of $10.7
million, excluding the severance charge discussed above, for 1994 ($3.4 million
income including the severance charge) compared to an operating loss of $33.9
million for the prior year.
Other Income (Expense)
Interest expense on a consolidated basis was $30.5 million for 1994 compared to
$31.2 million for 1993. The decrease in interest expense is primarily the
result of repayments of 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 million in
1993. As described in Note C -- "Investment in Fruehauf Trailer Corporation"
in the Notes to the Consolidated Financial Statements, the Company's carrying
value for its investment in Fruehauf was reduced to zero during 1992 and the
Company did not recognize any additional gains or losses with respect to its
investment in Fruehauf except as realized on transactions in Fruehauf common
stock. In December 1993, the Company sold 1,000,000 shares of Fruehauf common
stock and realized a gain of $3.0 million. During 1994 the Company sold a
total of 5,900,000 shares of Fruehauf common stock and realized a gain of $26.0
million.
In 1994, the Company recorded a provision for state income taxes of $0.5
million in connection with the sale of its former subsidiary, Drexel
Industries, Inc. 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 million of old senior
secured notes. The Company recognized extraordinary losses totaling $0.7
million 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 million in the second quarter of 1993
to write off unamortized debt issuance costs.
In December 1993, the Company repurchased $5.0 million of old senior secured
notes for approximately $4.5 million, including accrued interest. The Company
recognized an extraordinary gain on this transaction of approximately $0.5
million, net of write-off of unamortized discount and debt issuance costs.
1993 Compared with 1992
The table below is a comparison of net sales, gross profit, engineering,
selling, and administrative expenses and income (loss) from operations, by
segment, for the years ended December 31, 1993 and 1992. As described in Note
A -- "Significant Accounting Policies -- Restatements and Reclassifications" of
the Notes to Consolidated Financial Statements, the 1993 amounts have been
restated. Amounts shown for the Material Handling Segment for 1992 represent
activity for the five months subsequent to the CMH Acquisition.
Year Ended
December 31, Increase
1993 1992 (Decrease)
(in millions of dollars)
NET SALES
Material Handling $ 395.6 $ 241.0 $ 154.6
Heavy Equipment 203.8 194.7 9.1
Mobile Cranes 71.4 87.7 (16.3)
Eliminations (0.5) --- (0.5)
Total $ 670.3 $ 523.4 $ 146.9
GROSS PROFIT
Material Handling $ 16.0 $ 22.5 $ (6.5)
Heavy Equipment 30.5 26.8 3.7
Mobile Cranes 2.0 2.8 (0.8)
Total $ 48.5 $ 52.1 $ (3.6)
ENGINEERING, SELLING AND
ADMINISTRATIVE EXPENSES
Material Handling $ 44.6 $ 20.3 $ 24.3
Heavy Equipment 24.2 23.6 0.6
Mobile Cranes 10.1 12.0 (1.9)
General/Corporate 3.5 0.3 3.2
Total $ 82.4 $ 56.2 $ 26.2
INCOME (LOSS) FROM OPERATIONS
Material Handling $ (28.6) $ 2.2 $ (30.8)
Heavy Equipment 6.3 3.2 3.1
Mobile Cranes (8.1) (9.2) 1.1
General/Corporate (3.5) (0.3) (3.2)
Total $ (33.9) $ (4.1) $ (29.8)
Net Sales
Sales in 1993 increased $146.9 million, or approximately 28%, over 1992.
Material Handling Segment sales were $395.6 million for 1993 compared to $241.0
million for the last five months of 1992, an increase of $154.6 million. On a
pro forma basis, giving effect to the CMH Acquisition as of January 1, 1992,
sales decreased $133.9 million for 1993 from $529.5 million for 1992. Material
Handling Segment sales in the first quarter of 1993 were significantly lower
than in the fourth quarter of 1992. Management believes that Material Handling
Segment dealers increased orders during the fourth quarter of 1992 to ensure
adequate inventory levels during the first quarter of 1993 while the Company
transferred certain light IC lift truck production from Korea to the U.S. and
Germany. In addition, the Material Handling Segment operations in the U. S.
experienced working capital constraints during 1993 which limited the Company's
ability to obtain materials and maintain production, adversely affecting sales
for 1993. Bookings remained strong because of improved demand in the North
American forklift industry. As a result of these factors, the Material
Handling Segment backlog was $152.7 million at December 31, 1993 compared to
$83.2 million at December 31, 1992 and $80.8 million at the July 31, 1992 CMH
Acquisition date.
Heavy Equipment Segment sales increased $9.1 million in 1993 from 1992.
Machines and contract sales represented $9.9 million of the increase and offset
by a parts sales decrease of $0.8 million. The sales mix changed from
approximately 41% parts in 1992 to 39% parts in 1993. Unit Rig, the Heavy
Equipment Segment division that principally serves the mining industry,
experienced a decrease in sales of $4.5 million to $69.6 million in 1993 from
$74.1 million in 1992. Unit Rig equipment sales decreased $7.0 million,
partially offset by a $2.5 million increase in parts sales. The decrease in
equipment sales reflects continuing low activity in the mining industry as well
as more aggressive pricing and financing by competitors. The decreased sales
at Unit Rig were offset by an $11.3 million increase in sales by the Terex
Business to $132.7 million for 1993. Terex Business machine sales increased
$16.0 million, partially offset by a $4.7 million decrease in parts sales.
Heavy Equipment Segment bookings in 1993 were $194.1 million, a decrease of
$31.5 million, or 14%, from 1992. Bookings for parts sales, from which the
Company realizes higher margins than machine sales, decreased $1.9 million or
2.4% in 1993. Machine bookings decreased $32.1 million or 22%, reflecting
continuing weakness in the Heavy Equipment Segment's principal markets during
the first half of 1993 as well as more aggressive pricing and financing by the
Company's competitors. The slow recovery in the construction industry has also
made the Terex Business distributor networks more cautious in their acquisition
of new equipment, especially for machines to be used in the rental market.
Heavy Equipment Segment backlog was $62.3 million at December 31, 1993 compared
to $72.0 million at December 31, 1992, reflecting the decrease in bookings.
Parts backlog was $8.6 million at December 31, 1993 compared to $6.3 million at
December 31, 1992. This increase resulted primarily from liquidity constraints
experienced during 1993 which resulted in decreased parts inventory
availability.
Mobile Crane segment sales were $71.4 million for 1993, a decrease of $16.3
million from $87.7 million in the year earlier period. Machine sales decreased
23% and parts sales decreased 12%. The sales mix was approximately 33% parts
for 1993 compared to 30% parts in 1992. Koehring sales in 1992 were higher due
to sales of slow moving inventory and product lines at low margins to reduce
inventory and more effectively utilize working capital.
Mobile Crane Segment bookings were $76.5 million for 1993, a decrease of 15%
from the year earlier period. Machine bookings decreased 11%, and parts
bookings decreased by 9%. Bookings declined during 1993 due to the slow
recovery in the construction market which made the Mobile Crane Segment's
distributors more cautious in their acquistion of new equipment, especially
those to be used in the rental market.
Gross Profit
Gross profit for 1993 decreased $3.6 million compared to 1992.
The Material Handling Segment's gross profit decreased $6.5 million to $16.0
million for 1993 compared to $22.5 million for the last five months of 1992 and
compared to $40.1 million on a pro forma basis for 1992. The gross profit
percentage in the Material Handling Segment decreased to 4.0% for 1993 compared
to 9.3% for the last five months of 1992. The decrease in gross profit
percentage reflects comparatively lower 1993 sales (compared to annualized 1992
sales) and decreased manufacturing efficiency due to working capital
constraints, somewhat offset by cost reduction initiatives.
The Heavy Equipment Segment's gross profit increased $3.7 million to $30.5
million for 1993 compared to $26.8 million for 1992. Improved gross profit
from machines and contract sales accounted for substantially all of the
increase, reflecting the positive effects of cost reduction initiatives
implemented in 1992 and throughout 1993. The gross profit percentage in the
Heavy Equipment Segment increased to 15.0% for 1993 compared to 13.8% for 1992,
reflecting improved manufacturing efficiency.
Mobile Crane Segment's gross profit decreased $0.8 million to $2.0 million for
1993, compared to $2.8 million for 1992. The gross profit percentage in the
Mobile Crane segment decreased to 2.8% for 1993 from 3.2% in 1992. Gross
profit for the 1993 period included a $2.2 million provision for write-down of
certain inventory at Koehring in connection with management's decision to
consolidate model offerings.
Engineering, Selling and Administrative Expenses
Engineering, selling and administrative expenses increased to $77.7 million for
1993 from $56.2 million for 1992. Material Handling Segment engineering,
selling and administrative expenses totaled $44.6 million for 1993 compared to
$20.3 million for the last five months of 1992 and compared to $48.2 million on
a pro forma basis for 1992. Heavy Equipment Segment engineering, selling and
administrative expenses increased to $24.2 million for 1993 from $23.6 million
for 1992 Heavy Equipment Segment results for 1994 include a charge to income
of $4.7 million in the fourth quarter of 1993 to write-off the remaining
unamortized goodwill from the acquisition of Mark the Company recognized as a
result of changing Mark's product offerings and distribution. The write-off
was offset by cost reduction initiatives, including headcount
reductions and the consolidation of certain administrative functions into the
Heavy Equipment Segment's administrative offices in Tulsa, Oklahoma. Mobile
Crane Segment engineering, selling and administrative expenses decreased to
$10.1 million for 1993 from $12.0 million for 1992. Corporate expenses
increased $3.2 million primarily as a result of increased legal and accounting
expenses which were not fully allocated to operating segments.
Income (Loss) from Operations
The Material Handling Segment incurred a loss from operations of $28.6 million
for 1993, compared to operating income of $2.2 million for the last five months
of 1992 and compared to an operating loss of $8.2 million on a pro forma basis
for 1992, primarily as a result of decreased sales. As discussed above, sales
and gross profit in 1993 reflect the effects of the Company's working capital
constraints.
Heavy Equipment Segment income from operations improved by $3.1 million to
$6.3 million in 1993 from $3.2 million in 1992. This improvement resulted
from the increase in gross profit and the decrease in engineering, selling and
administrative expenses. The improvements were partially offset by a charge
to income of $4.7 million in the fourth quarter of 1993 to write-off the
remaining unamoritzed goodwill from the acquisition of Mark the Company
recognized as a result of changing Mark's product offerings and distribution.
Mobile Crane Segment loss from operations of $8.1 million for 1993 improved by
$1.1 million over 1992 principally due to continuing cost reductions,
improvements in inventory management and consolidation of model offerings.
On a consolidated basis, the Company experienced an operating loss of $29.2
million for 1993, compared to an operating loss of $4.1 million for 1992.
Other Income (Expense)
Interest expense on a consolidated basis was $31.2 million for 1993 compared to
$23.3 million for 1992. Terex sold $160 million principal amount of its 13%
senior secured notes due August 1, 1996 on July 31, 1992. The proceeds of the
senior secured notes were used for the cash portion of the the acquisition of
CMH ($85 million), the payment of all amounts outstanding under Terex's
previous credit and letter of credit agreement ($58 million), and for working
capital and transaction costs. The increase in Terex interest expense for 1993
over 1992 is primarily the result of incremental borrowings to finance the
acquisition of CMH (incremental interest expense of approximately $6.7 million)
and higher interest rates on new borrowings used to refinance the previous
credit and letter of credit agreement, as well as additional costs related to
establishing and utilizing a new credit and letter of credit agreement.
The Company recognized equity in the net loss of Fruehauf of $0.7 million in
1993 compared to a gain from deconsolidation of Fruehauf of $36.5 million in
1992. As described in Note C -- "Investment in Fruehauf Trailer Corporation"
in the Notes to the Consolidated Financial Statements, the Company's carrying
value for its investment in Fruehauf was reduced to zero in 1992 and the
Company did not recognize any additional gains or losses with respect to its
investment in Fruehauf except as realized on transactions in Fruehauf common
stock. In December 1993, the Company sold 1,000,000 shares of Fruehauf common
stock and realized a gain of $3.0 million.
As a result of changing Mark's product offerings and distribution, the Company
recognized a charge to income of $4.7 million in the fourth quarter of 1993 to
write-off the remaining unamortized goodwill from the acquisition of Mark.
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. The Company adopted SFAS No. 109,
"Accounting for Income Taxes" on January 1, 1993. The new pronouncement
retains the basic concepts of SFAS No. 96, but generally simplifies its
application. The adoption of this new pronouncement did not have a material
impact on the Company's financial statements.
Extraordinary Items
In connection with terminating its previous bank lending agreement, the Company
recognized a charge of approximately $2.0 million in the second quarter of 1993
to write off unamortized debt issuance costs.
In December 1993, the Company repurchased $5.0 million of its old senior
secured notes for approximately $4.5 million, including accrued interest. The
Company recognized an extraordinary gain on this transaction of approximately
$0.5 million.
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.
Net cash of $27.9 million was used in operating activities during the nine
months ended September 30, 1995. Net cash used by investing activities was
$95.8 million during the nine months ended September 30, 1995 principally due
to the PPM Acquisition as described below. Net cash provided by financing
activities during the nine months ended September 30, 1995 was $127.5 million,
primarily from the Refinancing discussed below. Cash and cash equivalents
totaled $12.5 million at September 30, 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 million 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 million of the Senior Secured Notes, repayment of the Company's old senior
secured notes and senior subordinated notes, totaling approximately $152.6
million 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 1,000,000 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 million 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 $3.0 million. 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
million), 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 million (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 million in outstanding letters of
credit) up to $100 million. 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 million on November 15, 1995 on
the Senior Secured Notes. The Company's debt service obligations for the
remainder of 1995 include approximately $0.6 million monthly on the Credit
Facility. Management believes that, together with cash generated from
operations, the Refinancing provides 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 $67.1 million,
and the additional amount the Company could have borrowed was $10.0 million as
of that date. Management intends to seek additional working capital financing
facilities for the Company's international operations to provide additional
liquidity worldwide, but there can be no assurances whether, or under what
terms, such additional facilities can be obtained.
CONTINGENCIES AND UNCERTAINTIES
The Internal Revenue Service is currently examining the Company's federal tax
returns for the years 1987 through 1989. In December 1994, the Company
received an examination report from the IRS proposing a substantial tax
deficiency based on this examination. The examination report raises a variety
of issues, including the Company's substantiation for certain deductions taken
during this period, the Company's utilization of certain net operating loss
carryovers ("NOL's") and the availability of such NOL's to offset future
taxable income. If the IRS were to prevail on all the issues raised, the
amount of the tax assessment would be approximately $56 million plus interest
and penalties. If the Company were required to pay a significant portion of
the assessment, it could have a material adverse impact on the Company and
could exceed the Company's resources. The Company has filed its administrative
appeal to the examination report. Although management believes that the
Company will be able to provide adequate documentation for a substantial
portion of the deductions questioned by the IRS and that there is substantial
support for the Company's past and future utilization of the NOL's, the
ultimate outcome of this matter is subject to the resolution of significant
legal and factual issues. If the Company's positions prevail on the most
significant issues, management believes that the amounts due would not exceed
amounts previously paid or provided; however, even under such circumstances, it
is possible that the Company's NOL's could be reduced to some extent. No
additional accruals have been made for any amounts which might be due as a
result of this matter because the possible loss ranges from zero to $56 million
plus interest and penalties and the ultimate outcome cannot presently be
determined or estimated.
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 in 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 has 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 the year ended December 31, 1994, consolidated
revenues of the Company amounted to approximately $787 million. 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 the
Company's new Mobile Cranes Segment.
The Material Handling Segment designs, manufactures and markets a complete line
of internal combustion ("IC") and electric lift trucks, electric walkies,
automated pallet trucks, industrial tow tractors 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.
The Mobile Cranes Segment 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. The Mobile Cranes Segment 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.
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 long-term strategy has been, and continues to be, to seek out
acquisitions in the capital goods industry where aggressive management can
achieve substantial improvements in profitability and cash flow.
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, industrial tow tractors and related replacement parts.
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 CMH 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 on July 31, 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. Drexel, which is located in Horsham, Pennsylvania, manufactures very
narrow-aisle lift trucks.
CMH currently offers 116 basic truck designs within six 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),
electric walkies and tow tractors.
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. Tow tractors
are units designed to pull one or more trailers, with the largest market for
tow tractors being airport baggage handling.
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, Caterpillar 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.
Terex Business
The Company acquired 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. 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, Komatsu and
Dresser.
Mobile Cranes Segment
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 excavators
and hydraulic telescoping cranes sold under the well recognized trade names of
KOEHRING and LORAIN. In 1994 the Company discontinued manufacturing hydraulic
excavators except for large scrap handlers where the Company maintains a
meaningful market share. Hydraulic telescoping cranes are primarily used for
construction and industrial applications. Koehring's largest competitors in
the hydraulic excavator market are Komatsu and Caterpillar. Koehring has four
principal competitors in the mobile crane market: Grove Manufacturing,
Liebherr Werk Ehingen, Link-Belt and PPM Cranes, Inc.
In December 1991, the Company acquired substantially all operating assets of
the business that operated prior to the PPM Acquisition as the Mark Industries
Division. 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. In 1993, the Company began to market Mark's products
through the Terex and CMH dealer networks to expand distribution opportunities.
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: 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 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 four main competitors
in the mobile crane market: Grove Manufacturing, Liebherr Werk Ehingen,
Link-Belt and Koehring Cranes.
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. 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.
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 $10.5 million, $11.8 million and $6.7 million in
1994, 1993 and 1992, 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 85
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.
The Mobile Cranes Segment 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 Cranes, 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 distriubtion network
comprised of both distributors and a direct sales force.
Backlog
The Company's backlog as of September 30, 1995, December 31, 1994 and 1993 was
as follows:
September 30, December 31,
1995 1994 1993
(in millions of dollars)
Material Handling $100.1 $135.9 $152.7
Heavy Equipment 55.2 67.8 80.9
Mobile Cranes 81.6 11.7 18.6
Total $236.9 $215.4 $233.6
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.
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 and
patent registrations in countries where it conducts business, and monitors the
status of its trademark and patent registrations 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 September 30, 1995, the Company had approximately 3,670 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. Although the Company experienced a labor strike, which has been
settled, at its parts distribution center in Southaven, Mississippi during the
second quarter of 1995, and a strike at its Koehring facility in Waverly,
Iowa in December 1995, which has also been settled, the Company does not
expect these strikes to have a material continuing adverse impact on the
business.
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.
PROPERTIES
The following table outlines the principal manufacturing, warehouse and office
facilities owned or leased by the Company and its subsidiaries:
Entity Facility Location Type and Size of Facility
Terex
(Corporate Offices) 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.
CMHC Chicago, Illinois (1) Office 9,100 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 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.
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
As described in Note L -- "Litigation and Contingencies" in the Notes to the
Consolidated Financial Statements, the Company is involved in various legal
proceedings, including product liability and workers' compensation liability
matters, which have arisen in the normal course of its operations and to which
the Company is self-insured for up to $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.
In December 1992, a Class Action complaint was filed against Fruehauf Trailer
Corporation ("Fruehauf," a former subsidiary of the Company), 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 $0.25 million in the quarter ended March 31, 1995.
For information concerning other contingencies and uncertainties, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Contingencies and Uncertainties."
