WESTPORT, Conn.--(BUSINESS WIRE)--Jan. 23, 2003--Terex Corporation
(NYSE: TEX):
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Terex Details Fourth Quarter 2002 Restructuring Charges
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Comments on Fourth Quarter 2002 Cash, Debt and Earnings
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Comments on 2003 Outlook by Segment
Terex Corporation (NYSE: TEX) announced today that it will be
hosting a conference call at 8:30 a.m., Eastern Time, on Friday,
January 24, 2003, to detail fourth quarter 2002 restructuring charges,
provide commentary on fourth quarter 2002 performance, and review its
operating outlook for 2003 by segment.
"We are having this call to review for investors where we stand
given the significant changes that are underway within our company,"
stated Ronald M. DeFeo, Terex Chairman and Chief Executive Officer.
"We continue to operate in a challenging environment, and with Genie,
Demag and the other acquisitions and savings programs implemented in
2002, we wanted to review these items with investors earlier than was
previously planned. We will provide a detailed review of the fourth
quarter and full year 2002 results at the end of February as we have
done historically."
2002 Restructuring
During the fourth quarter of 2002, Terex initiated restructuring
plans in several businesses, including Terex Compact Equipment, Demag,
Genie, and Terex Mining. The restructuring charge related to these
plans will be approximately $53 million, $51 million of which will be
recorded in the fourth quarter of 2002 and $2 million of which will be
future period costs. The cash component of the restructuring charge
will be approximately $18 million. The annualized savings from these
actions is approximately $19 million, $12 million of which is expected
to be realized in 2003. The restructuring actions are also expected to
have a positive cash impact of over $20 million in 2003. The
restructuring actions can be grouped into the following three main
areas:
Acquisition related - The recent acquisitions of Demag and Genie
have provided the Company with further opportunities to rationalize
facilities and product lines within the Crane and Aerial Work Platform
business segments. Demag's product range and capabilities allow the
Company to consolidate crane manufacturing and distribution activities
along with product offerings. The Company's Montceau crane facility
will be scaled back and many of its models will be discontinued, as
those product lines will be integrated with Demag products. Demag's
presence in Germany also provides the opportunity to leverage its
distribution infrastructure in that country. The acquisition of Genie
has provided the Company the opportunity to rationalize aerial product
offerings between Genie and Terex, and the former Terex models will be
discontinued as those product lines are integrated with Genie
products. The acquisition related restructuring charges are
approximately $25 million and consist of severance (approximately 150
employees - $7 million), inventory valuation related to discontinued
product lines (approximately $15 million) and various other items
including facility and equipment write-offs (approximately $3
million).
Terex Compact Equipment - In the fourth quarter of 2002, the
Company announced the transfer of the operations of its Warwick,
England, facility which manufactures mini-dumpers, rollers and soil
compactors, into a new facility in Coventry, England. The new facility
has 326,000 sq. ft. of dedicated manufacturing space. The Company has
also presented to local labor unions a proposed plan to close the
Manchester, England, facility which manufactures loader backhoes, and
relocate its operations to another Terex location. These actions will
allow the Company to leverage manufacturing and infrastructure to
further reduce costs and streamline operations. The restructuring
charge related to these actions is approximately $9 million and
consists of severance (approximately 270 employees - $6 million) and
various other items including facility and equipment write-offs
(approximately $3 million). Of the approximately $9 million in
restructuring charges, approximately $7 million will be accrued in the
fourth quarter of 2002 and $2 million represents future period costs.
Businesses to be exited and product rationalizations - During the
fourth quarter of 2002, the Company decided to close and exit its tank
container business, CPV, in Clones, Ireland. This business has been a
non-core operation since it was acquired as part of the Powerscreen
acquisition in 1999. CPV had sales of approximately $12 million in
2002. The Company also decided to rationalize certain product
offerings within its Mining, Roadbuilding and Tower Crane businesses.
In Mining, the Company made the decision to exit rental activities and
to rationalize the scraper product offering. In Roadbuilding, the
Company continues to integrate CMI and is rationalizing certain
product offerings previously sold under the Standard Havens brand
name. In Tower Cranes, the Company rationalized the product offering
and restructured manufacturing operations. The restructuring charge
related to businesses to be exited and product rationalization is
approximately $19 million (approximately 185 employees - $3 million),
inventory valuation related to discontinued businesses and product
lines (approximately $14 million) and various other items including
facility and equipment write-offs (approximately $2 million).
Fourth Quarter 2002
"While we continue to work through the closing process, we expect
operating performance for the fourth quarter of 2002 to be broadly in
line with previously announced guidelines," commented Mr. DeFeo.
