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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 (FEE REQUIRED)
For the Fiscal Year Ended December 31, 1995
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
|_| OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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 (I.R.S. Employer
incorporation) Identification No.)
500 POST ROAD EAST, SUITE 320, WESTPORT, CONNECTICUT 06880
(Address of principal executive offices)
(203) 222-7170
(Telephone number)
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. |_|
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $24.0 million based on the last sale price on March
1, 1996.
THE NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK OUTSTANDING WAS
10,590,425 AS OF MARCH 1, 1996.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the 1996 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 1996 Annual Meeting of Stockholders are
incorporated by reference into Part III.
TEREX CORPORATION AND SUBSIDIARIES
Index to Annual Report on Form 10-K
For the Year Ended December 31, 1995
PAGE
PART I
Item 1 Business .................................................... 3
Item 2 Properties ................................................... 9
Item 3 Legal Proceedings............................................. 10
Item 4 Submission of Matters to a Vote of Security Holders........... 10
PART II
Item 5 Market for Registrant's Common Stock and Related
Stockholder Matters......................................... 11
Item 6 Selected Financial Data....................................... 12
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 13
Item 8 Financial Statements and Supplementary Data................... 22
Item 9 Changes in and Disagreements With Accountants on Accounting
and Financial Disclosures................................... 23
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 Schedule and Reports on Form 8-K. 24
* Incorporated by reference from Terex Corporation Proxy Statement.
PART I
Terex Corporation, together with its consolidated subsidiaries, is hereinafter
referred to as "Terex," the "Registrant," or the "Company." Dollar amounts
except per share are in millions unless otherwise designated.
ITEM 1. BUSINESS
GENERAL
Terex is a global provider of capital goods and equipment used in the
manufacturing, distribution, mining, construction and infrastructure industries.
The Company's operations began in 1983 with the purchase of Northwest
Engineering Company, the Company's original business and name. Since 1983,
management has expanded the Company's business through a series of acquisitions.
In 1988, Northwest Engineering Company merged into a subsidiary acquired in 1986
named Terex Corporation, with Terex Corporation as the surviving corporation.
For 1995, consolidated revenues of the Company amounted to approximately
$1,030.2. Prior to May 1995, the Company's operations were divided into two
principal segments: Material Handling and Heavy Equipment. On May 9, 1995, the
Company completed the PPM Acquisition which is more fully described below.
Together with Koehring, these businesses form Terex Cranes, Inc., the Company's
Mobile Cranes Segment.
The Material Handling Segment designs, manufactures and markets a complete line
of internal combustion ("IC") and electric lift trucks, electric walkies and
related components and replacement parts under the Clark trademark. These
products are used in material handling applications in a broad array of
manufacturing, distribution and transportation industries. The Material Handling
Segment consists of Clark Material Handling Company ("CMHC") and certain
affiliated companies (together with CMHC, "CMH") which were acquired by the
Company in July 1992 from Clark Equipment Company (the "CMH Acquisition").
The Heavy Equipment Segment designs, manufactures and markets heavy-duty,
off-highway earthmoving and construction equipment and related components and
replacement parts. These products are used primarily by construction, mining,
logging, industrial and government customers in building roads, dams and
commercial and residential buildings and in supplying coal, minerals, sand and
gravel. The Heavy Equipment Segment consists of two operating businesses: (i)
the Terex Business (defined below), which manufactures off-highway rigid and
articulated haulers, scrapers and wheel loaders and (ii) the Unit Rig Division,
which manufactures electric rear and bottom dump haulers, as well as mechanical
drive haulers and wheel loaders principally sold to the mining industry.
On May 9, 1995, the Company, through Terex Cranes, Inc., a Delaware corporation
which is a wholly owned subsidiary of the Company ("Terex Cranes"), completed
the acquisition (the "PPM Acquisition") of substantially all of the shares of
P.P.M. S.A., a societe anonyme, and certain subsidiaries ("PPM Europe"), from
Potain S.A., a societe anonyme, and all of the capital stock of Legris
Industries, Inc., a Delaware corporation which owns 92.4% of the capital stock
of PPM Cranes, Inc., a Delaware corporation ("PPM North America;" and PPM North
America together with PPM Europe collectively referred to as "PPM") from Legris
Industries S.A., a societe anonyme ("Legris France"). PPM designs, manufactures
and markets mobile cranes and container stackers primarily in North America and
Western Europe under the brand names of PPM, P&H (trademark of Harnischfeger
Corporation) and BENDINI. Concurrently with the completion of the PPM
Acquisition, the Company contributed the assets (subject to liabilities) of its
Koehring Cranes and Excavators and Marklift division to Terex Cranes. The former
division now operates as Koehring Cranes, Inc., a wholly owned subsidiary of
Terex Cranes ("Koehring"). Koehring manufactures mobile cranes under the LORAIN
brand name and aerial lift equipment under the MARKLIFT brand name.
For financial information about the Company's industry and geographic segments,
see Note N -- "Business Segment Information" in the Notes to the Consolidated
Financial Statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Company's long-term strategy has been, and continues to be, to seek out
acquisitions in the capital goods industry where aggressive management can
achieve substantial improvements in profitability and cash flow.
MATERIAL HANDLING SEGMENT
CMH is a leading North American and European designer, manufacturer and marketer
of a complete line of IC and electric lift trucks, electric walkies and related
replacement parts under the CLARK trademark. CMH's products are distributed
through an established global dealer network which includes more than 440
locations. Management believes CMH has the largest installed fleet in North
America, with over 250,000 units, and that over 320,000 CLARK trucks are
presently in operation worldwide. Historically, approximately 80% of CMH's
revenues have been derived from new product sales and approximately 20% of
revenues have been derived from the sale of replacement parts. CMH and its
independent dealers sell to a diversified base of customers in a variety of
industries. CMH's headquarters and U.S. manufacturing facilities are located in
Lexington, Kentucky. CMH's international manufacturing facilities are located in
Mulheim-Ruhr, Germany. CMH also owns a training and research center in
Lexington, Kentucky.
The Company acquired CMH in July 1992. Following the acquisition, CMH began
implementing initiatives intended to reduce its manufacturing and operating
costs. These initiatives have included consolidation of engineering,
manufacturing and parts facilities. In December 1993, CMH transferred its parts
supply operations to the Company's parts distribution center in Southaven,
Mississippi. During 1994, CMH completed the transfer of its light IC lift truck
chassis production from Korea to Lexington, Kentucky, closed its manufacturing
facility in Danville, Kentucky and closed its axle manufacturing facility in
Korea. In April 1994, the Company sold 100% of the stock of Drexel Industries,
Inc. ("Drexel"), which is located in Horsham, Pennsylvania. Drexel manufactures
very narrow-aisle lift trucks.
CMH currently offers 116 basic truck designs within five major product lines:
light IC trucks (1.0 to 5.0 tons), heavy IC trucks (5.5 to 47.5 tons),
narrow-aisle trucks, electric counterbalanced trucks (1.3 to 6.0 tons) and
electric walkies.
Light IC trucks are used for general warehousing needs and are generally powered
by liquid propane and well suited for manufacturing and distribution
applications which require a high degree of maneuverability. Heavy IC trucks are
specialty products designed for use in more demanding situations such as heavy
manufacturing or container handling applications. Narrow-aisle trucks provide
solutions for high density storage needs and operate in six-to-eight foot aisles
and reach heights of more than 30 feet. Electric counterbalanced trucks are
designed for indoor use in warehousing, manufacturing, distribution and other
applications and are powered by a rechargeable electric battery. For
environmental reasons, electric trucks are becoming more popular. Electric
walkies are generally used in transporting and order-selecting.
CMH is a leading manufacturer of lift trucks in North America, although the
brand names of Hyster and Yale combined, both owned by Nacco Industries, Inc.,
account for production of more lift trucks annually. Other major North American
competitors include Toyota, Mitsubishi and Komatsu in both IC and electric
riders, and Crown and Raymond in electric riders alone. In Europe, CMH competes
with the Linde Group, the European market leader, as well as Hyster-Yale, Toyota
and Jungheinreich. CMH also competes with a number of specialty firms.
HEAVY EQUIPMENT SEGMENT
The Company is recognized as a significant competitor in the market for large
capacity haulers and scrapers. However, the Company is not a dominant
manufacturer in the heavy equipment industry, which is dominated in most
segments by large, diversified firms, such as Caterpillar, Dresser Industries
and Komatsu, that have broader product lines and greater financial resources.
The Company also competes in this industry with a number of specialty firms,
whose products generally compete directly with one or more of the Company's
product lines.
TEREX BUSINESS
The Company acquired the Terex Corporation, whose operations were subsequently
carried out as the Terex Division, in December 1986 and acquired Terex Equipment
Limited ("TEL"), a subsidiary of the Company located in Scotland, in June 1987.
The Terex Division and TEL are jointly hereinafter referred to as the "Terex
Business," which is headquartered in Motherwell, Scotland. Terex Division's
marketing efforts in the United States serve the needs of North, Central and
South America, while TEL serves the remainder of the international market. TEL
manufactures the products of the Terex Business at its facility in Motherwell,
Scotland.
The Terex Business has two principal product lines: off-highway rigid and
articulated haulers and scrapers sold under the TEREX trademark and as original
equipment manufacturers to be sold under other brand names. A "hauler" is an
off-road dump truck with a capacity in excess of 25 tons. Haulers produced by
the Terex Business have capacities ranging from 25 to 85 tons. A "scraper" is an
off-road vehicle, commonly referred to as an "earth mover," that loads, moves
and unloads large quantities of soil for site preparations, including roadbeds.
The Terex Business product line also includes wheel loaders although these are
not presently being manufactured. A "wheel loader" is a vehicle that loads
materials onto trucks, conveyors and similar equipment. The Terex Business
products perform a wide range of earthmoving functions in quarry and open pit
mining and in many types of heavy construction, including highway, dam and
waterway construction; commercial and industrial site preparation; general land
improvement and real estate development; and structural renovation and
replacement. The Terex Business's main competitors are Caterpillar, VME Group,
Komatsu and Dresser.
In 1987, TEL entered into a joint venture agreement with Second Inner Mongolia
Machinery Company for the production of haulers in China. The joint venture
company, North Hauler Limited Liability Company, manufactures heavy trucks,
principally used in mining, at a facility in Baotou, Inner Mongolia, People's
Republic of China.
UNIT RIG
In July 1988, the Company purchased certain domestic and foreign assets and
operations of the business that now operates as the Unit Rig Division ("Unit
Rig"). Unit Rig is headquartered in Tulsa, Oklahoma.
Unit Rig's predecessor pioneered the development of the diesel electric drive,
rear dump hauling truck for use in open pit mining operations. The truck is
powered by a diesel engine driving an electric generator that provides power to
individual electric motors in each of the rear wheels. Unit Rig's current LECTRA
HAUL product line consists of a series of rear dump hauler trucks with payload
capacities ranging from 100 to 260 tons, and bottom dump haulers with capacities
ranging from 180 to 270 tons.
Unit Rig also produces the Dart line of wheel loaders and mechanical drive
haulers. This product line consists of the Dart 600C mechanical drive wheel
loader with a bucket capacity up to 23 cubic yards and rear dump trucks ranging
in capacity from 85 to 130 tons. The Dart line also includes a tractor-trailer
bottom dump hauler with capacities from 120 to 160 tons.
The present principal markets for Unit Rig products are copper, gold, coal and
iron mines. Unit Rig's major customers are mining companies in North and South
America, Asia, Africa and Australia. Approximately 70% of Unit Rig's sales are
export sales. Unit Rig's largest competitors are Caterpillar and
Komatsu/Dresser.
TEREX CRANES, INC.
KOEHRING
In January 1987, the Company purchased certain assets and operations of the
business that operated prior to the PPM Acquisition as the Koehring Cranes &
Excavators Division, which assets and operations were contributed to Koehring in
connection with the PPM Acquisition. Koehring, headquartered in Waverly, Iowa,
designs, manufactures and markets a broad line of hydraulic telescoping cranes
sold under the well recognized trade names of KOEHRING and LORAIN. Hydraulic
telescoping cranes are primarily used for construction and industrial
applications. Koehring has three principal competitors in the mobile crane
market: Grove Manufacturing, Liebherr Werk Ehingen and Link-Belt.
In December 1991, the Company acquired substantially all operating assets of the
business that operates as the Marklift Division ("Mark"). Mark relocated to the
Koehring facilities in Waverly, Iowa during 1992 in order to more effectively
utilize existing capabilities and manufacturing facilities at the Waverly
location. Mark is engaged in the manufacture and sale of aerial lift equipment,
including scissor lifts, boom lifts and a full line of replacement parts.
Scissor lifts and boom lifts are used for the repair, maintenance and
construction of buildings, manufacturing facilities and equipment. These lifts
are used in a wide variety of industrial applications, such as installing and
repairing electrical and plumbing fixtures; installing drywall and ceilings;
cleaning, repairing and painting production equipment; maintaining refineries,
chemical plants and aircraft; and performing common construction tasks such as
siding, insulation and structural member installation. Mark's largest competitor
in the aerial lift industry is JLG Industries.
The Company currently manages the Northwest Engineering and BCP Construction
Products ("BCP," acquired in 1985) businesses from Koehring's location in
Waverly, Iowa. The sale of replacement parts for Northwest Engineering and BCP
products, including the Dynahoe backhoe/loader, constitutes the most important
part of these businesses.
PPM EUROPE
On May 9, 1995, the Company acquired substantially all of the capital stock of
PPM Europe. PPM Europe was formed in 1966 by Potain, S.A., and is a leading
European designer, manufacturer and marketer of mobile cranes and container
stackers. PPM Europe consists of several subsidiaries throughout Europe,
including: PPM S.A. in France, Bendini SpA, an Italian rough terrain crane
producer, Brimont Agraire S.A., a specialized trailer manufacturer in France,
PPM Krane GmbH, a sales organization in Germany, and Baulift Baumaschinen Und
Krane Handels GmbH, a parts distributor in Germany. PPM Europe operates two
manufacturing facilities, its PPM manufacturing facility at Montceau les Mines
in central France and its Bendini manufacturing facility in northern Italy. PPM
Europe markets its products primarily in Europe, Africa and the Middle East
under the PPM and BENDINI brand names. PPM Europe's major competitors in mobile
cranes are Krupp Mobilkran, Grove Cranes Ltd. and Liebherr Werk Ehingen. PPM
Europe's major competitors in the container stacker market are Kalmar, Valmet
Belloti and Taylor.
PPM NORTH AMERICA
On May 9, 1995, the Company acquired substantially all of the capital stock of
PPM North America. PPM North America, headquartered in Conway, South Carolina,
designs, manufactures and markets rough terrain cranes, truck cranes and
container stackers under the P&H brand name which is licensed from Harnischfeger
Corporation. PPM North America also markets mobile cranes and container stackers
in the Far East through its Singapore subsidiary and in Australia through its
Australian subsidiary. PPM North America has three main competitors in the
mobile crane market: Grove Manufacturing, Liebherr Werk Ehingen and Link-Belt.
ENVIRONMENTAL CONSIDERATIONS
The Company generates hazardous and nonhazardous wastes in the normal course of
its operations. As a result, the Company is subject to a wide range of federal,
state, local and foreign environmental laws and regulations, including the
Comprehensive Environmental Response, Compensation and Liability Act, that (i)
govern activities or operations that may have adverse environmental effects,
such as discharges to air and water, as well as handling and disposal practices
for hazardous and nonhazardous wastes, and (ii) impose liability for the costs
of cleaning up, and certain damages resulting from, sites of past spills,
disposals or other releases of hazardous substances. Compliance with such laws
and regulations has, and will, require expenditures by the Company on a
continuing basis.
RESEARCH AND DEVELOPMENT
The Company maintains engineering staffs at several of its locations which
design new products and improvements in existing product lines. Such costs
incurred in the development of new products or significant improvements to
existing products amounted to $11.2 million, $10.5 million and $11.8 million in
1995, 1994 and 1993, respectively.
MATERIALS
Principal materials used by the Company in its various manufacturing processes
include steel, castings, engines, tires, electric controls and motors, and a
variety of other fabricated or manufactured items. In the absence of labor
strikes or other unusual circumstances, substantially all materials are normally
available from multiple suppliers. Current and potential suppliers are evaluated
on a regular basis on their ability to meet the Company's requirements and
standards. During the first half of 1994, certain of CMH's suppliers experienced
difficulties in meeting CMH's production schedules. Such difficulties, while not
eliminated, were substantially alleviated in the second half of 1994. Electric
wheel motors and controls used in the Unit Rig product line are currently
supplied exclusively by General Electric Company.
SEASONAL FACTORS
The Company markets a large portion of its products in North America and Europe,
and its sales of heavy equipment and cranes during the fourth quarter of each
year (i.e., October through December) to the construction industry are usually
lower than sales of such equipment during each of the first three quarters of
the year because of the normal winter slowdown of construction activity.
However, sales of heavy equipment to the mining industry, as well as sales of
lift trucks, are generally less affected by such seasonal factors.
DISTRIBUTION
CMH markets original equipment and repair parts through a worldwide dealer
network. CMH currently has 94 independent North American dealers who operate
approximately 233 outlets, with all such dealer outlets providing both sales and
service. CMH's European distribution network consists of approximately 93
independent dealers and three company-owned dealers operating in 29 countries.
CMH dealers generally market the full CMH product line and maintain
comprehensive service capabilities. CMH operates a dealer service organization
designed to coordinate sales and promotional activities, provide ongoing dealer
training and facilitate dealer communications.
CMH products are sold through a system which enables customers to specify a
truck which meets their particular materials handling needs. Customers can add
attachments such as container handlers, side shifters, roll clamps, block
handlers, carton clamps, push-pulls (slip-sheet) and fork positioners. CMH and
its dealers sell to a diversified customer base with no single customer
accounting for more than 4% of CMH's revenues.
The Terex Business markets original equipment and repair parts through worldwide
dealership networks. Unit Rig distributes its products and services directly to
customers primarily through its own distribution system. The Company's heavy
equipment dealers are independent businesses which generally serve the
construction, mining, timber and/or scrap industries. Although these dealers
carry products of a variety of manufacturers, and may or may not carry more than
one of the Company's products, each dealer generally carries only one
manufacturer's "brand" of each particular type of product. The Company employs
sales representatives who service these dealers from offices located throughout
the world.
Terex Cranes distributes its products through a global network of over 300
independent dealers organized by product line. With respect to mobile cranes, in
North America both Koehring and PPM North America maintain extensive dealer
networks. The geographic strength of Koehring, which markets its mobile cranes
under the LORAIN brand name, centers in the midwest and mid-Atlantic regions of
the U.S. and the geographic strength of PPM North America, which markets its
mobile cranes under the P&H brand, centers in the southern and western regions.
PPM Europe's distribution is carried out under two brand names, PPM and BENDINI,
through a single distribution network comprised of both distributors and a
direct sales force.
BACKLOG
The Company's backlog as of December 31, 1995 and 1994 was as follows:
December 31,
1995 1994
(in millions
of dollars)
Material Handling ............ $ 78.9 $ 135.9
Heavy Equipment .............. 88.8 67.8
Terex Cranes ................. 85.3 11.7
Total $ 253.0 $ 215.4
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. Backlog in Terex Cranes increased in 1995 primarily due to the
effect of the PPM Acquisition.
Backlog at the Material Handling Group fell from $135.9 at December 31, 1994 to
$78.9 at December 31, 1995 as the Company maintained full production in the
Material Handling Segment United States operations and parts availability
returned to normal levels. As a result, the backlog of both machines orders and
parts orders was reduced during 1995.
