UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
F O R M 10 - Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 1-10702
_____________Terex Corporation_____________
(Exact name of registrant as specified in its charter)
_____Delaware______ _________34-1531521________
(State of Incorporation) (IRS Employer Identification No.)
500 Post Road East, Suite 320, Westport, Connecticut 06880
(Address of principal executive offices)
_______(203) 222-7170______
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES __X__ NO ____
Number of outstanding shares of common stock: 13.6 million as of April 30, 1997.
The Exhibit Index appears on page 27.
<PAGE>
INDEX
TEREX CORPORATION AND SUBSIDIARIES
GENERAL
This Quarterly Report on Form 10-Q filed by Terex Corporation (the "Company")
includes financial information with respect to the following Subsidiaries of the
Company, which are guarantors (the "Guarantors") of the Company's $250 million
principal amount of 13.25% Senior Secured Notes due 2002 (the "Senior Secured
Notes"). See Note F -- Consolidating Financial Statements.
State or other jurisdiction of I.R.S. employer
Guarantor incorporation or organization identification number
Terex Cranes, Inc. * Delaware 06-1423889
PPM Cranes, Inc. Delaware 39-1611683
Koehring Cranes, Inc. * Delaware 06-1423888
* Wholly-owned subsidiaries
Page No.
PART I FINANCIAL INFORMATION
Item 1 Condensed Consolidated Financial Statements
TEREX CORPORATION
Condensed Consolidated Statement of Operations --
Three months ended March 31, 1997 and 1996..................3
Condensed Consolidated Balance Sheet --
March 31, 1997 and December 31, 1996........................4
Condensed Consolidated Statement of Cash Flows -
Three months ended March 31, 1997 and 1996..................5
Notes to Condensed Consolidated Financial
Statements -- March 31, 1997................................6
PPM CRANES, INC.
Condensed Consolidated Statement of Operations --
Three months ended March 31, 1997 and 1996.................14
Condensed Consolidated Balance Sheet --
March 31, 1997 and December 31, 1996.......................15
Condensed Consolidated Statement of Cash Flows --
Three months ended March 31, 1997 and 1996.................16
Notes to Condensed Consolidated Financial
Statements -- March 31, 1997...............................17
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations...................19
PART II OTHER INFORMATION
Item 1 Legal Proceedings......................................24
Item 5 Other Information......................................24
Item 6 Exhibits and Reports on Form 8-K.......................25
SIGNATURES ...............................................................26
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share data)
For the Three Months
Ended March 31,
---------------------------
1997 1996
------------- -------------
<S> <C> <C>
Net sales.....................................................$ 176.3 $ 173.2
Cost of goods sold............................................ 148.8 149.8
------------- -------------
Gross profit............................................. 27.5 23.4
Engineering, selling and administrative expenses.............. 14.1 16.3
------------- -------------
Income from operations................................... 13.4 7.1
Other income (expense):
Interest income.......................................... 0.6 0.1
Interest expense......................................... (9.5) (11.4)
Other income (expense) - net............................. (0.4) 1.5
------------- -------------
Income (loss) from continuing operations before income taxes.. 4.1 (2.7)
Provision for income taxes.................................... (0.2) ---
------------- -------------
Income (loss) from continuing operations...................... 3.9 (2.7)
Income from discontinued operations........................... --- 3.2
------------- -------------
Net income (loss)............................................. 3.9 0.5
Less preferred stock accretion................................ (0.4) (1.9)
------------- -------------
Income (loss) applicable to common stock......................$ 3.5 $ (1.4)
============= =============
PER COMMON AND COMMON EQUIVALENT SHARE:
Income (loss) from continuing operations.................$ 0.24 $ (0.43)
Income from discontinued operations...................... --- 0.30
------------- -------------
Net income (loss)......................................$ 0.24 $ (0.13)
============= =============
Weighted average common shares outstanding including dilutive
securities (See Exhibit 11.1)............................ 14.4 10.6
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
March 31, 1997 December 31,
1996
----------------- -----------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents...................................$ 39.6 $ 72.0
Cash securing letters of credit............................. 2.9 3.4
Trade receivables (less allowance of $4.8 at March 31, 1997
and $7.0 at December 31, 1996)............................ 109.6 110.3
Net inventories............................................. 188.5 190.6
Other current assets........................................ 11.0 13.9
----------------- -----------------
Total current assets.................................... 351.6 390.2
Long-term assets
Property, plant and equipment - net......................... 30.7 31.7
Goodwill - net.............................................. 31.8 32.4
Debt issuance costs - net................................... 12.5 12.7
Other assets................................................ 4.0 4.2
----------------- -----------------
Total assets $ 430.6 $ 471.2
================= =================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Notes payable and current portion of long-term debt.........$ 22.7 $ 19.2
Trade accounts payable...................................... 103.0 104.4
Accrued compensation and benefits........................... 14.9 15.8
Accrued warranties and product liability.................... 19.6 19.4
Other current liabilities................................... 42.5 36.2
----------------- -----------------
Total current liabilities............................... 202.7 195.0
Non current liabilities
Long-term debt, less current portion........................ 261.1 262.1
Other....................................................... 29.1 29.6
Minority interest, including redeemable preferred stock
of a subsidiary liquidation preference
$19.7 at March 31, 1997 and $21.4 at December 31, 1996,
subject to adjustment....................................... 10.4 10.0
Redeemable convertible preferred stock liquidation preference
$1.3 at March 31, 1997 and $46.2 at December 31, 1996....... 0.8 46.2
Commitments and contingencies
Stockholders' deficit
Warrants to purchase common stock........................... 3.2 3.2
Common stock, $.01 par value - authorized 30.0 shares;
issued and outstanding 13.3 at March 31, 1997 and
13.2 at December 31, 1996.............................. 0.1 0.1
Additional paid-in capital.................................. 56.0 55.8
Accumulated deficit......................................... (122.6) (126.1)
Pension liability adjustment................................ (2.0) (2.0)
Cumulative translation adjustment........................... (8.2) (2.7)
----------------- -----------------
Total stockholders' deficit............................. (73.5) (71.7)
----------------- -----------------
Total liabilities and stockholders' deficit......................$ 430.6 $ 471.2
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
For the Three Months
Ended March 31,
---------------------------
1997 1996
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss).............................................$ 3.9 $ 0.5
Adjustments to reconcile net income (loss) to
cash used in operating activities:
Depreciation............................................. 1.6 2.0
Amortization............................................. 1.4 1.9
Other.................................................... (0.2) (1.9)
Changes in operating assets and liabilities:
Cash securing letters of credit...................... 0.5 0.9
Trade receivables.................................... 0.7 (21.4)
Net inventories...................................... 1.0 2.7
Net assets of discontinued operations................ --- (4.3)
Trade accounts payable............................... (1.4) 9.1
Accrued compensation and benefits.................... (0.9) 1.1
Other, net........................................... 8.4 7.1
------------- -------------
Net cash provided by (used in)
operating activities........................... 15.0 (2.3)
------------- -------------
INVESTING ACTIVITIES
Capital expenditures.......................................... (0.8) (0.3)
Proceeds from sale of excess assets........................... 0.3 4.0
Other......................................................... 0.1 ---
------------- -------------
Net cash provided by (used in)
investing activities................................ (0.4) 3.7
------------- -------------
FINANCING ACTIVITIES
Redemption of preferred stock................................. (45.4) ---
Net incremental borrowings under revolving
line of credit agreements................................ 3.8 3.5
Other......................................................... (1.5) (1.3)
------------- -------------
Net cash provided by (used in) financing activities...... (43.1) 2.2
------------- -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS....... (3.9) 1.3
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............... (32.4) 4.9
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD................... 72.0 7.0
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.........................$ 39.6 $ 11.9
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(in millions, unless otherwise denoted)
NOTE A -- BASIS OF PRESENTATION
Basis of Presentation. The accompanying unaudited condensed consolidated
financial statements of Terex Corporation and subsidiaries as of March 31, 1997
and for the three months ended March 31, 1997 and 1996 have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles to be included in full year
financial statements. The accompanying condensed consolidated balance sheet as
of December 31, 1996, has been derived from the audited consolidated balance
sheet as of that date.