MANAGEMENT
Executive Officers and Directors
The following individuals are currently directors of the Company:
Name Age Positions and First Year Elected
Offices with Company Director
Ronald M. DeFeo 43 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 57 Director 1992
William H. Fike 58 Director 1995
Bruce I. Raben 42 Director 1992
David A. Sachs 36 Director 1992
Adam E. Wolf 81 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, 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. Mr. Andersen has
been Vice Chairman of PaineWebber Incorporated ("PaineWebber") since March
1990. Prior to joining PaineWebber, Mr. Andersen was Managing Director for
nine years at Drexel Burnham Lambert Incorporated ("Drexel Burnham"), an
investment banking firm which filed for protection under Chapter 11 of the
United States Bankruptcy Code in 1990. Mr. Andersen is also a director of
Sunshine Mining Company.
William H. 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. Raben was appointed a director of the Company in 1992. Mr. Raben is an
Executive Vice President of Jefferies & Company, Inc. Mr. Raben was employed
by Drexel Burnham from 1978 to 1990 where he served in various capacities
including Managing Director. 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. TMT-FW, Inc. is one of two general
partners of EBD, L.P., which is the sole general partner of The Airlie Group
L.P. ("Airlie"). At TMT-FW, Inc., Mr. Sachs was engaged in the investment
activities of both Airlie and Taylor & Co.
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 November 1, 1995, 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 43 President, Chief Executive
Officer and Chief Operating
Officer
David J. Langevin 44 Executive Vice President
Marvin B. Rosenberg 55 Senior Vice President,
General Counsel and
Secretary
Ralph T. Brandifino 50 Senior Vice President and
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.
Executive Compensation
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 1994 earned qualifying compensation in
excess of $100,000 (the "Named Executive Officers").
Long-Term
Annual Compensation Compensation
Other
Annual Restricted Securities All Other
Name and Compen- Stock Underlying Compen-
Principal Salary Bonus sation Awards(1) Options/ sation
Position Year ($) ($) ($) ($) SARS (#) ($)
Randolph W. 1994 486,000 243,000 - 118,250 43,000(4) -
Lenz 1993 483,508 - - - - -
1992 504,692 - - - - -
Chairman of
the Board
(2)(3)
Ronald M. 1994 350,000 325,000 - 84,700 30,800(4) 3,080(6)
DeFeo 1993 237,500 60,000 222,693(7) - 10,000 3,148(6)
1992 127,145 66,666 - - 20,000 -
President,
Chief Execu-
tive Officer
and Chief
Operating
Officer (5)
David J. 1994 303,600 150,000 - 75,350 27,400(4) -
Langevin 1993 - - - - - -
1992 - - - - - -
Executive
Vice
President
(3)(8)
Marvin B. 1994 250,000 75,000 - 62,150 22,600(4) -
Rosenberg 1993 - - - - - -
1992 - - - - - -
Senior Vice
President,
Secretary
and General
Counsel
(3)(9)
Ralph T. 1994 235,000 100,000 - 58,300 21,200(4) -
Brandifino 1993 16,913 - - - - -
1992 - - - - - -
Senior Vice
President,
Chief
Financial
Officer and
Treasurer (10)
(1) Consists of shares of restricted Common Stock ("Restricted Stock") granted
under the 1994 Terex Long-Term Incentive Plan (the "1994 Incentive Plan").
Restricted Stock is valued at the closing stock price of $5.50 per share on
June 23, 1994, the date of grant. Dividends 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 $7.00 per share, of Restricted Stock
holdings as of December 31, 1994 for each of the Named Executive Officers were
as follows: Mr. Lenz, 21,500 shares, $150,500; Mr. DeFeo, 15,400 shares,
$107,800; Mr. Langevin, 13,700 shares, $95,900; Mr. Rosenberg 11,300 shares,
$79,100; and Mr. Brandifino, 10,600 shares, $74,200. 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 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 immediately vest.
(2) Mr. Lenz was Chief Executive Officer of the Company during 1992, 1993 and
1994 and retired as Chairman of the Board and a Director of Company as of
August 28, 1995 (See "Retirement of Randolph W. Lenz," below).
(3) 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. Such payments are not included as part of annual
compensation. See "Certain Transactions."
(4) Includes shares of Common Stock underlying stock options granted under the
1994 Incentive Plan.
(5) Mr. DeFeo joined the Company on May 1, 1992 and became Chief Executive
Officer on March 24, 1995.
(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. Mr. Brandifino is
no longer Treasurer of the Company.
Option Grants in 1994
In May 1986, the stockholders approved an incentive stock option plan covering
key management employees (the "1986 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 1986 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 1986 Incentive Plan vest ratably over three
years from the date of grant. No options were granted during 1994 to any Named
Executive Officers under the 1986 Incentive Plan.
The Board of Directors adopted the 1994 Incentive Plan on June 23, 1994,
subject to stockholder approval which was obtained on June 23, 1995. The 1994
Incentive 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 Incentive 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 Incentive Plan).
The table below summarizes options conditionally granted during 1994 to the
Named Executive Officers under the 1994 Incentive Plan, subject to stockholder
approval which was obtained on June 23, 1995.
Option/SAR Grants in Last Fiscal Year
Individual Grants
% of Total
Options/ Potential
Number of SARs Realizable
Securities Granted Value at Assumed
Underlying to Exercise Annual Rates of
Options/ Employees or Stock Price
SARs in Base Appreciation for
Granted Fiscal Price Expiration Option Term
Name (#)(1) Year ($/SH) Date 5%($) 10%($)
Randolph W. 43,000 15.6% 5.50 6/23/04 148,734 376,920
Lenz
Ronald M. 30,800 11.2 5.50 6/23/04 106,535 269,980
DeFeo
David J. 27,400 10.0 5.50 6/23/04 94,774 240,177
Langevin
Marvin B. 22,600 8.2 5.50 6/23/04 78,172 198,102
Rosenberg
Ralph T. 21,200 7.7 5.50 6/23/04 73,329 185,830
Brandifino
(1) All the options become vested to the extent of one-fourth of the shares of
Common Stock covered thereby on each of the first four anniversaries of June
23, 1994, the date of grant.
(2) 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.
Aggregated Option Exercises in 1994 and Year-End Option Values
The table below summarizes options exercised during 1994 and year-end option
values of the Named Executive Officers.
Name Shares Value Number of Value of
Acquired Realized Securities Unexercised
on ($) Underlying In-the-Money
Exercise Unexercised Options/SARs at
(#) Options/SARs at Fiscal Year-end
Fiscal Year-end ($)(3)
(#)
Exercisable/ Exercisable/
Unexercisable Unexercisable
Randolph W. - - 0/43,000(1) 0/64,500
Lenz
Ronald M. - - 16,668/44,132(2) 0/46,200
DeFeo
David J. - - 0/27,400(1) 0/41,100
Langevin
Marvin B. - - 0/22,600(1) 0/33,900
Rosenberg
Ralph T. - - 0/21,200(1) 0/31,800
Brandifino
(1) Consist of shares of Common Stock underlying options granted under the
1994 Incentive Plan.
(2) Of such 44,132 shares of Common Stock, 30,800 consist of shares underlying
options granted under the 1994 Incentive Plan.
(3) Based upon the $7.00 per share market value of the Common Stock at closing
on December 31, 1994.
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.
Messrs. Lenz and DeFeo participate 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. Lenz and 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. Mr. Lenz is already fully vested. The annual retirement
benefits payable at normal retirement age under the Retirement Plan will be
$31,530 for Mr. Lenz and $4,503 for Mr. DeFeo (assuming full vesting).
Compensation of Directors
Directors who are officers of the Company receive no additional compensation by
virtue of their being directors of the Company. Non-officer directors receive
an annual fee of $24,000. No additional compensation is paid for participation
in special or committee meetings of the Board. All directors of the Company
are reimbursed for travel, lodging and related expenses incurred in attending
Board and committee meetings.
In addition, under the 1994 Incentive Plan, outside directors are awarded (i)
an option to purchase 10,000 shares of Common Stock after having completed two
years of service as a member of the Board of Directors, and (ii) an option to
purchase an additional 10,000 shares after having completed five years of
service as a member of the Board of Directors. Years of service completed
include all years served on the Board of Directors, whether prior to, or
subsequent to, the adoption of the 1994 Incentive Plan. The options will have
a term of five years and the exercise price of the options will be equal to the
fair market value of the Common Stock on the date preceding the day the grant
is authorized. The options will not vest until at least one year following the
date of grant, provided, however, that the options will vest immediately in the
event of a change in control of the Company. On June 23, 1994, pursuant to
such provisions of the 1994 Incentive Plan, (i) each of G. Chris Andersen,
Bruce I. Raben and David A. Sachs was granted an option to purchase 10,000
shares of Common Stock and (ii) Adam E. Wolf was granted an option to purchase
20,000 shares of Common Stock, in each case at an option price of $5.50.
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 through 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 200,000 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.
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 salary for a period of 24 months.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board during fiscal 1994 consisted of G.
Chris Andersen and Adam E. Wolf. There are no Compensation Committee
interlocks or insider participation with respect to such individuals.
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 December 1, 1995. 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
December 1, 1995 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) 4,761,362 (3) 44.47%
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
The Airlie Group L.P. (2) 525,900 (4) 4.88%
201 Main Street
Fort Worth, TX 76102
Dort A. Cameron, III (2) 581,900 (4) 5.40%
c/o The Airlie Group, L.P.
201 Main Street
Fort Worth, TX 76102
Thomas A. Taylor (2) 763,200 (4) 7.09%
c/o The Airlie Group, L.P.
201 Main Street
Fort Worth, TX 76102
EBD L.P. (2) 525,900 (4) 4.88%
c/o The Airlie Group, L.P.
201 Main Street
Forth Worth, TX 76102
TMT-FW, Inc. (2) 525,900 (4) 4.88%
c/o The Airlie Group, L.P.
201 Main Street
Forth Worth, TX 76102
The Prudential Insurance Company 610,204 (4) 5.86%
of America (5)
Prudential Plaza
Newark, NJ 07102-3777
G. Chris Andersen 34,900 (6) *
1285 Avenue of the Americas
New York, NY 10019
Ronald M. DeFeo 65,473 (7) *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
William H. Fike 0 *
26200 Lahser Road
Suite 300
Southfield, MI 48034
Bruce I. Raben 63,664 (8) *
11100 Santa Monica Boulevard
Suite 1000
Los Angeles, CA 90025
Marvin B. Rosenberg 111,475 (9) 1.06%
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
David A. Sachs 37,300 (4)(10) *
2141 Hidden Creek Road
Fort Worth, TX 76107
Adam E. Wolf 28,100 (11) *
875 East Donges Lane
Milwaukee, WI 53217
David J. Langevin 128,775 (12) 1.23%
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
Ralph T. Brandifino 7,950 (13) *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
All directors and executive 493,337 4.59%
* 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. See "Risk Factors -- Future Sales of Common Stock."
(2) Dort A. Cameron, III and TMT-FW, Inc., a Texas corporation, are general
partners of EBD L.P., a Delaware limited partnership which is the sole general
partner of Airlie. Thomas M. Taylor is the President, sole director and sole
stockholder of TMT-FW, Inc. By reason of such relationships, Messrs. Cameron
and Taylor may each be deemed the beneficial owner of the shares deemed
beneficially owned by Airlie. Each of the indicated individuals, together with
certain other persons, reported ownership of an aggregate of 637,000 shares of
Common Stock, 40,000 shares of the Company's Series A Cumulative Redeemable
Convertible Preferred Stock (the "Series A Preferred Stock") and 40,000 of the
Company's Series A Common Stock Purchase Warrants (the "Series A Warrants"), or
approximately 7.61% of all outstanding Common Stock, assuming the conversion of
such shares of Series A Preferred Stock and the exercise of such Series A
Warrants (but not the conversion of any Series A Preferred Stock or the
exercise of any Series A Warrants by any other holder). Except as otherwise
reflected in this table or the footnotes thereto, each of the indicated
individuals disclaims the beneficial ownership of any shares held by any other
party.
(3) Includes (i) 4,106,037 shares of Common Stock, representing approximately
40.27% of the outstanding Common Stock, directly owned by Mr. Lenz, (ii)
536,200 shares of Common Stock indirectly owned by Mr. Lenz through a
corporation that he indirectly owns and controls, (iii) 5,375 shares of
restricted Common Stock granted under the 1994 Incentive Plan and which are
vested, (iv) 10,750 shares of restricted Common Stock issuable upon the
exercise of options exercisable within 60 days held by Mr. Lenz, and (v) 38,800
shares of the Company's Series B Cumulative Redeemable Convertible Preferred
Stock (the "Series B Preferred Stock") convertible into 87,300 shares of Common
Stock and the Company's Series B Common Stock Purchase Warrants (the "Series B
Warrants") exercisable into 15,700 shares of Common Stock received in
connection with the termination of the Company's management agreement with KCS
(see "Certain Transactions").
(4) For each of Airlie, Dort A. Cameron, III, Thomas M. Taylor, EBD L.P.,
TMT-TW, Inc., The Prudential Insurance Company of America ("Prudential") and
David A. Sachs, the amount shown assumes the conversion of the shares of Series
A Preferred Stock owned by such beneficial owner (but not by any other holder
of Series A Preferred Stock), and assumes the exercise of Series A Warrants
owned by such beneficial owner (but not by any other holder of Series A
Warrants).
(5) Prudential filed a Schedule 13G Statement, dated February 9, 1995,
pursuant to Section 13(g) of the Exchange Act, reflecting the ownership of an
aggregate of 557,200 shares of Common Stock and 23,045 Series A Warrants, or
approximately 5.86% of all outstanding Common Stock, assuming the exercise of
such Series A Warrants (but not the exercise of any Series A Warrants by any
other holder). Such securities are held for the benefit of Prudential's
clients by Prudential's registered investment companies and its subsidiary
Prudential Securities Incorporated, and Prudential disclaims the beneficial
ownership of such shares.
(6) Includes 10,000 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days held by Mr. Andersen (see "Management --
Compensation of Directors").
(7) Includes 3,850 shares of restricted Common Stock granted under the 1994
Incentive Plan and which are vested and 31,034 shares of Common Stock issuable
upon the exercise of options exercisable within 60 days held by Mr. DeFeo (see
"Management -- Executive Compensation").
(8) Does not include 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. Includes 10,000 shares of Common Stock issuable upon the exercise
of options exercisable within 60 days held by Mr. Raben (see "Management --
Compensation of Directors") and 10,244 Series A Warrants exercisable for 23,664
shares of Common Stock.
(9) Includes (i) 2,825 shares of restricted Common Stock granted under the
1994 Incentive Plan and which are vested, and (ii) 5,650 shares of Common Stock
issuable upon the exercise of options exercisable within 60 days held by Mr.
Rosenberg.
(10) Includes 10,000 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days held by Mr. Sachs (see "Management --
Compensation of Directors"). Includes 3,300 shares of Common Stock owned by
Mr. Sachs' wife. Mr. Sachs disclaims the beneficial ownership of such shares.
(11) Includes 20,000 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days held by Mr. Wolf (see "Management --
Compensation of Directors").
(12) Includes (i) 3,425 shares of restricted Common Stock granted under the
1994 Incentive Plan and which are vested, and (ii) 6,850 shares of Common Stock
issuable upon the exercise of options exercisable within 60 days held by Mr.
Langevin.
(13) Includes 2,650 shares of restricted Common Stock granted under the 1994
Incentive Plan and which are vested and 5,300 shares of Common Stock issuable
upon the exercise of options exercisable within 60 days held by Mr. Brandifino
(see "Management -- Executive Compensation").
SELLING SECURITY HOLDERS
The following table sets forth certain information, as of December 1, 1995,
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 L.P. 40,000
Baninsa International 5,000
Bear Stearns Securities Corp. 122,300
Cumberland Partners 40,000
Donaldson Lufkin & Jenrette Securities Corp. 10,000
FAMCO Capital Partners 32,000
FAMCO Income Partners, LP 37,000
Gerlach & Co. 117,000
Hare & Co. 40,000
J. Romeo & Co. 80,000
JEFCO 38,000
Lewco Securities Corp. 108,800
Merrill Lynch Pierce Fenner & Smith Incorporated 173,500
Merrill Lynch Pierce Fenner & Smith Incorporated 25,000
Morgan Stanley & Co. 15,000
Chase Multi-Strategy Fund Ltd. 3,000
GRS Partners III 10,590
Stonehill Partners L.P. 21,780
Aurora Limited Partnership 9,930
Claus Motulsky 900
Polly & Co. 1,000
Prudential Securities Incorporated 11,000
SC Fundamental Value Fund LP 40,000
SP Investment International NVB 20,000
Scattered Corp. 20,000
Strome Offshore, Ltd. 90,000
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."
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 December 1, 1995 he beneficially owned, directly and indirectly,
approximately 44% 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."
During 1993, the Company's Board of Directors concluded that it would be in the
Company's best interest to terminate the Company's management contract with
KCS, principally owned by Randolph W. Lenz, then Chairman of the Board of the
Company, 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 suspended as of the close of business on
December 31, 1993. David J. Langevin and Marvin B. Rosenberg, 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 addition, in consideration of the termination of the contract, the Company
issued 89,800 shares of Series B Preferred Stock and 106,950 Series B Warrants,
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 38,800 shares of Series B Preferred Stock and
Series B Warrants exercisable for 15,700 shares of Common Stock, and Messrs.
Langevin and Rosenberg each received 25,500 shares of Series B Preferred Stock
and Series B Warrants exercisable for 45,625 shares of Common Stock. In
addition, Messrs. Lenz, Langevin and Rosenberg received cash payments of
$515,000, $82,000 and $82,000, respectively.
The Company, certain directors and executives of the Company, and KCS are named
parties in various legal proceedings. During 1994, the Company incurred
$319,000 of legal fees and expenses on behalf of the Company, directors and
executives of the Company, and KCS named in the lawsuits.
Bruce I. Raben, a director of the Company, is an officer of Jefferies & Company
Inc. ("Jefferies"), which acted as placement agent for the sale of the
Preferred Stock, Warrants and the Senior Secured Notes. In May 1995, the
Company paid $5.7 million in fees to Jefferies in connection with the placement
of the Senior Secured Notes. Jefferies has previously rendered financial
advisory and other services to the Company. JEFCO, one of the Selling Security
Holders, is an affiliate 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 40,000,000 shares of capital
stock, $.01 par value, consisting of 30,000,000 shares of Common Stock and
10,000,000 shares of preferred stock. As of November 1, 1995, 10,588,480
shares of Common Stock and 1,200,000 shares of preferred stock 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 Mellon Securities
Trust Company, 111 Founders Plaza, Suite 1100, East Hartford, Connecticut
06108.
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 Mellon Securities
Trust Company.
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 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 from the Issue Date
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 Certificate of Incorporation or 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 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 Series A Preferred Stock), 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 Series A Preferred Stock), 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 (as defined) per
share of the Common Stock on the trading day immediately prior to the
declaration of any cash dividend.
Redemption. Except as described immediately below, prior to December 31, 1995,
the Series B Preferred Stock may not be redeemed in whole or in part by the
Company. The Series B Preferred Stock may be redeemed prior to December 31,
1995 in whole, but not in part, at a per share redemption price equal to the
Series B Liquidation Preference per share on the date of redemption plus all
accrued and unpaid dividends thereon to and including the date of redemption;
provided, that concurrently with such redemption the Company redeems all
warrants exercisable into shares of Common Stock that were issued on the Series
B Issue Date.
