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 September 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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, including area code)
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: 27.7 million as of November 6,
2000.
The Exhibit Index appears on page 32.
<PAGE>
INDEX
TEREX CORPORATION AND SUBSIDIARIES
GENERAL
This Quarterly Report on Form 10-Q filed by Terex Corporation ("Terex" or the
"Company") includes financial information with respect to the following
subsidiaries of the Company (all of which are wholly-owned except PPM Cranes,
Inc.) which are guarantors (the "Guarantors") of the Company's $250 million
principal amount of 8-7/8% Senior Subordinated Notes due 2008 (the "Senior
Subordinated Notes"). See Note I to the Company's September 30, 2000 Condensed
Consolidated Financial Statements.
State or other jurisdiction of I.R.S. employer
Guarantor incorporation or organization identification number
Terex Cranes, Inc. Delaware 06-1513089
PPM Cranes, Inc. Delaware 39-1611683
Koehring Cranes, Inc. Delaware 06-1423888
Terex-Telelect, Inc. Delaware 41-1603748
Terex-RO Corporation Kansas 44-0565380
Terex Aerials, Inc. Wisconsin 39-1028686
Terex Mining Equipment, Inc. Delaware 06-1503634
Payhauler Corp. Illinois 36-3195008
The American Crane Corporation North Carolina 56-1570091
O & K Orenstein & Koppel, Inc. Delaware 58-2084520
Amida Industries, Inc. South Carolina 57-0531390
Cedarapids, Inc. Iowa 42-0332910
Page No.
PART I FINANCIAL INFORMATION
Item 1 Condensed Consolidated Financial Statements
TEREX CORPORATION
Condensed Consolidated Statement of Operations --
Three months and nine months ended September 30, 2000 and 1999......3
Condensed Consolidated Balance Sheet - September 30, 2000
and December 31, 1999...............................................4
Condensed Consolidated Statement of Cash Flows --
Nine months ended September 30, 2000 and 1999.......................5
Notes to Condensed Consolidated Financial Statements --
September 30, 2000..................................................6
PPM CRANES, INC.
Condensed Consolidated Statement of Operations --
Three months and nine months ended September 30, 2000 and 1999.....16
Condensed Consolidated Balance Sheet - September 30, 2000
and December 31, 1999..............................................17
Condensed Consolidated Statement of Cash Flows --
Nine months ended September 30, 2000 and 1999......................18
Notes to Condensed Consolidated Financial Statements --
September 30, 2000.................................................19
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................21
Item 3 Quantitative and Qualitative Disclosures About Market Risk..........27
PART II OTHER INFORMATION
Item 1 Legal Proceedings...................................................29
Item 2 Changes in Securities and Use of Proceeds...........................29
Item 3 Defaults Upon Senior Securities.....................................29
Item 4 Submission of Matters to a Vote of Security Holders.................29
Item 5 Other Information...................................................29
Item 6 Exhibits and Reports on Form 8-K....................................29
SIGNATURES ..................................................................31
EXHIBIT INDEX ...............................................................32
2
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share data)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------------- ---------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales.............................................$ 475.1 $ 495.6 $ 1,622.1 $ 1,367.0
Cost of goods sold.................................... 388.4 407.1 1,332.1 1,130.9
------------- ------------- ------------- -------------
Gross profit..................................... 86.7 88.5 290.0 236.1
Selling, general and administrative expenses.......... 39.3 38.7 124.1 98.8
------------- ------------- ------------- -------------
Income from operations........................... 47.4 49.8 165.9 137.3
Other income (expense):
Interest income.................................. 1.6 2.5 4.1 3.7
Interest expense................................. (26.0) (20.0) (77.7) (48.9)
Gain on sale of businesses....................... 57.2 --- 57.2 ---
Other income (expense) - net..................... (0.2) (1.3) (1.8) (3.2)
------------- ------------- ------------- -------------
Income before income taxes............................ 80.0 31.0 147.7 88.9
Provision for income taxes............................ (30.3) (1.1) (51.9) (2.6)
------------- ------------- ------------- -------------
Net income............................................$ 49.7 $ 29.9 $ 95.8 $ 86.3
============= ============= ============= =============
Net income per common share:
Basic.............................................$ 1.84 $ 1.12 $ 3.51 $ 3.74
Diluted...........................................$ 1.79 $ 1.07 $ 3.41 $ 3.49
Weighted average number shares outstanding
in per share calculation:
Basic......................................... 27.0 26.6 27.3 23.1
Diluted....................................... 27.8 28.0 28.1 24.7
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
September 30, December 31,
2000 1999
----------------- -----------------
Assets
Current assets
<S> <C> <C>
Cash and cash equivalents......................................................... $ 260.8 $ 133.3
Trade receivables (net of allowance of $6.1 at September 30, 2000
and $5.8 at December 31, 1999).................................................. 391.3 429.2
Net inventories................................................................... 584.1 665.6
Deferred taxes.................................................................... 47.2 47.2
Other current assets.............................................................. 47.0 40.0
------------------ ----------------
Total current assets.......................................................... 1,330.4 1,315.3
Long-term assets
Property, plant and equipment - net............................................... 130.6 172.8
Goodwill.......................................................................... 491.5 554.7
Deferred taxes.................................................................... 33.3 55.3
Other assets...................................................................... 75.6 79.4
------------------ ----------------
Total assets........................................................................... $ 2,061.4 $ 2,177.5
================== ================
Liabilities and Stockholders' Equity
Current liabilities
Notes payable and current portion of long-term debt............................... $ 21.3 $ 57.6
Trade accounts payable............................................................ 312.2 297.0
Accrued compensation and benefits................................................. 25.2 27.3
Accrued warranties and product liability.......................................... 47.7 55.9
Other current liabilities......................................................... 137.3 141.7
------------------ ----------------
Total current liabilities..................................................... 543.7 579.5
Non-current liabilities
Long-term debt, less current portion.............................................. 1,001.0 1,098.8
Other............................................................................. 70.2 66.4
Commitments and contingencies
Stockholders' equity
Warrants to purchase common stock................................................. 0.3 0.8
Equity rights..................................................................... 0.7 0.8
Common stock, $.01 par value - authorized 150.0 shares; issued 27.7 at September
30, 2000 and 27.5 at December 31, 1999.......................................... 0.3 0.3
Additional paid-in capital........................................................ 357.6 355.0
Retained earnings................................................................. 187.8 92.0
Accumulated other comprehensive income............................................ (85.5) (16.1)
Less cost of shares of common stock in treasury (0.9 shares at September 30, 2000) (14.7) ---
------------------ ----------------
Total stockholders' equity.................................................... 446.5 432.8
------------------ ----------------
Total liabilities and stockholders' equity............................................. $ 2,061.4 $ 2,177.5
================== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
For the Nine Months
Ended September 30,
---------------------------
2000 1999
-------------- ------------
Operating Activities
<S> <C> <C>
Net income.................................................................... $ 95.8 $ 86.3
Adjustments to reconcile net income to cash provided by (used in) operating
activities:
Depreciation............................................................. 16.6 10.6
Amortization............................................................. 14.8 9.3
Gain on sale of businesses............................................... (34.2) ---
Deferred taxes........................................................... 22.0 ---
Gain on sale of fixed assets............................................. (0.4) (0.1)
Changes in operating assets and liabilities (net of effects of
acquisitions):
Trade receivables...................................................... 5.9 (114.6)
Net inventories........................................................ 32.5 (34.2)
Trade accounts payable................................................. 34.7 39.4
Other, net............................................................. (56.0) 3.7
-------------- -------------
Net cash provided by operating activities........................... 131.7 0.4
-------------- -------------
Investing Activities
Proceeds from sale of businesses.............................................. 144.3 ---
Capital expenditures.......................................................... (17.7) (12.8)
Acquisition of businesses, net of cash acquired............................... (4.1) (475.9)
Proceeds from sale of assets.................................................. 9.2 2.7
-------------- -------------
Net cash provided by (used in) investing activities................. 131.7 (486.0)
-------------- -------------
Financing Activities
Principal repayments of long-term debt........................................ (58.3) (32.1)
Net incremental repayments under revolving line of credit agreements.......... (56.0) (29.2)
Purchase of common stock held in treasury..................................... (14.7) ---
Proceeds from issuance of common stock........................................ --- 162.8
Proceeds from issuance of long-term debt, net of issuance costs............... --- 505.8
Other......................................................................... (3.3) 8.0
-------------- -------------
Net cash provided by (used in) financing activities................. (132.3) 615.3
-------------- -------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents.................... (3.6) (0.7)
-------------- -------------
Net Increase in Cash and Cash Equivalents........................................ 127.5 129.0
Cash and Cash Equivalents at Beginning of Period................................. 133.3 25.1
-------------- -------------
Cash and Cash Equivalents at End of Period....................................... $ 260.8 $ 154.1
============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(in millions, unless otherwise noted)
NOTE A -- BASIS OF PRESENTATION
Basis of Presentation. The accompanying unaudited condensed consolidated
financial statements of Terex Corporation and subsidiaries as of September 30,
2000 and for the three months and nine months ended September 30, 2000 and 1999
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, 1999 has been derived from the
audited consolidated balance sheet as of that date.
The condensed consolidated financial statements include the accounts of Terex
Corporation and its majority owned subsidiaries ("Terex" or the "Company"). All
material intercompany balances, transactions and profits have been eliminated.
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 and nine months ended
September 30, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000. 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, 1999.
Cash and cash equivalents at September 30, 2000 and December 31, 1999 include
$16.8 and $8.6, respectively, which was not immediately available for use.
NOTE B - SALE OF BUSINESSES
On September 30, 2000, the Company completed the sale of its truck-mounted
forklift businesses to various subsidiaries of Partek Corporation of Finland,
for $144 in cash, subject to adjustment. During the nine months ended September
30, 2000 and 1999, total net sales for the Company's truck-mounted forklift
business were approximately $68 and $7, respectively, and were included in the
Terex Lifting segment. The Company intends to use the approximately $125 of net
after-tax proceeds from this transaction to repay long-term bank debt.