As set forth in Note B below, the Company sold its worldwide Material Handling
business ("CMHC") on November 27, 1996. CMHC is accounted for as a discontinued
operation in the statement of cash flows and in the statement of operations for
the three month period ended March 31, 1996.
The condensed consolidated financial statements include the accounts of Terex
Corporation and its majority owned subsidiaries ("Terex" or the "Company"). All
material intercompany balances, transactions and profits have been eliminated.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been made. Such adjustments consist only of those of a normal
recurring nature. Operating results for the three months ended March 31, 1997
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. 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, 1996.
NOTE B -- DISCONTINUED OPERATIONS
The Company sold CMHC on November 27, 1996. The accompanying condensed
consolidated statement of operations for the three months ended 1996 includes
the results of CMHC in "Income (Loss) from Discontinued Operations." Generally
accepted accounting principles permit, but do not require, the allocation of
interest expense between continuing and discontinued operations. Because the
methods allowed under generally accepted accounting principles for calculating
interest expense to be allocated to discontinued operations are not necessarily
indicative of the use of proceeds from the sale of CMHC by the Company, and the
effect on interest expense of the continuing operations of the Company, the
Company has elected not to allocate interest expense to discontinued operations.
The results of this election are that loss from continuing operations includes
substantially all of the interest expense of the Company, and income from
discontinued operations does not include any material interest expense. Summary
operating results of discontinued operations are as follows:
<TABLE>
<CAPTION>
Three Months
Ended
March 31, 1996
-----------------
<S> <C>
Net sales............................................$ 108.8
Income before income taxes........................... 3.2
Provision for income taxes........................... ---
Income from discontinued operations ................. 3.2
</TABLE>
<PAGE>
NOTE C -- INVENTORIES
Net inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------------- ----------------
<S> <C> <C>
Finished equipment............................................$ 63.1 $ 49.3
Replacement parts............................................. 67.2 68.0
Work-in-process............................................... 14.9 19.8
Raw materials and supplies.................................... 46.1 56.3
----------------- ----------------
191.3 193.4
Less: Excess of FIFO inventory value
over LIFO cost........................................... (2.8) (2.8)
----------------- ----------------
Net inventories...............................................$ 188.5 $ 190.6
================= ================
</TABLE>
NOTE D -- PROPERTY, PLANT AND EQUIPMENT
Net property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------------- ----------------
<S> <C> <C>
Property, plant and equipment.................................$ 61.6 $ 65.4
Less: Accumulated depreciation............................... (30.9) (33.7)
----------------- ----------------
Net property, plant and equipment.............................$ 30.7 $ 31.7
================= ================
</TABLE>
NOTE E -- LITIGATION AND CONTINGENCIES
The Company is subject to a number of contingencies and uncertainties including
product liability claims, self-insurance obligations, tax examinations and
guarantees. Many of the exposures are unasserted or proceedings are at a
preliminary stage, and it is not presently possible to estimate the amount or
timing of any cost to the Company. However, management does not believe that
these contingencies and uncertainties will, in the aggregate, have a material
effect on the Company. When it is probable that a loss has been incurred and
possible to make reasonable estimates of the Company's liability with respect to
such matters, a provision is recorded for the amount of such estimate or for the
minimum amount of a range of estimates when it is not possible to estimate the
amount within the range that is most likely to occur.
The Company generates hazardous and nonhazardous wastes in the normal course of
its operations. As a result, the Company is subject to a wide range of federal,
state, local and foreign environmental laws and regulations, including the
Comprehensive Environmental Response, Compensation and Liability Act, that (i)
govern activities or operations that may have adverse environmental effects,
such as discharges to air and water, as well as handling and disposal practices
for hazardous and nonhazardous wastes, and (ii) impose liability for the costs
of cleaning up, and certain damages resulting from, sites of past spills,
disposals or other releases of hazardous substances. Compliance with such laws
and regulations has, and will, require expenditures by the Company on a
continuing basis.
The Internal Revenue Service (the "IRS") is currently examining the Company's
federal tax returns for the years 1987 through 1989. In December 1994, the
Company received an examination report from the IRS proposing a substantial tax
deficiency. The examination report raises a variety of issues, including the
Company's substantiation for certain deductions taken during this period, the
Company's utilization of certain net operating loss carryovers ("NOL's") and the
availability of such NOL's to offset future taxable income. If the IRS were to
prevail on all the issues raised, the amount of the tax assessment would be
approximately $56 plus interest and penalties. If the Company were required to
pay a significant portion of the assessment, it could have a material adverse
impact on the Company and could exceed the Company's resources. The Company has
filed its administrative appeal to the examination report in April 1995. As a
result of a meeting with the Manhattan division of the IRS in July 1995, in June
1996 the Company was advised that the matter was being referred back to the
Milwaukee audit division of the IRS. The Milwaukee audit division of the IRS is
currently reviewing information provided by the Company over the past 18 months.
Although management believes that the Company will be able to provide adequate
documentation for a substantial portion of the deductions questioned by the IRS
and that there is substantial support for the Company's past and future
utilization of the NOL's, the ultimate outcome of this matter is subject to the
resolution of significant legal and factual issues. If the Company's positions
prevail on the most significant issues, management believes that the amounts due
would not exceed amounts previously paid or provided; however, even under such
circumstances, it is possible that the Company's NOL's could be reduced to some
extent. No additional accruals have been made for any amounts which might be due
as a result of this matter because the possible loss ranges from zero to $56
plus interest and penalties and the ultimate outcome cannot presently be
determined or estimated. Additionally, if a change in control for tax purposes
were to occur, such a change in control could possibly result in a significant
reduction in the amount of NOL's available to the Company to offset future
taxable income.
NOTE F -- CONSOLIDATING FINANCIAL STATEMENTS
On May 9, 1995, the Company completed the refinancing of substantially all of
its outstanding debt (the "Refinancing") and, through Terex Cranes, Inc. ("Terex
Cranes"), a wholly-owned subsidiary, completed the acquisition of substantially
all of the outstanding stock of PPM. S.A. and Legris Industries, Inc.
Terex Cranes, Inc., Koehring Cranes, Inc. (the "Wholly-owned Guarantors"), and
PPM Cranes, Inc. (collectively, the "Guarantors"), all subsidiaries of Terex,
provide a joint and several, unconditional guarantee of the obligations under
the Senior Secured Notes.
With the exception of PPM Cranes, Inc. each of the Guarantors is a corporation
organized and existing under the laws of the state of Delaware and is a
wholly-owned subsidiary of the Company. PPM Cranes, Inc. is a corporation
organized and existing under the laws of the state of Delaware and is 92.4%
owned by Terex.
The following summarized condensed consolidating financial information for the
Company segregates the financial information of Terex Corporation, the
Wholly-owned Guarantors, PPM Cranes, Inc. and the Non-guarantor Subsidiaries.
Terex Corporation consists of parent company operations. Subsidiaries of the
parent company are reported on the equity basis.