On and after December 31, 1995, 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 Series A 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 Certificate of Incorporation or
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
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 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 Series A Preferred Stock and the Series B
Preferred Stock, the Company has outstanding 1,275,000 of Series A Warrants and
106,950 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 September 1, 1995, each Series A Warrant may be exercised by the
registered holder thereof for 2.31 shares of Common Stock. 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 on or after
December 31, 1994; provided, that concurrently with such redemption the Company
redeems all then outstanding shares of Series A 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.
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 Mellon Securities Trust Company, 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 accounts 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, 1994
and 1993 and for each of the years in the three year period ended December 31,
1994 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 in the Registration Statement,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of Terex Corporation
In our opinion, the consolidated financial statements listed in the Index to
Consolidated Financial Statements and Financial Statement Schedule on page F-1
and referred to under Item 14(a)(1) and (2) present fairly, in all material
respects, the financial position of Terex Corporation and its subsidiaries at
December 31, 1994 and 1993, and the 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. 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.
As discussed in Note O to the consolidated financial statements, the Company is
required to make significant principal repayments during 1995 and is currently
seeking to refinance its long term debt obligations.
As discussed in Notes A and C to the consolidated financial statements, the
1993 and 1992 financial statements have been restated.
PRICE WATERHOUSE LLP
Stamford, Connecticut
March 28, 1995
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands except per share amounts)
Year Ended December 31,
1994 1993 1992
NET SALES $ 786,781 $ 670,309 $ 523,355
COST OF GOODS SOLD 703,622 621,816 471,242
Gross profit 83,159 48,493 52,113
ENGINEERING, SELLING AND ADMINISTRATIVE EXPENSES
Third parties 70,200 74,793 53,390
Related parties 2,245 2,878 2,848
Write-off of Mark goodwill --- 4,718 ---
72,445 82,389 56,238
SEVERANCE CHARGES 7,353 --- ---
Income (loss) from operations 3,361 (33,896) (4,125)
OTHER INCOME (EXPENSE)
Interest income 587 1,149 1,666
Interest expense (30,492) (31,246) (23,320)
Amortization of debt issuance costs (2,300) (3,369) (1,694)
Gain on sale of Fruehauf stock 26,043 3,009 ---
Equity in net loss of Fruehauf --- (677) (3,714)
Gain from deconsolidation of Fruehauf --- --- 36,518
Gain on sale of Drexel business 4,742 --- ---
Gain on sale of property,
plant and equipment 260 2,601 363
Other income (expense) - net (245) (2,493) (2,712)
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEMS 1,956 (64,922) 2,982
PROVISION FOR INCOME TAXES (786) (158) (67)
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS 1,170 (65,080) 2,915
EXTRAORDINARY LOSS ON
RETIREMENT OF DEBT (709) (1,464) ---
NET INCOME (LOSS) 461 (66,544) 2,915
LESS PREFERRED STOCK ACCRETION (5,929) (152) ---
INCOME (LOSS) APPLICABLE TO
COMMON STOCK $ (5,468) $(66,696) $ 2,915
PER COMMON AND COMMON EQUIVALENT SHARE:
Loss before extraordinary items $ (0.46) $ (6.55) $ .29
Extraordinary loss on
retirement of debt (0.07) (0.15) ---
Net income (loss) $ (0.53) $ (6.70) $ .29
AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
IN PER SHARE CALCULATION 10,303 9,953 9,945
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands except per share amounts)
ASSETS
December 31,
1994 1993
CURRENT ASSETS
Cash and cash equivalents $ 9,727 $ 9,183
Cash securing letters of credit 6,688 6,263
Trade receivables (less allowance
of $6,114 in 1994 and $7,478 in 1993) 91,717 74,028
Net inventories 164,245 163,838
Other current assets 5,775 4,016
Total Current Assets 278,152 257,328
LONG-TERM ASSETS
Property, plant and equipment - net 86,160 97,537
Debt issuance costs and
intangible assets - net 8,604 12,645
Other assets 28,700 23,192
TOTAL ASSETS $ 401,616 $ 390,702
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes payable $ 2,078 $ 2,909
Current portion of long-term debt 25,806 19,799
Trade accounts payable 112,213 85,350
Accrued compensation and benefits 10,823 8,162
Accrued warranties and product liability 27,629 27,226
Accrued interest 8,969 10,698
Accrued income taxes 1,328 1,415
Other current liabilities 32,732 32,221
Total Current Liabilities 221,578 187,780
NON CURRENT LIABILITIES
Long-term debt, less current portion 162,987 195,331
Accrued warranties and product liability 31,846 33,959
Accrued pension 16,456 20,270
Other 7,225 5,143
REDEEMABLE CONVERTIBLE PREFERRED STOCK
Liquidation preference $36,578 in 1994
and $30,108 in 1993 17,262 10,480
COMMITMENTS AND CONTINGENCIES (Note L)
STOCKHOLDERS' DEFICIT
Warrants to purchase common stock 17,564 16,851
Common Stock, $0.01 par value--
authorized 30,000 shares;
issued and outstanding 10,303
in 1994 and 1993 103 103
Additional paid-in capital 40,127 40,127
Accumulated deficit (108,395) (102,927)
Pension liability adjustment (1,778) (4,173)
Unrealized holding gain on
equity securities 1,825 ---
Cumulative translation adjustment (5,184) (12,242)
Total Stockholders' Deficit (55,738) (62,261)
TOTAL LIABILITIES
AND STOCKHOLDERS' DEFICIT $ 401,616 $ 390,702
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(in thousands)
Cumu-
Addi- Pension Unre- lative
tional Accumu- Liabi- alized Trans-
Common Paid-in lated lity Holding lation
Warrants Stock Capital Deficit Adjustment Gain Adjustment Total
BALANCE AT
DECEMBER 31,
1991 $ --- $ 99 $37,496 $(39,146) $(8,233) $ --- $5,643 $(4,141)
Exercise
of stock
options --- --- 274 --- --- --- --- 274
Net income --- --- --- 2,915 --- --- --- 2,915
Pension
liability
adjustment --- --- --- --- 3,781 --- --- 3,781
Translation
adjustment --- --- --- --- --- --- (11,904) (11,904)
BALANCE AT
DECEMBER 31,
1992 --- 99 37,770 (36,231) (4,452) --- (6,261) (9,075)
Exercise
of stock
options --- --- 38 --- --- --- --- 38
Issuance of
Warrants
(Note I) 16,851 --- --- --- --- --- --- 16,851
Pension
Contribution
(Note J) --- 4 2,319 --- --- --- --- 2,323
Net loss --- --- --- (66,544) --- --- --- (66,544)
Accretion
of carrying
value of
redeemable
preferred
stock to
redemption
value
(Note I) --- --- --- (152) --- --- --- (152)
Pension
liability
adjustment --- --- --- --- 279 --- --- 279
Translation
adjustment --- --- --- --- --- --- (5,981) (5,981)
BALANCE AT
DECEMBER 31,
1993 16,851 103 40,127 (102,927) (4,173) --- (12,242) (62,261)
Issuance
of Warrants
(Note I) 713 --- --- --- --- --- --- 713
Net income --- --- --- 461 --- --- --- 461
Accretion
of carrying
value of
redeemable
preferred
stock to
redemption
value
(Note I) --- --- --- (5,929) --- --- --- (5,929)
Pension
liability
adjustment --- --- --- --- 2,395 --- --- 2,395
Unrealized
holding
gain on
equity
securities
(Note C) --- --- --- --- --- 1,825 --- 1,825
Translation
adjustment --- --- --- --- --- --- 7,058 7,058
BALANCE AT
DECEMBER 31,
1994 $17,564 $103 $40,127$(108,395) $(1,778) $1,825$(5,184)$(55,738)
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Year Ended December 31,
1994 1993 1992
OPERATING ACTIVITIES
Net income (loss) $ 461 $ (66,544) $ 2,915
Adjustments to reconcile net income
(loss) to net cash from (used in)
operating activities:
Depreciation 13,709 12,139 7,074
Amortization and write-off of
debt issuance costs, goodwill
and other intangibles 3,388 10,261 2,746
Extraordinary loss on
retirement of debt 709 1,464 ---
Gain on sale of Fruehauf stock (26,043) (3,009) ---
Equity in net loss of Fruehauf --- 677 3,714
Gain from deconsolidation
of Fruehauf --- --- (36,518)
Gain on sale of Drexel business (4,742) --- ---
Gain on sale of property,
plant and equipment (260) (2,601) (363)
Other noncash charges (804) 99 1,796
Increase (decrease) in cash
due to changes in operating
assets and liabilities net of
the effects of acquisitions
of businesses:
Cash securing letters of credit (425) 5,216 (11,479)
Trade receivables (17,564) 1,708 18,806
Net inventories 77 30,312 49,176
Other current assets 143 2,061 (512)
Trade accounts payable 24,379 (5,141) 7,187
Accrued compensation
and benefits 3,277 (3,567) (6,821)
Accrued warranties and
product liabilities 296 (3,356) 4,590
Accrued interest (1,729) (1,121) 7,763
Accrued income taxes (78) (604) 940
Other assets (306) (123) (7,928)
Other liabilities (3,728) (24,075) (21,318)
Net cash from (used in)
operating activities (9,240) (46,204) 21,768
INVESTING ACTIVITIES
Acquisitions of businesses,
net of cash acquired --- --- (86,544)
Capital expenditures (12,717) (11,549) (5,382)
Advances to Fruehauf --- (677) (3,714)
Proceeds from sale of excess assets 3,295 11,306 1,513
Proceeds from sale of Fruehauf stock 24,943 2,464 ---
Proceeds from sale of Drexel business 10,289 --- ---
Proceeds from sale-leaseback of
Saarn property 9,981 --- ---
Other - net 1,000 1,823 248
Net cash from (used in)
investing activities 36,791 3,367 (93,879)
FINANCING ACTIVITIES
Net borrowings (repayments) under
revolving line of credit agreements 12,947 11,931 (55,753)
Principal repayments of long-term debt (41,524) (12,450) (9,109)
Proceeds from issuance of
preferred stock and warrants --- 27,179 ---
Proceeds from issuance of
long-term debt --- --- 151,890
Other - net 249 44 2,258
Net cash from (used in)
financing activities (28,328) 26,704 89,286
Effect of exchange rate changes on
cash and cash equivalents 1,321 (355) (2,396)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 544 (16,488) 14,779
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 9,183 25,671 10,892
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 9,727 $ 9,183 $ 25,671
The accompanying notes are an integral part of these financial statements.
- -------------------------------------------------------------------------------
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994
(dollar amounts in thousands, 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 affiliates 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. Although Terex has entered into a new lending facility which replaced
the previous lending arrangement, Terex will continue to utilize letters of
credit issued under the previous lending arrangement until their expiration.
These cash balances will be made available to the Company as the underlying
bonds and letters of credit expire.
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 50% and 49% of consolidated inventories at December 31, 1994 and
1993, respectively, are accounted for under the LIFO method.
Debt Issuance Costs. Debt issuance costs associated with securing the
Company's financing arrangements are capitalized and amortized over the life of
the respective debt agreement. 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 $3,271 and $6,283 at December 31, 1994
and 1993, respectively. During 1994, 1993 and 1992, the Company amortized
$2,300, $3,369 and $1,694, respectively, of capitalized debt issuance costs; in
addition, $601 and $2,162 of such costs were charged to extraordinary loss on
retirement of debt in 1994 and 1993, respectively.
Intangible Assets. Intangible assets include the excess of purchase price over
the fair value of identifiable net assets of acquired companies, which is being
amortized on a straight-line basis over 15 years, and costs allocated to
patents, trademarks and other specifically identifiable assets arising from
business combinations, which are amortized on a straight-line basis over the
respective estimated useful lives not exceeding seven years. Unamortized
intangible assets totaled $5,222 and $6,362 at December 31, 1994 and 1993,
respectively, net of accumulated amortization of $2,388 and $1,377 at December
31, 1994 and 1993, respectively. Amortization of intangible assets of $1,140,
$1,612 and $599 in 1994, 1993 and 1992, respectively, is included in
Engineering, Selling and Administrative Expenses. Intangible assets are
periodically assessed for impariment of value and any loss is recognized upon
impairment.
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. Certain of the Company's product liability
accruals, principally related to the forklift business acquired during 1992
(see Note B -- "Acquisitions"), are presented on a discounted basis. The
related discount of approximately $8,100 at each of December 31, 1994 and 1993,
computed using an 8.0% discount rate, is recorded as a direct reduction of
gross product liability claims and is amortized using the effective interest
rate method. Interest expense attributable to the amortization of the discount
aggregated approximately $3,200, $4,000 and $1,300 in 1994, 1993 and 1992,
respectively. The remainder of the Company's product liability accruals are
presented on a gross settlement basis. Product liability payments, including
expenses, are estimated to approximate $10,000 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. Net foreign
exchange losses were $235, $825 and $2,413 in 1994, 1993 and 1992,
respectively.
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, 1994 and 1993, the Company had no 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 are not
material at December 31, 1994 and 1993.
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 $10,462 in 1994, $11,822 in
1993 and $6,741 in 1992.
Issuance of Stock by a Subsidiary. The Company accounts for increases and
decreases in its proportionate share of a subsidiary's equity arising from the
issuance of stock by the subsidiary and related transactions as gains and
losses in the Consolidated Statement of Operations.
Income Taxes. The Company adopted SFAS No. 109, "Accounting for Income Taxes"
on January 1, 1993. SFAS No. 109 retains the basic concepts of SFAS No. 96, the
Company's former method of accounting for income taxes, which requires the
Company to follow the liability method. The liability method 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.
Restatements and Reclassifications. The consolidated financial statements for
the year ended December 31, 1992 have been restated as a result of Fruehauf
Trailer Corporation's ("Fruehauf") restatement of its financial statements as
described in Note C -- "Investment in Fruehauf Trailer Corporation." The
consolidated financial statements for the year ended December 31, 1993 have
been restated to reflect the correction of various vendor accounts, resulting
from the resolution of unreconciled items, at the Material Handling Segment.
The accompanying consolidated financial statements reflect the effects of the
restatements as follows:
As
Previously Restatement As
Reported Effect Restated
Stockholders' Deficit,
December 31, 1991
(cumulative effect of
restatements for 1989
through 1991) $ 59,881 $(64,022) $ (4,141)
Net income (loss), year ended
December 31, 1992 (57,175) 60,090 2,915
Change in translation adjustment,
year ended December 31, 1992 (12,929) 1,025 (11,904)
Stockholders' Deficit,
December 31, 1992 (6,168) (2,907) (9,075)
Net income (loss), year ended
December 31, 1993 (62,661) (3,883) (66,544)
Change in translation adjustment,
year ended December 31, 1993 (8,962) 2,981 (5,981)
Stockholders investment,
December 31, 1993 $(58,452) $ (3,809) $(62,261)
Net income (loss) per share:
Year ended December 31, 1992 $ (5.75) $ 6.04 $ 0.29
Year ended December 31, 1993 $ (6.31) $ (0.39) $ (6.70)
Certain amounts shown for 1992 and 1993 have been reclassified to conform to
the 1994 presentation.
NOTE B -- ACQUISITIONS
Clark Material Handling Company - On July 31, 1992, the Company acquired Clark
Material Handling Company ("CMHC") and certain affiliate companies (together
with CMHC, "CMH") from Clark Equipment Company (the "CMH Acquisition"). CMH is
engaged in the design, manufacture and marketing of internal combustion ("IC")
and electric forklift and lift trucks and related parts and equipment. The
purchase price of the CMH Acquisition was $91,090, which was funded by $85,000
of cash and a $6,090 note to the seller.
The acquisition was accounted for using the purchase method with the purchase
price of the acquisition allocated to assets acquired and liabilities assumed
based upon their respective estimated fair value at the date of the
acquisition. Purchase price allocations were based on evaluations,
estimations, appraisals, actuarial studies and other studies performed by the
Company. The excess of purchase price over the net assets acquired ($4,009) is
included in Debt Issuance Costs and Intangible Assets and is being amortized on
a straight-line basis over 15 years.
The operating results of CMH have been included in the Company's consolidated
results of operations since August 1, 1992. The following unaudited pro forma
summary presents the consolidated results of operations as though the Company
completed the CMH Acquisition on January 1, 1992, after giving effect to
certain adjustments, including amortization of goodwill and intangible assets,
increased depreciation resulting from the revaluation of property, plant and
equipment, interest expense and amortization of debt issuance costs on the
acquisition debt, and reduced operating costs related to recurring cost savings
which are directly attributable to the CMH Acquisition.
Unaudited Pro Forma
For the Year Ended
December 31,1992
Net sales $811,859
Loss from operations (14,452)
Net loss (16,423)
Net loss per common share $ (1.65)
The unaudited pro forma consolidated results do not represent actual operating
results. The Company is actively reorganizing the operations of CMH by
consolidating manufacturing and distribution operations. Consequently, the pro
forma results are not necessarily indicative of the Company's future
operations.
Mark Industries - In December 1991, the Company purchased substantially all
operating assets of Mark Industries ("Mark"), a manufacturer of aerial lift
equipment, for $5,865. The acquisition of Mark was accounted for using the
purchase method, with the purchase price of the acquisition allocated to assets
acquired and liabilities assumed based upon their respective estimated fair
value at the date of the acquisition. Purchase price allocations were based on
evaluations, estimations and other studies performed by the Company. The Mark
purchase price allocation was completed in 1992. The excess of the purchase
price over the fair value of the net assets acquired totaled $5,550 and was
originally being amortized on a straight-line basis over 12 years. In late
1993 the Company introduced several new aerial lift models under the CMH brand
name and began to market these products through the Terex and CMH dealer
networks. Management made a determination that the goodwill related to the
December 1991 acquisition, primarily associated with the Mark name and dealer
network, had been impaired as a result of the above factors and, accordingly,
the Company wrote off the remaining balance of $4,718 in 1993.
NOTE C-- INVESTMENT IN FRUEHAUF TRAILER CORPORATION
Accounting for Investment
Prior to an initial public offering of 4,000,000 shares of Fruehauf common
stock in July of 1991 (the "Fruehauf IPO"), Fruehauf was a wholly-owned
subsidiary of the Company. Following the IPO and as of December 31, 1992, the
Company owned approximately 42% of the outstanding common stock of Fruehauf.
Pending the consummation of certain exchange transactions, Terex's principal
shareholder and certain other individuals placed 956,000 shares of Fruehauf
common stock in a voting trust to enable the Company to retain voting control
of more than 50% of Fruehauf's outstanding common stock. Because the voting
trust allowed the Company to retain a controlling financial interest in
Fruehauf, the Company included Fruehauf in its consolidated financial
statements in 1991. The voting trust terminated during 1992 and, accordingly,
the Company accounted for its ownership interest in Fruehauf using the equity
method in 1992 and 1993.
In August 1993, Fruehauf entered into agreements with its existing lenders, a
new lender and a number of investors which resulted in a restructuring of
existing debt and provided for a new $25,000 credit facility and $20,500 of new
equity (the "Fruehauf Restructuring"). As a result of the Fruehauf
Restructuring the Company's ownership of Fruehauf decreased to approximately
26% in August 1993. As part of the Fruehauf Restructuring, Terex confirmed its
agreement with Fruehauf to accept 2,251,167 shares of Fruehauf common stock in
payment of $13,507 of intercompany indebtedness which Fruehauf owed to Terex.
