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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
|X| OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2001
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
|_| OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission File Number 1-10702
TEREX CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware 34-1531521
(State of incorporation) (I.R.S. Employer
Identification No.)
500 Post Road East, Suite 320, Westport, Connecticut 06880
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (203) 222-7170
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.01 par value
(Title of Class)
New York Stock Exchange
(Name of Exchange on which Registered)
Securities registered pursuant to Section 12(g) of the Act: None
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
------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
The aggregate market value of the voting and non-voting common equity stock held
by non-affiliates of the Registrant was approximately $837.3 million based on
the last sale price on March 25, 2002.
The number of shares of the Registrant's Common Stock
outstanding was 38,539,374 as of March 25, 2002.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Terex Corporation Proxy Statement to be filed
with the Securities and Exchange Commission within 120 days after the
year covered by this Form 10-K with respect to the 2002 Annual
Meeting of Stockholders are incorporated by reference into Part III hereof.
TEREX CORPORATION AND SUBSIDIARIES
Index to Annual Report on Form 10-K
For the Year Ended December 31, 2001
Page
PART I
Item 1 Business.......................................................... 3
Item 2 Properties........................................................ 27
Item 3 Legal Proceedings................................................. 29
Item 4 Submission of Matters to a Vote of Security Holders............... 29
PART II
Item 5 Market for Registrant's Common Stock and
Related Stockholder Matters...................................... 30
Item 6 Selected Financial Data........................................... 31
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 32
Item 7A Quantitative and Qualitative Disclosure about Market Risk......... 43
Item 8 Financial Statements and Supplementary Data....................... 44
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................. 45
PART III
Item 10 Directors and Executive Officers of the Registrant................ *
Item 11 Executive Compensation............................................ *
Item 12 Security Ownership of Certain Beneficial Owners and Management.... *
Item 13 Certain Relationships and Related Transactions.................... *
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K... 45
* Incorporated by reference from Terex Corporation Proxy Statement to be filed
with the Securities and Exchange Commission with respect to the 2002 Annual
Meeting of Stockholders.
-2-
As used in this Annual Report on Form 10-K, unless otherwise indicated, Terex
Corporation, together with its consolidated subsidiaries, is hereinafter
referred to as "Terex," the "Registrant," or the "Company."
PART I
ITEM 1. BUSINESS
General
Terex is a diversified global manufacturer of a broad range of equipment for the
construction, infrastructure and mining industries. The Company is building a
growing franchise under the Terex brand name. The Company remains focused on its
mission of delivering products that are reliable and cost-effective and
producing equipment that improves its customers' return on invested capital. The
Company is organized into three business segments: Terex Americas, Terex Europe
and Terex Mining. The Company's products are manufactured at 49 plants in the
United States, Europe, Australia and Asia, and are sold primarily through a
worldwide distribution network with over 2,000 locations to the global
construction, infrastructure and surface mining markets.
Over the past several years, the Company has implemented a series of
interrelated operational and strategic initiatives designed to create a
competitive advantage in the marketplace. These initiatives include: (i)
providing customers with lower cost products to increase their return on
invested capital; (ii) implementing a variable cost structure with over 80% of
cost of sales from purchased components; (iii) reducing selling expense and
eliminating non-value-added functions throughout the organization; and (iv)
increasing product and geographic diversity through internal development and
acquisitions.
The Company currently operates in three business segments: Terex Americas, Terex
Europe and Terex Mining. The focus of Terex Americas and Terex Europe is
geographic. Terex Americas includes the business units located in North and
South America, Australia and Asia, with the exception of those business units
included within Terex Mining. Terex Europe includes the business units located
in Europe, with the exception of those business units included within Terex
Mining. While the Company's operations are increasingly global, the geographic
organization of these segments reflects the Company's belief that Terex's
business is a local one that can be best developed and served by focusing on
operations geographically and by developing local relationships among equipment
users, distribution channels and suppliers.
The Terex Mining business segment includes the Company's mining manufacturing
and distribution operation in Tulsa, Oklahoma, and in Dortmund, Germany and
certain sales offices in Australia, South America and Africa. The Terex Mining
business is organized under product lines and not geographic lines because of
the worldwide scope of the Company's mining customers. In the mining industry,
manufacturers and customers are located in various areas around the globe, with
many customers operating multiple sites in widely dispersed locations, with the
result that local geographic concerns are far less significant than a
manufacturer's global range.
For financial information about the Company's industry and geographic segments,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note O -- "Business Segment Information" in the Notes to the
Consolidated Financial Statements.
Terex Americas and Terex Europe
The Terex Americas and Terex Europe segments manufacture and sell telescopic
mobile cranes (including rough terrain, truck and all terrain mobile cranes),
tower cranes (including self-erecting, hammerhead, flat top and luffing jib
tower cranes), lattice boom cranes, utility aerial devices (including digger
derricks and articulated aerial devices), telescopic material handlers
(including container stackers and rough terrain, telescopic boom material
handlers), truck-mounted cranes (boom trucks), aerial work platforms, loader
backhoes, excavators, wheeled loaders, loading machines, articulated and rigid
off-highway trucks, scrapers, crushing and screening equipment, asphalt pavers,
concrete pavers, reclaimers/trimmers, pavement profilers, concrete plants,
asphalt rollers, soil compactors, construction trailers, asphalt mixing plants
and related components and replacement parts. The Terex Americas and Terex
Europe segments also manufacture and sell various light construction equipment,
including mobile and portable floodlighting systems, concrete power trowels,
concrete placement systems, concrete finishing systems, concrete mixers, power
buggies, generators, traffic control products, and related components and
replacement parts.
-3-
Terex Americas has 21 significant manufacturing operations:
o Terex Lifting - Waverly (also known as Koehring Cranes, Inc.),
located in Waverly, Iowa, at which rough terrain hydraulic
telescoping mobile cranes and truck cranes are manufactured under
the brand names TEREX, LORAIN and P&H (a licensed trademark of Joy
Global Inc., formerly known as Harnischfeger Corporation), and
aerial lift equipment is manufactured under the brand names TEREX
AERIALS and TEREX;
o Terex-Telelect, Inc. ("Telelect"), located in Watertown and Huron,
South Dakota, at which utility aerial devices and digger derricks
are manufactured under the TELELECT and HI-RANGER brand names;
o Terex-RO Corporation ("Terex-RO"), located in Olathe, Kansas, at
which truck mounted cranes are manufactured under the RO-STINGER
brand name;
o Terex Handlers, located in Baraga, Michigan, at which rough
terrain telescopic boom material handlers are manufactured under
the SQUARE SHOOTER and TEREX brand names;
o The American Crane Corporation ("American Crane") located in
Wilmington, North Carolina, at which lattice boom cranes are
manufactured under the AMERICAN brand name;
o Terex Lifting Australia Pty. Ltd. ("Terex Lifting Australia"),
located in Brisbane, Australia, at which all terrain mobile
cranes are manufactured under the FRANNA trade name;
o Simplicity Engineering ("Simplicity"), located in Durand,
Michigan, at which crushing and screening equipment and recycling
systems are manufactured under the SIMPLICITY, CANICA and TEREX
RECYCLING brand names;
o Cedarapids, Inc. ("Cedarapids") located in Cedar Rapids, Iowa,
which manufactures crushing and screening equipment, trommels,
and asphalt plants under the CEDARAPIDS, ROYER and RE-TECH brand
names;
o Jaques International ("Jaques"), located in Melbourne, Australia,
which manufactures crushing and screening equipment under the
JAQUES brand name;
o Jaques International Sdn Bhd ("Jaques Malaysia"), located in
Subang Jaya, Malaysia, which manufactures crushing and screening
equipment under the JAQUES brand name;
o Jaques (Thailand) Limited ("Jaques Thailand"), located in
Chomburi, Thailand, which manufactures crushing and screening
equipment under the JAQUES brand name;
o Amida Industries, Inc. ("Amida"), located in Rock Hill, South
Carolina, which manufactures and sells portable floodlighting
systems, concrete power trowels, concrete placement systems,
concrete finishing systems, concrete mixers and traffic control
products under the AMIDA, BARTELL, MORRISON, BENFORD, MULLER and
TEREX brand names;
o Terex Bartell, Ltd. ("Bartell"), located in Brampton, Ontario,
Canada, which manufactures and sells concrete power trowels
and concrete finishing systems under the BARTELL brand name;
o Coleman Engineering, Inc. ("Coleman") located in Holly Springs,
Mississippi and Memphis, Tennessee, which manufactures and
sells portable floodlighting systems and generators under the
TEREX POWER and COLEMAN ENGINEERING brand names;
o CMI Terex Corporation ("CMI"), located in Oklahoma City, Oklahoma,
at which pavement profilers, reclaimers/trimmers, asphalt plants
and concrete plants are manufactured under the CMI, JOHNSON-ROSS,
BARTON and STANDARD HAVENS brand names;
o Bid-Well, located in Canton, South Dakota, at which concrete
pavers are manufactured under the BID-WELL brand name;
-4-
o Load King, located in Elk Point, South Dakota, at which
construction trailers are manufactured under the LOAD KING brand
name;
o CMI-Cifali Equipmentamentos, Ltda. ("CMI-Cifali"), located in
Cachoeirinha, Brazil, which manufactures asphalt pavers and
asphalt plants under the CMI-CIFALI brand name; and
o Schaeff, Inc., located in Sioux City, Iowa, which manufactures
electric stand-up counterbalance forklifts under the SCHAEFF
brand name.
Terex Europe has 26 significant manufacturing operations:
o Terex Equipment Limited ("TEL"), located in Motherwell, Scotland,
which manufactures off-highway rigid haulers and articulated
haulers, having capacities ranging from 25 to 100 tons, and
scrapers under the TEREX brand name;
o Powerscreen International Distribution Ltd. and Powerscreen
Limited ("Powerscreen"), located in Dungannon, Northern Ireland
and Kilbeggan, Ireland, respectively, which manufacture and
sell washing systems, screens and trommels under the
POWERSCREEN brand name;
o Finlay Hydrascreens (Omagh) Limited ("Finlay"), located in Omagh,
Ireland, at which crushers, washing systems, screens and trommels
are manufactured under the FINLAY brand name;
o BL-Pegson Ltd. ("B.L. Pegson"), located in Coalville, England,
which manufactures crushers under the B.L. PEGSON brand name;
o Benford Limited ("Benford"), located in Warwick, England, at which
dumpers and compaction equipment are manufactured under the
Company's AMIDA, BENFORD, and TEREX brand names and material
handlers are manufactured under the MATBRO trade name;
o Fermec Manufacturing Limited ("Fermec"), located in Manchester,
England, which manufactures loader backhoes under the TEREX and
FERMEC brand names;
o PPM S.A.S., located in Montceau-les-Mines, France, at which
mobile cranes and container stackers under the brand names TEREX
and PPM are manufactured;
o Terex Italia S.r.l., located in Crespellano, Italy, at which
mobile cranes are manufactured under the TEREX, BENDINI and PPM
brand names;
o TerexLift S.r.l. ("TerexLift"), located near Perugia, Italy, at
which rough terrain telescopic material handlers are manufactured
under the ITALMACCHINE and TEREX brand names and cement mixers and
concrete pumps are manufactured under the ITALMACCHINE brand name;
o Terex Peiner ("Peiner"), located in Trier, Germany, at which tower
cranes are manufactured under the PEINER and TEREX brand names;
o Gru Comedil S.p.A. ("Comedil"), located in Fontanafredda, Italy,
at which tower cranes are manufactured under the COMEDIL and
TEREX trade names;
o Atlas Terex UK Limited ("Atlas UK"), located in Hamilton,
Scotland, at which truck mounted articulated hydraulic cranes are
manufactured under the ATLAS trade name;
o Atlas Terex GmbH ("Atlas Terex"), located in Delmenhorst,
Ganderkasee, Loeningen and Vechta, Germany, at which excavators
and truck mounted articulated hydraulic cranes are manufactured
under the ATLAS TEREX and TEREX brand names;
o Containers & Pressure Vessels, Ltd. ("CPV"), located in Clones,
Ireland, at which tank containers are manufactured under the
CPV brand name;
-5-
o The Schaeff Group of Companies ("Schaeff"), located in Langenburg,
Gerabron, Rothenburg, Crailsheim, Clausnitz and Ilshofen, Germany,
at which wheeled loaders, mini-excavators and midi-excavators are
manufactured under the SCHAEFF, ATLAS TEREX and TEREX brand names;
o Fuchs-Bagger GmbH & Co. KG ("Fuchs"), located in Bad Schoenborn,
Germany, at which loading machines are manufactured under
the FUCHS brand name; and
o Terex Aerials Limited, located in Cork, Ireland, at which aerial
platforms are manufactured under the TEREX brand name.
In addition, Terex has an interest in Inner Mongolia North Hauler Joint Stock
Company Limited ("North Hauler"), a company incorporated under the laws of
China, which manufactures rigid and articulated haulers in China. Trucks
manufactured by North Hauler, which is located in Baotou, Inner Mongolia, are
principally used in the People's Republic of China under the TEREX brand name.
Terex also has an interest in Tatra a.s. ("Tatra"), a company incorporated under
the laws of the Czech Republic. Tatra, which is located in Koprivnice, Czech
Republic, manufactures a range of four-by-four to twelve-by-twelve heavy-duty on
and off-road vehicles for military and commercial applications under the TATRA
brand name. The Company is also participating in a joint venture with Tatra and
STV USA under the name of American Truck Company ("ATC"). ATC will assemble
vehicles based on the Tatra design and technology incorporating U.S. components
under the brand names TEREX, AMERICAN TRUCK and TATRA at the Company's American
Crane facility in Wilmington, North Carolina.
Terex owns Utility Equipment Co., Inc. ("Utility Equipment") and Telelect
Southeast Distribution, Inc. ("Telelect Southeast") and has a 50% interest in
Combatel Distribution, Inc. ("Combatel"). Utility Equipment, Telelect Southeast
and Combatel distribute and install the Company's utility aerial devices as well
as other products that service the utility industry.
In connection with the Company's EarthKing e-commerce project, the Company also
owns an interest in Fleet Edge, Inc., a developer of fleet management systems,
Source Right, an internet vendor of safety and consumable products, EKPass,
Inc., a provider of productivity and safety training programs for construction
equipment and eConstruction Parts, Inc., an internet vendor of construction
machinery parts.
Terex Mining
The Terex Mining segment manufactures and sells large hydraulic excavators and
high capacity surface mining trucks and related components and replacement
parts. These products are used primarily by construction, mining, quarrying and
government customers. Terex Mining has two significant manufacturing operations:
(i) Tulsa, Oklahoma, at which Unit Rig ("Unit Rig") and Payhauler Corp.
("Payhauler") manufacture electric drive hauler trucks with payload capacities
ranging from 50 to 360 tons and bottom dump haulers with capacities ranging from
180 to 270 tons, principally sold to copper, gold, iron ore, coal, borates and
diamond mining industry customers under the TEREX, UNIT RIG and LECTRA HAUL
brand names, as well as all wheel drive rigid off-highway trucks under the
PAYHAULER brand name; and (ii) Dortmund, Germany, at which O&K Mining
manufactures large hydraulic mining shovels under the O&K brand name.
Business Strategy
Over the past several years, Terex has implemented a series of interrelated
operational and strategic initiatives designed to create a competitive advantage
in the marketplace and maximize its financial performance. These initiatives
include: (i) providing customers with lower cost products to increase their
return on invested capital; (ii) implementing a variable cost structure with
over 80% of cost of sales from purchased components; (iii) reducing selling
expense and eliminating non-value-added functions throughout the organization;
and (iv) increasing product and geographic diversity through internal
development and acquisitions.
Increase Sales and Market Share Through Best Value Strategy
Terex has increased its sales and gained market share by pursuing its best value
strategy of providing comparable or superior products at a lower total cost of
ownership and with higher returns on invested capital as compared to its
competitors. Terex typically prices its products aggressively relative to its
competition while providing the same level of functionality. Examples of Terex's
best value strategy include:
-6-
o Terex lifting equipment customers are primarily regional equipment
rental companies which base rental rates primarily on lifting capacity.
The Company believes its lower-cost, easy-to-use products provide these
customers with enhanced returns on invested capital. As a result, the
Company, based on internal estimates, believes its position in the U.S.
commercial hydraulic mobile crane market has grown from number four in
1994 to a current leading market position in the size categories in
which the Company participates.
o Terex believes its diesel-electric drive surface mining trucks are more
reliable and cost-efficient than mechanical drive alternatives offered
by competitors, particularly in certain applications. As a result, the
Company believes it has more than tripled its global market share from
1997 to 2000, and has a leading global market position in surface
mining trucks.
o In the Company's opinion, Terex articulated off-highway trucks offer
comparable or superior performance at a total cost of up to 20% lower
than its competitors. As a result, the Company believes its global
market share in off-highway trucks more than doubled from 1997 to 2001.
o The Company believes its hydraulic mining shovels offer higher mobility
and greater operating time at a lower initial investment than
comparably sized alternatives sold by competitors, and as a result, it
believes that it is a global market leader in hydraulic mining shovels
over 200 tons.
Reduce Costs and Improve Manufacturing Efficiency
The Company's best value strategy is supported by ongoing efforts to reduce
costs and improve manufacturing efficiency. Over the past few years, it has
initiated several programs to consolidate manufacturing operations, minimize
selling costs, outsource non-critical manufacturing processes and rationalize
product lines in order to increase profitability and reduce fixed costs. The
Company believes its focus on reducing costs and improving manufacturing
efficiency has yielded significantly more efficient and flexible operations than
its competitors as measured by its comparatively low selling, general and
administrative expense-to-sales ratio, significantly higher sales per employee,
and greater capital efficiency (based on the ratio of capital expenditures to
sales). Some recent examples of Terex's cost reduction initiatives include:
o Since its acquisition of Powerscreen in July 1999, the number of
employees at Powerscreen has been reduced by approximately 250, and
since its acquisition of Cedarapids in August 1999, the number of
employees at Cedarapids has been reduced by more than 525. Overall, the
Company estimates these cost reduction initiatives have reduced annual
operating expenses by over $22.5 million in the aggregate.
o Since its acquisition of Fermec in December 2000, the number of
employees at Fermec has been reduced by approximately 135. Terex also
reduced costs at Fermec through improved purchasing, outsourcing of
fabrication and other selling, general and administrative expense
reductions. Overall, the Company estimates these cost reduction
initiatives have reduced annual operating expenses by over $9 million.
o In connection with a restructuring plan announced in the third quarter
of 2001, the Company plans to consolidate 11 factory locations,
including four CMI facilities, reducing headcount by approximately
1,225. Overall, the Company estimates these cost reduction initiatives
will reduce annual operating expenses by approximately $40 million.
o In connection with its recent acquisitions of CMI, Atlas Terex and
Schaeff, the Company has been aggressively implementing its 100-day
restructuring plans. The Company has already achieved its anticipated
$20 million in annual savings at CMI, and the Company has identified
approximately $41 million of annual cost savings at Atlas Terex and
Schaeff, of which over $24 million have been implemented to date.
-7-
Focus on Geographic, Product and End-Market Diversification
Over the past several years, the Company has focused on growing and improving
the operations of its core business segments. The Company also has expanded the
size and scope of its core businesses both through acquisitions and through
development of new products in order to increase its market share. Management
believes that these initiatives have helped to reduce the effect of potential
cyclical changes in any one product category or geographic market. These
initiatives have also expanded the Company's product lines within its core
businesses, added new technology and improved its distribution network. As a
result, the Company has developed a geographically diverse revenue base with
approximately 50% of its revenues derived outside North America, and has built a
diverse product portfolio addressing a range of end-markets as illustrated by
the Company's sales by product category in 2001:
Percentage of
Product Category 2001 Sales
---------------- -------------
Crushing, Screening & Paving Equipment 23%
Hydraulic Mobile Cranes 13
Off-Highway Trucks 11
Compact Construction Equipment 9
Utility Aerial Devices 7
Surface Mining Trucks 7
Hydraulic Mining Shovels 7
Material Handlers 5
Tower Cranes 4
Aerial Work Platforms 3
Boom Trucks 3
Lattice Boom Cranes 3
Light Construction Equipment 3
Container Stackers 2
---------------
Total 100%
===============
Grow through Acquisitions
During the past several years, the Company has invested over $1.4 billion to
strengthen its core business segments and complementary businesses through over
20 strategic acquisitions. The Company expects that acquisitions will continue
to be an important component of its growth strategy and is continually reviewing
opportunities to make additional acquisitions, some of which, individually or in
the aggregate, could be material. As with its previous acquisitions, the Company
will continue to pursue strategic acquisitions which accomplish the following
goals: complement core operations; offer cost reduction opportunities as well as
distribution and purchasing synergies; provide product diversification; and
provide geographic diversification.
Some recent examples of the Company's acquisition strategy include:
o The acquisition during 2002 of Schaeff (including Schaeff, Inc. and
Fuchs), Utility Equipment and Telelect Southeast.
o The acquisition during 2001 of Jaques (including Jaques Malaysia and
Jaques Thailand), CMI (including Bid-Well, Load King and CMI-Cifali)
and Atlas Terex (including Atlas UK).
o The acquisition during 2000 of Coleman and Fermec.
-8-
Products
Telescopic Mobile Cranes
Telescopic mobile cranes are used primarily for industrial applications, in
commercial and public works construction and in maintenance applications, to
lift equipment or material to heights in excess of 225 feet. Terex manufactures
the following types of telescopic mobile cranes:
Rough Terrain Cranes - are designed to move materials and
equipment on rough or uneven terrain. Rough terrain cranes
are most often located on a single construction or work site
such as a building site, a highway or a utility project for
long periods of time. Rough terrain cranes cannot be driven
on highways and accordingly must be transported by truck to
the work site. Rough terrain cranes manufactured by Terex
have maximum lifting capacities of up to 100 tons and
maximum tip heights of up to 225 feet. Terex manufactures
its rough terrain cranes at its facilities located at
Waverly, Iowa and Crespellano, Italy, under the brand names
TEREX, LORAIN, P&H, PPM and BENDINI.
Truck Cranes - have two cabs and can travel rapidly from job
site to job site at highway speeds. In contrast to rough
terrain cranes, which are often located for extended periods
at a single work site, truck cranes are often used for
multiple local jobs, primarily in urban or suburban areas.
Truck cranes manufactured by Terex have maximum lifting
capacities of up to 90 tons and maximum tip heights of up to
193 feet. Terex manufactures truck cranes at its Waverly,
Iowa facility under the brand names TEREX, P&H and LORAIN.
All Terrain Cranes - were developed in Europe as a cross
between rough terrain and truck cranes in that they are
designed to travel across both rough terrain and highways.
All terrain cranes are versatile and highly maneuverable.
All terrain cranes manufactured by Terex have lifting
capacities of up to 130 tons and maximum tip heights of up
to 246 feet. Terex manufactures its all terrain cranes at
its Montceau-les-Mines, France and Brisbane, Australia
facilities under the brand names TEREX, PPM and FRANNA.
Tower Cranes
Tower cranes lift construction material to heights and place the material at the
point where it is being used. They include a stationary vertical tower with a
horizontal jib with a counterweight at the top. On the job is a trolley through
which runs a load carrying cable and which moves the load along the jib length.
On larger cranes, the operator is located above the work site where the tower
and jib meet, providing superior visibility. The jib also rotates 360 degrees,
creating a large working area equal to twice the jib length. Luffing jib tower
cranes have an angled jib with no trolley, and operate like a traditional
lattice boom crane mounted on a tower. Luffing jib tower cranes are often used
in urban areas where space is constrained. Tower cranes are currently produced
by Terex under the PEINER, COMEDIL and TEREX brand names. Terex produces the
following types of tower cranes:
Self-Erecting Tower Cranes - are trailer-mounted and unfold
from four sections (two for the tower and two for the jib);
certain larger models have a telescopic tower and folding
jib. These cranes can be assembled on site in a few hours.
Application include residential and small commercial
construction. Crane heights range from 50-90 feet and jib
lengths from 60-125 feet.
-9-
Hammerhead Tower Cranes - have a tower and a horizontal jib
assembled from sections. The tower extends above the jib to
which suspension cables supporting the jib are attached.
These cranes are assembled on-site in one to three days
depending on height, and can increase in height with the
project; they have a maximum free-standing height of 200
feet and a maximum jib length of 240 feet.
Flat Top Tower Cranes - have a tower and a horizontal jib
assembled from sections. There is no tower extension above
the jib, which reduces cost and facilities assembly; the jib
is self-supporting and consists of reinforced jib sections.
These cranes are assembled on site in one to two days, and
can increase in height with the project; they have a maximum
freestanding height of 305 feet and a maximum jib length of
280 feet.
Luffing Jib Tower Cranes - have a tower and an angled jib
assembled from sections. The tower extends above the jib to
which suspension cables supporting the jib are attached.
Unlike other tower cranes, there is no trolley to control
lateral movement of the load, which is accomplished by
changing the jib angle. These cranes are assembled on site
in two to three days, and can increase in height with the
project; they have a maximum freestanding height of 185 feet
and a maximum jib length of 200 feet.
Lattice Boom Cranes
Terex produces crawler and truck mounted lattice boom cranes.
Lattice Boom Cranes - Crawler lattice boom cranes are
designed to lift material on rough terrain and can maneuver
while bearing a load. Truck mounted lattice boom cranes are
used on-roads, typically in urban areas. Both types consist
of a boom made of tubular steel sections, which are
transported to and erected, together with the base unit, at
a construction site. Terex imports and private labels
cranes, then assembles the booms for crawler and truck
mounted lattice boom cranes at its Wilmington, North
Carolina facilities under the TEREX and AMERICAN brand
names. These hydraulic lattice boom crawler cranes have
lifting capacities from 60 to 275 tons, and lattice boom
truck cranes have lifting capacities up to 300 tons.
Utility Aerial Devices
Utility aerial devices are used to set utility poles, and move workers and
materials to work areas at the top of utility poles and towers. Utility aerial
devices are mounted on commercial truck chassis, which include separately
installed steel cabinets for tool and material storage.
Articulated Aerial Devices - are used to elevate workers to
work areas at the top of utility poles or in trees and
include one or two man baskets. Articulated aerial devices
available from Terex include telescopic, non-overcenter and
overcenter models and range in working heights from 32 to
103 feet. Articulated aerial devices are manufactured by
Terex at its Watertown, South Dakota facility under the
brand names TELELECT and HI-RANGER.
-10-
Digger Derricks - are used to set utility poles. The digger
derricks include a telescopic boom with an auger mounted at
the tip, which digs a hole, and a device to grasp,
manipulate and set the pole. Digger derricks available from
Terex have sheave heights exceeding 95 feet and lifting
capacities up to 48,000 pounds. Digger derricks are
manufactured by Terex at its Watertown, South Dakota
facility under the brand name TELELECT.
Telescopic Material Handlers
Telescopic material handlers are used to lift containers or other material from
one location to another at the same job site.
Telescopic Container Stackers - are used to pick up and
stack containers at dock and terminal facilities. At the end
of a telescopic container stacker's boom is a spreader which
enables it to attach to containers of varying lengths and
weights and to rotate the container up to 360 degrees.
Telescopic container stackers are particularly effective in
storage areas where containers are continually added and
removed, and where the efficient manipulation of, and access
to, specific containers is required. Telescopic container
stackers manufactured by Terex have lifting capacities up to
49.5 tons, can stack up to six full or nine empty containers
and are able to maneuver through very narrow areas. Terex
manufactures its telescopic container stackers under the
brand names PPM, TEREX and P&H SUPERSTACKERS at its
Montceau-les-Mines, France facility.
Rough Terrain Telescopic Boom Material Handlers - serve a
similar function as smaller size rough terrain telescopic
mobile cranes and are used to move and place materials on
new residential and commercial job sites. Terex manufactures
rough terrain telescopic boom material handlers with load
capacities of up to 11,000 pounds and with a maximum
extended reach of up to 62 feet and lift capabilities of up
to 78 feet. Terex manufactures rough terrain telescopic boom
material handlers at its facilities in Baraga, Michigan and
Perugia, Italy under the brand names SQUARE SHOOTER, TEREX
and ITALMACCHINE.
Truck Mounted Cranes (Boom Trucks)
Terex manufactures telescopic boom cranes for mounting on commercial truck
chassis. Truck mounted cranes are used primarily in the construction industry to
lift equipment or materials to various heights. Boom trucks are generally
lighter and have less lifting capacity than truck cranes, and are used for many
of the same applications when lower lifting capabilities are required. An
advantage of a boom truck is that the equipment or material to be lifted by the
crane can be transported by the truck, which can travel at highway speeds.
Applications include the installation of air conditioners and other roof
equipment. Terex manufactures the following types of cranes for installation on
truck chassis:
Telescopic Boom Truck Mounted Cranes - enable an operator to
reach heights of up to 166 feet and have a maximum lifting
capacity of up to 35 tons. Terex manufactures its telescopic
boom truck mounted cranes at its Olathe, Kansas facility
under the brand names RO-STINGER and TEREX.
-11-
Articulated Boom Truck Mounted Cranes - are available in two
product categories, each with a maximum reach of
approximately 30 meters. The "knuckle boom" crane can be
mounted either on the front or the rear of commercial trucks
which are folded within the width of the truck while in
transport. The "V-boom" crane is also mounted on the front
or the rear of the truck and spans the length of the truck
while folded. A broad range of accessories are available to
meet specific customer needs. Terex manufactures these
products in Delmenhorst, Germany and Hamilton, Scotland
under the ATLAS, ATLAS TEREX and TEREX brand names.
Aerial Work Platforms
Aerial work platforms are self-propelled devices which position workers and
materials easily and quickly to elevated work areas. These products have
developed over the past 20 years as alternatives to scaffolding and ladders. The
work platform is mounted on either a telescoping and/or articulating boom or on
a vertical lifting scissor mechanism. Terex manufactures the following types of
aerial work platforms:
Scissor Lifts - are used in open areas in indoor or outdoor
applications in a variety of construction, industrial and
commercial settings. Scissor lifts manufactured by Terex
have maximum working heights of up to 36 feet and maximum
load capacities of up to 1,000 pounds. Terex manufactures
scissor aerial work platforms at its Waverly, Iowa facility
under the TEREX AERIALS brand name.
Straight Telescopic Boom Lifts - are used primarily outdoors
in residential, commercial and industrial new construction
and maintenance projects. Straight telescopic boom lifts
manufactured by Terex have maximum working heights of up to
116 feet and maximum load capacities of up to 650 pounds.
Terex manufactures its straight telescopic aerial work
platforms at its Waverly, Iowa facility under the brand name
TEREX AERIALS.
Articulating Telescopic Boom Lifts - are generally used in
industrial environments where the articulation allows the
user to access elevated areas over machines or structural
obstacles which prevent access with a scissor lift or
straight boom. Articulating lifts available from Terex have
maximum working heights of up to 86 feet and maximum load
capacities of up to 500 pounds. Terex manufactures its
articulating telescopic boom lifts at its Cork, Ireland
facility under the brand name TEREX AERIALS.
-12-
Rigid and Articulated Off-Highway Trucks
Terex manufactures two distinct types of off-highway trucks with hauling
capacities from 25 to 100 tons: articulated and rigid frame.
Articulated Off-Highway Trucks - are three-axle, six-wheel
drive machines with a capacity range of 25 to 40 tons. Their
differentiating feature is an oscillating connection between
the cab and body, which allows the cab and body to move
independently. This enables all six tires to maintain ground
contact for improved traction on rough terrain. This also
allows the truck to move effectively through extremely rough
or muddy off-road conditions. Articulated off-highway trucks
are typically used together with an excavator or wheel
loader to move dirt in connection with road, tunnel or other
infrastructure construction and commercial, industrial or
major residential construction projects. Terex's articulated
trucks are manufactured in Motherwell, Scotland, under the
brand name TEREX.
Rigid Off-Highway Trucks - are two axle machines which
generally have larger capacities than articulated trucks,
but can operate only on improved or graded surfaces. The
capacities of rigid off-highway trucks range from 35 to 100
tons, and off-highway trucks have applications in large
construction or infrastructure projects, aggregates and
smaller surface mines. Terex's rigid trucks are manufactured
in Motherwell, Scotland, under the TEREX brand name and in
Tulsa, Oklahoma, under the PAYHAULER brand name.
High Capacity Surface Mining Trucks
Terex manufactures high capacity surface mining trucks, which are off-road dump
trucks with capacities in excess of 120 tons used primarily for surface mining.
Terex's high capacity surface mining trucks are powered by a
diesel engine driving an electric generator that provides
power to individual electric motors in each of the rear
wheels. Unit Rig's current LECTRA HAUL product line consists
of a series of rear dump trucks with payload capabilities
ranging from 120 to 360 tons, and bottom dump trucks with
capacities ranging from 180 to 270 tons. Terex's high
capacity surface mining trucks are manufactured at Unit Rig,
located in Tulsa, Oklahoma, under the UNIT RIG, LECTRA HAUL
and TEREX brand names.
Large Hydraulic Excavators
Terex sells hydraulic excavators, which are shovels primarily used to load coal,
copper ore, iron ore, diamonds, other mineral-bearing materials, or rocks into
trucks. These products are primarily utilized for quarrying construction
materials or digging in surface mines. Additional applications include large
construction projects with difficult working conditions where large amounts of
solid material and rock are to be moved.