NOTE C - INVENTORIES
Net inventories consist of the following:
September 30, December 31,
2000 1999
---------------- ----------------
Finished equipment.................... $ 184.9 $ 235.3
Replacement parts..................... 167.4 176.8
Work-in-process....................... 69.1 81.9
Raw materials and supplies............ 162.7 171.6
----------------- ----------------
Net inventories....................... $ 584.1 $ 665.6
================= ================
6
<PAGE>
NOTE D -- PROPERTY, PLANT AND EQUIPMENT
Net property, plant and equipment consists of the following:
September 30, December 31,
2000 1999
----------------- -----------------
Property................................. $ 16.8 $ 23.3
Plant.................................... 80.8 97.2
Equipment................................ 97.9 112.5
---------------- -----------------
195.5 233.0
Less: Accumulated depreciation.......... (64.9) (60.2)
---------------- -----------------
Net property, plant and equipment........ $ 130.6 $ 172.8
================ =================
NOTE E - EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended September 30,
(in millions, except per share data)
----------------------------------------------------------------------
2000 1999
----------------------------------- ----------------------------------
Per-Share Per-Share
Income Shares Amount Income Shares Amount
------------- ----------- --------- --------- ----------- ------------
Basic earnings per share
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary items...... $ 49.7 27.0 $ 1.84 $ 29.9 26.6 $ 1.12
Effect of dilutive securities
Warrants............................... --- 0.1 --- 0.1
Stock Options.......................... --- 0.5 --- 0.9
Equity Rights.......................... --- 0.2 --- 0.4
------------ ----------- --------- ----------
Income available to common
stockholders - diluted.................. $ 49.7 27.8 $ 1.79 $ 29.9 28.0 $ 1.07
============ =========== ========= ========= =========== ============
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
(in millions, except per share data)
----------------------------------------------------------------------
2000 1999
----------------------------------------------------------------------
Per-Share Per-Share
Income Shares Amount Income Shares Amount
------------- ----------- --------- --------- ----------- -----------
Basic earnings per share
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary items...... $ 95.8 27.3 $ 3.51 $ 86.3 23.1 $ 3.74
Effect of dilutive securities
Warrants............................... --- 0.1 --- 0.1
Stock Options.......................... --- 0.5 --- 0.9
Equity Rights.......................... --- 0.2 --- 0.6
------------- ----------- ---------- -------
Income available to common
stockholders - diluted.................. $ 95.8 28.1 $ 3.41 $ 86.3 24.7 $ 3.49
============ ============ ========= ========== ========== ===========
</TABLE>
NOTE F - STOCKHOLDER'S EQUITY
Total non-shareowner changes in equity (comprehensive income) include all
changes in equity during a period except those resulting from investments by,
and distributions to, shareowners. The specific components include: net income,
deferred gains and losses resulting from foreign currency translation, and
minimum pension liability adjustments. For the three months ended September 30,
2000 and September 30, 1999 and the nine months ended September 30, 2000 and
September 30, 1999, total non-shareowner changes in equity were $25.6, $52.1,
$26.4 and $81.2, respectively.
7
<PAGE>
In March 2000, the Company's Board of Directors authorized the purchase of up to
2.0 shares of the Company's outstanding common stock over the following twelve
months. As of September 30, 2000, the Company had acquired 0.9 shares at a total
cost of $14.7.
NOTE G -- 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
adverse 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 ("CERCLA"),
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.
Clark Material Handling Company ("CMHC"), the purchaser of the Company's Clark
material handling business, and certain of CMHC's related entities have filed
voluntary petitions for bankruptcy. In connection with the sale of the Company's
Clark material handling business to CMHC in November 1996, CMHC assumed
liabilities from the Company arising from product liability claims dealing with
Clark material handling products manufactured prior to the date of such sale. In
September 2000, the bankruptcy court granted CMHC's motion to reject its
obligations to indemnify and defend the Company for such product liability
claims. However, substantially all litigation involving product liability claims
related to Clark material handling products has been stayed until January 15,
2001. At such time as the stay is no longer in effect, the Company will incur
liability arising from certain of these product liability claims. The Company is
unable at this time to determine what liabilities it will incur as a result of
CMHC's bankruptcy, or to estimate the amount of such liabilities; however, the
Company does not believe that these liabilities, in the aggregate, will have a
material adverse effect on the financial position of the Company.
NOTE H - BUSINESS SEGMENT INFORMATION
The Company operates primarily in two industry segments: Terex Lifting and Terex
Earthmoving. Included in Other are the results of Amida Industries, Inc. as well
as the results of Terex Bartell, Ltd. and Terex Bartell Inc. for the periods
from April 1, 1999 and September 20, 1999, their respective dates of
acquisition, as well as general and corporate items for the three months and
nine months ended September 30, 2000 and 1999. Industry segment information is
presented below:
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
2000 1999 2000 1999
---------- ---------- ----------- ---------
Sales
Terex Lifting.................... $ 232.7 $ 242.5 $ 715.2 $ 746.9
Terex Earthmoving................ 230.1 244.2 872.6 599.5
Other............................ 12.3 8.9 34.3 20.6
---------- ---------- ----------- ---------
Total.......................... $ 475.1 $ 495.6 $ 1,622.1 $ 1,367.0
========== ========== =========== =========
Income (Loss) from Operations
Terex Lifting.................... $ 25.0 $ 22.6 $ 74.5 $ 75.3
Terex Earthmoving................ 21.6 26.1 88.8 62.6
Other............................ 0.8 1.1 2.6 (0.6)
---------- ---------- ----------- ---------
Total.......................... $ 47.4 $ 49.8 $ 165.9 $ 137.3
========== ========== =========== =========
8
<PAGE>
NOTE I -- CONSOLIDATING FINANCIAL STATEMENTS
On March 31, 1998 and March 9, 1999, the Company issued and sold $150.0
aggregate principal amount and $100.0 aggregate principal amount, respectively,
of 8-7/8% Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes").
The Senior Subordinated Notes are each jointly and severally guaranteed by the
following wholly-owned subsidiaries of the Company (the "Wholly-owned
Guarantors"): Terex Cranes, Inc., Koehring Cranes, Inc., Terex-Telelect, Inc.,
Terex-RO Corporation, Terex Aerials, Inc., Terex Mining Equipment, Inc.,
Payhauler Corp., O & K Orenstein & Koppel, Inc., The American Crane Corporation,
Amida Industries, Inc. and Cedarapids, Inc. The financial results of Amida
Industries, Inc. and Cedarapids, Inc. are included in the results of the
Wholly-owned Guarantors since April 1, 1999 and August 26, 1999, their
respective dates of acquisition. The Senior Subordinated Notes are each also
jointly and severally guaranteed by PPM Cranes, Inc., which 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. Subsidiaries of Wholly-owned Guarantors that are not themselves
guarantors are reported on the equity basis.
PPM Cranes, Inc. consists of the operations of PPM Cranes, Inc. Its subsidiaries
are reported on the 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
Subordinated Notes.
Debt and Goodwill allocated to subsidiaries is presented on an accounting
"push-down" basis.
9
<PAGE>
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000
(in millions)
<TABLE>
<CAPTION>
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............................... $ 67.9 $ 158.9 $ 19.3 $ 264.9 $ (35.9) $ 475.1
Cost of goods sold................... 58.9 130.5 16.8 218.1 (35.9) 388.4
------------- ------------- ------------- ------------- ------------- -------------
Gross profit............................ 9.0 28.4 2.5 46.8 --- 86.7
Selling, general & administrative 8.1 4.1 1.7 25.4 --- 39.3
expenses
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from operations........... 0.9 24.3 0.8 21.4 --- 47.4
Interest income....................... 1.3 (0.1) --- 0.4 --- 1.6
Interest expense...................... (4.6) (4.9) (1.5) (15.0) --- (26.0)
Gain on sale of businesses............ 10.3 --- --- 46.9 --- 57.2
Income (loss) from equity investees... 61.5 --- --- --- (61.5) ---
Other income (expense) - net.......... 1.3 (0.3) --- (1.2) --- (0.2)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes....... 70.7 19.0 (0.7) 52.5 (61.5) 80.0
Provision for income taxes............ (21.0) (0.1) --- (9.2) --- (30.3)
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss)....................... $ 49.7 $ 18.9 $ (0.7) $ 43.3 $ (61.5) $ 49.7
============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999
(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............................... $ 124.3 $ 151.7 $ 18.9 $ 255.5 $ (54.8) $ 495.6
Cost of goods sold................... 108.6 127.0 16.7 207.1 (52.3) 407.1
------------- ------------- ------------- ------------ ------------- -------------
Gross profit............................ 15.7 24.7 2.2 48.4 (2.5) 88.5
Selling, general & administrative 5.9 8.7 1.3 22.8 --- 38.7
expenses
------------- ------------- ------------- ------------ ------------- -------------
Income (loss) from operations........... 9.8 16.0 0.9 25.6 (2.5) 49.8
Interest income....................... 1.4 0.1 --- 1.0 --- 2.5
Interest expense...................... (6.3) (2.1) (1.2) (10.4) --- (20.0)
Income (loss) from equity investees... 25.8 (0.2) --- --- (25.6) ---
Other income (expense) - net.......... (0.4) (0.2) (0.1) (0.6) --- (1.3)
------------- ------------- ------------- ------------ ------------- -------------
Income (loss) before income taxes....... 30.3 13.6 (0.4) 15.6 (28.1) 31.0
Provision for income taxes............ (0.4) --- --- (0.7) --- (1.1)
------------- ------------- ------------- ------------ ------------- -------------
Net income (loss)....................... $ 29.9 $ 13.6 $ (0.4) $ 14.9 $ (28.1) $ 29.9
============= ============= ============= ============ ============= =============
</TABLE>
10
<PAGE>
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(in millions)
<TABLE>
<CAPTION>
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............................... $ 289.0 $ 504.6 $ 51.8 $ 955.6 $ (178.9) $ 1,622.1
Cost of goods sold................... 255.7 421.9 45.1 786.7 (177.3) 1,332.1
------------- ------------- ------------- ------------- ------------- -------------
Gross profit............................ 33.3 82.7 6.7 168.9 (1.6) 290.0
Selling, general & administrative 17.5 24.8 4.8 77.0 --- 124.1
expenses
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from operations........... 15.8 57.9 1.9 91.9 (1.6) 165.9
