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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) March 31, 1998
TEREX CORPORATION
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 1-10702 34-1531521
- -------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
500 Post Road East, Suite 320, Westport, Connecticut 06880
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (203) 222-7170
NOT APPLICABLE
- -------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
===============================================================================
<PAGE>
2
The Registrant hereby amends Item 7 of its Current Report on Form 8-K dated
March 31, 1998 as follows:
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits
The following financial statements and pro forma financial information are
hereto attached and filed as part of this report:
a) Consolidated Financial Statements of Businesses Acquired:
Page
Audited Consolidated Financial Statements of O&K Mining GmbH
Report of Independent Accountants.........................................5
Consolidated Statement of Operations for the years ended
December 31, 1997 and 1996..............................................6
Consolidated Balance Sheet as of December 31, 1997 and 1996...............7
Consolidated Statement of Cash Flows for the years ended
December 31, 1997 and 1996..............................................8
Consolidated Statement of Changes in Shareholder's Equity
for the years ended December 31, 1997 and 1996..........................9
Notes to Consolidated Financial Statements...............................10
b) Pro Forma Financial Information...........................................15
Unaudited Pro Forma Condensed Consolidated Statement of Operations
of Terex Corporation and Subsidiaries for the year ended
December 31, 1997......................................................18
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Information............................................................19
c) Exhibits
10.1 Share Purchase Agreement dated December 18, 1997 between O&K AG and
Terex Mining Equipment, Inc. (incorporated by reference to Exhibit
10.19 to the Form 10-K Annual Report for the year ended December 31,
1997, Commission File No. 1-10702).
10.2 Credit Agreement dated as of March 6, 1998 among Terex Corporation,
certain of its subsidiaries, the lenders named therein, Credit Suisse
First Boston, as Administrative Agent, Bank Boston N.A., as Syndication
Agent and Canadian Imperial Bank of Commerce and First Union National
Bank, as Co-Documentation Agents (incorporated by reference to Exhibit
10.14 to the Form 10-K Annual Report for the year ended December 31,
1997, Commission File No. 1-10702).
10.3 Guarantee Agreement dated as of March 6, 1998 of Terex Corporation and
Credit Suisse First Boston, as Collateral Agent (incorporated by
reference to Exhibit 10.14 to the Form 10-K Annual Report for the year
ended December 31, 1997, Commission File No. 1-10702).
10.4 Guarantee Agreement dated as of March 6, 1998 of Terex Corporation,
each of the subsidiaries of Terex Corporation listed therein and Credit
Suisse First Boston, as Collateral Agent (incorporated by reference to
Exhibit 10.15 to the Form 10-K Annual Report for the year ended
December 31, 1997, Commission File No. 1-10702).
10.5 Security Agreement dated as of March 6, 1998 of Terex Corporation, each
of the subsidiaries of Terex Corporation listed therein Credit Suisse
First Boston, as Collateral Agent (incorporated by reference to Exhibit
10.16 to the Form 10-K Annual Report for the year ended December 31,
1997, Commission File No.
1-10702).
<PAGE>
3
10.6 Pledge Agreement dated as of March 6, 1998 of Terex Corporation, each
of the subsidiaries of Terex Corporation listed therein and Credit
Suisse First Boston, as Collateral Agent (incorporated by reference to
Exhibit 10.17 to the Form 10-K Annual Report for the year ended
December 31, 1997, Commission File No. 1-10702).
10.7 Form Mortgage, Leasehold Mortgage, Assignment of Leases and Rents,
Security Agreement and Financing entered into by Terex Corporation and
certain of the subsidiaries of Terex Corporation, as Mortgagor, and
Credit Suisse First Boston, as Mortgagee (incorporated by reference to
Exhibit 10.18 to the Form 10-K Annual Report for the year ended
December 31, 1997, Commission File No. 1-10702).
10.8 Purchase Agreement, dated as of March 24, 1998, of Terex Corporation,
each of the subsidiaries of Terex Corporation listed therein and Credit
Suisse First Boston Corporation, CIBC Oppenheimer Corp., Morgan Stanley
& Co. Incorporated, Salomon Brothers Inc and BancBoston Securities
Inc., for the issue and sale of U.S. $150,000,000 of 8-7/8% Senior
Subordinated Notes due 2008.*
10.9 Indenture, dated as of March 31, 1998, between Terex Corporation, each
of the subsidiaries of Terex Corporation listed therein, as Issuer and
United States Trust Company of New York, as Trustee, for $150,000,000
of 8-7/8% Senior Subordinated Notes due 2008.*
10.10 Registration Rights Agreement, dated as of March 31, 1998, of Terex
Corporation, each of the subsidiaries of Terex Corporation listed
therein and Credit Suisse First Boston Corporation, CIBC Oppenheimer
Corp., Morgan Stanley & Co. Incorporated, Salomon Brothers Inc and
BancBoston Securities Inc., for the issue and sale of U.S. $150,000,000
of 8-7/8% Senior Subordinated Notes due 2008.*
23.1 Independent Accountants' Consent of C&L Treuhand-Vereinigung Deutsche
Revision, Cologne.**
*Previously filed.