These shares were received by Terex in December 1993.
Because Fruehauf had experienced significant losses since 1990 and continued to
have a stockholders' deficit after the new equity investment described above
under "Fruehauf Restructuring," Terex's carrying value for its investment in
Fruehauf was reduced to zero. Terex also recognized a contingent obligation of
approximately $3,000 with respect to guaranties by Terex of certain obligations
of Fruehauf. This amount was reduced to $2,000 in 1994 as a result of the
expiration of certain of the guarantees.
In December 1993, the Company sold 1,000,000 shares of Fruehauf common stock
and realized a gain and aggregate proceeds of $3,009, reducing its ownership to
approximately 22.6% (6,386,622 shares) at December 31, 1993. In February 1994
the Company sold an additional 1,000,000 shares of Fruehauf common stock for
$4,620, reducing its remaining ownership interest in Fruehauf to 19.1%.
Because the Company's ownership interest was below 20% and because the Company
intended to sell the remaining shares, management concluded that use of the
equity method was no longer appropriate for the Company's investment in
Fruehauf and classified the Company's remaining shares of Fruehauf common stock
as shares available for sale under SFAS No. 115. During the remainder of 1994
the Company sold an additional 4,900,000 shares of Fruehauf common stock for
$21,423 and the Company's remaining ownership interest in Fruehauf at December
31, 1994 was 486,622 shares of common stock or approximately 1.6% of Fruehauf's
outstanding common stock. As required by SFAS 115 for assets held for sale,
the investment was valued at $1,825 at December 31, 1994, with an equivalent
amount presented as a component of stockholders' investment. The Company sold
the remaining shares of Fruehauf common stock in January 1995 for $796.
Restatement of Fruehauf Financial Statements
In March 1994, Fruehauf announced that it would revise the allocation of the
purchase price paid by Terex in its 1989 acquisition of Fruehauf. In March
1995, Fruehauf restated its financial statements for 1989 through 1992 for
revisions in the accounting treatment for Fruehauf's maritime operations,
certain liabilities included in the opening purchase price allocation and the
valuation of certain assets in the opening purchase price allocation. Because
Fruehauf was included as a consolidated subsidiary in the Company's
consolidated financial statements for 1989 through 1991 and was accounted for
on the equity method for 1992 and 1993, the restatements by Fruehauf also
resulted in the restatement of Terex's consolidated financial statements for
1989 through 1992. There was no significant effect on Terex's 1993 financial
statements because Terex's investment in Fruehauf had been reduced to zero
during 1992 and use of the equity method had been suspended. See Note A --
"Significant Accounting Policies -- Restatements and Reclassifications."
NOTE D -- INVENTORIES
Inventories consist of the following:
December 31,
1994 1993
Finished equipment $ 26,812 $ 27,157
Replacement parts 69,932 62,150
Work-in-process 13,520 14,351
Raw materials and supplies 57,894 65,165
167,158 168,823
Less: Excess of FIFO inventory value
over LIFO cost (2,913) (4,985)
Net inventories $164,245 $ 163,838
In 1994 and 1993, 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 $2,072 in 1994 and $167 in 1993.
NOTE E -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
December 31,
1994 1993
Property $ 8,335 $ 12,157
Plant 32,249 41,711
Equipment 83,419 73,918
124,003 127,786
Less: Accumulated depreciation (37,843) (30,249)
Net property, plant and equipment $ 86,160 $ 97,537
NOTE F -- LONG-TERM OBLIGATIONS
December 31,
1994 1993
Long-term debt is summarized as follows:
Senior Secured Notes bearing interest
at 13%, due August 1, 1996
("Senior Secured Notes") $ 127,219 $ 154,173
Secured Senior Subordinated Notes
bearing interest at 13.5%,
due July 1, 1997 ("Subordinated
Notes") 24,546 32,702
Lending Facility maturing
August 24, 1997 24,064 10,165
Secured promissory note bearing
interest at prime rate,
due July 31, 1994 --- 6,090
Secured term note bearing interest
at 9.0% payable in equal semiannual
installments from August 1994
to February 1998 587 740
Capital lease obligations (Note G) 12,377 11,130
Other --- 130
Total long-term debt 188,793 215,130
Current portion of long-term debt 25,806 19,799
Long-term debt, less current portion $ 162,987 $ 195,331
Senior Secured Notes and Subordinated Notes
The Senior Secured Notes, totaling $127,673 principal amount outstanding at
December 31, 1994, were issued during July 1992 for a total of $160,000 in
conjunction with the CMH Acquisition and a refinancing of the Company's bank
debt. Proceeds from the issuance of the Senior Secured Notes were used for the
cash portion of the CMH Acquisition purchase price ($85,000), for the
settlement of all amounts outstanding under its previous credit facility
($58,000), and for working capital and transaction costs. Interest on the
Senior Secured Notes is due semiannually on February 1 and August 1.
The indenture for the Senior Secured Notes requires that proceeds from the
sale of collateral must be used to make an offer to repurchase, at par, an
equivalent amount of Senior Secured Notes. During 1994, as a result of sales
of 5,400,000 shares of Fruehauf common stock during 1994 and 1,000,000 shares
in the last quarter of 1993, the Company repurchased $27,327 principal amount
of the Senior Secured Notes. The Company realized an extraordinary loss of
$709 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 $5,000 principal
amount of Senior Secured Notes for approximately $4,544, 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 $539,
net of unamortized debt discount and debt issuance costs.
The provisions of the Senior Secured Notes registration rights agreement
required that the Company file a registration statement to register the Senior
Secured Notes, or to effect an exchange offer of registered notes for such
notes, with the Securities and Exchange Commission by November 30, 1992, which
registration was to become effective no later than March 1, 1993. The
registration has not become effective and, as a result, Terex is incurring
liquidated damages until such filing becomes effective. Terex incurred such
liquidated damages in the amount of $715 and $768 during 1994 and 1993,
respectively, which are included in interest expense.
The Subordinated Notes, totalling $24,915 principal amount outstanding at
December 31, 1994, were initially issued as unsecured subordinated notes for a
total amount of $50,000. The notes have annual sinking fund requirements of
$8,333 due July 1 which commenced in 1992, and mature in 1997. Interest on the
Subordinated Notes is due semiannually on January 2 and July 1. In 1992, in
conjunction with the issuance of the Senior Secured Notes, the holders of
Subordinated Notes were granted a secondary security interest in certain of the
Company's assets.
The Senior Secured Notes are secured by substantially all of the Company's
inventory and property, plant and equipment, and were secured by the Company's
investment in Fruehauf common stock. The Subordinated Notes are secured by a
secondary secured position in substantially the same assets. Certain
non-financial covenants of the indentures governing the Senior Secured Notes
and Subordinated Notes limit, among other things, Terex's ability to incur
additional indebtedness, consummate mergers and acquisitions, pay dividends,
sell business segments and enter into transactions with affiliates, and also
place limitations on change of control. The Company's principal shareholder
has pledged shares of the Common Stock owned by him as collateral for loans.
If such loans are not paid when due, the pledgee may have the right to sell the
shares of the Common Stock pledged to it in satisfaction of such obligations.
The sale of a significant amount of such pledged shares could result in a
change of control of the Company and may require the Company to make an offer
to repurchase the Senior Secured Notes and the Subordinated Notes.
The financial covenants of the indentures require, among other things, that the
Company comply with the Net Worth Covenants and the Collateral Covenants. In
the event that the Company's net worth is not in excess of the amount required
under the Net Worth Covenants for any two consecutive quarters, the Company
must offer to repurchase, at par plus accrued interest, 20% of the outstanding
principal amount of the Notes. In the event the Company is not in compliance
with the Collateral Covenants at the end of any calendar quarter, the Company
must offer to repurchase, at par plus accrued interest, $16.0 million principal
amount of the Senior Secured Notes or such greater amount as would be necessary
to bring the Company into compliance with the Collateral Covenants. If the
Company were not to be in compliance with such covenants, there could result a
material adverse impact on the Company.
The Company was in compliance with the Net Worth Covenants and the
Collateral Covenants at December 31, 1994 and throughout 1994. As discussed in
Note O -- "Liquidity, Financing and Severance Actions," the Company is seeking
to refinance the Senior Secured Notes and the Subordinated Notes during 1995.
Even if the Company is not successful in such refinancing, the Company believes
that, based on management's current estimates, it will be in compliance with
its covenants with respect to the Senior Secured Notes and Subordinated Notes
over the next twelve months.
Lending Facility
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 is secured by substantially all the
Company's domestic receivables and proceeds thereof. Interest on Lending
Facility borrowings is 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
currently provides for up to $30,000 of cash advances and guarantees through
April 30, 1995, and $25,000 thereafter through the extended maturity date. The
balance outstanding under the Lending Facility at December 31, 1994 was
$24,064. 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 $2,003 to write off the unamortized debt issuance costs.
TEL Facility
In 1993, the Company's subsidiary, Terex Equipment Limited ("TEL") located in
Motherwell, Scotland, entered into a bank facility (the "TEL Facility") which
provides up to pd 28,000 ($42,000) including up to pd 13,000 ($19,500) 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 facility were $11,900 and
zero at December 31, 1994 and 1993, respectively.
Secured Promissory Note
A portion of the CMH Acquisition was financed through a note to the seller in
the amount of $6,090 due July 31, 1994. Interest accrued at prime rate and was
payable quarterly. The seller note was secured by certain property, plant and
equipment. The note was paid in May 1994.
Schedule of Debt Maturities
Scheduled annual maturities of long-term debt outstanding at December 31, 1994
in the successive five-year period are summarized below. Amounts shown are
exclusive of minimum lease payments disclosed in Note G -- "Lease Commitments":
1995 $ 23,360
1996 121,237
1997 32,571
1998 71
1999 ---
Thereafter ---
Total $ 177,239
Based on quoted market values, the Company believes that the fair value of the
Senior Secured Notes and Subordinated Notes is approximately $121,289 and
$23,171, respectively, as of December 31, 1994. The Company believes that the
carrying value of its other borrowings approximates fair market value, based on
discounting future cash flows using rates currently available for debt of
similar terms and remaining maturities.
The Company paid $32,221, $31,805 and $15,602 of interest in 1994, 1993 and
1992, respectively.
The weighted average interest rate on short term borrowings outstanding was
10.2% at December 31, 1994 and 9.3% at December 31, 1993.
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 $5,919 and $5,011 at December 31, 1994 and
1993, respectively, net of accumulated amortization of $2,856 and $3,352 at
December 31, 1994 and 1993, 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 $8,014 of which $1,549 is current at December 31, 1994.
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, 1994 are as
follows:
Capital Operating
Leases Leases
1995 3,621 6,775
1996 3,059 5,910
1997 2,998 4,963
1998 2,542 3,333
1999 1,778 2,482
Thereafter 139 1,128
Total minimum obligations 14,137 24,591
Less amount representing interest 1,760
Present value of net minimum obligations 12,377
Less current portion 2,445
Long-term obligations $ 9,932
Noncash investing and financing activities include net capital lease
obligations of $1,144, $4,156 and $2,150 incurred in 1994, 1993 and 1992,
respectively, when the Company entered into leases for new equipment.
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 $7,405, $6,294 and $6,601 in 1994, 1993, and
1992, 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 16,500 German marks ($11,000) and will lease the facility under the terms of
a five year lease for a total rental of 2,900 German marks ($1,900) per year.
The Company realized a gain of 6,244 German marks ($4,029) which was deferred
and will be amortized as a reduction of rental expense over the lease term
($774 per year).
NOTE H -- INCOME TAXES
The components of Income (Loss) Before Income Taxes and Extraordinary Items are
as follows:
Year ended December 31,
1994 1993 1992
United States $ 12,355 $(67,455) $ 169
Foreign (10,399) 2,533 2,813
Income (loss) before income taxes
and extraordinary items $ 1,956 $(64,922) $ 2,982
The major components of the Company's provision for income taxes are summarized
below:
Year ended December 31,
1994 1993 1992
Current:
Federal $ --- $ --- $ ---
State 498 --- ---
Foreign 2,132 1,336 167
Utilization of foreign net operating
loss ("NOL") carryforward (1,844) (1,178) ---
Current income tax provision 786 158 167
Deferred:
Deferred federal income tax benefit --- --- (100)
Total provision for income taxes $ 786 $ 158 $ 67
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, 1994 and 1993 are summarized below for
major balance sheet captions:
1994 1993
Net inventories $ (7,118) $ (4,343)
Fixed assets (9,564) (9,933)
Other (485) (202)
Total deferred tax liabilities (17,167) (14,478)
Receivables 1,376 2,136
Warranties and product liability 20,756 20,709
Investments 957 9,692
All other items 6,098 4,914
Benefit of net operating loss carryforward 126,573 114,109
Total deferred tax assets 155,760 151,560
Deferred tax assets valuation allowance (138,593) (137,082)
Net deferred tax liabilities $ --- ---
The valuation allowance for deferred tax assets as of January 1, 1993 was
$112,708. The net change in the total valuation allowance for the years ended
December 31, 1993 and 1994 were increases of $24,374 and $1,511, respectively.
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,
1994 1993 1992
Statutory federal income tax rate $ 685 $(22,723) $ 1,014
Recognition of previously
unrecognized tax assets (4,333) --- ---
NOL with no current benefit --- 21,641 ---
Foreign tax differential on
income/losses of foreign subsidiaries 3,698 (627) (856)
Goodwill write-off --- 1,793 ---
State tax 498 --- ---
Other 238 74 (91)
Total provision for income taxes $ 786 $ 158 $ 67
The Company has not provided for U.S. federal and foreign withholding taxes on
$10,625 of foreign subsidiaries' undistributed earnings as of December 31,
1994, 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 $1,900.
At December 31, 1994, the Company had domestic federal net operating loss
carryforwards of $272,501. Approximately $93,765 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
1995 24,041
1996 45,231
1997 8,004
1998 11,908
1999 ---
2000 4,581
2006 20,689
2007 35,661
2008 101,896
2009 20,490
Total $ 272,501
The Company also has various state net operating loss and tax credit
carryforwards expiring at various dates through 2009 available to reduce future
state taxable income and income taxes. In addition, the Company's foreign
subsidiaries have approximately $60,586 of loss carryforwards, $33,475 in
Germany, $17,748 in U.K. and $9,363 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 $7,271 are available without expiration, with the remaining $2,092
expiring in the years 1995 through 2000.
The Internal Revenue Service is currently examining the Company's federal tax
returns for the years 1987 through 1989. In December 1994, the Company
received an examination report from the IRS proposing a substantial tax
deficiency based on this examination. The examination report raises a variety
of issues, including the Company's substantiation for certain deductions taken
during this period, the Company's utilization of certain net operating loss
carryovers ("NOL's") and the availability of such NOL's to offset future
taxable income. If the IRS were to prevail on all the issues raised, the
amount of the tax assessment would be approximately $56 million plus interest
and penalties. If the Company were required to pay a significant amount to
resolve such assessment, it would have a material adverse impact on the Company
and could exceed the Company's resources. The Company is preparing 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 significant legal and factual
issues. If the Company's positions are upheld, management believes that the
amounts due would not exceed amounts previously paid or provided; however, the
Company's NOL's could be reduced. 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.
The Company made income tax payments of $790, $58 and $66 in 1994, 1993 and
1992, respectively.
NOTE I -- PREFERRED STOCK
The Company's certificate of incorporation was amended in October 1993 to
authorize 10,000,000 shares of preferred stock, $.01 par value per share. As
of December 31, 1994, a total of 1,289,800 shares of preferred stock are issued
and outstanding as described below.
Series A Cumulative Redeemable Convertible Preferred Stock
As of December 31, 1994, the Company has 1,200,000 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 1,300,000
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 $34,321 at December 31,
1994.
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 $27,179. The Company
has allocated $10,328 and $16,851 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 1994 and 1993 was $5,912 and $152, respectively.
Series B Cumulative Redeemable Convertible Preferred Stock
As of December 31, 1994, the Company has 89,800 issued and outstanding shares
of Series B Cumulative Redeemable Convertible Preferred Stock (the "Series B
Preferred Stock"). These shares were issued to certain individuals on December
9, 1994 in consideration for the early termination of a contract between the
Company and KCS Industries, Inc., a Connecticut limited partnership ("KCS"), a
related party (see Note M -- "Related Party Transactions"). The transaction
also included the issuance of 106,950 Common Stock Purchase Warrants (the
"Series B Warrants," see Note J -- "Stockholders' Deficit"). 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 $2,257 at December 31, 1994.
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 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 has allocated $853 and $713 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. The
total accretion recorded in 1994 was $17.
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 30,000,000. As of December 31, 1994,
there were 10,303,067 shares issued and outstanding. Of the 19,696,933
unissued shares at that date, 6,016,228 shares were reserved for issuance as
follows:
Conversion of Series A Preferred Stock (Note I) 2,700,000
Conversion of Series B Preferred Stock (Note I) 202,050
Exercise of Series A and Series B Warrants 3,005,950
Exercise of Stock Options 108,228
Total reserved for issuance 6,016,228
In December 1993, the Company issued 350,000 shares of Common Stock as a
contribution to two of the Company's pension plans. The Company valued these
shares at $2,323, 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
1,300,000 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. Upon the exercise or redemption of a Warrant, the holder
thereof shall be entitled to receive 2.23 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 private placement of the Series B
Preferred Stock (see Note I -- "Series B Preferred Stock"), the Company issued
106,950 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. The number of shares of
Common Stock issuable upon exercise or redemption of the Warrants is subject to
adjustment in certain circumstances.
Stock Options. The Company maintains a qualified incentive stock option ("ISO")
plan covering certain officers and key employees. The exercise price of the
ISO stock option 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 options expire after ten years. At December 31, 1994,
26,062 stock options were available for grant under the plan.
The following table is a summary of stock options:
Number Exercise Price
of Options per Option
Outstanding at December 31, 1991 78,583 $ 6.40 to 14.80
Granted 20,000 13.25
Exercised (25,917) 6.40 to 14.80
Canceled or expired (13,000) 10.20 to 14.80
Outstanding at December 31, 1992 59,666 $ 6.40 to 14.80
Granted 23,750 7.13 to 10.50
Exercised (3,750) 10.20
Canceled or expired (3,750) 14.80
Outstanding at December 31, 1993 75,916 $ 6.40 to 14.80
Granted 10,000 6.63
Exercised ---
Canceled or expired (3,750) 14.80
Outstanding at December 31, 1994 82,166 $ 6.40 to 14.80
Exercisable at December 31, 1994 54,251 $ 6.40 to 14.80
Long-Term Incentive Plan. 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
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 750,000, subject to certain
adjustments. In June 1994, options to purchase a total of 308,800 shares of
common stock at $5.50 per share and a total of 129,400 shares of restricted
common stock were granted to employees and outside directors. The Plan, and
the options and restricted stock granted thereunder, are subject to approval by
the Company's shareholders. Accordingly, these shares and options are not
considered to be outstanding and are not included in calculations of earnings
per share.
Stock Appreciation Rights. In connection with the sale of the 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 658,409
common stock appreciation rights ("SAR"). As of December 31, 1994, there were
624,794 SAR's outstanding. Of the outstanding SAR's, 552,000 may be exercised
at the option of the holder thereof at any time through July 31, 1996. The
remaining 72,794 SAR's may be exercised through July 1, 1997. The SAR's
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, 1994, there was no reserve requirement necessary because the
Company's Common Stock price was below $11.00 per share.