Terex offers a complete range of large hydraulic excavators,
with operating weights from 58 to 800 tons. O&K Mining
produces the RH 400, available in both electric and diesel
drive, the world's largest hydraulic excavator, with an
800-ton machine weight and 80-ton bucket capacity. The
inclusion of the RH 400 in the Terex product line enables
the Company to compete with the most popular electric rope
shovel size class. Most hydraulic excavators sold by Terex
are manufactured under the O&K brand name by O&K Mining in
Dortmund, Germany.
-13-
Crushing and Screening Equipment
Terex's crushing and screening equipment is used in the aggregate processing and
recycling industries. Crushing and screening products include crushers, screens,
trommels, feeders and conveyors, which are used when processing raw aggregate
materials. Typical crushing and screening operations utilize a combination of
components in reducing virgin aggregate materials to required product sizes for
final usage in road building and related construction applications. Crushing and
screening plants can be either stationary or portable. Portable crushing and
screening plants are configured with a variety of components to provide easy
site-to-site mobility, application versatility, flexible on-demand finished
product and reduced set-up time.
Crushing Equipment
Terex manufactures crushing equipment under the PEGSON, CEDARAPIDS, JAQUES and
CANICA brand names in Coalville, England, Cedar Rapids, Iowa, Durand, Michigan,
Melbourne, Australia, and Subang Jaya, Malaysia. Terex produces the following
types of crushing equipment:
Jaw Crushers - are primary crushers with reduction ratios of
6 to 1 for crushing larger rock. Applications include hard
rock, sand and gravel and recycled materials. Models offered
yield a range of production capacities: up to 265 tons per
hour for the smallest unit, and up to 1,700 tons per hour
for the largest.
Horizontal Shaft Impactors - are secondary crushers which
utilize rotor impact bars and breaker plates to achieve high
production tonnages and improved aggregate particle shape.
The rugged durability and easy maintenance of horizontal
shaft impactors ensure less downtime and reduced wear costs
for the owner. They are typically applied to reduce soft to
medium hard materials.
Vertical Shaft Impactors - are tertiary crushers which
reduce material utilizing various rotor configurations and
are highly adaptable to any application. Vertical shaft
impactors can be customized to material conditions and
desired product size/shape. A full range of models provides
customers with increased tonnages, better circuit balance
and screen efficiency.
Cone Crushers - are used in secondary and tertiary
applications to reduce a number of materials, including
quarry rock and riverbed gravel. High production, low
maintenance and enhanced final material cubicle shape are
the principal features of these compression-type roller
bearing crushers.
-14-
Screening Equipment
Terex manufactures screening equipment at its facilities in Dungannon,
Northern Ireland, Kilbeggan, Ireland, Omagh, Northern Ireland, Durand,
Michigan, Cedar Rapids, Iowa, Melbourne, Australia, Subang Jaya, Malaysia
and Chomburi, Thailand under the brand names POWERSCREEN, FINLAY,
SIMPLICITY, CEDARAPIDS, ROYER, RE-TECH, JAQUES and TEREX.
Heavy Duty Inclined Screens and Feeders - are found in high
tonnage applications. These units are typically custom
designed to meet the needs of each customer. Although
primarily found in stationary installations, Terex supplies
a variety of screens and feeders for use on heavy duty
portable crushing and screening spreads.
Inclined Screens - are used in all phases of plant design
from handling quarried material to fine screening. Capable
of handling much larger capacity than a flat screen,
inclined screens are most commonly found in large stationary
installations where maximum output is required. This
requires the ability to custom design and manufacture units
that meet both the engineering and application requirements
of the end user.
Feeders - are generally situated at the primary end of the
processing facility, requiring rugged design in order to
handle the impact of the material being fed from front end
loaders, excavators, etc. The feeder moves material to the
crushing and screening equipment in a controlled fashion.
Some feeders manufactured by Terex remove smaller sized
materials through a short scalping area before reaching the
crusher, significantly reducing the wear in the crusher
chamber.
Flat Screens - combine the high efficiency of a horizontal
screen with the capacity, bearing life and low maintenance
of an inclined screen. They are adaptable for heavy
scalping, standard duty and fine screening applications and
are engineered for durability and user friendliness.
Dry Screening - is used to process materials such as sand,
gravel, quarry rock, coal, construction and demolition
waste, soil, compost and wood chips.
-15-
Washing Screens - are used to separate, wash, scrub, dewater
and stockpile sand and gravel. Products manufactured by
Terex include a completely mobile single chassis washing
plant incorporating separation, washing, dewatering and
stockpiling, mobile and stationary screening rinsers,
bucket-wheel dewaterers, scrubbing devices for aggregate, a
mobile cyclone for maximum retention of sand particles, silt
extraction systems, stockpiling conveyors and a sand screw
system as an alternative option to the bucket-wheel
dewaterers.
Trommels - are used in the recycling of construction and
demolition waste materials, as well as soil, compost and
wood chips. Trommels incorporate conveyors and variable
speed fingertip control of the belts and rotating drum to
separate the various materials. Terex manufactures a range
of trommel and soil shredding equipment. Terex also designs,
sources, installs, commissions and provides aftersales
support for turnkey recycling systems. These systems are
used to process construction and demolition waste, as well
as decasing, segmenting and processing empty bottles. The
soil shredding units are mainly used by landscape
contractors and provide a high specification end product.
Asphalt and Concrete Equipment
Terex manufactures asphalt mixing plants, asphalt pavers, concrete production
plants, concrete pavers and reclaimers at its facilities in Cedar Rapids, Iowa,
Oklahoma City, Oklahoma, Canton, South Dakota and Cachoeirinha, Brazil.
Asphalt Pavers - Terex sells asphalt pavers with maximum
widths from 18 feet to 30 feet. Pavers are available in
rubber tire and steel or rubber track designs. The smaller
units have a maximum paving width of 18 feet and are used
for commercial work such as parking lots, development
streets and construction overlay projects. Mid-sized pavers
are used for mainline and commercial projects and have
maximum paving widths ranging from 24 to 28 feet. High
production pavers are engineered and built for heavy-duty,
mainline paving and are capable of 30 foot maximum paving
widths. All of the above feature direct hydrostatic drive
for maximum uptime, patented frame raise for maneuverability
and three-point suspension for smooth, uniform mats. Terex
's asphalt pavers are manufactured under the CEDARAPIDS and
GRAYHOUND brand names in Cedar Rapids, Iowa and under the
CMI-CIFALI brand name in Cachoeirinha, Brazil.
Asphalt Mixing Plants - are used by road construction
companies to produce hot mix asphalt. The mixing plants are
available in portable, relocatable and stationary
configurations. Associated plant components and control
systems are manufactured to offer customers a wide variety
of equipment to meet individual production requirements.
Asphalt mixing plants are manufactured under the CMI and
CEDARAPIDS/STANDARD HAVENS brand names in Oklahoma City,
Oklahoma and under the CMI-CIFALI brand name in
Cachoeirinha, Brazil.
-16-
Concrete Production Plants - are used in residential,
commercial, highway, airport and other heavy construction
markets. Terex products include a full range of portable and
stationary transit mix and central mix production
facilities. They are manufactured in Oklahoma City, Oklahoma
and sold worldwide under the CMI JOHNSON-ROSS brand name.
Concrete Pavers - produced by Terex are used by paving
contractors to place and finish concrete streets, highways
and airport surfaces. Terex manufactures slipform pavers,
which pave widths ranging from two feet to 35 feet in a
single pass. The slipform paving technology includes
"Hydraulic Variable Width" paving that permits changing
pavement width during the paving process. This patented
feature significantly speeds the paving process. Terex also
produces concrete pavers which require paving forms, usually
metal, to contain the paving material. These pavers are used
on bridge decks, elevated highways and for general
conduction paving needs. Concrete pavers are manufactured
under the CMI and BID-WELL brand names in Oklahoma City,
Oklahoma and Canton, South Dakota.
Reclaimers/Stabilizers - produced by Terex are used to add
load-bearing strength to the base structures of new highways
and new building sites. They are also used for in-place
reclaiming of deteriorated asphalt pavement. Terex's
reclaimers/stabilizers are manufactured in Oklahoma City,
Oklahoma under the CMI brand name
Pavement Profilers - produced by Terex mill and reclaim
deteriorated asphalt pavement, leaving a level, textured
surface upon which new paving material is placed. The
process is less costly than complete removal, and produces a
by-product, RAP (Recycled Asphalt Product) that can be
processed through Terex hot mix asphalt plants to produce
lower cost paving materials. Terex produces pavement
profilers in Oklahoma City, Oklahoma under the CMI brand
name.
Light Construction Equipment
Light construction equipment produced by Terex includes mobile and portable
floodlighting systems, concrete power trowels, concrete placement systems,
concrete finishing systems, generators and traffic control products.
Light Towers - are used primarily to light work areas for
night construction activity. They are towed to the work-site
where the telescopic tower is extended and outriggers are
deployed for stability. They are diesel powered and provide
adequate light for construction activity for a radius of
approximately 300 feet from the tower. Light towers are
manufactured under the AMIDA, COLEMAN ENGINEERING and TEREX
brand names.
Power Trowels - are used to provide a smooth finish on
concrete surfaces. They are used on soft cement as the
concrete hardens. The power trowels are manufactured as
walk-behind and ride-on models. Trowels are typically used
in conjunction with other products manufactured by Terex,
including light towers, power buggies, screed, and material
spreaders. Power trowels are manufactured under the BARTELL
brand name in Brampton, Ontario, Canada.
-17-
Power Buggies - are used primarily to transport concrete
from the mixer to the pouring site. Terex power buggies
include dump capacities from 10 to 21 cubic feet with both
walk-behind and ride-on models. Terex manufactures power
buggies under the AMIDA, MORRISON and TEREX brand names in
Rock Hill, South Carolina.
Generators - are used to provide electric power on
construction sites and other remote locations. Generators up
to 2,000 kW are manufactured under the TEREX POWER and
COLEMAN ENGINEERING brand names in Holly Springs,
Mississippi and Memphis, Tennessee.
Directional Arrowboards - are used to direct traffic around
road construction sites. They are primarily solar powered,
with solar panels continuously recharging batteries which
provide power during night hours. Terex arrowboards include
15 and 25 light configurations. Directional arrowboards are
manufactured under the TEREX and AMIDA brand names in Rock
Hill, South Carolina.
Compaction Equipment
Terex manufactures a range of light and heavy compaction equipment for a wide
range of applications, from small plates which offer portability to heavy duty
ride-on rollers at the cutting edge of vibratory technology.
Single and reversible direction plates are used in the
compaction of trench backfill material, paths and driveways.
A range of tandem rollers from 1.5 to 10 tons covers larger
applications, including road formation, construction and
asphalt surfacing. Self propelled rollers from 6 to 12 tons
are used in landfill site construction and on soil and
sub-base materials. Included in the range are sophisticated
infra-red trench compactors that enable the operator to use
the machine at a distance. Terex Compaction equipment is
manufactured in Warwick, England under the BENFORD and TEREX
brand names.
Loaders
Terex manufactures its loaders in England and Germany. Terex products include
loader backhoes, wheeled loaders and loading machines.
Loader Backhoes - incorporate a front-end loader and rear
excavator arm. They are used for loading, excavating and
lifting in many construction and agricultural related
applications. Terex's loader backhoes are manufactured under
the FERMEC and TEREX brand names in Manchester, England.
-18-
Wheeled Loaders - are machines used for loading and
unloading. Due to the large variety of attachments, these
machines are also multi-equipment carriers used not only in
the field of construction but also in industrial, rental and
landscaping business. Terex wheeled loaders are manufactured
under the brand names of SCHAEFF and TEREX at its facility
in Crailsheim, Germany.
Loading Machines- are machines specifically designed for
handling logs, scrap and other bulky materials with
clamshell, magnet or grapple attachments. There are
stationary and mobile models for loading barges and various
operations in scrap, manufacturing and materials handling.
On most models manufactured by Terex, the cab raises up and
forward as required to allow the operator better visibility.
Terex produces loading machines ranging from 11 tons to 65
tons at its facilities in Bad Schoenborn and Ganderkasee,
Germany under the FUCHS, ATLAS and ATLAS TEREX brand names.
Excavators
Terex offers two categories of high quality excavators used primarily in the
construction and rental industries. These excavators are manufactured under the
ATLAS-TEREX, SCHAEFF and TEREX brand names in Germany.
Mini-Excavators - are crawler type excavators ranging in
size from 1.6 tons to 5.5 tons. Applications are in the
general construction, landscaping and rental businesses.
These machines are equipped with either rubber or steel
tracks.
Midi-Excavators - are manufactured in a mobile (wheeled)
version in the 6 to 11 ton sizes for the European market.
These excavators are commonly used for excavation and
lifting in confined areas in communities and in rental
businesses. Midi-excavators are also manufactured as crawler
excavators in sizes between 5.5 tons and 11.0 tons. In the 6
to 8 ton sizes Terex offers standard steel tracks and
optional rubber tracks.
Construction Trailers
Terex produces construction trailers with capacities up to 75 tons at its
facility in Elk Point, South Dakota under the LOAD KING brand name.
Construction Trailers - as manufactured by Terex are used in
the construction industry to haul materials and equipment.
Bottom drop material trailers are used to transport raw
aggregates, crushed aggregates and finished hot mix asphalt
paving material, while detachable drop deck and detachable
gooseneck trailers are used for transportation of oversized
equipment.
-20-
Tank Containers
Terex produces tank containers at its facility in Clones, Ireland under the CPV
brand name.
Tank Containers - are tanks designed to transport liquids by
rail, truck or sea. Tanks manufactured by Terex are used
primarily in the pharmaceutical, chemical and food
industries. Tanks come in standardized sizes for use in cell
guide systems of deep sea container ships or custom made
sizes for specialized chemicals and other areas where size
is of a concern.
-21-
Electric Standup Counterbalance Forklifts
Electric standup counterbalance forklifts are used primarily for industrial
applications in warehousing and manufacturing applications, to move materials to
a manufacturing floor or to move products in and out of a warehouse.
Electric Standup Counterbalance Forklifts - are designed to
move products or materials on smooth floor applications and
are often used in applications where electric powered
forklifts are required, such as grocery or food processing.
Standup forklifts are often used where an operator is going
to get on and off the forklift many times during a shift.
These forklifts can work in 10 - 12 feet aisles and have
lifting capacities from 3,000 to 6,000 pounds. Terex
manufactures its electric standup counterbalance forklifts
at its facilities in Sioux City, Iowa, under the brand name
SCHAEFF.
Backlog
The Company's backlog as of December 31, 2001 and 2000 was as follows:
December 31,
----------------------------
2001 2000
----------------------------
(in millions)
Terex Americas.....................$ 118.1 $ 129.1
Terex Europe....................... 119.1 65.0
Terex Mining....................... 17.1 43.0
Other/Eliminations................. (19.1) (17.3)
----------------------------
Total.........................$ 235.2 $ 219.8
============================
Substantially all of the Company's backlog orders are expected to be filled
within one year, although there can be no assurance that all such backlog orders
will be filled within that time period. The Company's backlog orders represent
primarily new equipment orders. Parts orders are generally filled on an
as-ordered basis.
Terex Americas backlog at December 31, 2001 decreased $11.0 million to $118.1
million as compared to $129.1 million at December 31, 2000. The decrease in
backlog was due primarily to the continued slowdown in the mobile crane business
and the Company's crushing and screening business, offset somewhat by the
businesses acquired in 2001.
The backlog at Terex Europe increased $54.1 million to $119.1 million at
December 31, 2001 from $65.0 million at December 31, 2000, principally due to
the effect of the acquisition of Atlas Terex in December 2001.
Terex Mining's backlog at December 31, 2001 decreased $25.9 million to $17.1
million as compared to $43.0 million at December 31, 2000. The decrease was due
primarily to the general economic uncertainty affecting the mining industry.
Included in Other backlog are the elimination of backlog among the Company's
three segments.
-21-
Distribution
Terex distributes its products primarily through a global network of dealers and
national accounts in over 2,000 different locations. Terex's telescopic mobile
cranes are marketed in the great majority of the United States under the TEREX
brand name. Terex's European telescopic mobile crane distribution is carried out
primarily under three brand names, TEREX, PPM and BENDINI, through a
distribution network comprised of both distributors and a direct sales force.
Terex sells its lattice boom cranes through a distribution network under the
TEREX and AMERICAN brand names. Terex distributes its mobile cranes in Australia
under the FRANNA and TEREX brand names. Telescopic and articulated boom truck
mounted cranes are distributed by Terex under the RO-STINGER, ATLAS, ATLAS TEREX
and TEREX brand names. Terex sells its utility aerial devices under the TELELECT
and HI-RANGER brand names principally through a network of North American
company-owned and independent distributors. Terex sells its aerial work platform
products through a distribution network throughout the world, but principally in
North America and Europe. Terex aerial work platform products are sold under the
brand name TEREX AERIALS. Terex sells its tower cranes through a distribution
network under the PEINER, COMEDIL and TEREX brand names. Terex material and
container handlers products are sold through a distribution network under the
brand names of TEREX, SQUARE SHOOTER, PPM, P&H and ITALMACCHINE.
TEL markets trucks, haulers, scrapers and replacement parts primarily through
worldwide dealership networks. TEL's truck dealers are independent businesses,
which generally serve the construction, mining, timber and/or scrap industries.
Although these dealers carry products of a variety of manufacturers, and may or
may not carry more than one of Terex's products, each dealer generally carries
only one manufacturer's "brand" of each particular type of product. Terex
employs sales representatives who service these dealers from offices located
throughout the world. Fermec sells its loader backhoes through a network of
independent dealers and distributors throughout the world.
Powerscreen distributes all screening products through a global network of
dealers in more than 80 locations. The American dealers are supported by a
distribution center located in Louisville, Kentucky. Most dealers are single
line Powerscreen dealers. B.L. Pegson sells its entire range of crushers,
screens and feeders worldwide through distributors under the B. L. PEGSON brand
name. In total there are approximately 50 dealers, half of which are located in
the United States and served by the distribution center in Louisville, Kentucky.
Finlay distributes all products worldwide through a network of independent
dealers. In total there are approximately 35 distributors located across five
continents. Simplicity sells products through dealers, mainly located in the
United States, as well as direct to original equipment manufactures.
Cedarapids crushing and screening equipment and asphalt pavers (and aftermarket
support parts for both of these lines) are sold principally through a worldwide
network of distributors under the CEDARAPIDS brand name. There are approximately
40 domestic and 25 international dealers, many of which have multiple branch
offices. The Jaques Group distributes its crushing and screening equipment
principally through a worldwide network of independent distributors and dealers.
CMI asphalt reclaimers, stabilizers, profilers and asphalt plants are
principally sold direct to end user customers under the CMI, JOHNSON-ROSS,
BARTON and CEDARAPIDS/STANDARD HAVENS brand names by the CMI sales force
consisting of approximately 37 marketing and sales personnel and, to a lesser
extent, through independent dealers and distributors.
Atlas Terex cranes and excavators are sold in Germany through a network of
company-owned and independent dealers and distributors and in the balance of
Europe through a network of independent dealers and distributors under the brand
names ATLAS and ATLAS TEREX. Similarly, Schaeff excavators and loaders are sold
in Germany through a network of company-owned and independent dealers and
distributors and in the balance of Europe through a network of independent
dealers and distributors under the SCHAEFF brand name. Fuchs distributes its
loading machines through a worldwide network of dealers and distributors under
the FUCHS brand name.
Terex light construction products are distributed through a global network of
dealers and national accounts. Terex employs sales representatives who service
these dealers throughout the world. Worldwide distribution is conducted under
the AMIDA, BARTELL, MORRISON, BENFORD, MULLER, COLEMAN ENGINEERING, TEREX POWER
and TEREX brand names.
With respect to Terex Mining, Payhauler distributes its products primarily
through a dealership network under the PAYHAULER brand name. Unit Rig
distributes its products and services directly to customers primarily through
its own sales and distribution organization under the TEREX, UNIT RIG and LECTRA
HAUL brand names. O&K Mining sells its hydraulic excavators and after-market
parts and services under the O&K brand primarily through its export sales
department in Dortmund, Germany, through O&K Mining's global network of
wholly-owned foreign subsidiaries and through dealership networks.
CPV markets its tank containers primarily to direct users through its internal
sales force. To a lesser extent CPV's products are sold to independent dealers
and distributors.
Schaeff forklifts are principally sold through independent dealers under the
SCHAEFF brand name and to a lesser extent sold direct to end user customers as
national accounts. Additionally, Schaeff manufactures these forklifts on a
private label basis for other manufacturers.
Research and Development
The Company maintains engineering staffs at several of its locations who design
new products and improvements in existing product lines. The Company's
engineering expenses are primarily incurred in connection with the improvements
of existing products, efforts to reduce costs of existing products and, in
certain cases, the development of products which may have additional
applications or represent extensions of the existing product line. Such costs
incurred in the development of new products, cost reductions, or improvements to
existing products of continuing operations amounted to $6.2, $9.1 and $9.1
million in 2001, 2000 and 1999, respectively.
Materials
Principal materials used by the Company in its various manufacturing processes
include steel, castings, engines, tires, hydraulic cylinders, drive trains,
electric controls and motors, and a variety of other fabricated or manufactured
items. In the absence of labor strikes or other unusual circumstances,
substantially all materials are normally available from multiple suppliers.
Current and potential suppliers are evaluated on a regular basis on their
ability to meet the Company's requirements and standards. Electric wheel motors
and controls used in most of the Unit Rig product line are currently supplied
exclusively by General Electric Company. The Company has also entered into a
contract with General Atomics, a former defense contractor, who has developed
electric wheel motors for the largest Unit Rig trucks. If the Company is unable
to develop alternative sources, or if there is disruption or termination of its
relationship with General Electric Company (which is not governed by a written
contract) or General Atomics, it could have a material adverse effect on Unit
Rig's operations.
Competition
Telescopic Mobile Cranes - The domestic telescopic mobile crane industry is
comprised primarily of three manufacturers. The Company believes that it is the
second largest domestic manufacturer. The Company believes that the number one
domestic manufacturer is Grove Worldwide, and the number three domestic
manufacturer is Link-Belt, a subsidiary of Sumitomo Corp. The Company's
principal markets in Europe are in France, Italy and Spain, where the Company
believes it has the largest market shares. In Europe, the Company's primary
competitors are Grove Cranes, Liebherr and Demag Mobile Cranes.
Truck Mounted Cranes (Boom Trucks) - The United States boom truck industry is
dominated by four manufacturers, of which the Company believes Terex RO is the
second largest behind Grove's National Crane. The European boom truck industry
is comprised primarily of five manufacturers, of which the Company believes
Atlas Terex is the fifth. Other competitors are Palfinger, Hiab, Fassi and PM.
Tower Cranes - The tower crane industry includes two principal competitors,
Liebherr and Potain (Manitowoc), who combined represent well over half of the
worldwide market. Terex and Wolf are the only other competitors with a
multi-national presence; other manufacturers are small and regional.
Lattice Boom Cranes - The lattice boom crane industry includes Manitowoc,
Link-Belt, Demag, Liebherr, Hitachi and Kobelco. Manitowoc is the world leader
in lifting capacities over 125 tons, and represents over half of the United
States lattice boom crane market.
Utility Aerial Devices - The utility aerial device industry is comprised
primarily of three manufacturers. The Company believes that it is the second
largest manufacturer in the United States of utility aerial devices behind
Altec.
Telescopic Container Stackers - The Company believes that four manufacturers
account for a majority of the global market for telescopic container stackers.
The Company believes that it is the second largest manufacturer behind Kalmar.
Other manufacturers include Valmet Belloti and Fantuzzi.
-22-
Rough Terrain Telescopic Boom Material Handlers - OmniQuip (Textron),
Caterpillar, Gradall (JLG) and Ingersoll Rand are the largest manufacturers of
rough terrain telescopic material handlers. The Company believes that it is the
fifth largest manufacturer of rough terrain telescopic material handlers.
Aerial Work Platforms - The aerial work platform industry in North America is
fragmented, with seven major competitors. Terex believes that it is the fifth
largest manufacturer of aerial work platforms in North America, behind JLG,
Genie, UpRight and Skyjack. The Company believes that its market share in boom
lifts is greater than its market share in scissor lifts.
Rigid and Articulated Off-Highway Trucks - North America and Europe account for
a majority of the global market. Four manufacturers dominate the global market.
Terex believes that it is the third largest of these manufacturers (behind Volvo
and Caterpillar).
High Capacity Surface Mining Trucks - The high capacity surface mining truck
industry includes three principal manufacturers: Caterpillar, Komatsu and the
Company. The Company believes that all of these companies have held similar
market positions since 1999.
Large Hydraulic Excavators - The large hydraulic excavator industry is comprised
of primarily seven manufacturers, the largest of which are Hitachi,
Komatsu-Demag, Liebherr and Caterpillar. The Company believes it is the largest
manufacturer of hydraulic excavators having machine weights in excess of 200
tons. The largest hydraulic excavators also compete against electric mining
shovels (rope excavators) from competitors such as Joy Global, Inc. and Bucyrus
International Inc. and, for some applications, against bucket wheeled loaders
from competitors such as Caterpillar, Volvo and Komatsu.
Crushing and Screening Equipment - The crushing industry is a competitive market
reflecting a large number of competitors. The largest competitor is Metso
Corporation, which is a combination of Nordberg and Svedala Industri A.B. The
Company believes it is the second largest manufacturer. The screening industry
includes five other principal manufacturers: Extec (U.K.), Metso Corporation
(Finland), Astec Industries (U.S.), Ohio Screen (U.S.), and Parker Plant (U.K.).
The Company believes that it is the market leader in the mobile screening
industry.
Asphalt Pavers - The asphalt paver industry includes four principal
manufacturers: Blaw-Knox (Ingersoll-Rand), Barber Greene (Caterpillar), Roadtec
(Astec Industries) and the Company. The Company believes it is the third largest
manufacturer.
Asphalt Mixing Plants - The asphalt mixing plant industry includes three
principal manufacturers: Astec Industries, Gencor Corporation, and Terex. The
Company believes it is the second largest manufacturer.
Concrete Pavers - The Company believes that it has the largest market share in
the concrete paver market in North America through Bid-Well. The second largest
manufacturer is Gomaco.
Reclaimers/Stabilizers - The Company believes that it has the largest market
share in the North American reclaimers/stabilizers market. Other competitors are
Caterpillar, Wirtgen and Bomag.
Pavement Profilers - The Company believes that it has the largest market share
in the North American pavement profiler market for half-lane width and larger
machines. Other competitors are Caterpillar, Wirtgen and Road-Tech (Astec
Industries).
Light Towers - The United States light tower market is dominated by three
manufacturers. The Company believes that it is the largest manufacturer followed
by Allmand Bros. and Ingersoll-Rand.
Light Concrete Equipment - The light concrete equipment market is fragmented
with numerous small manufacturers. The Company believes that Allen Engineering,
Multiquip, and Wacker are the primary extended line competitors. The Company
believes that it is the third largest extended line manufacturer in this
category.
Compaction Equipment - The compaction equipment industry is a competitive market
reflecting a large number of competitors. The Company believes it is the second
largest manufacturer in the United Kingdom. Other significant competitors in
Europe are Bomag, Amman, Dynapac, and Hamm. The North American market has three
significant manufacturers: Ingersoll-Rand, Caterpillar and Compaction America.
-23-
Loader Backhoes - The loader backhoe industry is a competitive market reflecting
a large number of competitors. The largest competitors are Caterpillar, CNH
(including both its Case and New Holland brands), JCB, Komatsu and John Deere.
The Company believes that it is the fifth largest of these manufacturers in
Europe and in the United States.
Wheeled Loaders - The wheeled loader market in the under one cubic meter bucket
size category is a competitive market in Europe. These machines are designed
using various design philosophies from different manufacturers such as Kramer,
Volvo, Terex and Caterpillar.
Mini-Excavators - Main competitors in the European mini-excavator market are
Yanmar, Volvo, Neuson and Kubota. In addition, Bobcat (Ingersoll-Rand) competes
in the United States market.
Midi-Excavators - The wheeled midi-excavator market in the under 11 ton size
category is a competitive market in Europe. The major competitors are Komatsu,
Fiat-Hitachi and Volvo. In the crawler midi-excavator market from 5.5 to 11
tons, the leading competitors are Komatsu, Volvo and Yanmar.
Loading Machines - The Company believes that it has the largest market share in
the scrap handler market in Europe with the combined volume of Fuchs and Atlas
Terex. Other competitors in Europe are Liebherr, Sennebogen and Caterpillar.
Trailers - The Company competes in the heavy-haul lowbed trailer market and in
the bottom dump trailer market. In the lowbed trailer market there are many
significant competitors including Trail King, Talbert, Fontaine, Rogers and
Etnyre. There are also many smaller, regional producers. In the bottom dump
trailer market the significant competitors include Trail King, Ranco, Clement
and CPS, as well as several smaller regional suppliers.
Electric Standup Counterbalance Forklifts - The domestic standup forklift
industry is comprised primarily of four manufacturers. The Company believes that
it is the third largest domestic manufacturer. The Company believes that the
number one domestic manufacturer is Crown Equipment and the number two domestic
manufacturer is Raymond Corporation, while the number four domestic manufacturer
is Clark Material Handling.
Tank Containers - North America and Europe account for a majority of the global
market. Six manufacturers dominate the global tank container market. Terex
believes it is the sixth largest manufacturer of tank containers, behind
Consani, Burg Group, Van Hool, Universal Bulk Handling and MTK.
Employees
As of December 31, 2001, the Company had approximately 7,363 employees. The
Company considers its relations with its personnel to be good. Approximately 38%
of the Company's employees are represented by labor unions which have entered
into or are in the process of entering into various separate collective
bargaining agreements with the Company.
Patents, Licenses and Trademarks
Several of the trademarks and trade names of the Company, in particular the
TEREX, LORAIN, UNIT RIG, MARKLIFT, P&H, PPM, TELELECT, HI-RANGER, SQUARE
SHOOTER, PAYHAULER, O&K, AMERICAN, ITALMACCHINE, PEINER, COMEDIL, FRANNA,
POWERSCREEN, CEDARAPIDS, FINLAY, SIMPLICITY, B.L. PEGSON, MATBRO, BENFORD,
MULLER, RE-TECH, JAQUES, CANICA, AMIDA, MORRISON, EARTHKING, FERMEC, COLEMAN
ENGINEERING, BARTELL, GRAYHOUND, CMI, LOAD KING, BID-WELL, ATLAS, FUCHS and
SCHAEFF trademarks, are important to the business of the Company. The Company
owns and maintains trademark registrations and patents in countries where it
conducts business, and monitors the status of its trademark registrations and
patents to maintain them in force and renews them as required. The Company also
protects its trademark, trade name and patent rights when circumstances warrant
such action, including the initiation of legal proceedings, if necessary. P&H is
a registered trademark of Joy Global, Inc. which the Company has the right to
use for certain products pursuant to a license agreement until 2011. The Company
also has the right to use the O&K and Orenstein & Koppel names (which are
registered trademarks of O&K Orenstein & Koppel AG) for most applications in the
mining business for an unlimited period of time. All other trademarks and trade
names of the Company referred to in this Annual Report are registered trademarks
of Terex Corporation or its subsidiaries.
Environmental Considerations
The Company generates hazardous and non-hazardous 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
-24-
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 non-hazardous 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. However, the Company has not incurred, and does not expect
to incur in the future, any material capital expenditures for environmental
control facilities.
-25-
Seasonal Factors
The Company markets a large portion of its products in North America and Europe.
Due to the normal winter slowdown of construction activity, the Company's sales
of trucks, asphalt mixing plants, mobile crushing and screening equipment and
cranes during the fourth quarter of each year to the construction industry are
usually lower than sales of such equipment during each of the first three
quarters of the year. However, sales of trucks and excavators to the mining
industry are generally less affected by such seasonal factors.
-26-
ITEM 2. PROPERTIES
The following table outlines the principal manufacturing, warehouse and office
facilities owned or leased by the Company and its subsidiaries:
Entity Facility Location Type and Size of Facility
Terex (Corporate Offices) and EarthKing.....Westport, Connecticut (1) Office; 19,898 sq. ft.
Terex Americas
American Crane..............................Wilmington, North Carolina Office, manufacturing and warehouse;
572,200 sq. ft.
Amida Rock Hill, South Carolina.............Office, manufacturing and warehouse;
121,020 sq. ft.
Bartell.....................................Brampton, Ontario, Canada Office, manufacturing and warehouse;
32,509 sq. ft.
Bid-Well....................................Canton, South Dakota Office, manufacturing and warehouse;
70,760 sq. ft.
Cedarapids..................................Cedar Rapids, Iowa Office, manufacturing and warehouse;
608,423 sq. ft.
CMI.........................................Oklahoma City, Oklahoma Office, manufacturing and warehouse;
634,592 sq. ft.
CMI--Cifali.................................Cachoeirinha, Brazil Office, manufacturing and warehouse;
83,000 sq. ft.
Coleman.....................................Holly Springs, Mississippi Office, manufacturing and warehouse;
100,000 sq. ft.
Jaques......................................Melbourne, Australia (1) Office, manufacturing and warehouse;
36,000 sq. ft.
Jaques Malaysia.............................Subang Jaya, Malaysia (1) Manufacturing and warehouse;
111,200 sq. ft.
Jaques Thailand.............................Chomburi, Thailand Manufacturing; 79,500 sq. ft.