** Filed herewith.
<PAGE>
4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 29, 1998
TEREX CORPORATION
By: /s/ Joseph F. Apuzzo
Joseph F. Apuzzo
Vice President Finance and Controller
(Principal Accounting Officer)
<PAGE>
5
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Terex Corporation:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of cash flows and changes in
shareholder's equity present fairly, in all material respects, the consolidated
financial position of O&K Mining GmbH, Germany and its subsidiaries O&K
Australia Pty. Ltd., Australia, O&K Orenstein & Koppel Ltd, U.K., O&K Orenstein
& Koppel Inc., Canada, O&K Far East Pte. Ltd., Singapore, O&K Orenstein & Koppel
(South Africa) Pty. Ltd., Republic of South Africa, and O&K Orenstein & Koppel
Inc., U.S.A. at December 31, 1997 and 1996, and the results of their operations
and their cash flows for the years then ended in conformity with generally
accepted accounting principles in the United States. 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 audit. We
conducted our audit of these statements in accordance with generally accepted
auditing standards in the United States 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 audit provides a reasonable basis for the opinion expressed
above.
Cologne, June 26, 1998
C&L TREUHAND-VEREINIGUNG
DEUTSCHE REVISION
Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
<PAGE>
6
O&K Mining GmbH
CONSOLIDATED STATEMENT OF OPERATIONS
(In millions)
For the Year Ended
December 31,
--------------------------
1997 1996
------------- ------------
Net sales............................................$ 259.0 $ 282.4
Cost of goods sold .................................. 229.8 239.4
------------- ------------
Gross profit....................................... 29.2 43.0
Engineering, selling and administrative expenses..... 28.0 28.0
------------- ------------
Income from operations............................. 1.2 15.0
Interest expense..................................... (10.4) (10.9)
Interest income...................................... 0.4 0.5
Other income/(expense)-net........................... (5.4) (0.6)
------------- ------------
Income (loss) before income taxes................ (14.2) 4.0
Income tax (provision) benefit....................... 0.9 (0.6)
------------- ------------
Net income (loss)....................................$ (13.3) $ 3.4
============= ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
7
O&K Mining GmbH
CONSOLIDATED BALANCE SHEET
(In millions)
As of December 31,
-------------------
1997 1996
--------- ---------
Assets
Current assets
Cash and cash equivalents................................$ 4.9 $ 2.6
Trade receivables (net of allowance of $9.1 and $5.9
at December 31, 1997 and 1996, respectively)........... 33.4 52.0
Net inventories.......................................... 122.7 134.3
Other current assets..................................... 11.4 9.2
--------- --------
Total current assets........................................ 172.4 198.1
Property, plant and equipment - net......................... 28.6 41.1
Other long-term assets...................................... 4.4 3.0
--------- --------
Total assets................................... ............$ 205.4 $ 242.2
========= ========
Liabilities and shareholder's equity
Current liabilities
Notes payable and short-term borrowings..................$ 72.9 $ 36.0
Trade accounts payable................................... 23.3 25.4
Due to affiliates........................................ 35.2 126.8
Accruals and other current liabilities................... 26.9 17.6
-------- --------
Total current liabilities................................... 158.3 205.9
Non-current liabilities..................................... 18.1 26.5
Commitments and contingencies
Shareholder's equity
Common stock ............................................ 12.9 12.9
Additional paid-in capital............................... 46.4 12.9
Accumulated deficit...................................... (28.1) (14.8)
Cumulative translation adjustment........................ (2.2) (1.2)
--------- --------
Total shareholder's equity.................................. 29.0 9.8
--------- --------
Total liabilities and shareholder's equity.................$ 205.4 $ 242.2
========= ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
8
O&K Mining GmbH
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
For the Year Ended
December 31,
-----------------
1997 1996
-------- --------
Operating Activities
Net income (loss)..........................................$ (13.3) $ 3.4
Adjustments to reconcile net income (loss)
to cash used in operating activities:
Depreciation........................................... 9.8 8.5
Changes in operating assets and liabilities:
Trade receivables................................... 18.6 5.2
Due from affiliates................................. --- 6.6
Net inventories..................................... 11.6 (13.9)