PATENTS, LICENSES AND TRADEMARKS
Several of the trademarks and trade names of the Company, in particular the
TEREX, CLARK, KOEHRING, LORAIN, UNIT RIG, MARKLIFT, DYNAHOE, POWERWORKER, P&H
(licensed by PPM North America from Harnischfeger Corporation), PPM,
HYPERSTACKER, SUPERSTACKER, BENDINI and GENESIS trademarks, are important to the
business of the Company. The Company owns and maintains trademark 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 takes steps, including legal action, to
protect its trademark, trade name and patent rights when circumstances warrant
such action.
EMPLOYEES
As of December 31, 1995, the Company had approximately 3,600 employees. The
Company considers its relations with its personnel to be good. Approximately 33%
of the Company's employees are represented by labor unions which have entered
into various separate collective bargaining agreements with the Company. The
Company experienced a labor strike at its parts distribution center in
Southaven, Mississippi during the second quarter of 1995 which is ongoing, and a
strike at its Koehring facility in Waverly, Iowa in December 1995, which has
been settled. The strike at Southaven has had no appreciable effect on the
conduct of business or financial results of that operation.
FINANCIAL INFORMATION ABOUT INDUSTRY AND GEOGRAPHIC SEGMENTS,
EXPORT SALES AND MAJOR CUSTOMERS
Information regarding foreign and domestic operations, export sales, segment
information and major customers is included in Note N -- "Business Segment
Information" in the Notes to the Consolidated Financial Statements.
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).. Westport, Connecticut (1) Office 14,898 sq. ft.
Terex
(Distribution Center) Southaven, Mississippi (1) Warehouse and light
manufacturing
505,000 sq. ft. (2)
MATERIAL HANDLING SEGMENT
CMHC .............Lexington, Kentucky (1) Manufacturing, warehouse and
office 372,600 sq. ft.
CMHC .............Lexington, Kentucky Training and research and
development 43,000 sq. ft.
CMHC .............Lexington, Kentucky (1) Office 64,600 sq. ft.
CMHC .............Lexington, Kentucky (1) Manufacturing, warehouse and
test facility
59,500 sq. ft.
CMH Germany...........Mulheim-Ruhr, Germany Manufacturing, engineering,
power generation,
maintenance and office
241,350 sq. ft.
CMH Germany...........Mulheim-Ruhr, Germany (1) Office 61,360 sq. ft.
CMH Germany...........Saarn, Germany (1) Warehouse 150,700 sq. ft.
HEAVY EQUIPMENT SEGMENT
Unit Rig .............Tulsa, Oklahoma Manufacturing and office
325,000 sq. ft.
TEL...................Motherwell, Scotland Manufacturing, warehouse and
office 714,000 sq. ft. (3)
TEREX CRANES, INC.
Koehring & Mark.......Waverly, Iowa (4) Office, manufacturing and
warehouse 383,000 sq. ft.
PPM North America.....Conway, South Carolina (1) Office, manufacturing and
warehouse 257,040 sq. ft.
PPM Europe............Montceau les Mines, France Office, manufacturing and
warehouse 419,764 sq. ft.
PPM Europe............Crespellano, Italy Office, manufacturing and
warehouse 92,750 sq. ft.
PPM Europe............Dortmund, Germany (1) Office and warehouse
129,180 sq. ft.
PPM Europe............Rethel, France Office, manufacturing and
warehouse 215,300 sq. ft.
- ------------------------------
(1) These facilities are either leased or subleased by the indicated entity.
(2) Includes 239,400 sq. ft. of warehouse space currently leased to others.
(3) Includes 148,500 sq. ft. of manufacturing space currently leased to others.
(4) Koehring also owns a 66,000 sq. ft. facility in Waterloo, Iowa which is
currently leased to others.
CMH also operates seven sales and service branch locations, all of which are
leased. The branch facilities consist of office and service space and generally
range in size from 1,500 to 3,100 square feet per facility. CMH also owns
manufacturing and office facilities in Seoul and Banwael, Korea which were
closed in the fourth quarter of 1994 and are presently held for sale.
Unit Rig also has 10 owned or leased locations for parts distribution and
rebuilding of components, of which two are in the United States, two are in
Canada and six are abroad.
The properties listed above are suitable and adequate for the Company's use. The
Company has determined that certain of its properties exceed its requirements.
Such properties may be sold, leased or utilized in another manner and have been
excluded from the above list.
ITEM 3. LEGAL PROCEEDINGS
As described in Note L -- "Litigation and Contingencies" in the Notes to the
Consolidated Financial Statements, the Company is involved in various legal
proceedings, including product liability matters, which have arisen in the
normal course of its operations. 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.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed on the NYSE under the symbol "TEX."
QUARTERLY MARKET PRICES
1995 1994
--------------------------------- ---------------------------------
Fourth Third Second First Fourth Third Second First
------ ------ ------- ------- ------- ------- ------- ------
High. $ 5.25 $ 5.38 $ 6.63 $ 7.13 $ 8.75 $ 7.38 $ 8.00 $ 9.88
Low.. 4.13 4.88 4.63 5.88 6.00 4.25 5.13 6.13
No dividends were declared or paid in 1994 or in 1995. Certain of the Company's
debt agreements contain restrictions as to the payment of cash dividends. Under
the most restrictive of these agreements, $3.0 was available for dividends at
December 31, 1995. In addition, the Company's debt agreements generally limit
payment of cash dividends by the Company in excess of $3.0 to 40% of the
Company's net income, if any. The terms of the Company's outstanding Series A
Cumulative Redeemable Convertible Preferred Stock, par value $.01 per share (the
"Series A Preferred Stock") and Series B Cumulative Redeemable Convertible
Preferred Stock, par value $.01 per share (the "Series B Preferred Stock") also
restrict the Company's ability to pay cash dividends on the Common Stock. The
Company intends generally to retain earnings, if any, to fund the development
and growth of its business. The Company does not plan on paying dividends on the
Common Stock in the foreseeable future. Any future payments of cash dividends
will depend upon the financial condition, capital requirements and earnings of
the Company, as well as other factors that the Board of Directors may deem
relevant.
As of March 1, 1996, there were 785 stockholders of record of the Company's
Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
(in millions except per share amounts and employees)
Year Ended December 31,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
SUMMARY OF OPERATIONS
Net Sales $ 1,030.2 $ 786.8 $ 670.3 $ 523.4 $ 784.2
Income (loss) from operations 21.4 3.4 (33.9) (4.1) (70.7)
Income (loss) before extraordinary items (27.7) 1.2 (65.0) 2.9 (42.7)
Net income (loss) (35.2) 0.5 (66.5) 2.9 (42.7)
Net income (loss) applicable to common (42.5) (5.5) (66.7) 2.9 (42.7)
Per Common and Common Equivalent Share:
Income (loss) before extraordinary items (3.37) (0.46) (6.55) 0.29 (4.31)
Net income (loss) (4.09) (0.53) (6.70) 0.29 (4.31)
WORKING CAPITAL
Current assets $ 426.2 $ 278.1 $ 257.3 $ 319.2 $ 360.4
Current liabilities 294.7 221.6 187.8 222.0 234.7
Working capital 131.5 56.5 69.5 97.2 125.7
PROPERTY, PLANT AND EQUIPMENT
Net property, plant and equipment $ 101.3 $ 86.2 $ 97.5 $ 116.3 $ 70.3
Capital expenditures 10.5 12.7 11.5 5.4 4.1
Depreciation 21.4 13.7 12.1 7.1 7.5
TOTAL ASSETS $ 626.9 $ 401.6 $ 390.7 $ 477.3 $ 506.7
CAPITALIZATION
Long-term debt and notes payable, including current
maturities $ 337.5 $ 190.9 $ 218.0 $ 217.6 $ 223.0
Redeemable convertible preferred stock 24.6 17.3 10.5 --- ---
Stockholders' deficit (98.8) (55.7) (62.3) (9.1) (4.1)
Book value per share $ (9.34) $ (5.41) $ (6.04) $ (0.91) $ (0.42)
Dividends per share of Common Stock --- --- --- --- $ 0.06
Shares of Common Stock outstanding at year-end 10.6 10.3 10.3 9.9 9.9
EMPLOYEES 3,600 2,851 2,930 3,056 6,980
The Selected Financial Data include the results of operations of PPM, CMH and
Mark from the dates of their acquisitions, May 9, 1995, July 31, 1992 and
December 31, 1991, respectively, and reflect the deconsolidation of Fruehauf
Trailer Corporation ("Fruehauf") as of January 1, 1992. Income (loss) before
extraordinary items and net income (loss) in 1992 include a $36.5 million gain
on deconsolidation of Fruehauf and in 1991 include a $56.0 million gain as a
result of the Fruehauf initial public offering. The Selected Financial Data for
1991 is derived from unaudited financial statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
1995 COMPARED WITH 1994
The table below is a comparison of net sales, gross profit, selling, general and
administrative expenses, severance and exit costs, and income (loss) from
operations, by segment, for 1995 and 1994.
Year Ended
December 31, Increase
1995 1994 (Decrease)
(in millions of dollars)
NET SALES
Material Handling ......... $ 528.8 $ 472.7 $ 56.1
Heavy Equipment ........... 250.3 226.8 23.5
Terex Cranes .............. 252.3 90.4 161.9
Eliminations .............. (1.2) (3.1) 1.9
Total .................. $ 1,030.2 $ 786.8 $ 243.4
GROSS PROFIT
Material Handling ......... $ 37.6 $ 35.2 $ 2.4
Heavy Equipment ........... 35.9 33.8 2.1
Terex Cranes .............. 35.2 14.2 21.0
Eliminations .............. (0.5) -- (0.5)
Total .................. $ 108.2 $ 83.2 $ 25.0
ENGINEERING, SELLING AND
ADMINISTRATIVE EXPENSES
Material Handling ......... $ 31.1 $ 42.4 $ (11.3)
Heavy Equipment ........... 22.9 22.0 0.9
Terex Cranes .............. 28.0 6.3 21.7
General/Corporate ......... 1.3 1.7 (0.4)
Total .................. $ 83.3 $ 72.4 $ 10.9
SEVERANCE AND EXIT COSTS
Material Handling ......... $ 3.5 $ 6.8 $ (3.3)
Heavy Equipment ........... -- 0.6 (0.6)
Total .................. $ 3.5 $ 7.4 $ (3.9)
INCOME (LOSS) FROM OPERATIONS
Material Handling ......... $ 3.0 $ (13.9) $ 16.9
Heavy Equipment ........... 13.0 11.1 1.9
Terex Cranes .............. 7.2 7.9 (0.7)
General/Corporate ......... (1.8) (1.7) (0.1)
Total .................. $ 21.4 $ 3.4 $ 18.0
Prior to the PPM Acquisition on May 9, 1995, the Company operated in two
industry segments during the periods presented herein: material handling and
heavy equipment. The addition of the PPM business to the Company's existing
crane and aerial lift business has created combined mobile crane operations
sufficient in size to constitute a third industry segment. The 1994 amounts
presented above have been reclassified to a three segment basis for consistency.
The Terex Cranes results for periods prior to May 1995 consist solely of
Koehring's operations.
NET SALES
Sales increased $243.4 to $1,030.2, or approximately 31%, for 1995 versus 1994.
Material Handling Segment sales were $528.8 for 1995, an increase of $56.1 from
$472.7 in 1994. The sales mix was approximately 18% parts in 1995 compared to
19% in 1994. Machine sales increased 12%, primarily because of increased output
resulting from actions taken by management during 1994 and shipments of the new
Genesis line of IC trucks, introduced in December 1994. The light IC market, in
which this product competes, represents approximately 60% of the rider lift
truck industry. Management believes this product is superior to competitors'
products in performance, reliability and operator comfort, and is designed to
achieve reduced production costs. Parts sales increased 6% because of improved
parts inventory availability partially offset by the adverse effects of a labor
strike at the Company's parts distribution center. The strike has not had a
material continuing effect on parts sales.
Material Handling Segment bookings for 1995 were $471.8, an increase of $13.0,
or 3%, from 1994. Material Handling Segment backlog was $78.9 at December 31,
1995 compared to $135.9 at December 31, 1994. Backlog at the Material Handling
Group fell from $135.9 at December 31, 1994 to $78.9 at December 31, 1995 as the
Company maintained full production in the Material Handling Segment United
States operations and parts availability returned to normal levels. As a result,
the backlog of both machines orders and parts orders was reduced during 1995.
Heavy Equipment Segment sales increased $23.5 for 1995 over 1994. Machines sales
increased 8%, and parts sales increased 7%. The sales mix was approximately 35%
parts for 1995 compared to 36% parts for 1994. Heavy Equipment Segment parts
sales were also adversely affected by the strike at the parts distribution
center, but to a lesser degree than the Material Handling Segment.
Heavy Equipment Segment bookings for 1995 were $271.3, an increase of $39.1, or
17%, from 1994. Heavy Equipment Segment backlog was $88.8 at December 31, 1995
compared to $67.8 at December 31, 1994.
Terex Cranes sales were $252.3 for 1995, an increase of $161.9 from $90.4 in
1994 due primarily to the PPM Acquisition in May 1995. Terex Cranes backlog was
$85.3 at December 31, 1995, reflecting the additional PPM backlog, compared to
$11.7 at December 31, 1994.
GROSS PROFIT
Gross profit of $108.2 for 1995 was $25.0, or 30%, higher than gross profit of
$83.2 for 1994.
The Material Handling Segment's gross profit increased $2.4 to $37.6 for 1995
compared to $35.2 for 1994. The gross profit percentage in the Material Handling
Segment was 7% for both 1995 and 1994. Favorable efficiencies due to higher
production and sales volumes and the effects of 1994 severance actions were
offset by additional costs associated with the start-up of production of the new
Genesis product line and manufacturing inefficiencies related to vendors'
continuing inability to meet demand.
The Heavy Equipment Segment's gross profit increased $2.1 to $35.9 for 1995
compared to $33.8 for 1994. The gross profit percentage in the Heavy Equipment
Segment was 14% for 1995 and 15% for 1994.
Terex Cranes gross profit increased $21.0 to $35.2 for 1995, compared to $14.2
for 1994, primarily reflecting the addition of the May through December 1995
results of the PPM businesses. The gross profit percentage for Terex Cranes was
14% for 1995 and 16% for 1994. The gross profit percentage decrease was
primarily due to costs related to integrating the PPM Acquisition into Terex
Cranes.
ENGINEERING, SELLING AND ADMINISTRATIVE EXPENSES
Engineering, selling and administrative expenses increased to $83.3 for 1995
from $72.4 for 1994. Material Handling Segment engineering, selling and
administrative expenses decreased to $31.1 for 1995 from $42.4 for 1994,
primarily as a result of severance actions taken by management during the second
half of 1994. Heavy Equipment Segment engineering, selling and administrative
expenses increased to $22.9 for 1995 from $22.0 for 1994 as a result of costs
associated with the start-up of a new parts service business. Terex Cranes
engineering, selling and administrative expenses increased to $28.0 for 1995
from $6.3 for 1994 reflecting the PPM Acquisition in May 1995. Corporate
administrative expenses in 1994 included a charge of $2.2 in connection with the
termination of a management contract with a related party.
SEVERANCE AND EXIT COSTS
The Company announced personnel reductions totaling approximately 134 employees
in the Material Handling Segment's North American operations during the second
quarter of 1995 as a continuation of the Company's programs to increase
manufacturing efficiency, reduce costs and improve liquidity. The Company
recorded a combined charge of $3.5 in the second quarter of 1995 for severance
costs associated with these actions and additional costs associated with the
closing of certain administrative and warehouse facilities.
During the second quarter of 1994, the Company recorded a charge of $4.5
principally related to severance costs in the Material Handling Segment's North
American and European operations. In June 1994, the Company announced personnel
reductions in plant supervision, engineering, marketing and administration
totaling approximately 160 employees. The $4.5 charge represents severance costs
associated with these actions. The Company also reorganized certain marketing
activities and closed several of its regional sales offices in the United
States. In December 1994, the Company announced additional personnel reductions
totaling approximately 90 employees in conjunction with the closing of the
Material Handling Segment's Korean plant and certain branch sales offices in
France. An additional $2.9 charge was recorded for costs, principally severance
costs, associated with these actions.
INCOME (LOSS) FROM OPERATIONS
The Material Handling Segment income from operations of $3.0 for 1995 represents
a $16.9 improvement over the $13.9 loss in 1994. As discussed above, increased
sales and reduced costs contributed to the improvement.
Heavy Equipment Segment income from operations improved by $1.9 to $13.0 for
1995 from $11.1 in 1994, primarily as a result of reduced costs, offset by costs
associated with the start up of a new parts service business.
Terex Cranes income from operations of $7.2 for 1995 decreased by $0.7 versus
1994, primarily due to losses of the PPM businesses acquired in May 1995. As a
result of cost reductions, improvements in inventory management and
consolidation of model offerings, Koehring was profitable in 1994 and 1995 after
several years of losses.
On a consolidated basis, the Company realized operating income of $21.4 for
1995, compared to $3.4 for 1994.
OTHER INCOME (EXPENSE)
Net interest expense increased to $38.7 for 1995 from $29.9 in 1994 as a result
of incremental borrowings associated with the PPM Acquisition in May 1995. The
Company realized gains of $1.0 and $26.0 from sales of Fruehauf common stock
during 1995 and 1994, respectively. The Company owns 250 thousand shares of
Fruehauf common stock which it received in settlement of certain obligations of
Fruehauf.
The Company recorded a charge of $3.0 in 1995 to recognize the impairment in
value of certain properties held for sale.
The Company also incurred net foreign exchange losses of $1.9, trademark-related
expenses of $1.3, and $0.6 of group retiree expenses during 1995.
The Company recorded a charge of $2.5 in 1995 for payments related to the
retirement of its former Chairman of the Board in August 1995, and future
payments related to the consulting obligations under the retirement agreement of
the former Chairman.
During 1995, the Company recorded no provision for income taxes. In 1994, the
Company recorded a provision for state income taxes of $0.5 in connection with
the sale of Drexel, in addition to the taxes on foreign royalties.
EXTRAORDINARY ITEMS
The Company recorded a charge of $7.5 in 1995 to recognize a loss on the early
extinguishment of debt in connection with the May 1995 refinancing. During 1994,
the Company recognized extraordinary losses totaling $0.7 to write-off
unamortized discount and debt issuance costs when it repurchased $27.3 of the
Old Senior Secured debt.
1994 COMPARED WITH 1993
The table below is a comparison of net sales, gross profit, engineering,
selling, and administrative expenses, severance charges and income (loss) from
operations, by segment, for 1994 and 1993.