Load King...................................Elk Point, South Dakota Office, manufacturing and warehouse;
92,700 sq. ft.
Schaeff, Inc................................Sioux City, Iowa Office, manufacturing and warehouse;
165,874 sq. ft.
Simplicity..................................Durand, Michigan Office, manufacturing and warehouse;
167,000 sq. ft.
Telelect....................................Watertown, South Dakota Office, manufacturing and warehouse;
219,350 sq. ft.
Telelect (Terex Manufacturing)..............Huron, South Dakota Manufacturing; 88,000 sq. ft.
Terex Cranes - Waverly......................Waverly, Iowa Office, manufacturing and warehouse;
311,920 sq. ft.
Terex-RO....................................Olathe, Kansas Office and manufacturing; 80,400 sq. ft.
Terex Handlers..............................Baraga, Michigan Office, manufacturing and warehouse;
53,620 sq. ft.
Terex Lifting Australia.....................Brisbane, Australia (1) Office, manufacturing and warehouse;
42,495 sq. ft.
Terex Parts Distribution Center............Southaven, Mississippi (1) Office and warehouse; 505,000 sq. ft. (2)
Terex Power.................................Memphis, Tennessee (1) Warehouse and manufacturing;
50,000 sq. ft.
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Terex Europe
Atlas Terex.................................Delmenhorst, Germany Office, manufacturing and warehouse;
224,255 sq. ft.
Atlas Terex.................................Ganderkasee, Germany Office, manufacturing and warehouse;
362,281 sq. ft.
Atlas Terex.................................Vechta, Germany Manufacturing and warehouse;
280,238 sq. ft.
Atlas Terex.................................Loeningen, Germany Manufacturing and warehouse;
130,254 sq. ft.
Atlas UK....................................Hamilton, Scotland Office, manufacturing and warehouse;
118,486 sq. ft.
Benford.....................................Warwick, England Office, manufacturing and warehouse;
210,000 sq. ft.
B. L. Pegson................................Coalville, England Office, manufacturing and warehouse;
204,486 sq. ft.
Comedil.....................................Fontanafredda, Italy Office, manufacturing and warehouse;
100,682 sq. ft.
CPV.........................................Clones, Ireland Office and manufacturing; 313,700 sq. ft.
Fermec......................................Manchester, England Office, manufacturing and warehouse;
371,683 sq. ft.
Finlay......................................Omagh, Northern Ireland Office, manufacturing and warehouse;
152,863 sq. ft.
Fuchs.......................................Bad Schoenborn, Germany Office, manufacturing and warehouse;
237,839 sq. ft.
Powerscreen.................................Dungannon, Northern Ireland Office, manufacturing and warehouse;
330,000 sq. ft.
Powerscreen.................................Kilbeggan, Ireland Manufacturing; 70,000 sq. ft.
PPM S.A.S. .................................Montceau-les-Mines, France Office, manufacturing and warehouse;
418,376 sq. ft.
Schaeff ....................................Langenburg, Germany Office, manufacturing and warehouse;
102,102 sq. ft.
Schaeff ....................................Gerabronn, Germany Office, manufacturing and warehouse;
63,333 sq. ft.
Schaeff ....................................Rothenburg, Germany (3) Office, manufacturing and warehouse;
97,303 sq. ft.
Schaeff ....................................Crailsheim, Germany Office, manufacturing and warehouse;
185,384 sq. ft.
Schaeff.....................................Clausnitz, Germany Office, manufacturing and warehouse;
83,573 sq. ft.
Schaeff.....................................Ilshofen, Germany Office, manufacturing and warehouse;
66,636 sq. ft.
TEL.........................................Motherwell, Scotland Office, manufacturing and warehouse;
473,000 sq. ft.
Terex Italia................................Crespellano, Italy Office, manufacturing and warehouse;
68,501 sq. ft.
Terex Aerials Limited.......................Cork, Ireland (1) Office and manufacturing; 35,250 sq. ft.
TerexLift...................................Perugia, Italy Office, manufacturing and warehouse;
113,834 sq. ft.
Terex Peiner................................Trier, Germany Office, manufacturing and warehouse;
85,787 sq. ft.
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Terex Mining
O&K Mining..................................Dortmund, Germany (1) Office, manufacturing, warehouse;
775,000 sq. ft.
Unit Rig and Payhauler......................Tulsa, Oklahoma Office, manufacturing and warehouse;
375,587 sq. ft.
(1) These facilities are either leased or subleased by the indicated entity.
(2) Includes 239,400 sq. ft. of warehouse space subleased to others.
(3) Includes 54,134 sq. ft. which are leased by the indicated entity.
The Company also has numerous owned or leased locations for new machine and
parts sales and distribution and rebuilding of components located worldwide.
Management believes that the properties listed above are suitable and adequate
for the Company's use. The Company has determined that certain of its properties
exceed its requirements. Such properties may be sold, leased or utilized in
another manner and have been excluded from the above list.
The majority of the Company's U.S. properties are subject to mortgages in favor
of its bank lenders in connection with its bank credit facilities.
Financial Information about Industry and Geographic Segments, Export Sales and
Major Customers
Information regarding foreign and domestic operations, export sales, segment
information and major customers is included in Note O -- "Business Segment
Information" in the Notes to the Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
As described in Note M -- "Litigation and Contingencies" in the Notes to the
Consolidated Financial Statements, the Company is involved in various legal
proceedings, including product liability and workers' compensation liability,
which have arisen in the normal course of its operations and to which the
Company is self-insured for up to $3.0 million per incident. Management believes
that the final outcome of such matters will not have a material adverse effect
on the Company's consolidated financial position.
For information concerning other contingencies and uncertainties, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Contingencies and Uncertainties."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
-29-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
(a) The Company's Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol "TEX." The high and low stock prices for the Company's
Common Stock on the NYSE Composite Tape (for the last two completed years) are
as follows:
2001 2000
------------------------------- --------------------------------
Fourth Third Second First Fourth Third Second First
High..........$19.00 $22.94 $24.50 $20.35 $17.19 $19.50 $17.25 $28.88
Low........... 15.78 15.35 16.75 14.50 11.56 12.00 12.38 11.13
No dividends were declared or paid in 2001 or in 2000. Certain of the Company's
debt agreements contain restrictions as to the payment of cash dividends. In
addition, payment of dividends is limited by Delaware law. The Company intends
generally to retain earnings, if any, to fund the development and growth of its
business and to pay down debt. The Company does not plan on paying dividends on
the Common Stock in the near term. Any future payments of cash dividends will
depend upon the financial condition, capital requirements and earnings of the
Company, as well as other factors that the Board of Directors may deem relevant.
As of March 25, 2002, there were 1,281 stockholders of record of the Company's
Common Stock.
(b) On December 5, 2001, the Company issued 40,432 shares of its Common Stock
that were not registered under the Securities Act of 1933, as amended (the
"Securities Act"). These shares were issued to a holder of the Company's equity
rights issued May 9, 1995 ("Equity Rights") in connection with the exercise of
56,000 Equity Rights by such holder. Pursuant to the terms of the Equity Rights
exercised by such holder, the holder was entitled to receive payment of $716,455
in cash or shares of Common Stock. The Company elected to make such payment by
issuance of shares of Common Stock having a then-current market value equal to
the payment amount. The issuance was made pursuant to an exemption from
registration provided by Section 4(2) of the Securities Act, as this issuance of
Common Stock did not involve a "public offering" pursuant to the Securities Act
given the limited number and scope of persons to whom the securities were
issued.
-30-
ITEM 6. SELECTED FINANCIAL DATA
(in millions except per share amounts and employees)
As of or for the Year Ended December 31,
----------------------------------------------------------------
2001 2000 1999 1998 1997
----------------------------------------------------------------
Summary of Operations
Net sales...................................................$ 1,812.5 $ 2,068.7 $ 1,856.6 $ 1,233.2 $ 842.3
Income from operations....................................... 104.2 198.3 178.3 122.0 71.1
Income from continuing operations before extraordinary items. 16.7 103.9 172.9 72.8 30.3
Income (loss) from discontinued operations................... --- (7.3) --- --- ---
Income before extraordinary items............................ 16.7 96.6 172.9 72.8 30.3
Net income................................................... 12.8 95.1 172.9 34.5 15.5
Per Common and Common Equivalent Share:
Basic
Income (loss) from continuing operations................$ 0.60 $ 3.82 $ 7.14 $ 3.52 $ 1.57
Income (loss) from discontinued operations............... --- (0.27) --- --- ---
Income before extraordinary items........................ 0.60 3.55 7.14 3.52 1.57
Net income............................................... 0.46 3.50 7.14 1.67 0.66
Diluted
Income (loss) from continuing operations................$ 0.58 $ 3.72 $ 6.75 $ 3.25 $ 1.44
Income (loss) from discontinued operations............... --- (0.26) --- --- ---
Income before extraordinary items........................ 0.58 3.46 6.75 3.25 1.44
Net income............................................... 0.44 3.41 6.75 1.54 0.60
Working Capital
Current assets..............................................$ 1,383.0 $ 1,242.4 $ 1,315.3 $ 771.6 $ 426.5
Current liabilities.......................................... 627.1 575.6 579.5 425.4 236.1
Working capital.............................................. 755.9 666.8 735.8 346.2 190.4
Property, Plant and Equipment
Net property, plant and equipment...........................$ 173.9 $ 153.9 $ 172.8 $ 99.5 $ 47.8
Capital expenditures......................................... 13.5 24.2 21.4 13.1 9.9
Depreciation................................................. 22.5 23.0 17.6 10.1 8.2
Total Assets..................................................$ 2,387.0 $ 1,983.7 $ 2,177.5 $ 1,151.2 $ 588.5
Capitalization
Long-term debt and notes payable, including current
maturities................................................$ 1,055.4 $ 902.5 $ 1,156.4 $ 631.3 $ 300.1
Minority interest, including redeemable preferred stock of
a subsidiary.............................................. --- --- --- 0.6 0.6
Stockholders' equity ........................................ 595.4 451.5 432.8 98.1 59.6
Dividends per share of Common Stock.........................$ ---- $ --- $ --- $ --- $ ---
Shares of Common Stock outstanding at year end............... 36.4 26.8 27.5 20.8 20.5
Employees...................................................... 7,363 6,150 6,650 4,142 2,950
The Selected Financial Data include the results of operations of Jaques, CMI,
Atlas, Coleman, Fermec, Amida, Powerscreen, Cedarapids, Bartell, Re-Tech,
Princeton/Kooi, Terex Lifting Australia, Payhauler, O&K Mining, Holland Lift,
American Crane, Terexlift, Peiner, Comedil, the Simon Access Companies and Terex
Handlers from January 24, 2001, October 1, 2001, December 28, 2001, October 23,
2000, December 28, 2000, April 1, 1999, July 27, 1999, August 27, 1999,
September 20, 1999, September 29, 1999, November 3, 1999, December 1, 1999,
January 5, 1998, March 31, 1998, May 4, 1998, July 31, 1998, November 3, 1998,
November 13, 1998, December 18, 1998, April 7, 1997 and April 14, 1997,
respectively, the dates of their acquisitions. See Note B -- "Acquisitions" in
the Notes to the Consolidated Financial Statements for further information. The
Selected Financial Data for the year ended December 31, 2000, includes the
results of operations of Princeton/Kooi and Moffett (a division of Powerscreen)
through September 30, 2000, the date these units were sold. See Note C - "Sale
of Businesses" in the Notes to the Consolidated Financial Statements for further
information.
-31-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
On April 23, 2001, the Company announced that it was implementing a modified
organizational structure effective May 1, 2001. On May 1, 2001, the Company
began operating primarily in two business segments: (i) Terex Americas and
Mining and (ii) Terex Europe. Previously, the Company had reported its
operations as Terex Earthmoving and Terex Lifting. On August 28, 2001, the
Company announced that the Terex Americas and Mining group was being divided
into two separate business segments: (i) Terex Americas and (ii) Terex Mining.
Therefore, commencing in the third quarter of 2001, the Company began operating
primarily in three business segments: (i) Terex Americas, (ii) Terex Europe, and
(iii) Terex Mining. All prior periods have been restated to reflect results
based on the three current business segments.
The Company implemented these organizational changes in response to the growth
and diversity of the Company's business. While the product focus represented by
having earthmoving and lifting segments assisted the Company's growth, both in
the United States and internationally, as the Company's product offerings
expanded it resulted in customers in many cases having to deal with multiple
sales and marketing groups within the Company. This made the Company's objective
of satisfying its customers more difficult to achieve. The Company, while
increasingly global, believes that ultimately its business is a local one that
can best be developed and served by focusing its operations geographically and
by developing local relationships among equipment users, distribution channels
and suppliers. For that reason, the Company created the Terex Americas and Terex
Europe segments. The Terex Mining business remains organized under product, and
not geographic, lines because of the worldwide scope of the mining business. In
the mining industry, manufacturers and customers are located in various areas
around the globe, with many customers operating multiple sites in widely
dispersed locations, with the result that local geographic concerns are far less
significant than a manufacturer's global range.
Terex Americas includes the results of all business units located in North and
South America, Australia and Asia, with the exception of those business units
included within Terex Mining. The 2001 results for Terex Americas include the
operations of Jaques and its affiliates (collectively the "Jaques Group") and
CMI and its affiliates since January 24, 2001 and October 1, 2001, their
respective dates of acquisition. The 2000 results for Terex Americas include the
operations of the Company's Princeton division through September 30, 2000,
the date it was sold. The results for 2000 include the operations of Coleman
since October 23, 2000, its date of acquisition.
Terex Europe includes the results of all business units located in Europe with
the exception of those business units included within Terex Mining. The 2001
results for Terex Europe include the operations of Fermec and its affiliates
which were acquired on December 28, 2000. The 2000 results for Terex Europe
include the operations of Moffett Engineering Limited and the Company's Kooi
division (collectively the "European Truck-mounted Forklift Business" and along
with Princeton, the "Truck-mounted Forklift Business"), through September 30,
2000, the date they were sold.
Terex Mining includes the results of the Terex Mining operations in Tulsa,
Oklahoma, the O&K Mining business located in Germany and certain sales offices
in Australia, South America and Africa.
Included in Other are the eliminations among the segments, as well as general
and corporate items.
During the third quarter of 2001, the Company announced that a number of its
current production facilities would reduce staffing, seven facilities would be
closed and their activities consolidated into other Terex facilities and that
other additional non-recurring expenses would be incurred. The restructuring
program is designed to maximize factory utilization and to leverage common
purchasing, engineering and marketing operations in the Americas and Europe. The
majority of facility consolidations occurred in 2001 and the plan is expected to
be fully implemented by the end of the second quarter of 2002.
The Company recorded costs of $29.9 million during 2001 for severance and
consolidation costs related to these actions as well as other non-recurring
expenses. The severance costs, totaling approximately $6 million, are for the
elimination of approximately 725 positions in connection with the aforementioned
plant consolidations and staff reductions. Other costs, totaling approximately
$24 million, include plant consolidation costs and related asset write-offs of
which approximately $21 million represents non-cash charges. These costs have
been included in cost of sales ($26.0 million) and selling, general and
administrative expenses ($3.9 million) in the consolidated statement of income.
As of December 31, 2001, approximately $6 million representing future cash costs
have been accrued; cash payments will take place primarily in the first quarter
of 2002 and are expected to be completed by the end of the second quarter of
2002. The Company has estimated that an additional charge of approximately $6
million will be recorded in 2002 for costs relating to this and other expected
restructuring.
-32-
Consistent with its plan at the time of acquisition, the Company has announced
its intention to close four of CMI's existing facilities and consolidate the
work into CMI's Oklahoma City location. These closures will eliminate
approximately 500 positions and are expected to be completed during the first
quarter of 2002. Costs related to these closures are expected to be included in
the purchase accounting for CMI and will not be recorded as operating expenses.
2001 Compared with 2000
The table below is a comparison of net sales, gross profit, selling, general and
administrative expenses and income (loss) from operations, by segment, for 2001
and 2000.
Year Ended December 31,
----------------------- Increase
2001 2000 (Decrease)
---- ---- ---------
NET SALES
Terex Americas.............................$ 857.8 $ 1,095.4 $ (237.6)
Terex Europe............................... 872.3 895.1 (22.8)
Terex Mining............................... 266.2 319.3 (53.1)
Other/Eliminations......................... (183.8) (241.1) 57.3
----------- ----------- ----------
Total....................................$ 1,812.5 $ 2,068.7 $ (256.2)
=========== =========== ==========
GROSS PROFIT
Terex Americas.............................$ 125.2 $ 171.4 $ (46.2)
Terex Europe............................... 107.4 145.0 (37.6)
Terex Mining............................... 44.4 44.9 (0.5)
Other/Eliminations......................... (0.4) 2.3 (2.7)
----------- ----------- ----------
Total....................................$ 276.6 $ 363.6 $ (87.0)
=========== =========== ==========
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Terex Americas.............................$ 73.1 $ 64.0 $ 9.1
Terex Europe............................... 66.6 61.9 4.7
Terex Mining............................... 29.9 38.0 (8.1)
Other/Eliminations......................... 2.8 1.4 1.4
----------- ----------- ----------
Total....................................$ 172.4 $ 165.3 $ 7.1
=========== =========== ==========
INCOME (LOSS) FROM OPERATIONS
Terex Americas.............................$ 52.1 $ 107.4 $ (55.3)
Terex Europe............................... 40.8 83.1 (42.3)
Terex Mining............................... 14.5 6.9 7.6
Other/Eliminations......................... (3.2) 0.9 (4.1)
----------- ----------- ----------
Total....................................$ 104.2 $ 198.3 $ (94.1)
=========== =========== ==========
Net Sales
Overall sales declines were consistent with weaker end market and general
economic factors and generally do not reflect a weakening in the competitive
condition of the Company's products. Sales decreased $256.2 million, or
approximately 12%, to $1,812.5 million from $2,068.7 million in 2000.
Acquisitions made during 2001, net of businesses disposed of in 2000, increased
2001 revenues by $80.6 million.
Terex Americas' sales were $857.8 million for 2001, a decrease of $237.6 million
or approximately 22% from $1,095.4 million for 2000. Excluding the impact of
acquisitions and divestitures, sales decreased approximately $269.1 million,
which was due primarily to the decline in the articulated and rigid truck,
lifting and Cedarapids businesses. The sales mix was approximately 19% parts for
2001 compared to 14% parts for 2000, reflecting the decrease in machine sales.
Parts sales in 2001 were $6.3 million higher than in 2000.
-33-
Terex Europe's sales were $872.3 million for 2001, a decrease of $22.8 million
or approximately 3% from $895.1 million for 2000. Excluding the results of the
European Truck-mounted Forklift Business in 2000 and Fermec in 2001, net sales
in 2001 were down approximately 8.5% from 2000. The decline in sales was due
largely to weaker performance in the articulated and rigid truck business, the
material handler business and the lifting business. In addition, sales at the
aerial work platform business declined due in part to the Company's decision to
exit those businesses. The sales mix was approximately 12% parts for 2001 and
10% in 2000, partially due to lower machine sales. Parts sales in 2001 were
$15.5 million higher than in 2000.
Terex Mining's sales were $266.2 million for 2001, a decrease of $53.1 million
or approximately 17% from $319.3 for 2000. This was due to a decrease in sales
of surface mining trucks and large hydraulic excavators. The sales mix was
approximately 48% parts for 2001 compared to 37% for 2000. Parts sales in 2001
were $8.5 million higher than in 2000.
Net sales for Other/Eliminations in 2001 and 2000 primarily consists of the
elimination of sales among the three segments. The primary reason for the
decrease from 2000 to 2001 is the decline in the sales of articulated and rigid
trucks from Terex Europe to Terex Americas.
Gross Profit
Gross profit for 2001 decreased $87.0 million, or approximately 24%, to $276.6
million as compared to $363.6 million in 2000. The decrease in gross profit is
primarily due to the decrease in sales and the inclusion of $26.0 million of
restructuring and other charges in cost of goods sold in 2001, as compared to
2000 when restructuring and other charges were $9.9 million. Gross profit as a
percentage of sales decreased to 15.3% in 2001 as compared to 17.6% in 2000.
Excluding the impact of the restructuring charges and the acquisitions and
divestitures, gross margin percentage decreased to 17.0% in 2001 from 17.8% in
2000.
Terex Americas' gross profit decreased $46.2 million, or approximately 27%, to
$125.2 million for 2001, compared to $171.4 million for 2000. The decrease in
gross profit is due primarily to the inclusion of $9.7 million of restructuring
charges and the decline in sales in the Cedarapids, the articulated and rigid
truck and the lifting businesses. The gross margin percentage decreased to 14.6%
in 2001 as compared to 15.6% in 2000. Excluding the impact of the restructuring
charges and the acquisitions and divestitures, gross margin percentage decreased
to 15.2% in 2001 from 15.9% in 2000.
Terex Europe's gross profit decreased $37.6 million, or approximately 26%, to
$107.4 million for 2001, compared to $145.0 million for 2000. The decrease in
gross profit was a result primarily of the inclusion of $15.6 million of
restructuring charges and a decline in sales in the articulated and rigid truck
business and the material handler business. Excluding the impact of the
restructuring charges and the results of the acquisitions and divestitures,
gross profit in 2001 decreased approximately $23.7 million from the comparable
period in 2000. Gross profit as a percentage of sales decreased to 12.3% from
16.2% in 2000. Excluding the impact of the restructuring charges and the results
of the European Truck-mounted Forklift Business in 2000 and Fermec in 2001,
gross profit as a percentage of sales decreased to 14.7% in 2001 from 15.9% in
2000.
Terex Mining's gross profit decreased $0.5 million, or approximately 1%, to
$44.4 million for 2001, compared to $44.9 million for 2000. The decrease in
gross profit was a result of the decrease in machine sales, offset partially by
the increase in parts sales, as well as the realization of cost savings
from restructuring actions taken in the third quarter of 2000. Gross profit as a
percentage of sales increased to 16.7% from 14.1% in 2000.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $172.4 million for
2001 from $165.3 million for 2000. The increase principally reflected the impact
of the businesses acquired in late 2000 and early 2001, the inclusion of $3.9
million and $3.2 million of restructuring and other charges in 2001 and 2000,
respectively, and the Company's investments in its EarthKing subsidiary and
other e-commerce businesses, offset by the effect of the divestiture of the
Truck-mounted Forklift Business and continued cost control within all
businesses. As a percentage of sales, selling, general and administrative
expenses increased to 9.5% for 2001 as compared to 8.0% for 2000, primarily as a
result of decreased sales.
Terex Americas' selling, general and administrative expenses increased to $73.1
million for 2001 from $64.0 million for 2000, principally due to the inclusion
of $2.1 million of restructuring charges and the Company's investments in
EarthKing and other e-commerce businesses. Absent the restructuring charges and
acquisitions and divestitures, selling, general and administrative expenses in
2001 were $1.7 million lower than in 2000. As a percentage of sales, selling,
general and administrative expenses increased to 8.5% for 2001, as compared to
5.8% in 2000, principally due to lower sales volume.
-34-
Terex Europe's selling, general and administrative expenses increased $4.7
million to $66.6 million for 2001 from $61.9 million for 2000. This increase in
selling, general and administrative expenses was principally due to the
inclusion of $1.8 million of restructuring charges and the impact of the Fermec
acquisition, partially offset by the sale of the European Truck-mounted Forklift
Business in September 2000. As a percentage of sales, selling, general and
administrative expenses increased to 7.6% in 2001 from 6.9% in 2000, primarily
due to higher expenses and lower sales volume.
Terex Mining's selling, general and administrative expenses decreased $8.1
million to $29.9 million for 2001 as compared to $38.0 million for 2000. This
decline was due primarily to cost savings from restructuring actions undertaken
in the third quarter of 2000. As a percentage of sales, selling, general and
administrative expenses decreased to 11.2% in 2001 as compared to 11.9% in the
prior year's period.
Income from Operations
The Company had income from operations of $104.2 million, or 5.7% of sales, for
2001, compared to income from operations of $198.3 million, or 9.6% of sales,
for 2000. Excluding the impact of the restructuring charges and the businesses
acquired or disposed of in 2000 and 2001, operating margins decreased to 7.8%
from 10.0% in 2000.
Terex Americas' income from operations decreased by $55.3 million to $52.1
million, or 6.1% of sales, for 2001 from $107.4 million, or 9.8% of sales, for
2000. The decrease in income from operations and operating margins is primarily
due to the decline in sales and the inclusion of $11.8 million of restructuring
charges. Excluding the impact of the restructuring charges and the businesses
acquired in late 2000 and early 2001, as well as those divested in September
2000, operating margin was 7.6% for 2001, as compared to 10.0% in 2000.
Terex Europe's income from operations decreased by $42.3 million to $40.8
million for 2001 from $83.1 million for 2000. The decrease was due to the impact
on operating income of lower sales as well as restructuring charges of $17.4
million. Income from operations as a percentage of sales decreased to 4.7% for
2001 from 9.3% for 2000. Excluding the impact of restructuring charges and
acquisitions and divestitures, income from operations was 7.3% of sales in 2001
as compared to 9.2% in 2000.
Terex Mining's income from operations increased by $7.6 million to $14.5 million
for 2001 from $6.9 million for 2000. As a percentage of sales, operating income
was 5.4% in 2001 as compared to 2.2% in 2000. The primary reason for the
increase was a reduction in operating expenses resulting from a restructuring in
the third quarter of 2000.
Net Interest Expense
During 2001, the Company's net interest expense decreased $15.3 million to $79.0
million from $94.3 million for 2000. This decrease was primarily due to lower
interest rates and lower average net debt levels in 2001 versus 2000.
Gain on Sale of Businesses
During 2000, the Company recognized a $57.2 million gain on the sale of the
Truck-mounted Forklift Businesses to various subsidiaries of Partek Corporation
of Finland for $145 million in cash.
Extraordinary Items
During 2001 and 2000, the Company recorded charges of $3.9 million and $1.5
million, net of income taxes, respectively, to recognize losses on the write-off
of unamortized debt acquisition costs for the early extinguishment of debt in
connection with the prepayment of principal of certain term loans under the
Company's bank credit facilities.
-35-
2000 Compared with 1999
The table below is a comparison of net sales, gross profit, selling, general and
administrative expenses and income (loss) from operations, by segment, for 2000
and 1999.
Year Ended December 31,
----------------------- Increase
2000 1999 (Decrease)
---- ---- ----------
NET SALES
Terex Americas.............................$ 1,095.4 $ 873.3 $ 222.1
Terex Europe............................... 895.1 718.6 176.5
Terex Mining............................... 319.3 453.0 (133.7)
Other/Eliminations......................... (241.1) (188.3) (52.8)
----------- ----------- ----------
Total....................................$ 2,068.7 $ 1,856.6 $ 212.1
=========== =========== ==========
GROSS PROFIT
Terex Americas.............................$ 171.4 $ 123.6 $ 47.8
Terex Europe............................... 145.0 119.6 25.4
Terex Mining............................... 44.9 75.3 (30.4)
Other/Eliminations......................... 2.3 (1.8) 4.1
----------- ----------- ----------
Total....................................$ 363.6 $ 316.7 $ 46.9
=========== =========== ==========
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Terex Americas.............................$ 64.0 $ 47.1 $ 16.9
Terex Europe............................... 61.9 52.6 9.3
Terex Mining............................... 38.0 39.7 (1.7)
Other/Eliminations......................... 1.4 (1.0) 2.4
----------- ----------- ----------
Total....................................$ 165.3 $ 138.4 $ 26.9
=========== =========== ==========
INCOME (LOSS) FROM OPERATIONS
Terex Americas.............................$ 107.4 $ 76.5 $ 30.9
Terex Europe............................... 83.1 67.0 16.1
Terex Mining............................... 6.9 35.6 (28.7)
Other/Eliminations......................... 0.9 (0.8) 1.7
----------- ----------- ----------
Total....................................$ 198.3 $ 178.3 $ 20.0
=========== =========== ==========
Net Sales
Sales increased $212.1 million, or approximately 11%, to $2,068.7 million in
2000 from $1,856.6 million in 1999. This revenue increase was due to the effect
of a full year of inclusion of companies acquired in 1999, offset partially by
declining revenues at existing businesses.
Terex Americas' sales were $1,095.4 million for 2000, an increase of $222.1
million or approximately 25% from $873.3 million for 1999. Excluding the impact
of acquisitions and divestitures, sales decreased approximately $25.5 million,
which was due primarily to declines in the lifting businesses. The sales mix was
approximately 14% parts for 2000 compared to 13% parts for 1999, reflecting the
decrease in machine sales.
Terex Europe's sales were $895.1 million for 2000, an increase of $176.5 million
or approximately 25% from $718.6 million for 1999. Excluding the impact of the
businesses acquired and divested in 2000 and 1999, net sales in 2000 were down
approximately $7.6 million from 1999. The decline in sales was due largely to
weaker performance in the lifting business. The sales mix for parts was
relatively unchanged between 2000 and 1999. Parts sales in 2000 were $8.1
million higher than in 1999.
Terex Mining's sales were $319.3 million for 2000, a decrease of $133.7 million
or approximately 30% from $453.0 million for 1999. The decrease in sales was
primarily due to a decrease in sales of surface mining trucks and large
hydraulic excavators. The sales mix was approximately 37% parts for 2000
compared to 28% for 1999. Parts sales in 2000 were $8.7 million lower than in
1999.
-36-
Net sales for Other/Eliminations in 2000 and 1999 primarily consists of the
elimination of sales among the three segments.
Gross Profit
Gross profit for 2000 increased $46.9 million to $363.6 million from $316.7
million for 1999 as a result of acquisitions made in 1999. Gross profit as a
percentage of net sales for 2000 increased to 17.6% as compared to 17.1% for
1999. This increase was related primarily to margin improvements in the Terex
truck and the utility aerial device businesses, driven by increased volumes and
manufacturing efficiencies, and a full year of inclusion of companies acquired
in 1999. In 2000, the Company recorded special charges of $10.1 million related
to the closure of the Company's distribution facility in the United Kingdom, the
impact of an aggregates customer that filed for bankruptcy and the further
integration of the Company's mining division. In 1999, the Company recorded
special charges of $9.9 million related to the closure of the Company's
Milwaukee aerial work platform facility and head count reductions at O&K Mining.
Excluding the special charges, gross margin was 18.1% in 2000 compared to 17.6%
in 1999.
Terex Americas' gross profit increased approximately 39%, or $47.8 million, to
$171.4 million for 2000, compared to $123.6 million for 1999. The increase in
gross profit is due primarily to the higher gross margin in the lifting business
and the gross margin earned by the acquired units. The gross margin percentage
increased to 15.6% in 2000 as compared to 14.2% in 1999. Excluding the impact of
the restructuring charges and the acquisitions and divestitures, gross margin
percentage increased to 17.4% in 2000 from 15.1% in 1999.
Terex Europe's gross profit increased $25.4 million, or approximately 21%, to
$145.0 million for 2000, compared to $119.6 million for 1999. The increase in
gross profit was a result primarily of the additional volume from acquired
businesses partially offset by reduced margins in the lifting business.
Excluding the impact of the restructuring charges and the results of the
acquisitions and divestitures, gross profit in 2000 decreased approximately
$17.5 million from the comparable period in 1999. Gross profit as a percentage
of sales decreased to 16.2% from 16.6% in 1999. Excluding the impact of the
restructuring charges and acquisitions and divestitures, gross profit as a
percentage of sales decreased to 13.1% in 2000 from 15.7% in 1999.
Terex Mining's gross profit decreased $30.4 million, or approximately 40%, to
$44.9 million for 2000, compared to $75.3 million for 1999. The decrease in
gross profit was a result of the overall decrease in sales and the $4.8 million
restructuring costs recorded in 2000. Gross profit as a percentage of sales
decreased to 14.1% from 16.6% in 1999.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $165.3 million in 2000
from $138.4 million for 1999, reflecting the effects of a full year of inclusion
of the companies acquired in 1999 and the special charges recorded during the
year. In 2000, the Company recorded special charges of $2.7 million related to
the closure of the Company's distribution facility in the United Kingdom, the
further integration of the Company's mining division and due diligence costs
associated with a significant acquisition which did not come to fruition, offset
partially by a curtailment gain related to one of the Company's pension plans.
In 1999, the Company recorded special items of ($1.4) million related to
headcount reductions at the Company's manufacturing facility in Germany, offset
by a favorable legal settlement. As a percentage of sales, selling, general and
administrative expenses increased to 8.0% in 2000 from 7.5% in 1999.
Terex Americas' selling, general and administrative expenses increased to $64.0
million for 2000 from $47.1 million for 1999, principally due to the impact of
the businesses acquired in the third quarter of 1999, as well as the Company's
investments in EarthKing. Absent the benefit of the pension curtailment ($1.8)
and acquisitions and divestitures, selling, general and administrative expenses
in 2000 were approximately $1.2 million more than in 1999. As a percentage of
sales, selling, general and administrative expenses increased to 5.8% for 2000,
as compared to 5.4% in 1999, principally due to the impact of the businesses
acquired in the third quarter of 1999.
Terex Europe's selling, general and administrative expenses increased $9.3
million to $61.9 million for 2000 from $52.6 million for 1999. This increase in
selling, general and administrative expenses was principally due to the acquired
businesses. As a percentage of sales, selling, general and administrative
expenses decreased to 6.9% in 2000 from 7.3% in 1999 primarily due to higher
sales volume.