Dividends. No dividends were declared or paid in 1994, 1993 or 1992. As
discussed in Note F -- "Long-Term Obligations," certain of the Company's debt
agreements contain restrictions as to the payment of cash dividends. Under the
most restrictive of these agreements, no retained earnings were available for
dividends at December 31, 1994. The terms of the Company's outstanding Series
A Preferred Stock and Series B Convertible Preferred Stock also restrict the
Company's ability to pay cash dividends on the Common Stock.
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 1994, 1993 and 1992:
Year Ended December 31,
1994 1993 1992
Service cost for benefits
earned during period $ 183 $ 449 $ 499
Interest cost on projected
benefit obligation 2,176 2,368 2,378
Actual (return) loss on plan assets (355) (2,128) (3,052)
Net amortization and deferral (1,150) 872 1,870
Curtailment (gain) loss --- (284) 58
Net pension expense $ 854 $ 1,277 $ 1,753
The following table sets forth the US plans' funded status and the amounts
recognized in the Company's financial statements at December 31:
1994 1993 1992
OverfundedUnderfunded Overfunded UnderfundedUnderfunded
Plans Plans Plans Plans Plans
Actuarial present value of:
Vested benefits $ 7,952 $ 19,041 $ 9,252 $ 22,450 $ 27,249
Accumulated
benefits $ 8,145 $ 19,119 $ 9,509 $ 22,657 $ 27,637
Projected
benefits $ 8,145 $ 19,119 $ 9,509 $ 22,657 $ 29,602
Fair value of
plan assets 9,268 14,723 9,711 14,641 19,929
Projected benefit
obligation
(in excess of)
less than
plan assets 1,123 (4,396) 202 (8,016) (9,673)
Unrecognized net
loss from past
experience different
than assumed 2,488 1,778 3,691 4,173 6,328
Unrecognized prior
service cost 470 --- 503 --- 920
Unrecognized
transition (asset) --- --- --- --- (324)
Adjustment to
recognize minimum
liability --- (1,778) --- (4,173) (4,988)
Pension asset
(liability)
recognized in the
balance sheet $ 4,081 $ (4,396) $ 4,396 $ (8,016) $ (7,737)
The expected long-term rate of return on plan assets was 9% for the periods
presented. The discount rate assumption was 8.5% for 1994, 7.0% for 1993 and
8.25% for 1992. The assumption for the rate of compensation increase, if
applicable per plan provisions, was 5.5% for 1992 and 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 $1,778 and $4,173 to
recognize a minimum pension liability at December 31, 1994 and 1993,
respectively. This liability is offset by a direct reduction of stockholders'
investment of $1,778 and $4,173 at December 31, 1994 and 1993, respectively.
Assets of Terex's pension plans were combined with assets of Fruehauf's pension
plans into a master trust (the "Master Trust") effective January 1, 1992. In
1993, the Master Trust acquired Terex Common Stock to be held in designated
accounts for the benefit of Fruehauf retirees. The fair value of the Terex
Common Stock held for the benefit of the Fruehauf retirees totaled
approximately $3.3 million at December 31, 1993. The Master Trust disposed of
this investment in Terex Common Stock in March 1994 for approximately $3.9
million.
In December 1993, Terex contributed 350,000 shares of Terex Common Stock, par
value $.01, to the Master Trust for the benefit of two of the Terex plans,
which were valued by Terex at $2,323 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 $2,450 at December 31,
1994.
In addition, the Master Trust held 6,000 Terex Common Stock Appreciation Rights
("Terex SAR's"), valued at $1.00 per right (total value of $6) at December 31,
1994 and 12,000 Terex SAR's, valued at $1.25 per right ($15 total) at December
31, 1993.
As of December 31, 1993 the Master Trust maintained a participation in
Fruehauf's Credit Facility with a market value of $1,954 (cost of $2,299). The
rights of the Master Trust were equivalent to those of the other lenders and
investors.
Effective September 1, 1994, the Fruehauf Trailer Corporation Master Retirement
Trust was created, and those investments held by the Master Trust allocable to
the Fruehauf pension plans were transferred to the Fruehauf Trailer Corporation
Master Retirement Plan Trust, including the investment in Fruehauf's Bank
Credit Facility. The investments in Terex Common Stock and Terex SAR's
remained in the Master Trust for the benefit of participants in Terex's pension
plans.
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 $260, $228 and $208 for the years ended December
31, 1994, 1993 and 1992, respectively.
Certain of CMH's German employees are covered by noncontributory defined
benefit pension plans. The Company retained responsibility for such plans
after the Acquisition. 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.
The components of consolidated pension expense for each of the reporting
periods covered by these financial statements is as follows:
Five months
Year Ended Year Ended ended
December 31, December 31, December 31,
1994 1993 1992
Current service cost $ 174 $ 201 $ 103
Interest cost 877 862 339
Net amortization and deferrals (820) 84 37
Defined benefit pension expense $ 231 $ 1,147 $ 479
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,
1994 1993
Accumulated benefit obligation,
including nonvested benefits
of $207 and $819 at
December 31, 1994 and 1993 $ 11,095 $ 12,220
Projected benefit obligation $ 11,152 $ 13,143
Unrecognized net gain/(loss) 1,902 (893)
Unrecognized transition
asset (liability) (665) (814)
Adjustment required to recognize
minimum liability --- 785
Accrued pension cost $ 12,389 $ 12,221
Discount rates of 7.5% in 1994 and 7% in 1993 were used 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." The Company changed certain assumptions used in the actuarial
valuation of the plans: the assumed rate of compensation increases is 0%
through 1999 and 2% thereafter (4% for all periods in the 1993 valuation); and
the assumed rate of cost of living adjustments of pensions in payment is 0%
through 1999 and 2% thereafter (3.5% for all periods in the 1993 valuation).
These changes in assumptions reflect 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 $2,724. The gain in excess of 10% of the projected benefit obligation
is being amortized over 2 years; $908 was amortized as a reduction of pension
cost in 1994 and was recorded in the fourth quarter of 1994.
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 Postretirement Benefits
The Company provides postretirement 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.
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 $4,476. 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:
1994 1993
Actuarial present value of accumulated
postretirement benefit obligation:
Retirees $ 4,604 $ 4,522
Active participants --- ---
Total accumulated postretirement
benefit obligation 4,604 4,522
Unamortized transition obligation (3,730) (4,103)
Liability recognized in the
balance sheet $ 874 $ 419
Health care trend rates used in the actuarial assumptions range from 12.3% to
13.5%. These rates decrease to 6.75% over a period of 9 to 11 years. The
effect of a one percentage-point change in the health care cost trend rates
would change the accumulated postretirement benefit obligation approximately
5%. The discount rate used in determining the accumulated postretirement
benefit obligation is 8.25%.
Net periodic postretirement benefit expense includes the following components
for 1994 and 1993:
Year Ended December 31,
1994 1993
Service Cost $ --- $ ---
Interest cost 369 369
Net amortization 373 373
Total 742 742
The Company's postretirement benefit obligations are not funded. Net periodic
postretirement benefit expense for the year ended December 31, 1994 and 1993
was approximately $455 and $419 greater on the accrual basis than it would have
been on the cash basis.
Retiree health payments totaled $235 for the year ended December 31, 1992.
NOTE L -- LITIGATION AND CONTINGENCIES
In December 1992, a Class Action complaint was filed, purportedly on behalf of
all persons who purchased Fruehauf common stock during the period from June 28,
1991 through December 4, 1992, against Fruehauf, the Company, certain of
Fruehauf's then officers and directors, including Randolph W. Lenz, Marvin B.
Rosenberg and G. Chris Andersen, and certain of the underwriters of the initial
public offering of Fruehauf, namely, PaineWebber Incorporated, Alex. Brown &
Sons, Incorporated and Wertheim Schroder & Co., Incorporated, in the United
States District Court for the Eastern District of Michigan, Southern Division,
seeking unspecified compensatory and punitive damages. The complaint alleges,
among other things, that, in connection with and following the initial public
offering of Fruehauf, the defendants misrepresented Fruehauf's liquidity and
the status of compliance with Fruehauf's credit facilities at the time of the
Fruehauf IPO, and in certain other documents publicly disseminated by Fruehauf
subsequent to the initial public offering. The plaintiffs then amended their
complaint to include claims based on the April 1993 restatement of Fruehauf's
1989 and 1990 financial statements. The defendants filed answers to the
complaint denying material allegations of the complaint, as amended, and
asserting various affirmative defenses. A motion for partial summary judgment
against the defendants on the restatement claims is currently pending. The
Company has not recorded any loss provision for this litigation. The Company
has been participating in settlement discussions and, based on an agreement in
principal reached with the plaintiffs, believes that an agreement to settle
this litigation will be resolved without any material adverse impact to the
Company.
In the Company's lines of business, but primarily in the Material Handling
Segment, numerous suits have been filed alleging damages for injuries or deaths
from accidents involving the Company's products that have arisen in the normal
course of operations. 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, 1994, 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 as used equipment at its estimated
net realizable value. Any resultant losses are charged against related
reserves. The guarantee under such floor plans aggregated $7,031 at December
31, 1994. The Company has recorded reserves based on management's estimates of
potential losses arising from these guarantees. Historically, the Company has
incurred only immaterial 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
out of the ordinary conduct of its business. Such guarantees approximated
$6,400 at December 31, 1994. Potential losses 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 products and parts inventory and certain products used
as dealer rental assets 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 and rental asset financing of approximately $206,000
at December 31, 1994 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 immaterial losses relating to
these arrangements.
Terex's outstanding letters of credit totaled $6,687 which are cash
collateralized. 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.
Terex 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. As of December 31, 1994 Terex has recognized liabilities for these
contingent obligations in the aggregate amount of $2,000, representing
management's estimate of the maximum potential losses which the Company might
incur.
NOTE M -- RELATED PARTY TRANSACTIONS
Under a contract dated July 1, 1987, as amended, KCS Industries, L.P., a
Connecticut limited partnership ("KCS"), principally owned by Randolph W. Lenz,
Chairman of the Board and a principal stockholder of the Company, provided
administrative, financial, marketing, technical, real estate and legal services
to the Company and its subsidiaries until December 31, 1993. KCS also provided
assistance in the evaluation, negotiation and consummation of potential
acquisitions of other companies, products and processes, as well as the
development of new areas of business for the Company.
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, including travel and similar expenses and fees for professional and
other services provided by third parties. Each year the contract was in
effect, the annual fee increased by the greater of 10% or the increase in the
Consumer Price Index, subject to limitations imposed by the Company's debt
agreements. During 1993 and 1992, the Company made payments to KCS for fees of
$2,878 and $2,848, respectively.
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. David
J. Langevin and Marvin B. Rosenberg, 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 89,800
shares of the Company's Series B Cumulative Redeemable Convertible Preferred
Stock (valued at $853) and 106,950 Series B Warrants (valued at $713), 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 38,800 shares of preferred stock and warrants
exercisable for 15,700 shares of Terex Common Stock and Messrs. Langevin and
Rosenberg received 25,500 shares of preferred stock and warrants exercisable
for 45,625 shares of Terex Common Stock. In addition, Messrs. Lenz, Langevin
and Rosenberg received cash payments of $515, $82 and $82, respectively.
The Company, certain directors and executives of the Company, and KCS are named
parties in various legal proceedings. During 1994, 1993 and 1992, the Company
incurred $319, $351 and $59 of legal fees and expenses on behalf of the
Company, directors and executives of the Company, and KCS named in the
lawsuits.
On January 25, 1993, Terex entered into an agreement whereby KCS borrowed
$1,683 from Terex (the "KCS/Terex Note"). The KCS/Terex Note bore interest at
prime. The loan represented by the KCS/Terex Note may have constituted a
default under the Senior Secured Notes, the Subordinated Notes and the Bank
Lending Agreement. The entire balance was repaid to Terex on February 1, 1993,
six days after the initial borrowing, thereby curing any default which may have
occurred.
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 SAR's, and the establishment
of the Bank Lending Agreement. Mr. Raben, a director of the Company, is 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 Senior Secured Notes and SAR's. Jefferies was paid fees of
$6,500 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 $2,500 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 250,000 Series A Warrants and 180,000 shares of Series A
Preferred Stock from the Company in connection with the Company's private
placement on December 20, 1993.
David A. Sachs, a director of the Company, was affiliated with the Airlie Group
L.P. ("Airlie"), a limited partnership which owns approximately 9% of the
Company's Common Stock (including Common Stock issuable upon conversion of
Series A Preferred Stock) and 40,000 Warrants. Until May 1994, Mr. Sachs 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 Mr. Sachs was
affiliated with Airlie, Airlie received all director fees to which Mr. Sachs
was entitled by reason of his service as a director of the Company ($6 in 1994
and $24 in 1993). On December 20, 1993, Airlie purchased 40,000 Warrants and
40,000 shares of Series A Preferred Stock from the Company as part of the
Company's private placement.
In 1992, the Board approved a program to consolidate Fruehauf's parts
warehousing and administration functions with the Company. During the fourth
quarter of 1992, Fruehauf announced its intention to close its parts warehouse
in Westerville, Ohio and transfer its replacement parts inventory to the Terex
distribution center in Southaven Mississippi. In November 1992, in
contemplation of the parts consolidation, Terex had transferred $2.0 million to
Fruehauf. As a result of a debt restructuring of Fruehauf, the proposed
arrangement was not effectuated and, in May 1993, Terex entered into an
agreement with an operating unit of Fruehauf, whereby such operating unit was
to provide products and manufacturing services to Terex. This agreement
required Terex to make a $2.0 million payment to such operating unit, which
Terex effected on May 11, 1993 by instructing Fruehauf to transfer the $2.0
million Fruehauf owed to Terex directly to such operating unit. The operating
unit of the Fruehauf unit in question subsequently ceased operations. The
Company is in discussions with Fruehauf concerning the satisfaction of
Fruehauf's obligations under the May 1993 agreement.
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.
NOTE N-- BUSINESS SEGMENT INFORMATION
The Company operates in two industry segments: Material Handling and Heavy
Equipment.
The Material Handling Segment, which was acquired during 1992 (see Note B --
"Acquisitions"), designs, manufactures and markets a complete line of internal
combustion and electric lift trucks, electric walkies, automated pallet trucks,
industrial tow tractors and related replacement parts. Material Handling
Segment products are used in material handling applications in a broad array of
manufacturing, distribution and transportation industries.
The Heavy Equipment Segment designs, manufactures and markets heavy-duty,
off-highway earthmoving, construction, lifting, material handling and aerial
lift equipment, and related components and replacement parts. Products include
haulers, scrapers, wheel loaders, crawlers, mobile cranes, excavators and
aerial lifts. Such 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; and handling materials in the scrap, refuse and lumber industries.
Industry segment information is presented below:
1994 1993 1992
Sales
Material Handling $ 472,652 $ 395,625 $ 240,940
Heavy Equipment 317,168 275,164 282,415
Eliminations (3,039) (480) ---
Total $ 786,781 $ 670,309 $ 523,355
Income (Loss) From Operations
Material Handling $ (13,983) $ (28,573) $ 2,177
Heavy Equipment 18,952 2,922 (5,929)
General/Corporate (1,608) (3,527) (373)
Total $ 3,361 $ (29,178) $ (4,125)
Depreciation and Amortization
Material Handling $ 11,024 $ 9,733 $ 4,068
Heavy Equipment 3,169 8,707 3,564
General/Corporate 2,904 3,960 2,188
Total $ 17,097 $ 22,400 $ 9,820
Capital Expenditures
Material Handling $ 7,860 $ 8,882 $ 3,129
Heavy Equipment 4,565 2,620 2,238
General/Corporate 292 47 15
Total $ 12,717 $ 11,549 $ 5,382
Identifiable Assets
Material Handling $ 194,985 $ 205,581 $ 247,813
Heavy Equipment 187,710 168,236 229,042
General/Corporate 18,921 16,885 501
Total $ 401,616 $ 390,702 $ 477,356
Geographic segment information is presented below:
1994 1993 1992
Sales
North America $ 557,114 $ 466,927 $ 369,394
Europe 240,670 211,726 149,970
All other 33,994 19,338 30,780
Eliminations (44,997) (27,682) (26,789)
Total $ 786,781 $ 670,309 $ 523,355
Income (Loss) From Operations
North America $ 6,255 $ (32,004) $ (11,968)
Europe (4,449) (722) 5,453
All other 374 2,320 1,351
Eliminations 1,181 1,228 1,039
Total $ 3,361 $ (29,178) $ (4,125)
Identifiable Assets
North America $ 250,559 $ 241,564 $ 363,252
Europe 167,538 150,006 122,877
All other 8,766 10,785 8,664
Eliminations (25,247) (11,653) (17,437)
Total $ 401,616 $ 390,702 $ 477,356
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 Material Handling Segment operations market their product primarily through
independent dealers and distributors. The Heavy Equipment Segment operations
market their products through independent dealers and distributors and directly
to the end user.
The Company is not dependent upon any single customer. No single customer
accounted for more than 10% of 1994, 1993 or 1992 consolidated net sales.
Export sales from U.S. operations were as follows:
Year ended December 31,
1994 1993 1992
North and South America $ 34,873 $ 28,838 $ 31,845
Europe, Africa and Middle East 15,122 20,689 38,191
Asia and Australia 39,574 32,837 22,311
$ 89,569 $ 82,364 $ 92,347
NOTE O -- LIQUIDITY, FINANCING AND SEVERANCE ACTIONS
The Company experienced significant operating losses in the first quarter of
1994. Results improved in the second through fourth quarters of 1994 and the
Company generated income from operations of $3,361 for the year and $6,268 for
the quarter ended December 31, 1994. During 1994 the Company has taken
significant actions to reduce its overall cost structure and improved liquidity
by selling non-strategic assets to repay debt and lower interest costs.
During 1994, the Company repaid $35,744 of high interest rate debt, which will
result in interest expense savings of approximately $4,700 on an annual basis.
In June 1994, the Company announced personnel reductions in plant supervision,
engineering, marketing and administration totaling approximately 160 employees
in the Material Handling Segment's North American and European operations. The
Company also reorganized certain marketing activities and closed several of its
regional sales offices in the United States. The Company recorded a $4,549
charge in the second quarter of 1994 for severance costs associated with these
actions. 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 $2,804 charge was recorded for costs,
principally severance costs, associated with these actions.
The indentures governing the Senior Secured Notes and Subordinated Notes
require, among other things, that the Company maintain certain levels of
tangible net worth (the "Net Worth Covenants") and collateral (the "Collateral
Covenants"). In the event that the Company's net worth is not in excess of
the amount required under the Net Worth Covenants for any two consecutive
quarters, the Company must offer to repurchase, at par plus accrued interest,
20% of the outstanding principal amount of the Notes. In the event the
Company is not in compliance with the Collateral Covenants at the end of any
calendar quarter, the Company must offer to repurchase, at par plus accrued
interest, $16,000 principal amount of the Senior Secured Notes or such greater
amount as would be necessary to bring the Company into compliance with the
Collateral Covenants. If any offer to repurchase Notes were required to be
made as a result of noncompliance with the Covenants it is likely that the
Company would require additional funding to complete the offer, and if such
funding were unavailable to it, the Company would be unable to comply with the
terms of the Notes and the maturity of the Notes may be accelerated. Such
circumstances could result in a material adverse impact on the Company.
