-- Sales increased to $1,336 million, up 27% over the prior year
-- Net income of $1.17 per share
-- Cash flow from operations of $134 million
-- Net debt decreased $160 million
-- Gross debt decreased $113 million
-- Backlog increased to $916 million, up 125% as compared with
second quarter 2003
WESTPORT, Conn.--(BUSINESS WIRE)--July 21, 2004--Terex Corporation
(NYSE: TEX) today announced net income for the
second quarter of 2004 of $59.1 million, or $1.17 per share, compared
to a net loss of $51.8 million, or $1.09 per share, for the second
quarter of 2003. Excluding the impact of special items, net income for
the quarter was $52.3 million, or $1.03 per share, compared to $24.7
million, or $0.50 per share, for the second quarter of 2003. The
effective tax rate for the second quarter of 2004 was 19.7%. Using the
2003 and anticipated full year 2004 tax rate of 28%, net income
excluding special items for the second quarter of 2004 would have been
$46.9 million, or $0.93 per share. Special items for the second
quarter of 2004, which are explained in more detail later in this
release, primarily included gains on the sale of real estate and the
favorable settlement of litigation proceedings related to the O&K
acquisition, partially offset by costs related to the restructuring of
Terex-Atlas facilities in the UK and Germany, loss on the sale of
certain discontinued service parts businesses, a write-down of a joint
venture investment and the accelerated amortization arising from the
early retirement of debt. Special items for the second quarter of 2003
primarily included a goodwill impairment charge and a charge for
product rationalization within the Roadbuilding group, a charge
related to facility consolidation in the tower crane and Powerscreen
businesses and a loss on the early retirement of debt.
Net sales increased to $1,336.4 million in the second quarter of
2004, an increase of 27% from $1,048.8 million in the second quarter
of 2003. Cash flow from operations was $134.3 million and net debt
(consisting of long-term debt, including the current portion of
long-term debt, less cash and cash equivalents) decreased by $159.9
million during the second quarter of 2004.
For the six months ended June 30, 2004, net sales increased to
$2,380.2 million, an increase of 20% from $1,976.5 million for the six
months ended June 30, 2003. Net income for the first six months of
2004 was $76.1 million, or $1.50 per share, compared to a net loss of
$39.8 million, or $0.84 per share, for the first six months of 2003.
Net income, excluding special items, was $69.3 million, or $1.37 per
share, for the first six months of 2004, compared to net income,
excluding special items, of $40.3 million, or $0.82 per share, for the
first six months of 2003. Cash flow from operations was $69.9 million
and net debt decreased by $85.8 million in the six months ended June
30, 2004.
"We had a strong performance in the second quarter, ahead of our
expectations, in spite of the operational challenges of steel cost
increases and supplier issues," commented Ronald M. DeFeo, Terex's
Chairman and Chief Executive Officer. "Our sales grew by 27% over the
prior year's period and 28% over the first quarter of 2004. Consistent
with our cash focus, this sales growth was achieved with a 7%
reduction in working capital from the first quarter, and supplemented
with more than $23 million of cash proceeds from facility sales, to
generate a net debt reduction of $160 million. Utilizing a consistent
tax rate with the second quarter of 2003, earnings per share,
excluding special items, grew by more than 86%."
"The quarter, however, wasn't without its challenges," added Mr.
DeFeo. "Supplier issues, particularly steel, had an impact on our
business, both from a cost and production perspective. We estimate
that steel cost increases negatively affected our operating results by
roughly $18 million in the second quarter, mainly impacting our U.S.
operations. We have been successful in partially offsetting this
impact through internal initiatives and volume leverage. Additionally,
some of our end-markets remain challenging, particularly in
Roadbuilding, North American cranes and our Utility business. We
continue to take steps to reduce the cost structure in these
businesses in an effort to streamline operations, reduce our
investment and improve profitability, and we are seeing some
year-over-year performance improvement in these areas."
"We are beginning to realize benefits from end market recoveries,
the integration of our businesses, cost-saving initiatives put in
place over the past year, and the initial impact of our Terex
Improvement Process ("TIP"). Our company has rallied behind TIP, and
we are pleased with the early successes this program has delivered.
Today we have numerous TIP projects in process; most of them are being
pursued and implemented locally throughout the company's business
units."
Mr. DeFeo continued, "For example, as part of the Asset Management
TIP initiative, we established a process to identify excess assets.
During the quarter, we sold $23 million in excess real property, as
well as reduced our used, rental and demonstration fleet of equipment
by more than $30 million. This directly contributed to Terex's ability
to pay down debt in the second quarter. At the business unit level,
improvement can be seen through analyzing our operating margin trends.
While net sales excluding acquisitions were up 21% versus the second
quarter of 2003, operating margin increased approximately 50%. This
demonstrates improved margin beyond the benefit of volume leverage,
even taking into account the negative impact of steel costs."