Year Ended Increase
December 31, (Decrease)
1994 1993
(in millions of dollars)
NET SALES
Material Handling ................. $ 472.7 $ 395.6 $ 77.1
Heavy Equipment ................... 226.8 203.8 23.0
Terex Cranes ...................... 90.4 71.4 19.0
Eliminations ...................... (3.1) (0.5) (2.6)
Total .......................... $ 786.8 $ 670.3 $ 116.5
GROSS PROFIT
Material Handling ................. $ 35.2 $ 16.0 $ 19.2
Heavy Equipment ................... 33.8 30.5 3.3
Terex Cranes ...................... 14.2 2.0 12.2
Total .......................... $ 83.2 $ 48.5 $ 34.7
ENGINEERING, SELLING
AND ADMINISTRATIVE EXPENSES
Material Handling ................. $ 42.4 $ 44.6 $ (2.2)
Heavy Equipment ................... 22.0 19.5 2.5
Terex Cranes ...................... 6.3 10.1 (3.8)
General/Corporate ................. 1.7 3.5 (1.8)
Total .......................... $ 72.4 $ 77.7 $ (5.3)
SEVERANCE AND EXIT COSTS AND
GOODWILL WRITE-OFF
Material Handling ................. $ 6.8 $ -- $ 6.8
Heavy Equipment ................... 0.6 -- 0.6
Terex Cranes ...................... -- 4.7 (4.7)
Total .......................... $ 7.4 $ 4.7 $ 2.7
INCOME (LOSS) FROM OPERATIONS
Material Handling ................. $ (13.9) $ (28.6) $ 14.7
Heavy Equipment ................... 11.1 11.0 0.1
Terex Cranes ...................... 7.9 (12.8) 20.7
General/Corporate ................. (1.7) (3.5) 1.8
Total .......................... $ 3.4 $ (33.9) $ 37.3
NET SALES
Sales in 1994 increased $116.5, or approximately 17%, over 1993.
Material Handling Segment sales were $472.7 for 1994, an increase of $77.1, or
19%, from $395.6 for 1993. Machine sales increased $81.0 and parts sales
decreased $3.9. As a result, the sales mix was approximately 19% parts in 1994
compared to 24% parts in 1993. Machine sales improved due to increased industry
demand and increased output resulting from production improvements and the
easing of capital constraints. Cash constraints in the second half of 1993
resulted in production problems caused by a lack of supplies and materials
during the last half of 1993 and the opening months of 1994. Production improved
in 1994 because of reorganization of work flows and other actions taken by
manufacturing management and because a working capital infusion in December 1993
allowed management to improve relations and schedule payment terms with its key
suppliers. Parts sales were affected by the cash constraints previously
discussed and by difficulties in assimilating the Material Handling Segment's
parts business into the Terex Parts Distribution Center during the first half of
1994, leading to decreased parts availability. Parts sales improved during the
last half of 1994 as these difficulties were mitigated.
Material Handling Segment bookings for 1994 were $470.6, an increase of $5.6
from 1993. Machine order bookings for 1994 of $381.2 increased $17.3 or 5%
compared to $364.0 in 1993. Bookings for parts sales for 1994, from which the
Company generally realizes higher margins than machine sales, decreased $11.6,
or 12%, from 1993, primarily because of decreased parts availability as
discussed above. Material Handling Segment backlog was $135.9 at December 31,
1994 compared to $152.7 at December 31, 1993. This change reflects the
improvement in second through fourth quarter sales resulting from the upward
trend in production and improved parts availability levels. The Company
maintained full production in the Material Handling Segment United States
operations and parts availability returned to normal levels. As a result, the
backlog of both machines orders and parts orders was reduced during 1995.
Heavy Equipment Segment sales increased $23.0, or 11%, to $226.8 in 1994 from
$203.8 in 1993. Machine sales increased $21.6 and parts sales increased $1.4.
The sales mix was approximately 36% parts in 1994 compared to 39% parts in 1993.
Machine sales increased at all of the Heavy Equipment Segment divisions,
reflecting increased domestic construction industry demand and improved sales
volume outside the United States.
Heavy Equipment Segment bookings for 1994 were $232.2, an increase of $38.1, or
20%, from 1993. Bookings for parts sales of $77.6, from which the Company
generally realizes higher margins than machine sales, were comparable to
bookings for 1993. Machine bookings for 1994 increased $42.2, or 38%, from 1993,
reflecting the factors discussed above. Heavy Equipment Segment backlog was
$67.8 at December 31, 1994 compared to $62.3 at December 31, 1993, reflecting
the improved shipments in 1994. Parts backlog was $6.1 at December 31, 1994
compared to $8.6 at December 31, 1993. This decrease resulted from increased
parts availability during 1994. As a result of the working capital infusion in
December 1993, the inventory availability for parts sales increased during 1994
and the backlog of parts orders was reduced as working capital continues to be
applied to improve parts inventory availability.
Terex Cranes sales were $90.4 for 1994, an increase of $19.0 from $71.4 in 1993.
Machine sales increased 43% and parts sales increased 3%. The sales mix was
approximately 27% parts in 1994 compared to 33% parts in 1993.
Terex Cranes bookings were $83.6 for 1994, an increase of 9% from 1993. Machine
bookings increased 16%, and parts bookings increased by 1%.
GROSS PROFIT
Gross profit for 1994 increased $34.7 compared to 1993.
The Material Handling Segment's gross profit increased $19.2 to $35.2 for 1994
compared to $16.0 for 1993. The gross profit percentage in the Material Handling
Segment increased to 7.4% for 1994 from 4.0% for 1993, reflecting cost reduction
initiatives and production improvements in the second through fourth quarters of
1994, somewhat offset by comparatively lower sales and decreased manufacturing
efficiency due to shortages in manufacturing supplies and materials during the
first quarter of the year and the decrease in sales of replacement parts.
The Heavy Equipment Segment's gross profit increased $3.3 to $33.8 for 1994
compared to $30.5 for 1993. Improved gross profit from machine sales accounted
for substantially all of the increase. The gross profit percentage in the Heavy
Equipment Segment remained at 15.0% for 1994 and 1993, reflecting the continuing
effects of cost reduction initiatives and improved manufacturing efficiency
offset by a decrease in the parts sale mix during 1994.
Terex Cranes gross profit increased $12.2 to $14.2 for 1994, compared to $2.0
for 1993. The gross profit percentage for Terex Cranes increased to 15.7% for
1994 from 2.8% in 1993 reflecting the continuing effects of cost reductions and
improved manufacturing efficiency.
ENGINEERING, SELLING AND ADMINISTRATIVE EXPENSES
Engineering, selling and administrative expenses decreased to $72.4 for 1994
from $77.7 for 1993 as a result of cost reduction initiatives throughout the
Company. Material Handling Segment engineering, selling and administrative
expenses totaled $42.4 for 1994 compared to $44.6 for 1993. Heavy Equipment
Segment engineering, selling and administrative expenses increased to $22.0 for
1994 from $19.5 for 1993. Terex Cranes engineering, selling and administrative
expenses decreased to $6.3 for 1994 compared to $10.1 for 1993. Corporate
administrative expense in 1994 includes a charge of $2.2 in connection with the
termination, as of January 1, 1994, of the Company's management contract with
KCS Industries, L.P. ("KCS"), a Connecticut limited partnership principally
owned by certain present and former officers of the Company, offset by
allocations to operating segments. See Note M -- "Related Party Transactions" in
the Notes to the Consolidated Financial Statements for further information.
SEVERANCE AND EXIT COSTS AND GOODWILL WRITE-OFF
In June 1994, the Company announced personnel reductions in plant supervision,
engineering, marketing and administration totaling approximately 160 employees
at the Material Handling Segment's North American and European operations. A
charge of $4.5 was recorded related to these actions. The Company also
reorganized certain marketing activities and closed several of its regional
sales offices in the United States. In December 1994, the Company announced
additional personnel reductions totaling approximately 90 employees in
conjunction with the closing of the Material Handling Segment's Korean plant and
certain branch sales offices in France. An additional $2.9 charge was recorded
for costs, principally severance costs, associated with these actions. As a
result of changing Mark's product offerings and distribution, Terex Cranes
recognized a charge to income of $4.7 in the fourth quarter of 1993 to write-off
the remaining unamortized goodwill from the acquisition of Mark.
INCOME (LOSS) FROM OPERATIONS
The Material Handling Segment incurred a loss from operations of $7.1 for 1994,
excluding the severance charge discussed above ($13.9 including the severance
charge), compared to a loss of $28.6 for 1993. As discussed above, the decreases
in sales and gross profit in the opening months of 1994 reflected the
difficulties in restoring full production due to supplier problems. Income from
operations was $3.5 in the fourth quarter of 1994, excluding the severance
charge ($1.1 including the severance charge), compared to a loss of $10.7 in the
fourth quarter of 1993.
Heavy Equipment Segment income from operations improved by $0.1 to $11.1 for
1994 compared to $11.0 in 1993. This improvement resulted from the increase in
gross profit offset by the increase in engineering, selling and administrative
expenses described above.
Terex Cranes income from operations of $7.9 for 1994 improved by $20.7 over 1993
due to increased sales and cost reductions outlined above. As a result of cost
reductions, improvements in inventory management and consolidation of model
offerings, Koehring was profitable in 1994 after several years of losses.
Additionally (as discussed above), Terex Cranes recognized a charge to income in
1993 of $4.7 to write-off the remaining unamortized goodwill from the
acquisition of Mark.
On a consolidated basis, the Company achieved operating income of $10.8,
excluding the severance charge discussed above, for 1994 ($3.4 income including
the severance charge) compared to an operating loss of $33.9 for 1993.
OTHER INCOME (EXPENSE)
Interest expense on a consolidated basis was $30.5 for 1994 compared to $31.2
for 1993. The decrease in interest expense was primarily the result of
repayments of the then outstanding senior and subordinated debt partially offset
by increased borrowings under the Company's lending facilities.
The Company recognized equity in the net loss of Fruehauf of $0.7 in 1993. In
December 1993, the Company sold 1.0 million shares of Fruehauf common stock and
realized a gain of $3.0. During 1994 the Company sold a total of 5.9 million
shares of Fruehauf common stock and realized a gain of $26.0.
In 1994, the Company recorded a provision for state income taxes of $0.5 in
connection with the sale of its former subsidiary, Drexel. The balance of the
provision for income taxes generally represents taxes withheld on foreign
royalties and dividends. As such, any fluctuation in the provision for income
tax is due to fluctuations in these items.
EXTRAORDINARY ITEMS
During 1994, the Company repurchased a total of $27.3 of Old Senior Secured
Notes. The Company recognized extraordinary losses totaling $0.7 from these
transactions to write off unamortized discount and debt issuance costs.
In connection with terminating its previous bank lending agreement, the Company
recognized a charge of approximately $2.0 in the second quarter of 1993 to write
off unamortized debt issuance costs.
In December 1993, the Company repurchased $5.0 of Old Senior Secured Notes for
approximately $4.5, including accrued interest. The Company recognized an
extraordinary gain on this transaction of approximately $0.5, net of write-off
of unamortized discount and debt issuance costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's businesses are working capital intensive and require funding for
purchases of production and replacement parts inventories, capital expenditures
for repair, replacement and upgrading of existing facilities as well as
financing of receivables from customers and dealers. The Company has significant
debt service requirements including semi-annual interest payments on senior debt
and monthly interest payments on its credit facility. Debt reduction and an
improved capital structure are major focal points for the Company. In this
regard the Company is currently reviewing its alternatives to improve its
capital structure and to reduce debt through debt refinancings, issuance of
equity, asset sales, the sales of business units or any combination thereof.
Net cash of $21.9 was used in operating activities during 1995. Net cash used by
investing activities in 1995 was $98.9 principally due to the PPM Acquisition.
Net cash provided by financing activities during 1995 was $120.1, primarily from
the Refinancing discussed below. Cash and cash equivalents totaled $7.8 at
December 31, 1995.
FACTORS AFFECTING FUTURE LIQUIDITY
The Company announced personnel reductions totaling approximately 134 employees
in the Material Handling Segment's North American operations during the second
quarter of 1995 as a continuation of the Company's programs to increase
manufacturing efficiency, reduce costs and improve liquidity. The Company
recorded a combined charge of $3.5 for costs associated with these actions and
additional costs associated with the closing of certain administrative and
warehouse facilities.
On May 9, 1995, the Company completed the Refinancing and the PPM Acquisition.
The Refinancing included the private placement to institutional investors of
$250 of the Senior Secured Notes, repayment of the Company's Old Senior Secured
Notes and Senior Subordinated Notes, totaling approximately $152.6 principal
amount, and entry into a $100 revolving credit facility (the "Credit Facility")
to replace the Company's existing lending facility in the U.S. Until such time
as the Company completes an exchange of the Senior Secured Notes for an
equivalent issue of registered notes, or a shelf registration statement for the
Senior Secured Notes is effective, the interest rate on the Senior Secured Notes
will be 13.75%. The Indenture for the Senior Secured Notes places certain limits
on the Company's ability to incur additional indebtedness; permit the existence
of liens; issue, pay dividends on or redeem equity securities; utilize the
proceeds of assets sales; consolidate, merge or transfer assets to another
entity; and enter into transactions with affiliates. In connection with the May
1995 issuance of the Senior Secured Notes, the Company issued 1.0 million stock
appreciation rights (the "1995 SARs") entitling the holders to receive cash or
Common Stock, at the option of the Company, in an amount equal to the average
closing sale price of the Common Stock for 60 trading days prior to the date of
exercise less $7.288 for each 1995 SAR.
Approximately $92.6 of the proceeds of the Senior Secured Notes was used for the
PPM Acquisition, including the repayment of certain indebtedness of PPM required
to be repaid in connection with the acquisition. In addition, the acquisition
costs totaled approximately $5.0. The remainder of the purchase price consisted
of the issuance to the seller of redeemable preferred stock of Terex Cranes
having an aggregate liquidation preference of 127 French francs (approximately
$26.1), subject to adjustment. The purchase price is subject to adjustment
calculated by reference to the consolidated net asset value of PPM as determined
by an audit as of the date of closing. The preferred stock does not bear a
dividend and, accordingly, the Company has valued this stock at approximately
$8.8 (discounted at 15%). The Company has not yet reached agreement with the
sellers about the amount of purchase price adjustment but, based on work
performed, the Company believes that the amount of the preferred stock could
ultimately be reduced.
The Company's Credit Facility provides the Company with the ability to borrow up
to $100 (in the form of revolving loans and up to $15 in outstanding letters of
credit). The Credit Facility is secured by substantially all of the Company's
domestic receivables and inventory (including PPM). The amount of borrowings is
limited to the sum of the following: (i) 75% of the net amount of eligible
receivables, as defined, of the Company's U.S. businesses other than CMHC, plus
(ii) 70% of the net amount of CMHC eligible receivables, plus (iii) the lesser
of 45% of the value of eligible inventory, as defined, or 80% of the appraised
orderly liquidation value of eligible inventory less (iv) any availability
reserves established by the lenders. The Credit Facility expires May 9, 1998
unless extended by the lenders for one additional year. At the option of the
Company, revolving loans may be in the form of prime rate loans initially
bearing interest at the rate of 1.75% per annum in excess of the prime rate and
eurodollar rate loans initially bearing interest at the rate of 3.75% per annum
in excess of the adjusted eurodollar rate.
The Company made an interest payment of $17.7 on November 15, 1995 on the Senior
Secured Notes. The Company's debt service obligations for 1996 include
approximately $17.1 on May 15 and November 15, 1996 on the Senior Secured Notes
and approximately $0.6 monthly on the Credit Facility. Management believes that,
absent significant unanticipated declines in operating performance, cash
generated from operations and the Refinancing provide the Company with adequate
liquidity to meet the Company's operating and debt service requirements. The
balance outstanding under the Credit Facility as of December 31, 1995 was $66.8,
and the additional amount the Company could have borrowed was $8.8 as of that
date. TEL entered into a new bank working capital facility in 1995 and PPM
Europe is in negotiations to secure a working capital facility. Management
intends to seek additional working capital financing facilities for the
Company's international operations to provide additional liquidity worldwide.
CONTINGENCIES AND UNCERTAINTIES
The Internal Revenue Service (the "IRS") is currently examining the Company's
federal tax returns for the years 1987 through 1989. In December 1994, the
Company received an examination report from the IRS proposing a substantial tax
deficiency based on this examination. The examination report raises a variety of
issues, including the Company's substantiation for certain deductions taken
during this period, the Company's utilization of certain net operating loss
carryovers ("NOL's") and the availability of such NOL's to offset future taxable
income. If the IRS were to prevail on all the issues raised, the amount of the
tax assessment would be approximately $56 plus interest and penalties. If the
Company were required to pay a significant portion of the assessment, it could
have a material adverse impact on the Company and could exceed the Company's
resources. The Company has filed its administrative appeal to the examination
report. Although management believes that the Company will be able to provide
adequate documentation for a substantial portion of the deductions questioned by
the IRS and that there is substantial support for the Company's past and future
utilization of the NOL's, the ultimate outcome of this matter is subject to the
resolution of significant legal and factual issues. If the Company's positions
prevail on the most significant issues, management believes that the amounts due
would not exceed amounts previously paid or provided; however, even under such
circumstances, it is possible that the Company's NOL's could be reduced to some
extent. No additional accruals have been made for any amounts which might be due
as a result of this matter because the possible loss ranges from zero to $56
plus interest and penalties and the ultimate outcome cannot presently be
determined or estimated.
In addition, Randolph W. Lenz retired as Chairman of the Board of the Company.
Although his retirement agreement places certain restrictions on his ability to
sell his shares of Common Stock in the Company, in the event that Mr. Lenz is
able to sell a substantial portion of his shares in the Company, such sale, in
combination with the issuance by Terex of certain Common Stock Purchase Warrants
on December 20, 1993 and subject to the effects of other changes in share
ownership of the Company, could result in a change in control for tax purposes.
Such a change in control for tax purposes could possibly result in a significant
reduction in the amount of NOL's available to the Company to offset future
taxable income.
The Securities and Exchange Commission (the "Commission") in March of 1994
initiated a private investigation, which included the Company and certain of its
affiliates, to determine whether violations of certain aspects of the Federal
securities laws have taken place. The Company is cooperating with the Commission
in its investigation and it is not possible at this time to determine the
outcome of the Commission's investigation.
The Company received a letter from the Department of Labor (the "DOL") in May of
1995, alleging that the Company's former Chairman of the Board, at the time a
fiduciary for the Company's retirement plans, violated certain provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") in making
certain investments which may have been imprudent and by possibly engaging in
prohibited transactions under ERISA. The Company and its former Chairman of the
Board are currently in discussions with the DOL concerning the allegations and
it is not possible at this time to determine the outcome of this matter;
however, the Company does not believe that the resolution of the allegations
will have a material adverse effect on the Company.
The Company is subject to a number of contingencies and uncertainties including
product liability claims, self-insurance obligations, tax examinations and
guarantees. Many of the exposures are unasserted or proceedings are at a
preliminary stage, and it is not presently possible to estimate the amount or
timing of any cost to the Company. However, management does not believe that
these contingencies and uncertainties will, in the aggregate, have a material
effect on the Company. When it is probable that a loss has been incurred and
possible to make reasonable estimates of the Company's liability with respect to
such matters, a provision is recorded for the amount of such estimate or for the
minimum amount of a range of estimates when it is not possible to estimate the
amount within the range that is most likely to occur.