"Before special items, we expect earnings to be in the $0.10 to $0.14
per share range and EBITDA to be in the $40 to $45 million range. We
also improved our cash generation during the quarter, reducing total
debt by approximately $70 million and net debt by approximately $85
million, from $1,297 million at the end of the third quarter of 2002
to approximately $1,212 million at the end of 2002. With respect to
our bank covenants, the Company remains well within our limits for
compliance."
2003 Outlook
"We remain confident as to our ability to meet or exceed current
market expectations for earnings in 2003," said Mr. DeFeo. "We have
built a stronger company over the past 12 months with the completion
of the strategic acquisitions of Demag and Genie, positioning Terex to
grow in 2003 despite challenging end markets. We will continue to be
aggressive on cost reductions, and the benefits from the restructuring
actions implemented in the fourth quarter of 2002 will positively
impact 2003. Our focus for the upcoming year is to integrate and
execute, particularly with respect to the integration of our
acquisitions of Demag and Genie, and execute on our cost saving
targets. Cash flow generation is a main focus for management and we
have targeted a $200 million reduction in debt by the end of 2003."
Segment outlook for 2003 is as follows:
Terex Construction - The Company expects net sales to be in the
range of $1,150 to $1,250 million, with operating margins in the 6.0%
to 7.0% range. Overall end markets remain challenging. The articulated
dump truck market remains very competitive, as this product category
has seen several new entrants over the past few years. There continues
to be opportunity with the Terex Compact Equipment business to
penetrate new market opportunities, particularly in the U.S. The
Powerscreen business continues to show signs of growth. Continued
integration of the Atlas and Schaeff acquisitions should improve
margins, as the Company continues to pursue cost reductions.
Terex Cranes - The Company expects net sales to be in the range of
$700 to $750 million, with operating margins in the 6.0% to 7.0%
range. The North American market remains depressed, but the Demag
acquisition is opening up new customer opportunities for the Company's
other crane products. The addition of Demag has allowed the Company to
restructure its PPM Montceau and PPM Germany operations, driving
additional costs out of the business.
Terex Mining - The Company expects 2003 net sales to be slightly
below 2002 levels. However, the Company expects a significant
improvement in operating results. Overall, the Company expects net
sales to be in the range of $250 to $280 million, with operating
margins in the 6.5% to 7.5% range. The expected improvement in
financial performance relates to already implemented projects, such as
the closure of the Tulsa manufacturing facility, lower warranty and
product service costs and a favorable shift in product mix. Demand for
mining shovels has generally remained positive and quoting activities
have picked up for mining trucks.
Terex Roadbuilding and Utility Products - The Company expects net
sales to be in the range of $600 to $675 million, with operating
margins in the 6.0% to 7.0% range. The growth in this segment is
driven primarily by the inclusion of the 2002 acquisitions for a full
year. The Utility Products business has begun to see the benefit of
the investments made during 2002 in its distribution network. This
trend should continue as investor owned utility companies provide a
significant opportunity. The increased distribution network has the
additional benefit of cross-selling other Terex products, such as the
loader backhoe and boom trucks. The Terex Roadbuilding business will
continue to face difficult end markets in 2003, as uncertainty
surrounding funding for highway construction at both the federal and
state levels will impact new equipment purchases. In the near term,
however, the Company will continue to focus on cost control and sizing
the business for the current operating environment.
Terex Aerial Work Platforms - This segment was created with the
acquisition of Genie in September 2002. For 2003, the Company expects
net sales to be in the range of $475 to $510 million, which represents
an approximately 10% decrease from the 2002 run rate. This reduction
in net sales is primarily the result of lower capital expenditures
forecasted for the large rental companies, offset partially by growth
opportunities within Europe. Operating margins are expected to be in
the 9.0% to 10.0% range, reflecting the successful execution of cost
reduction plans.
Other additional financial information:
Corporate - Interest expense for the year is estimated at $100 to
$105 million and other income/expense is estimated to be an expense of
$5 million. The effective tax rate is expected to be 32% for 2003 and
the average number of shares outstanding for 2003 is estimated at 48.5
million. Depreciation and amortization for the Company is estimated at
$60 million. Capital expenditures should be approximately $30 to 35
million.
Working Capital - Effective January 1, 2003, the Company
implemented a new incentive compensation plan within the Company,
which places a greater emphasis on cash generation. The plan was
designed with the goal of reducing working capital and generating free
cash flow in order to reduce the Company's leverage. The target for
2003 is a reduction in working capital of $150 million from December
2002 levels.