Interest income....................... 2.8 0.2 --- 1.1 --- 4.1
Interest expense...................... (15.2) (14.8) (4.3) (43.4) --- (77.7)
Gain on sale of businesses............ 10.3 --- --- 46.9 --- 57.2
Income (loss) from equity investees... 121.1 --- --- --- (121.1) ---
Other income (expense) - net.......... 1.7 (0.9) (0.1) (2.5) --- (1.8)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes....... 136.5 42.4 (2.5) 94.0 (122.7) 147.7
Provision for income taxes............ (40.7) (0.3) --- (10.9) --- (51.9)
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss)....................... $ 95.8 $ 42.1 $ (2.5) $ 83.1 $ (122.7) $ 95.8
============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(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............................... $ 362.9 $ 445.2 $ 58.1 $ 635.3 $ (134.5) $ 1,367.0
Cost of goods sold................... 316.4 372.4 51.4 519.5 (128.8) 1,130.9
------------- ------------- ------------- ------------- ------------- -------------
Gross profit............................ 46.5 72.8 6.7 115.8 (5.7) 236.1
Selling, general & administrative 19.2 20.5 4.0 55.1 --- 98.8
expenses
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from operations........... 27.3 52.3 2.7 60.7 (5.7) 137.3
Interest income....................... 1.8 0.2 --- 1.7 --- 3.7
Interest expense...................... (14.2) (5.8) (3.4) (25.5) --- (48.9)
Income (loss) from equity investees... 72.9 (0.8) 0.2 (0.6) (71.7) ---
Other income (expense) - net.......... (0.4) (0.8) (0.2) (1.8) --- (3.2)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes....... 87.4 45.1 (0.7) 34.5 (77.4) 88.9
Provision for income taxes............ (1.1) 0.1 --- (1.6) --- (2.6)
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss)....................... $ 86.3 $ 45.2 (0.7) 32.9 (77.4) $ 86.3
============= ============= ============= ============= ============= =============
</TABLE>
11
<PAGE>
TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2000
(in millions)
<TABLE>
<CAPTION>
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Assets
Current assets
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents.......... $ 114.2 $ 0.8 $ 0.1 $ 145.7 $ --- $ 260.8
Trade receivables - net............ 27.7 102.2 14.6 246.8 --- 391.3
Intercompany receivables........... 28.3 28.2 17.2 68.0 (141.7) ---
Net inventories.................... 93.1 165.4 15.9 323.8 (14.1) 584.1
Other current assets............... 53.8 1.9 0.2 38.3 --- 94.2
------------- ------------- ------------- ------------- ------------- -------------
Total current assets............. 317.1 298.5 48.0 822.6 (155.8) 1,330.4
Long-term assets
Property, plant & equipment - net.. 10.3 45.8 0.5 74.0 --- 130.6
Investment in and advances to
(from) subsidiaries.............. 347.3 (103.7) (9.0) (131.4) (103.2) ---
Goodwill........................... 9.4 160.1 12.3 309.7 --- 491.5
Other assets....................... 39.7 38.3 0.8 30.1 --- 108.9
------------- ------------- ------------- ------------- ------------- -------------
Total assets............................ $ 723.8 $ 439.0 $ 52.6 $ 1,105.0 $ (259.0) $ 2,061.4
============= ============= ============= ============= ============= =============
Liabilities and stockholders' equity
(deficit)
Current liabilities
Notes payable and current portion
of long-term debt................ $ 2.7 $ 0.1 $ 0.5 $ 18.0 $ --- $ 21.3
Trade accounts payable............. 31.7 77.6 7.4 195.5 --- 312.2
Intercompany payables.............. 5.0 19.0 9.1 108.6 (141.7) ---
Accruals and other current
liabilities...................... 70.4 32.4 8.5 98.9 --- 210.2
------------- ------------- ------------- ------------- ------------- -------------
Total current liabilities........ 109.8 129.1 25.5 421.0 (141.7) 543.7
Non-current liabilities
Long-term debt, less current portion 146.7 210.0 62.6 581.7 --- 1,001.0
Other long-term liabilities........ 20.8 16.2 1.2 32.0 --- 70.2
Stockholders' equity (deficit)....... 446.5 83.7 (36.7) 70.3 (117.3) 446.5
------------- ------------- ------------- ------------- ------------- -------------
Total liabilities and stockholders'
equity (deficit)..................... $ 723.8 $ 439.0 $ 52.6 $ 1,105.0 $ (259.0) $ 2,061.4
============= ============= ============= ============= ============= =============
</TABLE>
12
<PAGE>
TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999
(in millions)
<TABLE>
<CAPTION>
Wholly- Non-
Terex owned PPM Guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Assets
Current assets
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents.......... $ 64.3 $ 1.7 $ 0.1 $ 67.2 $ --- $ 133.3
Trade receivables - net............ 90.2 103.5 21.3 214.2 --- 429.2
Intercompany receivables........... 8.8 26.1 13.7 57.0 (105.6) ---
Net inventories.................... 130.3 190.2 18.2 330.7 (3.8) 665.6
Other current assets............... 50.2 8.8 --- 28.2 --- 87.2
------------- ------------- ------------- ------------- ------------- -------------
Total current assets............. 343.8 330.3 53.3 697.3 (109.4) 1,315.3
Long-term assets
Property, plant & equipment - net.. 17.3 49.1 0.1 106.3 --- 172.8
Investment in and advances to
(from) subsidiaries............. 311.4 (185.7) (20.6) (95.2) (9.9) ---
Goodwill - net..................... 28.7 151.5 12.0 362.5 --- 554.7
Other assets - net................. 74.5 28.0 0.4 31.8 --- 134.7
------------- ------------- ------------- ------------- ------------- -------------
Total assets............................ $ 775.7 $ 373.2 $ 45.2 $ 1,102.7 $ (119.3) $ 2,177.5
============= ============= ============= ============= ============= =============
Liabilities and stockholders' equity
(deficit)
Current liabilities
Notes payable and current portion
of long-term debt................ $ 16.6 $ (0.8) $ 0.8 $ 41.0 $ --- $ 57.6
Trade accounts payable............. 41.4 53.3 6.4 195.9 --- 297.0
Intercompany payables.............. 30.6 15.9 4.5 54.1 (105.1) ---
Accruals and other current 68.5 30.2 7.5 118.7 ---- 224.9
liabilities......................
------------- ------------- ------------- ------------- ------------- -------------
Total current liabilities........ 157.1 98.6 19.2 409.7 (105.1) 579.5
Non-current liabilities
Long-term debt, less current portion 170.8 223.7 59.8 644.5 --- 1,098.8
Other long-term liabilities........ 15.0 9.3 0.4 41.7 --- 66.4
Stockholders' equity (deficit)....... 432.8 41.6 (34.2) 6.8 (14.2) 432.8
------------- ------------- ------------- ------------- ------------- -------------
Total liabilities and stockholders'
equity (deficit)..................... $ 775.7 $ 373.2 $ 45.2 $ 1,102.7 $ (119.3) $ 2,177.5
============= ============= ============= ============= ============= =============
</TABLE>
13
<PAGE>
TEREX CORPORATION
CONDENSED CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(in millions)
<TABLE>
<CAPTION>
Wholly- Non-
Terex owned PPM Guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- ----------------
Net cash provided by (used in)
<S> <C> <C> <C> <C> <C> <C>
operating activities................. $ 61.4 $ 1.1 $ 1.1 $ 68.1 $ --- $ 131.7
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from investing activities
Proceeds from sale of businesses..... 51.8 --- --- 92.5 --- 144.3
Capital expenditures................. (2.2) (8.1) (0.3) (7.1) --- (17.7)
Acquisition of businesses, net of
cash acquired...................... --- (0.5) --- (3.6) --- (4.1)
Proceeds from sale of assets......... --- 6.6 --- 2.6 --- 9.2
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
investing activities........... 49.6 (2.0) (0.3) 84.4 --- 131.7
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from financing activities
Principal repayments of long-term debt (45.6) --- (0.8) (11.9) --- (58.3)
Net incremental borrowings
(repayments) under revolving
line of credit agreements.......... --- --- --- (56.0) --- (56.0)
Purchase of common stock held in
treasury........................... (14.7) --- --- --- --- (14.7)
Proceed from issuance of common stock --- --- --- --- --- ---
Proceeds from issuance of long-term
debt, net of issuance costs....... --- --- --- --- --- ---
Other................................ (0.8) --- --- (2.5) --- (3.3)
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
financing activities............. (61.1) --- (0.8) (70.4) --- (132.3)
------------- ------------- ------------- ------------- ------------- -------------
Effect of exchange rates on cash and
cash equivalents..................... --- --- --- (3.6) --- (3.6)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) in cash and cash
equivalents.......................... 49.9 (0.9) --- 78.5 --- 127.5
Cash and cash equivalents, beginning of
period............................... 64.3 1.7 0.1 67.2 --- 133.3
------------- ------------- ------------- ------------- ------------- -------------
Cash and cash equivalents,
end of period........................ $ 114.2 $ 0.8 $ 0.1 $ 145.7 $ --- $ 260.8
============= ============= ============= ============= ============= =============
</TABLE>
14
<PAGE>
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(in millions)
<TABLE>
<CAPTION>
Wholly- Non-
Terex Owned PPM Guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- --------------
Net cash provided by (used in)
<S> <C> <C> <C> <C> <C> <C>
operating activities................. $ 332.2 $ (119.7) $ 0.2 $ (212.3) $ --- $ 0.4
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from investing activities
Acquisition of businesses, net of
cash acquired...................... (475.9) --- --- --- --- (475.9)
Capital expenditures................. (0.8) (6.0) (0.2) (5.8) --- (12.8)
Proceeds from sale of excess assets.. --- 2.1 --- 0.6 --- 2.7
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
investing activities.............. (476.7) (3.9) (0.2) (5.2) --- (486.0)
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from financing activities
Proceeds from issuance of long-term
debt, net of issuance costs....... 94.9 128.0 --- 282.9 --- 505.8
Proceeds from issuance of common stock 162.8 --- --- --- --- 162.8
Principal repayments of long-term debt (17.8) (0.2) --- (14.1) --- (32.1)
Net incremental borrowings
(repayments) under
revolving line of credit agreements --- --- --- (29.2) --- (29.2)
Payment of premiums on early
extinguishment of debt............. --- --- --- --- --- ---
Other................................ --- (0.3) --- 8.3 --- 8.0
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
financing activities............. 239.9 127.5 --- 247.9 --- 615.3
------------- ------------- ------------- ------------- ------------- -------------
Effect of exchange rates on cash and
cash equivalents..................... --- --- --- (0.7) --- (0.7)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) in cash and cash
equivalents.......................... 95.4 3.9 --- 29.7 --- 129.0
Cash and cash equivalents, beginning of
period............................... 9.3 0.5 0.1 15.2 --- 25.1
------------- ------------- ------------- ------------- ------------- -------------
Cash and cash equivalents,
end of period........................ $ 104.7 $ 4.4 $ 0.1 $ 44.9 $ --- $ 154.1
============= ============= ============= ============= ============= =============
</TABLE>
15
<PAGE>