Wholly-owned Guarantors combine the operations of the Wholly-owned Guarantor
Subsidiaries (Terex Cranes, Inc. and Koehring Cranes, Inc.). Non-guarantor
subsidiaries of Wholly-owned Guarantors are reported on the equity basis.
PPM Cranes, Inc. presents the operations of PPM Cranes, Inc. and its
subsidiaries (PPM of Australia Pty Ltd and PPM Far East Private Ltd) reported on
an equity basis.
Non-Guarantor Subsidiaries combine the operations of subsidiaries which have not
provided a guarantee of the obligations of Terex Corporation under the Senior
Secured Notes. These subsidiaries include Terex Equipment Limited, Unit Rig
Australia (Pty) Ltd., Unit Rig South Africa (Pty) Ltd., Unit Rig (Canada) Ltd.,
PPM S.A., Bendini S.P.A., Brimont Agraire, PPM Kranes, Baulift, PPM Pty Ltd.,
and PPM Far East Ltd.
Debt and Goodwill allocated to subsidiaries are presented on an accounting
"push-down" basis.
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 1997
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents.......... $ 38.6 $ --- $ 0.1 $ 0.9 $ --- $ 39.6
Cash securing letters of credit.... 0.8 --- --- 2.1 --- 2.9
Trade receivables - net............ 12.9 17.8 13.6 65.3 --- 109.6
Intercompany receivables........... 6.8 5.1 10.0 55.8 (77.7) ---
Net inventories.................... 47.0 23.2 27.5 91.4 (0.6) 188.5
Other current assets............... 2.6 0.1 0.1 8.2 --- 11.0
------------- ------------- ------------- ------------- ------------- -------------
Total current assets............. 108.7 46.2 51.3 223.7 (78.3) 351.6
Long-Term Assets
Property, plant & equipment - net.. 4.7 4.4 --- 21.6 --- 30.7
Investment in and advances
to (from) subsidiaries......... 34.9 (68.8) (5.4) (85.8) 125.1 ---
Goodwill - net..................... --- --- 15.1 16.7 --- 31.8
Debt issuance costs - net.......... 6.6 0.8 2.2 2.9 --- 12.5
Other assets....................... 2.9 --- 0.1 1.0 --- 4.0
------------- ------------- ------------- ------------- ------------- -------------
TOTAL ASSETS............................ $ 157.8 $ (17.4) $ 63.3 $ 180.1 $ 46.8 $ 430.6
============= ============= ============= ============= ============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Notes payable and current portion
of long-term debt................ $ --- $ --- $ 0.8 $ 21.9 $ --- $ 22.7
Trade accounts payable............. 12.2 16.7 4.2 69.9 --- 103.0
Intercompany payables.............. 37.0 7.6 13.1 20.0 (77.7) ---
Accruals and other current 40.5 4.2 10.2 22.1 --- 77.0
liabilities......................
------------- ------------- ------------- ------------- ------------- -------------
Total current liabilities........ 89.7 28.5 28.3 133.9 (77.7) 202.7
Non-Current Liabilities
Long-term debt less current portion 119.1 17.8 51.7 72.5 --- 261.1
Other long-term liabilities........ 14.5 1.9 1.1 11.6 --- 29.1
Minority interest and redeemable
preferred stock.................... --- 9.8 0.6 --- --- 10.4
Redeemable convertible preferred stock 0.8 --- --- --- --- 0.8
Stockholders' deficit................ (66.3) (75.4) (18.4) (37.9) 124.5 (73.5)
------------- ------------- ------------- ------------- ------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT.............................. $ 157.8 $ (17.4) $ 63.3 $ 180.1 $ 46.8 $ 430.6
============= ============= ============= ============= ============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1996
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents.......... $ 53.5 $ --- $ --- $ 18.5 $ --- $ 72.0
Cash securing letters of credit.... 0.9 --- --- 2.5 --- 3.4
Trade receivables - net............ 21.8 10.1 12.8 65.6 --- 110.3
Intercompany receivables........... 4.7 2.8 8.6 26.6 (42.7) ---
Net inventories.................... 44.9 25.3 27.9 93.8 (1.3) 190.6
Other current assets............... 2.0 --- 0.1 11.8 --- 13.9
------------- ------------- ------------- ------------- ------------- -------------
Total current assets............. 127.8 38.2 49.4 218.8 (44.0) 390.2
Long -Term Assets
Property, plant & equipment - net.. 3.5 4.5 --- 23.7 --- 31.7
Investment in and advances to
(from) subsidiaries.............. 27.9 (70.2) (5.4) (89.7) 137.4 ---
Goodwill - net..................... --- --- 15.5 16.9 --- 32.4
Debt issuance - net................ 6.4 0.9 2.3 3.1 --- 12.7
Other assets....................... 3.0 --- 0.1 1.1 --- 4.2
------------- ------------- ------------- ------------- ------------- -------------
TOTAL ASSETS............................ $ 168.6 $ (26.6) $ 61.9 $ 173.9 $ 93.4 $ 471.2
============= ============= ============= ============= ============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Notes payable and current portion of
long-term debt................... $ --- $ --- $ 0.8 $ 18.4 $ --- $ 19.2
Trade accounts payable............. 13.3 11.7 5.0 74.4 --- 104.4
Intercompany payables.............. 10.8 7.6 10.7 13.6 (42.7) ---
Accruals and other current 35.2 3.6 10.1 22.5 --- 71.4
liabilities......................
------------- ------------- ------------- ------------- ------------- -------------
Total current liabilities........ 59.3 22.9 26.6 128.9 (42.7) 195.0
Non-Current Liabilities
Long-term debt less current portion 119.1 17.8 51.7 73.5 --- 262.1
Other long-term liabilities........ 14.3 1.8 1.2 12.3 --- 29.6
Minority interest and redeemable
preferred stock.................... --- 9.4 0.6 --- --- 10.0
Redeemable convertible preferred stock 46.2 --- --- --- --- 46.2
Stockholders' deficit................ (70.3) (78.5) (18.2) (40.8) 136.1 (71.7)
------------- ------------- ------------- ------------- ------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT.............................. $ 168.6 $ (26.6) $ 61.9 $ 173.9 $ 93.4 $ 471.2
============= ============= ============= ============= ============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES............................... $ 47.4 $ 40.4 $ 17.1 $ 99.9 $ (28.5) $ 176.3
Cost of goods sold................... 41.4 33.5 15.0 86.8 (27.9) 148.8
------------- ------------- ------------- ------------- ------------- -------------
GROSS PROFIT............................ 6.0 6.9 2.1 13.1 (0.6) 27.5
Engineering, selling & administrative
expenses........................... 4.1 2.0 0.7 7.3 --- 14.1
------------- ------------- ------------- ------------- ------------- -------------
INCOME (LOSS) FROM OPERATIONS........... 1.9 4.9 1.4 5.8 (0.6) 13.4
Interest income....................... 0.4 --- --- 0.2 --- 0.6
Interest expense...................... (4.3) (0.6) (1.7) (2.9) --- (9.5)
Income (loss) from equity investees... 6.5 (0.9) 0.1 --- (5.7) ---
Other income (expense) - net.......... (0.4) --- --- --- --- (0.4)
------------- ------------- ------------- ------------- ------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES.......