Other current assets................................ (2.2) (0.1)
Other long-term assets.............................. (1.4) (0.1)
Trade accounts payable.............................. (2.1) (5.5)
Due to affiliates................................... (58.1) 6.8
Accruals and other current liabilities.............. 9.3 (7.8)
Non-current liabilities............................. (8.4) (4.3)
--------- -------
Net cash used in operating activities...................... (36.2) (1.2)
Investing Activities
Capital expenditures.................................... (1.4) (8.6)
Proceeds from sale of fixed assets...................... 0.1 1.6
--------- -------
Net cash used in investing activities...................... (1.3) (7.0)
Financing Activities
Changes in notes payable, net.......................... 36.9 10.7
Payment of dividends................................... --- (0.8)
Other.................................................. --- (0.6)
--------- --------
Net cash provided by financing activities.................. 36.9 9.3
Effect of exchange rate changes on cash
and cash equivalents..................................... 2.9 ---
--------- --------
Net increase in cash and cash equivalents at
beginning of period...................................... 2.3 1.1
Cash and cash equivalents.................................. 2.6 1.5
--------- --------
Cash and cash equivalents at end of period.................$ 4.9 $ 2.6
========= ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
9
O&K Mining GmbH
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
For the Years Ended December 31, 1997 and 1996
(in millions)
<TABLE>
<CAPTION>
Additional Cumulative
Paid-in Accumulated Translation
Common Stock Capital Deficit Adjustment Total
------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995....................$ 12.9 $ 12.9 $ (17.4) $ (1.2) $ 7.2
Net income...................................... --- --- 3.4 --- 3.4
Dividend payment................................ --- --- (0.8) --- (0.8)
Translation adjustment.......................... --- --- --- --- ---
------------- ------------- ------------- ------------- -------------
Balance at December 31, 1996.................... 12.9 12.9 (14.8) (1.2) 9.8
Net loss........................................ --- --- (13.3) --- (13.3)
Capital contribution by parent.................. --- 33.5 --- --- 33.5
Translation adjustment.......................... --- --- --- (1.0) (1.0)
------------- ------------- ------------- ------------- -------------
Balance at December 31, 1997....................$ 12.9 $ 46.4 $ (28.1) $ (2.2) $ 29.0
============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
10
O&K Mining GmbH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
(In millions, unless otherwise noted)
1. Basis of Presentation and Description of Business
Basis of Presentation. As more fully described in Note 11, Terex Corporation
("Terex") completed the acquisition of all of the capital stock of O&K Mining
GmbH ("O&K Mining" or the "Company") on March 31, 1998. Prior to the
acquisition, O&K Mining was a wholly-owned subsidiary of O&K Orenstein & Koppel
AG ("Orenstein & Koppel").
The accompanying consolidated financial statements were prepared on the basis of
generally accepted accounting principles in the United States and include the
consolidated financial position, results of operations, cash flows and changes
in shareholder's equity of O&K Mining and its subsidiaries.
Description of Business. O&K Mining, a German company, designs, manufactures,
installs and markets a complete range of large hydraulic excavators, with
operating weights from 58 to 800 tons. O&K Mining's products are primarily used
to load copper ore, iron ore, oil sand, other mineral-bearing materials or rock
into trucks.
2. Summary of Significant Accounting Policies
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents. Cash equivalents consist of highly liquid investments
with original maturities of three months or less. The carrying amounts of cash
and cash equivalents approximates their fair value.
Principles of Consolidation. The consolidated financial statements include the
accounts of O&K Mining and its wholly-owned subsidiaries. All material
intercompany balances, transactions and profits have been eliminated.
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 Shareholder's Equity. Gains or losses resulting from foreign currency
transactions are included in cost of goods sold.
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 transactions. At December 31, 1997 and 1996, the
Company had foreign exchange contracts, which were hedges of firm commitments,
totaling $9.8 and $16.5, respectively fair value of which approximates their
carrying value.
<PAGE>
11
Intangible Assets. Intangible assets are valued at cost less amortization.
Amortization is recorded on a straight-line basis over the estimated useful
life, but not to exceed five years.
Property, Plant and Equipment. Property, plant and equipment are stated at cost.