PPM CRANES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months
September 30, Ended September 30,
--------------------------- ----------------------------
2000 1999 2000 1999
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Net sales..................................$ 19.3 $ 20.3 $ 51.8 $ 63.6
Cost of goods sold......................... 16.8 17.7 45.1 55.8
------------- ------------- -------------- -------------
Gross profit.......................... 2.5 2.6 6.7 7.8
Engineering, selling
and administrative expenses............ 1.7 1.6 4.8 4.8
------------- ------------- -------------- -------------
Income from operations................ 0.8 1.0 1.9 3.0
Other income (expense):
Interest expense...................... (1.5) (1.3) (4.3) (3.5)
Amortization of debt issuance costs... --- (0.1) (0.1) (0.2)
------------- ------------- -------------- -------------
Income (loss) before income taxes.......... (0.7) (0.4) (2.5) (0.7)
Provision for income taxes................. --- --- --- ---
------------- ------------- -------------- -------------
Net loss...................................$ (0.7) $ (0.4) $ (2.5) $ (0.7)
============= ============= ============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
<TABLE>
<CAPTION>
PPM CRANES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions, except share amounts)
September 30, December 31,
2000 1999
---------------- ---------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents........................................... $ 0.1 $ 0.1
Trade accounts receivables (net of allowance of $0.7 at September
30, 2000 and $0.6 at December 31, 1999)........................... 14.6 21.3
Net inventories..................................................... 15.9 18.2
Due from affiliates................................................. 17.2 14.5
Other current assets ............................................... 0.2 ---
---------------- -----------------
Total current assets.............................................. 48.0 54.1
Long-term assets:
Property, plant and equipment - net................................. 0.5 0.2
Goodwill............................................................ 12.3 13.2
Other assets........................................................ 0.8 0.9
---------------- -----------------
Total assets........................................................... $ 61.6 $ 68.4
================ =================
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Trade accounts payable.............................................. $ 7.4 $ 6.4
Accrued warranties and product liability............................ 6.9 6.9
Accrued expenses.................................................... 1.6 0.7
Due to affiliates................................................... 9.1 5.3
Due to Terex Corporation............................................ 9.0 18.2
Current portion of long-term debt................................... 0.5 1.1
---------------- -----------------
Total current liabilities......................................... 34.5 38.6
---------------- -----------------
Non-current liabilities:
Long-term debt, less current portion................................ 62.6 62.8
Other non-current liabilities....................................... 1.2 1.2
---------------- -----------------
Total non-current liabilities..................................... 63.8 64.0
---------------- -----------------
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................................................. (36.7) (34.2)
Accumulated other comprehensive income.............................. --- ---
---------------- -----------------
Total shareholders' deficit...................................... (36.7) (34.2)
---------------- -----------------
Total liabilities and shareholders' deficit............................ $ 61.6 $ 68.4
================ =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
<TABLE>
<CAPTION>
PPM CRANES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
For the Nine Months
Ended September 30,
-----------------------
2000 1999
------------ ----------
OPERATING ACTIVITIES
<S> <C> <C>
Net loss.................................................... $ (2.5) $ (0.7)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization........................... 1.1 1.1
Changes in operating assets and liabilities:
Trade accounts receivable............................. 6.7 (3.2)
Net inventories....................................... 2.3 9.4
Trade accounts payable................................ 1.0 (0.3)
Net amounts due to affiliates......................... (8.1) (4.6)
Other, net............................................ 0.6 (0.8)
------------ ------------
Net cash provided by operating activities........... 1.1 0.9
------------ ------------
INVESTING ACTIVITIES
Capital expenditures........................................ (0.3) (0.2)
------------ ------------
Net cash used in investing activities..................... (0.3) (0.2)
------------ ------------
FINANCING ACTIVITIES
Principal repayments of long-term debt...................... (0.8) (0.5)
------------ ------------
Net cash used in financing activities..................... (0.8) (0.5)
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS................................... --- ---
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS...................... --- 0.2
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............... 0.1 0.2
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................... $ 0.1 $ 0.4
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
PPM CRANES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(in millions unless otherwise denoted)
NOTE 1 -- 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, Terex Corporation, through its wholly-owned subsidiary Terex
Cranes, Inc., a Delaware corporation, completed the acquisition of all of the
capital stock of Legris Industries, Inc., a Delaware corporation, which then
owned 92.4% of the capital stock of PPM Cranes, Inc.
The 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 and nine months ended
September 30, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000. For further information, refer
to the Company's consolidated financial statements and footnotes thereto for the
year ended December 31, 1999.
The condensed consolidated financial statements include the accounts of the
Company and its wholly-owned inactive subsidiary, PPM Far East Pte. Ltd. Prior
to November 30, 1999, the accounts of the Company's other wholly-owned
subsidiary, Terex Cranes Pty. Ltd. ("Terex Australia"), were also included. On
November 30, 1999, the Company sold its ownership in Terex Australia to Terex
Corporation. All material intercompany transactions and profits have been
eliminated.
NOTE 2 -- Inventories
Net inventories consist of the following:
September 30, December 31,
2000 1999
----------------- ----------------
Finished equipment..................... $ 2.8 $ 3.6
Replacement parts...................... 6.8 6.8
Work in process........................ 2.4 1.9
Raw materials and supplies............. 3.9 5.9
$ 15.9 $ 18.2
================ =================
note 3 -- Property, Plant and Equipment
Net property, plant and equipment consists of the following:
September 30, December 31,
2000 1999
----------------- ----------------
Property, plant and equipment........ $ 0.7 $ 0.4
Less: Accumulated depreciation...... (0.2) (0.2)
---------------- -----------------
Net property, plant and equipment.... $ 0.5 $ 0.2
================ =================
19
<PAGE>
NOTE 4 - COMMITMENTS AND 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.
On March 31, 1998 and March 9, 1999, Terex Corporation issued and sold $150.0
aggregate principal amount and $100.0 aggregate principal amount, respectively,
of 8-7/8% Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes").
The Senior Subordinated Notes are each jointly and severally guaranteed by
certain domestic subsidiaries of Terex Corporation, including PPM.
NOTE 5 - RELATED PARTY TRANSACTIONS
During the three months and nine months ended September 30, 2000 and 1999, the
Company had transactions with various unconsolidated affiliates as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -------------------
2000 1999 2000 1999
---------- ----------- ---------- --------
Product sales and service revenues $ 0.4 $ --- $ 1.4 $ ---
Management fee expense $ 0.3 $ 0.3 $ 0.8 $ 0.8
Interest expense $ 1.2 $ 1.4 $ 4.0 $ 3.8
Included in management fee expenses are expenses paid by Terex Corporation on
behalf of the Company (e.g. legal, treasury and tax services expense).
20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company operates primarily in two industry segments: Terex Lifting and Terex
Earthmoving. Included in Other are the results of the operations of Amida
Industries, Inc. ("Amida") and Terex Bartell, Ltd. and Terex Bartell, Inc.
(collectively "Bartell"), for the periods from April 1, 1999 and September 20,
1999, their respective dates of acquisition, as well as general and corporate
items for the three months and nine months ended September 30, 2000 and 1999.
Three Months Ended September 30, 2000 Compared with the Three Months Ended
September 30, 1999
The table below is a comparison of net sales, gross profit, selling, general and
administrative expenses, and income from operations, by segment, for the three
months ended September 30, 2000 and 1999.
<TABLE>
<CAPTION>
Three Months Ended
September 30, Increase
------------------------
2000 1999 (Decrease)
------------ ----------- ----------
NET SALES
<S> <C> <C> <C>
Terex Lifting.............................$ 232.7 $ 242.5 $ (9.8)
Terex Earthmoving......................... 230.1 244.2 (14.1)
Other..................................... 12.3 8.9 3.4
------------ ----------- ----------
Total...................................$ 475.1 $ 495.6 $ (20.5)
============ =========== ==========
GROSS PROFIT
Terex Lifting.............................$ 39.2 $ 38.2 $ 1.0
Terex Earthmoving......................... 45.9 48.5 (2.6)
Other..................................... 1.6 1.8 (0.2)
------------ ----------- ----------
Total...................................$ 86.7 $ 88.5 $ (1.8)
============ =========== ==========
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Terex Lifting.............................$ 14.2 $ 15.6 $ (1.4)
Terex Earthmoving......................... 24.3 22.4 1.9
Other..................................... 0.8 0.7 0.1
------------ ----------- ----------
Total...................................$ 39.3 $ 38.7 $ 0.6
============ =========== ==========
INCOME FROM OPERATIONS
Terex Lifting.............................$ 25.0 $ 22.6 $ 2.4
Terex Earthmoving......................... 21.6 26.1 (4.5)
Other..................................... 0.8 1.1 (0.3)
------------ ----------- ----------
Total...................................$ 47.4 $ 49.8 $ (2.4)
============ =========== ==========
</TABLE>
Net Sales
Sales decreased $20.5 million, or approximately 4%, to $475.1 million for the
three months ended September 30, 2000 over the comparable 1999 period. Excluding
the impact of businesses acquired during 1999, net sales were down approximately
19% from the third quarter of 1999, as acquired companies contributed
approximately $72 million in incremental net sales.