4.1 3.4 (0.2) 3.1 (6.3) 4.1
Provision for income taxes............ --- --- --- (0.2) --- (0.2)
------------- ------------- ------------- ------------- ------------- -------------
NET INCOME (LOSS)....................... 4.1 3.4 (0.2) 2.9 (6.3) 3.9
Less preferred stock accretion........ (0.1) (0.3) --- --- --- (0.4)
------------- ------------- ------------- ------------- ------------- -------------
INCOME (LOSS) APPLICABLE TO COMMON STOCK
$ 4.0 $ 3.1 $ (0.2) $ 2.9 $ (6.3) $ 3.5
============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
TEREX CORPORATION
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES............................... $ 36.8 $ 36.7 $ 23.5 $ 96.1 $ (19.9) $ 173.2
Cost of goods sold................... 32.8 31.8 20.2 83.5 (18.5) 149.8
------------- ------------- ------------- ------------- ------------- -------------
GROSS PROFIT............................ 4.0 4.9 3.3 12.6 (1.4) 23.4
Engineering, selling & administrative
expenses........................... 4.7 1.7 1.8 8.1 --- 16.3
------------- ------------- ------------- ------------- ------------- -------------
INCOME (LOSS) FROM OPERATIONS........... (0.7) 3.2 1.5 4.5 (1.4) 7.1
Interest income....................... --- --- --- 0.1 --- 0.1
Interest expense...................... (6.1) (0.6) (1.7) (3.0) --- (11.4)
Income (loss) from equity investees... 5.7 (0.6) (0.2) --- (4.9) ---
Other income (expense) - net.......... (0.3) (0.3) (0.1) 2.2 --- 1.5
------------- ------------- ------------- ------------- ------------- -------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES...................
(1.4) 1.7 (0.5) 3.8 (6.3) (2.7)
Provision for income taxes............ --- --- --- --- --- ---
------------- ------------- ------------- ------------- ------------- -------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
(1.4) 1.7 (0.5) 3.8 (6.3) (2.7)
Income (loss) from discontinued
operations, net of tax benefits...... 3.3 3.2 --- 0.1 (3.4) 3.2
------------- ------------- ------------- ------------- ------------- -------------
NET INCOME (LOSS)....................... 1.9 4.9 (0.5) 3.9 (9.7) 0.5
Less preferred stock accretion........ (1.9) --- --- --- --- (1.9)
------------- ------------- ------------- ------------- ------------- -------------
INCOME (LOSS) APPLICABLE TO COMMON STOCK
$ --- $ 4.9 $ (0.5) $ 3.9 $ (9.7) $ (1.4)
============= ============= ============= ============= ============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES................. $ 30.6 $ (0.1) $ 0.1 $ (15.6) $ --- $ 15.0
------------- ------------- ------------- ------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures................. (0.2) (0.1) --- (0.5) --- (0.8)
Proceeds from sale of excess assets.. --- 0.3 --- --- --- 0.3
Other................................ --- --- --- 0.1 --- 0.1
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
investing activities............. (0.2) 0.2 --- (0.4) --- (0.4)
------------- ------------- ------------- ------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Redemption of preferred stock........ (45.4) --- --- --- --- (45.4)
Net borrowings (repayments) under
revolving line of credit agreements --- --- --- 3.8 --- 3.8
Other................................ --- --- --- (1.5) --- (1.5)
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
financing activities............. (45.4) --- --- 2.3 --- (43.1)
------------- ------------- ------------- ------------- ------------- -------------
EFFECT OF EXCHANGE RATES ON CASH AND
CASH EQUIVALENTS..................... --- --- --- (3.9) --- (3.9)
------------- ------------- ------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.......................... (15.0) 0.1 0.1 (17.6) --- (32.4)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD............................... 53.4 0.1 --- 18.5 --- 72.0
------------- ------------- ------------- ------------- ------------- -------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD........................ $ 38.4 $ 0.2 $ 0.1 $ 0.9 $ --- $ 39.6
============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
TEREX CORPORATION
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES................. $ 3.1 $ --- $ (0.2) $ (5.2) $ --- $ (2.3)
------------- ------------- ------------- ------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures................. (0.1) --- (0.1) (0.1) --- (0.3)
Proceeds from sale of excess assets.. --- --- 0.1 3.9 --- 4.0
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
investing activities............. (0.1) --- --- 3.8 --- 3.7
------------- ------------- ------------- ------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under
revolving line of credit agreements (1.0) --- --- 4.5 --- 3.5
Other................................ --- --- --- (1.3) --- (1.3)
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
financing activities............. (1.0) --- --- 3.2 --- 2.2
------------- ------------- ------------- ------------- ------------- -------------
EFFECT OF EXCHANGE RATES ON CASH AND
CASH EQUIVALENTS..................... --- --- --- 1.3 --- 1.3
------------- ------------- ------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.......................... 2.0 --- (0.2) 3.1 --- 4.9
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD............................... 3.1 --- 0.3 3.6 --- 7.0
------------- ------------- ------------- ------------- ------------- -------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD........................ $ 5.1 $ --- $ 0.1 $ 6.7 $ --- $ 11.9
============= ============= ============= ============= ============= =============
</TABLE>
<PAGE>
NOTE G -- EARNINGS PER SHARE
Earnings per share is computed by dividing net income for the period by the
weighted average number of common shares outstanding and common stock
equivalents. Weighted average common shares and common stock equivalents used to
compute earnings per share amounts were as follows:
Three months ended March 31, 1997.................... 14.4
Three months ended March 31, 1996.................... 10.6
Recently Issued Accounting Standard on Earnings per Share. Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," issued in
February 1997, establishes new standards for computing and presenting earnings
per share ("EPS") effective for December 31, 1997 reporting. At that time, all
previous EPS disclosures will be restated to comply with the new standard. SFAS
No. 128 requires a dual presentation of basic and diluted EPS and a
reconciliation of the numerator and denominator amounts used in the
computations. Basic EPS is new for the Company and is essentially net income
divided by the weighted average common shares outstanding during the period.
Diluted EPS is consistent with the Company's current EPS disclosures which
reflects the potential dilution of the outstanding stock options and other
common stock equivalents.
The basic and diluted EPS using the new standard for the three months ended
March 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
Basic EPS................................$ 0.26 $ (0.13)
Diluted EPS..............................$ 0.24 $ (0.13)
</TABLE>
NOTE H -- SUBSEQUENT EVENTS
On April 7, 1997, the Company completed the purchase of the industrial
businesses of Simon Access division ("Simon Access") of Simon Engineering plc
for $90 in cash, subject to adjustment.
Simon Access consists principally of several business units in the United States
and Europe which are engaged in the manufacture and sale of access equipment
designed to position people and materials to work at heights. Simon Access
products include truck mounted aerial devices, aerial work platforms and truck
mounted cranes (boom trucks) which are sold to utility companies as well as to
customers in the industrial and construction markets. Specifically, the Company
acquired 100% of the outstanding common stock of (i) Simon-Telelect Inc., a
Delaware corporation, (ii) Simon Aerials, Inc., a Wisconsin corporation, (iii)
Sim-Tech Management Limited, a private limited company incorporated under the
laws of Hong Kong, (iv) Simon-Cella, S.r.l., a company incorporated under the
laws of Italy, and (v) Simon Aerials Limited, a company incorporated under the
laws of Ireland; and 60% of the outstanding common stock of Simon-Tomen
Engineering Company Limited, a limited liability stock company organized under
the laws of Japan. Not included in the businesses acquired were Simon Access'
fire fighting equipment business. The Company obtained the funds necessary to
complete the transaction from its cash on hand and borrowings under a new
revolving credit facility (see description below).
Also on April 7, 1997, the Company and certain of its domestic subsidiaries
(collectively, the "Borrowers") entered a Revolving Credit Agreement with a
financial institution, as agent (the "Agent"), pursuant to which the Agent and
other financial institutions party thereto have provided the Borrowers with a
line of credit of up to $125 secured by accounts receivable and inventory (the
"New Credit Facility"). The New Credit Facility replaced the Company's $100
revolving credit facility (the "Old Credit Facility"). The Company had to pay a
fee of $2.0 upon termination of the Old Credit Facility. Additionally, $0.6 of
unamortized debt acquisition costs related to the Old Credit Facility were
written off at the termination of the Old Credit Facility. These expenses will
be reflected as extraordinary items in the second quarter of 1997.