Expenditures for major renewals and improvements are capitalized while
expenditures for maintenance and repairs not expected to extend the life of an
asset beyond its normal useful life are charged to expense when incurred. Plant
and equipment are depreciated over the estimated useful lives of the assets
under the straight-line method of depreciation for financial reporting purposes
and both straight-line and other methods for tax purposes.
Inventories. Inventories are stated at the lower of cost or market value. Cost
is determined by the first-in, first-out (FIFO) method.
Impairment of Long Lived Assets. The Company's policy is to assess the
realizability of its long lived assets and to evaluate such assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets (or group of assets) may not be recoverable.
Impairment is determined to exist if the estimated future undiscounted cash
flows is less than its carrying value. The amount of any impairment then
recognized would be calculated as the difference between estimated future
discounted cash flows and the carrying value of the asset.
Revenue Recognition. Revenue and costs are generally recorded when products are
shipped and invoiced to either independently owned and operated dealers or to
customers.
3. Inventories
Inventories consist of the following:
December 31,
------------------------------
1997 1996
-------------- ---------------
Finished equipment..................$ 29.6 $ 52.5
Replacement parts................... 65.7 56.3
Work-in-process..................... 17.4 16.4
Raw materials and supplies.......... 10.0 9.1
============== ===============
$ 122.7 $ 134.3
============== ===============
4. Property, Plant and Equipment
Property, plant and equipment consists of the following:
December 31,
------------------------------
1997 1996
-------------- ---------------
Land and improvements...............$ 0.2 $ 0.2
Buildings........................... 1.9 1.6
Machinery and equipment............. 34.6 76.9
-------------- ---------------
36.7 78.7
Less accumulated depreciation....... (8.1) (37.6)
-------------- ---------------
$ 28.6 $ 41.1
============== ===============
Depreciation expense for 1997 and 1996 was $9.8 and $8.5, respectively.
<PAGE>
12
5. Notes Payable and Short-term Borrowings
Notes payable and short-term borrowings at December 31, 1997 totaled $72.9.
These borrowings mature at various times through August 31, 1998 and bear
interest at an annual rate from 4.31% to 10.00%.
Notes payable and short-term borrowings at December 31, 1996 totaled $36.0.
These borrowings mature at various times through April 30, 1997 and bear
interest at an annual rate from 4.75% to 7.11%.
6. Income Taxes
The components of income (loss) before income taxes consists of the following:
1997 1996
----------- ----------
Domestic (Germany)..........................$ 2.6 $ 1.0
Foreign..................................... (16.8) 3.0
----------- ----------
Total...................................$ (14.2) $ 4.0
=========== ==========
From the income taxes shown, $0.4 and $0.6 has been paid to foreign tax
authorities in 1997 and 1996, respectively. In Germany the Company had a tax
affiliation within the Orenstein & Koppel Group, this affiliation existed
through December 31, 1997.
The Company's foreign subsidiaries have approximately $67.3 in net operating
loss carryforwards as of December 31, 1997.
7. Leases
O&K Mining has various lease agreements, primarily related to foreign office
space and domestic production facilities, which are accounted for as operating
leases. Certain leases have renewal options and provisions requiring the Company
to pay maintenance and insurance. Total rental expense under operating leases
for 1997 and 1996 was $1.1 and $2.4, respectively.
Future minimum noncancelable operating lease payments at December 31, 1997 are
as follows:
1998........................................$ 1.2
1999........................................ 0.9
2000........................................ 0.6
2001........................................ 0.5
2002........................................ 0.4
Thereafter.................................. 0.4
-------------
Total minimum lease payments...................$ 4.0
=============
8. Commitments and Contingencies
O&K Mining is involved in lawsuits incident to the operation of its business.
Insurance coverages are maintained for claims and lawsuits of this nature.
Although it is difficult to estimate the liability of O&K Mining related to
these matters, it is management's opinion that none of these lawsuits will have
a materially adverse effect on O&K Mining's consolidated financial position.
<PAGE>
13
O&K Mining is, in the normal course of business, a party to financial
instruments with off-balance-sheet risk. This risk arises from residual value
guaranties and buy back obligations mainly in the United Kingdom. Estimates of
differences between the possible buy back value and the market value of the
units at the given time have been accrued for and recorded as liabilities.