Terex Lifting's sales were $232.7 million for the three months ended September
30, 2000, a decrease of $9.8 million or approximately 4% from $242.5 million for
the three months ended September 30, 1999. The decline in sales was caused
mainly by two factors: continued softness in the mobile hydraulic cranes market
and a reduced level of activity in the aerial work platforms business due to the
closing of the Company's Milwaukee facility during the fourth quarter of 1999,
which were partially offset by the results of the businesses acquired during
1999 (approximately $20 million). Terex Lifting's backlog was $129.1 million at
September 30, 2000 and $179.5 million at September 30, 1999. The decrease in
backlog is consistent with the weakness in the mobile hydraulic crane and aerial
21
<PAGE>
work platforms businesses and was also impacted by the divestiture of the
Company's truck-mounted forklift business. Backlog does not include any
significant parts orders, which are normally filled in the period ordered. The
sales mix was approximately 11% parts for the three months ended September 30,
2000 compared to approximately 10% parts for the comparable 1999 period,
reflecting the decrease in machine sales.
Terex Earthmoving's sales were $230.1 million for the three months ended
September 30, 2000, a decrease of $14.1 million from $244.2 million for the
three months ended September 30, 1999. The decrease in sales was driven
primarily by the decline in the mining business, offset somewhat by businesses
acquired in 1999 (approximately $49 million). Backlog was $110.6 million at
September 30, 2000 compared to $204.2 million at September 30, 1999. The
decrease in backlog is primarily due to the decline in the mining business and
the impact of the completion of the Coal India contract. The sales mix was
approximately 25% parts for the three months ended September 30, 2000 compared
to 23% parts for the comparable 1999 period, reflecting the decrease in machine
sales.
Net sales for Other in the three months ended September 30, 2000 represents
sales from Amida and Bartell. Amida and Bartell were acquired by Terex on April
1, 1999 and September 20, 1999, respectively. In 1999, net sales consisted of
sales from Amida and Bartell, subsequent to their dates of acquisition, and
service revenues generated by Terex's parts distribution center for services
provided to a third party.
Gross Profit
Gross profit for the three months ended September 30, 2000 decreased $1.8
million over the comparable 1999 period, or approximately 2%, to $86.7 million.
The decrease in gross profit is a combination of a decrease in sales offset
somewhat by improved gross profit percentages in both the Terex Lifting and
Terex Earthmoving businesses as management continues to focus on cost controls.
Terex Lifting's gross profit increased $1.0 million to $39.2 million for the
three months ended September 30, 2000, compared to $38.2 million for the three
months ended September 30, 1999. The increase in gross profit was driven by the
contribution of businesses acquired in 1999 and the continued performance of the
utility aerial device business, offset somewhat by the overall decline in net
sales for hydraulic cranes and aerial work platforms. Gross profit as a
percentage of sales increased to 16.8% from 15.8% in 1999, due primarily to an
increase in parts sales as a percentage of total sales, the performance of the
businesses acquired in 1999 and the performance of the utility aerial device
business.
Terex Earthmoving's gross profit decreased approximately 5% or $2.6 million to
$45.9 million for the three months ended September 30, 2000, compared to $48.5
million for the three months ended September 30, 1999. The decrease in gross
profit is due primarily to the decline in sales in the mining business and the
impact of the one-time charge related to the further integration of the
Company's surface mining truck and hydraulic shovel businesses, offset somewhat
by the performance of the businesses acquired in 1999. The gross margin
percentage remained unchanged at 19.9% in the three months ended September 30,
2000 and 1999. Excluding the one-time charge, the gross margin percentage
increased to 21.3%, which reflects the impact of the higher margin businesses
acquired in 1999 and a continued focus on cost controls.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased slightly to $39.3 million
for the three months ended September 30, 2000 from $38.7 million for the three
months ended September 30, 1999, principally reflecting the effect of the
businesses acquired in 1999. As a percentage of sales, selling, general and
administrative expenses increased to 8.3% for the three months ended September
30, 2000 as compared to 7.8% for the three months ended September 30, 1999.
Excluding the impact of businesses acquired in 1999, selling general and
administrative expenses as a percentage of sales remained constant at 7.8%
compared to the prior year.
Terex Lifting's selling, general and administrative expenses decreased to $14.2
million for the three months ended September 30, 2000 from $15.6 million for the
three months ended September 30, 1999. This decrease in selling, general and
administrative expenses was principally due to a continued focus on cost
controls as most units reported decreases in these expenses over the previous
year, offset somewhat by increased costs resulting from the businesses acquired
in 1999. As a percentage of sales, selling, general and administrative expenses
for the quarter decreased to 6.1% compared to 6.4% in 1999. Excluding businesses
acquired in 1999, selling, general and administrative expenses for the three
months ended September 30, 2000 were 5.2% as a percentage of sales.
22
<PAGE>
Terex Earthmoving's selling, general and administrative expenses increased to
$24.3 million for the three months ended September 30, 2000, from $22.4 million
for the comparable period in 1999, principally due to the effect of the
businesses acquired in 1999. As a percentage of sales, selling, general and
administrative expenses increased to 10.6% for the three months ended September
30, 2000, as compared to 9.2% in the comparable 1999 period.
Income from Operations
On a consolidated basis, the Company had income from operations of $47.4
million, or 10.0% of sales, for the three months ended September 30, 2000,
compared to income from operations of $49.8 million, or 10.0% of sales, for the
three months ended September 30, 1999.
Terex Lifting's income from operations of $25.0 million for the three months
ended September 30, 2000 increased by $2.4 million over the three months ended
September 30, 1999. The increase is the result of operating income contributed
by the businesses acquired in 1999, partially offset by decreasing sales and
gross margins within the Company's mobile hydraulic cranes and aerial work
platforms businesses. Income from operations as a percentage of sales increased
to 10.7% for the three months ended September 30, 2000, from 9.3% for the
comparable 1999 period.
Terex Earthmoving's income from operations decreased by $4.5 million to $21.6
million, or 9.4% of sales, for the three months ended September 30, 2000 from
$26.1 million, or 10.7% of sales, for the three months ended September 30, 1999.
The decrease in income from operations and operating margins is due to the
decline in sales and the one-time charge ($3.0 million) related to the Company's
mining business. Excluding the one-time charge, income from operations as a
percent of sales remained flat at 10.7%.
Net Interest Expense
During the three months ended September 30, 2000, the Company's net interest
expense increased $6.9 million to $24.4 million from $17.5 million for the
comparable 1999 period. This increase was primarily due to higher debt levels in
the three months ended September 30, 2000 versus the comparable period in 1999.
The higher debt levels were incurred to fund the acquisition of Powerscreen and
Cedarapids during the third quarter of 1999.
Gain on Sale of Businesses
During the three months ended September 30, 2000, the Company recognized a $57.2
million gain on the sale of its truck-mounted forklift businesses to various
subsidiaries of Partek Corporation of Finland for $144 million in cash, subject
to adjustment.
Income Taxes
During the three months ended September 30, 2000, the Company's income tax
expense was $30.3 million as compared to $1.1 million for the three months ended
September 30, 1999. This increase resulted from the resolution in the fourth
quarter of 1999 of an IRS audit of the Company's income tax returns for the
years 1987 through 1989 and the capitalization of certain deferred tax assets.
As a result of the capitalization of these deferred tax assets, the Company now
reports a higher effective tax rate, but still makes use of substantial net
operating loss carryforwards to minimize cash paid for taxes.
23
<PAGE>
Nine Months Ended September 30, 2000 Compared with Nine Months Ended September
30, 1999
The table below is a comparison of net sales, gross profit, selling, general and
administrative expenses, and income from operations, by segment, for the nine
months ended September 30, 2000 and 1999.
Nine Months Ended
September 30, Increase
-----------------------
2000 1999 (Decrease)
----------- ----------- ----------
NET SALES
Terex Lifting..............................$ 715.2 $ 746.9 $ (31.7)
Terex Earthmoving.......................... 872.6 599.5 273.1
Other...................................... 34.3 20.6 13.7
----------- ----------- ----------
Total....................................$ 1,622.1 $ 1,367.0 $ 255.1
=========== =========== ==========
GROSS PROFIT
Terex Lifting..............................$ 120.9 $ 119.4 $ 1.5
Terex Earthmoving.......................... 162.9 112.9 50.0
Other...................................... 6.2 3.8 2.4
----------- ----------- ----------
Total....................................$ 290.0 $ 236.1 $ 53.9
=========== =========== ==========
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Terex Lifting..............................$ 46.4 $ 44.1 $ 2.3
Terex Earthmoving.......................... 74.1 50.3 23.8
Other...................................... 3.6 4.4 (0.8)
----------- ----------- ----------
Total....................................$ 124.1 $ 98.8 $ 25.3
=========== =========== ==========
INCOME FROM OPERATIONS
Terex Lifting..............................$ 74.5 $ 75.3 $ (0.8)
Terex Earthmoving.......................... 88.8 62.6 26.2
Other...................................... 2.6 (0.6) 3.2
----------- ----------- ----------
Total....................................$ 165.9 $ 137.3 $ 28.6
=========== =========== ==========
Net Sales
Sales increased $255.1 million, or approximately 19%, to $1,622.1 million for
the nine months ended September 30, 2000 over the comparable 1999 period.
Excluding the impact of 1999 acquisitions, net sales were down approximately 14%
from the first nine months of 1999, as acquired businesses contributed
approximately $445 million in incremental net sales.
Terex Lifting's sales were $715.2 million for the nine months ended September
30, 2000, a decrease of $31.7 million from $746.9 million for the nine months
ended September 30, 1999. The decline in sales was caused mainly by two factors:
softness in the mobile hydraulic cranes market and a reduced level of activity
in the aerial work platforms business due to the closing of the Company's
Milwaukee facility, which were partially offset by the results of the businesses
acquired in 1999 (approximately $87 million). The sales mix was approximately
11% parts for the nine months ended September 30, 2000 compared to approximately
9% parts for the comparable 1999 period, reflecting the decrease in machine
sales.