Terex Mining's selling, general and administrative expenses decreased to $38.0
million for 2000 as compared to $39.7 million for 1999. This slight decline was
due primarily to cost savings from restructuring actions undertaken in 2000. As
a percentage of sales, selling, general and administrative expenses increased to
11.9% in 2000 as compared to 8.8% in the prior year's period. The primary reason
for the increase was the decline in sales.
-37-
Income from Operations
Income from operations for the Company increased $20.0 million, or 11.2%, to
$198.3 million, compared to $178.3 million in 1999. Income from operations as a
percentage of sales remained at 9.6% in 2000 and 1999. Excluding special
charges, income from operations as a percentage of sales was 10.2% in 2000 as
compared to 10.1% in 1999.
Terex Americas' income from operations increased by $30.9 million to $107.4
million, or 9.8% of sales, for 2000 from $76.5 million, or 8.8% of sales, for
1999. The increase in income from operations and operating margins is primarily
due to the increase in sales. Excluding the impact of the restructuring charges
and the businesses acquired in 1999 and 2000, as well as those divested in
September 2000, operating margin was 12.2% for 2000, as compared to 9.3% in
1999.
Terex Europe's income from operations of $83.1 million for 2000 was an increase
of $16.1 million from $67.0 million for 1999. The increase was due to the impact
on operating income of increased sales from the businesses acquired in 1999.
Income from operations as a percentage of sales remained flat at 9.3% in 2000
and 1999. Excluding the impact of restructuring charges and acquisitions and
divestitures, income from operations was 7.1% of sales in 2000 as compared to
8.5% in 1999.
Terex Mining's income from operations decreased to $6.9 million for 2000 as
compared to $35.6 million in 1999. As a percentage of sales, operating income
was 2.2% in 2000 as compared to 7.9% in 1999. The primary reason for the
decrease was the decrease in sales.
Net Interest Expense
Net interest expense increased to $94.3 million for 2000 from $77.5 million in
1999 as a result of higher average debt levels due to debt incurred to finance
the 1999 acquisitions as well as higher interest rates.
Income Taxes
During 2000, the Company recognized an income tax expense of $55.7 million as
compared to an income tax benefit of $74.5 million in 1999. During the fourth
quarter of 1999, the Company announced the resolution of an Internal Revenue
Services audit, which started in December 1994, regarding its income tax returns
for the years 1987 through 1989. The resolution of this audit did not require
payment of tax. The 1999 income tax benefit resulted from the capitalization of
certain deferred taxes. See Note J - "Income Taxes" in the Notes to the
Consolidated Financial Statements.
Loss from Discontinued Operations
In connection with the Company's sale of the Clark material handling business to
Clark Material Handling Company ("CMHC") in November 1996, CMHC assumed
liabilities from Terex arising from product liability claims dealing with Clark
material handling products manufactured prior to the date of the divestiture. In
connection with CMHC's voluntary filing for bankruptcy in 2000, CMHC defaulted
on its obligations to indemnify and defend the Company from such product
liability claims. As a result of this situation, the Company recorded an expense
of $7.3 million, net of income taxes, in the fourth quarter of 2000,
representing the Company's estimated liability for known product liability
claims.
Extraordinary Items
During 2000, the Company recorded a charge of $1.5 million, net of income taxes,
to recognize a loss on the early extinguishment of debt in connection with the
prepayment of principal of the Company's bank credit facilities.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Changes in the estimates and assumptions used by management could have
significant impact on the Company's financial results. Actual results could
differ from those estimates.
-38-
The Company believes that the following are among its most significant
accounting polices which are important in determining the reporting of
transactions and events and which utilize estimates about the effect of matters
that are inherently uncertain and therefore are based on management judgment.
Please refer to Note A - "Significant Accounting Policies" in the accompanying
consolidated financial statements for a complete listing of the Company's
accounting policies.
Inventories - Inventories are stated at the lower of cost or market value. In
valuing inventory, management is required to make assumptions regarding the
level of reserves required to value potentially obsolete or over-valued items at
the lower of cost or market. The valuation of used equipment taken in trade from
customers requires the Company to use the best information available to
determine the value of the equipment to potential customers. This value is
subject to change based on numerous conditions. Inventory reserves are
established taking into account age, frequency of use, or sale, and in the case
of repair parts, the installed base of machines. While calculations are made
involving these factors, significant management judgment regarding expectations
for future events is involved. Future events which could significantly influence
management's judgment and related estimates include general economic conditions
in markets where the Company's products are sold, new equipment price
fluctuations, competitive actions including the introduction of new products and
technological advances, as well as new products and design changes introduced by
the Company. At December 31, 2001, management had established reserves of $27.1
million for excess and obsolete inventory.
Accounts Receivable - Management is required to make judgments about the
collectibility of accounts receivables from the Company's customers. Valuation
of receivables includes evaluating customer payment histories, customer
leverage, availability of third party finance, political and exchange risks and
other factors. Many of these factors, including the assessment of a customer's
ability to pay, are influenced by economic and market factors which cannot be
predicted with certainty. At December 31, 2001, reserves for potentially
uncollectible accounts receivable totaled $8.6 million.
Guarantees - The Company has issued $53.2 million in guarantees of customer
financing to purchase equipment as of December 31, 2001. The Company must assess
the probability of losses or non-performance in ways similar to the evaluation
of accounts receivable, including consideration of a customer's payment history,
leverage, availability of third party finance, political and exchange risks and
other factors. Many of these factors, including the assessment of a customer's
ability to pay, are influenced by economic and market factors that cannot be
predicted with certainty. To date, losses related to guarantees have been
negligible.
Revenue Recognition - Revenue and costs are generally recorded when products are
shipped and invoiced to either independently owned and operated dealers or to
customers. Certain new units may be invoiced prior to the time customers take
physical possession. Revenue is recognized in such cases only when the customer
has a fixed commitment to purchase the units, the units have been completed,
tested and made available to the customer for pickup or delivery, and the
customer has requested that the Company hold the units for pickup or delivery at
a time specified by the customer. In such cases, the units are invoiced under
the Company's customary billing terms, title to the units and risks of ownership
pass to the customer upon invoicing, the units are segregated from the Company's
inventory and identified as belonging to the customer, and the Company has no
further obligations under the order. Revenues are recognized generally when
title and risk of loss transfers to the customer. The Company's customers
include rental companies, finance companies and owner operators. In certain
cases, the products are purchased for retailing. In some cases recognizing
revenue requires evaluating the stability and reason for purchase by the
customer, performance commitments, probability of returns and other factors.
Goodwill - Goodwill, representing the difference between the total purchase
price and the fair value of assets (tangible and intangible) and liabilities at
the date of acquisition, is amortized on a straight-line basis over between
fifteen and forty years. In order to determine the amount of goodwill,
management uses estimates and assumptions to determine the fair value of assets
acquired. Actual results could differ from those estimates. In accordance with
the Company's adoption of SFAS No. 141 and SFAS No. 142, goodwill will no longer
be amortized. However, the value assigned to goodwill must be reviewed annually
to determine if its estimated value exceeds the carrying value. Estimates of
future discounted cash flows are one of the principal methods that will be used
by the Company to value goodwill. There are no assurances that future cash flow
assumptions will be achieved, nor are there assurances that the values placed on
goodwill will be attainable.
Impairment of Long Lived Assets - The Company's policy is to assess the
realizability of its long lived assets and to evaluate such assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets (or group of assets) may not be recoverable.
Impairment is determined to exist if the estimated future undiscounted cash
flows is less than its carrying value. There are no assurances that future cash
flow assumptions will be achieved. The amount of any impairment then recognized
would be calculated as the difference between estimated future discounted cash
flows and the carrying value of the asset.
-39-
Accrued Warranties - The Company records accruals for potential warranty claims
based on the Company's prior claim experience. Warranty costs are accrued at the
time revenue is recognized. These warranty costs are based upon management's
assessment of past claims and current experience. However, actual claims could
be higher or lower than amounts estimated, as the amount and value of warranty
claims are subject to variation as a result of many factors that cannot be
predicted with certainty, including the performance of new products, models and
technology, changes in weather conditions for product operation, different uses
for products and other similar factors.
Accrued Product Liability - The Company records accruals for potential product
liability claims based on the Company's prior claim experience. Accruals for
product liability claims are valued based upon the Company's prior claims'
experience, including consideration of the jurisdiction, circumstances of the
accident, type of loss or injury, identity of plaintiff, other potential
responsible parties, analysis of outside counsel, analysis of internal product
liability counsel and the experience of the Company's director of product
safety. The Company provides self-insurance accruals for estimated product
liability experience on known claims. Actual product liability costs could be
different due to a number of variables such as the decisions of juries or
judges.
LIQUIDITY AND CAPITAL RESOURCES
Net cash of $5.5 million was used in operating activities during the year ended
December 31, 2001. Approximately $32 million of cash was used for working
capital. Net cash used in investing activities was $136.3 million during the
year ended December 31, 2001, primarily related to the acquisitions of CMI and
Atlas Terex. Net cash provided by financing activities was $211.5 million during
the year ended December 31, 2001. As described below, this consists primarily of
cash provided by the issuance of long term debt (approximately $481 million) and
common stock (approximately $96 million), offset by the repayment of debt
(approximately $389 million). Cash and cash equivalents totaled $250.4 million
at December 31, 2001. In addition, the Company had $249.5 million available for
borrowing under its revolving credit facilities at December 31, 2001. Therefore,
total liquidity available to the Company at December 31, 2001 was approximately
$500 million.
Including the January 2002 acquisitions of Schaeff and Utility Equipment and the
2001 acquisitions of the Jaques Group, CMI and Atlas (see Note B
- --"Acquisitions" in the Notes to the Consolidated Financial Statements), since
the beginning of 1995 Terex has invested approximately $1.4 billion to
strengthen and expand its core businesses through more than 20 strategic
acquisitions. Terex expects that acquisitions and new product development will
continue to be important components of its growth strategy and is continually
reviewing acquisition opportunities. The Company will continue to pursue
strategic acquisitions, some of which could individually or in the aggregate be
material, which complement the Company's core operations and offer cost
reduction opportunities, distribution and purchasing synergies and product
diversification.
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, issuance of
equity, asset sales, including strategic dispositions of business units, or any
combination thereof. During 2001, the Company successfully executed three
capital market transactions raising $500 million in senior subordinated notes,
expanding its revolving credit facilities to $300 million and raising $96
million from the issuance of common stock. Additionally, in October 2001 and
January 2002, the Company issued approximately 3.6 million shares, 0.5 million
shares and 0.3 million shares of its Common Stock in connection with the
acquisition of CMI, Utility Equipment and Telelect Southeast, respectively, as a
means of acquiring businesses. The Company also issued approximately 1.5 million
shares of its Common Stock to certain former shareholders of Schaeff in January
2002.
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 its senior
subordinated notes and monthly interest payments on its 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 with
adequate liquidity to meet the Company's operating and debt service
requirements. No principal payments are required under the Company's bank
facility or subordinated notes until March 2003. Other than default under the
terms of the Company's debt instruments, there are no other events that would
accelerate the repayment of the Company's debt.
-40-
The Company's main sources of funding are cash generated from operations and
access to the Company's bank credit facilities, as well as the Company's ability
to access the capital markets. Additionally, the Company sells insured customer
accounts receivable to lending institutions to accelerate the collection of
cash.
Cash generated from operations is directly tied to the amount of the Company's
sales. A decrease in sales will have a negative impact on the Company's ability
to derive liquidity from its operations. Sales are subject to decline for a
number of reasons, including economic conditions, weather, competition and
foreign currency fluctuations. A significant portion of sales are financed by
third party finance companies in reliance on the credit worthiness of the
Company's customers and the estimated residual value of its equipment.
Deterioration in the credit quality of the Company's customers or the estimated
residual value of its equipment could negatively impact the ability of such
customers to obtain the resources needed to make purchases from the Company and
could have a material adverse impact on results of operations or financial
condition of the Company.
The Company's ability to borrow under its existing bank credit facilities is
subject to the Company's ability to comply with a number of covenants. The
Company's bank credit facilities include covenants regarding interest coverage,
fixed charge coverage and leverage, among others. These covenants require
quarterly compliance and become more restrictive annually. Maintaining
compliance with these ratios depends on the future performance of the Company
and the achievement of cost savings and earning levels anticipated in
acquisitions.
The Company's ability to access the capital markets to raise funds, through sale
of equity or debt securities, is subject to various factors, some specific to
the Company and some impacted by general economic conditions. These include
results of operations, projected results and debt to equity leverage.
The Company's contractual cash obligations at December 31, 2001, are as follows:
Payments due by year
--------------------------------------------------------------------
Total There-
Committed 2002 2003 2004 2005 2006 after
--------------- ----------- ----------- ---------- ----------- ----------- ----------
Long-term debt.................. $ 1,040.2 $ 30.7 $ 8.2 $ 82.1 $ 130.7 $ 38.1 $ 750.4
Capital lease obligations....... 15.2 4.0 3.6 2.3 1.3 0.8 3.2
Operating leases................ 79.5 21.0 19.3 18.2 10.5 6.8 3.7
--------------- ----------- --------- ---------- ----------- ----------- --------
$ 1,134.9 $ 55.7 $ 31.1 $ 102.6 $ 142.5 $ 45.7 $ 757.3
=============== =========== =========== ========== =========== =========== ========
Additionally at December 31, 2001, the Company had outstanding letters of credit
that totaled $40.9 million and had issued $53.2 million in guarantees of
customer financing to purchase equipment.
CONTINGENCIES AND UNCERTAINTIES
Euro
In 1999, 12 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. Since 1999 the Euro has traded on currency exchanges
and could be used in business transactions. Beginning in January 2002, new
Euro-denominated bills and coins were issued, and legacy currencies began to be
withdrawn from circulation. The Company's operating subsidiaries affected by the
Euro conversion previously assessed the systems and business issues raised by
the Euro currency conversion. These issues included, 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, since the
Euro currency was issued in 2002. To date the Euro conversion has not had a
material adverse impact on the Company's financial condition or results of
operations.
Foreign Currencies and Interest Rate Risk
The Company's products are sold in over 100 countries around the world and,
accordingly, revenues of the Company are generated in foreign currencies, while
the costs associated with those revenues are only partly incurred in the same
currencies. The major foreign currencies, among others, in which the Company
does business are the Euro, the British Pound and the Australian Dollar. The
Company may, from time to time, hedge specifically identified committed cash
flows in foreign currencies using forward currency sale or purchase contracts.
Such foreign currency contracts have not historically been material in amount.
-41-
The Company manages exposure to fluctuating interest rates with interest
protection arrangements. Certain of the Company's obligations, including
indebtedness under the Company's bank credit facility, bear interest at floating
rates, and as a result an increase in interest rates could adversely affect,
among other things, the results of operations of the Company. The Company has
entered into interest protection arrangements with respect to approximately $65
million of the principal amount of its indebtedness under its bank credit
facility, fixing interest at various rates between 9.23% and 9.32%.
Certain of the Company's obligations, including its senior subordinated notes,
bear interest at fixed interest rates from 8-7/8% to 10-3/8%. The Company has
entered into interest rate agreements to convert these fixed rates to floating
rates with respect to approximately $350 million of the principal amount of its
indebtedness under its 8-7/8% Senior Subordinated Notes and its 10-3/8% Senior
Subordinated Notes. The floating rates are based on a spread of 2.94% to 4.94%
over LIBOR. At December 31, 2001, the floating rates ranged between 4.84% and
6.97%.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes a new model for
accounting for derivative and hedging activities and supersedes and amends a
number of existing standards. Upon initial application, all derivatives are
required to be recognized in the statement of financial position as either
assets or liabilities and measured at fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. In addition, all
hedging relationships must be reassessed and documented pursuant to the
provisions of SFAS No. 133. SFAS No. 133 became effective for the Company
beginning in 2001. Upon adoption of this statement on January 1, 2001, the
Company did not experience a significant impact on its financial position or
results of operations.
Other
The Company is subject to a number of contingencies and uncertainties including,
without limitation, 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 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 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 to 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.
The Company is party to an action commenced in the United States District Court
for the District of Delaware by End of Road Trust, a creditor liquidating trust
formed to liquidate the assets of Fruehauf Trailer Corporation ("Fruehauf"), a
former subsidiary of the Company and currently a reorganized debtor in
bankruptcy, and Pension Transfer Corporation, as sponsor and administrator for
certain Fruehauf pension plans (collectively, the "Plaintiffs") against the
Company and certain former officers and directors of Fruehauf and Terex
(collectively, the "Defendants"). The Plaintiffs allege, in essence, that the
Defendants breached fiduciary duties owed to Fruehauf and made certain
misrepresentations in connection with certain accounting matters arising from
the Company's 1989 acquisition of Fruehauf and the 1991 initial public offering
of Fruehauf stock, and that the Defendants were unjustly enriched thereby.
Plaintiffs also allege that certain pension investments made on behalf of the
Fruehauf pension plans violated ERISA. The Company has reached an agreement in
principal to settle this matter in a manner which will not have a material
adverse effect on the Company's operations.
Transactions with Current and Former Employees
Atlas Terex, which the Company acquired in December 2001, was previously owned
by David Langevin, a former executive officer of the Company, and GKM Value
Partners L.P. ("GKM"), of which Mr. Langevin is a general partner. Mr. Langevin
left the Company to pursue other interests in 1998. In July 2001, the Company
entered into an agreement with GKM and Mr. Langevin whereby the Company was
granted an option to purchase all of the share capital of Atlas Terex for
$750,000. The Company and Atlas Terex also entered into an agreement for the
Company to lend Atlas Terex funds for working capital purposes. During the
option period, the Company provided Atlas Terex with certain management
consulting services for which the Company received compensation. The Company
exercised its option to acquire Atlas Terex from GKM and Mr. Langevin and
completed the acquisition on December 28, 2001.
-42-
During 2002, the Company and GKM formed GT Distribution, LLC, a limited
liability company of which the Company and GKM are the only members. GT
Distribution, LLC will pursue certain potential acquisitions in the mutual
interest of both parties.
During 2000, the Company formed EarthKing, an independent e-commerce company
that provides systems and products for equipment owners and operators to
maximize their return on investment. As authorized by the Company's board of
directors, certain officers and employees of the Company purchased common stock
in EarthKing. Currently, officers and employees of the Company own approximately
10% of EarthKing and the remainder is owned by the Company.
Forward-Looking Information
Certain information in this Annual 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 Annual 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 Company's business is
highly cyclical and weak general economic conditions may affect the sales of its
products and its financial results; 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
changes in exchange rates between currencies, as well as international politics;
the ability of suppliers to timely supply the Company parts and components at
competitive prices; the financial condition of suppliers and customers, and
their continued access to capital; the Company's ability to timely manufacture
and deliver products to customers; the Company's substantial amount of debt and
its need to comply with restrictive covenants contained in the Company's debt
agreements; 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 Annual 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 Annual 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 7A. 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. See Note A -
"Significant Accounting Policies" in the Notes to the Consolidated Financial
Statements for further information on accounting policies related to derivative
financial statements.
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 Euro, the British Pound and the Australian Dollar. 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 December 31, 2001, the Company had foreign
exchange contracts with a notional value of $100.0 million. The fair market
value of these arrangements, which represents the cost to settle these
contracts, was an asset of approximately $1 million at December 31, 2001.
-43-
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 December 31, 2001, the Company had approximately $65 million
of interest rate swaps fixing interest rates between 9.23% and 9.32%. The fair
market value of these arrangements, which represents the cost to settle these
contracts, was a liability of approximately $2 million at December 31, 2001.
At December 31, 2001, the Company had approximately $350 million of interest
rate swaps that converted fixed rates to floating rates. The floating rates
ranged between 4.84% and 6.97% at December 31, 2001. The fair market value of
these arrangements, which represent the cost to settle these contracts, was a
liability of approximately $11 million.
At December 31, 2001, 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 December 31, 2001 would have increased interest expense by
approximately $4 million in 2001.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Unaudited Quarterly Financial Data
Summarized quarterly financial data for 2001 and 2000 are as follows (in
millions, except per share amounts):
2001 2000
----------------------------------------------------------------------------
Fourth Third Second First Fourth Third Second First
------------------------------------- --------------------------------------
Net sales $ 442.1 $ 453.7 $ 439.3 $ 477.4 $ 446.6 $ 475.1 $ 593.5 $ 553.5
Gross profit 72.3 45.5 80.2 78.6 73.6 86.7 106.6 96.7
Income (loss) before extraordinary items 3.2 (10.9) 12.0 12.4 0.8 49.7 26.0 20.1
Net income (loss) 1.6 (10.9) 12.0 10.1 (0.7) 49.7 26.0 20.1
Per share:
Basic
Income (loss) before extraordinary items $ 0.10 $ (0.41)$ 0.45$ 0.46 $ 0.03 $ 1.84 $ 0.95$ 0.73
Net income (loss) 0.05 (0.41) 0.45 0.37 (0.03) 1.84 0.95 0.73
Diluted
Income (loss) before extraordinary items $ 0.10 $ (0.41)$ 0.43$ 0.45 $ 0.03 $ 1.79 $ 0.93$ 0.71
Net income (loss) 0.05 (0.41) 0.43 0.37 (0.03) 1.79 0.93 0.71
The accompanying unaudited quarterly financial data of the Company have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with Item 302 of Regulation S-K. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been made and were of a normal recurring nature except for those discussed
below.
During the fourth quarter of 2001, the Company recorded expenses of $1.2 million
for severance and consolidation costs related to its decision to consolidate
seven facilities and restructure certain operations. These costs were included
in cost of sales in the statement of income.
During the third quarter of 2001, the Company recorded expenses of $28.7 million
in relation to its announcement that it would consolidate seven facilities as
part of a restructuring plan. These costs were for severance and consolidation
costs related to these actions as well as other non-recurring expenses. These
items have been reflected in cost of sales and selling, general and
administrative expenses in the statement of income in the amounts of $24.8
million and $3.9 million, respectively.
-44-
During the fourth quarter of 2000, the Company recorded expenses of $9.8 million
related to the closing of its distribution facility in the United Kingdom, the
impact of an aggregates customer that filed for bankruptcy and a one-time charge
related to due diligence costs associated with a significant acquisition which
did not come to fruition. These expenses have been included in cost of sales and
selling, general and administrative expenses in the statement of income in the
amounts of $6.9 million and $2.9 million, respectively.
Also in the fourth quarter of 2000, the Company recorded a loss from
discontinued operations of $7.3 million, net of income taxes, representing the
Company's estimated liability for known product liability claims which the
Company assumed upon the default by a purchaser of one of the Company's former
subsidiaries of its obligations to indemnify and defend the Company from product
liability claims arising from the former subsidiary.
During the third quarter of 2000, the Company recorded expenses of $3.0 related
to the further integration of the Company's surface mining truck and hydraulic
shovel business, partially offset by a curtailment gain recorded for one of the
Company's pension plans. These items have been reflected in cost of sales and
selling, general and administrative expenses in the statement of income in the
amounts of $3.2 million and $(0.2) million, respectively.
Also in the third quarter of 2000, the Company completed the sale of its
Truck-mounted Forklift Business for a gain of $57.2 million before income taxes.
(See Note C -- "Sale of Businesses" to the Notes to the Consolidated Financial
Statements.)
Extraordinary Items
In the fourth and first quarters of 2001, the Company reorganized extraordinary
losses on the early extinguishments of debt ($1.6 million and $2.3 million,
respectively) in connection with the prepayment of principal on its existing
credit facility.
In the fourth quarter of 2000, the Company recognized an extraordinary loss on
the early extinguishment of debt ($1.5 million) in connection with the
prepayment of principal on its existing credit facility.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Items 10 through 13 is incorporated by reference to
the definitive Terex Corporation Proxy Statement to be filed with the Securities
and Exchange Commission not later than 120 days after the end of the fiscal year
covered by this Annual Report on Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Financial Statement Schedules.
See "Index to Consolidated Financial Statements and Financial Statement
Schedule" on Page F-1.
(3) Exhibits
-45-
See "Exhibit Index" on Page E-1.
(b) Reports on Form 8-K
During the quarter ended December 31, 2001, the Company filed the following
Current Reports on Form 8-K:
- - A report on Form 8-K dated October 1, 2001 was filed on October 2, 2001
announcing the completion of the Company's
acquisition of CMI Corporation.
- - A report on Form 8-K dated November 26, 2001 was filed on November 27, 2001
announcing the Company's intention to acquire Atlas Weyhausen and The
Schaeff Group.
- - A report on Form 8-K dated December 5, 2001 was filed December 6, 2001
announcing that the Company entered into an underwriting agreement with
Salomon Smith Barney Inc. relating to the sale and issuance by the Company
of up to 5.75 million shares of its Common Stock.
- - A report on Form 8-K dated December 10, 2001 was filed December 11, 2001
announcing the Company's intention to issue approximately $200 million
principal amount of Senior Subordinated Notes and that the Company had
closed on the sale of 5.75 million shares of its Common Stock.
- - A report on Form 8-K dated December 19, 2001 was filed on December 19, 2001
providing operating segment information for the Company.
-46-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ Ronald M. DeFeo March 28, 2002
----------------------------------------
Ronald M. DeFeo,
Chairman, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Name Title Date
/s/ Ronald M. DeFeo Chairman, Chief Executive March 28, 2002
- ------------------------- Officer, and Director
Ronald M. DeFeo (Principal Executive Officer)
/s/ Joseph F. Apuzzo Chief Financial Officer March 28, 2002
- ------------------------- (Principal Financial Officer)
Joseph F. Apuzzo
/s/ Mark T. Cohen Controller March 28, 2002
- ------------------------- (Principal Accounting Officer)
Mark T. Cohen
/s/ G. Chris Andersen Director March 28, 2002
- -------------------------
G. Chris Andersen
/s/ Don DeFosset Director March 28, 2002
- -------------------------
Don DeFosset
/s/ Donald P. Jacobs Director March 28, 2002
- -------------------------
Donald P. Jacobs
/s/ William H. Fike Director March 28, 2002
- -------------------------
William H. Fike
/s/ Marvin B. Rosenberg Director March 28, 2002
- -------------------------
Marvin B. Rosenberg
/s/ David A. Sachs Director March 28, 2002
- -------------------------
David A. Sachs
-47-
THIS PAGE IS INTENTIONALLY BLANK
NEXT PAGE IS NUMBERED "F-1"
-48-
TEREX CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements and Financial Statement Schedule
Page
TEREX CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2001 AND 2000
AND FOR EACH OF THE THREE YEARS
IN THE PERIOD ENDED DECEMBER 31, 2001
Report of independent accountants.......................................F - 2
Consolidated statement of income .......................................F - 3
Consolidated balance sheet..............................................F - 4
Consolidated statement of changes in stockholders' equity...............F - 5
Consolidated statement of cash flows....................................F - 6
Notes to consolidated financial statements..............................F - 7
PPM CRANES, INC.
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2001 AND 2000
AND FOR EACH OF THE THREE YEARS
IN THE PERIOD ENDED DECEMBER 31, 2001
Report of independent accountants......................................F - 39
Consolidated statement of operations...................................F - 40
Consolidated balance sheet.............................................F - 41
Consolidated statement of changes in shareholders' deficit.............F - 42
Consolidated statement of cash flows...................................F - 43
Notes to consolidated financial statements.............................F - 44
FINANCIAL STATEMENT SCHEDULE
Schedule II -- Valuation and Qualifying Accounts and Reserves..........F - 51
All other schedules for which provision is made in the applicable regulations of
the Securities and Exchange Commission are not required under the related
instructions or are not applicable, and therefore have been omitted.
F - 1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of Terex Corporation
In our opinion, the consolidated financial statements listed in the accompanying
index on page F-1 present fairly, in all material respects, the financial
position of Terex Corporation and its subsidiaries (the "Company") at December
31, 2001 and 2000, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2001, in conformity
with accounting principles generally accepted in the United States of America.
In addition, in our opinion, the financial statement schedule listed in the
accompanying index on page F-1 presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Stamford, Connecticut
February 20, 2002
F - 2
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share amounts)
Year Ended December 31,
--------------------------------
2001 2000 1999
---------- ---------- ----------
NET SALES.......................................$ 1,812.5 $ 2,068.7 $ 1,856.6
COST OF GOODS SOLD.............................. 1535.9 1,705.1 1,539.9
---------- ---------- ----------
GROSS PROFIT................................. 276.6 363.6 316.7
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.... 172.4 165.3 138.4
---------- ---------- ----------
INCOME FROM OPERATIONS....................... 104.2 198.3 178.3
OTHER INCOME (EXPENSE)
Interest income.............................. 7.7 5.5 5.3
Interest expense............................. (86.7) (99.8) (82.8)
Gain on sale of businesses................... --- 57.2 ---
Amortization of debt issuance costs.......... (3.8) (3.5) (2.6)
Other income (expense) - net................. 3.2 1.9 0.2
---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND EXTRAORDINARY ITEMS...... 24.6 159.6 98.4
(PROVISION FOR) BENEFIT FROM INCOME TAXES....... (7.9) (55.7) 74.5
---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS BEFORE
EXTRAORDINARY ITEMS....................... 16.7 103.9 172.9
LOSS FROM DISCONTINUED OPERATIONS............... --- (7.3) ---
---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY ITEMS............... 16.7 96.6 172.9
EXTRAORDINARY LOSS ON RETIREMENT OF DEBT........ (3.9) (1.5) ---
---------- ---------- ----------
NET INCOME ..................................$ 12.8 $ 95.1 $ 172.9
========== ========== ==========
PER COMMON SHARE:
Basic
Income from continuing operations............ $ 0.60 $ 3.82 $ 7.14
Loss from discontinued operations............ --- (0.27) ---
---------- --------- --------
Income before extraordinary items.......... 0.60 3.55 7.14
Extraordinary loss on retirement of debt..... (0.14) (0.05) ---
---------- ---------- --------
Net income.................................. $ 0.46 $ 3.50 $ 7.14
========== ========== ========
Diluted
Income from continuing operations............ $ 0.58 $ 3.72 $ 6.75
Loss from discontinued operations............ --- (0.26) ---
---------- ---------- --------
Income before extraordinary items.......... 0.58 3.46 6.75
Extraordinary loss on retirement of debt..... (0.14) (0.05) ---
---------- ---------- --------
Net income................................. $ 0.44 $ 3.41 $ 6.75
========== ========== ========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING IN PER SHARE CALCULATION:
Basic.................................... 28.1 27.2 24.2
Diluted.................................. 28.9 27.9 25.6
The accompanying notes are an integral part of thesefinancial statements.
F - 3
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions, except par value)
December 31,
------------------------
2001 2000
----------- ------------
CURRENT ASSETS
Cash and cash equivalents...........................$ 250.4 $ 181.4
Trade receivables (less allowance of $8.6
and $6.3 as of December 31, 2001 and 2000,
respectively)..................................... 351.1 360.2
Net inventories..................................... 704.8 598.1
Deferred taxes...................................... 23.7 51.0
Other current assets................................ 53.0 51.7
------------- -----------
Total Current Assets............. 1,383.0 1,242.4
LONG-TERM ASSETS
Property, plant and equipment - net................. 173.9 153.9
Goodwill............................................ 620.1 491.4
Deferred taxes...................................... 75.4 21.2
Other assets........................................ 134.6 74.8
------------- -----------
TOTAL ASSETS...........................................$ 2,387.0 $ 1,983.7
============= ===========
CURRENT LIABILITIES
Notes payable and current portion of long-term debt.$ 34.7 $ 20.5
Trade accounts payable.............................. 291.0 311.2
Accrued compensation and benefits................... 37.4 25.9
Accrued warranties and product liability............ 62.7 65.2
Other current liabilities........................... 201.3 152.8
------------- -----------
Total Current Liabilities......... 627.1 575.6
NON CURRENT LIABILITIES
Long-term debt, less current portion................ 1,020.7 882.0
Other............................................... 143.8 74.6
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Equity rights........................................ 0.5 0.7
Common Stock, $0.01 par value --
authorized 150.0 shares; issued 37.5 and
27.9 shares at December 31, 2001 and 2000,
respectively...................................... 0.4 0.3
Additional paid-in capital.......................... 532.4 358.9
Retained earnings................................... 199.9 187.1
Accumulated other comprehensive income.............. (120.3) (78.5)
Less cost of shares of common stock in treasury
(1.1 shares at December 31, 2001 and 2000)...... (17.5) (17.0)
------------- -----------
Total Stockholders' Equity.......... 595.4 451.5
------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.............$ 2,387.0 $ 1,983.7
============= ===========
The accompanying notes are an integral part of these financial statements.