Loans made under the New Credit Facility (a) bear interest, based on the
Company's fixed charge coverage ratio, at a rate between 0.5% and 1.5% per annum
in excess of the prime rate or at a rate between 2.0% and 3.0% per annum in
excess of eurodollar rate, at the election of the Company, (b) mature on April
7, 2000, (c) were used by the Borrowers to repay the Old Credit Facility, and
(d) are to be used for working capital and other general corporate purposes,
including acquisitions.
<PAGE>
<TABLE>
<CAPTION>
PPM CRANES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions)
For the Three Months Ended
March 31,
----------------------------
1997 1996
------------- --------------
<S> <C> <C>
Net sales............................................$ 19.7 $ 25.0
Cost of goods sold................................... 17.5 21.9
------------- --------------
Gross profit.................................... 2.2 3.1
Engineering, selling and administrative expenses..... 0.9 2.4
------------- --------------
Income from operations.......................... 1.3 0.7
Other income (expense):
Interest expense................................ (1.8) (1.9)
Amortization of debt issuance costs............. (0.1) (0.1)
------------- --------------
Loss before income taxes............................. (0.6) (1.3)
Provision for income taxes........................... --- ---
------------- --------------
Net loss.............................................$ (0.6) $ (1.3)
============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
PPM CRANES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions, except share amounts)
March 31, 1997 December 31,
1996
---------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...........................................$ 0.3 $ 0.4
Trade accounts receivables
(less allowance of $0.6 in 1997 and $0.6 in 1996)................. 16.0 14.4
Net inventories..................................................... 29.2 29.2
Due from affiliates................................................. 11.5 10.2
Prepaid expenses.................................................... 0.1 0.1
---------------- -----------------
Total current assets.............................................. 57.1 54.3
Property, plant and equipment....................................... 0.1 0.1
Goodwill - net...................................................... 16.7 17.0
Other assets - net.................................................. 2.4 2.4
================ =================
Total assets...........................................................$ 76.3 $ 73.8
================ =================
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Trade accounts payable..............................................$ 4.4 $ 5.0
Accrued warranties and product liability............................ 7.7 7.5
Accrued expenses.................................................... 2.7 2.9
Due to affiliates................................................... 15.5 12.3
Due to Terex Corporation............................................ 9.6 8.9
Current portion of long-term debt................................... 1.3 1.3
---------------- -----------------
Total current liabilities......................................... 41.2 37.9
---------------- -----------------
Non-current liabilities:
Long-term debt, less current portion................................ 54.3 54.2
Other non-current liabilities....................................... 1.6 1.9
---------------- -----------------
Total non-current liabilities..................................... 55.9 56.1
---------------- -----------------
Commitments and contingencies
Shareholders' deficit
Common stock, Class A, $.01 par value -
authorized 8,000 shares; issued and outstanding 5,000 shares...... --- ---
Common stock, Class B, $.01 par value -
authorized 2,000 shares; issued and outstanding 413 shares........ --- ---
Accumulated deficit................................................. (20.9) (20.3)
Foreign currency translation adjustment............................. 0.1 0.1
---------------- -----------------
Total shareholders' deficit....................................... (20.8) (20.2)
================ =================
Total liabilities and shareholders' deficit............................$ 76.3 $ 73.8
================ =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
PPM CRANES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
For the Three Months Ended
March 31,
-----------------------------------
1997 1996
----------------- -----------------
OPERATING ACTIVITIES
<S> <C> <C>
Net loss........................................................$ (0.6) $ (1.3)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization............................... 0.5 0.9
Other....................................................... 0.1 0.2
Changes in operating assets and liabilities:
Trade accounts receivable................................. (1.6) (5.5)
Net inventories........................................... --- (0.9)
Prepaid expenses and other current assets................. --- 0.4
Trade accounts payable.................................... (0.6) 2.3
Net amounts due to affiliates............................. 2.6 4.5
Accrued product liability and product warranty............ 0.2 0.3
Accrued expenses.......................................... (0.2) (0.1)
Other, net................................................ (0.4) (0.7)
----------------- -----------------
Net cash provided by operating activities............... --- 0.1
----------------- -----------------
INVESTING ACTIVITIES
Capital expenditures............................................ (0.1) (0.1)
----------------- -----------------
Net cash used in investing activities......................... (0.1) (0.1)
----------------- -----------------
FINANCING ACTIVITIES --- ---
----------------- -----------------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS....................................... --- (0.2)
----------------- -----------------
NET DECREASE IN CASH AND CASH EQUIVALENTS.......................... (0.1) (0.2)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............................................. 0.4 0.5
----------------- -----------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD...................................................$ 0.3 $ 0.3
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
PPM CRANES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(in millions unless otherwise denoted)
NOTE A -- DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
PPM Cranes, Inc. (sometimes referred to as Terex Cranes - Conway Operations)
(the "Company" or "PPM") is engaged in the design, manufacture, marketing and
worldwide distribution and support of construction equipment, primarily
hydraulic cranes and related spare parts.
On May 9, 1995 (the "date of acquisition"), Terex Corporation, through its
wholly-owned subsidiary Terex Cranes, Inc., completed the acquisition of all of
the capital stock of Legris Industries, Inc., a Delaware Corporation which owns
92.4% of the capital stock of PPM Cranes, Inc. Terex Corporation and Terex
Cranes, Inc., are both Delaware corporations.
The unaudited condensed consolidated financial statements reflect Terex
Corporation's basis in the assets and liabilities of the Company which was
accounted for as a purchase transaction. As a result, the debt and goodwill
associated with the acquisition have been "pushed down" to the Company's
financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been made. Such adjustments consist only of those of a normal
recurring nature. Operating results for the three months ended March 31, 1997
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. For further information, refer to the Company's
consolidated financial statements and footnotes thereto included in Terex
Corporation's Annual Report on Form 10-K for the year ended December 31, 1996.
The condensed consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries; PPM of Australia Pty. Ltd., and PPM
Far East Private Ltd., a Singapore company. All material intercompany
transactions and profits have been eliminated. During 1995, management closed
the operations in PPM Far East Private Ltd.
NOTE B -- INVENTORIES
Net inventories consist of the following:
<TABLE>
<CAPTION>
March 31, 1997 December 31,
1996
----------------- -----------------
<S> <C> <C>
Finished equipment...................................$ 7.2 $ 4.9
Replacement parts.................................... 8.3 7.9
Work in process...................................... 1.7 3.0
Raw materials and supplies........................... 12.0 13.4
----------------- -----------------
$ 29.2 $ 29.2
================= =================
</TABLE>
NOTE C -- PROPERTY, PLANT AND EQUIPMENT
Net property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
March 31, 1997 December 31,
1996
----------------- -----------------
<S> <C> <C>
Property, plant and equipment........................$ 0.1 $ 0.1
Less: Accumulated depreciation...................... --- ---
----------------- -----------------
Net property, plant and equipment....................$ 0.1 $ 0.1
================= =================
</TABLE>
NOTE D -- CONTINGENCIES
The Company is involved in product liability and other lawsuits incident to the
operation of its business. Insurance with third parties is maintained for
certain of these items. It is management's opinion that none of these lawsuits
will have a materially adverse effect on the Company's financial position.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollar amounts are in millions, unless otherwise noted.)