Terex Earthmoving's sales were $872.6 million for the nine months ended
September 30, 2000, an increase of $273.1 million from $599.5 million for the
nine months ended September 30, 1999. The increase in sales was driven by
businesses acquired in 1999 (approximately $349 million) and the performance of
the construction truck business, offset somewhat by a decline in the mining
business. The sales mix was approximately 20% parts for the nine months ended
September 30, 2000 compared to 24% parts for the comparable 1999 period.
Net sales for Other in the nine months ended September 30, 2000 represents sales
from Amida and Bartell and service revenues generated by Terex's parts
distribution center for services provided to a third party through March 2000.
Amida and Bartell were acquired by Terex on April 1, 1999 and September 20,
1999, respectively. In 1999, net sales consisted of sales from Amida and Bartell
subsequent to their dates of acquisition and service revenues generated by
Terex's parts distribution center.
24
<PAGE>
Gross Profit
Gross profit for the nine months ended September 30, 2000 increased $53.9
million over the comparable 1999 period, or approximately 23%, to $290.0 million
as a result of acquisitions and improved gross profit percentages in the Terex
Lifting and Terex Earthmoving businesses.
Terex Lifting's gross profit increased $1.5 million to $120.9 million for the
nine months ended September 30, 2000, compared to $119.4 million for the nine
months ended September 30, 1999. The increase in gross profit was due primarily
to the contribution of businesses acquired in 1999 and the continued performance
of the utility aerial device business, offset somewhat by the overall decline in
net sales for hydraulic cranes and aerial work platforms. Gross profit as a
percentage of sales increased to 16.9% from 16.0% in 1999 due primarily to the
impact of the businesses acquired in 1999, an increase in part sales as a
percentage of total sales and the performance of the utility aerial device
business.
Terex Earthmoving's gross profit increased $50.0 million to $162.9 million for
the nine months ended September 30, 2000, compared to $112.9 million for the
nine months ended September 30, 1999. The increase in gross profit is due
primarily to the performance of businesses acquired in 1999, offset somewhat by
the decline in sales and the impact of a one-time charge related to the further
integration of the Company's surface mining truck and hydraulic shovel
businesses. The gross margin percentage decreased slightly to 18.7% from 18.8%
in the comparable 1999 period. Excluding the one-time charge, the gross margin
percentage actually increased to 19.0%.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $124.1 million for the
nine months ended September 30, 2000 from $98.8 million for the nine months
ended September 30, 1999, principally reflecting the effect of the businesses
acquired in 1999. As a percentage of sales, selling, general and administrative
expenses increased to 7.7% for the nine months ended September 30, 2000 as
compared to 7.2% for the nine months ended September 30, 1999. Excluding the
impact of businesses acquired in 1999, selling, general and administrative
expenses as a percentage of sales was 7.3%.
Terex Lifting's selling, general and administrative expenses increased to $46.4
million for the nine months ended September 30, 2000 from $44.1 million for the
nine months ended September 30, 1999. This increase in selling, general and
administrative expenses was principally due to businesses acquired in 1999. As a
percentage of sales, selling, general and administrative expenses for the nine
months increased to 6.5% compared to 5.9% in 1999. Excluding businesses acquired
in 1999, selling, general and administrative expenses for the nine months ended
September 30, 2000 actually decreased to 5.8% as a percentage of sales.
Terex Earthmoving's selling, general and administrative expenses increased $23.8
million to $74.1 million for the nine months ended September 30, 2000, from
$50.3 million for the comparable period in 1999, principally due to the effect
of the businesses acquired in 1999. As a percentage of sales, selling, general
and administrative expenses increased slightly to 8.5% for the nine months ended
September 30, 2000, from 8.4% for the comparable 1999 period.
Income from Operations
On a consolidated basis, the income from operations of the Company increased
$28.6 million to $165.9 million, or 10.2% of sales, for the nine months ended
September 30, 2000, compared to income from operations of $137.3 million, or
10.0% of sales, for the nine months ended September 30, 1999.
Terex Lifting's income from operations of $74.5 million for the nine months
ended September 30, 2000 decreased slightly from $75.3 million for the nine
months ended September 30, 1999. The decrease is the result of decreasing sales
and gross margins within the Company's mobile hydraulic cranes and aerial work
platforms businesses, partially offset by approximately $13 million of operating
income contributed by the businesses acquired in 1999. Income from operations as
a percentage of sales was 10.4% for the nine months ended September 30, 2000, an
increase from 10.1% for the comparable 1999 period.
Terex Earthmoving's income from operations increased by $26.2 million or
approximately 42% to $88.8 million, or 10.2% of sales, for the nine months ended
September 30, 2000 from $62.6 million, or 10.4% of sales, for the nine months
ended September 30, 1999. The increase in income from operations is due
primarily to the impact of the 1999 acquisitions and the performance of the
Company's construction truck business, offset somewhat by the one-time charge
related to the Company's mining business ($3.0 million) and a decline in the
mining business.
25
<PAGE>
Net Interest Expense
During the nine months ended September 30, 2000, the Company's net interest
expense increased $28.4 million to $73.6 million from $45.2 million for the
comparable 1999 period. This increase was primarily due to higher debt levels in
the nine months ended September 30, 2000 versus the comparable period in 1999.
The higher debt levels were incurred to fund the acquisition of Powerscreen and
Cedarapids during the third quarter of 1999.
Gain on Sale of Businesses
During the nine months ended September 30, 2000, the Company recognized a $57.2
million gain on the sale of its truck-mounted forklift businesses to various
subsidiaries of Partek Corporation of Finland for $144 million in cash, subject
to adjustment.
Income Taxes
During the nine months ended September 30, 2000, the Company's income tax
expense was $51.9 million as compared to $2.6 million for the nine months ended
September 30, 1999. This increase resulted from the resolution in the fourth
quarter of 1999 of an IRS audit of the Company's income tax returns for the
years 1987 through 1989 and the capitalization of certain deferred tax assets.
As a result of the capitalization of these deferred tax assets, the Company now
reports a higher effective tax rate, but still makes use of substantial net
operating loss carryforwards to minimize cash paid for taxes.
LIQUIDITY AND CAPITAL RESOURCES
Net cash of $131.7 million was provided by operating activities during the nine
months ended September 30, 2000, of which approximately $73 million was
generated from reductions of working capital. Net cash provided by investing
activities was $131.7 million during the nine months ended September 30, 2000
and primarily represents the proceeds from the sale of the truck-mounted
forklift business. Net cash used in financing activities was $132.3 million
during the nine months ended September 30, 2000, which primarily represents
principal repayments of the Company's long-term debt and revolving line of
credit. Cash and cash equivalents totaled $260.8 million at September 30, 2000.
Debt reduction and an improved capital structure are major focal points for the
Company. The Company regularly reviews its alternatives to improve its capital
structure and to reduce debt service through debt refinancings, issuances of
equity, asset sales, strategic dispositions of business units, or any
combination thereof. In this regard, the Company committed to generate $200
million of free cash flow by the end of 2000 from working capital reduction and
operating results, which was anticipated to be used to either pay down debt or
increase the liquidity of the Company. Through the nine months ended September
30, 2000, the Company paid down approximately $114 million of bank debt. During
the first week of October, the Company paid down an additional $125 million of
debt from the net after-tax proceeds from the sale of its truck-mounted forklift
business.
The Company continually explores and conducts discussions regarding acquisitions
and other strategic corporate transactions with respect to businesses with
complementary products and services and in other industries. Such potential
acquisitions range from transactions that are relatively small to transactions
which may be significant to the Company. The purchase price for possible
acquisitions may be paid with internally generated cash, through the public or
private issuance of common stock (which would increase the number of shares of
common stock outstanding) or other securities of the Company, through
borrowings, or a combination thereof. No assurance can be given with respect to
the timing, likelihood or business effect of any possible transaction, including
whether the Company will be able to identify suitable acquisition candidates and
whether the Company will be able to raise sufficient funds to complete potential
future acquisitions.
On March 9, 2000, the Company's Board of Directors authorized the purchase of up
to 2 million shares of the Company's common stock over the following 12 months
from available cash. As of September 30, 2000, the Company had purchased 917
thousand shares of common stock to be held in treasury for aggregate
consideration of $14.7 million.
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 the Senior
Subordinated Notes and monthly interest payments on the Company's bank credit
facilities. Management believes that cash generated from operations, together
with the Company's bank credit facilities and cash on hand, provides the Company
adequate liquidity to meet the Company's operating and debt service
requirements.
26
<PAGE>
CONTINGENCIES AND UNCERTAINTIES
Euro
On January 1, 1999, 11 of the 15 member countries of the European Union
established fixed conversion rates between their existing currencies ("legacy
currencies") and one common currency, the euro. The euro now trades on currency
exchanges and may be used in business transactions. Beginning in January 2002,
new euro-denominated bills and coins will be issued, and legacy currencies will
be withdrawn from circulation. The Company's operating subsidiaries affected by
the euro conversion are assessing the systems and business issues raised by the
euro currency conversion. These issues include, among others, (1) the need to
adapt computer and other business systems and equipment to accommodate
euro-denominated transaction and (2) the competitive impact of cross-border
price transparency, which may make it more difficult for businesses to charge
different prices for the same products on a country-by-country basis,
particularly once the euro currency is issued in 2002. The Company believes that
the euro conversion has not and will not have a material adverse impact on its
financial condition or results of operations.
Other
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, the Company does not believe that
these contingencies and uncertainties will, in the aggregate, have a material
adverse 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 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 manufacturing operations. As a result, Terex is subject to a wide range of
federal, state, local and foreign environmental laws and regulations. These laws
and regulations govern actions that may have adverse environmental effects and
also require compliance with certain practices when handling and disposing of
hazardous and nonhazardous wastes. These laws and regulations also impose
liability for the costs of, and damages resulting from, cleaning up sites, past
spills, disposals and other releases of hazardous substances. Compliance with
these laws and regulations has, and will continue require, the Company to make
expenditures. The Company does not expect that these expenditures will have a
material adverse effect on its business or profitability.