F - 4
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(in millions)
Retained Accumulated
Earnings Other
Additional (Accumu- Comprehen- Common
Equity Common Paid-in lated sive Stock in
Warrants Rights Stock Capital Deficit) Income Treasury Total
----------- ----------- ----------- ----------- ---------- ------------ ------------ -----------
BALANCE AT
DECEMBER 31, 1998....... $ 0.8 $ 3.1 $ 0.2 $ 179.0 $ (80.9) $ (4.1) $ --- $ 98.1
Net Income................ --- --- --- --- 172.9 --- --- 172.9
Other Comprehensive Income:
Translation adjustment --- --- --- --- --- (13.3) --- (13.3)
Pension liability
adjustment........... --- --- --- --- --- 1.3 --- 1.3
Comprehensive Income...... 160.9
Exercise of Equity Rights. --- (2.3) --- 1.6 --- --- --- (0.7)
Issuance of Common Stock.. --- --- 0.1 174.4 --- --- --- 174.5
------------ ----------- ----------- ----------- ---------- ------------ ----------- ----------
BALANCE AT
DECEMBER 31, 1999....... 0.8 0.8 0.3 355.0 92.0 (16.1) --- 432.8
Net Income................ --- --- --- --- 95.1 --- --- 95.1
Other Comprehensive Income:
Translation adjustment --- --- --- --- --- (62.6) --- (62.6)
Pension liability
adjustment........... --- --- --- --- --- 0.2 --- 0.2
Comprehensive Income...... 32.7
Exercise of Equity Rights. --- (0.1) --- (0.1) --- --- --- (0.2)
Issuance of Common Stock.. --- --- --- 3.0 --- --- --- 3.0
Exercise of Warrants...... (0.8) --- --- 0.8 --- --- --- ---
Acquisition of Businesses. --- --- --- 0.2 --- --- 3.2 3.4
Acquisition of Treasury
Shares.................. --- --- --- --- --- --- (20.2) (20.2)
------------ ----------- ----------- ----------- ---------- ------------ ----------- ----------
BALANCE AT
DECEMBER 31, 2000....... $ --- $ 0.7 $ 0.3 $ 358.9 $ 187.1 $ (78.5) $ (17.0) $451.5
Net Income................ --- --- --- --- 12.8 --- --- 12.8
Other Comprehensive Income:
Translation adjustment. --- --- --- --- --- (37.7) --- (37.7)
Pension liability
adjustment............ --- --- --- --- --- (3.3) --- (3.3)
Derivative hedging
adjustment............ --- --- --- --- --- (0.8) --- (0.8)
---------
Comprehensive Income...... (29.0)
Issuance of Common Stock.. --- --- 0.1 98.4 --- --- --- 98.5
Acquisition of businesses. --- --- --- 74.9 --- --- (0.5) 74.4
Exercise of Equity Rights. --- (0.2) --- 0.2 --- --- --- ---
------------ ----------- ----------- ----------- ---------- ------------ ----------- ----------
BALANCE AT
DECEMBER 31, 2001....... $ --- $ 0.5 $ 0.4 $ 532.4 $ 199.9 $ (120.3) $ (17.5) $595.4
============ =========== =========== =========== ========== ============ =========== ==========
The accompanying notes are an integral part of these financial statements.
F - 5
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Year Ended December 31,
------------------------------------------
2001 2000 1999
------------------------------------------
OPERATING ACTIVITIES
Net income................................................................$ 12.8 $ 95.1 $ 172.9
Adjustments to reconcile net income to cash provided by (used in)
operating activities:
Depreciation .......................................................... 22.5 23.0 17.6
Amortization.............................................................. 17.8 18.5 14.6
Gain on sale of businesses............................................. --- (34.2) ---
Deferred taxes......................................................... 10.7 33.5 (82.8)
Extraordinary loss on retirement of debt............................... 3.9 1.5 ---
Loss from discontinued operations..................................... --- 7.3 ---
Gain on sale of fixed assets........................................... (1.5) (0.6) (0.1)
Restructuring charges................................................. 19.5 --- ---
Impairment charges and asset writedowns............................... --- --- 9.9
Changes in operating assets and liabilities (net of effects of acquisitions):
Trade receivables.................................................. 28.1 64.2 (79.4)
Net inventories.................................................... (19.6) 43.6 (48.1)
Trade accounts payable............................................. (40.5) 12.8 7.1
Other.............................................................. (59.2) (64.1) (6.7)
--------------- ------------- -------------
Net cash provided by (used in) operating activities.............. (5.5) 200.6 5.0
--------------- ------------- -------------
INVESTING ACTIVITIES
Proceeds from sale of businesses....................................... --- 144.3 ---
Acquisition of businesses, net of cash acquired........................ (130.8) (20.0) (535.6)
Capital expenditures................................................... (13.5) (24.2) (21.4)
Proceeds from sale of assets........................................... 8.0 10.8 4.0
--------------- ------------- -------------
Net cash provided by (used in) investing activities.............. (136.3) 110.9 (553.0)
--------------- ------------- -------------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt, net of issuance costs........ 481.4 --- 534.6
Issuance of common stock............................................... 96.3 --- 162.8
Principal repayments of long-term debt................................. (388.5) (183.1) (33.7)
Net borrowings (repayments) under revolving line of credit agreements.. 23.6 (53.6) (17.3)
Purchases of common stock held in treasury............................. --- (20.2) ---
Other.................................................................. (1.3) (4.3) 10.8
--------------- ------------- -------------
Net cash provided by (used in) financing activities.............. 211.5 (261.2) 657.2
--------------- ------------- -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS.............. (0.7) (2.2) (1.0)
--------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...................... 69.0 48.1 108.2
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.......................... 181.4 133.3 25.1
--------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................................$ 250.4 $ 181.4 $ 133.3
=============== ============= =============
The accompanying notes are an integral part of these financial statements.
F - 6
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
(dollar amounts in millions, unless otherwise noted, except per share amounts)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The Consolidated Financial Statements include the
accounts of Terex Corporation and its majority owned subsidiaries ("Terex" or
the "Company"). All material intercompany balances, transactions and profits
have been eliminated. The equity method is used to account for investments in
affiliates in which the Company has an ownership interest between 20% and 50%.
Investments in entities in which the Company has an ownership interest of less
than 20% are accounted for on the cost method or at fair value in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 115 "Accounting
for Certain Investments in Debt and Equity Securities."
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents. Cash equivalents consist of highly liquid investments
with original maturities of three months or less. The carrying amount of cash
and cash equivalents approximates their fair value. Cash and cash equivalents at
December 31, 2001 and 2000 include $7.6 and $11.7, respectively, the use of
which was not immediately available.
Inventories. Inventories are stated at the lower of cost or market value. Cost
is determined by the first-in, first-out ("FIFO") method.
Debt Issuance Costs. Debt issuance costs incurred in securing the Company's
financing arrangements are capitalized and amortized over the term of the
associated debt. Capitalized debt issuance costs related to debt that is retired
early are charged to extraordinary expense at the time of retirement. Debt
issuance costs before amortization totaled $32.2 and $21.8 at December 31, 2001
and 2000, respectively.
Intangible Assets. Intangible assets include purchased patents, trademarks and
other specifically identifiable assets and are amortized on a straight-line
basis over the respective estimated useful lives not exceeding seven years.
Goodwill. Goodwill, representing the difference between the total purchase price
and the fair value of assets (tangible and intangible) and liabilities at the
date of acquisition, is being amortized on a straight-line basis over between
fifteen and forty years. Accumulated amortization is $54.1 and $39.9 at December
31, 2001 and 2000, respectively. During the year ended December 31, 2001, the
Company incurred goodwill amortization expenses of $14.2.
In July 2001, the Financial Accounting Standards Board issued SFAS No. 141
"Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets."
SFAS No. 141 effective July 1, 2001, addresses financial accounting and
reporting for business combinations and requires all business combinations to be
accounted for using the purchase method. SFAS No. 142 addresses financial
accounting for acquired goodwill and other intangible assets and how such assets
should be accounted for in financial statements upon their acquisition and after
they have been initially recognized in the financial statements. In accordance
with SFAS 142, goodwill related to acquisitions completed after June 30, 2001,
has not been amortized and, effective January 1, 2002, goodwill related to
acquisitions completed prior to July 1, 2001 will no longer be amortized. Under
this standard, goodwill and indefinite life intangible assets will be reviewed
for impairment and written down only in the period in which the recorded value
of such assets exceed their fair value. The Company's initial impairment test
must be performed on all reporting units by June 30, 2002. Any required
adjustment from adoption will be recorded as a cumulative effect adjustment as
of January 1, 2002.
Property, Plant and Equipment. Property, plant and equipment are stated at cost.
Expenditures for major renewals and improvements are capitalized while
expenditures for maintenance and repairs not expected to extend the life of an
asset beyond its normal useful life are charged to expense when incurred. Plant
and equipment are depreciated over the estimated useful lives of the assets
under the straight-line method of depreciation for financial reporting purposes
and both straight-line and other methods for tax purposes.
F - 7
Impairment of Long Lived Assets. The Company's policy is to assess the
realizability of its long lived assets and to evaluate such assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets (or group of assets) may not be recoverable.
Impairment is determined to exist if the estimated future undiscounted cash
flows are less than the carrying value. The amount of any impairment then
recognized would be calculated as the difference between estimated future
discounted cash flows and the carrying value of the asset.
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
was issued in October 2001. SFAS No. 144 is effective for the Company on January
1, 2002 and provides new guidance on the recognition of impairment losses on
long-lived assets to be held and used or to be disposed of and also broadens the
definition of what constitutes a discontinued operation and how the results of a
discontinued operation are to be measured and presented. The adoption of the
standard is not expected to materially change the methods used by the Company to
determine impairment losses on long-lived assets, but may result in additional
matters being reported as discontinued operations.
Revenue Recognition. Revenue and costs are generally recorded when products are
shipped and invoiced to either independently owned and operated dealers or to
customers. Certain new units may be invoiced prior to the time customers take
physical possession. Revenue is recognized in such cases only when the customer
has a fixed commitment to purchase the units, the units have been completed,
tested and made available to the customer for pickup or delivery, and the
customer has requested that the Company hold the units for pickup or delivery at
a time specified by the customer. In such cases, the units are invoiced under
the Company's customary billing terms, title to the units and risks of ownership
pass to the customer upon invoicing, the units are segregated from the Company's
inventory and identified as belonging to the customer and the Company has no
further obligations under the order.
Accrued Warranties and Product Liability. The Company records accruals for
potential warranty and product liability claims based on the Company's claim
experience. Warranty costs are accrued at the time revenue is recognized. The
Company provides self-insurance accruals for estimated product liability
experience on known claims.
Non Pension Postretirement Benefits. The Company provides postretirement
benefits to certain former salaried and hourly employees and certain hourly
employees covered by bargaining unit contracts that provide such benefits and
has elected the delayed recognition method of adoption of the accounting
standard related to the benefits. (See Note L -- "Retirement Plans.")
Foreign Currency Translation. Assets and liabilities of the Company's
international operations are translated at year-end exchange rates. Income and
expenses are translated at average exchange rates prevailing during the year.
For operations whose functional currency is the local currency, translation
adjustments are accumulated in the Cumulative Translation Adjustment component
of Stockholders' Equity. Gains or losses resulting from foreign currency
transactions are recorded in the accounts based on the underlying transaction.
Derivatives. Effective January 1, 2001, the Company adopted SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," and its related
amendment, SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities." These standards require that all derivative
financial instruments be recorded on the consolidated balance sheets at their
fair value as either assets or liabilities. Changes in the fair value of
derivatives will be recorded each period in earnings or accumulated other
comprehensive income, depending on whether a derivative is designated and
effective as part of a hedge transaction and, if it is, the type of hedge
transaction. Gains and losses on derivative instruments reported in accumulated
other comprehensive income will be included in earnings in the periods in which
earnings are affected by the hedged item. As of January 1, 2001, the adoption of
these new standards resulted in no cumulative effect of an accounting change on
net earnings. The cumulative effect of the accounting change increased
accumulated other comprehensive income by $0.9, net of income taxes. Prior
years' financial statements have not been restated for this change.
Under SFAS 133, there are two types of derivatives that the Company enters into:
hedges of fair value exposures and hedges of cash flow exposures. Fair value
exposures relate to recognized assets or liabilities and firm commitments, while
cash flow exposures relate to the variability of future cash flows associated
with recognized assets or liabilities or forecasted transactions.
The Company operates internationally, with manufacturing and sales facilities in
various locations around the world, and utilizes certain financial instruments
to manage its foreign currency, interest rate and fair value exposures. To
qualify a derivative as a hedge at inception and throughout the hedge period,
the Company formally documents the nature and relationships between the hedging
instruments and hedged items, as well as its risk-management objectives,
F - 8
strategies for undertaking the various hedge transactions and method of
assessing hedge effectiveness. Additionally, for hedges of forecasted
transactions, the significant characteristics and expected terms of a forecasted
transaction must be specifically identified, and it must be probable that each
forecasted transaction would occur. If it were deemed probable that the
forecasted transaction will not occur, the gain or loss would be recognized in
earnings currently. Financial instruments qualifying for hedge accounting must
maintain a specified level of effectiveness between the hedging instrument and
the item being hedged, both at inception and throughout the hedged period. The
Company does not engage in trading or other speculative use of financial
instruments.
The Company uses forward contracts and options to mitigate its exposure to
changes in foreign currency exchange rates on third-party and inter-company
forecasted transactions. The primary currencies to which the Company is exposed
include the Euro, British Pound and Australian Dollar. When using options as a
hedging instrument, the Company excludes the time value from the assessment of
effectiveness. The effective portion of unrealized gains and losses associated
with forward contracts and the intrinsic value of option contracts are deferred
as a component of accumulated other comprehensive income until the underlying
hedged transactions are reported on the Company's consolidated statement of
operations. The Company uses interest rates swaps to mitigate its exposure to
changes in interest rates related to existing issuances of variable rate debt
and to fair value changes of fixed rate debt. Primary exposure includes
movements in the U.S. prime rate and London Interbank Offer Rate ("LIBOR").
Changes in the fair value of derivatives that are designated as fair value
hedges are recognized in earnings as offsets to the changes in fair value of
exposures being hedged. The change in fair value of derivatives that are
designated as cash flow hedges are deferred in accumulated other comprehensive
income (loss) and are recognized in earnings as the hedged transactions occur.
Any ineffectiveness is recognized in earnings immediately.
The Company records hedging activity related to debt instruments in interest
expense and hedging related to foreign currency and lease obligations in
operating profit.
The Company has entered into interest rate swap agreements that effectively
convert variable rate interest payments into fixed rate interest payments. At
December 31, 2001, the Company had $65.0 notional amount of these interest rate
swap agreements outstanding which mature in 2002. The fair market value of these
swaps at December 31, 2001 was a loss of $2.0. These swap agreements have been
designated as, and are effective as, cash flow hedges of outstanding debt
instruments. During 2001, the Company recorded the change in fair value to
accumulated other comprehensive income (loss) and reclassified to earnings a
portion of the deferred loss from accumulated other comprehensive income (loss)
as the hedged transactions occurred and were recognized in earnings.
The Company has entered into a series of interest rate swap agreements that
convert fixed rated interest payments into variable rate interest payments. At
December 31, 2001, the Company had $429.0 notional amount of such interest rate
swap agreements outstanding with mature in 2006 through 2011. The fair market
value of these swaps at December 31, 2001 was a loss of $10.8 which is recorded
in other non-current liabilities and is offset by a $10.8 reduction in the
carrying value of the long-term obligations being hedged.
The Company is also a party to currency exchange forward contracts to manage its
exposure to changing currency exchange rates that mature within one year. At
December 31, 2001, the Company had $100.0 of notional amount of currency
exchange forward contracts outstanding which mature in 2002. The fair market
value of these swaps at December 31, 2001 was a gain of $0.9. These swap
agreements have been designated as, and are effective as, cash flow hedges of
specifically identified assets and liabilities. During 2001, the Company
recorded the change in fair value to accumulated other comprehensive income
(loss) and reclassified to earnings a portion of the deferred loss from
accumulated other comprehensive income (loss) as the hedged transactions
occurred and were recognized in earnings.
At December 31, 2001, the fair value of all derivative instruments has been
recorded in the consolidated balance sheet as a net liability of $11.9.
Counterparties to interest rate derivative contracts and currency exchange
forward contracts are major financial institutions with credit ratings of
investment grade or better and no collateral is required. There are no
significant risk concentrations. Management believes the risk of incurring
losses on derivative contracts related to credit risk is remote and any losses
would be immaterial.
F - 9
Unrealized net gains (losses) included in Other Comprehensive Income are as
follows:
Balance at beginning of year at adoption
of SFAS 133........................... $ 0.9
Additional gains (losses)............... (4.6)
Amounts reclassified to earnings........ 2.9
-------------
Balance at end of year.................. $ (0.8)
=============
Environmental Policies. Environmental expenditures that relate to current
operations are either expensed or capitalized depending on the nature of the
expenditure. Expenditures relating to conditions caused by past operations that
do not contribute to current or future revenue generation are expensed.
Liabilities are recorded when environmental assessments and/or remedial actions
are probable, and the costs can be reasonably estimated. Such amounts were not
material at December 31, 2001 and 2000.
Research and Development Costs. Research and development costs are expensed as
incurred. Such costs incurred in the development of new products or significant
improvements to existing products are included in Selling, General and
Administrative Expenses.
Income Taxes. The Company accounts for income taxes using the asset and
liability method. This approach requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of temporary
differences between the carrying amounts and the tax bases of assets and
liabilities (see Note J -- "Income Taxes").
Earnings Per Share. Basic earnings per share is computed by dividing net income
for the period by the weighted average number of shares of Terex common stock
outstanding. Diluted earnings per share is computed by dividing net income for
the period by the weighted average number of shares of Terex common stock
outstanding and potential dilutive common shares.
NOTE B -- ACQUISITIONS
On January 15, 2002, the Company announced that it had completed the acquisition
of the Schaeff Group of Companies ("Schaeff"). Schaeff is a German manufacturer
of compact construction equipment and a full range of scrap material handlers.
Schaeff's annual revenues are approximately $220. Total consideration paid for
Schaeff was approximately $62. In a separate transaction, certain former
shareholders of Schaeff purchased approximately 1.5 million shares of Common
Stock from the Company in January 2002.
On January 15, 2002, the Company completed the acquisition of Utility Equipment,
Inc., which does business as Pacific Utility Equipment Co. ("Utility
Equipment"). Utility Equipment, headquartered in Oregon with locations in
various states, distributes, assembles, rents and provides service of products
for the utility, telecommunications and municipal markets. In connection with
the acquisition, the Company issued approximately 455 thousand shares of Common
Stock.
On January 24, 2001, the Company completed the acquisition of Jaques
International Holdings Pty. Ltd. and its affiliates (collectively the "Jaques
Group"), manufacturers of crushing equipment in Australia, Asia and North
America. The Jaques Group is included in the Company's Terex Americas segment.
On October 1, 2001, the Company acquired 100% of the equity of CMI Corporation
and its affiliates ("CMI"). CMI manufactures and markets a wide variety of
mobile equipment and materials processing equipment for the road building and
heavy construction industry. The acquisition of CMI complements the Company's
existing infrastructure business and significant cost savings are anticipated.
CMI's operating results are included in the Company's results from October 1,
2001. CMI is included in the Company's Terex Americas segment.
The cost to acquire CMI was $145.5, including the issuance approximately 3.6
million shares of the Company's common stock with a value of $75.0 based on the
market value of the Company's stock for the three days ending June 28, 2001. No
contingent payments are provided for. The Company is in the process of obtaining
third party valuations of certain assets and liabilities of CMI; as such, the
allocation of purchase price is subject to revision.
On December 28, 2001, the Company acquired 100% of the equity of Atlas Weyhausen
GmbH and its affiliates ("Atlas"), a manufacturer of wheeled excavators and
truck-mounted articulated cranes with facilities in Germany and Scotland. Atlas'
operating results for 2001 are not included in the Company's consolidated
statement of income due to its December 28, 2001 acquisition date. The cost to
acquire Atlas was $41.1. The Company is in the process of obtaining third party
valuations of certain assets and liabilities of Atlas; as such, the allocation
of purchase price is subject to revision. Atlas is part of the Company's Terex
Europe segment.
The Jaques Group, CMI and Atlas acquisitions (the "Acquired Businesses") are
being accounted for using the purchase method, with the purchase price allocated
to the assets acquired and the liabilities assumed based upon their respective
estimated fair values at their respective dates of acquisition.
F - 10
The Company is in the process of completing certain valuations, appraisals and
actuarial and other studies for purposes of determining certain fair values with
respect to the Acquired Businesses. The Company is also estimating costs related
to plans to integrate the activities of the Acquired Businesses into the
Company, including plans to exit certain activities and consolidate and
restructure certain functions. The Company may revise its preliminary
allocations as additional information is obtained. The excess of purchase price
over the net assets acquired ($139.4) will be recorded as goodwill. In
accordance with SFAS No. 142, goodwill related to the CMI and Atlas acquisitions
was not amortized in 2001.
On October 23, 2000, the Company completed the purchase of Coleman Engineering,
Inc. ("Coleman"). Coleman manufactures and markets light construction equipment
consisting of light towers and generators at its facilities in Memphis,
Tennessee and Holly Springs, Mississippi.
On December 28, 2000, the Company acquired Fermec Manufacturing Limited
("Fermec"). Fermec, headquartered in Manchester, England, is a manufacturer and
marketer of loader backhoes.
The Coleman and Fermec acquisitions are being accounted for using the purchase
method, with the purchase price allocated to the assets acquired and the
liabilities assumed based upon their respective estimated fair values at the
date of acquisition. The excess of purchase price over the net assets acquired
(approximately $15.9) is being amortized on a straight-line basis over 40 years.
On April 1, 1999, the Company completed the purchase of Amida Industries, Inc.
("Amida"). Amida manufactures and markets light construction equipment
consisting of light towers, concrete products and traffic safety devices at its
facility in Rock Hill, South Carolina.
The Company announced on June 15, 1999 an offer to acquire all of the issued and
to be issued share capital of Powerscreen International plc ("Powerscreen"). On
July 27, 1999, the effective date of acquisition, Terex declared the offer for
Powerscreen unconditional, with respect to all valid acceptances received.
Powerscreen, headquartered in Dungannon, Northern Ireland, is a manufacturer and
marketer of screening and crushing equipment for the quarrying, construction and
demolition industries. The purchase price of GBP 181 (approximately $294) was
financed with a loan under a bank credit facility maturing March 2006 (see Note
H - "Long-Term Obligations").
On August 26, 1999, the Company acquired Cedarapids, Inc. ("Cedarapids") for
approximately $170. Cedarapids, headquartered in Cedar Rapids, Iowa, is a
manufacturer and marketer of mobile crushing and screening equipment, asphalt
pavers and asphalt material mixing plants. The acquisition was financed through
cash on hand and approximately $125 in additional debt (see Note H - "Long-Term
Obligations").
On September 20, 1999, the Company completed the acquisition of certain assets
and liabilities of Bartell Industries, Inc. ("Bartell"), a manufacturer and
marketer of concrete finishing equipment located near Toronto, Canada.
On September 29, 1999, the Company completed the acquisition of certain assets
and liabilities of Re-Tech, a manufacturer and marketer of trommels, conveyors,
and picking stations located in Pennsylvania.
On November 3, 1999, the Company completed the acquisition of certain assets of
the Material Handling Business of Teledyne Specialty Equipment
("Princeton/Kooi"). Princeton/Kooi manufactures and markets truck mounted lift
trucks at its facilities in Canal Winchester, Ohio and Vrouwenparochie, The
Netherlands. Princeton/Kooi was sold on September 30, 2000 (See Note C - "Sale
of Businesses").
On December 1, 1999, the Company completed the purchase of Franna Cranes Pty.
Ltd., now known as Terex Lifting Australia Pty. Ltd. ("Terex Lifting
Australia"). Terex Lifting Australia manufactures and markets mobile cranes at
its facility in Brisbane, Australia.
The Amida, Powerscreen, Cedarapids, Bartell, Re-Tech, Princeton/Kooi and Terex
Lifting Australia acquisitions are being accounted for using the purchase
method, with the purchase price allocated to the assets acquired and the
liabilities assumed based upon their respective estimated fair values at the
date of acquisition. The excess of purchase price over the net assets acquired
(approximately $302) is being amortized on a straight-line basis over 40 years.
The operating results of the acquired businesses are included in the Company's
consolidated results of operations since their respective dates of acquisition.
F - 11
NOTE C - 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
$145 in cash. During the years ended December 31, 2000 and 1999, total net sales
for the Company's truck-mounted forklift businesses were approximately $68 and
$23, respectively. The Company used approximately $125 of net after-tax proceeds
from this transaction to repay long-term bank debt. The businesses sold included
Princeton/Kooi and the Moffett subsidiary of Powerscreen.
NOTE D - RESTRUCTURING AND OTHER CHARGES
During the third quarter of 2001, the Company announced that a number of its
production facilities would reduce staffing, seven facilities would be closed
and their activities consolidated into other Company facilities and that other
additional non-recurring expenses would be incurred. The restructuring program
is designed to maximize factory utilization and to leverage common purchasing,
engineering and marketing operations in the Americas and Europe. The majority of
facility consolidations occurred in 2001 and the plan is expected to be fully
implemented by the end of the second quarter of 2002.
The Company recorded costs of $1.2 and $28.7 during the fourth and third
quarters of 2001, respectively, for severance and consolidation costs related to
these actions as well as other non-recurring expenses. The severance costs,
totaling approximately $6, are for the elimination of approximately 725
positions in connection with the aforementioned plant consolidations and staff
reductions. Other costs, totaling approximately $24, including plant
consolidation costs and related asset write-offs of which approximately $21
represents non-cash charges. These costs have been included in cost of sales
($26.0) and selling, general and administrative expenses ($3.9) in the
consolidated statement of income. As of December 31, 2001, approximately $6
representing future cash costs have been accrued; cash payments will take place
primarily in the first quarter of 2002 and are expected to be completed by the
end of the second quarter of 2002.
During the fourth quarter of 2000, the Company recorded expenses of $9.8 related
to the closing of its distribution facility in the United Kingdom, the impact of
an aggregates customer that filed for bankruptcy and a one-time charge related
to due diligence costs associated with a large potential acquisition which did
not come to fruition. These expenses have been included in cost of sales and
selling, general and administrative expenses in the statement of income in the
amounts of $6.9 and $2.9, respectively.
During the third quarter of 2000, the Company recorded expenses of $3.0 related
to the further integration of the Company's surface mining truck and hydraulic
shovel businesses, partially offset by a curtailment gain related to one of the
Company's pension plans. These items have been reflected in cost of sales and
selling, general and administrative expenses in the statement of income in the
amounts of $3.2 and $(0.2), respectively.
During the fourth quarter of 1999, the Company announced the closing of its
aerial work platform scissor lift manufacturing plant in Milwaukee, Wisconsin.
As a result of this action the Company had a one-time charge of $9.9 related to
the impairment of goodwill and certain closure costs. These costs have been
included in cost of sales in the statement of income.
Also in the fourth quarter of 1999, the Company recorded income of $1.4 related
to a favorable legal settlement, partially offset by the cost of a headcount
reduction at its manufacturing facility in Germany. These items have been
reflected in selling, general and administrative expenses in the statement of
income.
F - 12
NOTE E -- EARNINGS PER SHARE
(in millions, except per share data)
----------------------------------------------------------------------------------------------
2001 2000 1999
---------------------------- --------------------------- -------------------------------
Per-Share Per-Share Per-Share
Income Shares Amount Income Shares Amount Income Shares Amount
-------- -------- ---------- ------- -------- ---------- ----------- -------- ---------
Basic earnings per share
Income from continuing $ 16.7 28.1 $ 0.60 $ 103.9 27.2 $ 3.82 $ 172.9 24.2 $ 7.14
operations before
extraordinary items......
Effect of dilutive securities
Warrants..................s --- --- --- 0.1 --- 0.1
Stock Options.............. --- 0.7 --- 0.5 --- 0.8
Equity Rights.............. --- 0.1 --- 0.1 --- 0.5
-------- --------- -------- -------- ----------- ---------
Income from continuing
operations before
extraordinary items.........$ 16.7 28.9 $ 0.58 $ 103.9 27.9 $ 3.72 $ 172.9 25.6 $ 6.75
Options to purchase 738 thousand, 548 thousand and 198 thousand shares of common
stock were outstanding during 2001, 2000 and 1999, respectively, but were not
included in the computation of diluted earnings per share because the exercise
price of the options was greater than the average market price of the common
shares and therefore, the effect would be antidilutive.
NOTE F -- INVENTORIES
Inventories consist of the following:
December 31,
-----------------------
2001 2000
---------- -----------
Finished equipment............................... $ 236.4 $ 215.1
Replacement parts................................ 195.0 161.9
Work-in-process.................................. 90.5 63.9
Raw materials and supplies....................... 182.9 157.2
---------- -----------
Net inventories................................ $ 704.8 $ 598.1
========== ===========
NOTE G -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
December 31,
-----------------------
2001 2000
---------- -----------
Property.......................................... $ 20.9 $ 20.8
Plant............................................. 108.9 87.9
Equipment......................................... 126.9 118.6
---------- -----------
256.7 227.3
Less: Accumulated depreciation................... (82.8) (73.4)
---------- -----------
Net property, plant and equipment............... $ 173.9 $ 153.9
========== ===========
F - 13
NOTE H -- LONG-TERM OBLIGATIONS
Long-term debt is summarized as follows:
December 31,
----------------------
2001 2000
----------- ----------
9-1/4 % Senior Subordinated Notes due July 15, 2011..... $ 200.0 $ ---
10-3/8% Senior Subordinated Notes due April 11, 2011.... 300.0 ---
8-7/8% Senior Subordinated Notes due March 31, 2008..... 245.7 245.2
1999 Bank Credit Facility............................... 152.9 398.9
1999 Revolving Credit Facility.......................... --- ---
1998 Bank Credit Facility............................... 65.0 208.3
1998 Revolving Credit Facility.......................... 29.6 ---
Notes payable........................................... 20.3 10.6
Capital lease obligations............................... 15.2 14.8
Other................................................... 26.7 24.7
----------- ----------
Total long-term debt.................................. 1,055.4 902.5
Less: Current portion of long-term debt............... (34.7) (20.5)
----------- ----------
Long-term debt, less current portion.................. $ 1,020.7 $ 882.0
=========== ==========
The 9-1/4% Senior Subordinated Notes
On December 17, 2001, the Company sold and issued $200 aggregate principal
amount of 9-1/4% Senior Subordinated Notes Due 2011 (the "9-1/4% Notes"). The
9-1/4% Notes are jointly and severally guaranteed by certain domestic
subsidiaries of the Company (see Note P - "Consolidating Financial Statements").
The Company used approximately $194 of the net proceeds from the offering of the
9-1/4% Notes to prepay a portion of its existing term loans. The Company
recorded a charge of $1.6, net of income taxes, to recognize a loss on the
write-off of unamortized debt acquisition costs for the early extinguishment of
debt in connection with the prepayment of such existing term loans. The 9-1/4%
Notes were issued in a private placement made in reliance upon an exemption from
registration under the Securities Act of 1933, as amended (the "Securities
Act"). During the first quarter of 2002, the outstanding unregistered 9-1/4%
Notes were exchanged for 9-1/4% Notes registered under the Securities Act.
The 10-3/8% Senior Subordinated Notes
On March 29, 2001, the Company sold and issued $300 aggregate principal amount
of 10-3/8% Senior Subordinated Notes Due 2011 (the "10-3/8% Notes").
Additionally, on March 29, 2001, the Company increased its availability under
its revolving bank credit facilities, described below, from $125 to $300. The
10-3/8% Notes are jointly and severally guaranteed by certain domestic
subsidiaries of the Company (see Note P - "Consolidating Financial Statements").
The Company used approximately $194 of the net proceeds from the offering of the
10-3/8% Notes to prepay a portion of its existing term loans. The Company
recorded a charge of $2.3, net of income taxes, to recognize a loss on the
write-off of unamortized debt acquisition costs for the early extinguishment of
debt in connection with the prepayment of such existing term loans. The 10-3/8%
Notes were issued in a private placement made in reliance upon an exemption from
registration under the Securities Act. During the third quarter of 2001, the
outstanding unregistered 10-3/8% Notes were exchanged for 10-3/8% Notes
registered under the Securities Act.
The 8-7/8% Senior Subordinated Notes
On March 9, 1999 and March 31, 1998, the Company issued and sold $100.0 and
$150.0 aggregate principal amount of 8-7/8% Senior Subordinated Notes due 2008,
discounted to yield 9.73% and 8.94%, respectively (the "8-7/8% Notes"). The
8-7/8% Notes are jointly and severally guaranteed by certain domestic
subsidiaries of the Company (see Note P - "Consolidating Financial Statements").
The net proceeds from the offerings were used to repay a portion of the
outstanding indebtedness under Terex's credit facilities, to fund a portion of
the aggregate consideration for the acquisition of O&K Mining GmbH and for other
acquisitions.
F - 14
The 1999 Bank Credit Facility
On July 2, 1999, the Company entered into a credit agreement (the "1999 Bank
Credit Facility") for a term loan of up to $325 to provide the funds necessary
to acquire the outstanding share capital of Powerscreen and for other general
corporate purposes. The 1999 Bank Credit Facility was subsequently amended and
restated on August 23, 1999 to provide an additional term loan of up to $125 to
acquire Cedarapids. The 1999 Bank Credit Facility was further amended and
restated on March 29, 2001 to provide an additional $175.0 revolving credit
facility (the "1999 Revolving Credit Facility"). Term loans under the 1999 Bank
Credit Facility mature in March 2006 and bear interest, at the Company's option,
at a rate of 3.00% to 3.25% per annum in excess of the adjusted Eurodollar rate
or 2.00% to 2.25% in excess of the prime rate. The weighted average interest
rate on the term loans under the 1999 Bank Credit Facility at December 31, 2001
was 6.88%. During 2001 and 2000, the Company made principal prepayments of
$246.0 and $50.0, respectively, on the term loans under the 1999 Bank Credit
Facility such that the next scheduled principal payment is due in March 2003.