9. Segment and Geographic Information
O&K Mining operates in one business segment. Geographic data for the Company's
operations are presented in the following table:
1997 1996
--------------- --------------
Net sales:
Europe....................... $ 218.4 $ 263.6
North America................ 43.1 42.7
Australia.................... 33.2 51.3
All other.................... 25.9 20.6
Eliminations................. (61.6) (95.8)
-------------- --------------
$ 259.0 $ 282.4
============== ==============
Income (loss) from operations:
Europe....................... $ (1.2) $ 10.3
North America................ 0.3 3.8
Australia.................... 1.1 1.2
All other.................... 1.5 (0.3)
Eliminations................. (0.5) ---
-------------- --------------
$ 1.2 $ 15.0
============== ==============
Identifiable assets:
Europe....................... $ 194.4 $ 255.0
North America................ 41.9 42.3
Australia.................... 17.7 31.1
All other.................... 11.0 11.2
Eliminations................. (59.6) (97.4)
-------------- --------------
$ 205.4 $ 242.2
============== ==============
Sales between geographic areas are generally priced to recover costs plus a
reasonable markup for profit. Income (loss) from operations equals net sales
less direct and allocated operating expenses, excluding interest and other
non-operating items.
The Company is not dependent on any single customer.
<PAGE>
14
10. Related Party Transactions
During 1997 and 1996, the Company had transactions with Orenstein & Koppel and
certain of its affiliated companies as follows:
1997 1996
------------ -------------
Purchases of inventory....................$ 17.7 $ 19.9
Sales of product..........................$ 18.0 $ 22.1
Interest expense..........................$ 5.4 $ 8.5
Rental of facilities......................$ 1.2 $ 1.4
Other charges.............................$ 9.8 $ 11.3
On December 31, 1997 Orenstein & Koppel contributed $33.5 of additional
paid-in-capital to O&K Mining through the elimination of $33.5 of the Company's
intercompany payable to Orenstein & Koppel.
11. Subsequent Events-Acquisition by Terex
On March 31, 1998 Terex completed the acquisition of all the capital stock of
O&K Mining for net aggregate consideration of approximately $168, subject to
certain post-closing adjustments.
<PAGE>
15
TEREX CORPORATION
PRO FORMA FINANCIAL INFORMATION
(dollar amounts in millions, unless otherwise noted, except per share amounts)
The following unaudited pro forma condensed financial information of Terex
Corporation ("Terex" or the "Company") gives effect to the acquisition of (i)
all of the outstanding shares of O&K Mining GmbH ("O&K Mining") on March 31,
1998 by the Company (the "O&K Acquisition") as described in Item 2 of Terex's
Form 8-K dated March 31, 1998. The pro forma information is based on the
historical statements of operations of the Company for the year ended December
31, 1997 as if the O&K Acquisition had taken place at the beginning of 1997,
giving effect to the O&K Acquisition and related financing transactions and
adjustments as reflected in the accompanying notes. A pro forma balance sheet
has not been presented herein because the March 31, 1998 condensed consolidated
balance sheet as filed in the Company's March 31, 1998 Report on Form 10-Q
includes the O&K Acquisition.
On March 31, 1998, the Company completed the O&K Acquisition. The purchase
price, together with amounts needed to repay indebtedness of O&K Mining required
to be repaid in connection with the O&K Acquisition, consisted of approximately
$168 million. The Company obtained the funds necessary to complete the
transaction from the issuance of the Company's New Senior Subordinated Notes (as
defined below) and borrowings under the Company's New Bank Credit Facility (as
defined below).
On March 6, 1998, the Company redeemed or defeased all of its $166.7 principal
amount of its then outstanding 13-1/4% Senior Secured Notes due 2002 (the
"Senior Secured Notes"). Concurrently therewith, the Company also refinanced
substantially all of its then existing domestic and foreign revolving credit
debt. The proceeds for the offer to purchase and the repayment of its then
existing revolving credit facility were obtained from borrowings under the
Company's new $500.0 global bank credit facility ("New Bank Credit Facility").
The New Bank Credit Facility consists of a new secured global revolving credit
facility aggregating up to $125.0 (the "New Revolving Credit Facility") and two
term loan facilities (collectively, the "Term Loan Facilities") providing for
loans in an aggregate principal amount of up to approximately $375.0. The New
Revolving Credit Facility will be used for working capital and general corporate
purposes, including acquisitions. With limited exceptions, the obligations of
the Borrowers under the New Bank Credit Facility are secured by (i) a pledge of
all of the capital stock of domestic subsidiaries of the Company, (ii) a pledge
of 65% of the stock of the foreign subsidiaries of the Company and (iii) a first
priority security interest in, and mortgages on, substantially all of the assets
of Terex and its domestic subsidiaries. The New Bank Credit Facility contains
covenants limiting the Borrowers' activities, including, without limitation,
limitations on dividends and other payments, liens, investments, incurrence of
indebtedness, mergers and asset sales, related party transactions and capital
expenditures. The New Bank Credit Facility also contains certain financial and
operating covenants, including a maximum leverage ratio, a minimum interest
coverage ratio and a minimum fixed charge coverage ratio.