The Company was in compliance with the Net Worth Covenants and the
Collateral Covenants at December 31, 1994 and throughout 1994. During 1994,
the Company has taken actions to maintain compliance with the Net Worth
Covenants and Collateral Covenants, including the sale of its Drexel
subsidiary, shares of Fruehauf common stock and other assets, and plans to take
additional actions, if needed, to continue in compliance. As discussed below,
the Company is seeking to refinance the Senior Secured Notes and the
Subordinated Notes during 1995. In the event that the Company is not
successful in such refinancing, the Company believes that, based on
management's current estimates, it will be in compliance with its covenants
with respect to the Senior Secured Notes and Subordinated Notes over the next
twelve months.
The Company's interest payment requirements for 1995 total approximately
$23,200 on the Senior Secured Notes, the Subordinated Notes and the Lending
Facility, of which amount approximately $10,900 has been paid as of March 1,
1995. The Company's principal repayment requirements for 1995 include
approximately $8,247 in June 1995 for a required sinking fund payment on the
Subordinated Notes. In addition, as a result of the sale of certain real
estate collateral in November and December 1994, 500,000 shares of Fruehauf
common stock in December 1994 and the remaining 486,622 shares of Fruehauf
common stock in January 1995, pursuant to the indenture for the Senior Secured
Notes, the Company also intends to offer to repurchase approximately $15,923 of
the Senior Secured Notes in the second quarter of 1995.
The Senior Secured Notes mature on August 1, 1996 and the Subordinated Notes
mature on July 1, 1997. As discussed below, the Company is currently seeking
to refinance the Senior Secured Notes and Subordinated Notes during 1995;
however, there is no assurance that it will be successful in this regard. If
the refinancing is not completed, management intends to pursue alternative
refinancing opportunities, including replacement or additional working capital
based lending facilities; however, management has not identified any specific
sources of such alternative financing.
If the Company does not refinance the Senior Secured Notes and Subordinated
Notes and does not arrange additional financing before the principal repayments
of Senior Secured Notes and Subordinated Notes discussed above are due, the
Company intends to fund such repayments from operations. The need to use funds
from operations for $24,300 of debt repayments in the second quarter of 1995
could adversely affect the Company's operations by affecting its ability to
meet its operating payment obligations, including payments to vendors, on a
timely basis in the second quarter, although management believes that continued
improvement in cash flow from operations would allow the Company to return to
normal payment terms during the second half of 1995.
The Company has announced its plans to acquire, through a newly formed wholly
owned subsidiary of the Company ("Terex Cranes"), (i) substantially all of the
capital stock of P.P.M., S.A. ("PPM Europe") which is engaged in the mobile
crane and container stacker business in Europe primarily under the PPM brand
name, and (ii) all of the capital stock of Legris Industries, Inc. ("PPM North
America"), which is currently engaged in the mobile crane and container stacker
business in the United States, Singapore and Australia primarily under the P&H
brand name ("PPM North America" and, together with PPM Europe, "PPM"), from
Legris Industries, S.A. Simultaneously with the closing of the acquisition,
the Company will contribute to Terex Cranes, substantially all of the assets,
subject to all of the liabilities of its Koehring and Mark divisions.
The aggregate purchase price for PPM (including debt to be repaid immediately
after the acquisition and debt expected to remain outstanding) is approximately
577,000 French Francs (approximately $115,400). A portion of the purchase
price is payable by issuance of a redeemable non-interest bearing promissory
note of Terex Cranes in the amount of 8,000 French Francs (approximately
$1,600) and 119,000 French Francs (approximately $23,800) in aggregate
liquidation preference of preferred stock of Terex Cranes, bearing no
dividends. The note matures in seven years and may be paid in cash or, at the
option of Terex Cranes, in 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.
The Company intends to finance the cash portion of the purchase price through
the sale to institutional investors of a new series of secured notes. Proceeds
from the sale of such notes will also provide funds to permit the Company to
redeem all of its existing Senior Secured Notes and Senior Subordinated Notes.
The Company is also endeavoring to obtain expanded working capital lending
facilities. There is no assurance that the Company will be able to conclude
any of such financings.
- -----------------------------------------------------------------------------
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
For the Nine Months
Ended September 30,
1995 1994
Net sales $ 766,789 $ 573,350
Cost of goods sold 690,529 515,889
Gross profit 76,260 57,461
Engineering, selling and
administrative expenses:
Third parties 61,401 53,574
Related parties --- 2,245
Total engineering, selling
and administrative
expenses 61,401 55,819
Severance and exit costs 3,478 4,549
Income (loss)
from operations 11,381 (2,907)
Other income (expense):
Interest income 1,073 400
Interest expense (28,416) (23,298)
Gain on sale of
Fruehauf stock 1,032 24,361
Gain on sale of
Drexel business --- 4,742
Property impairment charge (3,000) ---
Amortization of debt
issuance costs (1,672) (1,835)
Other income (expense)
- other (6,352) (8)
Income (loss) before
income taxes and
extraordinary items (25,954) 1,455
Income tax provision (133) (816)
Income (loss) before
extraordinary items (26,087) 639
Extraordinary losses on
retirement of debt (7,452) (397)
NET INCOME (LOSS) (33,539) 242
Less preferred stock
accretion (5,200) (4,341)
Income (loss) applicable
to common stock $(38,739) $ (4,099)
PER COMMON AND
COMMON EQUIVALENT SHARE:
Primary:
Income (loss) before
extraordinary items $ (3.02) $ (0.36)
Extraordinary items (0.73) (0.04)
Net income (loss) $ (3.75) $ (0.40)
Fully diluted:
Income (loss) before
extraordinary items $ (3.02) $ (0.36)
Extraordinary items (0.73) (0.04)
Net income (loss) $ (3.75) $ (0.40)
Weighted average common
shares outstanding including
dilutive securities
(See Exhibit 11.1)
Primary (in millions) 10.3 10.3
Fully diluted (in millions) 10.3 10.3
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
1995 1994
ASSETS
Current assets
Cash and cash equivalents $ 12,482 $ 9,727
Cash securing letters of credit 3,695 6,688
Trade receivables (less allowance
of $9,486 at September 30 and
$6,114 at December 31) 147,210 91,717
Net inventories 248,666 164,245
Other current assets 18,279 5,775
Total current assets 430,332 278,152
Property, plant and equipment - net 111,817 86,160
Goodwill - net 70,343 5,222
Debt issuance costs - net 15,110 3,382
Other assets 18,332 28,700
Total assets $ 645,934 $ 401,616
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Notes payable $ 6,575 $ 2,078
Current portion of long-term debt 12,298 25,806
Trade accounts payable 146,464 112,213
Accrued compensation and benefits 16,226 10,823
Accrued warranties and
product liability 38,488 27,629
Accrued interest 16,426 8,969
Accrued income taxes 3,827 1,328
Other current liabilities 62,951 32,732
Total current liabilities 303,255 221,578
Long-term debt less current portion 337,039 162,987
Accrued warranties and
product liability - long-term 35,110 31,846
Accrued pension 18,562 16,456
Other long-term liabilities 13,635 7,225
Total liabilities 707,601 440,092
Minority interest, including
redeemable preferred stock of a
subsidiary (liquidation preference
$26,051, subject to adjustment)
(Note B) 10,028 ---
Redeemable convertible preferred stock
(liquidation preference $39,083 at
September 30 and $36,578 at
December 31) 22,462 17,262
Commitments and contingencies (Note E)
Stockholders' investment
Warrants to purchase common stock 17,240 17,564
Common stock, $.01 par value
- authorized 30,000,000 shares;
issued and outstanding 10,359 at
September 30 and 10,303 at
December 31 104 103
Additional paid-in capital 40,451 40,127
Accumulated deficit (147,872) (108,395)
Pension liability adjustment (1,778) (1,778)
Unrealized holding gain on
equity securities 938 1,825
Cumulative translation adjustment (3,240) (5,184)
Total stockholders' investment (94,157) (55,738)
Total liabilities and
stockholders' investment $ 645,934 $ 401,616
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
For the Nine Months
Ended September 30,
1995 1994
OPERATING ACTIVITIES
Net loss $(33,539) $ 242
Adjustments to reconcile net loss to
cash used in operating activities:
Depreciation 13,265 10,053
Amortization 7,873 3,207
(Gain) loss on sale of property,
plant and equipment (173) (115)
Gain on sale of Fruehauf stock (1,032) (24,361)
Gain on sale of Drexel business --- (4,742)
Property impairment charge 3,000 ---
Other 337 (647)
Changes in operating assets
and liabilities:
Restricted cash 2,993 (781)
Trade receivables (15,504) (18,201)
Net inventories (4,598) (1,043)
Trade accounts payable (20,553) 15,488
Accrued compensation and benefits 4,866 1,616
Accrued warranties and
product liability 2,275 3,251
Accrued interest 7,571 (5,842)
Accrued income taxes 537 242
Other 4,737 3,883
Net cash used in operating activities (27,945) (17,750)
INVESTING ACTIVITIES
Acquisition of businesses,
net of cash acquired (92,429) ---
Capital expenditures (7,128) (9,853)
Proceeds from sale of property,
plant and equipment 872 483
Proceeds from refinancing
note receivable --- 1,000
Proceeds from sale of Fruehauf stock 2,714 24,916
Proceeds from sale of Drexel business --- 10,289
Other 185 535
Net cash from (used in) investing
activities (95,786) 27,370
FINANCING ACTIVITIES
Net borrowings under revolving
line of credit agreements 42,107 11,916
Principal repayments of long-term debt (153,947) (28,275)
Issuance of long-term debt, net of
issuance costs 239,800 ---
Other (446) (124)
Net cash from (used in)
financing activities 127,514 (16,483)
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS (1,028) 435
NET DECREASE IN CASH AND CASH EQUIVALENTS 2,755 (6,428)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 9,727 (9,183)
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 12,482 $ 2,755
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, unless otherwise denoted)
September 30, 1995
NOTE A -- BASIS OF PRESENTATION
Basis of Presentation. The accompanying condensed consolidated financial
statements of Terex Corporation and subsidiaries as of September 30, 1995 and
for the nine months ended September 30, 1995 and 1994 have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles.
The accompanying condensed consolidated balance sheet as of December 31, 1994,
has been derived from the audited consolidated balance sheet as of that date.
The condensed consolidated financial statements include the accounts of Terex
Corporation and its majority owned subsidiaries ("Terex" or the "Company").
All material intercompany balances, transactions and profits have been
eliminated. 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 affiliates 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."
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.
It is the Company's policy to periodically evaluate the carrying value of
its operating assets, including goodwill, and to recognize impairments when
the estimated future net operating cash flows from the use of the assets is
less than their carrying value. The amount of any impairment then recognized
would be calculated as the difference between estimated future discounted
cash flows and the carrying value of the asset.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been made. Such adjustments consist only of those of a
normal recurring nature. Operating results for the nine months ended
September 30, 1995 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1995. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994.
NOTE B -- REFINANCING AND ACQUISITION
On May 9, 1995, the Company completed the refinancing of substantially all of
its outstanding debt (the "Refinancing") and, through Terex Cranes, Inc.
("Terex Cranes"), a newly formed subsidiary, completed the acquisition of
substantially all of the outstanding stock of P.P.M., S.A. and Legris
Industries, Inc. (together, "PPM") (the "PPM Acquisition"). PPM designs,
manufactures and markets mobile cranes and container stackers primarily in
North America and Western Europe.
The Refinancing included the private placement to institutional investors of
$250,000 of 13.25% Senior Secured Notes due May 15, 2002 (the "New Senior
Secured Notes"), repayment of the Company's old senior secured notes and senior
subordinated notes, totaling approximately $152,600 principal amount, and entry
into a new 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 New
Senior Secured Notes for an equivalent issue of registered notes, or a shelf
registration statement for the New Senior Secured Notes is effective, the
interest rate on the New Senior Secured Notes will be 13.75%. The Indenture
for the New 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 asset sales;
consolidate, merge or transfer assets to another entity; and enter into
transactions with affiliates. In connection with the issuance of the New
Senior Secured Notes, the Company issued 1,000,000 stock appreciation rights
("SAR") 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 Company's new Credit Facility provides that the Company will be able to
borrow (in the form of revolving loans and up to $15,000 in outstanding letters
of credit) up to $100,000, subject to borrowing base limitations. The Credit
Facility is secured by substantially all of the Company's domestic receivables
and inventory. 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 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 new 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 bearing interest at the rate of 1.75% 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.
Approximately $92,612 of the proceeds of the New 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
$3,000. 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 $26,051), 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 $8,840
(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 is being accounted for using the purchase method, 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 (approximately $65,864)
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 $ 974
Accounts receivable 33,816
Inventories 69,107
Other current assets 11,866
Property, plant and equipment 20,516
Other assets 268
Goodwill 65,864
Accounts payable and other
current liabilities (84,458)
Other liabilities (13,501)
$ 104,452
The Company is in the process of obtaining certain evaluations, estimations,
appraisals and actuarial and other studies for purposes of determining certain
values. The Company has also estimated costs related to plans to integrate the
activities of PPM into the Company, including plans to terminate excess
employees, exit certain activities and consolidate and restructure certain
functions. The Company may revise the estimates as additional information is
obtained.
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:
Pro Forma for the
Nine Months ended Year ended
September 30, 1995 December 31, 1994
Net sales $831,629 $966,476
Loss from operations (5,122) (12,004)
Loss before extraordinary items (51,297) (27,217)
Loss before extraordinary items,
per share $(5.55) $(3.37)
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 -- INVENTORIES
Net inventories consist of the following:
September 30, December 31,
1995 1994
Finished Equipment $ 55,676 $ 26,812
Replacement parts 88,381 68,932
Work-in-process 25,351 13,520
Raw materials and supplies 82,171 57,894
251,579 167,158
Less: Excess of FIFO inventory value
over LIFO cost (2,913) (2,913)
Net inventories $ 248,666 $ 164,245
NOTE D -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
September 30, December 31,
1995 1994
Property $ 10,733 $ 8,335
Plant 44,575 32,249
Equipment 102,884 83,419
158,192 124,003
Less: Accumulated depreciation (46,375) (37,843)
Net property, plant and equipment $ 111,817 $ 86,160
NOTE E -- LITIGATION, CONTINGENCIES AND RELATED PARTY TRANSACTIONS
The Company is subject to a number of contingencies and uncertainties including
product liability claims, self-insurance obligations, tax examinations and
other contingencies. 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.
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 through 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 200,000 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. The Company recorded a charge of $1.8 million to Other Income/Expense
during the three and nine months ended September 30, 1995 in connection with
the retirement.
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 $56,000 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 $56,000
plus interest and penalties and the ultimate outcome cannot presently be
determined or estimated. As discussed above, Mr. 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 before December 20, 1996, such sale, in combination with the issuance
of the Warrants in 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.
- -----------------------------------------------------------------------------
Report of Independent Auditors
The Board of Directors and Shareholders
PPM S.A. and Legris Industries, Inc.
We have audited the accompanying combined balance sheets of PPM S.A. and Legris
Industries, Inc. as of December 31, 1994 and 1993, and the related combined
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, based on our audits, the financial statements referred to above
present fairly, in all material respects, the combined financial position of
PPM S.A. and Legris Industries, Inc. at December 31, 1994 and 1993, and the
combined results of their operations and their cash flows for each of the three
years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Greenville, South Carolina
August 22, 1995
PPM S.A. and Legris Industries, Inc.
Combined Balance Sheets
December 31
1994 1993
(In thousands except
share amounts)
Assets
Current assets:
Cash and cash equivalents $ 3,586 $ 2,152
Trade accounts receivable,
less allowances of $2,861 and
$2,181 in 1994 and 1993, respectively 35,173 25,868
Due from affiliates 1,705 1,869
Refundable taxes 5,946 5,257
Inventories 70,020 63,498
Prepaid expenses 5,525 4,758
Other current assets 32 81
Total current assets 121,987 103,483
Property, plant, and equipment, net 20,922 23,002
Intangible assets:
Cost in excess of net assets acquired,
less accumulated amortization of $8,567
and $6,871 in 1994 and 1993, respectively 34,951 36,540
Other identified intangible assets,
less accumulated amortization of $871 and
$597 in 1994 and 1993, respectively 462 715
35,413 37,255
Total assets $178,322 $163,740
PPM S.A. and Legris Industries, Inc.
Combined Balance Sheets
(continued)
December 31
1994 1993
(In thousands except
share amounts)
Liabilities and shareholders' equity
Current liabilities:
Trade accounts payable $ 43,963 $ 35,052
Due to affiliates 6,200 3,027
Product liability reserve 4,850 4,432
Product warranty reserve 1,526 753
Accrued expenses 15,215 16,352
Current portion of long-term debt
and other short-term borrowings 72,689 37,044
Current portion of obligations
under capital leases 925 731
Total current liabilities 145,368 97,391
Long-term debt, less current portion 5,851 28,331
Obligations under capital leases,
less current portion 2,896 3,308
Minority interest in subsidiaries 1,944 2,591
Shareholders' equity:
Common stock of Legris Industries, Inc.,
$100 par value -- authorized, issued
and outstanding 200 shares --- ---
Common stock of PPM S.A.,
100 French Francs ($19) par value --
authorized, issued and outstanding
1,265,544 shares --- ---
Paid-in capital 90,491 81,209
Accumulated deficit (65,079) (46,043)
Foreign currency translation
adjustments (3,149) (3,047)
Total shareholders' equity 22,263 32,119
Total liabilities and
shareholders' equity $178,322 $163,740
See accompanying notes.
PPM S.A. and Legris Industries, Inc.
Combined Statements of Operations
Year Ended December 31
1994 1993 1992
(In thousands)
Net Sales $ 179,695 $ 191,236$ 236,088
Cost of products sold (155,129) (175,072)(197,243)
Selling, general and administrative expenses (35,673) (38,861) (49,862)
Amortization of intangible assets (1,970) (1,807) (2,074)
Loss from operations (13,077) (24,504) (13,091)
Other income (expense):
Interest income 48 11 30
Interest expense (6,668) (8,293) (6,421)
Insurance proceeds --- 6,177 1,122
(6,620) (2,105) (5,269)
Loss before income taxes and
minority interest (19,697) (26,609) (18,360)
Income tax (benefit) provision (14) 30 917
Loss before minority interest (19,683) (26,639) (19,277)
Minority interest in loss of
consolidated subsidiaries 647 946 424
Net loss $ (19,036) $(25,693)$(18,853)
See accompanying notes.
PPM S.A. and Legris Industries, Inc.
Combined Statements of Shareholders' Equity
Foreign
Accu- Currency
Common Stock Paid-In mulated Translation
Shares Amount Capital Deficit Adjustments Total
(In thousands except share amounts)
Balance at
December 31,
1991 1,265,744 $ --- $ 71,242 $ (1,497) $ (62) $69,683
Capital
contribution --- --- 3,500 --- --- 3,500
Conversion of
debt to paid-in
capital --- --- 6,467 --- --- 6,467
Net loss --- --- --- (18,853) --- (18,853)
Translation
adjustment --- --- --- --- (2,443) (2,443)
Balance at
December 31,
1992 1,265,744 --- 81,209 (20,350) (2,505) 58,354
Net loss --- --- --- (25,693) --- (25,693)
Translation
adjustment --- --- --- --- (542) (542)
Balance at
December 31,
1993 1,265,744 --- 81,209 (46,043) (3,047) 32,119
Conversion of
debt to paid-in
capital --- --- 9,282 --- --- 9,282
Net loss --- --- --- (19,036) --- (19,036)
Translation
adjustment --- --- --- --- (102) (102)
Balance at
December 31,
1994 1,265,744 $ --- $ 90,491 $(65,079) $(3,149) $ 22,263
See accompanying notes.