The 1999 Revolving Credit Facility is used for working capital and general
corporate purposes, including acquisitions. Pursuant to the 1999 Revolving
Credit Facility, the Company has available an aggregate amount of up to $175.0.
As of December 31, 2001, the Company had no balance outstanding under the 1999
Revolving Credit Facility, letters of credit issued under the 1999 Revolving
Credit Facility totaled $7.8, and the additional amount the Company could have
borrowed under the 1999 Revolving Credit Facility was $167.2. The outstanding
principal amount of loans under the 1999 Revolving Credit Facility bears
interest, at the Company's option, at an all-in drawn cost of 1.75% per annum in
excess of the adjusted eurocurrency rate or, with respect to U.S. dollar
denominated alternate base rate loans, at an all-in drawn cost of 0.75% per
annum above the prime rate. The 1999 Revolving Credit Facility will terminate on
March 6, 2004.
The 1998 Bank Credit Facility
On March 6, 1998, the Company refinanced its then outstanding credit facility
and redeemed or defeased all of its $166.7 principal amount of its then
outstanding 13-1/4% Senior Secured Notes due 2002. The refinancing included
effectiveness of a revolving credit facility aggregating up to $125.0 and term
loan facilities providing for loans in an aggregate principal amount of up to
approximately $375.0 (collectively, the "1998 Bank Credit Facility").
The 1998 Bank Credit Facility consists of a secured global revolving credit
facility aggregating up to $125.0 (the "1998 Revolving Credit Facility") and two
term loan facilities (collectively, the "Term Loan Facilities") providing for
loans in an aggregate principal amount of up to approximately $375.0. The 1998
Revolving Credit Facility is used for working capital and general corporate
purposes, including acquisitions.
Pursuant to the Term Loan Facilities, the Company had borrowed (i) $175.0 in
aggregate principal amount pursuant to a Term Loan A due March 2004 (the "Term
A Loan") and (ii) $200.0 in aggregate principal amount pursuant to a Term Loan
B due March 2005 (the "Term B Loan"). At December 31, 2001, there is no
outstanding principal amount for the Term A Loan, as the Term A Loan was
repaid in full during 2001. The outstanding principal amount of the Term B
Loan currently bears interest, at the Company's option, at a rate of 2.75% per
annum in excess of the adjusted eurodollar rate or, with respect to U.S.
Dollar denominated alternate base rate loans, 1.75% in excess of the prime
rate. The weighted average interest rate on the Term B Loan at December 31,
2001 was 4.85%. The Term B Loan amortizes at a rate of 0.25% quarterly through
March 31, 2004, and then at a rate of 23.5% quarterly through March 6, 2005.
The Term B Loan is subject to mandatory prepayment in certain circumstances
and is voluntarily prepayable without payment of a premium (subject to
reimbursement of the lenders' costs in case of prepayment of eurodollar loans
other than on the last day of an interest period). During 2001 and 2000, the
Company made principal prepayments of $142.4 and $124.4, respectively, on the
Term A Loan and Term B Loan. As a result of principal prepayments, the next
scheduled principal payments on the Term B Loan are due in March 2003.
The 1998 Revolving Credit Facility is used for working capital and general
corporate purposes, including acquisitions. Pursuant to the 1998 Revolving
Credit Facility, the Company has available an aggregate amount of up to $125.0.
As of December 31, 2001, the Company had a balance of $29.6 outstanding under
the 1998 Revolving Credit Facility, letters of credit issued under the 1998
Revolving Credit Facility totaled $13.1, and the additional amount the Company
could have borrowed under the 1998 Revolving Credit Facility was $82.3. The
outstanding principal amount of loans under the 1998 Revolving Credit Facility
bears interest, at the Company's option, at an all-in drawn cost of 1.75% per
annum in excess of the adjusted eurocurrency rate or, with respect to U.S.
dollar denominated alternate base rate loans, at an all-in drawn cost of 0.75%
per annum above the prime rate. The weighted average interest rate on the 1998
Revolving Credit Facility outstanding was 5.11% at December 31, 2001. The 1998
Revolving Credit Facility will terminate on March 6, 2004.
F - 15
With limited exceptions, the obligations of the Company under the 1998 Bank
Credit Facility and the 1999 Bank Credit Facility are secured by (i) a pledge of
all of the capital stock of domestic subsidiaries of the Company, (ii) a pledge
of 65% of the stock of the foreign subsidiaries of the Company and (iii) a first
priority security interest in, and mortgages on, substantially all of the assets
of Terex and its domestic subsidiaries. The 1998 Bank Credit Facility and the
1999 Bank Credit Facility contain covenants limiting the Company's activities,
including, without limitation, limitations on dividends and other payments,
liens, investments, incurrence of indebtedness, mergers and asset sales, related
party transactions and capital expenditures. The 1998 Bank Credit Facility and
the 1999 Bank Credit Facility also contain certain financial and operating
covenants, including a maximum leverage ratio, a minimum interest coverage
ratio, a maximum senior secured debt leverage ratio and a minimum fixed charge
coverage ratio.
The Letter of Credit Facility
In conjunction with the 1999 Bank Credit Facility, in July 1999 the Company
received a separate $50 letter of credit facility (the "Letter of Credit
Facility"). Letters of credit issued under the Letter of Credit Facility do not
decrease availability under the Company's 1999 Revolving Credit Facility or 1998
Revolving Credit Facility. At December 31, 2001, letters of credit issued under
the Letter of Credit Facility totaled $20.0.
Schedule of Debt Maturities
Scheduled annual maturities of long-term debt outstanding at December 31, 2001
in the successive five-year period are summarized below. Amounts shown are
exclusive of minimum lease payments disclosed in Note I -- "Lease Commitments":
2002................................... $ 30.7
2003................................... 8.2
2004................................... 82.1
2005................................... 130.7
2006................................... 38.1
Thereafter............................. 750.4
-------------
Total.............................. $ 1,040.2
=============
Total long-term debt at December 31, 2001 is $1,048.8. The $8.6 difference is
due to the fair value adjustment reducing the carrying value of debt as a
result of accounting for fair value hedges for the fixed interest rate to
floating interest rate swaps on the 10-3/8% Notes and the 8-7/8% Notes.
Based on quoted market values, the Company believes that the fair values of the
9-1/4% Notes, the 10-3/8% Notes and the 8-7/8% Notes were approximately $200,
$315 and $250, respectively as of December 31, 2001. The Company believes that
the carrying value of its other borrowings approximates fair market value, based
on discounting future cash flows using rates currently available for debt of
similar terms and remaining maturities.
The Company paid $95.6, $94.9 and $67.6 of interest in 2001, 2000 and 1999,
respectively.
NOTE I -- LEASE COMMITMENTS
The Company leases certain facilities, machinery and equipment, and vehicles
with varying terms. Under most leasing arrangements, the Company pays the
property taxes, insurance, maintenance and expenses related to the leased
property. Certain of the equipment leases are classified as capital leases and
the related assets have been included in Property, Plant and Equipment. Net
assets under capital leases were $9.4 and $2.5, net of accumulated amortization
of $11.9 and $15.5, at December 31, 2001 and 2000, respectively.
F - 16
Future minimum capital and noncancelable operating lease payments and the
related present value of capital lease payments at December 31, 2001 are as
follows:
Capital Operating
Leases Leases
------------- -------------
2002............................................ $ 4.0 $ 21.0
2003............................................ 3.6 19.3
2004............................................ 2.3 18.2
2005............................................ 1.3 10.5
2006............................................ 0.8 6.8
Thereafter...................................... 3.2 3.7
------------- -------------
Total minimum obligations .................. 15.2 $ 79.5
=============
Less amount representing interest............... (0.7)
-------------
Present value of net minimum obligations.... 14.5
Less current portion............................ (4.0)
-------------
Long-term obligations....................... $ 10.5
=============
Most of the Company's operating leases provide the Company with the option to
renew the leases for varying periods after the initial lease terms. These
renewal options enable the Company to renew the leases based upon the fair
rental values at the date of expiration of the initial lease. Total rental
expense under operating leases was $13.2, $8.7 and $9.1 in 2001, 2000 and 1999,
respectively.
NOTE J -- INCOME TAXES
In December 1994, the Company received an examination report from the Internal
Revenue Service ("IRS") proposing a tax deficiency of approximately $56 for 1987
through 1989. The examination report raised several issues including the
substantiation for certain tax deductions and whether the Company was able to
use certain net operating losses ("NOLs") to offset taxable income. In April
1995, the Company filed an administrative appeal to the examination.
On November 18, 1999, Terex announced that it had resolved the IRS audit
regarding the Company's federal income tax returns for the years 1987 through
1989. As a result of the completion of the audit, the IRS will no longer
challenge the Company's right to use certain NOLs. Furthermore, because of the
existence of substantial NOLs, Terex will not owe any tax. However, due to
timing issues associated with NOL carrybacks and the substantial amount of time
which had elapsed since the years in question, Terex has recorded interest
expense of $0.9 and $7.7 in 2000 and 1999, respectively. During 2001 the Company
has paid all interest relating to this matter, all of which will be tax
deductible.
The components of Income From Continuing Operations Before Income Taxes and
Extraordinary Items are as follows:
Year ended December 31,
--------------------------------
2001 2000 1999
---------- ---------- ----------
United States.................................. $ 11.2 $ 91.2 $ 26.5
Foreign........................................ 13.4 68.4 71.9
---------- ---------- ----------
Income from continuing operations
before income taxes
and extraordinary items.................... $ 24.6 $ 159.6 $ 98.4
========== ========== ==========
F - 17
The major components of the Company's provision for income taxes are summarized
below:
Year ended December 31,
-----------------------------------------
2001 2000 1999
------------- ------------- -------------
Current:
Federal........................................................ $ 6.0 $ 2.1 $ 0.8
State.......................................................... 1.4 0.7 0.4
Foreign........................................................ 8.9 17.4 7.1
------------- ------------- -------------
Current income tax provision............................... 16.3 20.2 8.3
------------- ------------- -------------
Deferred:
Federal........................................................ (8.0) 32.1 ---
State.......................................................... 1.6 (0.3) ---
Foreign........................................................ (29.6) 13.8 ---
Tax benefits reducing goodwill................................. 2.0 8.3 15.5
Adjustment for changes in valuation allowance.................. 25.6 (18.4) (98.3)
------------- ------------- -------------
Deferred income tax provision (8.4) 35.5 (82.8)
------------- ------------- -------------
Total (benefit) provision for income taxes.............. $ 7.9 $ 55.7 $ (74.5)
============= ============= =============
Deferred tax assets and liabilities result from differences in the basis of
assets and liabilities for tax and financial statement purposes. A valuation
allowance has been recognized for $56.2 of the deferred tax assets for certain
foreign and U.S. net operating loss carryforwards. The tax effects of the basis
differences and net operating loss carryforward as of December 31, 2001 and 2000
are summarized below for major balance sheet captions:
2001 2000
------------- -------------
Intangibles................................ $ (13.1) $ (2.7)
Other...................................... (0.3) (0.4)
------------- -------------
Total deferred tax liabilities........ (13.4) (3.1)
------------- -------------
Receivables................................ 1.4 2.0
Net inventories............................ 6.2 7.9
Fixed assets............................... 1.4 1.6
Workers' compensation...................... 0.7 0.8
Warranties and product liability........... 9.7 13.8
Net operating loss carryforwards........... 131.9 75.4
Other...................................... 4.0 1.3
------------- -------------
Total deferred tax assets............. 155.3 102.8
------------- -------------
Deferred tax assets valuation allowance.... (56.2) (30.6)
------------- -------------
Net deferred tax assets............... $ 85.7 $ 69.1
============= =============
Total deferred tax liabilities are included in other non-current liabilities on
the consolidated balance sheet. The valuation allowance for deferred tax assets
as of January 1, 2000 was $32.2. The net change in the total valuation allowance
for the years ended December 31, 2000 and 2001 were a decrease of $1.6 and an
increase of $25.6, respectively. The increase in valuation allowance for the
year ended December 31, 2001 was due to an increase in foreign net operating
loss carryforwards, for which the Company has provided a valuation allowance.
F - 18
The Company's Provision for Income Taxes is different from the amount that would
be provided by applying the statutory federal income tax rate to the Company's
Income From Continuing Operations Before Income Taxes and Extraordinary Items.
The reasons for the difference are summarized below:
Year ended December 31,
------------------------------------------
2001 2000 1999
-------------- ------------- -------------
Tax at statutory federal income tax rate.......................... $ 8.6 $ 55.9 $ 34.4
State taxes....................................................... 1.6 0.3 0.3
Recognition of fully reserved preacquisition deferred tax asset... 2.0 8.3 15.5
Change in valuation allowance relating to NOL and temporary
differences.................................................... (8.3) (14.4) (124.5)
Foreign tax differential on income/losses of foreign subsidiaries. 3.8 1.4 (2.8)
Goodwill.......................................................... 0.4 1.9 0.5
Other............................................................. (0.2) 2.3 2.1
-------------- ------------- -------------
Total (benefit) provision for income taxes................... $ 7.9 $ 55.7 $ (74.5)
============== ============= =============
United States income taxes have not been provided on undistributed earnings of
foreign subsidiaries. The Company's intention is to reinvest these earnings
indefinitely or to repatriate earnings when it is tax effective to do so.
Accordingly, the Company believes that any U.S. tax on unrepatriated earnings
would be substantially offset by foreign tax credits.
At December 31, 2001, the Company had domestic federal net operating loss
carryforwards of $189.9. The tax basis of U. S. federal net operating loss
carryforwards expire as follows:
Tax Basis Net
Operating Loss
Carryforwards
----------------
2001................................. $ 4.6
2002-2007............................ ---
2008................................. 78.2
2009................................. 35.8
2010................................. 41.6
2011................................. 1.2
2012................................. 1.0
2013-2017............................ ---
2018................................. 0.3
2019................................. 0.1
2020................................. ---
2021................................. 27.1
----------------
Total............................ $ 189.9
================
If a change of control of the Company, as defined by the Tax Reform Act of 1986,
were to occur, the Company's utilization of the U.S. net operating loss and
credit carryforwards would be subject to annual limitation in future periods.
The Company also has various state net operating loss carryforwards expiring at
various dates through 2013 available to reduce future state taxable income and
income taxes. In addition, the Company's foreign subsidiaries have approximately
$172.6 of loss carryforwards, $44.5 in the United Kingdom, $21.7 in France,
$87.8 in Germany, and $18.6 in other countries, which are available to offset
future foreign taxable income. These foreign tax loss carryforwards are
available without expiration. The Company also has tax credit carryforwards of
$2.9 in the U.S., $0.8 of which expire in 2006 and the remaining $2.1 of which
is available without expiration.
The Company made income tax payments of $14.8, $2.9 and $2.6 in 2001, 2000 and
1999, respectively.
F - 19
NOTE K -- STOCKHOLDERS' EQUITY
Common Stock. The Company's certificate of incorporation was amended in June
1998 to increase the number of authorized shares of common stock, par value
$0.01 (the "Common Stock"), to 150.0 million. On October 1, 2001, the Company
issued 3.6 million shares of Common Stock in exchange for the common stock of
CMI. Additionally, on December 10, 2001, the Company issued 5.8 million shares
of Common Stock in a public offering for net proceeds to the Company of $96.3.
On June 22, 1999, the Company issued 3.5 million shares of Common Stock in a
public offering for net proceeds to the Company of $103.7. On July 28, 1999, the
Company issued 2 million shares of Common Stock for net proceeds to the Company
of $59.1. On December 31, 2001, there were 37.5 million shares issued and 36.4
million shares outstanding. Of the 112.5 million unissued shares at that date,
966.7 thousand shares were reserved for issuance for the exercise of stock
options and the vesting of restricted stock.
Common Stock in Treasury. In March 2000, the Company's Board of Directors
authorized the purchase of up to 2.0 million shares of the Company's outstanding
Common Stock over the following twelve months. As of December 31, 2001, the
Company had acquired 1.3 million shares of Common Stock at a total cost of
$20.2. During the fourth quarter of 2000, the Company reissued 0.2 million
shares of Common Stock as partial payment for an acquired company. As of
December 31, 2001, the Company held 1.1 million shares of Common Stock in
treasury.
Preferred Stock. The Company's certificate of incorporation was amended in June
1998 to authorize 50.0 million shares of preferred stock, $0.01 par value per
share. As of December 31, 2001, no shares of preferred stock were outstanding.
Equity Rights. On May 9, 1995, the Company sold one million equity rights
securities (the "Equity Rights") along with a $250 debt offering. The portion of
the proceeds related to the Equity Rights ($3.2) has been recorded in the
stockholders' equity section of the balance sheet, because they can be satisfied
in Common Stock or cash at the option of the Company. The Equity Rights entitle
the holders, upon exercise at any time on or prior to May 15, 2002, to receive
cash or, at the election of the Company, Common Stock in an amount equal to the
average closing sale price of the Common Stock for the 60 consecutive trading
days prior to the date of exercise (the "Current Price"), less $7.288 per share,
subject to adjustment in certain circumstances. Changes in the Current Price do
not affect the net income or loss reported by the Company; however, changes in
the Current Price vary the amount of cash that the Company would have to pay or
the number of shares of Common Stock that would have to be issued in the event
holders exercise the Equity Rights. During 2001, 2000 and 1999, holders
exercised 72.0 thousand, 23.2 thousand and 721.4 thousand rights, respectively.
As of December 31, 2001, 147.8 thousand Equity Rights were outstanding and the
Current Price of the Common Stock was $17.4003. Accordingly, the Company would
have been required to either pay $1.5 or issue 85.7 thousand shares of Common
Stock, at the Company's option, in the event that all of the holders had
exercised their Equity Rights.
Series A Warrants. In connection with the December 1993 private placement of
Series A Preferred Stock, the Company issued 1.3 million Series A Warrants. Each
Series A Warrant could have been exercised, in whole or in part, at the option
of the holder at any time before the expiration date on December 31, 2000 and
was redeemable by the Company under certain circumstances. All Series A Warrants
were exercised prior to the December 31, 2000 expiration date.
Long-Term Incentive Plans. In May 2000, the stockholders approved the Terex
Corporation 2000 Incentive Plan (the "2000 Plan"). The purpose of the 2000 Plan
is to assist the Company in attracting and retaining selected individuals to
serve as directors, officers, consultants, advisors and employees of the Company
and its subsidiaries and affiliates who will contribute to the Company's success
and to achieve long-term objectives which will inure to the benefit of all
stockholders of the Company through the additional incentive inherent in the
ownership of the Common Stock. The 2000 Plan authorizes the granting of (i)
options ("Options") to purchase shares of Common Stock, (ii) stock appreciation
rights ("SARs"), (iii) stock purchase awards, (iv) restricted stock awards and
(v) performance awards. There are 2.0 million shares of Common Stock available
for grant under the 2000 Plan. As of December 31, 2001, 865.0 thousand were
available for grant under the 2000 Plan.
In May 1996, the stockholders approved the 1996 Terex Corporation Long-Term
Incentive Plan (the "1996 Plan"). The 1996 Plan authorizes the granting, among
other things, of (i) Options to purchase shares of Common Stock, (ii) shares of
Common Stock, including restricted stock, and (iii) cash bonus awards based upon
a participant's job performance. In May 1999, the stockholders approved an
increase in the aggregate number of shares of Common Stock (including restricted
stock, if any) optioned or granted under the 1996 Plan to 2.0 million shares. At
December 31, 2001, 83.3 thousand shares were available for grant under the 1996
Plan. The 1996 Plan also provides for automatic grants of Options to
non-employee directors.
F - 20
In 1994, the stockholders approved the 1994 Terex Corporation Long-Term
Incentive Plan (the "1994 Plan") covering certain managerial, administrative and
professional employees and outside directors. The 1994 Plan provides for awards
to employees, from time to time and as determined by a committee of outside
directors, of cash bonuses, stock options, stock and/or restricted stock. The
total number of shares of the Company's Common Stock available to be awarded
under the 1994 Plan is 750 thousand, subject to certain adjustments. At December
31, 2001, 4.5 thousand shares were available for grant under the 1994 Plan.
The Company maintains the Terex Corporation Incentive Stock Option Plan (the
"1988 Plan"). The 1988 Plan is a qualified incentive stock option ("ISO") plan
covering certain officers and key employees. The exercise price of the ISO is
the fair market value of the shares at the date of grant. An ISO allows the
holder to purchase shares of Common Stock, commencing one year after grant. An
ISO expires after ten years. At December 31, 2001, 13.9 thousand stock options
were available for grant under the 1988 Plan.
The following table is a summary of stock options under all four of the
Company's plans.
Weighted
Average Exercise
Number of Price per Share
Options
------------- -----------------
Outstanding at December 31, 1998................ 1,161,209 $ 14.39
Granted...................................... 204,574 $ 25.93
Exercised.................................... (145,583) $ 6.73
Canceled or expired.......................... (12,958) $ 22.14
-------------
Outstanding at December 31, 1999................ 1,207,242 $ 16.76
Granted...................................... 224,030 $ 13.33
Exercised.................................... (121,550) $ 4.65
Canceled or expired.......................... (12,325) $ 18.97
-------------
Outstanding at December 31, 2000................ 1,297,397 $ 17.29
Granted...................................... 852,000 $ 16.90
Exercised.................................... (154,650) $ 7.59
Canceled or expired.......................... (43,985) $ 13.62
-------------
Outstanding at December 31, 2001................ 1,950,762 $ 17.96
============= =================
Exercisable at December 31, 2001................ 761,688 $ 18.52
============= =================
Exercisable at December 31, 2000................ 713,246 $ 15.78
============= =================
Exercisable at December 31, 1999................ 641,235 $ 12.35
============= =================
F - 21
The following table summarizes information about stock options outstanding and
exercisable at December 31, 2001:
Options Outstanding Options Exercisable
---------------------------------------- -------------------------------
Weighted Weighted
Weighted Average Average
Average Exercise Price Exercise
Range of Number of Life per Share Number of Price per
Exercise Prices Options (in years) Options Share
--------------------------- ------------- -------------------------- ----------------- -------------
$ 3.50 - $ 6.00 75,747 3.7 $ 4.49 75,747 $ 4.49
$ 6.01 - $ 10.00 15,690 5.9 $ 6.76 15,690 $ 6.76
$ 10.01 - $ 15.00 459,808 6.5 $ 13.29 284,245 $ 13.45
$ 15.01 - $ 20.00 873,750 9.2 $ 16.79 45,000 $ 16.66
$ 20.01 - $ 25.00 153,738 5.7 $ 22.58 107,870 $ 22.64
$ 25.01 - $ 30.00 355,506 6.0 $ 27.67 219,863 $ 28.34
$ 30.01 - $ 34.88 16,523 7.2 $ 30.98 13,273 $ 31.12
------------- ----------------
1,950,762 7.4 $ 17.96 761,688 $ 18.52
============= ================
In accordance with the provisions of SFAS 123, "Accounting for Stock-Based
Compensation," the Company applies APB Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations in accounting for its plans
and does not recognize compensation expense for its stock-based compensation
plans other than for restricted stock. If the Company had elected to recognize
compensation expense based upon the fair value at the grant date for awards
under these plans consistent with the methodology prescribed by SFAS No. 123,
the Company's net income would have been reduced by $3.4 ($0.12 (basic) and
$0.12 (diluted) per share), $2.2 ($0.08 (basic) and $0.08 (diluted) per share),
and $2.9 ($0.12 (basic) and $0.11 (diluted) per share), in 2001, 2000 and 1999,
respectively.
The fair value for these options was estimated at the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions for 2001, 2000 and 1999, respectively: dividend yields of 0%, 0% and
0%; expected volatility of 51.28%, 49.46% and 51.47% risk-free interest rates of
5.63%, 6.23% and 5.64%; and expected life of 9.9 years, 9.7 years and 9.5 years.
The aggregate fair value of options granted during 2001, 2000 and 1999 for which
the exercise price equals the market price on the grant date was $9.9, $1.9 and
$3.6, respectively. The weighted average fair value at date of grant for options
granted during 2001, 2000 and 1999 was $11.68, $9.92 and $17.49, respectively
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
Comprehensive Income. The following table reflects the accumulated balances of
other comprehensive income.
Accumulated
Pension Cumulative Derivative Other
Liability Translation Hedging Comprehensive
Adjustment Adjustment Adjustment Income
------------- -------------- -------------- ----------------
Balance at December 31, 1998....$ (1.8) $ (2.3) $ --- $ (4.1)
Current year change............. 1.3 (13.3) --- (12.0)
------------- -------------- -------------- -----------------
Balance at December 31, 1999.... (0.5) (15.6) --- (16.1)
Current year change............. 0.2 (62.6) --- (62.4)
------------- -------------- -------------- ----------------
Balance at December 31, 2000.... (0.3) (78.2) --- (78.5)
Current year change............. (3.3) (37.7) (0.8) (41.8)
------------- -------------- -------------- ----------------
Balance at December 31, 2001....$ (3.6) $ (115.9) $ (0.8) $ (120.3)
============= ============== ============== ================
F - 22
NOTE L -- RETIREMENT PLANS AND OTHER BENEFITS
Pension Plans
US Plans - As of December 31, 1998, the Company maintained four defined benefit
pension plans covering certain domestic employees (the "Terex Plans"). During
1999 the Company added four additional defined benefit pension plans in
connection with the acquisitions of Powerscreen and Cedarapids. On June 30,
2000, four of the Company's defined benefit pension plans merged into one of the
Company's other defined benefit pension plans. As a result of the merger, as of
December 31, 2001, the Company maintained four defined benefit pension plans.
The benefits for the plans covering the salaried employees are based primarily
on years of service and employees' qualifying compensation during the final
years of employment. Participation in the Terex Plans and the Cedarapids pension
plan for salaried employees was frozen as of May 7, 1993 and October 15, 2000,
respectively, and no participants will be credited with service following such
date except that participants not fully vested will be credited with service for
purposes of determining vesting only. The benefits for the plans covering the
hourly employees are based primarily on years of service and a flat dollar
amount per year of service. It is the Company's policy generally to fund these
plans based on the minimum requirements of the Employee Retirement Income
Security Act of 1974 (ERISA). Plan assets consist primarily of common stocks,
bonds, and short-term cash equivalent funds. At December 31, 2001 and 2000, the
Terex Plans held 0.2 million shares and 0.3 million shares of the Company's
Common Stock, with market values of $3.5 and $5.3, respectively.
Other Postemployment Benefits
The Company provides postemployment health and life insurance benefits to
certain former salaried and hourly employees of Terex Cranes - Waverly
Operations (also known as Koehring Cranes, Inc.), Cedarapids and Simplicity
Engineering. The Company adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions," on January 1, 1993. This statement
requires accrual of postretirement benefits (such as health care benefits)
during the years an employee provides service. Terex adopted the provisions of
SFAS No. 106 using the delayed recognition method, whereby the amount of the
unrecognized transition obligation at January 1, 1993 is recognized
prospectively as a component of future years' net periodic postretirement
benefit expense. The unrecognized transition obligation at January 1, 1993 was
$4.5. Terex is amortizing this transition obligation over 12 years, the average
remaining life expectancy of the participants.
F - 23
The liability of the Company's U.S. Plans, as of December 31, was as follows:
Pension Benefits Other Benefits
--------------------------- ----------------------------
2001 2000 2001 2000
------------- ------------- ------------- -------------
Change in benefit obligation:
Benefit obligation at beginning of year$ 97.0 $ 88.5 $ 6.9 $ 4.8
Benefits obligation of plans acquired
during the year...................... --- --- --- 0.5
Service cost.......................... 0.7 1.3 0.2 0.2
Interest cost......................... 7.1 7.3 0.5 0.5
Impact of plan amendments............. --- 0.9 --- 1.2
Actuarial (gain) loss................. 1.7 6.1 (0.2) 0.4
Benefits paid......................... (7.4) (7.1) (0.7) (0.7)
------------- ------------- ------------- -------------
Benefit obligation end of year.......... 99.1 97.0 6.7 6.9
------------- ------------- ------------- -------------
Change in plan assets:
Fair value of plan assets at beginning
of year.............................. 103.7 124.2 --- ---
Fair value of plan assets acquired
during the year...................... --- --- --- ---
Actual return on plan assets.......... 1.3 (13.4) --- ---
Employer contribution................. --- --- 0.7 0.7
Benefits paid......................... (7.4) (7.1) (0.7) (0.7)
------------- ------------- ------------- -------------
Fair value of plan assets at end of year 97.6 103.7 --- ---
------------- ------------- ------------- -------------
Funded status........................... (1.5) 6.7 (6.7) (6.9)
Unrecognized actuarial (gain) loss..... 28.7 19.8 (1.1) (1.1)
Unrecognized prior service cost......... 3.9 4.3 1.0 1.1
Unrecognized transition obligation...... --- --- 0.9 1.2
------------- ------------- ------------- -------------
Net amount recognized................... $ 31.1 $ 30.8 $ (5.9) $ (5.7)
============= ============= ============= =============
Amounts recognized in the Consolidated Balance Sheet
consist of:
Prepaid benefit cost................. $ 30.5 $ 33.0 $ --- $ ---
Accrued benefit liability............ (3.0) (2.5) (5.9) (5.7)
Accumulated other comprehensive income 3.6 0.3 --- ---
------------- ------------- ------------- -------------
Net amount recognized................... $ 31.1 $ 30.8 $ (5.9) $ (5.7)
============= ============= ============= =============
Pension Benefits Other Benefits
--------------------------- ----------------------------
2001 2000 2001 2000
------------- ------------- ------------- -------------
Weighted-average assumptions as of December 31:
Discount rate........................ 7.25% 7.75% 7.25% 7.75%
Expected return on plan.............. 9.00% 9.00% 9.00% 9.00%
Rate of compensation increase........ --- 4.50% --- ---
F - 24
Pension Benefits Other Benefits
-------------------------------------- -------------------------------------
2001 2000 1999 2001 2000 1999
------------ ------------ ------------ ----------- ----------- ------------
Components of net periodic cost:
Service cost.......................... $ 0.7 $ 1.3 $ 0.6 $ 0.2 $ 0.2 $ ---
Interest cost......................... 7.1 7.3 3.8 0.5 0.5 0.2
Expected return on plan assets........ (9.0) (10.6) (5.5) --- --- ---
Amortization of prior service cost.... 0.4 0.4 0.1 0.1 --- ---
Amortization of transition obligation. --- --- --- 0.3 0.4 0.3
Recognized actuarial (gain)loss....... 0.5 (0.1) 0.1 (0.2) (0.1) (0.1)
Curtailment (gain)loss................ --- (2.6) --- --- --- ---
------------ ------------ ------------ ----------- ----------- ------------
Net periodic cost (benefit)............. $ (0.3) $ (4.3) $ (0.9) $ 0.9 $ 1.0 $ 0.4
============ ============ ============ =========== =========== ============
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the pension plans with accumulated benefit obligations in
excess of plan assets were $19.5, $19.5 and $13.8, respectively, as of December
31, 2001, and $14.3, $14.3 and $8.7, respectively, as of December 31, 2000.
The Company has five nonpension postretirement benefit plans. The health care
plans are contributory with participants' contributions adjusted annually; the
life insurance plan is noncontributory. For measurement purposes, a 7.19 percent
annual rate of increase in the per capita cost of covered health care benefits
was assumed for 2001. The rate was assumed to decrease gradually to 5.75 percent
for 2005 and remain at that level thereafter. Assumed health care cost trend
rates have a significant effect on the amounts reported for the health care
plan. A one-percentage-point change in assumed health care cost trend rates
would have the following effects:
1-Percentage- 1-Percentage-
Point Increase Point Decrease
----------------- ---------------
Effect on total service and interest cost 3.56% (3.19)%
components
Effect on postretirement benefit obligation 3.31% (2.99)%
International Plans - Terex Equipment Limited maintains a government-required
defined benefit plan (which includes certain defined contribution elements)
covering substantially all of its management employees. Terex Aerials Limited
(Ireland) maintains two voluntary defined benefit plans covering its employees.
O & K Mining maintains an unfunded noncontributory defined benefit plan covering
substantially all of its employees. Fermec, which was acquired by Terex on
December 28, 2000, maintains a voluntary defined benefit pension plan covering
substantially all of its employees. Atlas, which was acquired on the December
28, 2001, maintains a noncontributory defined benefit plan covering
substantially all of its employees in Germany. Additionally, Atlas maintains a
government required defined benefit plan for its employees in Scotland.