The Company generates hazardous and nonhazardous wastes in the normal course of
its operations. As a result, the Company is subject to a wide range of federal,
state, local and foreign environmental laws and regulations, including the
Comprehensive Environmental Response, Compensation and Liability Act, that (i)
govern activities or operations that may have adverse environmental effects,
such as discharges to air and water, as well as handling and disposal practices
for hazardous and nonhazardous wastes, and (ii) impose liability for the costs
of cleaning up, and certain damages resulting from, sites of past spills,
disposals or other releases of hazardous substances. Compliance with such laws
and regulations has, and will, require expenditures by the Company on a
continuing basis.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
UNAUDITED QUARTERLY FINANCIAL DATA
Summarized quarterly financial data for 1995 and 1994 are as follows (in
millions, except per share amounts):
1995 1994
Fourth Third Second First Fourth Third Second First
Net sales ............ $ 263.3 $ 283.3 $ 269.4 $ 214.2 $ 213.4 $ 207.1 $ 198.3 $ 168.0
Gross profit ......... 32.0 30.8 24.2 21.2 25.7 22.8 19.5 15.2
Income (loss) before
extraordinary items (1.8) (7.8) (16.4) (1.9) 0.5 1.2 10.3 (10.8)
Net income (loss) .... (1.8) (7.8) (23.9) (1.9) 0.2 1.0 10.0 (10.8)
Net income (loss) to
applicable common .. (3.7) (9.6) (25.7) (3.6) (1.4) (0.5) 8.6 (12.2)
Per share:
Primary
Income (loss) before
extraordinary items $ (0.35)$ (0.93)$ (1.76)$ (0.35)$ (0.10)$ (0.03)$ 0.64$ (1.18)
Net income (0.35) (0.93) (2.48) (0.35) (0.13) (0.05) 0.62 (1.18)
Fully diluted
Income (loss) before
extraordinary items $ (0.35)$ (0.93)$ (1.76)$ (0.35)$ (0.10)$ (0.03)$ 0.60$ (1.18)
Net income (0.35) (0.93) (2.48) (0.35) (0.13) (0.05) 0.59 (1.18)
The accompanying unaudited quarterly financial data of the Company have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with Item 302 of Regulation S-K. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been made and were of a normal recurring nature except for those discussed
below.
In 1995, the Company recognized a gain of $1.0 in the first quarter as a result
of the sale of 486.6 thousand shares of Fruehauf common stock, recorded
severance and exit costs of $3.5 and an extraordinary loss on retirement of debt
of $7.5 in the second quarter.
In 1994, the Company recognized gains of $4.6 in the first quarter, $15.5 in the
second quarter, $4.3 in the third quarter and $1.6 million in the fourth quarter
as a result of the sale of a total of 5.9 million shares of Fruehauf common
stock. The Company recognized a gain of $4.7 from the sale of its Drexel
Industries subsidiary in the second quarter of 1994. The Company recorded
severance charges of $4.5 in the second quarter of 1994 and $2.9 in the fourth
quarter of 1994, and a related pension curtailment gain of $0.9 in the fourth
quarter of 1994.
Net income (loss) has been reduced by Preferred Stock accretion for purposes of
calculating earnings per share amounts. See Note I -- "Preferred Stock" in the
Notes to the Company's Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
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 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
See "Index to Exhibits" on Page E-1.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December 31, 1995.
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
Ronald M. DeFeo,
President, Chief Executive Officer
and Chief Operating Officer
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 President, Chief Executive Officer, March 29, 1996
Ronald M. DeFeo Director and Chief Operating Officer
(Principal Executive Officer)
/s/ Ralph T. Brandifino Senior Vice President and March 29, 1996
Ralph T. Brandifino Chief Financial Officer
(Principal Financial Officer)
/s/ Marvin B. Rosenberg Senior Vice President, March 29, 1996
Marvin B. Rosenberg General Counsel, Secretary
and Director
/s/ Joseph F. Apuzzo Vice President and Controller March 29, 1996
Joseph F. Apuzzo (Principal Accounting Officer)
/s/ G. Chris Andersen Director March 29, 1996
G. Chris Andersen
/s/ William H. Fike Director March 29, 1996
William H. Fike
/s/ Bruce I. Raben Director March 29, 1996
Bruce I. Raben
/s/ David A. Sachs Director March 29, 1996
David A. Sachs
/s/ Adam E. Wolf Director March 29, 1996
Adam E. Wolf
TEREX CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
PAGE
TEREX CORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS
Report of Independent Accountants......................................... F-2
Consolidated Statement of Operations...................................... F-3
Consolidated Balance Sheet................................................ F-4
Consolidated Statement of Stockholders' Deficit........................... F-5
Consolidated Statement of Cash Flows...................................... F-6
Notes to Consolidated Financial Statements................................ F-7
FINANCIAL STATEMENT SCHEDULES
Schedule II -- Valuation and Qualifying Accounts and Reserves............. F-30
Schedule IV -- Indebtedness of and to Related Parties -- Not Current...... F-31
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.
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 at December 31, 1995 and
1994, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Stamford, Connecticut
March 22, 1996
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in millions except per share amounts)
Year Ended December 31,
1995 1994 1993
NET SALES ...................................$ 1,030.2 $ 786.8 $ 670.3
COST OF GOODS SOLD .......................... 922.0 703.6 621.8
Gross Profit ............................. 108.2 83.2 48.5
ENGINEERING, SELLING
AND ADMINISTRATIVE EXPENSES
Third parties ............................ 83.3 70.2 74.8
Related parties .......................... -- 2.2 2.9
Write-off of Mark goodwill ............... -- -- 4.7
83.3 72.4 82.4
SEVERANCE AND EXIT CHARGES .................. 3.5 7.4 --
Income (loss) from operations ............ 21.4 3.4 (33.9)
OTHER INCOME (EXPENSE)
Interest income .......................... 0.8 0.6 1.2
Interest expense ......................... (39.5) (30.5) (31.2)
Amortization of debt issuance costs ...... (2.3) (2.3) (3.4)
Gain on sale of Fruehauf stock ........... 1.0 26.0 3.0
Gain on sale of Drexel business .......... -- 4.7 --
Property impairment charge ............... (3.0) -- --
Gain on sale of property,
plant and equipment .................... 0.2 0.3 2.6
Other income (expense) - net ............. (6.3) (0.2) (3.2)
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEMS .............. (27.7) 2.0 (64.9)
PROVISION FOR INCOME TAXES .................. -- (0.8) (0.1)
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS . (27.7) 1.2 (65.0)
EXTRAORDINARY LOSS ON RETIREMENT OF DEBT .... (7.5) (0.7) (1.5)
NET INCOME (LOSS) ........................ (35.2) 0.5 (66.5)
LESS PREFERRED STOCK ACCRETION .............. (7.3) (6.0) (0.2)
INCOME (LOSS) APPLICABLE TO COMMON STOCK .$ (42.5) $ (5.5) $ (66.7)
PER COMMON AND COMMON EQUIVALENT SHARE:
Loss before extraordinary items ..........$ (3.37)$ (0.46)$ (6.55)
Extraordinary loss on retirement of debt . (0.72) (0.07) (0.15)
Net income (loss) ........................$ (4.09)$ (0.53)$ (6.70)
AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING
IN PER SHARE CALCULATION ................... 10.4 10.3 10.0
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
December 31,
1995 1994
CURRENT ASSETS
Cash and cash equivalents .................. $ 7.8 $ 9.7
Cash securing letters of credit ............ 7.7 6.7
Trade receivables (less allowance
of $9.8 in 1995 and $6.1 in 1994) ........ 127.1 91.7
Customer deposit ........................... 19.1 --
Net inventories ............................ 249.3 164.2
Other current assets ....................... 15.2 5.8
Total Current Assets .... 426.2 278.1
LONG-TERM ASSETS
Property, plant and equipment - net ........ 101.3 86.2
Goodwill - net ............................. 65.8 5.3
Debt issuance costs - net .................. 14.5 3.3
Other assets ............................... 19.1 28.7
TOTAL ASSETS .................................. $ 626.9 $ 401.6
CURRENT LIABILITIES
Notes payable .............................. $ 1.9 $ 2.1
Current portion of long-term debt .......... 7.2 25.8
Trade accounts payable ..................... 161.0 112.2
Accrued compensation and benefits .......... 16.8 10.8
Accrued warranties and product liability ... 38.6 27.6
Accrued interest ........................... 4.7 9.0
Accrued income taxes ....................... 1.4 1.3
Customer deposit ........................... 19.1 --
Other current liabilities .................. 44.0 32.8
Total Current Liabilities 294.7 221.6
NON CURRENT LIABILITIES
Long-term debt, less current portion ....... 328.4 163.0
Accrued warranties and product liability ... 33.1 31.8
Accrued pension ............................ 18.9 16.4
Other ...................................... 16.6 7.2
MINORITY INTEREST, INCLUDING
REDEEMABLE PREFERRED STOCK OF A SUBSIDIARY
Liquidation preference $26.1,
subject to adjustment .................... 9.4 --
REDEEMABLE CONVERTIBLE PREFERRED STOCK
Liquidation preference $41.2, in 1995
and $36.6 in 1994 ........................ 24.6 17.3
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Warrants to purchase common stock .......... 17.2 17.6
Common Stock, $0.01 par value--
authorized 30.0 shares;
issued and outstanding 10.6 in 1995
and 10.3 in 1994 ....................... 0.1 0.1
Additional paid-in capital ................. 40.5 40.1
Accumulated deficit ........................ (150.9) (108.4)
Pension liability adjustment ............... (2.7) (1.8)
Unrealized holding gain on equity securities 1.0 1.8
Cumulative translation adjustment .......... (4.0) (5.1)
Total Stockholders' Deficit (98.8) (55.7)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT ... $ 626.9 $ 401.6
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(in millions)
Additional Pension UnrealizedCumulative
Common Paid-in Accumulated Liability Holding Translation
Warrants Stock Capital Deficit Adjustment Gain Adjustment Total
BALANCE AT DECEMBER 31, 1992 $--- $0.1 $37.8 $(36.2) $(4.5) $--- $(6.2) $(9.0)
Issuance of Warrants 16.9 --- --- --- --- --- --- 16.9
Pension Contribution --- --- 2.3 --- --- --- --- 2.3
Net loss --- --- --- (66.5) --- --- --- (66.5)
Accretion of carrying value
of redeemable preferred
stock to redemption value --- --- --- (0.2) --- --- --- (0.2)
Pension liability adjustment --- --- --- --- 0.3 --- --- 0.3
Translation adjustment --- --- --- --- --- --- (6.0) (6.0)
BALANCE AT DECEMBER 31, 1993 16.9 0.1 40.1 (102.9) (4.2) --- (12.2) (62.2)
Issuance of Warrants 0.7 --- --- --- --- --- --- 0.7
Net income --- --- --- 0.5 --- --- --- 0.5
Accretion of carrying value
of redeemable preferred
stock to redemption value --- --- --- (6.0) --- --- --- (6.0)
Pension liability adjustment --- --- --- --- 2.4 --- --- 2.4
Unrealized holding gain on
equity securities --- --- --- --- --- 1.8 --- 1.8
Translation adjustment --- --- --- --- --- --- 7.1 7.1
BALANCE AT DECEMBER 31, 1994 17.6 0.1 40.1 (108.4) (1.8) 1.8 (5.1) (55.7)
Conversion of Warrants (0.4) --- 0.4 --- --- --- --- ---
Net loss --- --- --- (35.2) --- --- --- (35.2)
Accretion of carrying value
of redeemable preferred
stock to redemption value --- --- --- (7.3) --- --- --- (7.3)
Pension liability adjustment --- --- --- --- (0.9) --- --- (0.9)
Unrealized holding gain on
equity securities --- --- --- --- --- (0.8) --- (0.8)
Translation adjustment --- --- --- --- --- --- 1.1 1.1
BALANCE AT DECEMBER 31, 1995 $17.2 $0.1 $40.5 $(150.9) $(2.7) $1.0 $(4.0) $(98.8)
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Year Ended December 31,
1995 1994 1993
OPERATING ACTIVITIES
Net Income (Loss) ............................... $ (35.2) $ 0.5 $ (66.5)
Adjustments to reconcile
net income (loss) to cash used
in operating activities:
Depreciation .................................. 21.4 13.7 12.1
Amortization .................................. 6.3 3.4 10.3
Extraordinary loss on retirement of debt ...... 7.5 0.7 1.5
Gain on sale of Fruehauf stock ................ (1.0) (26.0) (3.0)
Gain on sale of Drexel business ............... -- (4.7) --
Gain on sale of property, plant and equipment . (0.2) (0.3) (2.6)
Property impairment charge .................... 3.0 -- --
Other ......................................... 0.3 (0.8) 0.1
Changes in operating assets and
liabilities (net of effects of acquisitions):
Restricted cash ............................. (1.0) (0.4) 5.2
Trade receivables ........................... 6.9 (17.6) 1.7
Net inventories ............................. (10.6) 0.1 30.3
Trade accounts payable ...................... (3.8) 24.4 (5.2)
Accrued compensation and benefits ........... 5.5 3.3 (3.6)
Accrued warranties and product liability .... 2.4 0.3 (3.4)
Accrued interest ............................ (4.1) (1.7) (1.1)
Accrued income taxes ........................ (1.9) (0.1) (0.6)
Other, net .................................. (17.4) (4.1) (21.4)
Net cash used in operating activities ..... (21.9) (9.3) (46.2)
INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired (92.4) -- --
Capital expenditures .......................... (10.5) (12.7) (11.5)
Proceeds from sale of excess assets ........... 1.1 3.3 11.3
Proceeds from sale of Fruehauf stock .......... 2.7 24.9 2.5
Proceeds from sale of Drexel business ......... -- 10.3 --
Proceeds from sale-leaseback of Saarn property -- 10.0 --
Other ......................................... 0.2 1.0 1.1
Net cash provided by (used in)
investing activities ....................... (98.9) 36.8 3.4
FINANCING ACTIVITIES
Net borrowings under revolving line
of credit agreements ......................... 34.7 13.0 11.9
Principal repayments of long-term debt ........ (153.9) (41.5) (12.4)
Proceeds from issuance of preferred stock
and warrants ................................. -- -- 27.2
Proceeds from issuance of long-term debt,
net of issuance costs ........................ 239.8 -- --
Other ......................................... (0.5) 0.2 --
Net cash provided by (used in)
financing activities ....................... 120.1 (28.3) 26.7
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS ................... (1.2) 1.3 (0.4)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALNTS ................................ (1.9) 0.5 (16.5)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD ............................ 9.7 9.2 25.7
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...... $ 7.8 $ 9.7 $ 9.2
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(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."
Cash and Cash Equivalents. Cash equivalents consist of highly liquid investments
with original maturities of three months or less. The carrying amount of cash
and cash equivalents approximates their fair value.
Cash Securing Letters of Credit. The Company has certain cash and cash
equivalents that are not fully available for use in its operations. Certain
international operations collateralize letters of credit and performance bonds
with cash deposits. In addition, certain provisions of the Company's previous
lending agreement with a commercial bank required that amounts be deposited in a
cash collateral account to collateralize letters of credit issued by that bank.
Customer Deposits. The customer deposit asset and liability in 1995 represent a
deposit made by an Australian customer on a large order placed with Unit Rig.
Inventories. Inventories are stated at the lower of cost or market value. Cost
is determined by the last-in, first-out ("LIFO") method for certain domestic
inventories and by the first-in, first-out ("FIFO") method for inventories of
international subsidiaries and certain domestic inventories. Approximately 32%
and 50% of consolidated inventories at December 31, 1995 and 1994, respectively,
are accounted for under the LIFO 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 expense at the time of retirement. Unamortized debt
issuance costs totaled $14.5 and $3.3 at December 31, 1995 and 1994,
respectively. During 1995, 1994 and 1993, the Company amortized $2.3, $2.3 and
$3.4, respectively, of capitalized debt issuance costs; in addition, $7.5, $0.7
and $2.2 of such costs were charged to extraordinary loss on retirement of debt
in 1995, 1994 and 1993, respectively.
Intangible Assets. Intangible assets include purchased patents and trademarks.
Costs allocated to patents, trademarks and other specifically identifiable
assets arising from business combinations 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 to forty years. Accumulated amortization is $4.2 and $0.7 at December
31, 1995 and 1994, respectively. It is the Company's policy to periodically
evaluate the carrying value of goodwill, and to recognize impairments when the
estimated related future net operating 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 goodwill.
Property, Plant and Equipment. Property, plant and equipment are stated at cost.
Expenditures for major renewals and improvements are capitalized while
expenditures for maintenance and repairs not expected to extend the life of an
asset beyond its normal useful life are charged to expense when incurred. Plant
and equipment are depreciated over the estimated useful lives of the assets
under the straight-line method of depreciation for financial reporting purposes
and both straight-line and other methods for tax purposes.
Revenue Recognition. Revenue and costs are generally recorded when products are
shipped and invoiced to either independently owned and operated dealers or to
customers. Certain new units may be invoiced prior to the time customers take
physical possession. Revenue is recognized in such cases only when the customer
has a fixed commitment to purchase the units, the units have been completed,
tested and made available to the customer for pickup or delivery, and the
customer has requested that the Company hold the units for pickup or delivery at
a time specified by the customer in the sales documents. In such cases, the
units are invoiced under the Company's customary billing terms, title to the
units and risks of ownership pass to the customer upon invoicing, the units are
segregated from the Company's inventory and identified as belonging to the
customer and the Company has no further obligations under the order.
Accrued Warranties and Product Liability. The Company records accruals for
potential warranty and product liability claims based on the Company's claim
experience. Warranty costs are accrued at the time revenue is recognized. The
Company provides self-insurance accruals for estimated product liability
experience on known claims and for claims anticipated to have been incurred
which have not yet been reported. The Company's product liability accruals are
presented on a gross settlement basis. Product liability payments, including
expenses, are estimated to approximate $10.0 per year.
Non Pension Postretirement Benefits. The Company adopted SFAS No. 106 "Employers
Accounting for Postretirement Benefits other than Pensions" on January 1, 1993.
The statement requires accrual of the obligation to provide future benefits to
employees during the years that the employees provide service. The Company
provides postretirement benefits to certain former salaried and hourly employees
and certain hourly employees covered by bargaining unit contracts that provide
such benefits. The Company elected the delayed recognition method of adoption,
and the effect of adoption of the new standard was not material to the Company's
financial statements. (See Note K -- "Retirement Plans.")
Foreign Currency Translation. Assets and liabilities of the Company's
international operations are translated at year-end exchange rates. Income and
expenses are translated at average exchange rates prevailing during the year.
For operations whose functional currency is the local currency, translation
adjustments are accumulated in the Cumulative Translation Adjustment component
of Stockholders' Deficit. Gains or losses resulting from foreign currency
transactions are included in Other income (expense) -- net.
Foreign Exchange Contracts. The Company uses foreign exchange contracts to hedge
recorded balance sheet amounts related to certain international operations and
firm commitments that create currency exposures. The Company does not enter into
speculative contracts. Gains and losses on hedges of assets and liabilities are
recognized in income as offsets to the gains and losses from the underlying
hedged amounts. Gains and losses on hedges of firm commitments are recorded on
the basis of the underlying transaction. At December 31, 1995 the Company had
foreign exchange contracts, which were hedges of firm commitments, totaling
$21.8 whose fair value approximates its carrying value. These contracts related
primarily to the customer deposit discussed above. At December 31, 1994, the
Company had no material outstanding foreign exchange contracts.
Environmental Policies. Environmental expenditures that relate to current
operations are either expensed or capitalized depending on the nature of the
expenditure. Expenditures relating to conditions caused by past operations that
do not contribute to current or future revenue generation are expensed.
Liabilities are recorded when environmental assessments and/or remedial actions
are probable, and the costs can be reasonably estimated. Such amounts were not
material at December 31, 1995 and 1994.
Research and Development Costs. Research and development costs are expensed as
incurred. Such costs incurred in the development of new products or significant
improvements to existing products are included in Engineering, Selling and
Administrative Expenses and amounted to $11.2 in 1995, $10.5 in 1994 and $11.8
in 1993.
Income Taxes. The Company adopted SFAS No. 109, "Accounting for Income Taxes" on
January 1, 1993. SFAS No. 109 provides that deferred tax assets and liabilities
be recorded based upon the difference between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes. SFAS
No. 109 further requires that the Company record a valuation allowance for
deferred tax assets if realization of such assets is dependent on future taxable
income. The effect of adoption of the new standard was not material to the
Company's financial statements. (See Note H -- "Income Taxes.")