PPM S.A. and Legris Industries, Inc.
Combined Statements of Cash Flows
Year Ended December 31
1994 1993 1992
(In thousands)
Operating activities
Net loss $(19,036) $(25,693) $(18,853)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 6,088 5,661 6,013
Changes in operating assets and liabilities:
Accounts receivable (9,305) 11,824 13,992
Inventories (6,522) 20,562 513
Prepaid expenses and other (1,407) 3,450 3,328
Accounts payable 8,911 (14,911) (20,660)
Net amounts due to affiliates 3,009 (3,275) (6,257)
Product liability reserve 418 493 (3,123)
Accrued expenses and product
warranty reserve (364) (2,654) (208)
Net cash used in operating activities (18,208) (4,543) (25,255)
Investing activities
Purchases of property, plant and equipment (718) (1,683) (5,398)
(Increase) 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
See accompanying notes.
PPM S.A. and Legris Industries, Inc.
Notes to Combined Financial Statements
December 31, 1994
(In thousands)
1. Basis of Presentation and Description of Business
Basis of Presentation
As more fully described in Note 13, Terex Corporation ("Terex"), through its
wholly owned subsidiary Terex Cranes, Inc. ("Terex Cranes"), completed the
acquisition of substantially all of the common stock of PPM S.A. ("PPM Europe")
and Legris Industries, Inc. ("PPM North America") on May 9, 1995. PPM North
America together with PPM Europe collectively are referred to as "PPM" or "the
Company". Prior to the acquisition, Legris Industries, Inc. was a wholly owned
subsidiary of Groupe Legris Industries S.A., a French corporation, and PPM S.A.
was owned 99.13% by Potain S.A., a majority owned subsidiary of Groupe Legris
Industries S.A. ("Groupe Legris").
The accompanying combined financial statements were prepared on the basis of
generally accepted accounting principles and include the combined financial
position, results of operations and cash flows of the businesses of PPM as
follows below (subsidiaries are 100% owned except as indicated). All
significant intercompany balances have been eliminated.
PPM S.A.
- Brimont Agraire S.A.
- Bendini SpA
- PPM Krane GmbH
- Baulift Baumaschiunen and Krane Handels GmbH
Legris Industries, Inc.
- Potain Tower Cranes, Inc. (inactive)
- PPM Cranes, Inc. (92.4%)
- PPM of Australia Pty. Ltd. (92.4%)
- PPM Far East Pte. Ltd. (92.4%)
Description of Business
PPM designs, manufactures and markets mobile cranes and container stackers
primarily in North America and Western Europe under the brand names of PPM, P&H
(trademark of Harnischfeger Corporation) and BENDINI.
2. Summary of Significant Accounting Policies
Cash and Cash Equivalents
For the purpose of reporting cash flows, cash and cash equivalents include cash
on hand and overnight investments. Included in cash and cash equivalents is
$512 at December 31, 1994 invested under repurchase agreements collateralized
by U. S. Treasury Notes. Securities pledged as collateral for repurchase
agreements are held by the Company's custodian bank until maturity of the
repurchase agreements. Provisions of the agreements ensure that the market
value of this collateral is sufficient in the event of default; however, in the
event of default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral may be subject to legal proceedings.
Accounts Receivable
The Company provides credit in the normal course of business and performs
ongoing credit evaluation on certain of its customers' financial condition, but
generally does not require collateral to support such receivable. Accounts
receivable potentially exposes the Company to concentration of credit risk,
because the Company's customers operate primarily in the construction industry.
The Company also establishes an allowance for doubtful accounts based upon
factors surrounding the credit risk of specific customers, historical trends
and other information.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by
the last-in, first-out (LIFO) method for inventories held in the United States,
by the first-in, first-out (FIFO) method for inventories of PPM of Australia
Pty. Ltd and PPM Far East Pte. Ltd., and by the weighted average method for
inventories of PPM S.A.
Property, Plant and Equipment
Additions and major replacements or improvements to property, plant and
equipment are recorded at cost. Maintenance, repairs and minor replacements are
charged to expense when incurred. Assets of PPM are depreciated using the
straight-line method over their estimated useful lives.
Intangible Assets
The excess of cost over fair value of net assets of businesses acquired
("goodwill") is amortized on the straight-line method over a period of twenty
years for Legris Industries, Inc. and fifteen years for PPM S.A. Other
identified intangibles are primarily patents and organizational costs which are
amortized over five years. The lives established for these assets are a
composite of many factors; accordingly, the Company evaluates the continued
appropriateness of these lives based upon the latest available economic factors
and circumstances.
The carrying value of goodwill is reviewed if the facts and circumstances
suggest that it may be impaired. If this review indicates that goodwill will
not be recoverable, as determined based on the undiscounted cash flows of the
entity acquired over the remaining amortization period, the Company's carrying
value of the goodwill is reduced by the estimated shortfall of cash flows.
Product Warranty
PPM warrants that each finished machine is merchantable and free of defects in
workmanship and material for a period of up to one year or a specified period
of use. Warranty reserves have been established for estimated normal warranty
costs and for specific problems known to exist on products in use.
Product Liability
Reserves for product liability have been established based upon historical loss
experience for the estimated liability on incidents which have occurred but
have not yet been reported and for the estimated liability for reported
incidents.
Income Taxes
Income taxes are provided using the liability method in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("FAS 109O). Under FAS 109, the deferred tax liabilities and assets are
determined based on temporary differences between the bases of certain assets
and liabilities for income tax and financial reporting purposes. A valuation
allowance is recognized if it is more likely than not that some portion or all
of a deferred tax asset will not be ultimately realized.
Revenue Recognition
Sales are recorded upon shipment or designation of specific goods for later
shipment at customers' request with related risk of ownership passing to such
customers.
Research and Development Costs
Company sponsored research and development costs related to both present and
future products are expensed currently. Total expenditures for research and
development for 1994, 1993 and 1992 were $2,669, $3,751 and $3,440,
respectively.
Translation of Foreign Currencies
The local currencies of the Company's foreign operations have been determined
to be the functional currencies in accordance with Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation". Transactions in
foreign currencies are translated into United States dollars at average rates
of exchange prevailing during the period. Assets and liabilities denominated in
foreign currencies are translated at the year end exchange rates and resulting
translation adjustments are included as a separate component of shareholders'
equity. Gains and losses on foreign currency transactions are recognized in
earnings.
Shareholders' Equity
No amounts were paid as consideration for the issuance of common stock of PPM
S.A. and Legris Industries, Inc. Accordingly, no amounts have been assigned to
common stock in the financial statements.
3. Inventories
Inventories at December 31, 1994 and 1993 consist of the following:
1994 1993
Raw materials and parts $ 41,018 $ 37,767
Work in process 15,139 11,275
Finished goods and subassemblies 13,091 14,103
Consigned inventory 772 353
$ 70,020 $ 63,498
At December 31, 1994 and 1993, approximately $26,308 and $24,618 of inventories
were valued using the LIFO method. These amounts are approximately equivalent
to the corresponding FIFO values at December 31, 1994 and 1993.
4. Property, Plant and Equipment
Property, plant and equipment at December 31, 1994 and 1993 consists of the
following:
1994 1993
Land and improvements $ 2,080 $ 2,242
Buildings 21,273 20,181
Machinery and equipment 31,504 29,083
54,857 51,506
Less accumulated depreciation (33,935) (28,504)
$ 20,922 $ 23,002
Depreciation expense for 1994, 1993 and 1992 was $4,118, $3,854 and $3,939,
respectively.
5. Debt
Debt at December 31, 1994 and 1993 consists of the following:
1994 1993
Non-interest bearing promissory note payable to Harnischfeger
Corporation with annual payments of $1,000
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
Notes payable to Credit National bearing interest at rates
ranging from 8% to 15.5% with maturities ranging from
10 to 15 years. 815 1,154
Note payable to Credit CECA over 5 years at 9.32% 2,170 1,968
Notes payable to Solirem bearing interest at 8.5% and
10.24%, payable over 6 years 557 843
Note payable to Ministero del'Industria over 10 years
at 8.37% 366 373
Note payable to Credito Romagnolo over 8 years at 10.93% 295 292
Lines of credit due on demand with various banks, bearing
interest at rates ranging from 5.8% to 7.4% 37,857 33,753
Other 4,263 3,251
78,540 65,375
Less current portion 72,689 37,044
$ 5,851 $28,331
Other than the note payable to Harnischfeger Corporation, all debt obligations
were satisfied in connection with the acquisition by Terex in May of 1995 (see
Note 13). Accordingly, all debt obligations other than the long-term portion
of the note payable to Harnischfeger Corporation have been classified as
current.
The maturities of the note payable to the Harnischfeger Corporation for the
five years following December 31, 1994 and thereafter are as follows:
Year Payments
1995 $ 480
1996 520
1997 312
1998 338
1999 366
Thereafter 4,315
$ 6,331
6. Employee Benefit Plan
Domestically, PPM Cranes, Inc. has a defined contribution plan covering its
U.S. employees. Under this plan, the Company matches a portion of an employee's
contribution to the plan. PPM Europe also maintains government required fully
funded retirement plans for its employees in France and Italy. For purposes of
these financial statements, all domestic and PPM Europe employees are
considered to have participated in a multi-employer pension plan as defined in
Statement of Financial Accounting Standards No. 87 "Employer's Accounting for
Pensions". For multi-employer plans, employers are required to recognize as
net pension expense total contributions for the period. With respect to these
plans, PPM recorded a net pension expense of $289 for 1994, $118 for 1993 and
$82 for 1992.
7. Income Taxes
Effective January 1, 1992, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". The adoption had no impact on the financial statements of the Company.
(Loss) income before income taxes and minority interest consisted of the
following:
1994 1993 1992
Domestic $ (7,346) $ (11,179) $ (4,269)
Foreign (12,351) (15,430) (14,091)
$ (19,697) $ (26,609) $ (18,360)
Significant components of the provision for income taxes are as follows:
1994 1993 1992
Current
Federal $ --- $ (5) $ 147
Foreign 5 72 836
5 67 983
Deferred:
Federal --- --- ---
Foreign (19) (37) (66)
$ (14) $ 30 $ 917
PPM has not provided U.S. and foreign income taxes on foreign undistributed
earnings which are being retained indefinitely for reinvestment. The
distribution of these earnings would result in additional foreign withholding
taxes and additional U.S. Federal income taxes to the extent they are not
offset by foreign tax credits, but it is not practicable to estimate the total
tax liability that would be incurred upon such a distribution.
The income tax (benefit) provision at the effective tax rate differed from the
benefit at the statutory rate as follows:
1994 1993 1992
Computed tax (benefit) at expected
statutory rate $ (6,697) $ (9,047) $ (4,074)
State taxes (315) (480) (183)
Valuation allowance 4,695 8,823 4,431
Nondeductible goodwill 837 837 837
Adjustment of prior years' accruals 1,548 --- ---
Foreign tax rate differential (82) (103) (94)
Income tax (benefit) provision $ (14) $ 30 $ 917
At December 31, 1994, PPM North America has net operating loss carryforwards
for Federal income tax purposes of approximately $50,550 available to offset
future taxable income, expiring from 1997 to 2008 if not used. PPM Europe has
loss carryforwards of approximately $21,665 at December 31, 1994, including
approximately $11,023 of carryforwards which have no fixed expiration date.
The remaining carryforwards will expire beginning in 1995.
The differences between the loss carryforwards for financial reporting and
income tax purposes result principally from differences between the income tax
basis and the financial reporting basis allocated to the net assets acquired
and differences in the methods of depreciating property, plant, and equipment.
For financial reporting purposes, a valuation allowance equal to the entire
benefit of the cumulative temporary differences and net operating loss
carryforwards has been recognized to offset the net deferred tax assets. For
substantially all of the valuation allowance for deferred tax assets,
subsequently recognized tax benefits will be allocated to reduce goodwill
resulting from the acquisition of PPM by Terex. Components of the Company's
deferred taxes are as follows:
1994 1993
Total deferred tax liabilities $ (3,030) $ (1,113)
Total deferred tax assets, principally
net operating loss carryforwards 43,454 36,179
Total valuation allowance (40,424) (35,066)
Net deferred taxes $ --- $ ---
8. Fair Value of Financial Instruments
The Company has estimated the fair value amounts of financial instruments as
required by Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments", using available market information
and appropriate valuation methodologies. The carrying amount of cash and cash
equivalents, accounts receivable, other current assets, accounts payable and
long-term debt are reasonable estimates of their fair value at December 31,
1994. However, considerable judgment is required in interpreting market data
to develop the carrying amounts of fair value. Accordingly, the carrying
amounts presented herein are not necessarily indicative of the amounts that
the Company would realize in a current market exchange.
9. Leases
PPM has various lease agreements, primarily related to office space, production
facilities, and office equipment, which are accounted for as operating leases.
Certain leases have renewal options and provisions requiring PPM to pay
maintenance, property taxes and insurance. Rent expense for 1994, 1993 and 1992
was $2,977, $2,433 and $3,401, respectively.
PPM Europe also leases buildings and machinery and equipment under capital
leases with terms of 1 to 10 years. Capitalized lease obligations are
calculated using interest rates appropriate at the inception of the lease.
Amortization of assets under capital leases is included with depreciation
expense. Property, plant and equipment includes the following amounts for
leases that have been capitalized:
1994 1993
Buildings $ 1,810 $ 1,642
Machinery and equipment 5,124 3,700
6,934 5,342
Less accumulated depreciation (3,030) (1,603)
Property, plant and equipment, net $ 3,904 $ 3,739
Future minimum rental payments, by year and in the aggregate, under capital
leases and noncancellable operating leases as of December 31, 1994 are as
follows:
Capital Operating
Year Leases Leases
1995 $ 1,365 $ 1,796
1996 1,297 1,242
1997 1,248 890
1998 664 788
1999 380 505
2000 and thereafter 2,847 272
Total minimum
lease payments $ 7,801 $ 5,493
Amount representing
interest (3,980)
Present value of minimum
lease payments $ 3,821
10. Commitments and Contingencies
PPM is involved in product liability and other lawsuits incident to the
operation of its business. Insurance coverages are maintained for claims and
lawsuits of this nature. At December 31, 1994 and 1993, the Company had a
reserve of $4,850 and $4,432 related to product liability matters, including
$200 at December 31, 1994 related to unasserted claims. Actual costs to be
incurred in the future may vary from the estimates, given the inherent
uncertainties in evaluating the outcome of claims and lawsuits of this nature.
Although it is difficult to estimate the liability of the Company related to
these matters, it is management's opinion that none of these lawsuits will have
a materially adverse effect on the Company's combined financial position.
PPM North America is a defendant in a lawsuit initiated by the bankruptcy
trustee for Century II GmbH, a former subsidiary of the Company, related to an
increase in capital. The amount of the claim is for $6,000. Groupe Legris has
indemnified the Company against all losses related to this claim.
PPM is contingently liable up to $1,027 with respect to financing arrangements
and performance guarantees entered into with banks and between certain banks
and certain dealers or customers of PPM.
11. Segment and Geographic Information
The Company operates in one business segment, designing, manufacturing and
marketing mobile cranes and container stackers primarily in North America and
Western Europe. Geographic data for the Company's operations are presented in
the following table. Intercompany sales and expenses are eliminated in
determining results for each operation.
1994 1993 1992
Net sales to unaffiliated customers:
North America $ 72,409 $ 71,984 $ 65,459
Europe 92,175 112,673 155,587
164,584 184,657 221,046
Sales to affiliates 15,111 6,579 15,042
$ 179,695 $191,236 $ 236,088
(Loss) from operations:
North America $ (5,466) $(9,729) $ (3,130)
Europe (7,611) (14,775) (9,961)
$(13,077) $(24,504) $(13,091)
Identifiable assets:
North America $ 80,179 $ 74,710 $ 87,900
Europe 98,143 89,030 122,683
$ 178,322 $ 163,740 $ 210,583
12. Related Party Transactions
PPM had transactions with Groupe Legris and certain of its subsidiaries as
follows:
1994 1993 1992
Product sales and service revenues $ 15,111 $ 6,579 $ 15,042
Purchases of inventory 23,613 17,860 13,515
Interest expense 3,230 2,529 3,038
Other charges 4,493 2,772 4,333
13. Subsequent Events -- Acquisition by Terex and Financing Arrangements
(unaudited)
On May 9, 1995, Terex, through its wholly-owned subsidiary Terex Cranes,
completed the acquisition of 99.18% of the shares of PPM S.A., a societe
anonyme ("PPM Europe"), from Potain S.A., a societe anonyme, and 100% of the
capital stock of Legris Industries, Inc., a Delaware corporation which owns
92.4% of the capital stock of PPM Cranes, Inc., a Delaware corporation ("PPM
North America") from Legris Industries S.A., a societe anonyme ("Legris
France"). PPM North America together with PPM Europe collectively are referred
to as "PPM". PPM designs, manufactures and markets mobile cranes and container
stackers primarily in North America and Western Europe under the brand names of
PPM, P&H (trademark of Harnischfeger Corporation) and BENDINI.
The purchase price, together with amounts needed to repay indebtedness of PPM
required to be repaid in connection with the Acquisition, consisted of (i)
approximately $92.6 million in cash and (ii) shares of Series A Redeemable
Exchangeable Preferred Stock of Terex Cranes having an aggregate liquidation
preference of approximately $25.9 million, subject to adjustment (the "Seller
Preferred Stock"). The Seller Preferred Stock bears no dividend and is
mandatorily redeemable in seven years and three months from the date of
issuance. The Seller Preferred Stock may be redeemed at any time for cash (to
the extent permitted pursuant to the provisions of the Indenture for Terex's 13
1/4% Senior Secured Notes due 2002) or, under certain circumstances for shares
of common stock, par value $.01 per share (the "Cranes Common Stock"), of Terex
Cranes. The purchase price is subject to adjustment calculated by reference to
the consolidated net asset value of PPM as determined by an audit to be
conducted following the consummation of the Acquisition. Terex Cranes has not
yet reached agreement with the sellers about the amount of purchase price
adjustment but, based on work performed, Terex Cranes believes that the amount
of the Seller Preferred Stock could ultimately be reduced. In addition, the
liquidation preference and the redemption price of the Seller Preferred Stock
may be adjusted based upon the unit shipments of the mobile crane industry in
Western Europe during the second and third years following the consummation of
the Acquisition.
The funds for the cash portion of the purchase price and the repayment of debt
of the acquired businesses were obtained from the private placement on May 9,
1995 to institutional investors of units consisting of Terex's 13 1/4% Senior
Secured Notes due 2002 and common stock appreciation rights. The Senior
Secured Notes are secured by substantially all of the assets of Terex and its
domestic subsidiaries, including PPM North America, subject to security
interests granted under the Credit Facility as described below, and by liens
on certain assets of Terex's foreign subsidiaries, including PPM Europe.