Pursuant to the Term Loan Facilities, the Borrowers have borrowed (i) $175.0 in
aggregate principal amount pursuant to a Term Loan A due March 2004 (the "Term A
Loan") and (ii) $200.0 in aggregate principal amount pursuant to a Term Loan B
due March 2005 (the "Term B Loan"). The outstanding principal amount of the Term
A Loan currently bears interest, at the applicable Borrower's option, at an
all-in drawn cost of 2.00% per annum in excess of the adjusted eurodollar rate
or, with respect to U.S. dollar denominated alternate based rate loans, at an
all-in drawn cost of 1.00% per annum in excess of the prime rate. The
outstanding principal amount of the Term B Loan currently bears interest, at the
Company's option, at a rate of 2.50% per annum in excess of the adjusted
eurodollar rate or, with respect to U.S. Dollar denominated alternate base rate
loans, 1.50% in excess of the prime rate. The Term A Loan amortizes on a
quarterly basis, in the annual percentages of 0%, 16%, 16%, 21%, 21% and 26%,
respectively, during the six-year term of the loan. The Term B Loan amortizes in
an annual percentage of 1% during each of the first six years of the term of the
loan and 94% in the seventh year of the term of the loan. The Term A Loan and
Term B Loan are subject to mandatory prepayment in certain circumstances and are
voluntarily prepayable without payment of a premium (subject to reimbursement of
the lenders' costs in case of prepayment of eurodollar loans other than on the
last day of an interest period).
<PAGE>
16
Pursuant to the New Revolving Credit Facility, the Borrowers have available an
aggregate amount of up to $125.0. The outstanding principal amount of loans
under the New Revolving Credit Facility bears interest, at the applicable
Borrower's option, at an all-in drawn cost of 2.00% per annum in excess of the
adjusted eurocurrency rate or, with respect to U.S. dollar denominated alternate
base rate loans, at an all-in drawn cost of 1.00% per annum in excess of the
prime rate. The New Revolving Credit Facility will terminate on the sixth
anniversary thereof.
On March 31, 1998, the Company issued and sold $150.0 aggregate principal amount
of 8-7/8% Senior Subordinated Notes due 2008 (the "New Senior Subordinated
Notes"). The New Senior Subordinated Notes were issued in a private placement
made in reliance upon an exemption from registration under the Securities Act of
1933, as amended. The net proceeds from the offering were used to fund a portion
of the aggregate consideration of the O&K Acquisition and for general working
capital purposes.
The acquisition was accounted for using the purchase method, with the purchase
price of the O&K 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. However,
management believes that there will not be any changes which will have a
material effect on the pro forma information.
Other pro forma adjustments have been included to report significant events that
occurred in 1997 and 1998 which, although not part of the O&K Acquisition, do
represent changes in the Company's results of operations. Pro forma adjustments
have been included to reflect the events described below.
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
"1997 Credit Facility"). The 1997 Credit Facility replaced the Company's $100
revolving credit facility. The 1997 Credit Facility was replaced on March 6,
1998 with the New Bank Credit Facility.
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. The Company obtained the funds necessary to complete the
transaction from its cash on hand and borrowings under the 1997 Credit Facility.
On April 14, 1997, the Company completed the purchase of Baraga Products, Inc.
and M&M Enterprises of Baraga, Inc. (collectively, "Baraga", or the "Square
Shooter Business"). Baraga manufactures rough terrain telescopic boom forklifts.
On July 28, 1997 and August 7, 1997, the Company issued an additional five
million shares and 700 thousand shares, respectively, of its Common Stock in a
public stock offering. The shares were issued at a price to the public of $19.50
per share. The net proceeds received by the Company after deduction of
underwriting discounts, commissions and other expenses was $104.6. On September
4, 1997, the Company used a portion of the proceeds to redeem $83.3 in principal
of the Secured Senior Notes. In accordance with the terms of the Indenture, the
redemption of the Senior Secured Notes was at a 9.46% redemption premium. The
redemption premium plus the pro-rata share of unamortized debt origination costs
totaled $12.2 and were reflected as extraordinary items in the third quarter of
1997.