Net Income (Loss) Per Share. Net income (loss) per share is based on the
weighted average number of common and common equivalent shares outstanding
during the year. The dilutive effect of common stock equivalents (if applicable)
is calculated using the treasury stock method.
Reclassifications. Certain amounts shown for 1993 and 1994 have been
reclassified to conform to the 1995 presentation.
NOTE B -- ACQUISITIONS
PPM, Inc. - On May 9, 1995, the Company, through Terex Cranes, Inc., a Delaware
corporation which is a wholly owned subsidiary of the Company ("Terex Cranes"),
completed the acquisition (the "PPM Acquisition") of substantially all of the
shares of P.P.M. S.A., a societe anonyme ("PPM Europe"), from Potain S.A., a
societe anonyme, and all of the capital stock of Legris Industries, Inc., a
Delaware corporation which owns 92.4% of the capital stock of PPM Cranes, Inc.,
a Delaware corporation ("PPM North America;" and PPM North America together with
PPM Europe collectively referred to as "PPM") from Legris Industries S.A., a
societe anonyme ("Legris France"). PPM designs, manufactures and markets mobile
cranes and container stackers primarily in North America and Western Europe
under the brand names of PPM, P&H (trademark of Harnischfeger Corporation) and
BENDINI. Concurrently with the completion of the PPM Acquisition, the Company
contributed the assets (subject to liabilities) of its Koehring Cranes and
Excavators and Marklift division to Terex Cranes. The former division now
operates as Koehring Cranes, Inc., a wholly owned subsidiary of Terex Cranes
("Koehring"). Koehring manufactures mobile cranes under the LORAIN brand name
and aerial lift equipment under the MARKLIFT brand name. PPM and Koehring
comprise Terex Cranes, Inc., the Company's Mobile Cranes Segment.
The purchase price of PPM, including acquisition costs, was approximately
$104.5. Approximately $92.6 of the purchase price was paid in cash, including
the repayment of certain indebtedness of PPM required to be repaid in connection
with the acquisition. The remainder of the purchase price consisted of the
issuance of redeemable preferred stock of Terex Cranes having an aggregate
liquidation preference of 127 million French francs (approximately $26.1),
subject to adjustment. The purchase price is subject to adjustment calculated by
reference to the consolidated net asset value of PPM as determined by an audit
as of the date of closing. The preferred stock does not bear a dividend and,
accordingly, the Company has valued this stock at approximately $8.8 (discounted
at 15%). The Company has not yet reached agreement with the sellers about the
amount of purchase price adjustment but, based on work performed, the Company
believes that the amount of the preferred stock could ultimately be reduced.
The PPM Acquisition was accounted for as a purchase, with the purchase price
allocated to the assets acquired and liabilities assumed based upon their
respective estimated fair values at the date of acquisition. The excess of
purchase price over the net assets acquired is being amortized on a
straight-line basis over 15 years. The estimated fair values of assets and
liabilities acquired in the PPM Acquisition are summarized as follows:
Cash ......................................... $ 1.0
Accounts receivable .......................... 33.8
Inventories .................................. 69.1
Other current assets ......................... 11.9
Property, plant and equipment ................ 20.5
Other assets ................................. 0.3
Goodwill ..................................... 68.0
Accounts payable and other current liabilities (86.6)
Other liabilities ............................ (13.5)
$ 104.5
The operating results of PPM are included in the Company's consolidated results
of operations since May 9, 1995. The following pro forma summary presents the
consolidated results of operations as though the Company completed the PPM
Acquisition on January 1, 1994, after giving effect to certain adjustments,
including amortization of goodwill, interest expense and amortization of debt
issuance costs on the debt issued in the Refinancing:
Unaudited Pro Forma
for the Year Ended
December 31,
1995 1994
Net sales ................................. $ 1,095.1 $ 966.5
Income (loss) from operations ............. 4.9 (12.9)
Loss before extraordinary items ........... (53.0) (19.3)
Loss before extraordinary items, per share $ (5.89)$ (2.45)
The pro forma information is not necessarily indicative of what the actual
results of operations of the Company would have been for the periods indicated,
nor does it purport to represent the results of operations for future periods.
NOTE C -- SALE OF FRUEHAUF STOCK
In December 1993, the Company, which owned 26% of Fruehauf Trailer Corporation
("FTC" or "Fruehauf") before the sale, sold one million shares of FTC Common
Stock. The Company realized a gain of $3.0. In February 1994, the Company sold
5.9 million shares of FTC stock for $24.9. In January 1995, the Company sold its
remaining shares of FTC for $1.0. In June 1995, the Company received 250
thousand shares of Fruehauf stock in settlement of certain obligations of
Fruehauf.
NOTE D -- INVENTORIES
Inventories consist of the following:
December 31,
1995 1994
Finished equipment ................................. $ 53.1 $ 26.8
Replacement parts .................................. 94.5 68.9
Work-in-process .................................... 26.0 13.5
Raw materials and supplies ......................... 78.9 57.9
252.5 167.1
Less: Excess of FIFO inventory value over LIFO cost (3.2) (2.9)
Net inventories .................................... $ 249.3 $ 164.2
In 1994, certain inventory quantities were reduced, resulting in the liquidation
of LIFO inventory quantities carried at lower costs prevailing in prior years.
The effects of such liquidations were to decrease cost of goods sold by $2.1 in
1994.
NOTE E -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
December 31,
1995 1994
Property ........................ $ 11.0 $ 8.4
Plant ........................... 41.7 32.2
Equipment ....................... 101.2 83.4
153.9 124.0
Less: Accumulated depreciation . (52.6) (37.8)
Net property, plant and equipment $ 101.3 $ 86.2
NOTE F -- LONG-TERM OBLIGATIONS
Long-term debt is summarized as follows:
December 31,
1995 1994
13.25% Senior Secured Notes due
May 15, 2002 ("Senior Secured Notes") ....... $ 247.0 $--
Credit Facility maturing May 9, 1998 ........... 66.8 --
13.0% Senior Secured Notes due
August 1, 1996 ("Old Senior Secured Notes") -- 127.2
13.5% Secured Senior Subordinated Notes
due July 1, 1997 ("Subordinated Notes") ...... -- 24.5
Lending Facility maturing August 24, 1997 ...... -- 24.1
Secured term note bearing interest
at 9.0% payable in equal semiannual
installments from August 1994 to February 1998 -- 0.6
Note payable ................................... 4.5 --
Capital lease obligations ...................... 14.9 12.4
Other .......................................... 2.4 --
Total long-term debt ......................... 335.6 188.8
Current portion of long-term debt ............ 7.2 25.8
Long-term debt, less current portion ......... $ 328.4 $ 163.0
The Senior Secured Notes
On May 9, 1995, the Company issued $250 of Senior Secured Notes due May 15,
2002. The Senior Secured Notes were issued in conjunction with the PPM
Acquisition and a refinancing of the Old Senior Secured Notes, and Subordinated
Notes. Except in the event of certain asset sales, there are no principal
repayment or sinking fund requirements prior to maturity. Interest on the Notes
is payable semi-annually on May 15 and November 15 of each year, commencing on
November 15, 1995, to holders of record on the immediately preceding May 1 and
November 1, respectively. The Notes bear interest at 13 3/4% per annum. Upon the
earlier of (i) the consummation of an exchange offer and (ii) the effectiveness
of a Shelf Registration Statement, the interest rate on the Notes will decrease
to 13 1/4% per annum. Interest is computed on the basis of a 360-day year
comprised of twelve 30-day months.
The Senior Secured Notes are senior obligations of the Company, pari passu in
right of payment with all existing and future senior indebtedness and senior to
all subordinated indebtedness. Repayment of the Senior Secured Notes are
guaranteed by certain domestic subsidiaries of the Company (the "Guarantors").
The Senior Secured Notes are secured by a first priority security interest on
substantially all of the assets of the Company and the Guarantors, other than
cash and cash equivalents, except that as to accounts receivable and inventory
and proceeds thereof, and certain related rights, such security shall be
subordinated to liens securing obligations outstanding under any working capital
or revolving credit facility secured by such accounts receivable and inventory,
including the Credit Facility. The Senior Secured Notes are also secured by a
lien on certain assets of the Company's foreign subsidiaries. The indenture for
the Senior Secured Notes places certain limits on the Company's ability to incur
additional indebtedness; permit the existence of liens; issue, pay dividends on
or redeem equity securities; sell assets; consolidate, merge or transfer assets
to another entity; and enter into transactions with affiliates.
In connection with the issuance of the Senior Secured Notes, the Company issued
one million stock appreciation rights ("1995 SARs") entitling the holders to
receive cash or Terex Corporation common stock, at the option of the Company, in
an amount equal to the average closing sale price of the common stock for 60
trading days prior to the date of exercise less $7.288 for each SAR.
The Credit Facility
The Company currently has a secured revolving credit facility (the "Credit
Facility") with certain institutional lenders (the "Lenders"). Under the terms
of such facility, the Company and Clark Material Handling Company ("CMHC"),
Koehring and PPM North America, each a subsidiary of the Company, (collectively,
the "Borrowers") will have availability, subject to the borrowing base
limitations set forth below, in an aggregate amount of up to $100. Subject to
the terms and conditions set forth in the Credit Facility, the Borrowers may
borrow (in the form of revolving loans and up to $15 in outstanding letters of
credit) an amount at any time outstanding initially equalling the sum of the
following: (i) 75% of the net amount of eligible receivables (as defined in the
Credit Facility) of the Company, Koehring and PPM North America, plus (ii) 70%
of the net amount of eligible receivables of CMHC, plus (iii) the lesser of (a)
45% of the value of eligible inventory (as defined in the Credit Facility) of
the Borrowers or (b) 80% of the appraised orderly liquidation value of eligible
inventory.
Each Borrower guarantees, on a joint and several basis, all of the obligations
of the other Borrowers under the Credit Facility, which obligations will
generally be secured by a first priority security interest in favor of the
Lenders in all of the receivables and inventory and certain related rights of
the Borrowers.
The outstanding principal amount of prime rate loans initially bears interest at
the rate of 1.75% per annum in excess of the prime rate and the outstanding
principal amount of Eurodollar rate loans initially bears interest at the rate
of 3.75% per annum in excess of the adjusted Eurodollar rate. The Company must
pay a fee of 0.25% per annum on the unused portion of the Credit Facility. The
Credit Facility contains covenants limiting the Borrowers' activities,
including, without limitation, limitations on the incurrence of indebtedness,
liens, asset sales, dividends and other payments, investments, mergers and
related party transactions.
The Credit Facility matures on May 9, 1998. The Lenders, at their option, may
extend the facility for one additional year. In the event that for any reason
the facility is terminated prior to the maturity date, the Borrowers must pay to
the Lenders a termination fee.
Old Senior Secured Notes and Subordinated Notes
The Old Senior Secured Notes and Subordinated Notes were retired on May 9, 1995
in conjunction with the PPM Acquisition and the issuance of the Senior Secured
Notes. The Company realized an extraordinary loss of $5.7 and $1.6 on the early
extinguishment of the Old Senior Secured Notes and the Subordinated Notes,
respectively. The Old Senior Secured Notes, were issued during July 1992 for a
total of $160.0 in conjunction with the CMH Acquisition and a refinancing of the
Company's bank debt. Proceeds from the issuance of the Old Senior Secured Notes
were used for the cash portion of the CMH Acquisition purchase price ($85.0),
for the settlement of all amounts outstanding under its previous credit facility
($58.0), and for working capital and transaction costs. Interest on the Senior
Secured Notes was due semiannually on February 1 and August 1.
The indenture for the Old Senior Secured Notes required that proceeds from the
sale of collateral be used to make an offer to repurchase, at par, an equivalent
amount of Old Senior Secured Notes. During 1994, as a result of sales of 5.4
million shares of Fruehauf common stock during 1994 and 1.0 million shares in
the last quarter of 1993, the Company repurchased $27.3 principal amount of the
Old Senior Secured Notes. The Company realized an extraordinary loss of $0.7 on
the repurchases in conjunction with the accelerated write off of related
discount and debt issuance costs.
In December 1993, the Company repurchased in the open market $5.0 principal
amount of Old Senior Secured Notes for approximately $4.5, including accrued
interest, and had such notes cancelled as of December 31, 1993. The Company
realized an extraordinary gain from the early extinguishment of debt of $0.5,
net of unamortized debt discount and debt issuance costs.
The Subordinated Notes were initially issued as unsecured subordinated notes for
a total amount of $50.0. Interest on the Subordinated Notes was due semiannually
on January 2 and July 1.
Lending Facility
The Lending Facility was terminated in May 1995 in conjunction with the PPM
Acquisition and entering into the Credit Facility. The Company realized an
extraordinary loss of $0.2 to write-off the unamortized debt issuance cost at
termination. In May 1993, Terex entered into an agreement with a new lender
which initially provided short-term financing and currently provides long term
financing (the "Lending Facility"). The Lending Facility was secured by
substantially all the Company's domestic receivables and proceeds thereof.
Interest on Lending Facility borrowings was payable monthly at variable rates
generally equal to 2.75% above the prime rate. During 1994, the agreement was
amended to extend the maturity date from August 24, 1995 to August 24, 1997. The
agreement provided for up to $30.0 of cash advances and guarantees through April
30, 1995, and $25.0 thereafter through the extended maturity date. The balance
outstanding under the Lending Facility at December 31, 1994 was $24.1.
Accordingly, all outstanding borrowings are classified as Long Term Debt in the
accompanying Balance Sheet.
In conjunction with entering into the Lending Facility, the Company terminated a
former bank lending agreement and recognized, as an extraordinary item, a charge
of $2.0 to write off the unamortized debt issuance costs.
TEL Facility
In 1995, the Company's subsidiary, Terex Equipment Limited ("TEL") located in
Motherwell, Scotland, entered into a bank facility (the "TEL Facility") which
provides up to (pound)30.5 ($47.4) including up to (pound)10.0 ($15.5)
non-recourse discounting of accounts receivable which meet certain credit
criteria, plus additional facilities for tender and performance bonds and
foreign exchange contracts. Interest rates vary between 1.0% - 1.5% above the
financial institution's Published Base Rate or LIBOR. The TEL Facility is
collateralized primarily by the related accounts receivable. The TEL Facility
requires no performance covenants. Proceeds from the TEL Facility are primarily
used for working capital purposes. Amounts discounted under this and the prior
facility were $11.7 and $11.9 at December 31, 1995 and 1994, respectively.
In 1993, the Company's subsidiary, Terex Equipment Limited ("TEL") located in
Motherwell, Scotland, entered into a bank facility (the "Old TEL Facility")
which provides up to (pound)28.0 ($42.0) including up to (pound)13.0 ($19.5)
non-recourse discounting of accounts receivable which meet certain credit
criteria, plus additional facilities for tender and performance bonds and
foreign exchange contracts. Interest rates vary between 1.0% - 1.5% above the
financial institution's Published Base Rate or LIBOR. The Old TEL Facility is
collateralized primarily by the related accounts receivable. The Old TEL
Facility requires no performance covenants. Proceeds from the Old TEL Facility
are primarily used for working capital purposes.
Note Payable
As part of the PPM Acquisition, the Company assumed the obligation for a note
payable to Harnischfeger Corporation. The note is non-interest bearing.
Schedule of Debt Maturities
Scheduled annual maturities of long-term debt outstanding at December 31, 1995
in the successive five-year period are summarized below. Amounts shown are
exclusive of minimum lease payments disclosed in Note G -- "Lease Commitments":
1996 $ 1.8
1997 0.7
1998 67.2
1999 0.4
2000 0.3
Thereafter 250.2
Total $ 320.6
Based on quoted market values, the Company believes that the fair value of the
Senior Secured Notes was approximately $218.8 as of December 31, 1995. The
Company believes that, based on quoted market values, 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 $43.1, $32.2 and $31.8 of interest in 1995, 1994 and 1993,
respectively.
The weighted average interest rate on short term borrowings outstanding was
10.0% at December 31, 1995 and 10.2% at
December 31, 1994.
NOTE G -- LEASE COMMITMENTS
The Company leases certain facilities, machinery and equipment, and vehicles
with varying terms. Under most leasing arrangements, the Company pays the
property taxes, insurance, maintenance and expenses related to the leased
property. Certain of the equipment leases are classified as capital leases and
the related assets have been included in Property, Plant and Equipment. Net
assets under capital leases were $20.4 and $5.9 at December 31, 1995 and 1994,
respectively, net of accumulated amortization of $3.5 and $2.9 at December 31,
1995 and 1994, respectively.
The Company's Material Handling Segment also routinely enters into
sale-leaseback arrangements for certain equipment, which is later sold to
third-party customers under sales-type lease agreements. The Company maintains a
net investment in these leases, represented by the present value of payments due
under the leases of $6.6 of which $2.4 is current at December 31, 1995.
In connection with the original sale-leaseback arrangements underlying the
customer leasing program, the Company has an outstanding rental installment
obligation which is recorded based on the present value of minimum payments due
under the leases.
Future minimum capital and noncancelable operating lease payments and the
related present value of capital lease payments at December 31, 1995 are as
follows:
Capital Operating
Leases Leases
1996 $ 6.9 $ 6.6
1997 4.8 5.3
1998 2.9 2.1
1999 1.3 1.7
2000 0.5 1.2
Thereafter 0.2 1.1
Total minimum obligations 16.6 $ 18.0
Less amount representing interest 1.7
Present value of net minimum obligations 14.9
Less current portion 5.8
Long-term obligations $ 9.1
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 $6.5, $7.4 and $6.3 in 1995, 1994, and 1993,
respectively.
In November 1994, the Company entered into a sale-leaseback transaction for
CMH's parts distribution center in Germany. The Company received net proceeds of
$11.0 and will lease the facility under the terms of a five year lease for a
total rental of $1.9 per year. The Company realized a gain of $4.0 which was
deferred and will be amortized as a reduction of rental expense over the lease
term ($0.8 per year).
NOTE H -- INCOME TAXES
The components of Income (Loss) Before Income Taxes and Extraordinary Items are
as follows:
Year ended December 31,
1995 1994 1993
United States ................... $ (30.8) $ 12.4 $ (67.5)
Foreign ......................... 3.1 (10.4) 2.5
Income (loss) before income taxes
and extraordinary items ....... $ (27.7) $ 2.0 $ (65.0)
The major components of the Company's provision for income taxes are summarized
below:
Year ended December 31,
1995 1994 1993
Current:
Federal ................................. $-- $-- $--
State ................................... -- 0.5 --
Foreign ................................. 4.6 2.1 1.3
Utilization of foreign net operating loss
("NOL") carryforward ................... (4.6) (1.8) (1.2)
Current income tax provision .......... -- 0.8 0.1
Deferred:
Deferred federal income tax benefit ..... -- -- --
Total provision for income taxes ........ $-- $ 0.8 $ 0.1
Deferred tax assets and liabilities result from differences in the basis of
assets and liabilities for tax and financial statement purposes. In accordance
with SFAS No. 109, "Accounting for Income Taxes," a valuation allowance has been
recognized. The tax effects of the basis differences and net operating loss
carryforward as of December 31, 1995 and 1994 are summarized below for major
balance sheet captions:
1995 1994
Net inventories .......................... $ (5.6) $ (7.1)
Fixed assets ............................. (3.0) (9.6)
Other .................................... (1.0) (0.5)
Total deferred tax liabilities ...... (9.6) (17.2)
Receivables .............................. 1.7 1.4
Warranties and product liability ......... 24.6 20.8
Investments .............................. -- 1.0
All other items .......................... 4.4 6.1
Benefit of net operating loss carryforward 136.9 126.5
Total deferred tax assets ........... 167.6 155.8
Deferred tax assets valuation allowance .. (158.0) (138.6)
Net deferred tax liabilities ........ $ -- $ --
The valuation allowance for deferred tax assets as of January 1, 1994 was
$137.1. The net change in the total valuation allowance for the years ended
December 31, 1994 and 1995 were increases of $1.5 and $19.4, respectively.