F - 25
The liability of the Company's International Plans as of December 31, was as
follows:
Pension Benefits
----------------------------
2001 2000
------------- --------------
Change in benefit obligation:
Benefit obligation at beginning of year.................$ 54.2 $ 13.0
Benefits obligation of plans acquired during the year... 70.6 41.3
Service cost............................................ 2.4 0.7
Interest cost........................................... 3.2 0.8
Actuarial (gain) loss................................... (2.3) (0.9)
Benefits paid........................................... (4.4) (0.7)
------------- --------------
Benefit obligation end of year............................ 123.7 54.2
------------- --------------
Change in plan assets:
Fair value of plan assets at beginning of year.......... 46.4 8.9
Fair value of plan assets acquired during the year...... 12.2 37.6
Actual return on plan assets............................ (3.3) (0.2)
Employer contribution................................... 2.2 0.8
Benefits paid........................................... (4.4) (0.7)
------------- --------------
Fair value of plan assets at end of year.................. 53.1 46.4
------------- --------------
Funded status............................................. (70.6) (7.8)
Unrecognized actuarial (gain) loss....................... 6.9 2.8
Unrecognized transition obligation........................ (0.1) (0.1)
------------- --------------
Net amount recognized.....................................$ (63.8) $ (5.1)
============= ==============
Amounts recognized in the Consolidated Balance Sheet
consist of:
Prepaid benefit cost...................................$ 0.8 $ 1.2
Accrued benefit liability.............................. (64.6) (6.3)
------------- --------------
Net amount recognized.....................................$ (63.8) $ (5.1)
============= ==============
Pension Benefits
-----------------------------------------
2001 2000
------------------ ---------------------
The range of assumptions as of December 31:
Discount rate........................ 6.00%-6.25% 6.00%-8.00%
Expected return on plan.............. 6.00%-8.00% 6.25%-9.50%
Rate of compensation increase........ 3.75%-6.00% 3.75%-6.00%
F - 26
Pension Benefits
----------------------------------
2001 2000 1999
--------- ----------- -----------
Components of net periodic benefit cost:
Service cost.......................... $ 2.4 $ 0.7 $ 0.8
Interest cost......................... 3.2 0.8 0.7
Expected return on plan assets........ (3.7) (0.6) (0.5)
Amortization of prior service cost.... --- --- ---
Amortization of transition obligation. --- --- ---
Recognized actuarial (gain)loss....... --- --- ---
---------- ------------ -----------
Net periodic benefit cost............... $ 1.9 $ 0.9 $ 1.0
========== ============ ===========
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the pension plans with accumulated benefit obligations in
excess of plan assets were $124.7, $111.2 and $55.8, respectively, as of
December 31, 2001, and $46.8, $46.8 and $37.6, respectively, as of December 31,
2000.
Saving Plans
The Company sponsors various tax deferred savings plans into which eligible
employees may elect to contribute a portion of their compensation. The Company
may, but is not obligated to, contribute to certain of these plans. Company
contributions to these plans were $2.8, $2.5 and $1.7 for the years ended
December 31, 2001, 2000 and 1999, respectively.
NOTE M -- LITIGATION AND CONTINGENCIES
In the Company's lines of business numerous suits have been filed alleging
damages for accidents that have arisen in the normal course of operations
involving the Company's products. The Company is self-insured, up to certain
limits, for these product liability exposures, as well as for certain exposures
related to general, workers' compensation and automobile liability. Insurance
coverage is obtained for catastrophic losses as well as those risks required to
be insured by law or contract. The Company has recorded and maintains an
estimated liability in the amount of management's estimate of the Company's
aggregate exposure for such self-insured risks.
The Company is involved in various other legal proceedings which have arisen in
the normal course of its operations. The Company has recorded provisions for
estimated losses in circumstances where a loss is probable and the amount or
range of possible amounts of the loss is estimable.
The Company's outstanding letters of credit totaled $40.9 at December 31, 2001.
The letters of credit generally serve as collateral for certain liabilities
included in the Consolidated Balance Sheet. Certain of the letters of credit
serve as collateral guaranteeing the Company's performance under contracts.
The Company is party to an action commenced in the United States District Court
for the District of Delaware by the End of the Road Trust, a creditor
liquidating trust formed to liquidate the assets of Fruehauf Trailer Corporation
("Fruehauf"), a former subsidiary of the Company and currently a reorganized
debtor in bankruptcy, and Pension Transfer Corporation, as sponsor and
administrator for certain Fruehauf pension plans (collectively, the
"Plaintiffs") against the Company and certain former officers and directors of
Fruehauf and Terex (collectively, the "Defendants"). The Plaintiffs allege, in
essence, that the Defendants breached fiduciary duties owed to Fruehauf and made
certain misrepresentations in connection with certain accounting matters arising
from the Company's 1989 acquisition of Fruehauf and the 1991 initial public
offering of Fruehauf stock, and that the Defendants were unjustly enriched
thereby. Plaintiffs also allege that certain pension investments made on behalf
of the Fruehauf pension plans violated ERISA. The Company has reached an
agreement in principal to settle this matter in a manner which will not have a
material adverse effect on the Company's operations.
The Company has agreed to indemnify certain outside parties for losses related
to a former subsidiary's worker compensation obligations. Some of the claims for
which Terex is contingently obligated are also covered by bonds issued by an
insurance company. The Company recorded liabilities for these contingent
obligations representing management's estimate of the potential losses which the
Company might incur.
F - 27
In connection with the Company's sale of the Clark material handling business to
Clark Material Handling Company ("CMHC") in November 1996, CMHC assumed
liabilities from Terex arising from product liability claims dealing with Clark
material handling products manufactured prior to the date of the divestiture. In
connection with CMHC's voluntary filing for bankruptcy in 2000, CMHC defaulted
on its obligations to indemnify and defend the Company from such product
liability claims. As a result of this situation, the Company recorded an expense
of $7.3, net of income taxes, in the fourth quarter of 2000 representing the
Company's estimated liability for known product liability claims.
NOTE N -- RELATED PARTY TRANSACTIONS
On March 2, 2000, Terex made a loan to Ronald M. DeFeo, the Chairman, Chief
Executive Officer, President and Chief Operating Officer of the Company, in the
amount of $3.0. The loan currently bears interest at 4.5% per annum and matures
on March 31, 2005. Mr. DeFeo prepaid $1.0 of the principal amount of the loan in
October 2000. The loan is fully recourse to Mr. DeFeo and is secured by shares
of Common Stock owned by Mr. DeFeo and by payment of amounts earned by Mr. DeFeo
under the LTIP. The terms of the loan require prepayment by Mr. DeFeo of some or
all of the loan's outstanding balance upon the occurrence of certain events,
including Mr. DeFeo's ceasing to be employed by the Company for any reason
(including death or disability), Mr. DeFeo's failing to pay any amounts due
under the loan, the attainment of certain Common Stock price targets and the
payment to Mr. DeFeo of amounts under the LTIP.
Certain former executive officers and directors of the Company and Marvin B.
Rosenberg, a current director and former executive officer of the Company, are
named along with the Company in an ongoing private litigation initiated by the
End of the Road Trust, the successor to certain of the assets of the bankruptcy
estate of Fruehauf Trailer Corporation, a former subsidiary of the Company. The
Company expended approximately $2.4, $0.5 and $0.3 for legal fees and expenses
in 2001, 2000 and 1999, respectively, for this matter, which included the
defense of Mr. Rosenberg, as well as other former executive officers and
directors of the Company. The Company is unable to separately determine the
portion of these legal fees and expenses allocable to Mr. Rosenberg
individually. The Company has reached an agreement in principal to settle this
matter in a manner which will not have a material adverse effect on the
Company's operations.
In July and August 1999, the Company entered the 1999 Bank Credit Facility with
a syndicate of lenders. Ares Leveraged Investment Fund L.P. ("Ares") and Ares
Leveraged Investment Fund II, L.P. ("Ares II"), affiliates of David A. Sachs, a
director of the Company, participated as lenders under the 1999 Bank Credit
Facility for the amount of $14.0. Ares and Ares II also received a fee of less
than $0.1 for participating as lenders under the 1999 Bank Credit Facility. On
March 6, 1998, the Company entered the 1998 Bank Credit Facility with a
syndicate of lenders. Ares participated as a lender under the 1998 Bank Credit
Facility for the amount of $15.0 and received a fee of less than $0.1 for such
participation. Ares, Ares II, Ares III CLO Ltd., Ares IV CLO Ltd., and Ares V
CLO Ltd., other affiliates of Mr. Sachs (collectively, the "Ares Funds"),
currently hold approximately $9 of the Company's debt under the 1999 Bank Credit
Facility and the 1998 Bank Credit Facility. Participation by Ares and Ares II as
lenders under the 1999 Bank Credit Facility and by Ares under the 1998 Bank
Credit Facility, and purchases of debt by all of the Ares Funds from
time-to-time, have been in the ordinary course of business of the Ares Funds and
on the same terms as all other lenders and purchasers of debt under the
Company's 1999 and 1998 Bank Credit Facilities.
The Ares Funds also purchased $10 principal amount of the Company's 8-7/8% Notes
issued on March 6, 1999 and $5 principal amount of the Company's 10-3/8% Notes
issued on March 29, 2001. The Ares Funds currently hold approximately $3.5 of
the Company's Senior Subordinated Notes. The purchase by the Ares Funds of the
Company's Senior Subordinated Notes were made in the ordinary course of business
by the Ares Funds and on the same terms as all other purchasers of such Senior
Subordinated Notes.
On August 28, 1995, the Company's former chairman retired from his positions
with the Company and its Board of Directors. In connection with his retirement,
the Company (upon the recommendation of a committee comprised of its independent
Directors and represented by independent counsel) and the former chairman
executed a retirement agreement providing certain benefits to the former
chairman and the Company. The agreement provides, among other things, for a
five-year consulting engagement requiring the former chairman to make himself
available to the Company to provide consulting services for certain portions of
his time. The former chairman, or his designee, received a fee for consulting
services which included payments in an amount, and a rate, equal to his 1995
base salary until December 31, 1996. The agreement also provides for the (i)
granting of a five-year $1.8 million loan bearing interest at 6.56% per annum
which is subject to being forgiven in increments over the five-year term of the
agreement upon certain conditions, and (ii) equity grants having a maximum
potential of 200.0 thousand shares of Terex Common Stock conditioned upon the
Company achieving certain financial performance objectives in the future. During
1998 the former chairman received 150.0 thousand shares of common stock in
accordance with this agreement. In contemplation of the execution of this
retirement agreement, the Company advanced to the former chairman the principal
F - 28
amount of the forgivable loan. During 2000 and 1999, the Company forgave $0.1
and $0.2, respectively, of principal on the loan along with the current
interest. As of December 31, 2001, no principal or interest are owed to the
Company for this loan.
On December 31, 1997, Marvin B. Rosenberg, a director of the Company retired as
an officer of the Company. In connection with his retirement, the Company and
Mr. Rosenberg entered into an agreement providing certain benefits to the former
officer and the Company. Pursuant to the agreement, Mr. Rosenberg received an
award of 5.0 thousand shares of Common Stock in consideration of his years of
service to the Company. The agreement also provided for a two-year consulting
engagement requiring Mr. Rosenberg to make himself available to the Company to
provide consulting services for a certain portion of his time, for such services
he received a consulting fee of $0.1 for services provided in 1999.
The Company requires that all transactions with affiliates be on terms no less
favorable to the Company than could be obtained in comparable transactions with
an unrelated person. The Board of Directors is advised in advance of any such
proposed transaction or agreement and utilizes such procedures in evaluating
their terms and provisions as are appropriate in light of the Board's fiduciary
duties under Delaware law. In addition, the Company has an Audit Committee
consisting solely of independent directors. One of the responsibilities of the
Audit Committee is to review related party transactions.
NOTE O-- BUSINESS SEGMENT INFORMATION
Terex is a diversified global manufacturer of a broad range of equipment for the
construction, infrastructure and mining industries. During 2001, the Company
began operating in three business segments: (i) Terex Americas; (ii) Terex
Europe; and (iii) Terex Mining. Previously, the Company had reported its
operations as Terex Earthmoving and Terex Lifting. All prior periods have been
restated to reflect results based on the three current business segments.
Terex Americas includes the results of all business units located in North and
South America, Australia and Asia, with the exception of those business units
included within Terex Mining. Terex Europe includes the results of all business
units located in Europe with the exception of those business units included
within Terex Mining. Terex Mining includes the results of the Terex Mining
operations in Tulsa, Oklahoma, the O&K Mining business located in Dortmund,
Germany and certain sales offices in Australia, South America and Africa.
F - 29
Business segment information is presented below:
2001 2000 1999
------------- ------------- --------------
Sales
Terex Americas..................................... $ 857.8 $ 1,095.4 $ 873.3
Terex Europe....................................... 872.3 895.1 718.6
Terex Mining....................................... 266.2 319.3 453.0
Eliminations/Corporate............................. (183.8) (241.1) (188.3)
------------- ------------- --------------
Total............................................ $ 1,812.5 $ 2,068.7 $ 1,856.6
============= ============= ==============
Income from Operations
Terex Americas..................................... $ 52.1 $ 107.4 $ 76.5
Terex Europe....................................... 40.8 83.1 67.0
Terex Mining....................................... 14.5 6.9 35.6
Eliminations/Corporate............................. (3.2) 0.9 (0.8)
------------- ------------- --------------
Total............................................ $ 104.2 $ 198.3 $ 178.3
============= ============= ==============
Depreciation and Amortization
Terex Americas..................................... $ 15.0 $ 14.2 $ 11.6
Terex Europe....................................... 16.3 18.0 12.4
Terex Mining....................................... 5.3 5.8 5.6
Eliminations/Corporate............................. 3.7 3.5 2.6
------------- ------------- --------------
Total............................................ $ 40.3 $ 41.5 $ 32.2
============= ============= ==============
Capital Expenditures
Terex Americas..................................... $ 7.2 $ 13.5 $ 7.8
Terex Europe....................................... 5.7 9.1 7.9
Terex Mining....................................... 0.5 1.6 5.4
Eliminations/Corporate............................. 0.1 -- 0.3
------------- ------------- --------------
Total............................................ $ 13.5 $ 24.2 $ 21.4
============= ============= ==============
Identifiable Assets
Terex Americas..................................... $ 855.9 $ 701.7
Terex Europe....................................... 1,183.1 925.4
Terex Mining....................................... 386.0 411.8
Corporate.......................................... 825.2 685.6
Eliminations....................................... (863.2) (740.8)
------------- -------------
Total............................................ $ 2,387.0 $ 1,983.7
============= =============
F - 30
Sales between segments areas are generally priced to recover costs plus a
reasonable markup for profit.
Geographic segment information is presented below:
2001 2000 1999
------------- ------------- ------------
Sales
United States........................ $ 873.7 $ 1,048.9 $ 871.2
United Kingdom....................... 216.6 213.1 151.3
Other European countries............. 382.7 384.3 353.2
All other............................ 339.5 422.4 480.9
------------- ------------- ------------
Total.............................. $ 1,812.5 $ 2,068.7 $ 1,856.6
============= ============= ============
Long-lived Assets
United States........................ $ 77.1 $ 58.5
United Kingdom....................... 52.6 44.0
Other European Countries............. 38.8 49.7
All other............................ 5.4 1.7
------------- -------------
Total.............................. $ 173.9 $ 153.9
============= =============
The Company attributes sales to unaffiliated customers in different geographical
areas on the basis of the location of the customer. Long-lived assets include
net fixed assets which can be attributed to the specific geographic regions.
The Company is not dependent upon any single customer.
NOTE P -- CONSOLIDATING FINANCIAL STATEMENTS
On March 29, 2001, the Company sold and issued $300 aggregate principal amount
of the 10-3/8% Notes. On December 17, 2001, the Company sold and issued $200
aggregate principal amount of the 9-1/4% Notes. On March 31, 1998 and March 9,
1999, the Company issued and sold $150.0 and $100.0 aggregate principal amount,
respectively, of the 8-7/8% Notes. As of December 31, 2001, the 10-3/8% Notes,
the 9-1/4% Notes and the 8-7/8% Notes were 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, Payhauler Corp., O & K Orenstein & Koppel, Inc., The
American Crane Corporation, Amida Industries, Inc., Cedarapids, Inc., Standard
Havens, Inc., Standard Havens Products, Inc., BL-Pegson USA, Inc., Benford
America, Inc., Coleman Engineering, Inc., EarthKing, Inc., Finlay Hydrascreen
USA, Inc., Powerscreen Holdings USA Inc., Powerscreen International LLC,
Powerscreen North America Inc., Powerscreen USA, LLC, Royer Industries, Inc.,
Terex Bartell, Inc., Terex Mining Equipment, Inc. and CMI Terex Corporation. The
10-3/8% Notes and the 8-7/8% Notes are also jointly and severally guaranteed by
PPM Cranes, Inc., which is 92.4% owned by Terex.
No subsidiaries of the Company except the Wholly-owned Guarantors and PPM
Cranes, Inc. have provided a guarantee of the 10-3/8% Notes and the 8-7/8%
Notes. No subsidiaries of the Company except the Wholly-owned Guarantors have
provided a guarantee of the 9-1/4% Notes.
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 an equity basis.
Non-guarantor Subsidiaries combine the operations of subsidiaries which have not
provided a guarantee of the obligations of Terex Corporation under the 10-3/8%
Notes, the 9-1/4% Notes and the 8-7/8% Notes.
Debt and goodwill allocated to subsidiaries is presented on an accounting
"push-down" basis.
F - 31
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2001
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Net sales............................... $ 233.4 $ 654.8 $ 46.0 $ 1,070.1 $ (191.8) $ 1,812.5
Cost of goods sold.................... 226.1 559.6 40.6 901.4 (191.8) 1,535.9
------------- ------------- ------------- ------------- ------------- -------------
Gross profit............................ 7.3 95.2 5.4 168.7 --- 276.6
Selling, general & administrative
expenses............................. 20.9 47.4 10.4 93.7 --- 172.4
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from operations........... (13.6) 47.8 (5.0) 75.0 --- 104.2
Interest income....................... 3.4 0.2 --- 4.1 --- 7.7
Interest expense...................... (28.0) (12.7) (4.5) (41.5) --- (86.7)
Income (loss) from equity investees... 44.2 --- --- --- (44.2) ---
Gain on sale of businesses............
Other income (expense) - net.......... 1.5 (3.7) (0.1) 1.7 --- (0.6)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes and
extraordinary items................... 7.5 31.6 (9.6) 39.3 (44.2) 24.6
Benefit from (provision for) income
taxes................................ 7.0 (1.1) --- (13.8) --- (7.9)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from continuing operations
before extraordinary items............ 14.5 30.5 (9.6) 25.5 (44.2) 16.7
Loss from discontinued operations..... --- --- --- --- --- ---
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before extraordinary items 14.5 30.5 (9.6) 25.5 (44.2) 16.7
Extraordinary loss on retirement of
debt................................. (1.7) (1.0) --- (1.2) --- (3.9)
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss)....................... $ 12.8 $ 29.5 $ (9.6) $ 24.3 $ (44.2) $ 12.8
============= ============= ============= ============= ============= =============
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Net sales............................... $ 371.9 $ 657.1 $ 69.5 $ 1,190.0 $ (219.8) $ 2,068.7
Cost of goods sold.................... 329.1 548.6 58.2 988.4 (219.2) 1,705.1
------------- ------------- ------------- ------------- ------------- -------------
Gross profit............................ 42.8 108.5 11.3 201.6 (0.6) 363.6
Selling, general & administrative
expenses............................. 27.1 31.1 7.7 99.4 --- 165.3
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from operations........... 15.7 77.4 3.6 102.2 (0.6) 198.3
Interest income....................... 3.7 0.1 --- 1.7 --- 5.5
Interest expense...................... (19.8) (16.9) (5.9) (57.2) --- (99.8)
Income (loss) from equity investees... 105.2 --- 0.1 --- (105.3) ---
Gain on sale of businesses............ 39.0 --- --- 18.2 --- 57.2
Other income (expense) - net.......... 2.5 (0.9) (0.2) (3.0) --- (1.6)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes and
extraordinary items................... 146.3 59.7 (2.4) 61.9 (105.9) 159.6
Benefit from (provision for) income
taxes................................ (42.4) (0.3) --- (13.0) --- (55.7)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from continuing operations
before extraordinary items............ 103.9 59.4 (2.4) 48.9 (105.9) 103.9
Loss from discontinued operations..... (7.3) --- --- --- --- (7.3)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before extraordinary items 96.6 59.4 (2.4) 48.9 (105.9) 96.6
Extraordinary loss on retirement of
debt................................. (1.5) --- --- --- --- (1.5)
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss)....................... $ 95.1 $ 59.4 $ (2.4) $ 48.9 $ (105.9) $ 95.1
============= ============= ============= ============= ============= =============
F - 32
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Net sales............................... $ 504.3 $ 580.8 $ 73.4 $ 889.2 $ (191.1) $ 1,856.6
Cost of goods sold.................... 440.4 499.6 64.4 725.0 (189.5) 1,539.9
------------- ------------- ------------- ------------- ------------- -------------
Gross profit............................ 63.9 81.2 9.0 164.2 (1.6) 316.7
Selling, general & administrative
expenses............................. 22.0 29.7 6.2 80.5 --- 138.4
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from operations........... 41.9 51.5 2.8 83.7 (1.6) 178.3
Interest income....................... 2.6 0.4 --- 2.3 --- 5.3
Interest expense...................... (27.6) (11.4) (2.4) (41.4) --- (82.8)
Income (loss) from equity investees... 79.6 --- (1.9) (2.6) (75.1) ---
Other income (expense) - net.......... 2.5 2.1 (1.0) (6.0) --- (2.4)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes and
extraordinary items................... 99.0 42.6 (2.5) 36.0 (76.7) 98.4
Benefit from (provision for) income
taxes................................ 73.9 --- --- 0.6 --- 74.5
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before extraordinary items 172.9 42.6 (2.5) 36.6 (76.7) 172.9
Extraordinary loss on retirement of
debt................................. --- --- --- --- --- ---
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss)....................... $ 172.9 $ 42.6 $ (2.5) $ 36.6 $ (76.7) $ 172.9
============= ============= ============= ============= ============= =============
F - 33
TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2001
(in millions)
Wholly- Non-
Terex Owned PPM Guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Assets
Current assets
Cash and cash equivalents.......... $ 144.2 $ 3.9 $ 0.1 $ 102.2 $ --- $ 250.4
Trade receivables - net............ 23.1 94.6 3.9 229.5 --- 351.1
Intercompany receivables........... 14.2 18.7 --- 66.2 (99.1) ---
Net inventories.................... 76.1 254.2 14.5 361.8 (1.8) 704.8
Current deferred tax assets........ 22.5 0.4 --- 0.8 --- 23.7
Other current assets............... 13.2 2.7 0.1 37.0 --- 53.0
------------- ------------- ------------- ------------- ------------- -------------
Total current assets............. 293.3 374.5 18.6 797.5 (100.9) 1,383.0
Property, plant & equipment - net.... 8.4 66.2 0.2 99.1 --- 173.9
Investment in and advances to
(from) subsidiaries.............. 647.2 (245.2) (0.2) (295.4) (106.4) ---
Goodwill - net....................... 2.7 252.1 10.6 354.7 --- 620.1
Deferred taxes....................... 74.7 --- --- 0.7 --- 75.4
Other assets - net................... 33.4 44.6 0.7 55.9 --- 134.6
------------- ------------- ------------- ------------- ------------- -------------
Total assets............................ $ 1,059.7 $ 492.2 $ 29.9 $ 1,012.5 $ (207.3) $ 2,387.0
============= ============= ============= ============= ============= =============
Liabilities and stockholders' equity
(deficit)
Current liabilities
Notes payable and current portion
of long-term debt................ $ 0.4 $ 2.6 $ 0.4 $ 31.3 $ --- $ 34.7
Trade accounts payable............. 33.4 54.0 3.3 200.3 --- 291.0
Intercompany payables.............. 23.1 21.1 2.2 52.7 (99.1) ---
Current deferred tax liabilities... (0.8) 0.5 --- 0.3 --- ---
Accruals and other current
liabilities...................... 71.1 87.1 7.0 136.2 --- 301.4
------------- ------------- ------------- ------------- ------------- -------------
Total current liabilities........ 127.2 165.3 12.9 420.8 (99.1) 627.1
Long-term debt less current portion.. 298.6 185.8 62.4 473.9 --- 1,020.7
Other long-term liabilities.......... 38.5 10.6 0.8 93.9 --- 143.8
Stockholders' equity (deficit)....... 595.4 130.5 (46.2) 23.9 (108.2) 595.4
------------- ------------- ------------- ------------- ------------- -------------
Total liabilities and stockholders'
equity (deficit)..................... $ 1,059.7 $ 492.2 $ 29.9 $ 1,012.5 $ (207.3) $ 2,387.0
============= ============= ============= ============= ============= =============
F - 34
TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2000
(in millions)
Wholly- Non-
Terex Owned PPM Guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Assets
Current assets
Cash and cash equivalents.......... $ 108.7 $ 0.3 $ 0.1 $ 72.3 $ --- $ 181.4
Trade receivables - net............ 22.2 70.7 8.7 258.6 --- 360.2
Intercompany receivables........... 36.4 28.9 17.5 60.7 (143.5) ---
Net inventories.................... 75.2 157.0 16.3 360.4 (10.8) 598.1
Current deferred tax assets........ 51.0 --- --- --- --- 51.0
Other current assets............... 4.5 1.6 0.3 45.3 --- 51.7
------------- ------------- ------------- ------------- ------------- -------------
Total current assets............. 298.0 258.5 42.9 797.3 (154.3) 1,242.4
Property, plant & equipment - net.... 12.7 40.7 0.6 99.9 --- 153.9
Investment in and advances to
(from) subsidiaries.............. 346.1 (117.6) (1.5) (137.3) (89.7) ---
Goodwill - net....................... 11.1 168.1 11.9 300.3 --- 491.4
Deferred taxes....................... 21.2 --- --- --- --- 21.2
Other assets - net................... 8.1 35.2 0.7 30.8 --- 74.8
------------- ------------- ------------- ------------- ------------- -------------
Total assets............................ $ 697.2 $ 384.9 $ 54.6 $ 1,091.0 $ (244.0) $ 1,983.7
============= ============= ============= ============= ============= =============
Liabilities and stockholders' equity
(deficit)
Current liabilities
Notes payable and current portion
of long-term debt................ $ 0.8 $ --- $ 0.5 $ 19.2 $ --- $ 20.5
Trade accounts payable............. 32.7 57.0 10.2 211.3 --- 311.2
Intercompany payables.............. 3.8 15.2 9.3 115.2 (143.5) ---
Current deferred tax liabilities... --- --- --- --- --- ---
Accruals and other current
liabilities...................... 74.8 35.7 7.4 126.0 --- 243.9
------------- ------------- ------------- ------------- ------------- -------------
Total current liabilities........ 112.1 107.9 27.4 471.7 (143.5) 575.6
Long-term debt less current portion.. 117.0 163.9 62.6 538.5 --- 882.0
Other long-term liabilities.......... 16.6 12.1 1.2 44.7 --- 74.6
Stockholders' equity (deficit)....... 451.5 101.0 (36.6) 36.1 (100.5) 451.5
------------- ------------- ------------- ------------- ------------- -------------
Total liabilities and stockholders'
equity (deficit)..................... $ 697.2 $ 384.9 $ 54.6 $ 1,091.0 $ (244.0) $ 1,983.7
============= ============= ============= ============= ============= =============
F - 35
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2001
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
operating activities $ (223.0) $ 41.3 $ 0.5 $ 175.7 $ --- $ (5.5)
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from investing activities:
Proceeds from sale of business........ --- --- --- --- --- ---
Acquisition of business, net of cash
acquired............................. (5.3) (68.7) --- (15.7) --- (89.7)
Capital expenditures.................. (1.1) (5.1) --- (7.3) --- (13.5)
Proceeds from sale of assets 0.3 1.0 --- 6.7 --- 8.0
Other................................. --- --- --- (41.1) --- (41.1)
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
investing activities............... (6.1) (72.8) --- (57.4) --- (136.3)
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from financing activities:
Principal repayments of long-term debt (38.5) (90.0) (0.5) (259.5) --- (388.5)
Net borrowings (repayments) under
revolving line of credit agreements.. --- --- --- 23.6 23.6
Proceeds from issuance of long-term
debt, net of issuance costs.......... 207.0 125.2 --- 149.2 --- 481.4
Issuance of common stock.............. 96.3 --- --- --- --- 96.3
Other................................. (0.2) (0.1) --- (1.0) --- (1.3)
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
financing activities............... 264.6 35.1 (0.5) (87.7) --- 211.5
------------- ------------- ------------- ------------- ------------- -------------
Effect of exchange rates on cash and
cash equivalents...................... --- --- --- (0.7) --- (0.7)
------------- ------------- ------------- ------------- ------------- -------------
Net (decrease) increase in cash and cash
equivalents........................... 35.5 3.6 --- 29.9 69.0
Cash and cash equivalents, beginning of
period................................ 108.7 0.3 0.1 72.3 --- 181.4
------------- ------------- ------------- ------------- ------------- -------------
Cash and cash equivalents, end of period $ 144.2 $ 3.9 $ 0.1 $ 102.2 $ --- $ 250.4
============= ============= ============= ============= ============= =============
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2000
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
operating activities $ 180.2 $ 4.9 $ 1.1 $ 14.4 $ --- $ 200.6
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from investing activities:
Proceeds from sale of business........ 51.8 --- --- 92.5 --- 144.3
Acquisition of business, net of cash
acquired............................. (2.9) (0.5) --- (16.6) --- (20.0)
Capital expenditures.................. (2.5) (12.6) (0.3) (8.8) --- (24.2)
Proceeds from sale of assets.......... --- 6.8 --- 4.0 --- 10.8
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
investing activities............... 46.4 (6.3) (0.3) 71.1 --- 110.9
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from financing activities:
Principal repayments of long-term debt (161.0) --- (0.8) (21.3) --- (183.1)
Net borrowings (repayments) under
revolving line of credit agreements.. --- --- --- (53.6) (53.6)
Purchases of common stock held in
treasury............................. (20.2) --- --- --- --- (20.2)
Other................................. (1.0) --- --- (3.3) (4.3)
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
financing activities............... (182.2) --- (0.8) (78.2) --- (261.2)
------------- ------------- ------------- ------------- ------------- -------------
Effect of exchange rates on cash and
cash equivalents...................... --- --- --- (2.2) --- (2.2)
------------- ------------- ------------- ------------- ------------- -------------
Net (decrease) increase in cash and cash
equivalents........................... 44.4 (1.4) --- 5.1 48.1
Cash and cash equivalents, beginning of
period................................ 64.3 1.7 0.1 67.2 --- 133.3
------------- ------------- ------------- ------------- ------------- -------------
Cash and cash equivalents, end of period $ 108.7 $ 0.3 $ 0.1 $ 72.3 $ --- $ 181.4
============= ============= ============= ============= ============= =============
F - 36
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1999
(in millions)
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
operating activities $ 326.5 $ (124.8) $ 0.6 $ (197.3) $ --- $ 5.0
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from investing activities:
Acquisition of business, net of cash
acquired............................. (535.6) --- --- --- --- (535.6)
Capital expenditures.................. (3.3) (4.6) (0.2) (13.3) --- (21.4)
Proceeds from sale of assets.......... --- 2.6 0.4 1.0 --- 4.0
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
investing activities............... (538.9) (2.0) 0.2 (12.3) --- (553.0)
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt, net of issuance costs.......... 123.7 128.0 --- 282.9 --- 534.6
Net borrowings (repayments) under
revolving line of credit agreements.. (1.5) --- --- (15.8) --- (17.3)
Principal repayments of long-term debt (18.7) (0.2) (0.8) (14.0) --- (33.7)
Payment of premiums on early
extinguishment of debt............... --- --- --- --- --- ---
Issuance of common stock.............. 162.8 --- --- --- --- 162.8
Other................................. 1.1 0.2 --- 9.5 --- 10.8
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
financing activities............... 267.4 128.0 (0.8) 262.6 --- 657.2
------------- ------------- ------------- ------------- ------------- -------------
Effect of exchange rates on cash and
cash equivalents...................... --- --- --- (1.0) --- (1.0)
------------- ------------- ------------- ------------- ------------- -------------
Net (decrease) increase in cash and cash
equivalents........................... 55.0 1.2 --- 52.0 --- 108.2
Cash and cash equivalents, beginning of
period................................ 9.3 0.5 0.1 15.2 --- 25.1
------------- ------------- ------------- ------------- ------------- -------------
Cash and cash equivalents, end of period $ 64.3 $ 1.7 $ 0.1 $ 67.2 $ --- $ 133.3
============= ============= ============= ============= ============= =============
F - 37
NOTE Q - SUBSEQUENT EVENT (UNAUDITED)
On March 26, 2002, the Company acquired EPAC Holdings, Inc., which does business
under the names Telelect East and Eusco ("EPAC"). EPAC, headquartered in
Tennessee with locations in various states, distributes, assembles, rents and
provides service of products for the utility, telecommunications and municipal
markets. In connection with the acquisition, the Company issued approximately
300 thousand shares of Common Stock and cash.
F - 38
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of PPM Cranes, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in shareholders' deficit and
of cash flows present fairly, in all material respects, the financial position
of PPM Cranes, Inc. and its subsidiaries (the "Company") at December 31, 2001
and 2000, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Stamford, Connecticut
February 20, 2002
F - 39
PPM Cranes, Inc.
Consolidated Statement of Operations
(in millions)
Year Ended December 31,
------------------------------------------------------------
2001 2000 1999
----------------- ------------------- ------------------
Net sales..............................................$ 46.0 $ 69.5 $ 80.4
Cost of goods sold..................................... 40.6 58.2 70.2
----------------- ------------------- ------------------
Gross profit...................................... 5.4 11.3 10.2
Selling, general and administrative expenses........... 10.4 7.7 7.2
----------------- ------------------- ------------------
Income (loss) from operations..................... (5.0) 3.6 3.0
Other income (expense):
Interest expense.................................. (4.5) (5.8) (4.8)
Amortization of debt issuance costs............... (0.1) (0.2) (0.2)
Other income (expense)............................ --- --- (0.5)
----------------- ------------------- ------------------
Income (loss) before income taxes................. (9.6) (2.4) (2.5)
Provision for income taxes............................. --- --- ---
----------------- ------------------- ------------------
Net loss..........................................$ (9.6) $ (2.4) $ (2.5)
================= =================== ==================
The accompanying notes are an integral part of these financial statements.