Clark Material Handling Company ("CMHC"), the purchaser of the Company's Clark
material handling business, and certain of CMHC's related entities have filed
voluntary petitions for bankruptcy. In connection with the sale of the Company's
Clark material handling business to CMHC in November 1996, CMHC assumed
liabilities from the Company arising from product liability claims dealing with
Clark material handling products manufactured prior to the date of such sale. In
September 2000, the bankruptcy court granted CMHC's motion to reject its
obligations to indemnify and defend the Company for such product liability
claims. However, substantially all litigation involving product liability claims
related to Clark material handling products has been stayed until January 15,
2001. At such time as the stay is no longer in effect, the Company will incur
liability arising from certain of these product liability claims. The Company is
unable at this time to determine what liabilities, it will incur as a result of
CMHC's bankruptcy, or to estimate the amount of such liabilities; however, the
Company does not believe that these liabilities, in the aggregate, will have a
material adverse effect on the financial position of the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks which exist as part of its
ongoing business operations and the Company uses derivative financial
instruments, where appropriate, to manage these risks. The Company, as a matter
of policy, does not engage in trading or speculative transactions. For further
information on accounting policies related to derivative financial instruments,
refer to the Company's Annual Report on Form 10-K for the year ended December
31, 1999.
27
<PAGE>
Foreign Exchange Risk
The Company is exposed to fluctuations in foreign currency cash flows related to
third party purchases and sales, intercompany product shipments and intercompany
loans. The Company is also exposed to fluctuations in the value of foreign
currency investments in subsidiaries and cash flows related to repatriation of
these investments. Additionally, the Company is exposed to volatility in the
translation of foreign currency earnings to U.S. Dollars. Primary exposures
include the U.S. Dollars versus functional currencies of the Company's major
markets which include the British Pound, German Mark, French Franc, Irish Punt
and Italian Lira. The Company assesses foreign currency risk based on
transactional cash flows and identifies naturally offsetting positions and
purchases hedging instruments to protect anticipated exposures. At September 30,
2000, the Company had foreign currency contracts which were hedges of firm
commitments totaling approximately $33 million. The fair market value of these
arrangements, which represents the cost to settle these contracts, was a
liability of approximately $0.9 million at September 30, 2000.
Interest Rate Risk
The Company is exposed to interest rate volatility with regard to future
issuances of fixed rate debt and existing issuances of variable rate debt.
Primary exposure includes movements in the U.S. prime rate and London Interbank
Offer Rate ("LIBOR"). The Company uses interest rate swaps to reduce interest
rate volatility. At September 30, 2000, the Company had approximately $258
million of interest rate swaps fixing interest rates between 5.68% and 9.69%.
The fair market value of these arrangements, which represents the costs to
settle these contracts, was an asset of approximately $1.1 million at September
30, 2000.
At September 30, 2000, the Company performed a sensitivity analysis for the
Company's derivatives and other financial instruments that have interest rate
risk. The Company calculated the pretax earnings effect on its interest
sensitive instruments. Based on this sensitivity analysis, the Company has
determined that an increase of 10% in the Company's weighted average interest
rates at September 30, 2000 would have increased interest expense by
approximately $3.3 million in the nine months ended September 30, 2000.
28
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in certain claims and litigation arising in the ordinary
course of business, which are not considered material to the financial
operations or cash flow of the Company. For information concerning contingencies
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Contingencies and Uncertainties."
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Forward Looking Information
Certain information in this Quarterly Report includes forward-looking statements
regarding future events or the future financial performance of the Company that
involve certain contingencies and uncertainties, including those discussed above
in the section entitled "Contingencies and Uncertainties". In addition, when
included in this Quarterly Report or in documents incorporated herein by
reference, the words "may," "expects," "intends," "anticipates," "plans,"
"projects," "estimates" and the negatives thereof and analogous or similar
expressions are intended to identify forward-looking statements. However, the
absence of these words does not mean that the statement is not forward-looking.
The Company has based these forward-looking statements on current expectations
and projections about future events. These statements are not guarantees of
future performance. Such statements are inherently subject to a variety of risks
and uncertainties that could cause actual results to differ materially from
those reflected in such forward-looking statements. Such risks and
uncertainties, many of which are beyond the Company's control, include, among
others: the sensitivity of construction and mining activity to interest rates,
government spending and general economic conditions; the ability to successfully
integrate acquired businesses; the retention of key management personnel;
foreign currency fluctuations; the Company's businesses are very competitive and
may be affected by pricing, product initiatives and other actions taken by
competitors; the effects of changes in laws and regulations; the Company's
business is international in nature and is subject to exchange rates between
currencies, as well as international politics; the ability of suppliers to
timely supply parts and components at competitive prices and the Company's
ability to timely manufacture and deliver products to customers; compliance with
the restrictive covenants contained in the Company's debt agreements; continued
use of net operating loss carryforwards; compliance with applicable
environmental laws and regulations; 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. The forward-looking statements contained herein speak only as of the
date of this Quarterly Report and the forward-looking statements contained in
documents incorporated herein by reference speak only as of the date of the
respective documents. The Company expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statement contained or incorporated by reference in this Quarterly Report to
reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any such statement is
based.
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits set forth on the accompanying Exhibit Index have
been filed as part of this Form 10-Q.
(b) Reports on Form 8-K.
- A report on Form 8-K dated July 20, 2000 was filed on July
21, 2000, announcing the signing of a definitive agreement
to sell the Company's truck-mounted forklift business to
subsidiaries of Partek Corporation.
29
<PAGE>
- A report on Form 8-K dated September 30, 2000 was filed on
October 4, 2000, announcing the completion of the sale of
the Company's truck-mounted forklift business to
subsidiaries of Partek Corporation.
30
<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: November 14, 2000 /s/ Joseph F. Apuzzo
Joseph F. Apuzzo
Chief Financial Officer
(Principal Financial Officer)
Date: November 14, 2000 /s/ Kevin M. O'Reilly
Kevin M. O'Reilly
Controller
(Principal Accounting Officer)
31
<PAGE>
EXHIBIT INDEX
3.1 Restated Certificate of Incorporation of Terex Corporation (incorporated
by reference to Exhibit 3.1 to the Form S-1 Registration Statement of
Terex Corporation, Registration No. 33-52297).
3.2 Certificate of Elimination with respect to the Series B Preferred Stock
(incorporated by reference to Exhibit 4.3 to the Form 10-K for the year
ended December 31, 1998 of Terex Corporation, Commission File No.
1-10702).
3.3 Certificate of Amendment to Certificate of Incorporation of Terex
Corporation dated September 5, 1998 (incorporated by reference to Exhibit
3.3 to the Form 10-K for the year ended December 31, 1998 of Terex
Corporation, Commission File No. 1-10702).
3.4 Amended and Restated Bylaws of Terex Corporation (incorporated by
reference to Exhibit 3.2 to the Form 10-K for the year ended December 31,
1998 of Terex Corporation, Commission File No. 1-10702).
4.1 Warrant Agreement dated as of December 20, 1993 between Terex Corporation
and Mellon Securities Trust Company, as Warrant Agent (incorporated by
reference to Exhibit 4.40 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52297).
4.2 Form of Series A Warrant (incorporated by reference to Exhibit 4.41 to
the Form S-1 Registration Statement of Terex Corporation, Registration
No. 33-52297).
4.3 Indenture dated as of March 31, 1998 among Terex Corporation, the
Guarantors named therein and United States Trust Company of New York, as
Trustee (incorporated by reference to Exhibit 4.6 of Amendment No. 1 to
the Form S-4 Registration Statement of Terex Corporation, Registration
No. 333-53561).
4.4 First Supplemental Indenture, dated as of September 23, 1998, between
Terex Corporation and United States Trust Company of New York, as Trustee
(to Indenture dated as of March 31, 1998) (incorporated by reference to
Exhibit 4.4 to the Form 10-Q for the quarter ended September 30, 1999 of
Terex Corporation, Commission File No. 1-10702).
4.5 Second Supplemental Indenture, dated as of April 1, 1999, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of March 31, 1998) (incorporated by reference to
Exhibit 4.5 to the Form 10-Q for the quarter ended September 30, 1999 of
Terex Corporation, Commission File No. 1-10702).
4.6 Third Supplemental Indenture, dated as of July 29, 1999, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of March 31, 1998) (incorporated by reference to
Exhibit 4.6 to the Form 10-Q for the quarter ended September 30, 1999 of
Terex Corporation, Commission File No. 1-10702).
4.7 Fourth Supplemental Indenture, dated as of August 26, 1999, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of March 31, 1999) (incorporated by reference to
Exhibit 4.7 to the Form 10-Q for the quarter ended September 30, 1999 of
Terex Corporation, Commission File No. 1-10702).
4.8 Indenture dated as of March 9, 1999 among Terex Corporation, the
Guarantors named therein and United States Trust Company of New York, as
Trustee (incorporated by reference to Exhibit 4.4 to the Form 10-K for
the year ended December 31, 1998 of Terex Corporation, Commission File
No. 1-10702).
4.9 First Supplemental Indenture, dated as of April 1, 1999, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of March 9, 1999) (incorporated by reference to
Exhibit 4.8 to the Form 10-Q for the quarter ended September 30, 1999 of
Terex Corporation, Commission File No. 1-10702).
4.10 Second Supplemental Indenture, dated as of July 30, 1999, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of March 9, 1999) (incorporated by reference to
Exhibit 4.9 to the Form 10-Q for the quarter ended September 30, 1999 of
Terex Corporation, Commission File No. 1-10702).
4.11 Third Supplemental Indenture, dated as of August 26, 1999, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of March 9, 1999) (incorporated by reference to
Exhibit 4.11 to the Form 10-Q for the quarter ended September 30, 1999 of
Terex Corporation, Commission File No. 1-10702).
32
<PAGE>
10.1 Terex Corporation Incentive Stock Option Plan, as amended (incorporated
by reference to Exhibit 4.1 to the Form S-8 Registration Statement of
Terex Corporation, Registration No. 33-21483).