On December 10, 1997, the Company issued 706 thousand shares of Terex Common
Stock in exchange for the outstanding preferred stock of Terex Cranes. At the
time of the exchange Terex recorded an additional $3.2 preferred stock accretion
to reflect the difference between the fair market value of the Common Stock
issued and the carrying value of the Terex Cranes preferred stock. Total
preferred stock accretion recorded on the preferred stock of Terex Cranes was
$4.4 during 1997.
<PAGE>
17
On December 30, 1997 all 38.8 thousand outstanding shares of Series B Preferred
Stock were converted by the holder thereof into 87.3 thousand shares of common
stock. These shares constituted the remaining balance outstanding of the Series
B Preferred Stock issued to certain individuals on December 9, 1994 in
consideration for the early termination of a contract between the Company and
KCS Industries, L.P., a Connecticut limited partnership ("KCS"), a related
party. Total preferred stock accretion recorded on the Series B Preferred Stock
was $0.4 during 1997.
On January 5, 1998, the Company completed the purchase of Payhauler Corp.
(Payhauler"). Payhauler manufactures four-wheel drive off-highway trucks.
The unaudited pro forma consolidated financial information is not necessarily
indicative of what the actual results of operations of the Company would have
been for the period indicated, nor does it purport to represent the results of
operations for future periods.
<PAGE>
18
TEREX CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(in millions except per share amounts)
<TABLE>
<CAPTION>
Terex Pro Forma
Corporation Adjustments Pro Forma Other Pro
and O&K for O&K for O&K Forma Pro Forma
Subsidiaries Mining(2) Sub-Total Acquisition Acquisition Adjustments as Adjusted
------------ ---------- ----------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES.........................$ 842.3 $ 259.0 $ 1,101.3 $ (11.0)(3a) $ 1,090.3 $ 93.1(3f) $ 1,183.4
COST OF GOODS SOLD................ 702.7 229.8 932.5 (10.2)(3b) 922.3 77.0(3g) 999.3
----------- ---------- ----------- ------------ ------------- ------------- -------------
Gross Profit................... 139.6 29.2 168.8 (0.8) 168.0 16.1 184.1
ENGINEERING, SELLING AND
ADMINISTRATIVE EXPENSES........ 68.5 28.0 96.5 (7.5)(3c) 89.0 13.7(3h) 102.7
----------- ---------- ----------- ------------ ------------- ------------- -------------
Income from operations......... 71.1 1.2 72.3 6.7 79.0 2.4 81.4
OTHER INCOME (EXPENSE)
Interest income................ 0.9 0.4 1.3 --- 1.3 --- 1.3
Interest expense............... (39.4) (10.4) (49.8) (4.6)(3d) (54.4) 9.2(3i) (45.2)
Other income (expense) - net... (1.6) (5.4) (7.0) (0.6)(3d) (7.6) 0.9(3j) (6.7)
----------- ----------- ----------- ----------- ------------- ------------- -------------
INCOME (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY ITEMS 31.0 (14.2) 16.8 1.5 18.3 12.5 30.8
PROVISION FOR INCOME TAXES....... (0.7) 0.9 0.2 (0.9)(3e) (0.7) --- (0.7)
----------- ----------- ----------- ----------- ------------ ------------- -------------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS..........$ 30.3 $ (13.3) $ 17.0 $ 0.6 $ 17.6 $ 12.5 $ 30.1
=========== =========== =========== ============ ============ ============= =============
PER COMMON AND COMMON EQUIVALENT
SHARE:
Basic.......................$ 1.57 $ 0.79 $ 1.49
Diluted.....................$ 1.44 $ 0.72 $ 1.39
AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING IN PER SHARE
CALCULATION:
Basic....................... 16.2 16.2 20.2
Diluted..................... 17.7 17.7 21.7
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
19
TEREX CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(amounts in millions)
1) The unaudited pro forma condensed consolidated financial information is
presented for the year ended December 31, 1997. The pro forma statements of
operations reflect the consolidated operations of the Company combined with
those of the acquired business assuming the O&K Acquisition and the issuance of
the related debt were consummated on January 1, 1997.
2) The historical operating results of O&K Mining GmbH for the year ended
December 31, 1997 include $19.0 of one-time non-cash charges. These one-time
non-cash charges primarily resulted from changes in assumptions for the
valuation of used equipment, reserves for the buy back of leased equipment and
the collectibility of accounts receivable. These one-time non-cash charges have
been included in "Cost of goods sold" ($14.7) and "Other income (expense) net"
($4.3). Income from operations for O&K Mining GmbH for the year ended December
31, 1997 before these one-time charges would have been approximately $15.9.