F - 40
PPM Cranes, Inc.
Consolidated Balance Sheet
(in millions, except share amounts)
December 31,
---------------------------
2001 2000
------------- -------------
Assets
Current assets:
Cash and cash equivalents.......................................................... $ 0.1 $ 0.1
Trade accounts receivable (net of allowance of $0.6 and $0.7 at
December 31, 2001 and 2000, respectively)......................................... 3.9 8.7
Net inventories.................................................................... 14.5 16.3
Due from affiliates................................................................ 0.7 17.5
Prepaid expenses and other current assets.......................................... 0.1 0.3
------------- -------------
Total current assets................................................................. 19.3 42.9
Property, plant and equipment - net.................................................. 0.3 0.6
Intangible assets:
Goodwill - net..................................................................... 10.6 11.9
Other assets - net................................................................. 0.7 0.7
------------- -------------
Total assets......................................................................... $ 30.9 $ 56.1
============= =============
Liabilities and shareholders' deficit Current liabilities:
Trade accounts payable............................................................. $ 3.3 $ 10.2
Accrued warranties and product liability........................................... 4.8 5.5
Accrued expenses................................................................... 2.4 1.9
Due to affiliates.................................................................. 2.2 9.3
Due to Terex Corporation........................................................... 0.9 1.7
Current portion of long-term debt.................................................. 0.4 0.5
------------- -------------
Total current liabilities............................................................ 14.0 29.1
------------- -------------
Non-current liabilities:
Long-term debt, less current portion............................................... 62.4 62.6
Other non-current liabilities...................................................... 0.7 1.0
------------- -------------
Total non-current liabilities........................................................ 63.1 63.6
------------- -------------
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................................................................ (46.2) (36.6)
Accumulated other comprehensive income - foreign currency translation adjustments.. --- ---
------------- -------------
Total shareholders' deficit.......................................................... (46.2) (36.6)
------------- -------------
Total liabilities and shareholders' deficit.......................................... $ 30.9 $ 56.1
============= =============
The accompanying notes are an integral part of these financial statements.
F - 41
PPM Cranes, Inc.
Consolidated Statement of Changes of Shareholders' Deficit
(in millions)
Accumulated
Other
Common Accumulated Comprehensive
Stock Deficit Income (Loss) Total
--------------- -------------- ------------------- ----------------
Balance at December 31, 1998.......... --- (31.7) (0.1) (31.8)
Net loss.......................... --- (2.5) --- (2.5)
Translation adjustment............ --- --- 0.1 0.1
----------------
Comprehensive loss................ (2.4)
--------------- -------------- ------------------ ----------------
Balance at December 31, 1999 --- (34.2) --- (34.2)
Net loss.......................... --- (2.4) --- (2.4)
Translation adjustment............ --- --- --- ---
----------------
Comprehensive loss............... (2.4)
--------------- -------------- ------------------ ----------------
Balance at December 31, 2000.......... $ --- $ (36.6) $ --- $ (36.6)
Net loss.......................... --- (9.6) --- (9.6)
Translation adjustment............ --- --- --- ---
----------------
Comprehensive loss............... (9.6)
--------------- -------------- ------------------ ----------------
Balance at December 31, 2001 $ --- $ (46.2) $ --- $ (46.2)
=============== ============== ================== ================
The accompanying notes are an integral part of these financial statements.
F - 42
PPM Cranes, Inc.
Consolidated Statement of Cash Flows
(in millions)
Year Ended December 31,
---------------------------------------------------------
2001 2000 1999
------------------ ------------------ ----------------
Operating activities
Net loss........................................................$ (9.6) $ (2.4) $ (2.5)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization............................... 1.5 1.5 1.5
Loss on sale of subsidiary.................................. --- --- 0.7
Gain on sale of property, plant and equipment............... --- --- (0.4)
Other....................................................... --- --- 0.1
Changes in operating assets and liabilities:
Trade accounts receivable.............................. 4.8 12.6 (2.0)
Net inventories........................................ 1.8 1.9 12.2
Trade accounts payable................................. (6.9) 3.8 (4.2)
Net amounts due to affiliates.......................... 9.0 (15.5) (2.6)
Other - net............................................ (0.1) (0.8) (2.3)
------------------ ------------------ ----------------
Net cash provided by operating activities....................... 0.5 1.1 0.5
------------------ ------------------ ----------------
Investing activities
Capital expenditures............................................ --- (0.3) (0.2)
Proceeds from sale of excess assets............................. --- --- 0.4
------------------ ------------------ ----------------
Net cash provided by (used in) investing activities............. --- (0.3) 0.2
------------------ ------------------ ----------------
Financing activities
Principal repayments of long-term debt.......................... (0.5) (0.8) (0.8)
------------------ ------------------ ----------------
Net cash used in financing activities........................... (0.5) (0.8) (0.8)
------------------ ------------------ ----------------
Effect of exchange rate changes on cash......................... --- --- ---
------------------ ------------------ ----------------
Net increase (decrease) in cash and cash equivalents............ --- --- (0.1)
Cash and cash equivalents at beginning of period................ 0.1 0.1 0.2
------------------
------------------ ----------------
Cash and cash equivalents at end of period......................$ 0.1 $ 0.1 $ 0.1
================== ================== ================
Supplemental disclosure of cash flow information
Cash paid for interest..........................................$ 0.4 $ 0.4 $ 0.4
================== ================== ================
Cash paid for income taxes......................................$ --- $ --- $ ---
================== ================== ================
The accompanying notes are an integral part of these financial statements.
F - 43
PPM CRANES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(In millions of dollars)
NOTE 1 -- DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
PPM Cranes, Inc. (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., completed the acquisition of all of the capital stock of Legris
Industries, Inc., a Delaware corporation which owns 92.4% of the capital stock
of PPM Cranes, Inc. Terex Corporation and Terex Cranes, Inc., are both Delaware
corporations. Prior to the acquisition of Legris Industries, Inc. by Terex
Cranes, Inc. on May 9, 1995, Legris Industries, Inc. was a holding company, with
no assets, liabilities, or operations other than its investment in PPM.
The 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.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include the
accounts of the Company and its wholly-owned inactive subsidiary PPM Far East
Private Ltd. Prior to November 30, 1999 the accounts of the Company's other
wholly-owned subsidiary, PPM of Australia Pty. Ltd. ("PPM Australia"), were also
included. On November 30, 1999, the Company sold its ownership in PPM Australia
to Terex Corporation for $1.2, resulting in a loss of $0.7, which has been
included in other income (expense). All material intercompany transactions and
profits have been eliminated.
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Inventories. Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out (FIFO) method.
Property, Plant and Equipment. Additions and major replacements or improvements
to property, plant and equipment are recorded at cost. Maintenance, repairs and
minor replacements are charged to expense when incurred. Plant and equipment are
depreciated over the estimated useful lives of the assets under the
straight-line method of depreciation for financial reporting purposes and both
straight-line and other methods for tax purposes.
Goodwill. Goodwill, representing the difference between the total purchase price
and the fair value of assets (tangible and intangible) and liabilities at the
date of acquisition, is amortized on a straight-line basis over fifteen years.
Accumulated amortization is $8.6 and $7.3 at December 31, 2001 and 2000,
respectively. In July 2001, the Financial Accounting Standards Board issued SFAS
No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible
Assets." SFAS No. 141 effective July 1, 2001, addresses financial accounting and
reporting for business combinations and requires all business combinations to be
accounted for using the purchase method. SFAS No. 142 addresses financial
accounting for acquired goodwill and other intangible assets and how such assets
should be accounted for in financial statements upon their acquisition and after
they have been initially recognized in the financial statements. In accordance
with SFAS 142, goodwill related to acquisitions completed after June 30, 2001,
has not been amortized and effective January 1, 2002, goodwill related to
acquisitions completed prior to July1, 2001, will no longer be amortized. Under
this standard, goodwill and indefinite life intangible assets will be reviewed
for impairment and written down only in the period in which the recorded value
of such assets exceed their fair value. The Company's initial impairment test
must be performed on all reporting units by June 30, 2002. Any required
adjustment from adoption will be recorded as a cumulative effect adjustment as
of January 1, 2002.
F - 44
Debt Issuance Costs. Debt issuance costs incurred by Terex Corporation in
securing the financing related to acquiring the Company have been capitalized
and are reflected in the financial statements. Capitalized debt issuance costs
are amortized over the term of the related debt. Accumulated amortization is
$0.7 and $0.6 at December 31, 2001 and 2000, respectively.
Impairment of Long Lived Assets. The Company's policy is to assess the
realizability of its long lived assets and to evaluate such assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets (or group of assets) may not be recoverable.
Impairment is determined to exist if the estimated future undiscounted cash
flows is less than its carrying value. The amount of any impairment then
recognized would be calculated as the difference between estimated future
discounted cash flows and the carrying value of the asset.
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
was issued in October 2001. SFAS No. 144 is effective for the Company on January
1, 2002 and provides new guidance on the recognition of impairment losses on
long-lived assets to be held and used or to be disposed of and also broadens the
definition of what constitutes a discontinued operation and how the results of a
discontinued operation are to be measured and presented. The adoption of the
standard is not expected to materially change the methods used by the Company to
determine impairment losses on long-lived assets, but may result in additional
matters being reported as discontinued operations.
Product Liability and Warranty. The Company records accruals for potential
warranty and product liability claims based on the Company's claim experience.
Warranty costs are accrued at the time revenue is recognized. The Company
provides self-insurance accruals for estimated product liability experience on
known claims.
Income Taxes. Income taxes are provided using the liability method in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes." The Company is a part of a group that files a consolidated
income tax return. The method used to allocate income taxes to members of the
group is one in which current and deferred income taxes are calculated on a
separate return basis as if the Company had not been included in a consolidated
income tax return with its parent. The tax impact associated with the 1998 Bank
Credit Facility (as defined in Note 5) has been taken into account in the
Company's tax provision.
Revenue Recognition. Revenue and costs are generally recorded when products are
shipped and invoiced to either independently owned and operated dealers or to
customers. Certain new units may be invoiced prior to the time customers take
physical possession. Revenue is recognized in such cases only when the customer
has a fixed commitment to purchase the units, the units have been completed,
tested and made available to the customer for pickup or delivery, and the
customer has requested that the Company hold the units for pickup or delivery at
a time specified by the customer. In such cases, the units are invoiced under
the Company's customary billing terms, title to the units and risks of ownership
pass to the customer upon invoicing, the units are segregated from the Company's
inventory and identified as belonging to the customer and the Company has no
further obligations under the order.
Foreign Currency Translation. Assets and liabilities of the Company's
international operations are translated at year-end exchange rates. Income and
expenses are translated at average exchange rates prevailing during the year.
For operations whose functional currency is the local currency, translation
adjustments are accumulated in the Cumulative Translation Adjustment component
of Stockholders' Deficit. Gains or (losses) resulting from foreign currency
transactions are recorded in the accounts based on the underlying transaction.
During 1999, the Company recognized a loss of $0.1 in other income (expense)
related to the cumulative translation adjustment of PPM Australia at the sale
date. The translation gain included in comprehensive loss represents a
reclassification adjustment.
Environmental Policies. Environmental expenditures that relate to current
operations are either expensed or capitalized depending on the nature of the
expenditure. Expenditures relating to conditions caused by past operations that
do not contribute to current or future revenue generation are expensed.
Liabilities are recorded when environmental assessments and/or remedial actions
are probable, and the costs can be reasonably estimated. Such amounts were not
material at December 31, 2001 and 2000.
Research and Development Costs. Research and development costs are expensed as
incurred. Such costs incurred in the development of new products or significant
improvements to existing products are included in Selling, General and
Administrative Expenses.
F - 45
NOTE 3 - RESTRUCTURING AND OTHER CHARGES
During the third quarter of 2001, Terex Corporation announced that a number of
its production facilities would be consolidated, some facilities would be closed
(including PPM's Conway facility) and that other additional non-recurring
expenses would be incurred. These actions are designed to maximize factory
utilization by taking advantage of recently acquired factories and to leverage
common purchasing, engineering and marketing operations. The PPM facility closed
in the first quarter of 2002.
PPM recorded costs of $2.7 during the third quarter of 2001 for severance and
closing costs related to these actions as well as other non-recurring expenses.
The severance costs, totaling $0.5, are for the elimination of approximately 42
positions in connection with the plant closure. Other costs, totaling $2.2,
include asset write-offs and plant closing costs of which approximately $1.4
represents non-cash charges. These costs have been included in cost of sales
($2.2) and selling, general and administrative expenses ($0.5) in the condensed
consolidated statement of operations. As of December 31, 2001, all of these
costs have been accrued; cash payments took place primarily in the fourth
quarter of 2001 and are expected to be completed by the end of the first quarter
of 2002.
NOTE 4 -- INVENTORIES
Inventories consist of the following:
December 31,
--------------------
2001 2000
--------- ---------
Raw materials and supplies....................... $ 2.9 $ 5.0
Work in process.................................. 1.2 0.7
Replacement parts................................ 5.9 6.2
Finished goods equipment......................... 4.5 4.4
--------- ---------
$ 14.5 $ 16.3
========= =========
NOTE 5 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
December 31,
--------------------
2001 2000
---------- ----------
Property.......................................... $ 0.2 $ 0.2
Plant............................................. --- ---
Machinery and equipment........................... 0.6 0.6
---------- ----------
0.8 0.8
Less accumulated depreciation..................... (0.5) (0.2)
---------- ----------
$ 0.3 $ 0.6
========== ==========
Depreciation expense for 2001, 2000 and 1999 was $0.3, $0.0 and $0.0,
respectively.
F - 46
NOTE 6 - LONG-TERM DEBT
Long-term debt at is summarized as follows:
December 31,
---------------------
2001 2000
---------- ----------
1998 Bank Credit Facility............................. $ 60.0 $ 60.0
Note payable.......................................... 2.8 3.1
---------- ----------
Total long-term debt............................... 62.8 63.1
Less: Current portion of long-term debt............ (0.4) (0.5)
---------- ----------
Long-term debt, less current portion............... $ 62.4 $ 62.6
========== ==========
On May 9, 1995, Terex Corporation issued $250 of 13-1/4% Senior Secured Notes
due May 15, 2002 (the "Senior Secured Notes"). The Senior Secured Notes were
issued in conjunction with Terex Corporation's acquisition of substantially all
of the capital stock of PPM Cranes, Inc. and P.P.M. S.A. and the refinancing of
Terex Corporation's debt. Of the total principal amount, $50 related to the
acquisition of substantially all of the capital stock of PPM Cranes, Inc. and
was included in the Company's consolidated balance sheet prior to March 6, 1998.
On March 6, 1998, Terex Corporation redeemed or defeased all of its $166.7
principal amount of its then outstanding Senior Secured Notes. The Company had
$50.0 in principal of the Senior Secured Notes that were redeemed. Concurrently
therewith, Terex Corporation also refinanced substantially all of its then
existing domestic and foreign revolving credit debt. The proceeds for the offer
to purchase and the repayment of its then existing revolving credit facility
were obtained from borrowings under Terex Corporation's new $500.0 global bank
credit facility ("1998 Bank Credit Facility"). In connection with the repurchase
of the Senior Secured Notes, the Company incurred an extraordinary loss of $10.9
in 1998.
The 1998 Bank Credit Facility consists of a secured global revolving credit
facility aggregating up to $125.0 (the "1998 Revolving Credit Facility") and two
term loan facilities (collectively, the "Term Loan Facilities") providing for
loans in an aggregate principal amount of up to approximately $375.0. With
limited exceptions, the obligations under the 1998 Bank Credit Facility are
secured by (i) a pledge of all of the capital stock of domestic subsidiaries of
Terex Corporation, (ii) a pledge of 65% of the stock of the foreign subsidiaries
of Terex Corporation and (iii) a first priority security interest in, and
mortgages on, substantially all of the assets of Terex and its domestic
subsidiaries. The 1998 Bank Credit Facility contains covenants limiting Terex
Corporation's activities, including, without limitation, limitations on
dividends and other payments, liens, investments, incurrence of indebtedness,
mergers and asset sales, related party transactions and capital expenditures.
The 1998 Bank Credit Facility also contains certain financial and operating
covenants, including a maximum leverage ratio, a minimum interest coverage ratio
and a minimum fixed charge coverage ratio.
Pursuant to the Term Loan Facilities, Terex Corporation had borrowed (i) $175.0
in aggregate principal amount pursuant to a Term Loan A due March 2004 (the
"Term A Loan") and (ii) $200.0 in aggregate principal amount pursuant to a Term
Loan B due March 2005 (the "Term B Loan") of which $60.0 was allocated to the
Company. At December 31, 2001, there is no outstanding principal amount for the
Term A Loan. It was paid in full during 2001. The outstanding principal amount
of the Term B Loan currently bears interest, at Terex Corporation's option, at a
rate of 2.75% per annum in excess of the adjusted eurodollar rate or, with
respect to U.S. Dollar denominated alternate base rate loans, 1.75% in excess of
the prime rate. The weighted average interest rate on the Term B Loan at
December 31, 2001 was 4.85%. The Term B Loan amortizes in an annual percentage
of 1% during each of the first six years of the term of the loan and 94% in the
seventh year of the term of the loan. The Term B Loan is subject to mandatory
prepayment in certain circumstances and are voluntarily prepayable without
payment of a premium (subject to reimbursement of the lenders' costs in case of
prepayment of eurodollar loans other than on the last day of an interest
period.) As of December 31, 2001, the Term B Loan has been prepaid such that the
next scheduled principal payment is due in March 2003.
Note Payable
The note payable is to Joy Global, Inc., formerly known as Harnischfeger
Corporation, and is not interest bearing.
F - 47
Schedule of Debt Maturities
Scheduled annual maturities of long-term debt outstanding at December 31, 2001
in the successive five-year period are summarized as follows:
Note Payable -
Joy Global, Inc. Other Total
---------------- -------------- -------------
2002...........................$ 0.8 $ --- $ 0.8
2003........................... 0.8 --- 0.8
2004........................... 0.8 --- 0.8
2005........................... 0.7 --- 0.7
2006........................... 0.7 --- 0.7
Thereafter..................... 1.0 60.0 61.0
---------------- -------------- -------------
4.8 60.0 64.8
Imputed Interest............... (2.0) --- (2.0)
---------------- -------------- -------------
$ 2.8 $ 60.0 $ 62.8
================ ============== =============
The Company believes that the carrying value of other borrowings approximates
fair market value, based on discounting future cash flows using rates currently
available for debt of similar terms and remaining maturities.
NOTE 7 -- EMPLOYEE BENEFIT PLAN
The Company participates in a defined contribution plan which is sponsored by
Terex Corporation. The plan covers U.S. employees. Under the plan, the Company
matches a portion of an employee's contribution to the plan. The related expense
to the Company was $0.1, $0.1 and $0.1 for 2001, 2000 and 1999, respectively.
NOTE 8 -- INCOME TAXES
The components of income (loss) from continuing operations before income taxes
and extraordinary items consisted of the following:
Year Ended December 31,
-----------------------------------
2001 2000 1999
----------- ----------- ----------
Domestic.................................$ (9.6) $ (2.4) $ (2.9)
Foreign.................................. --- --- 0.4
----------- ----------- ----------
$ (9.6) $ (2.4) $ (2.5)
=========== =========== ==========
The Company has no provision (benefit) for federal, foreign and state income
taxes.
Deferred tax assets and liabilities result from differences in the basis of
assets and liabilities for tax and financial statements purposes. In accordance
with SFAS No. 109, "Accounting for income taxes," a valuation allowance fully
offsetting the net deferred tax asset, has been recognized. The tax effects of
the basis differences and Net Operating Loss ("NOL") carryforward as of December
31, 2001 and 2000 are summarized below:
Year Ended December 31,
------------------------------
2001 2000
--------------- --------------
Total deferred tax liabilities.............. $ --- $ ---
--------------- --------------
Receivables................................. $ (0.2) 0.1
Inventory................................... (0.2) ---
Fixed assets................................ (0.2) (0.2)
Product liability........................... 1.6 1.8
Warranty.................................... 0.1 0.5
Restructuring............................... 0.3 0.0
NOL carryforwards........................... 26.9 23.2
--------------- --------------
Total deferred tax assets................... 28.3 25.4
Deferred tax asset valuation allowance...... (28.3) (25.4)
--------------- --------------
Net deferred taxes.......................... $ --- $ ---
=============== ==============
F - 48
The valuation allowance for deferred tax assets at acquisition date, May 9,
1995, was $19.0. Any future reduction of this valuation allowance attributable
to the pre-acquisition period will reduce goodwill. The net change in the
valuation allowance for 2001, 2000 and 1999 was an increase of $2.9, a decrease
of $3.6 and an increase of $3.9, respectively.
At December 31, 2001, the Company has loss carryforwards for federal income tax
purposes of approximately $76.8 available to offset future taxable income. The
expiration of the Company's loss carryforwards are as follows:
Year
Expiring Amount
- ------------ -------------
2004 ................. $ 21.7
2005 ................. 0.8
2006 ................. 5.8
2007 ................. 8.9
2008 ................. 3.1
2009 ................. 2.4
2010 ................. 0.2
2011 ................. 5.4
2018 ................. 10.8
2019 ................. 4.6
2020 ................. 3.6
2021 .................. 9.5
-------------
Total ................. $ 76.8
=============
The utilization of approximately $42.7 of loss carryforwards is limited
annually, as a result of an "ownership change" (as defined by Section 382 of the
Internal Revenue Code), which occurred in 1995.
The Company's provision for income taxes from continuing operations is different
from the amount which would be provided by applying the statutory federal income
tax rate to the Company's loss before income taxes. The reasons for the
difference are summarized below:
Year Ended December 31,
---------------------------------------------------------
2001 2000 1999
-------------------- ------------------- ---------------
Statutory federal income tax rate................... $ (3.4) $ (0.8) $ (0.8)
Goodwill............................................ 0.5 0.4 0.4
NOL and basis differences with no current benefit... 2.9 0.4 0.4
-------------------- ------------------- ---------------
Total provision for income taxes.................... $ --- $ --- $ ---
==================== =================== ===============
There were no income taxes paid during 2001, 2000 and 1999.
NOTE 9 -- COMMITMENTS AND CONTINGENCIES
The Company has various lease agreements, primarily related to office space,
production facilities, and office equipment, which are accounted for as
operating leases. Certain leases have renewal options and provisions requiring
the Company to pay maintenance, property taxes and insurance. Rent expense for
2001, 2000 and 1999 was $0.3, $0.3 and $0.3, respectively.
Future minimum payments under noncancelable operating leases at December 31,
2001 are as follows:
2002...................................... $ 0.2
2003...................................... 0.2
2004...................................... 0.1
--------------
$ 0.5
==============
F - 49
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 29, 2001, Terex Corporation sold and issued $300 aggregate principal
amount of the 10-3/8% Senior Subordinated Notes (the "10-3/8% Notes"). On March
31, 1998 and March 9, 1999, Terex Corporation issued and sold $150.0 and $100.0
aggregate principal amount, respectively, of 8-7/8% Senior Subordinated Notes
due 2008 (the "8-7/8% Notes"). The 10-3/8% Notes and the 8-7/8% Notes are each
jointly and severally guaranteed by certain domestic subsidiaries of Terex
Corporation, including PPM.
NOTE 10 - BUSINESS SEGMENT INFORMATION
The Company operates in one industry segment, that being the designing,
manufacturing, and marketing of telescopic mobile cranes. These products are
used primarily in the construction industry.
Geographic segment information is presented below:
2001 2000 1999
------------- ------------- ------------
Sales
United States.......................$ 40.3 $ 57.8 $ 65.4
All Other........................... 5.7 11.7 15.0
------------- ------------- ------------
$ 46.0 $ 69.5 $ 80.4
============= ============= ============
The Company attributes sales to unaffiliated customers in different geographical
areas on the basis of the location of the customer.
Sales to the Company's largest customer comprised 12% of the Company's net sales
in the year ended December 31, 1999. During 2001 and 2000, no customer exceeded
10% of the Company's net sales.
NOTE 11 -- RELATED PARTY TRANSACTIONS
During the years ended December 31, 2001, 2000 and 1999, the Company had
transactions with various unconsolidated affiliates as follows:
2001 2000 1999
----------- ----------- -----------
Product sales and service revenues.... $ --- $ 1.4 $ ---
Management fee expense................ $ 1.0 $ 1.0 $ 1.0
Interest expense...................... $ 4.9 $ 5.2 $ 5.2
Included in management fee expense are expenses paid by Terex Corporation on
behalf of the Company (e.g. legal, treasury and tax services expense).
F - 50
TEREX CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Amounts in millions)
Additions
---------------------------
Balance
Beginning Charges to Balance End
of Year Earnings Other Deductions (1) of Year
------------- ------------- ------------- ---------------- -------------
Year ended December 31, 2001 Deducted
from asset accounts:
Allowance for doubtful accounts............. $ 6.3 $ 7.4 $ --- $ (5.1) $ 8.6
Reserve for excess and obsolete inventory... 26.1 7.6 --- (6.6) 27.1
------------- ------------- ------------- ---------------- -------------
Totals..................................... $ 32.4 $ 15.0 $ --- $ (11.7) $ 35.7
============= ============= ============= ================ =============
Year ended December 31, 2000 Deducted
from asset accounts:
Allowance for doubtful accounts............. $ 5.8 $ 2.4 $ --- $ (1.9) $ 6.3
Reserve for excess and obsolete inventory... 22.5 8.1 --- (4.5) 26.1
------------- ------------- ------------- ---------------- -------------
Totals..................................... $ 28.3 $ 10.5 $ --- $ (6.4) $ 32.4
============= ============= ============= ================ =============
Year ended December 31, 1999: Deducted
from asset accounts:
Allowance for doubtful accounts............. $ 5.6 $ 0.4 $ --- $ (0.2) $ 5.8
Reserve for excess and obsolete inventory... 24.0 4.7 --- (6.2) 22.5
------------- ------------- ------------- ---------------- -------------
Totals..................................... $ 29.6 $ 5.1 $ --- $ (6.4) $ 28.3
============= ============= ============= ================ =============
(1) Primarily represents the utilization of established reserves, net of
recoveries.
F - 51
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 Indenture dated as of September 30, 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).
4.2 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 September 30, 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).
4.3 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 September 30, 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).
4.4 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 September 30, 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).
4.5 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 September 30, 1998) (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).
4.6 Fifth Supplemental Indenture, dated as of March 29, 2001, between
Terex Corporation and United States Trust Company of New York, as
Trustee (to Indenture dated as of September 30, 1998) (incorporated by
reference to Exhibit 4.6 to the Form 10-Q for the quarter ended March
31, 2001 of Terex Corporation, Commission File No. 1-10702).
4.7 Sixth Supplemental Indenture, dated as of October 1, 2001, between
Terex Corporation and United States Trust Company of New York, as
Trustee (to Indenture dated as of September 30, 1998) (incorporated by
reference to Exhibit 4.7 to the Form 10-Q for the quarter ended
October 31, 2001 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).
4.12 Fourth Supplemental Indenture, dated as of March 29, 2001, 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 March
31, 2001 of Terex Corporation, Commission File No. 1-10702).
4.13 Fifth Supplemental Indenture, dated as of October 1, 2001, 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 4.13 to the Form 10-Q for the quarter ended
October 31, 2001 of Terex Corporation, Commission File No. 1-10702).
4.14 Indenture, dated as of March 29, 2001, between Terex Corporation and
United States Trust Company of New York, as Trustee (incorporated by
reference to Exhibit 4.12 to the Form 10-Q for the quarter ended March
31, 2001 of Terex Corporation, Commission File No. 1-10702).
4.15 First Supplemental Indenture, dated as of October 1, 2001, between
Terex Corporation and United States Trust Company of New York, as
Trustee (to Indenture dated as of March 29, 2001) (incorporated by
reference to Exhibit 4.15 to the Form 10-Q for the quarter ended
October 31, 2001 of Terex Corporation, Commission File No. 1-10702).
4.16 Indenture, dated as of December 17, 2001, between Terex Corporation,
the Guarantors named therein and The Bank of New York, as Trustee
(incorporated by reference to Exhibit 4.16 to Form S-4 Registration
Statement of Terex Corporation, Registration No. 333-75700).
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
September 30, 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 September 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 Amended and Restated Credit Agreement, dated as of March 29, 2001,
among Terex Corporation, certain of its Subsidiaries, the Lenders
named therein, and Credit Suisse First Boston, as Administrative Agent
(incorporated by reference to Exhibit 10.11 to the Form 10-Q for the
quarter ended March 31, 2001 of Terex Corporation, Commission File No.
1-10702).
10.12 Amendment No. 1 to the Amended and Restated Credit Agreement, dated as
of December 13, 2001, among Terex Corporation, certain of its
Subsidiaries, the Lenders named therein and Credit Suisse First
Boston, as Administrative Agent (incorporated by reference to Exhibit
10.12 to Form S-4 Registration Statement of Terex Corporation,
Registration No. 333-75700).
10.13 Amended and Restated Tranche C Credit Agreement, dated as of March 29,
2001, among Terex Corporation, the Lenders named therein, and Credit
Suisse First Boston, as Administrative Agent and Collateral Agent
(incorporated by reference to Exhibit 10.12 to the Form 10-Q for the
quarter ended March 31, 2001 of Terex Corporation, Commission File No.
1-10702).
10.14 Amendment No. 1 to the Amended and Restated Tranche C Credit
Agreement, dated as of December 13, 2001, among Terex Corporation, the
Lenders named therein and Credit Suisse First Boston, as
Administrative Agent and Collateral Agent (incorporated by reference
to Exhibit 10.14 to Form S-4 Registration Statement of Terex
Corporation, Registration No. 333-75700).
10.15 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).
10.16 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).
10.17 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).
10.18 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).
10.19 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).
10.20 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).
10.21 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).
10.22 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).
10.23 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).
10.24 Purchase Agreement dated as of March 22, 2001 among the Company and
the Purchasers, as defined therein (incorporated by reference to
Exhibit 10.27 to the Form 10-Q for the quarter ended March 31, 2001 of
Terex Corporation, Commission File No. 1-10702).
10.25 Registration Rights Agreement dated as of March 29, 2001 among the
Company and the Initial Purchasers, as defined therein (incorporated
by reference to Exhibit 10.28 to the Form 10-Q for the quarter ended
March 31, 2001 of Terex Corporation, Commission File No. 1-10702).
10.26 Agreement and Plan of Merger, dated as of June 27, 2001, by and among
CMI Corporation, Terex Corporation and Claudius Acquisition Corp.
(incorporated by reference to Exhibit 2.1 of the Form 8-K Current
Report, Commission File No. 1-10702, dated June 27, 2001 and filed
with the Commission on June 28, 2001).
10.27 Underwriting Agreement, dated as of December 5, 2001, 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 December 5, 2001 and filed with the Commission on
December 6, 2001).
10.28 Purchase Agreement, dated as of December 10, 2001, among Terex
Corporation and the Purchasers, as defined therein (incorporated by
reference to Exhibit 10.32 to Form S-4 Registration Statement of Terex
Corporation, Registration No. 333-75700).
10.29 Registration Rights Agreement, dated as of December 17, 2001, among
Terex Corporation and the Initial Purchasers, as defined therein
(incorporated by reference to Exhibit 10.33 to Form S-4 Registration
Statement of Terex Corporation, Registration No. 333-75700).
10.30 Agreement on the Sale and Purchase of Shares of the Schaeff Group of
Companies, dated as of November 26, 2001, among Terex Corporation, its
wholly-owned subsidiary and the parties named therein (incorporated by
reference to Exhibit 10.1 of the Form 8-K Current Report, Commission
File No. 1-10702, dated December 28, 2001 and filed with the
Commission on January 15, 2002).
10.31 Stock Purchase Agreement Concerning the Acquisition of Terex Common
Stock, dated as of November 26, 2001, among Terex Corporation, its
wholly-owned subsidiary and the parties named therein (incorporated by
reference to Exhibit 10.2 of the Form 8-K Current Report, Commission
File No. 1-10702, dated December 28, 2001 and filed with the
Commission on January 15, 2002).
10.32 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).
10.33 Supplement to Contract of Employment, dated as of April 1, 2000,
between Terex Corporation and Filip Filipov (incorporated by reference
to Exhibit 10.37 to the Form 10-Q for the quarter ended September 30,
2000 of Terex Corporation, Commission File No. 1-10702).
10.34 Second Amended and Restated Employment and Compensation Agreement,
dated as of January 1, 2002, between Terex Corporation and Ronald M.
DeFeo.*
10.35 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 September 30, 2000 of Terex Corporation, Commission File
No. 1-10702).
12.1 Calculation of Ratio of Earnings to Fixed Charges. *
21.1 Subsidiaries of Terex Corporation.*
23.1 Consent of Independent Accountants - PricewaterhouseCoopers LLP,
Stamford, Connecticut.*
24.1 Power of Attorney.*
* Exhibit filed with this document.