The Company's Provision for Income Taxes is different from the amount which
would be provided by applying the statutory federal income tax rate to the
Company's Loss Before Income Taxes and Extraordinary Items. The reasons for the
difference are summarized below:
Year ended December 31,
1995 1994 1993
Statutory federal income tax rate ............... $ (9.7) $ 0.7 $ (22.7)
Recognition of previously unrecognized tax assets -- (4.3) --
NOL with no current benefit ..................... 9.5 -- 21.6
Foreign tax differential on
income/losses of foreign subsidiaries .......... (1.2) 3.7 (0.6)
Goodwill ........................................ 1.1 -- 1.8
State tax ....................................... -- 0.5 --
Other ........................................... 0.3 0.2 0.1
Total provision for income taxes .............. $ -- $ 0.8 $ 0.2
The Company has not provided for U.S. federal and foreign withholding taxes on
$19.0 of foreign subsidiaries' undistributed earnings as of December 31, 1995,
because such earnings are intended to be reinvested indefinitely. Any income tax
liability that would result had such earnings actually been repatriated would
likely be offset by utilization of NOL's. On repatriation, certain foreign
countries impose withholding taxes. The amount of withholding tax that would be
payable on remittance of the entire amount of undistributed earnings would
approximate $3.4.
At December 31, 1995, the Company had domestic federal net operating loss
carryforwards of $297.7. Approximately $69.7 of the remaining net operating loss
carryforwards are subject to special limitations under the Internal Revenue
Code, and the NOL's may be affected by the current IRS examination discussed
below.
The tax basis net operating loss carryforwards expire as follows:
Tax Basis Net
Operating Loss
Carryforwards
1996 $ 45.2
1997 8.0
1998 11.9
1999 --
2000 4.6
2006 20.7
2007 35.7
2008 97.3
2009 34.2
2010 40.1
Total $ 297.7
The Company also has various state net operating loss and tax credit
carryforwards expiring at various dates through 2010 available to reduce future
state taxable income and income taxes. In addition, the Company's foreign
subsidiaries have approximately $62.5 of loss carryforwards, $36.1 in Germany,
$11.9 in U.K. and $14.5 in other countries, which are available to offset future
foreign taxable income. The loss carryforwards in Germany and U.K. are available
without expiration. The loss carryforwards in other countries of $10.7 are
available without expiration, with the remaining $3.8 expiring in the years 1996
through 2001.
The Internal Revenue Service is currently examining the Company's federal tax
returns for the years 1987 through 1989. In December 1994, the Company received
an examination report from the IRS proposing a substantial tax deficiency based
on this examination. The examination report raises a variety of issues,
including the Company's substantiation for certain deductions taken during this
period, the Company's utilization of certain net operating loss carryovers
("NOL's") and the availability of such NOL's to offset future taxable income. If
the IRS were to prevail on all the issues raised, the amount of the tax
assessment would be approximately $56 plus interest and penalties. If the
Company were required to pay a significant portion of the assessment, it could
have a material adverse impact on the Company and could exceed the Company's
resources. The Company has filed its administrative appeal to the examination
report. Although management believes that the Company will be able to provide
adequate documentation for a substantial portion of the deductions questioned by
the IRS and that there is substantial support for the Company's past and future
utilization of the NOL's, the ultimate outcome of this matter is subject to the
resolution of significant legal and factual issues. If the Company's positions
prevail on the most significant issues, management believes that the amounts due
would not exceed amounts previously paid or provided; however, even under such
circumstances, it is possible that the Company's NOL's could be reduced to some
extent. No additional accruals have been made for any amounts which might be due
as a result of this matter because the possible loss ranges from zero to $56
plus interest and penalties and the ultimate outcome cannot presently be
determined or estimated.
The Company made income tax payments of $0.0, $0.8 and $0.1 in 1995, 1994 and
1993, respectively.
NOTE I -- PREFERRED STOCK
The Company's certificate of incorporation was amended in October 1993 to
authorize 10.0 million shares of preferred stock, $.01 par value per share. As
of December 31, 1995, a total of 1.2 million shares of preferred stock are
issued and outstanding as described below.
Series A Cumulative Redeemable Convertible Preferred Stock
As of December 31, 1995, the Company had 1.2 million issued and outstanding
shares of Series A Cumulative Redeemable Convertible Preferred Stock (the
"Series A Preferred Stock"). These shares were issued as part of a private
placement on December 20, 1993 which also included the issuance of 1.3 million
Common Stock Purchase Warrants (the "Series A Warrants," see Note J --
"Stockholders' Deficit"). The Series A Preferred Stock has a par value of $.01
per share and an initial liquidation preference of $25.00 per share (the
"Liquidation Preference"). During the period from the issue date and ending at
the Accretion Termination Date (as defined below), the Liquidation Preference
will accrete at the rate of 13% per year until December 20, 1998, and 18% per
year thereafter. The Liquidation Preference totaled $39.2 at December 31, 1995.
After the Accretion Termination Date, the holders of the Series A Preferred
Stock are entitled to cumulative dividends, payable quarterly, as described
below. Each share of Series A Preferred Stock is convertible into 2.25 shares of
the Company's common stock (subject to adjustment in certain circumstances), and
is redeemable at the option of the Company on or after December 31, 1994 at a
price equal to the Liquidation Preference plus unpaid dividends provided that a
concurrent redemption of all outstanding Series A Warrants is made. The Series A
Preferred Stock is subject to a mandatory redemption requirement on or before
December 31, 2000 at a per share redemption price equal to the Liquidation
Preference on the date of redemption plus accrued but unpaid dividends. The
Series A Preferred Stock has no voting rights except when and if dividends are
in arrears as described below.
Commencing three months prior to the date the Company's indentures and loan
agreements allow the Company to declare and pay cash dividends on the Series A
Preferred Stock ("the Accretion Termination Date"), dividends will begin to
accrue at the rate of 13% per year through December 20, 1998, and at the rate of
18% per year thereafter. After the Accretion Termination Date the holders of the
Series A Preferred Stock will be entitled to elect one additional director of
the Company if the Company fails to declare and pay the full amount of dividends
payable on any two dividend payment dates. Such holders will have a right to
elect two additional directors of the Company if the Company misses four
dividend payment dates.
The aggregate net proceeds to the Company for the Series A Preferred Stock and
the Series A Warrants issued on December 20, 1993 were $27.2. The Company
allocated $10.3 and $16.9 of this amount to the Series A Preferred Stock and the
Series A Warrants, respectively, based on management's estimate of the relative
fair values of these securities at the time of their issuance, using information
provided by the Company's investment bankers. The difference between the
initially recorded amount and the redemption amount will be accreted to the
carrying value of the Series A Preferred Stock using the interest method over
the period from issuance to the mandatory redemption date, December 31, 2000. In
addition, the carrying value of the Series A Preferred Stock will be further
adjusted for increases in the Liquidation Preference prior to the Accretion
Termination Date as described above. The total accretion recorded in 1995 and
1994 was $7.3 and $6.0, respectively.
Series B Cumulative Redeemable Convertible Preferred Stock
As of December 31, 1995, the Company had 38.8 thousand issued and outstanding
shares of Series B Cumulative Redeemable Convertible Preferred Stock (the
"Series B Preferred Stock"). These shares constitute the remaining balance
outstanding of the Series B Preferred Stock issued to certain individuals on
December 9, 1994 in consideration for the early termination of a contract
between the Company and KCS Industries, L.P., a Connecticut limited partnership
("KCS"), a related party (see Note M -- "Related Party Transactions"). The
Series B Preferred Stock has a par value of $.01 per share and an initial
liquidation preference of $25.00 per share (the "Liquidation Preference").
During the period from the issue date and ending at the Accretion Termination
Date (as defined below), the Liquidation Preference will accrete at the rate of
13% per year until December 20, 1999, and 18% per year thereafter. The
Liquidation Preference totaled $2.0 at December 31, 1995.
After the Accretion Termination Date, the holders of the Series B Preferred
Stock are entitled to cumulative dividends, payable quarterly, as described
below. Each share of Series B Preferred Stock is convertible into 2.25 shares of
the Company's common stock (subject to adjustment in certain circumstances), and
is redeemable at the option of the Company on or after December 31, 1995 at a
price equal to the Liquidation Preference plus unpaid dividends provided that a
concurrent redemption of all outstanding Series B Warrants as described below is
made. The Series B Preferred Stock is subject to a mandatory redemption
requirement on or before December 31, 2001 at a per share redemption price equal
to the Liquidation Preference on the date of redemption plus accrued but unpaid
dividends. The Series B Preferred Stock has no voting rights except when and if
dividends are in arrears as described below.
Commencing three months prior to the date the Company's indentures and loan
agreements allow the Company to declare and pay cash dividends on the Series B
Preferred Stock ("the Accretion Termination Date"), dividends will begin to
accrue at the rate of 13% per year through December 20, 1999, and at the rate of
18% per year thereafter.
The Company allocated $0.9 and $0.7 to the Series B Preferred Stock and the
Series B Warrants, respectively, based on management's estimate of the relative
fair values of these securities at the time of their issuance (equivalent to the
allocation used for the Series A Preferred Stock and Series A Warrants). The
difference between the initially recorded amount and the redemption amount will
be accreted to the carrying value of the Series B Preferred Stock using the
interest method over the period from issuance to the mandatory redemption date,
December 31, 2001. In addition, the carrying value of the Series B Preferred
Stock will be further adjusted for increases in the Liquidation Preference prior
to the Accretion Termination Date as described above.
NOTE J -- STOCKHOLDERS' DEFICIT
Common Stock. The Company's certificate of incorporation was amended in October
1993 to increase the number of authorized shares of common stock, par value $.01
(the "Common Stock"), to 30.0 million. As of December 31, 1995, there were 10.6
million shares issued and outstanding. Of the 19.4 million unissued shares at
that date, 6.7 million shares were reserved for issuance for conversion of
Series A and B Preferred Stock (Note I) and the exercise of stock options and
Series A and B Warrants.
In December 1993, the Company issued 0.4 million shares of Common Stock as a
contribution to two of the Company's pension plans. The Company valued these
shares at $2.3, based on 96.5% of the market price of the Common Stock on the
date of issuance.
Series A Warrants. In connection with the private placement of the Series A
Preferred Stock (see Note I -- "Series A Preferred Stock"), the Company issued
1.3 million Series A Warrants. Each Series A Warrant may be exercised, in whole
or in part, at the option of the holder at any time before the expiration date
on December 31, 2000 and is redeemable by the Company under certain
circumstances. As of December 31, 1995, upon the exercise or redemption of a
Warrant, the holder thereof was entitled to receive 2.35 shares of Common Stock.
The exercise price for the Warrants is $.01 for each share of Common Stock. The
number of shares of Common Stock issuable upon exercise or redemption of the
Warrants is subject to adjustment in certain circumstances.
Series B Warrants. In connection with the issuance of the Series B Preferred
Stock (see Note I -- "Series B Preferred Stock"), the Company issued 107.0
thousand Series B Warrants. Each Series B Warrant may be exercised, in whole or
in part, at the option of the holder at any time before the expiration date on
December 31, 2001 and is redeemable by the Company under certain circumstances.
Upon the exercise or redemption of a Warrant, the holder thereof shall be
entitled to receive one share of Common Stock. The exercise price for the
Warrants is $.01 for each share of Common Stock. At December 31, 1995,
approximately 16 thousand warrants remain unexercised.
Stock Options. The Company maintains 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. The ISO allows the
holder to purchase shares of common stock, commencing one year after grant. ISO
expire after ten years. At December 31, 1995, 4.8 thousand stock options were
available for grant under the plan.
The following table is a summary of stock options:
Number of Exercise Price per
Options Option
Outstanding at December 31, 1992 59,666 $ 6.40 to 14.80
Granted 23,750 7.13 to 10.50
Exercised (3,750) 10.2
Canceled or expired (3,750) 14.8
Outstanding at December 31, 1993 75,916 $ 6.40 to 14.80
Granted 10,000 6.63
Exercised ---
Canceled or expired (3,750) 14.8
Outstanding at December 31, 1994 82,166 $ 6.40 to 14.80
Granted 27,900 4.25
Exercised ---
Canceled or expired (6,666) 7.13 to 14.80
Outstanding at December 31, 1995 103,400 $ 4.25 to 14.80
Exercisable at December 31, 1995 62,168 $ 6.40 to 14.80
Long-Term Incentive Plans. In December 1995, the Board of Directors approved,
subject to shareholder approval, the 1996 Terex Corporation Long-Term Incentive
Plan (the "1996 Plan"). The 1996 Plan authorizes the granting of (i) options
("Stock Option Awards") to purchase shares of Common Stock, including Restricted
Stock, (ii) shares of Common Stock, including Restricted Stock ("Stock Awards"),
and (iii) cash bonus awards based upon a participant's job performance
("Performance Awards"). Subject to adjustment as described below under
"Adjustments," the aggregate number of shares of Common Stock (including
Restricted Stock, if any) optioned or granted under the 1996 Plan shall not
exceed 300 thousand shares. The 1996 Plan provides that a committee (the
"Committee") of the Board of Directors consisting of two or more members thereof
who are non-employee directors, shall administer the 1996 Plan and has provided
the Committee with the flexibility to respond to changes in the competitive and
legal environments, thereby protecting and enhancing the Company's current and
future ability to attract and retain directors and officers and other key
employees and consultants. The 1996 Plan also provides for automatic grants of
Stock Option Awards to non-employee directors. In June 1994, the Company's board
of directors approved a Long-Term Incentive Plan (the "Plan") covering certain
managerial, administrative and professional employees and outside directors. The
Plan was approved by Stockholders at the 1994 annual meeting. The Plan provides
for awards to employees, from time to time and as determined by a committee of
outside directors, of cash bonuses, stock options, stock and/or restricted
stock. The total number of shares of the Company's common stock available to be
awarded under the Plan is 750 thousand, subject to certain adjustments. In 1995,
options to purchase a total of 290.7 thousand shares of common stock at $4.25 to
$7.00 per share and a total of 50.0 thousand shares of restricted stock were
granted to employees. In June 1994, options to purchase a total of 308.8
thousand shares of common stock at $5.50 per share and a total of 129.4 thousand
shares of restricted common stock were granted to employees and outside
directors.
Stock Appreciation Rights. In connection with the July 1992 sale of the Old
Senior Secured Notes and obtaining the consent of the holders of the Company's
existing Subordinated Notes to modify the Subordinated Notes, the Company issued
658.4 thousand common stock appreciation rights ("1992 SARs"). As of December
31, 1995, there were 624.8 thousand 1992 SARs outstanding. Of the outstanding
1992 SARs, 552.0 thousand may be exercised at the option of the holder thereof
at any time through July 31, 1996 at which time they expire. The remaining 72.8
thousand SARs may be exercised through July 1, 1997 at which time they expire.
The 1992 SARs entitle the holder to receive the market appreciation in the
Company's Common Stock between $11.00 per share, subject to adjustment, and the
average price per share for the 30 consecutive trading days prior to the date of
exercise. At December 31, 1995, there was no reserve requirement necessary
because the Company's Common Stock price was below $11.00 per share.
In connection with the May 1995 issuance of the Senior Secured Notes, the
Company issued 1.0 million stock appreciation rights (the "1995 SARs") entitling
the holders to receive cash or Common Stock, at the option of the Company, in an
amount equal to the average closing sale price of the common stock for 60
trading days prior to the date of exercise less $7.288 for each 1995 SAR. The
1995 SARs expire on May 15, 2002. At December 31, 1995 there was no reserve
requirement necessary because the Company's Common Stock price was below $7.288
per share.
NOTE K -- RETIREMENT PLANS
Pension Plans
US Plans
The Company maintains four defined benefit pension plans covering certain
domestic employees. The benefits for the plans covering the salaried employees
are based primarily on years of service and employees' qualifying compensation
during the final years of employment. Participation in the plan for salaried
employees was frozen as of May 7, 1993, and no participants will be credited
with service following such date except that participants not fully vested will
be credited with service for purposes of determining vesting only. The benefits
for the plans covering the hourly employees are based primarily on years of
service and a flat dollar amount per year of service. It is the Company's policy
generally to fund these plans based on the minimum requirements of the Employee
Retirement Income Security Act of 1974 (ERISA). Plan assets consist primarily of
common stocks, bonds, and short-term cash equivalent funds.
Pension expense includes the following components for 1995, 1994 and 1993:
Year ended December 31,
1995 1994 1993
Service cost for benefits earned during period $ 0.1 $ 0.2 $ 0.4
Interest cost on projected benefit obligation 2.2 2.2 2.4
Actual (return) loss on plan assets .......... (3.8) (0.4) (2.1)
Net amortization and deferral ................ 2.0 (1.2) 0.9
Curtailment (gain) loss ...................... -- -- (0.3)
Net pension expense .......................... $ 0.5 $ 0.8 $ 1.3
The following table sets forth the US plans' funded status and the amounts
recognized in the Company's financial statements at December 31:
1995 1994 1993
Overfunded Underfunded Overfunded Underfunded Overfunded Underfunded
Plans Plans Plans Plans Plans Plans
Actuarial present value of:
Vested benefits ............... $ 9.4 $ 20.9 $ 8.0 $ 19.0 $ 9.3 $ 22.5
Accumulated benefits .......... $ 9.9 $ 20.9 $ 8.1 $ 19.1 $ 9.5 $ 22.7
Projected benefits ............ $ 9.9 $ 20.9 $ 8.1 $ 19.1 $ 9.5 $ 22.7
Fair value of plan assets ....... 10.2 16.5 9.2 14.7 9.7 14.7
Projected benefit obligation
(in excess of) less than
plan assets .................. 0.4 (4.4) 1.1 (4.4) 0.2 (8.0)
Unrecognized net loss from past
experience different than
assumed ....................... 2.6 2.7 2.5 1.8 3.7 4.2
Unrecognized prior service cost . 0.9 -- 0.5 -- 0.5 --
Adjustment to recognize minimum
liability ..................... -- (2.7) -- (1.8) -- (4.2)
Pension asset (liability)
recognized in the balance
sheet ......................... $ 3.9 $ (4.4) $ 4.1 $ (4.4) $ 4.4 $ (8.0)
The expected long-term rate of return on plan assets was 9% for the periods
presented. The discount rate assumption was 7.5% for 1995, 8.5% for 1994 and
7.0% for 1993. The assumption for the rate of compensation increase, if
applicable per plan provisions, was 5.5% for 1993 (until May 7, 1993).
In accordance with the provisions of the SFAS No. 87, "Employers' Accounting for
Pensions," the Company has recorded an adjustment of $2.7 and $1.8 to recognize
a minimum pension liability at December 31, 1995 and 1994, respectively. This
liability is offset by a direct reduction of stockholders' deficit.
In December 1993, Terex contributed 350.0 thousand shares of Terex Common Stock
to the Master Trust for the benefit of two of the Terex plans, which were valued
by the Company at $2.3 based upon 96.5% of the market value of Terex Common
Stock as quoted on the New York Stock Exchange on the day of contribution. The
market value of this investment was $1.7 at December 31, 1995.