Simultaneously with the acquisition, Terex, PPM North America and certain other
domestic subsidiaries of Terex entered into a Credit Facility which provides
that the companies will be able to borrow (in the form of revolving loans and
up to $15 million in outstanding letters of credit) up to $100 million, subject
to borrowing base limitations. The Credit Facility is secured by substantially
all of the companies domestic receivables and inventory (including PPM North
America). The amount of borrowings is limited to the sum of the following: (i)
75% of the net amount of eligible receivables, as defined, of Terex's U.S.
businesses other than Clark Material Handling Company ("CMHC") plus (ii) 70% of
the net amount of CMHC eligible receivables, plus (iii) the lesser of 45% of
the value of eligible inventory, as defined, or 80% of the appraised orderly
liquidation value of eligible inventory, less (iv) any availability reserves
established by the lenders. The Credit Facility expires May 9, 1998 unless
extended by the lenders for one additional year. At the option of Terex,
revolving loans may be in the form of prime rate loans bearing interest at the
rate of l.75% per annum in excess of the prime rate and eurodollar rate loans
bearing interest at the rate of 3.75% per annum in excess of the adjusted
Eurodollar rate.
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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, 1994 and for the nine months ended September 30, 1995, giving
effect to the PPM Acquisition and related financing transactions and
adjustments as reflected in the accompanying notes.
On May 9, 1995, the Company completed the PPM Acquisition. The purchase price,
together with amounts needed to repay indebtedness of PPM required to be repaid
in connection with the PPM Acquisition, consisted of (i) approximately $92.6
million in cash and (ii) shares of Series A Redeemable Exchangeable Preferred
Stock of Terex Cranes having an aggregate liquidation preference of
approximately $26.1 million, subject to adjustment calculated by reference to
the consolidated net asset value of PPM on the closing date of the PPM
Acquisition. A private placement of $250 million of the Company's 13.25%
Senior Secured Notes due 2002 provided the financing for the cash portion of
the purchase price. Proceeds of the Senior Secured Notes and of a new domestic
Credit Facility also provided funds for the refinancing of certain existing
Company debt (the "Refinancing"), for transaction and acquisition costs and for
working capital purposes.
The acquisition was accounted for using the purchase method, with the purchase
price of the PPM Acquisition allocated to the assets acquired and liabilities
assumed based upon their respective estimated fair values at the date of
acquisition. The pro forma consolidated financial information reflects the
Company's initial estimates of the purchase price allocation.
The unaudited pro forma consolidated financial information is not necessarily
indicative of what the actual results of operations of the Company would have
been for the periods indicated, nor does it purport to represent the results of
operations for future periods.
- ------------------------------------------------------------------------------
TEREX CORPORATION
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(in thousands except per share amounts)
Terex
Corporation Pro Forma Pro Forma
and BusinessAcquisition Refinancing
Subsidiaries AcquiredAdjustments Adjustments Pro Forma
NET SALES $ 786,781 $ 179,695 $ 0 $ 0 $966,476
COST OF GOODS SOLD 703,622 157,099 2,288 (2a) 0 863,009
Gross Profit 83,159 22,596 (2,288) 0 103,467
ENGINEERING, SELLING
AND ADMINISTRATIVE
EXPENSES 72,445 35,673 0 0 108,118
SEVERANCE CHARGES 7,353 0 0 0 7,353
Income (loss) from
operations 3,361 (13,077) (2,288) 0 (12,004)
OTHER INCOME (EXPENSE):
Interest income 587 48 0 0 635
Interest expense (30,492) (6,668) 5,329 (2b)(12,388)(2d)(44,219)
Amortization of debt
issuance costs (2,300) 0 0 (129)(2d) (2,429)
Gain on sale
of Fruehauf 26,043 0 0 0 26,043
Gain on sale of
Drexel business 4,742 0 0 0 4,742
Other income
(expense) - net 15 0 0 0 15
Income (loss) before
extraordinary items
and income taxes 1,956 (19,697) 3,041 (12,517) (27,217)
PROVISION FOR
INCOME TAXES (786) 14 0 0 (772)
Income (loss) before
extraordinary
items 1,170 (19,683) 3,041 (12,517) (27,989)
Minority interest in
loss of subsidiary 0 647 0 0 647
LESS PREFERRED STOCK
ACCRETION (5,929) 0 (1,421) (2c) 0 (7,350)
LOSS BEFORE
EXTRAORDINARY
ITEMS APPLICABLE TO
COMMON STOCK $ (4,759) $(19,036) $ 1,620 $(12,517) $(34,692)
PER SHARE $ (.46) $ (3.37)
AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING IN PER
SHARE CALCULATION 10,303 10,303
- ------------------------------------------------------------------------------
TEREX CORPORATION
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(in thousands except per share amounts)
Terex
Corporation Pro Forma Pro Forma
and Business Acquisition Refinancing
Subsidiaries Acquired Adjustments Adjustments Pro Forma
NET SALES $766,789 $ 64,840 $ 0 $ 0 $831,629
COST OF
GOODS SOLD 690,529 66,618 672 (2a) 0 757,819
Gross Profit 76,260 (1,778) (672) 0 73,810
ENGINEERING,
SELLING AND
ADMINISTRATIVE
EXPENSES 61,401 14,053 0 0 75,454
SEVERANCE CHARGES 3,478 0 0 0 3,478
Income (loss)
from operations 11,381 (15,831) (672) 0 (5,122)
OTHER INCOME
(EXPENSE):
Interest income 1,073 0 0 0 1,073
Interest expense (28,416) (2,305) 1,858 (2b) (5,744)(2d)(34,607)
Amortization of
debt issuance
costs (1,672) 0 0 (161)(2d) (1,833)
Gain on sale
of Fruehauf 1,032 0 0 0 1,032
Other income
(expense) - net (9,352) (2,355) 0 0 (11,707)
Loss before
extraordinary
items and
income taxes (25,954) (20,491) 1,186 (5,905) (51,164)
PROVISION FOR
INCOME TAXES (133) 0 0 0 (133)
Loss before
extraordinary
items (26,087) (20,491) 1,186 (5,905) (51,297)
LESS PREFERRED STOCK
ACCRETION (5,200) 0 (794) (2c) 0 (5,994)
LOSS BEFORE
EXTRAORDINARY
ITEMS APPLICABLE
TO COMMON STOCK $(31,287) $(20,491) $ 392 $ (5,905) $(57,291)
PER SHARE $ (3.02) $ (5.55)
AVERAGE NUMBER
OF COMMON AND
COMMON EQUIVALENT
SHARES OUTSTANDING
IN PER SHARE
CALCULATION 10,330 10,330
TEREX CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
1) The unaudited pro forma condensed consolidated financial information is
presented for the year ended December 31, 1994 and the nine months ended
September 30, 1995. The pro forma statements of operations reflect the
consolidated operations of the Company combined with those of the acquired
business assuming the PPM Acquisition and the Refinancing were consummated on
January 1, 1994.
2) The pro forma statement of operations adjustments are summarized as
follows:
a) Pro forma acquisition adjustments to "Cost of goods sold" represent
the elimination of goodwill amortization of the business acquired and the
amortization of goodwill resulting from the PPM Acquisition over 15 years.
b) Pro forma acquisition adjustments to "Interest expense" represent the
elimination of interest expense relating to debt repaid in connection with the
PPM Acquisition or forgiven by the seller.
c) Pro forma acquisition adjustments to "Preferred stock accretion"
represent accretion on Terex Cranes redeemable preferred stock issued in the
PPM Acquisition, assuming issuance as of January 1, 1994.
d) The Refinancing provided the funds to finance the PPM Acquisition, as
well as funds to refinance certain existing Company debt and pay refinancing
and acquisition costs. The new Senior Secured Notes bear interest at 13.25%
and are due May 15, 2002. The Credit Facility loans bear interest at 1.75% in
excess of the prime rate or at 3.75% in excess of the adjusted eurodollar rate,
at the Company's option (interest rate of 11%, including fees, assumed for pro
forma presentation); the Credit Facility expires May 9, 1998. The pro forma
adjustments to "Interest expense" and "Amortization of debt issuance costs"
represent the incremental effects of the Refinancing:
- The Company's old 13% senior secured notes and 13.5% senior
subordinated notes are assumed to be repaid as of January 1, 1994, and the
interest expense and related amortization of discount and issuance costs is
eliminated.
- The 13.25% new Senior Secured Notes are assumed to be issued and
registered as of January 1, 1994 and interest expense and related amortization
of discount and issuance costs is included.
- The incremental amount borrowed under the Credit Facility at the
time of the Refinancing is assumed to be outstanding from January 1, 1994 and
interest is included thereon.
3) A pro forma condensed balance sheet is not presented herein because the
PPM Acquisition is reflected in the Company's Condensed Consolidated Balance
Sheet as of September 30, 1995. The estimated fair values of assets and
liabilities acquired in the PPM Acquisition are summarized as follows (in
thousands):
Cash $ 974
Accounts receivable 33,816
Inventories 69,107
Other current assets 11,866
Property, plant and equipment 20,516
Other assets 268
Goodwill 65,864
Accounts payable and other
current liabilities (84,458)
Other liabilities (13,501)
$ 104,452
The Company is in the process of obtaining certain evaluations, estimations,
appraisals and actuarial and other studies for purposes of determining certain
values. The Company has also estimated costs related to plans to integrate the
activities of PPM into the Company, including plans to terminate excess
employees, exit certain activities and consolidate and restructure certain
functions. The Company may revise the estimates as additional information is
obtained.
- ------------------------------------------------------------------------------
******************************************************************************
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 2
Prospectus Summary 3
Risk Factors 6
The Company 8
Use of Proceeds 10
Market for Common Stock and Dividend Policy 10
Capitalization 11
Selected Consolidated Financial Information 12
Management's Discussion and Analysis of
Financial Condition and Results of Operations 16
Business 28
Management 36
Principal Stockholders 40
Selling Security Holders 42
Certain Transactions 43
Description of Securities 45
Certain Federal Income Tax Considerations 51
Plan of Distribution 52
Legal Matters 53
Auditors 54
Index to Consolidated 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
, 1995
******************************************************************************
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 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 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.
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 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 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 From 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 From 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 From 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 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 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
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
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 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
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 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 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 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 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 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).
11.1 Computation of per share earnings.*
12.1 Computation of ratio of earnings to fixed charges.*
21.1 Subsidiaries of Terex Corporation.*
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 (included on signature page of this Registration
Statement).
* Filed herewith.
** To be filed by amendment.
(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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 2 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 January 24, 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 2 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 January 24, 1996
Ronald M. DeFeo Officer and Director
(Principal Executive Officer)
and Chief Operating Officer
/s/ Ralph T. Brandifino * Senior Vice President and January 24, 1996
Ralph T. Brandifino Chief Financial Officer
(Principal Financial Officer
and acting Principal Accounting
Officer)
/s/ Marvin B. Rosenberg * Senior Vice President, January 24, 1996
Marvin B. Rosenberg General Counsel, Secretary
and Director
/s/ G. Chris Andersen * Director January 24, 1996
G. Chris Andersen
/s/ William H. Fike * Director January 24, 1996
William H. Fike
/s/ Bruce I. Raben * Director January 24, 1996
Bruce I. Raben
/s/ David A. Sachs * Director January 24, 1996
David A. Sachs
/s/ Adam E. Wolf * Director January 24, 1996
Adam E. Wolf
* By: /s/ Ronald M. DeFeo
Ronald M. DeFeo
Attorney-in-fact
- -----------------------------------------------------------------------------
TEREX CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Amounts in thousands)
Balance Additions
Beginning Charges to Balance End
of Year Earnings Other Deductions(1) of Year
Year ended
December 31, 1994:
Deducted from
asset accounts:
Allowance for
doubtful
accounts $ 7,478 $ 1,018 $ --- $(2,382) $ 6,114
Reserve for
excess and
obsolete
inventory 20,670 7,561 --- (7,154) 21,077
Totals $ 28,148 $ 8,579 $ --- $(9,536) $ 27,191
Year ended
December 31, 1993:
Deducted from
asset accounts:
Allowance for
doubtful
accounts $ 6,348 $ 1,713 $ --- $ (583) $ 7,478
Reserve for
excess and
obsolete
inventory 22,364 7,478 --- (9,172) 20,670
Totals $ 28,712 $ 9,191 $ --- $(9,755) $ 28,148
Year ended
December 31, 1992:
Deducted from
asset accounts:
Allowance for
doubtful
accounts $ 1,932 $ 642 $ 4,462 (2) $ (688) $ 6,348
Reserve for
excess and
obsolete
inventory 20,135 2,545 691 (3) (1,007) 22,364
Totals $ 22,067 $ 3,187 $ 5,153 $ (1,695) $ 28,712
(1) Utilization of established reserves, net of recoveries.
(2) Added with the acquisition of businesses.
(3) Includes balances reclassified to other accounts.
EXHIBIT 11.1
(Page 1 of 2)
TEREX CORPORATION AND SUBSIDIARIES
Computation of Earnings per Common Share
In Thousands except per share amounts
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
PRIMARY:
Income (loss) before
extraordinary item (7,786) 1,209 (26,087) 639
Less: Accretion of
Preferred Stock (1,853) (1,517) (5,200) (4,341)
Income (loss) before
extraordinary item
applicable to common stock (9,639) (308) (31,287) (3,702)
Extraordinary gain (loss)
on retirement of debt --- (164) (7,452) (397)
Net income applicable to
common stock (9,639) (472) (38,739) (4,099)
Weighted average shares
outstanding during the
period (in millions) 10.3 10.3 10.3 10.3
Assumed exercise of warrants
at ratio determined as of
September 30, 1994 0 (a) 0 (a) 0 (a) 0 (a)
Assumed exercise of stock options 0 (a) 0 (a) 0 (a) 0 (a)
Primary shares outstanding
(in millions) 10.3 10.3 10.3 10.3
Primary income (loss) per
common share
Income (loss) before
extraordinary item $(0.93) $(0.03) $(3.02) ($0.36)
Extraordinary gain (loss) --- (0.02) (0.73) (0.04)
Net income (loss) $(0.93) $(0.05) $(3.75) ($0.40)
(a) Excluded from the computation because the effect is anti-dilutive.
EXHIBIT 11.1
(Page 2 of 2)
TEREX CORPORATION AND SUBSIDIARIES
Computation of Earnings per Common Share
In Thousands except per share amounts
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
FULLY DILUTED:
Income (loss) before
extraordinary item (7,786) 1,209 (26,087) 639
Income (loss) before
extraordinary item (7,786) 1,209 (26,087) 639
Less: Accretion of
Preferred Stock (1,853) (1,517) (5,200) (4,341)
Income (loss) before
extraordinary item applicable
to common stock (9,639) (308) (31,287) (3,702)
Add: Accretion of Preferred
stock assumed converted at
beginning of period 0 0 0 0
Extraordinary gain (loss)
on retirement of debt --- (164) (7,452) (397)
Net income (loss) applicable
to common stock (9,639) (472) (38,739) (4,099)
Weighted average shares
outstanding during the
period (in millions) 10.3 10.3 10.3 10.3
Assumed exercise of warrants
at ratio reflecting maximum
dilution 0 (a) 0 (a) 0 (a) 0 (a)
Assumed conversion of
Preferred Stock 0 (a) 0 (a) 0 (a) 0 (a)
Assumed exercise of stock options 0 (a) 0 (a) 0 (a) 0 (a)
Fully diluted shares
outstanding (in millions) 10.3 10.3 10.3 10.3
Fully diluted income (loss)
per common share
Income (loss) before
extraordinary item $(0.93) ($0.03) $(3.02) ($0.36)
Extraordinary gain (loss) --- (0.02) (0.73) (0.04)
Net income (loss) $(0.93) $(0.05) $(3.75) ($0.40)
(a) Excluded from the computation because the effect is anti-dilutive.
Exhibit 12.1
TEREX CORPORATION
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
Pro Forma
9 months 9 months
Ended Ended
Sept 30. Sept 30. Year Ended December 31,
1995* 1995* 1994* 1993 1992* 1991 1990*
EARNINGS
Income before
taxes and
minority
interest (25,954) (51,164) 1,956 (64,922) 2,982 (41,863) (39,705)
Adjustments:
Minority
interest
in losses of
consolidated
subsidiaries 0 0 0 0
Undistributed
(income) loss
of less than
50% owned
investments 0 0 0 677 3,714 (5,839) (8,605)
Distributions
from less
than 50%
owned
investments 0 0 1,681 732
Fixed charges 35,905 43,051 41,189 34,798 27,214 36,191 54,214
--------------------------------------------------------------
Earnings 9,951 (8,113) 43,145 (29,447)
COMBINED FIXED CHARGES
INCLUDING PREFERRED ACCRETION
Interest expense,
including debt
discount
amortization 28,416 34,607 30,492 31,246 23,320 31,457 45,824
Accretion of
redeemable
convertible
preferred
stock 5,200 5,994 5,929 152 0 0 0
Amortization/
writeoff of
debt issuance
costs 1,672 1,833 2,300 1,304 1,694 1,618 5,786
Portion of
rental expense
representative
of interest
factor (assumed
to be 33%) 617 617 2,468 2,096 2,200 3,116 2,604
---------------------------------------------------------------
Fixed charges 35,905 43,051 41,189 34,798 27,214 36,191 54,214
---------------------------------------------------------------
RATIO OF
EARNINGS TO
COMBINED FIXED
CHARGES (1) (1) 1.0 (1) 1.2 (1) (1)
AMOUNT OF EARNINGS
DEFICIENCY FOR
COVERAGE OF
COMBINED
FIXED CHARGES 25,954 51,164 0 64,245 0 46,021 47,578
(1) Less than 1.0x.
* Fruehauf deconsolidated as of January 1, 1992
EXHIBIT 21.1
CONSOLIDATED SUBSIDIARIES OF TEREX CORPORATION
Name of Subsidiary Jurisdiction of Incorporation
CMH Acquisition Corporation Delaware
Clark Material Handling Michigan
Clark Forklift Korea Korea
Clarklift of Western Michigan, Inc. Michigan
Clark Material Handling Company Kentucky
Clark Material Handling GmbH Germany
Clark France Manutention S.A. France
Clark Maquinaria S.A. Spain
CMH Acquisition International Corporation Delaware
New Terex Holdings Corporation Delaware
Terex Equipment Limited Scotland
Imaco England
Bucyrus Construction Products Delaware
Unit Rig Australia (Pty) Limited New South Wales,
Australia
Terex International Exports, Inc. Delaware
Unit Rig South Africa (Pty) Limited South Africa
Unit Rig (Canada) Limited Delaware
Terex Cranes, Inc. Delaware
PPM S.A. (France) France
Bendini SPA (Italy) Italy
Brimont Engine (France) France
Brimont Agaire (France) France
PPM Krane (Germany) Germany
Baulift (Germany) Germany
Koehring Cranes Inc. Delaware
Legris Industries Inc. Delaware (Liquidated)
PPM Cranes, Inc. Delaware
PPM PTY Ltd. (Australia) Australia
PPM Far East Ltd. (Singapore) Singapore
Century II Foreign Sales Corp. Virgin Islands
Potain Tower Cranes, Inc. New York
North West International, Ltd. Virgin Islands
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of
this Amendment No. 2 to the Registration Statement on Form S-1
(No. 33-52711) of our report dated March 28, 1995, relating to the
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, 1994 listed under Item 16(b) of this Registration
Statement when such schedule is read in conjunction with the financial
statements referred to in our report. The audits referred to in such
report also included this schedule. We also consent to the references
to us under the headings "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Stamford, CT
January 23, 1995