Results of Operations
The Company currently operates in two industry segments: Terex Trucks and Terex
Cranes. The Company previously operated a third industry segment, the Material
Handling Segment, the results of which are accounted for as Income from
Discontinued Operations. Terex Cranes consists of Terex Cranes - Waverly
Operations (previously known as Koehring), Terex Cranes - Conway Operations and
PPM Europe. Terex Trucks consist of Terex Equipment Limited ("TEL") located in
Motherwell, Scotland, and Unit Rig ("Unit Rig") located in Tulsa, Oklahoma.
Quarter Ended March 31, 1997
The table below is a comparison of net sales, gross profit, engineering, selling
and administrative expenses, income from operations and income from discontinued
operations, by segment, for the three months ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
Three Months Ended March
31,
--------------------------- Increase
1997 1996 (Decrease)
------------- ------------- --------------
<S> <C> <C> <C>
NET SALES
Terex Trucks......................................$ 77.7 $ 70.9 $ 6.8
Terex Cranes...................................... 97.1 102.5 (5.4)
General/Corporate/Eliminations.................... 1.5 (0.2) 1.7
------------- ------------- --------------
Total...........................................$ 176.3 $ 173.2 $ 3.1
============= ============= ==============
GROSS PROFIT
Terex Trucks......................................$ 12.8 $ 9.1 $ 3.7
Terex Cranes...................................... 14.3 14.9 (0.6)
General/Corporate/Eliminations.................... 0.4 (0.6) 1.0
------------- ------------- --------------
Total...........................................$ 27.5 $ 23.4 $ 4.1
============= ============= ==============
ENGINEERING, SELLING AND ADMINISTRATIVE EXPENSES
Terex Trucks......................................$ 6.4 $ 6.2 $ 0.2
Terex Cranes...................................... 6.8 8.7 (1.9)
General/Corporate/Eliminations.................... 0.9 1.4 (0.5)
------------- ------------- --------------
Total...........................................$ 14.1 $ 16.3 $ (2.2)
============= ============= ==============
INCOME FROM OPERATIONS
Terex Trucks......................................$ 6.4 $ 2.9 $ 3.5
Terex Cranes...................................... 7.5 6.2 1.3
General/Corporate/Eliminations.................... (0.5) (2.0) 1.5
------------- ------------- --------------
Total...........................................$ 13.4 $ 7.1 $ 6.3
============= ============= ==============
INCOME FROM
DISCONTINUED OPERATIONS...........................$ --- $ 3.2 $ (3.2)
============= ============= ==============
</TABLE>
Net Sales
Sales increased $3.1, or approximately 2%, to $176.3 for the three months ended
March 31, 1997 over the comparable 1996 period, reflecting a strong sales
quarter at TEL, partially offset by a decrease in sales for Terex Cranes.
Terex Trucks' sales increased $6.8 to $77.7 for the three months ended March 31,
1997 from $70.9 for the three months ended March 31, 1996. The increase in sales
was primarily in the TEL product line. Sales in Europe were lower than the 1996
quarter, reflecting continued weakness in the European construction sector. This
weakness was offset by sales growth in North America and the developing regions
of Southeast Asia. Machine sales increased 15.4%, and parts sales increased
2.2%. Parts sales have higher margins than machine sales. The sales mix was
approximately 29% parts for the three months ended March 31, 1997 compared to
31% parts for the comparable 1996 period. Backlog was $69.1 at March 31, 1997
compared to $53.4 at December 31, 1996 and $87.0 at March 31, 1996. The March
31, 1996 backlog included a single order for about $25.0, which was subsequently
canceled. Adjusting for that event, backlog at March 31, 1996 was $62.0.
Terex Cranes' sales were $97.1 for the three months ended March 31, 1997, a
decrease of $5.4 from $102.5 for the three months ended March 31, 1996. The
decrease in Terex Cranes' sales was due to timing of shipments and the weakening
of European currencies, principally the French franc. Sales were strong at Terex
Cranes - Waverly Operations, including the aerial work platform product line,
and were offset by weaker sales at PPM Europe and Terex Cranes - Conway
Operations, particularly in Europe. Terex Cranes' backlog was $101.0 at March
31, 1997, compared to $67.2 at December 31, 1996 and $57.3 at March 31, 1996.
Backlog levels at March 31, 1997 increased from December 31, 1996 for all Terex
Cranes operations. Backlog was particularly strong in the aerial work platform
product line. The sales mix between machines and parts for the first quarter of
1997 was relatively unchanged from the comparable period in the prior year.
Net sales for corporate are service revenues of $1.5 generated by Terex's parts
distribution center. These services were provided to the purchaser of the
Material Handling Segment during the three months ended March 31, 1997 pursuant
to a service contract entered into with the purchaser when the Company completed
the sale of its Material Handling Segment. The contract expires in November
1999.
Gross Profit
Gross profit for the three months ended March 31, 1997 increased $4.1 to $27.5
as compared to $23.4 for the three months ended March 31, 1996. The gross profit
increase at Terex Trucks was partially offset by a decrease in gross profit at
Terex Cranes.
Terex Trucks' gross profit increased $3.7 to $12.8 for the three months ended
March 31, 1997 compared to $9.1 for the three months ended March 31, 1996. The
increase in gross profit was primarily due to increased manufacturing
efficiencies and a relatively increased share of higher margin TEL machines. The
gross margin percentage at Terex Trucks was 16.5% for the three months ended
March 31, 1997 as compared to 12.8% for the three months ended March 31, 1996.
Terex Cranes' gross profit decreased $0.6 to $14.3 for the three months ended
March 31, 1997, compared to $14.9 for the three months ended March 31, 1996. The
decrease was due to the decrease in sales; the gross margin percentage at Terex
Cranes was 14.7% for the three months ended March 31, 1997 versus 14.5% for the
comparable 1996 period.
Engineering, Selling And Administrative Expenses
Engineering, selling and administrative expenses decreased to $14.1 for the
three months ended March 31, 1997 from $16.3 for the three months ended March
31, 1996, reflecting cost reductions at the corporate level and at Terex Cranes.
Terex Trucks' engineering, selling and administrative expenses increased $0.2 to
$6.4 for the three months ended March 31, 1997 as compared to $6.2 for the same
period in 1996. However, Terex Trucks' expenses decreased to 8.2% of sales for
the 1997 period from 8.7% of sales for the comparable 1996 period.
Terex Cranes' engineering, selling and administrative expenses decreased to $6.8
for the three months ended March 31, 1997 from $8.7 for the three months ended
March 31, 1996, reflecting the effect of cost reduction actions at PPM Europe
and Terex Cranes - Conway Operations. The engineering, selling and
administrative expenses as a percentage of sales decreased to 7.0% for the three
months ended March 31, 1997 as compared to 8.5% for the comparable 1996 period.
Income From Operations
On a consolidated basis, the Company had operating income from Continuing
Operations of $13.4 for the three months ended March 31, 1997, compared to
operating income of $7.1 for the three months ended March 31, 1996, for the
reasons mentioned below. For the three months ended March 31, 1997, unallocated
corporate expense declined by $0.5 versus the three months ended March 31, 1996.
Terex Trucks' income from operations increased by $3.5 to $6.4 for the three
months ended March 31, 1997 from $2.9 for the three months ended March 31, 1996,
primarily due to the realization of increased revenues, improved gross margin
percentages, and level engineering, selling and administrative charges. Improved
gross margin percentages were seen at Unit Rig, as a result of outsourcing
certain manufacturing processes, and in the TEL product line due to
manufacturing efficiencies at the Motherwell, Scotland facility.