In addition, the Master Trust held 6.0 thousand Terex SARs, valued at $0.10 per
right (total value of less than $0.1) at December 31, 1995 and 6.0 thousand
Terex SARs, valued at $1.00 per right (less than $0.1) at December 31, 1994.
International Plans
TEL maintains a government-required defined benefit plan (which includes certain
defined contribution elements) covering substantially all of its management
employees. This plan is fully funded. Pension expense relating to this plan was
approximately $0.3, $0.3 and $0.2 for the years ended December 31, 1995, 1994
and 1993, respectively.
Certain of CMH's German employees are covered by noncontributory defined benefit
pension plans. CMH also maintains separate pension benefit plans for certain
German executive employees and for other staff. The executive pension plans are
based on final pay and service, and, in some cases, are dependent on social
security pensions while the other staff plans are based on fixed amounts applied
to the number of years service rendered. The plans are unfunded.
The components of consolidated pension expense for each of the reporting periods
covered by these financial statements is as follows:
Year Ended December 31,
1995 1994 1993
Current service cost .......... $ 0.1 $ 0.2 $ 0.2
Interest cost ................. 0.9 0.9 0.9
Net amortization and deferrals (0.9) (0.8) 0.1
Defined benefit pension expense $ 0.1 $ 0.3 $ 1.2
The following table reconciles the funded status of the Company's defined
benefit pension plans to the amounts recognized on the Company's Consolidated
Balance Sheet:
December 31,
1995 1994
Accumulated benefit obligation,
including nonvested benefits of
$0.2 and $0.2 at December 31, 1995 and 1994 ..... $ 12.8 $ 11.1
Projected benefit obligations .................... $ 12.8 $ 11.2
Unrecognized net gain/(loss) ..................... (0.9) 1.9
Unrecognized prior service cost .................. 0.4 --
Unrecognized transition asset (liability) ........ 0.6 (0.7)
Adjustment required to recognize minimum liability -- --
Accrued pension cost ............................. $ 12.9 $ 12.4
The discount rate of 7.5% was used in 1995 and 1994 to determine the projected
benefit obligation. During 1994, the Company significantly reduced its German
work force in connection with restructuring of its operations. As a result, the
Company realized a curtailment gain with respect to these plans, which was
recognized as a reduction of the unrecognized transition liability in accordance
with the provisions of SFAS 88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Plans and for Termination of Benefits." In 1994
the Company changed certain assumptions used in the actuarial valuation of the
plans. These changes in assumptions reflected the reductions in personnel and
other changes in the Company's operations, including changes in compensation
arrangements, implemented during 1994. These changes resulted in an actuarial
gain of $2.7. The gain in excess of 10% of the projected benefit obligation is
being amortized over 2 years.
Saving Plans
The Company sponsors various tax deferred savings plans into which eligible
employees may elect to contribute a portion of their compensation. The Company
can, but is not obligated to, contribute to certain of these plans.
Other Postemployment Benefits
The Company provides postemployment health and life insurance benefits to
certain former salaried and hourly employees of Koehring. The Company adopted
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions," on January 1, 1993. This statement requires accrual of postretirement
benefits (such as health care benefits) during the years an employee provides
service.
Terex adopted the provisions of SFAS No. 106 using the delayed recognition
method, whereby the amount of the unrecognized transition obligation at January
1, 1993 is recognized prospectively as a component of future years' net periodic
postretirement benefit expense. The unrecognized transition obligation at
January 1, 1993 was $4.5. Terex is amortizing this transition obligation over 12
years, the average remaining life expectancy of the participants. The liability
of the Company, as of December 31, was as follows:
1995 1994
Actuarial present value of accumulated
postretirement benefit obligation:
Retirees ................................ $ 4.4 $ 4.6
Active participants ..................... -- --
Total accumulated postretirement
benefit obligation ..................... 4.4 4.6
Unamortized transition obligation ......... (3.4) (3.7)
Liability recognized in the balance sheet $ 1.0 $ 0.9
Health care trend rates used in the actuarial assumptions range from 12.0% to
13.5%. These rates decrease to 6.5% over a period of 8 to 10 years. The effect
of a one percentage-point change in the health care cost trend rates would
change the accumulated postretirement benefit obligation approximately 7%. The
discount rate used in determining the accumulated postretirement benefit
obligation was 7.5% and 8.25% for the years ended December 31, 1995 and 1994,
respectively. Net periodic postretirement benefit expense includes the following
components for 1995 and 1994:
Year Ended December 31,
1995 1994
Service cost $ --- $ ---
Interest cost 0.3 0.4
Net amortization 0.4 0.4
Total $ 0.7 $ 0.8
The Company's postretirement benefit obligations are not funded. Net
periodic postretirement benefit expense for the years ended December 31, 1995,
1994 and 1993 was approximately $0.6, $0.5 and $0.4 greater on the accrual basis
than it would have been on the cash basis.
NOTE L -- LITIGATION AND CONTINGENCIES
In December 1992, a Class Action complaint was filed against Fruehauf, the
Company, certain of Fruehauf's then officers and directors and certain of the
underwriters of the initial public offering of Fruehauf, in the United States
District Court for the Eastern District of Michigan, Southern Division,
alleging, among other things, violations of certain provisions of the federal
securities laws, and seeking unspecified compensatory and punitive damages. The
Company has settled this litigation, with court approval, and recorded a
provision of $0.3 million in the quarter ended March 31, 1995.
In the Company's lines of business, but primarily in the Material Handling
Segment, numerous suits have been filed alleging damages for accidents that have
arisen in the normal course of operations involving the Company's products. As
part of the acquisition of CMH, the Company and CMH assumed both the outstanding
and future product liability exposures related to such operations. As of
December 31, 1995, CMH had approximately 120 lawsuits outstanding alleging
damages for injuries or deaths arising from accidents involving CMH products.
Most of the foregoing suits are in various stages of pretrial completion, and
certain plaintiffs are seeking punitive as well as compensatory damages. The
Company is self-insured, up to certain limits, for these product liability
exposures, as well as for certain exposures related to general, workers'
compensation and automobile liability. Insurance coverage is obtained for
catastrophic losses as well as those risks required to be insured by law or
contract. The Company has recorded and maintains an estimated liability, based
in part upon actuarial determinations, in the amount of management's estimate of
the Company's aggregate exposure for such self-insured risks.
The Company is involved in various other legal proceedings which have arisen in
the normal course of its operations. The Company has recorded provisions for
estimated losses in circumstances where a loss is probable and the amount or
range of possible amounts of the loss is estimable.
The Company is contingently liable as a guarantor for certain customers' floor
plan obligations with financial institutions. As a guarantor, the Company is
obligated to purchase equipment which has been repossessed by the financial
institution based upon the unamortized principal balance outstanding. The
Company records the repossessed inventory at its estimated net realizable value.
Any resultant losses are charged against related reserves. The guarantee under
such floor plans aggregated approximately $30.0 at December 31, 1995. The
Company has recorded reserves based on management's estimates of potential
losses arising from these guarantees. Historically, the Company has incurred
only minimal losses relating to these arrangements.
CMH has also given guarantees to financial institutions relating to capital
loans, residual guarantees and other dealer and customer obligations arising in
the ordinary conduct of its business. Such guarantees approximated $3.8 at
December 31, 1995. Estimated losses, if any, on such guarantees are accrued as a
component of the Allowance for Doubtful Accounts.
To enhance its marketing effort and ensure continuity of its dealer network, CMH
has also agreed as part of its dealer sales agreements to repurchase certain new
and unused equipment in the event of a dealer termination. Repurchase agreements
included in operating agreements with an independent financial institution have
been patterned after those included in the dealer sales agreements, and provide
for repurchase of inventory in certain circumstances of dealer default on
financing provided by the financial institution to the dealer. Dealer inventory
of approximately $200.0 at December 31, 1995 were covered by those operating
agreements. Under these agreements, when dealer terminations do occur, a newly
selected dealer generally assumes the assets of the prior dealer and any related
financial obligations. Historically, CMH has incurred only minimal losses
relating to these arrangements.
The Company's outstanding letters of credit totaled $7.7. The letters of credit
generally serve as collateral for certain liabilities included in the
Consolidated Balance Sheet. Certain of the letters of credit serve as collateral
guaranteeing the Company's performance under contracts.
As described in Note H -- "Income Taxes," the Internal Revenue Service is
currently examining the Company's federal tax returns for the years 1987 through
1989.
The Company has agreed to indemnify certain outside parties for losses related
to Fruehauf's worker compensation obligations. Some of the claims for which
Terex is contingently obligated are also covered by bonds issued by an insurance
company. In 1993, the Company recorded liabilities for these contingent
obligations representing management's estimate of the maximum potential losses
which the Company might incur.
NOTE M -- RELATED PARTY TRANSACTIONS
On August 28, 1995, the Company announced that its Chairman, Randolph W. Lenz,
had retired from his position with the Company and its Board of Directors. In
connection with his retirement, the Company (upon the recommendation of a
committee comprised of its independent Directors and represented by independent
counsel) and Mr. Lenz have executed a retirement agreement providing certain
benefits to Mr. Lenz and the Company. The agreement provides, among other
things, for a five-year consulting engagement requiring Mr. Lenz to make himself
available to the Company to provide consulting services for certain portions of
his time. Mr. Lenz, or his designee, will receive a fee for consulting services
which will include payments in an amount, and a rate, equal to his 1995 base
salary until December 31, 1996. The agreement also provides for the granting of
a five-year $1.8 million loan bearing interest at 6.56% per annum which is
subject to being forgiven in increments over the five-year term of the agreement
upon certain conditions and equity grants having a maximum potential of 200.0
thousand shares of Terex common stock conditioned upon the Company achieving
certain financial performance objectives in the future. In contemplation of the
execution of this retirement agreement, the Company advanced to Mr. Lenz the
principal amount of the forgivable loan. Mr. Lenz has also agreed not to compete
with the Company, to vote his Terex shares in the manner recommended by the
Company's Board of Directors, not to acquire any additional shares of the
Company's common stock, and, except under certain circumstances, not to sell his
shares of common stock. In addition to indebtedness pursuant to the retirement
agreement, an affiliate of Mr. Lenz is indebted to the Company in the
approximate amount of $33.45 thousand representing shipping charges incurred by
the Company for such affiliate during 1994. The affiliate of Mr. Lenz has not
paid such charges to date.
Under a contract dated July 1, 1987, as amended, KCS Industries, L.P., a
Connecticut limited partnership ("KCS"), principally owned by Mr. Lenz provided
administrative, financial, marketing, technical, real estate and legal services
to the Company and its subsidiaries. This contract terminated December 31, 1993.
For the services of KCS, the Company paid KCS an annual fee plus the
reimbursement for all out-of-pocket expenses incurred by KCS in fulfilling the
contract. During 1993 the Company made payments to KCS of $2.9.
During 1993, the Board of Directors of the Company concluded that it would be in
the Company's best interest to terminate the Company's contract with KCS and
integrate the management services of KCS directly into the Company. Pursuant to
an agreement between the Company and KCS, the contract between the Company and
KCS was terminated as of the close of business on December 31, 1993. Certain
employees of KCS, became salaried employees of the Company effective January 1,
1994, with the titles of Executive Vice President and Senior Vice President,
respectively. In consideration of the termination of the contract, the Company
issued 89.8 thousand shares of the Company's Series B Cumulative Redeemable
Convertible Preferred Stock (valued at $0.9) and 106.95 thousand Series B
Warrants (valued at $0.7), the terms of which are substantially similar to the
terms of the Company's outstanding Series A Preferred Stock and Series A
Warrants, respectively. Of such amounts, Mr. Lenz received 38.8 thousand shares
of preferred stock and warrants exercisable for 15.7 thousand shares of Terex
Common Stock and other KCS employees each received 25.5 thousand shares of
preferred stock and warrants exercisable for 45.6 thousand shares of Terex
Common Stock. The employees converted their shares and warrants to Common Stock
in 1995. In addition, Mr. Lenz received cash payments of approximately $0.5.
The Company, certain directors and executives of the Company, and KCS have been
named parties in various legal proceedings. During 1995, 1994 and 1993, the
Company incurred $0.3, $0.3 and $0.4 of legal fees and expenses on behalf of the
Company, directors and executives of the Company, and KCS named in the lawsuits.
In conjunction with the CMH Acquisition, the Company financed the acquisition
and refinanced a major component of its previously outstanding bank debt through
a private placement of Secured Notes and 1992 SARs, and the establishment of the
Bank Lending Agreement. Mr. Raben, a director of the Company, was at the time an
employee and officer of Jefferies & Company, Inc. ("Jefferies"), the investment
banking firm which acted as an exclusive placement agent for the Company in the
offering of the Old Senior Secured Notes and 1992 SARs. Jefferies was paid fees
of $6.5 in 1992 for services performed as placement agent. Jefferies was also
the Company's placement agent for the December 1993 sale of the Series A
Preferred Stock and Series A Warrants for which Jefferies received fees
totalling $2.5 in 1993. Jefferies was also the agent for the Company for certain
sales by the Company of its common stock of Fruehauf in 1993. Jefferies
purchased 250.0 thousand Series A Warrants and 180.0 thousand shares of Series A
Preferred Stock from the Company in connection with the Company's private
placement on December 20, 1993.
In 1995, the Company retained Jefferies & Company, Inc., of which a director of
the Company was then Executive Vice President, in connection with the offering
of the Company's $250 million Senior Secured Notes and acquisition of PPM which
was completed in May 1995. Jefferies & Company, Inc. was paid $9.2 as an
underwriting discount and for services rendered.
David A. Sachs, a director of the Company, was affiliated with the Airlie Group
L.P. ("Airlie"), a limited partnership which owned approximately 9% of the
Company's Common Stock (including Common Stock issuable upon conversion of
Series A Preferred Stock) and 40,000 Warrants. Until May 1994, Mr. Sachs was an
employee of the investment firm of TMT-FW, Inc. which is one of two general
partners of the general partner of Airlie. During the time Mr. Sachs was
affiliated with Airlie, Airlie received all director fees to which Mr. Sachs was
entitled by reason of his service as a director of the Company. On December 20,
1993, Airlie purchased 40,000 Warrants and 40,000 shares of Series A Preferred
Stock from the Company as part of the Company's private placement.
The Company requires that all transactions with affiliates be on terms no less
favorable to the Company than could be obtained in comparable transactions with
an unrelated person. The Board is advised in advance of any such proposed
transaction or agreement and utilizes such procedures in evaluating their terms
and provisions as are appropriate in light of the Board's fiduciary duties under
Delaware law. In addition, the Company has an Audit Committee consisting solely
of outside directors. One of the responsibilities of the Audit Committee is to
review related party transactions.
NOTE N-- BUSINESS SEGMENT INFORMATION
The Company operates in three industry segments: Material Handling, Heavy
Equipment and Terex Cranes.
The Material Handling Segment designs, manufactures and markets a complete line
of internal combustion ("IC") and electric lift trucks, electric walkies,
automated pallet trucks and related components and replacement parts. These
products are used in material handling applications in a broad array of
manufacturing, distribution and transportation industries. The Material Handling
Segment consists of CMH, which was acquired by the Company on July 31, 1992 from
Clark Equipment Company.
The Heavy Equipment Segment designs, manufactures and markets heavy-duty,
off-highway earthmoving and construction equipment and related components and
replacement parts. These products are used primarily by construction, mining,
logging, industrial and government customers in building roads, dams and
commercial and residential buildings; supplying coal, minerals, sand and gravel.
The Heavy Equipment Segment consists of two operating businesses: (i) the Terex
Business, which manufactures off-highway rigid and articulated haulers, scrapers
and wheel loaders and (ii) Unit Rig, which manufactures electric rear and bottom
dump haulers, as well as mechanical drive haulers and wheel loaders principally
sold to the mining industry.
Terex Cranes designs, manufactures and markets mobile cranes, aerial platforms,
container stackers and scrap handlers and related components and replacement
parts. These products are used primarily for construction, repair and
maintenance of infrastructure, buildings and manufacturing facilities, for
material handling applications in the distribution and transportation industries
as well as in the scrap, refuse and lumber industries. Terex Cranes consists of
three operating businesses: (i) Koehring, which manufactures mobile cranes,
aerial lift platforms and scrap handlers, (ii) PPM North America, which
manufactures mobile cranes and container stackers under the brand name P&H (a
trademark of Harnischfeger) primarily in North America and (iii) PPM Europe,
which manufactures mobile cranes and container stackers primarily in Europe.
Industry segment information is presented below:
1995 1994 1993
Sales
Material Handling ........... $ 528.8 $ 472.7 $ 395.6
Heavy Equipment ............. 250.3 226.8 203.8
Terex Cranes ................ 252.3 90.4 71.4
Eliminations ................ (1.2) (3.1) (0.5)
Total ....................... $ 1,030.2 $ 786.8 $ 670.3
Income (Loss) from Operations
Material Handling ........... $ 3.0 $ (13.9) $ (28.6)
Heavy Equipment ............. 13.0 11.1 11.0
Terex Cranes ................ 7.2 7.9 (12.8)
General/Corporate ........... (1.8) (1.7) (3.5)
Total ....................... $ 21.4 $ 3.4 $ (33.9)
Depreciation and Amortization
Material Handling ........... $ 14.8 $ 11.0 $ 9.7
Heavy Equipment ............. 2.3 2.2 7.2
Terex Cranes ................ 7.6 1.0 1.5
General/Corporate ........... 3.0 2.9 4.0
Total ....................... $ 27.7 $ 17.1 $ 22.4
Capital Expenditures
Material Handling ........... $ 5.3 $ 7.8 $ 8.9
Heavy Equipment ............. 2.7 4.2 2.1
Terex Cranes ................ 2.4 0.4 0.5
General/Corporate ........... 0.1 0.3 --
Total ....................... $ 10.5 $ 12.7 $ 11.5
Identifiable Assets
Material Handling ........... $ 191.0 $ 195.0 $ 205.6
Heavy Equipment ............. 169.4 147.4 130.4
Terex Cranes ................ 239.9 40.3 37.8
General/Corporate ........... 26.6 18.9 16.9
Total ....................... $ 626.9 $ 401.6 $ 390.7
Geographic segment information is presented below:
1995 1994 1993
Sales
North America................ $ 677.9 $ 557.1 $ 466.9
Europe ...................... 385.4 240.7 211.7
All other ................... 13.0 34.0 19.4
Eliminations ................ (46.1) (45.0) (27.7)
Total ....................... $ 1,030.2 $ 786.8 $ 670.3
Income (Loss) from Operations
North America................ $ 12.2 $ 6.3 $ (36.7)
Europe ...................... 17.4 (4.5) (0.7)
All other ................... (4.6) 0.4 2.3
Eliminations ................ (3.6) 1.2 1.2
Total ....................... $ 21.4 $ 3.4 $ (33.9)
Identifiable Assets
North America................ $ 275.0 $ 250.6 $ 241.6
Europe ...................... 294.4 167.5 150.0
All other ................... 30.1 8.8 10.8
Eliminations ................ 27.4 (25.3) (11.7)
Total ....................... $ 626.9 $ 401.6 $ 390.7
Sales between segments and geographic areas are generally priced to recover
costs plus a reasonable markup for profit. Operating income equals net sales
less direct and allocated operating expenses, excluding interest and other
nonoperating items. Corporate assets are principally cash, marketable securities
and administration facilities.
The Company is not dependent upon any single customer.