3) The pro forma statement of operations adjustments are summarized as follows:
a) Pro forma adjustments to "Net Sales" represents the elimination of
sales between the Company and O&K Mining.
b) Pro forma adjustments to "Cost of Goods Sold" represent the net effect
of (i) the elimination of cost of goods sold between the Company and O&K
Mining and (ii) the adjustment of historical goodwill amortization of O&K
Mining to equal the amortization over 40 years of goodwill arising as a
result of the O&K Acquisition.
c) Pro forma adjustments to "Engineering, Selling and Administrative
Expenses" represent reductions throughout O&K Mining, primarily through
headcount reduction, consolidation of field operations, negotiation of
more favorable contractual service and supply terms and reduced cost
allocations. Liabilities related to these employee terminations have been
accrued in connection with the O&K Acquisition pursuant to EITF 95-3
"Recognition of Liabilities in Connection with a Business Combination"
("EITF 95-3"). Management believes these cost reduction initiatives will
not have a significant effect on sales.
d) The O&K Acquisition was financed from the issuance of the Company's New
Senior Subordinated Notes and borrowings under the Company's New Bank
Credit Facility. The pro forma adjustments to "Interest expense" and
"Other income (expense) - net" represent the effects of the interest
expense and amortization of debt issuance costs related to the New Senior
Subordinated Notes and the portion of the New Bank Credit Facility used to
finance the O&K Acquisition.
e) Pro forma adjustments to "Provision for income taxes" represent the
elimination of the tax benefit at O&K which will not be available to
Terex.
f) "Other Pro Forma Adjustments" to "Net Sales" represent the historical
net sales of Simon Access and Baraga for the first quarter of 1997 and
Payhauler for 1997.
g) "Other Pro Forma Adjustments" to "Cost of Goods Sold" represent the sum
of (i) the historical cost of goods sold of Simon Access and Baraga for
the first quarter of 1997 and Payhauler for 1997 and (ii) the adjustment
of historical goodwill amortization of Simon Access, Baraga and Payhauler
to equal the amortization over 40 years of goodwill arising as a result of
their acquisition.
h) "Other Pro Forma Adjustments" to "Engineering, Selling and
Administrative Expenses" represent the net of (i) the historical
engineering, selling and administrative expenses of Simon Access and
Baraga for the first quarter of 1997 and Payhauler for 1997 and (ii) the
reductions in costs and expenses resulting from the eliminiation of
overstaffing and redundant staffing at Simon Access and Payhauler.
Liabilities related to employee terminations in connection with such
acquisitions have been accrued pursuant to EITF 95-3.
<PAGE>
20
i) "Other Pro Forma Adjustments" to "Interest Expense" represent the net
effect of (i) the additional interest expense related to the debt incurred
under the New Bank Credit Facility and (ii) the reduction of interest
expense related to the redemption of the Senior Secured Notes.
"Other Pro Forma Adjustments" to "Other income (expense) net" represent the net
effect of (i) the amortization of the net additional debt origination fees
related to the New Bank Credit Facility and (ii) the decrease in amortization of
debt issuance costs resulting from the reduction of debt issuance costs related
to the redemption of the Senior Secured Notes.
3) The estimated fair values of assets and liabilities acquired in the O&K
Acquisition are summarized as follows:
Cash...............................................$ 3.5
Net trade receivables.............................. 35.1
Net inventories.................................... 133.8
Other current assets............................... 7.8
Property, plant and equipment...................... 26.6
Other assets....................................... 3.8
Goodwill........................................... 32.9
Accounts payable and other current liabilities..... (58.7)
Other liabilities.................................. (16.8)
============
$ 168.0
============
The Company is in the process of obtaining 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
O&K Mining into the Company, including plans to terminate excess O&K Mining
employees, exit certain activities and consolidate and restructure certain O&K
Mining functions. The Company may revise the estimates as additional information
is obtained. However, management believes that there will not be any changes
which will have a material effect on the pro forma information.
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-21483, 33-00949 and 33-03983) and on Form S-3
(No. 33-52297) of Terex Corporation of our report dated June 26, 1998 appearing
on Page 5 of this Amendment No. 2 to current report on Form 8-K.
Cologne, June 26, 1998
C&L TREUHAND-VEREINIGUNG
DEUTSCHE REVISION
Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