Terex Cranes' income from operations of $7.5 for the three months ended March
31, 1997 increased by $1.3 over the three months ended March 31, 1996, primarily
due to the effect of cost control initiatives implemented at PPM Europe and
Terex Cranes - Conway Operations and continued strong performance by Terex
Cranes - Waverly Operations.
Other Income (Expense)
During the three months ended March 31, 1997, the Company's interest expense
decreased $1.9 to $9.5 from $11.4 for the comparable 1996 period. This decrease
was primarily due to the $139.5 cash provided from the sale of the Company's
Materials Handling Segment, which allowed the Company to eliminate borrowings
under its revolving credit facility. Similarly, the Company was able to invest
excess cash during the period and interest income for the three months ended
March 31, 1997 increased $0.5 to $0.6 from $0.1 for the three months ended March
31, 1996.
Other income (expense) for the three months ended March 31, 1997 was primarily
amortization of debt issue costs. During the three months ended March 31, 1996
the Company realized a gain of $2.4 on the sale of excess property in Scotland.
Income From Discontinued Operations
As a result of selling its Material Handling Segment the Company did not have
any income from discontinued operations for the three months ended March 31,
1997 compared to $3.2 for the comparable period in the prior year.
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 the New Credit Facility described below.
Debt reduction and an improved capital structure are major focal points for the
Company. In this regard, the Company regularly reviews its alternatives to
improve its capital structure and to reduce debt service through debt
refinancings, issuance of equity, assets sales, including the sale of business
units, or any combination thereof. As part of its strategy to strengthen its
capital structure and reduce debt, on November 27, 1996 the Company completed
the sale of its worldwide Material Handling Segment for an aggregate cash
purchase price, subject to adjustments, of $139.5. Upon closing, the Company
immediately paid down its then outstanding credit facility. In accordance with
the Indenture governing the Company's 13.25% Senior Secured Notes, the Company
offered to repurchase (the "Offer") $100 principal amount of the Senior Secured
Notes. The Offer expired on December 27, 1996, but no Senior Secured Notes were
tendered for repurchase.
Consistent with its strategy of improving its capital structure, on December 30,
1996, the Company called all of its issued and outstanding Series A Cumulative
Redeemable Convertible Preferred Stock (the "Series A Preferred Stock") for
redemption on January 29, 1997 (the "Redemption Date"). The Series A Preferred
Stock was accreting initially at a rate of 13% per annum, which was to increase
to 18% per annum at the end of 1998. All 1,200,000 shares of the Series A
Preferred Stock outstanding on the Redemption Date were redeemed at a redemption
price of $37.80 per share, or approximately $45.4 in aggregate.
Net cash of $15.0 was provided by operating activities during the three months
ended March 31, 1997, of which $7.0 was provided by operating results plus
depreciation and amortization, plus an increase of approximately $8.6 in accrued
interest payable. Net cash used in investing activities was $0.4 during the
three months ended March 31, 1997. Net cash used by financing activities was
$43.1 during the three months ended March 31, 1997, principally due to the
redemption of the Series A Preferred Stock in January 1997 for $45.4. Cash and
cash equivalents totaled $39.6 at March 31, 1997.
As of March 31, 1997, the Company had no balance outstanding under its then
existing the credit facility, letters of credit issued under that credit
facility totaled $7.5, and the additional amount the Company could have borrowed
under that credit facility was $43.4. As discussed in Note H of the notes to the
interim condensed consolidated financial statements, on April 7, 1997 the
Company acquired Simon Access for $90.0. Concurrently with the Simon Access
acquisition, the Company entered into the New Credit Facility. The New Credit
Facility provides the Company with the ability to borrow (in the form of
revolving loans and up to $20.0 in outstanding letters of credit) up to $125.0.
The New Credit Facility is secured by substantially all of the Company's
domestic receivables and inventory. The amount of borrowings available under the
New Credit Facility is limited to established percentages of eligible
receivables and eligible inventory of certain of the Company's domestic
subsidiaries. The New Credit Facility matures on April 7, 2000. At the option of
the Company, revolving loans may be in the form of prime rate loans bearing
interest at a rate of between 0.5% and 1.5% per annum in excess of the prime
rate or eurodollar rate loans bearing interest at a rate of between 2.0% and
3.0% per annum in excess of the adjusted eurodollar rate. The margin over the
prime rate or eurodollar rate paid by the Company is based upon the Company's
fixed charge coverage ratio from time to time. As of April 30, 1997 the Company
had availability of $27.3 under the New Credit Facility.
CONTINGENCIES AND UNCERTAINTIES
The Internal Revenue Service (the "IRS") is currently examining the Company's
federal tax returns for the years 1987 through 1989. In December 1994, the
Company received an examination report from the IRS proposing a substantial tax
deficiency. The examination report raises a variety of issues, including the
Company's substantiation for certain deductions taken during this period, the
Company's utilization of certain net operating loss carryovers ("NOL's") and the
availability of such NOL's to offset future taxable income. If the IRS were to
prevail on all the issues raised, the amount of the tax assessment would be
approximately $56 plus interest and penalties. If the Company were required to
pay a significant portion of the assessment, it could have a material adverse
impact on the Company and could exceed the Company's resources. The Company has
filed its administrative appeal to the examination report in April 1995. As a
result of a meeting with the Manhattan division of the IRS in July 1995, in June
1996 the Company was advised that the matter was being referred back to the
Milwaukee audit division of the IRS. The Milwaukee audit division of the IRS is
currently reviewing information provided by the Company over the past 18 months.
Although management believes that the Company will be able to provide adequate
documentation for a substantial portion of the deductions questioned by the IRS
and that there is substantial support for the Company's past and future
utilization of the NOL's, the ultimate outcome of this matter is subject to the
resolution of significant legal and factual issues. If the Company's positions
prevail on the most significant issues, management believes that the amounts due
would not exceed amounts previously paid or provided; however, even under such
circumstances, it is possible that the Company's NOL's could be reduced to some
extent. No additional accruals have been made for any amounts which might be due
as a result of this matter because the possible loss ranges from zero to $56
plus interest and penalties and the ultimate outcome cannot presently be
determined or estimated. A change in control of the Company for tax purposes
could possibly result in a significant reduction in the amount of NOL's
available to the Company to offset future taxable income.
Under the terms of the Company's New Credit Facility, an event of default will
occur if the Company incurs any liability for federal income taxes which results
in an expenditure of cash of more than $15.0 in excess of the amounts shown as
owed on tax returns filed by the Company prior to April 7, 1997. If this were to
occur, the Company might be required to refinance the indebtedness outstanding
under the New Credit Facility. There can be no assurance, however, that any
refinancing would be obtainable or, if obtainable, that the terms of such
refinancing would be acceptable to the Company.
In March of 1994 the Securities and Exchange Commission (the "Commission")
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. During 1996, the Company incurred
$0.3 of legal fees and expenses on behalf of the Company, directors and
executives of the Company and KCS. In general, under the Company's by-laws, the
Company is obligated to indemnify officers and directors for all liabilities
arising in the course of their duties on behalf of the Company. To date, no
officer or director has had legal representation separate from the Company's
legal representation, and no allocation of the legal fees for such
representation has been made.
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.
<PAGE>
PART II OTHER INFORMATION
(Dollar amounts are in millions, unless otherwise noted.)
Item 1. Legal Proceedings
For information concerning other contingencies see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Contingencies and
Uncertainties."
Item 5. Other Information
Recent Developments
On April 7, 1997, the Company completed the purchase of the industrial
businesses of Simon Access division ("Simon Access") of Simon Engineering plc
for $90 in cash, subject to adjustment.