Export sales from U.S. operations were as follows:
Year Ended December 31,
1995 1994 1993
North and South America ...... $ 57.4 $ 34.9 $ 28.8
Europe, Africa and Middle East 26.2 15.1 20.7
Asia and Australia ........... 38.5 39.6 32.8
$ 122.1 $ 89.6 $ 82.3
NOTE O -- LIQUIDITY, FINANCING AND SEVERANCE ACTIONS
The Company's businesses are working capital intensive and require funding for
purchases of production and replacement parts inventories, capital expenditures
for repair, replacement and upgrading of existing facilities as well as
financing of receivables from customers and dealers. The Company has significant
debt service requirements including semi-annual interest payments on senior debt
and monthly interest payments on its credit facility. Debt reduction and an
improved capital structure are major focal points for the Company through debt
refinancings, issuance of equity, asset sales, the sales of business units or
any combination thereof. In this regard the Company reviews on a regular basis
its alternatives to improve its capital structure and to reduce debt through
debt refinancings, issuance of equity, assets sales, the sales of business units
or any combination thereof.
Net cash of $21.9 was used in operating activities during the year ended
December 31, 1995. Net cash used by investing activities was $98.9 during the
year ended December 31, 1995 principally due to the PPM Acquisition as described
below. Net cash provided by financing activities during the year ended December
31, 1995 was $120.1, primarily from the Refinancing discussed below. Cash and
cash equivalents totaled $7.8 at December 31, 1995.
The Company announced personnel reductions totaling approximately 134 employees
in the Material Handling Segment's North American operations during the second
quarter of 1995 as a continuation of the Company's programs to increase
manufacturing efficiency, reduce costs and improve liquidity. The Company
recorded a combined charge of $3.5 in the second quarter of 1995 for severance
costs associated with these actions and additional costs associated with the
closing of certain administrative and warehouse facilities.
As discussed below, the Company has refinanced its senior and subordinated debt,
established new credit facilities and borrowed additional funds to complete the
PPM Acquisition which will impact future operating results, sources of liquidity
and debt service requirements.
On May 9, 1995, the Company completed the Refinancing and the PPM Acquisition.
The Refinancing included the private placement to institutional investors of
$250 of the Senior Secured Notes, repayment of the Company's Old Senior Secured
Notes and Senior Subordinated Notes, totaling approximately $152.6 principal
amount, and entry into the Credit Facility to replace the Company's existing
Lending Facility in the U.S. Until such time as the Company completes an
exchange of the Senior Secured Notes for an equivalent issue of registered
notes, or a shelf registration statement for the Senior Secured Notes is
effective, the interest rate on the Senior Secured Notes will be 13.75%. The
Indenture for the Senior Secured Notes places certain limits on the Company's
ability to incur additional indebtedness; permit the existence of liens; issue,
pay dividends on or redeem equity securities; utilize the proceeds of assets
sales; consolidate, merge or transfer assets to another entity; and enter into
transactions with affiliates. In connection with the issuance of the Senior
Secured Notes, the Company issued 1.0 million stock appreciation rights ("SARs")
entitling the holders to receive cash or Common Stock, at the option of the
Company, in an amount equal to the average closing sale price of the common
stock for 60 trading days prior to the date of exercise less $7.288 for each
SAR.
Approximately $92.6 of the proceeds of the Senior Secured Notes was used for the
PPM Acquisition, including the repayment of certain indebtedness of PPM required
to be repaid in connection with the acquisition. In addition, the Company
estimates that the acquisition costs incurred will total approximately $5.0. The
remainder of the purchase price consisted of the issuance of redeemable
preferred stock of Terex Cranes having an aggregate liquidation preference of
127 French francs (approximately $26.1), subject to adjustment. The purchase
price is subject to adjustment calculated by reference to the consolidated net
asset value of PPM as determined by an audit as of the date of closing. The
preferred stock does not bear a dividend and, accordingly, the Company has
valued this stock at approximately $8.8 (discounted at 15%). The Company has not
yet reached agreement with the sellers about the amount of purchase price
adjustment but, based on work performed, the Company believes that the amount of
the preferred stock could ultimately be reduced.
The Company's Credit Facility provides the Company with the ability to borrow
(in the form of revolving loans and up to $15 in outstanding letters of credit)
up to $100. The Credit Facility is secured by substantially all of the Company's
domestic receivables and inventory (including PPM). The amount of borrowings is
limited to the sum of the following: (i) 75% of the net amount of eligible
receivables, as defined, of the Company's U.S. businesses other than CMHC, plus
(ii) 70% of the net amount of CMHC eligible receivables, plus (iii) the lesser
of 45% of the value of eligible inventory, as defined, or 80% of the appraised
orderly liquidation value of eligible inventory less (iv) any availability
reserves established by the lenders. The Credit Facility expires May 9, 1998
unless extended by the lenders for one additional year. At the option of the
Company, revolving loans may be in the form of prime rate loans initially
bearing interest at the rate of 1.75% per annum in excess of the prime rate and
Eurodollar rate loans initially bearing interest at the rate of 3.75% per annum
in excess of the adjusted Eurodollar rate.
The Company made an interest payment of $17.7 on November 15, 1995 on the
Senior Secured Notes. The Company's debt service obligations for 1996 include
approximately $17.1 on May 15 and November 15, 1996 on the Senior Secured Notes
and approximately $0.6 monthly on the Credit Facility. Management believes that,
absent significant unanticipated declines in operating performance, cash
generated from operations and the Refinancing provide the Company with adequate
liquidity to meet the Company's operating and debt service requirements. The
balance outstanding under the Credit Facility as of December 31, 1995 was $66.8,
and the additional amount the Company could have borrowed was $8.8 as of that
date. As of March 20, 1996, the amount available to the Company under the Credit
Facility was approximately $13.0. TEL entered into a new bank working capital
facility in 1995, and PPM Europe is in negotiations to secure a working capital
facility in 1996. Management intends to seek additional working capital
financing facilities for the Company's international operations to provide
additional liquidity worldwide.
TEREX CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Amounts in millions)
Additions
Balance Balance
Beginning Charges to End of
of Year Earnings Other Deductions(1) Year
Year ended December 31, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts .......................... $ 6.1 $ 6.3 $-- $ (2.6) $ 9.8
Reserve for excess and obsolete inventory ................ 21.1 8.7 0.3(2) (9.5) 20.6
Totals ................................................... $ 27.2 $ 15.0 $ 0.3 $ (12.1) $ 30.4
Year ended December 31, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts .......................... $ 7.5 $ 1.0 $-- $ (2.4) $ 6.1
Reserve for excess and obsolete inventory ................ 20.7 7.6 -- (7.2) 21.1
Totals ................................................... $ 28.2 $ 8.6 $-- $ (9.6) $ 27.2
Year ended December 31, 1993:
Deducted from asset accounts:
Allowance for doubtful accounts ....................... $ 6.3 $ 1.7 $-- $ (0.5) $ 7.5
Reserve for excess and obsolete inventory ............. 22.4 7.5 -- (9.2) 20.7
Totals .................................................... $ 28.7 $ 9.2 $-- $ (9.7) $ 28.2
(1) Utilization of established reserves, net of recoveries.
(2) Added with the acquisition of businesses.
TEREX CORPORATION AND SUBSIDIARIES
SCHEDULE IV - INDEBTEDNESS OF AND TO RELATED PARTIES -- NOT CURRENT
Indebtedness of
Balance at Balance at
Beginning End of
Name of Person of Period Additions Deductions Period
Year ended December 31, 1995:
Randolph W. Lenz
Promissory note, interest at 6.56%
due November 2, 2000................ $ --- $ 1,800,000 $ --- $ 1,800,000
Payable for shipping charges......... --- 33,450 --- 33,450
Total............................ $ --- $ 1,833,450 $ --- $ 1,833,450
Year ended December 31, 1994 $ --- $ --- $ --- $ ---
Year ended December 31, 1993 $ --- $ --- $ --- $ ---
INDEX TO EXHIBITS
3.1 Restated Certificate of Incorporation of Terex Corporation
(incorporated by reference to Exhibit 3.1 to the Form S-1 Registration Statement
of Terex Corporation, Registration No. 33-52297).
3.2 Restated Bylaws of Terex Corporation (incorporated by reference to
Exhibit 3.2 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52297).
3.3 Certificate of Designation of Preferences and Rights of Series B
Cumulative Redeemable Convertible Preferred Stock ("Series B Preferred Stock")
of Terex Corporation (incorporated by reference to Exhibit 3.3 to the Form 10-K
for the year ended December 31, 1994 of Terex Corporation, Commission File No.
1-10702).
4.1 Warrant Agreement dated as of December 20, 1993 between Terex
Corporation and Mellon Securities Trust Company, as Warrant Agent (incorporated
by reference to Exhibit 4.40 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52297).
4.2 Form of Series A Warrant (incorporated by reference to Exhibit 4.41 to
the Form S-1 Registration Statement of Terex Corporation, Registration No.
33-52297).
4.3 Form of Series A Preferred Stock certificate (incorporated by reference
to Exhibit 4.42 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52711).
4.4 Form of Series B Warrant (incorporated by reference to Exhibit 4.43 to
the Form 10-K for the year ended December 31, 1994 of Terex Corporation,
Commission File No. 1-10702).
4.5 Form of Series B Preferred Stock Certificate (incorporated by reference
to Exhibit 4.44 to the Form 10-K for the year ended December 31, 1994 of Terex
Corporation, Commission File No. 1-10702).
4.6 Form of 13-1/4% Senior Secured Notes Due 2002 of Terex Corporation
(incorporated by reference to Exhibit 4.6 of the Amendment No. 1 to the Form S-1
Registration Statement of Terex Corporation, Registration No. 33-52711).
4.7 Indenture dated as of May 9, 1995 among the Company, the Guarantors
referred to therein and United States Trust Company of New York, as Trustee
(incorporated by reference to Exhibit 4.7 of the Amendment No. 1 to the Form S-1
Registration Statement of Terex Corporation, Registration No. 33-52711).
10.1 Terex Corporation Incentive Stock Option Plan, as amended
(incorporated by reference to Exhibit 4.1 to the Form S-8 Registration Statement
of Terex Corporation, Registration No. 33-21483).
10.2 1994 Terex Corporation Long Term Incentive Plan (incorporated by
reference to Exhibit 10.2 to the Form 10-K for the year ended December 31, 1994
of Terex Corporation, Commission File No. 1-10702).
10.3 Terex Corporation Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.3 to the Form 10-K for the year ended December 31, 1994
of Terex Corporation, Commission File No. 1-10702).
10.4 Common Stock Appreciation Rights Agreement dated as of July 31, 1992
between Terex Corporation and United States Trust Company of New York, as SAR
Agent (incorporated by reference to Exhibit 10.36 to the Form 10-K for the year
ended December 31, 1992 of Terex Corporation, Commission file No. 1-10702).
10.5 SAR Registration Rights Agreement dated as of July 31, 1992 between
Terex Corporation and the purchasers who are signatories thereto (incorporated
by reference to Exhibit 10.37 to the Form 10-K for the year ended December 31,
1992 of Terex Corporation, Commission file No. 1-10702).
10.6 Stock Purchase Agreement dated as of May 27, 1992 between Clark
Equipment Company and Terex Corporation (incorporated by reference to Exhibit
10.27 to the Form 10-K for the year ended December 31, 1992 of Terex
Corporation, Commission File No. 1-10702).
10.7 First Amendment to Stock Purchase Agreement dated as of July 31, 1992
between Terex Corporation and Clark Equipment Company (incorporated by reference
to Exhibit 10.28 to the Form 10-K for the year ended December 31, 1992 of Terex
Corporation, Commission File No. 1-10702).
10.9 Tax Agreement dated as of July 31, 1992 between Terex Corporation in
favor of Clark Equipment Company (incorporated by reference to Exhibit 10.30 to
the Form 10-K for the year ended December 31, 1992 of Terex Corporation,
Commission File No. 1-10702).
10.10 Trademark Assignment Agreement dated as of July 31, 1992 between
Clark Equipment Company and Clark Material Handling Company (incorporated by
reference to Exhibit 10.31 to the Form 10-K for the year ended December 31, 1992
of Terex Corporation, Commission File No. 1-10702).
10.11 Trademark Assignment dated as of July 31, 1992 executed by Clark
Equipment Company in favor of Clark Material Handling Company (incorporated by
reference to Exhibit 10.32 to the Form 10-K for the year ended December 31, 1992
of Terex Corporation, Commission File No. 1-10702).
10.12 License Agreement dated as of July 31, 1992 between Clark Equipment
Company and Clark Material Handling Company (incorporated by reference to
Exhibit 10.33 to the Form 10-K for the year ended December 31, 1992 of Terex
Corporation, Commission File No. 1-10702).
10.14 Termination, General Release and Waiver Agreement, dated as of June
29, 1993, between Clark Material Handling Company and Gary D. Bello
(incorporated by reference to Exhibit 10.21 to the Form S-1 Registration
Statement of Terex Corporation, Registration No. 33-52297).
10.15 Form of Purchase Agreement dated as of December 20, 1993 between
Terex Corporation and the purchasers of Series A Warrants and shares of Series A
Preferred Stock of Terex Corporation (incorporated by reference to Exhibit 10.22
to the Form S-1 Registration Statement of Terex Corporation, Registration No.
33-52297).
10.16 Registration Rights Agreement dated as of December 20, 1993 between
Terex Corporation and the purchasers of Series A Warrants (incorporated by
reference to Exhibit 10.23 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52297).
10.17 Registration Rights Agreement dated as of December 20, 1993 between
Terex Corporation and the purchasers of shares of Series A Preferred Stock of
Terex Corporation (incorporated by reference to Exhibit 10.24 to the Form S-1
Registration Statement of Terex Corporation, Registration No. 33-52297).
10.18 Series B Preferred Stock and Warrants Registration Rights Agreement
(incorporated by reference to Exhibit 10.27 to the Form 10-K for the year ended
December 31, 1994 of Terex Corporation, Commission File No. 1-10702).
10.19 Agreement dated July 1, 1987, between KCS Industries, Inc. and
Northwest Engineering Company (incorporated by reference to Exhibit 10.2 to the
Form S-4 Registration Statement of Terex Corporation, Registration No.
33-20737).
10.20 Management Agreement Amendment, dated January 1, 1993, between KCS
Industries, Inc. and Terex Corporation (incorporated by reference to Exhibit
10.26 to the Form S-1 Registration Statement of Terex Corporation, Registration
No. 33-52297).
10.21 Management Agreement Termination Agreement, dated January 1, 1994,
between KCS Industries, L.P. and Terex Corporation (incorporated by reference to
Exhibit 10.27 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52297).
10.22 Amendment to Management Agreement Termination Agreement, dated
October 17, 1994, between KCS Industries , L.P. and Terex Corporation
(incorporated by reference to Exhibit 10.31 to the Form 10-K for the year ended
December 31, 1994 of Terex Corporation, Commission File No. 1-10702).
10.23 Credit Facility, dated December 23, 1993, among Terex Equipment
Limited, Terex Corporation and Standard Chartered Bank (incorporated by
reference to Exhibit 10.28 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52297).
10.24 Amended and Restated Stock Purchase Agreement by and between CMH
Acquisition Corp. and DAC Acquisition Corp. with respect to the sale of the
outstanding stock of Drexel Industries dated as of April 15, 1994 (incorporated
by reference to Exhibit 10.33 to the Form 10-K for the year ended December 31,
1994 of Terex Corporation, Commission File No. 1-10702).
10.25 Share Purchase Agreement, as amended, between Terex Cranes, Inc. and
Legris Industries, S.A. and Potain, S.A. (incorporated by reference to Exhibit
10.1 to the From 8-K for May 9, 1995, Commission File No. 1-10702).
10.26 Certificate of Designation of Terex Cranes, Inc. with respect to its
Series A Redeemable Exchangeable Preferred Stock (incorporated by reference to
Exhibit 10.2 to the From 8-K for May 9, 1995, Commission File No. 1-10702).
10.27 Stockholders Agreement dated as of May 9, 1995 by and among Terex
Corporation, Legris Industries S.A., Potain S.A. and Terex Cranes, Inc.
(incorporated by reference to Exhibit 10.3 to the From 8-K for May 9, 1995,
Commission File No. 1-10702).
10.28 Purchase Agreement, dated as of April 27, 1995, among Terex
Corporation (the "Company"), certain of its subsidiaries and Jefferies &
Company, Inc. ("Jefferies") and Dillon, Read & Co. Inc. (together with
Jefferies, the "Purchasers") (incorporated by reference to Exhibit 10.28 of the
Amendment No. 1 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52711).
10.29 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).
10.30 Debt Registration Rights Agreement dated as of May 9, 1995 among the
Company and the Purchasers (incorporated by reference to Exhibit 10.30 of the
Amendment No. 1 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52711).
10.31 SAR Registration Rights Agreement dated as of May 9, 1995 among the
Company and the Purchasers (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).
10.32 Security and Pledge Agreement dated as of May 9, 1995 between the
Company and United States Trust Company of New York, as Collateral Agent
(incorporated by reference to Exhibit 10.32 of the Amendment No. 1 to the Form
S-1 Registration Statement of Terex Corporation, Registration No. 33-52711).
10.33 Subsidiary Security and Pledge Agreement dated as of May 9, 1995
between certain subsidiaries of the Company and United States Trust Company of
New York, as Collateral Agent (incorporated by reference to Exhibit 10.33 of the
Amendment No. 1 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52711).
10.34 Loan and Security Agreement dated as of May 9, 1995 among Terex
Corporation, Clark Material Handling Company, Koehring Cranes, Inc. and PPM
Cranes, Inc. and Congress Financial Corporation and Foothill Capital
Corporation, for itself and as agent (incorporated by reference to Exhibit 10.34
of the Amendment No. 1 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52711).
10.35 Guarantee dated as of May 9, 1995 from Terex Corporation, Koehring
Cranes, Inc., PPM Cranes, Inc. and CMH Acquisition Corp. and Legris Industries,
Inc. (incorporated by reference to Exhibit 10.35 of the Amendment No. 1 to the
Form S-1 Registration Statement of Terex Corporation, Registration No.
33-52711).
10.36 Guarantee dated as of May 9, 1995 from Terex Corporation, Clark
Material Handling Company, PPM Cranes, Inc. and CMH Acquisition Corp. and Legris
Industries, Inc. (incorporated by reference to Exhibit 10.36 of the Amendment
No. 1 to the Form S-1 Registration Statement of Terex Corporation, Registration
No. 33-52711).
10.37 Guarantee dated as of May 9, 1995 from Terex Corporation, Clark
Material Handling Company, Koehring Cranes, Inc. and CMH Acquisition Corp. and
Legris Industries, Inc. (incorporated by reference to Exhibit 10.37 of the
Amendment No. 1 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52711).
10.38 Guarantee dated as of May 9, 1995 from Clark Material Handling
Company, Koehring Cranes, Inc., PPM Cranes, Inc. and CMH Acquisition Corp. and
Legris Industries, Inc. (incorporated by reference to Exhibit 10.38 of the
Amendment No. 1 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52711).
10.39 Agreement dated as of November 2, 1995 between Terex Corporation, a
Delaware corporation, and Randolph W. Lenz (incorporated by reference to Exhibit
10 to the Form 10-Q for the quarter ended September 30, 1995, Commission File
No. 1-10702).
11.1 Computation of per share earnings. *
23.1 Independent Accountants' Consent of Price Waterhouse LLP - Stamford,
Connecticut. *
24.1 Power of Attorney (included on signature page of this Registration
Statement).
- --------------------
* Filed herewith.
** To be filed by amendment.