10.2 1994 Terex Corporation Long Term Incentive Plan (incorporated by
reference to Exhibit 10.2 to the Form 10-K for the year ended December
31, 1994 of Terex Corporation, Commission File No. 1-10702).
10.3 Terex Corporation Employee Stock Purchase Plan (incorporated by reference
to Exhibit 10.3 to the Form 10-K for the year ended December 31, 1994 of
Terex Corporation, Commission File No. 1-10702).
10.4 1996 Terex Corporation Long Term Incentive Plan (incorporated by
reference to Exhibit 10.1 to Form S-8 Registration Statement of Terex
Corporation, Registration No. 333-03983).
10.5 Amendment No. 1 to 1996 Terex Corporation Long Term Incentive Plan
(incorporated by reference to Exhibit 10.5 to the Form 10-K for the year
ended December 31, 1999 of Terex Corporation, Commission File No.
1-10702).
10.6 Amendment No. 2 to 1996 Terex Corporation Long Term Incentive Plan
(incorporated by reference to Exhibit 10.6 to the Form 10-K for the year
ended December 31, 1999 of Terex Corporation, Commission File No.
1-10702).
10.7 Terex Corporation 1999 Long-Term Incentive Plan (incorporated by
reference to Exhibit 10.7 to the Form 10-Q for the quarter ended March
31, 2000 of Terex Corporation, Commission File No. 1-10702).
10.8 Terex Corporation 2000 Incentive Plan (incorporated by reference to
Exhibit 10.8 to the Form 10-Q for the quarter ended June 30, 2000 of
Terex Corporation, Commission File No. 1-10702).
10.9 Common Stock Appreciation Rights Agreement dated as of May 9, 1995
between the Company and United States Trust Company of New York, as
Rights Agents (incorporated by reference to Exhibit 10.29 of the
Amendment No. 1 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52711).
10.10 SAR Registration Rights Agreement dated as of May 9, 1995 among the
Company and the Purchasers, as defined therein (incorporated by reference
to Exhibit 10.31 of the Amendment No. 1 to the Form S-1 Registration
Statement of Terex Corporation, Registration No. 33-52711).
10.11 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
10.13 to the Form 10-K for the year ended December 31, 1998 of Terex
Corporation, Commission File No. 1-10702).
10.12 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 for the year ended December
31, 1998 of Terex Corporation, Commission File No. 1-10702).
10.13 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 for the year ended December 31, 1998 of Terex
Corporation, Commission File No. 1-10702).
10.14 Security 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
10.16 to the Form 10-K for the year ended December 31, 1998 of Terex
Corporation, Commission File No. 1-10702).
10.15 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 for the year ended December 31, 1998 of Terex
Corporation, Commission File No. 1-10702).
10.16 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 for the year ended December 31, 1998 of
Terex Corporation, Commission File No. 1-10702).
10.17 Amendment No. 1 to 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 and Collateral Agent
(incorporated by reference to Exhibit 10.17 to the Form 10-K for the year
ended December 31, 1998 of Terex Corporation, Commission File No.
1-10702).
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10.18 Amendment No. 2 to 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 and Collateral Agent
(incorporated by reference to Exhibit 10.18 to the Form 10-K for the year
ended December 31, 1998 of Terex Corporation, Commission File No.
1-10702).
10.19 Amendment No. 3 to 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 and Collateral Agent
(incorporated by reference to Exhibit 10.19 to the Form 10-K for the year
ended December 31, 1998 of Terex Corporation, Commission File No.
1-10702).
10.20 Amendment No. 4 to Credit Agreement dated as of March 6, 1998 among Terex
Corporation, certain of its subsidiaries, the lenders named therein, and
Credit Suisse First Boston, as Administrative and Collateral Agent
(incorporated by reference to Exhibit 10.1 to the Form 8-K Current
Report, Commission File No.1-10702, dated July 27, 1999 and filed with
the Commission on August 10, 1999).
10.21 Amendment No. 5 to Credit Agreement dated as of March 6, 1998 among Terex
Corporation, certain of its subsidiaries, the lenders named therein, and
Credit Suisse First Boston, as Administrative and Collateral Agent
(incorporated by reference to Exhibit 10.2 to the Form 8-K Current
Report, Commission File No. 1-10702, dated July 27, 1999 and filed with
the Commission on August 10, 1999).
10.22 Amendment No. 6 to Credit Agreement dated as of March 6, 1998 among Terex
Corporation, certain of its subsidiaries, the lenders named therein, and
Credit Suisse First Boston, as Administrative and Collateral Agent
(incorporated by reference to Exhibit 10.22 to the Form 10-Q for the
quarter ended September 30, 1999 of Terex Corporation, Commission File
No. 1-10702).
10.23 Amendment No. 7 to Credit Agreement dated as of March 6, 1998 among Terex
Corporation, certain of its subsidiaries, the lenders named therein and
Credit Suisse First Boston, as Administrative and Collateral Agent
(incorporated by reference to Exhibit 10.21 to the Form 10-K for the year
ended December 31, 1999 of Terex Corporation, Commission File No.
1-10702).
10.24 Amendment No. 8 to Credit Agreement dated as of March 6, 1998 among Terex
Corporation, certain of its subsidiaries, the lenders named therein, and
Credit Suisse First Boston, as Administrative and Collateral Agent
(incorporated by reference to Exhibit 10.24 to the Form 10-Q for the
quarter ended June 30, 2000 of Terex Corporation, Commission File No.
1-10702).
10.25 Tranche C Credit Agreement, dated as of July 2, 1999, as amended and
restated as of August 23, 1999, among Terex Corporation, the lenders
named therein, and Credit Suisse First Boston, as Administrative and
Collateral Agent (incorporated by reference to Exhibit 10.23 to the Form
10-Q for the quarter ended September 30, 1999 of Terex Corporation,
Commission File No. 1-10702).
10.26 Amendment No. 1 to Tranche C Credit Agreement dated as of July 2, 1999,
as amended and restated as of August 23, 1999, among Terex Corporation,
the lenders named therein, and Credit Suisse First Boston, as
Administrative and Collateral Agent (incorporated by reference to Exhibit
10.26 to the Form 10-Q for the quarter ended June 30, 2000 of Terex
Corporation, Commission File No. 1-10702).
10.27 Purchase Agreement dated as of March 9, 1999 among the Company and the
Initial Purchasers, as defined therein (incorporated by reference to
Exhibit 10.20 to the Form 10-K for the year ended December 31, 1998 of
Terex Corporation, Commission File No. 1-10702).
10.28 Registration Rights Agreement dated as of March 9, 1999 among the Company
and the Purchasers, as defined therein (incorporated by reference to
Exhibit 10.21 to the Form 10-K for the year ended December 31, 1998 of
Terex Corporation, Commission File No. 1-10702).
10.29 Underwriting Agreement, dated as of September 17, 1999, between Terex
Corporation and Salomon Smith Barney Inc. (incorporated by reference to
Exhibit 1 of the Form 8-K Current Report, Commission File No. 1-10702,
dated and filed with the Commission on September 18, 1999).
10.30 Stock Purchase Agreement between Raytheon Engineers & Constructors
International, Inc. and Terex Corporation, dated as of July 19, 1999
(incorporated by reference to Exhibit 10.27 to the Form 10-Q for the
quarter ended September 30, 1999 of Terex Corporation, Commission File
No. 1-10702).
10.31 Stock Purchase Agreement between Terex Corporation and Hartford Capital
Appreciation Fund, Inc., dated July 23, 1999 (incorporated by reference
to Exhibit 10.28 to the Form 10-Q for the quarter ended September 30,
1999 of Terex Corporation, Commission File No. 1-10702).
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10.32 Asset Purchase and Sale Agreement between Terex Corporation and Partek
Acquisition Company, Inc., dated as of July 20, 2000 (incorporated by
reference to Exhibit 1 of the Form 8-K Current Report, Commission File
No. 1-10702, dated September 30, 2000 and filed with the Commission on
October 5, 2000).
10.33 Share Purchase and Sale Agreement among Powerscreen International plc,
Partek Cargotec Holding Ltd and, for purposes of Article 9 only, Moffett
Engineering Limited, dated as of July 20, 2000 (incorporated by reference
to Exhibit 2 of the Form 8-K Current Report, Commission File No. 1-10702,
dated September 30, 2000 and filed with the Commission on October 5,
2000).
10.34 Share Purchase and Sale Agreement among Holland Lift International B.V.,
Partek Cargotec Holding Netherlands B.V. and, for purposes of Article 9
only, Kooi B.V., dated as of July 20, 2000 (incorporated by reference to
Exhibit 3 of the Form 8-K Current Report, Commission File No. 1-10702,
dated September 30, 2000 and filed with the Commission on October 5,
2000).
10.35 Asset Purchase and Sale Agreement among PPM Deutschland GmbH Terex
Cranes, Hiab GmbH and, for purposes of Section 2.3 only, Holland Lift
International B.V., Partek Cargotec Holding Netherlands B.V. and Kooi
B.V., dated as of September 29, 2000 (incorporated by reference to
Exhibit 4 of the Form 8-K Current Report, Commission File No. 1-10702,
dated September 30, 2000 and filed with the Commission on October 5,
2000).
10.36 Contract of Employment, dated as of September 1, 1999, between Terex
Corporation and Filip Filipov (incorporated by reference to Exhibit 10.29
to the Form 10-Q for the quarter ended September 30, 1999 of Terex
Corporation, Commission File No. 1-10702).
10.37 Supplement to Contract of Employment, dated as of April 1, 2000, between
Terex Corporation and Filip Filipov.*
10.38 Amended and Restated Employment and Compensation Agreement, dated as of
April 1, 2000, between Terex Corporation and Ronald M. DeFeo.*
10.39 Form of Change in Control and Severance Agreement dated as of April 1,
2000 between Terex Corporation and certain executive officers
(incorporated by reference to Exhibit 10.34 to the Form 10-Q for the
quarter ended June 30, 2000 of Terex Corporation, Commission File No.
1-10702).
12.1 Calculation of Ratio of Earnings to Fixed Charges. *
27.1 Financial Data Schedule.*
* Exhibit filed with this document.
35