Simon Access consists principally of several business units in the United States
and Europe which are engaged in the manufacture and sale of access equipment
designed to position people and materials to work at heights. Simon Access
products include truck mounted aerial devices, aerial work platforms and truck
mounted cranes (boom trucks) which are sold to utility companies as well as to
customers in the industrial and construction markets. Specifically, Terex has
acquired 100% of the outstanding common stock of (i) Simon-Telelect Inc., a
Delaware corporation, (ii) Simon Aerials, Inc., a Wisconsin corporation, (iii)
Sim-Tech Management Limited, a private limited company incorporated under the
laws of Hong Kong, (iv) Simon Cella, S.r.l., a company incorporated under the
laws of Italy, and (v) Simon Aerials Limited, a company incorporated under the
laws of Ireland; and 60% of the outstanding common stock of Simon-Tomen
Engineering Company Limited, a limited liability stock company organized under
the laws of Japan. Not included in the businesses acquired were Simon Access'
fire fighting equipment businesses. The Company intends to continue to operate
the Simon Access business.
The Company obtained the funds necessary to complete the transaction from its
cash on hand and borrowings under its revolving credit facility.
On April 7, 1997, the Company and certain of its domestic subsidiaries on such
date (collectively, the "Borrowers") entered a Revolving Credit Agreement with
the First National Bank of Boston, as agent (the "Agent"), pursuant to which the
Agent and other financial institutions party thereto provided the Borrowers with
a line of credit of up to $125 secured by accounts receivable and inventory (the
"New Credit Facility"). The New Credit Facility replaces the Company's $100
revolving credit facility with Foothill Capital Corporation, as agent (the "Old
Credit Facility").
Loans made under the New Credit Facility (a) bear interest, based on the
Company's fixed charge coverage ratio, at a rate between 0.5% and 1.5% per annum
in excess of the prime rate or at a rate between 2.0% and 3.0% per annum in
excess of eurodollar rate, at the election of the Company, (b) mature on April
7, 2000, (c) were used by the Borrowers to repay the Old Credit Facility, and
(d) are to be used for working capital and other general corporate purposes,
including acquisitions.
Forward Looking Information
Certain information in this report includes forward looking statements regarding
future events or the future financial performance of the Company that involve
certain risks and uncertainties, including, but not limited to, those discussed
in "Management's Discussion and Analysis of Financial Condition and Results of
Operations." In addition, the Company's expectations are predominantly based on
what it considers key economic assumptions. Construction and mining activity are
sensitive to interest rates, government spending and general economic
conditions. Some of the other significant factors for the Company include
integration of acquired businesses, retention of key management, foreign
currency movements, pricing, product initiatives and other actions taken by
competitors, the effects of changes in laws and regulations, continued use of
net operating loss carryovers and other factors. Actual events or the actual
future results of the Company may differ materially from any forward looking
statement due to these and other risks, uncertainties and significant factors.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits have been filed as part of this Form 10-Q:
Exhibit No.
11.1 Computation of earnings per share
27 Financial data schedule
(b) Reports on Form 8-K.
A report on Form 8-K dated December 30, 1996 was filed January
10, 1997 reporting the Company's calling for redemption its
Series A Preferred Stock on January 29, 1997.
A report on Form 8-K dated February 24, 1997 was filed
February 26, 1997 reporting the Company's execution of an
agreement of Purchase and Sale with Simon Engineering plc and
certain subsidiaries for the Company to acquire the industrial
businesses of Simon Access division.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TEREX CORPORATION
(Registrant)
Date: May 14, 1997 /s/ Joseph F. Apuzzo
Joseph F. Apuzzo
Vice President Finance and Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No.
11.1 Computation of Earnings per Share
27 Financial Data Schedule
<PAGE>
EXHIBIT 11.1
(Page 1 of 2)
<TABLE>
<CAPTION>
TEREX CORPORATION AND SUBSIDIARIES
Computation of Earnings per Common Share
(in millions except per share amounts)
Three Months Ended March 31,
----------------------------------
1997 1996
---------------- -----------------
<S> <C> <C>
PRIMARY:
Income (loss) from continuing operations...................$ 3.9 $ (2.7)
Income from discontinued operations........................ --- 3.2
---------------- -----------------
Net income................................................. 3.9 0.5
Less: Accretion of Preferred Stock................... (0.4) (1.9)
---------------- -----------------
Net income (loss) applicable to common stock...............$ 3.5 $ (1.4)
================ =================
Weighted average shares outstanding during the period...... 13.3 10.6
Assumed exercise of warrants at ratio determined
as of March 31, 1997.................................. 0.6 --- (a)
Assumed exercise of stock options.......................... 0.5 --- (a)
---------------- -----------------
Primary shares outstanding................................. 14.4 10.6
---------------- -----------------
Primary income (loss) per common share
Income (loss) from continuing operations..............$ 0.24 $ (0.43)
Income from discontinued operations................... --- 0.30
---------------- -----------------
Net income (loss).................................$ 0.24 $ (0.13)
================ =================
<FN>
(a) Excluded from computation because the effect is antidilutive.
</FN>
</TABLE>
<PAGE>
EXHIBIT 11.1
(Page 2 of 2)
<TABLE>
<CAPTION>
TEREX CORPORATION AND SUBSIDIARIES
Computation of Earnings per Common Share
(in millions except per share amounts)
Three Months Ended March 31,
----------------------------------
1997 1996
---------------- -----------------
<S> <C> <C>
FULLY DILUTED:
Income (loss) from continuing operations.........................$ 3.9 $ (2.7)
Income from discontinued operations.............................. --- 3.2
---------------- -----------------
Net income....................................................... 3.9 0.5
Less: Accretion of Preferred Stock......................... (0.4) (1.9)
---------------- -----------------
Income (loss) applicable to common stock......................... 3.5 (1.4)
Add: Accretion of Preferred Stock assumed converted
at beginning of period...................................... --- (a) --- (a)
---------------- -----------------
Net income (loss) applicable to common stock.....................$ 3.5 $ (1.4)
================ =================
Weighted average shares outstanding during the period............ 13.3 10.6
Assumed exercise of warrants at ratio determined
as of March 31, 1997........................................ 0.6 --- (a)
Assumed conversion of Preferred Stock............................ --- (a) --- (a)
Assumed exercise of stock options................................ 0.5 --- (a)
---------------- -----------------
Fully diluted shares outstanding................................. 14.4 10.6
---------------- -----------------
Fully diluted income (loss) per common share
Income (loss) from continuing operations....................$ 0.24 $ (0.43)
Income from discontinued operations......................... --- 0.30
---------------- -----------------
Net income (loss).......................................$ 0.24 $ (0.13)
================ =================
<FN>
(a) Excluded from the computation because the effect is anti-dilutive.
</FN>
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE TEREX CORPORATION
DECEMBER 31, 1996 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 39,600
<SECURITIES> 0
<RECEIVABLES> 114,400
<ALLOWANCES> 4,800
<INVENTORY> 188,500
<CURRENT-ASSETS> 351,600
<PP&E> 61,600
<DEPRECIATION> 30,900
<TOTAL-ASSETS> 430,600
<CURRENT-LIABILITIES> 202,700
<BONDS> 261,100
800
0
<COMMON> 100
<OTHER-SE> (73,600)
<TOTAL-LIABILITY-AND-EQUITY> 430,600
<SALES> 176,300
<TOTAL-REVENUES> 176,300
<CGS> 148,800
<TOTAL-COSTS> 148,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,500
<INCOME-PRETAX> 4,100
<INCOME-TAX> 200
<INCOME-CONTINUING> 3,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,900
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