"As we head into 2003, we are not expecting help from our end
markets," commented Phil Widman, Senior Vice President and Chief
Financial Officer. "There are certainly areas where we believe we can
continue to grow in 2003, such as our continued penetration of the
compact equipment market and our Powerscreen business, but there are
other businesses where we see continued weakness in 2003, such as the
crane business. When you look across our diversified portfolio there
are many puts and takes, but the growth and earnings improvement in
2003 will be driven primarily by the integration of acquisitions and
execution on restructuring plans." Mr. Widman continued, "We realize
that we have accomplished a lot in the acquisition area over the past
12 to15 months, and believe that this has made us a stronger company.
We added over $1 billion in pro forma revenues in new businesses,
diversifying both the Terex product offering and geographic presence.
Although our net debt has increased from December 2001 as a result of
the acquisitions, our pro forma net leverage ratio has stayed
relatively flat. We believe the Company has a tremendous opportunity
to reduce working capital and generate free cash flow, thereby
improving leverage, with the beginnings of this reflected in the
fourth quarter of 2002. Reduction of working capital and generation of
free cash flow will remain a key focus for management in 2003."
Conference Call Information
To access the conference call, call (877) 726-6603 on Friday,
January 24, 2003, at least 10 minutes before the call is scheduled to
begin. To accommodate our audiences in earlier time zones or anyone
unable to listen, there will be a replay of the teleconference. The
replay will be available shortly after the conclusion of the call and
can be accessed until Wednesday, January 29, 2003 at 6:00 p.m.,
Eastern Time. To access the replay, please call (800) 642-1687 and
enter conference ID #7802995.
International participants should call (706) 634-5517 at least 15
minutes before the start of the conference call. To access the
international replay, please call (706) 645-9291 and enter conference
ID #7802995.
Also, a simultaneous, listen-only mode webcast of this conference
call will be available on www.terex.com. Those who wish to listen to
the conference call should visit the Investor Relations section of the
Company's Website at least 15 minutes prior to the event's broadcast.
Then, follow the instructions provided to assure that the necessary
audio applications are downloaded and installed. These programs can be
obtained at no charge to the user.
Safe Harbor Statement
The above contains forward-looking information based on Terex's
current expectations. Because forward-looking statements involve risks
and uncertainties, actual results could differ materially. Such risks
and uncertainties, many of which are beyond Terex's control, include
among others: Terex's business is highly cyclical and weak general
economic conditions may affect the sales of its products and its
financial results; the sensitivity of construction and mining activity
to interest rates and government spending; the ability to successfully
integrate acquired businesses; the retention of key management
personnel; Terex's businesses are very competitive and may be affected
by pricing, product initiatives and other actions taken by
competitors; the effects of changes in laws and regulations; Terex's
business is international in nature and is subject to changes in
exchange rates between currencies, as well as international politics;
the ability of suppliers to timely supply Terex parts and components
at competitive prices; the financial condition of suppliers and
customers, and their continued access to capital; Terex's ability to
timely manufacture and deliver products to customers; Terex's
substantial amount of debt and its need to comply with restrictive
covenants contained in Terex's debt agreements; compliance with
applicable environmental laws and regulations; and other factors,
risks, uncertainties more specifically set forth in Terex's public
filings with the SEC. Actual events or the actual future results of
Terex may differ materially from any forward looking statement due to
those and other risks, uncertainties and significant factors. The
forward-looking statements herein speak only as of the date of this
release. Terex expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking
statement included in this release to reflect any changes in Terex's
expectations with regard thereto or any changes in events, conditions,
or circumstances on which any such statement is based.
Terex Corporation is a diversified global manufacturer based in
Westport, Connecticut. Terex is involved in a broad range of
construction, infrastructure, recycling and mining-related capital
equipment under the brand names of Advance, American, Amida, Atlas,
Bartell, Bendini, Benford, Bid-Well, B.L. Pegson, Canica, Cedarapids,
Cifali, CMI, Coleman Engineering, Comedil, CPV, Demag, Fermec, Finlay,
Franna, Fuchs, Genie, Grayhound, Hi-Ranger, Italmacchine, Jaques,
Johnson-Ross, Koehring, Lectra Haul, Load King, Lorain, Marklift,
Matbro, Morrison, Muller, O&K, Payhauler, Peiner, Powerscreen, PPM,
Re-Tech, RO, Royer, Schaeff, Simplicity, Square Shooter, Telelect,
Terex, and Unit Rig. Terex offers a complete line of financial
products and services to assist in the acquisition of Terex equipment
through Terex Financial Services. More information on Terex can be
found at www.terex.com.
CONTACT: |
Terex Corporation |
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Kevin O'Reilly, 203/222-5943 |
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Vice President |
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