"Even with our progress, we still have a lot of opportunities
ahead of us," said Mr. DeFeo. "With regard to margin improvement, the
main focus during the first half of 2004 was on mitigating current
supplier pressures on our businesses resulting from improving economic
conditions and higher demand. We are now focusing on other commodities
and services, such as common components and freight, and expect to see
continued improvement of our operating margins over the next 18
months. As a management team, we are constantly looking for ways to
create value for customers and shareholders. In the near term, we
remain committed to executing our plan, generating free cash flow, and
reducing debt."
In this press release Terex refers to various non-GAAP (generally
accepted accounting principles) financial measures. These measures may
not be comparable to similarly titled measures being disclosed by
other companies. The table below and the tables included elsewhere in
this press release provide a reconciliation of the reported GAAP
numbers for the second quarters and first six months of 2004 and 2003
and the reported numbers excluding special items. Terex believes that
this information is useful to understanding its operating results and
the ongoing performance of its underlying businesses without the
impact of special items. Terex also discloses EBITDA and net debt, as
they are commonly referred to financial metrics used in the investing
community. Terex believes that disclosure of EBITDA and net debt will
be helpful to those reviewing its performance and that of other
comparable companies, as EBITDA and net debt provide information on
Terex's leverage position, ability to meet debt service and capital
expenditure and working capital requirements, and EBITDA is also an
indicator of profitability.
A financial summary is shown below:
Three months ended June 30,
----------------------------------------------------------
2004 2003
---------------------------- -----------------------------
(in millions, except per share amounts)
Special Excluding Special Excluding
Reported Items Special Reported Items Special
(2) Items (3) Items
-------- -------- ---------- -------- -------- ----------
Net sales $1,336.4 $ - $ 1,336.4 $1,048.8 $ --- $ 1,048.8
======== ======= ========= ======== ======= =========
Gross
profit $ 195.0 $ 9.9 $ 204.9 $ 116.7 $ 38.1 $ 154.8
SG&A 119.2 (1.6) 117.6 100.9 (6.8) 94.1
Goodwill
impairment - - - 51.3 (51.3) ---
-------- ------- --------- -------- ------- ---------
Income
(loss)
from
operations 75.8 11.5 87.3 (35.5) 96.2 60.7
Other
income
(expense) (2.2) (19.9) (22.1) (29.4) 3.0 (26.4)
Benefit
from/
(provision
for)
income
taxes (14.5) 1.6 (12.9) 13.1 (22.7) (9.6)
-------- ------- --------- -------- ------- ---------
Net income
(loss) $ 59.1 $ (6.8) $ 52.3 $ (51.8) $ 76.5 $ 24.7
======== ======= ========= ======== ======= =========
Earnings
per share $ 1.17 $ 1.03 $ (1.09) $ 0.50
EBITDA (1) $ 94.9 $ 9.9 $ 104.8 $ (19.1) $ 96.2 $ 77.1
Backlog $ 916.2 $ 916.2 $ 407.4 $ 407.4
Average
diluted
shares
Outstanding 50.7 50.7 47.6 1.9 49.5
(1) EBITDA is calculated as income from operations plus depreciation
and amortization included in income from operations.
(2) Special items, net of tax, relate to the gain on the sale of
facilities ($13.3 million), costs associated with restructuring
activities, mainly in the Terex-Atlas businesses ($6.1 million),
the net gain related to the favorable settlement of litigation
proceedings regarding the O&K acquisition ($3.4 million), the loss
on the sale of discontinued service parts business activities
($1.8 million), the write-down of investments ($0.8 million), and
the accelerated amortization arising from the early retirement of
debt ($1.2 million).
(3) Special items, net of tax, relate to goodwill impairment for the
Roadbuilding group ($42.5 million), exiting certain businesses and
product rationalization within the Roadbuilding group ($22.0
million), restructuring activities ($7.0 million), charges related
to the Company's deferred compensation plan ($2.7 million), loss
on retirement of debt ($1.4 million), write-off of remaining
investment in SDC International ($0.8 million), and Genie
inventory fair value accounting treatment ($0.1 million).
Six months ended June 30,
----------------------------------------------------------
2004 2003
---------------------------- ----------------------------
(in millions, except per share amounts)
Special Excluding Special Excluding
Reported Items Special Reported Items Special
(2) Items (3) Items
-------- -------- ---------- -------- -------- ----------
Net sales $2,380.2 $ - $ 2,380.2 $1,976.5 $ --- $ 1,976.5
======== ======= ========= ======== ======= =========
Gross
profit $ 355.3 $ 9.9 $ 365.2 $ 246.4 $ 43.7 $ 290.1
SG&A 231.2 (1.6) 229.6 190.1 (7.9) 182.2
Goodwill
impairment - - - 51.3 (51.3) ---
-------- ------- --------- -------- ------- ---------
Income
from
operations 124.1 11.5 135.6 5.0 102.9 107.9
Other
income
(expense) (26.1) (19.9) (46.0) (53.3) 1.4 (51.9)
Benefit
from/
(provision
for)
income
taxes (21.9) 1.6 (20.3) 8.5 (24.2) (15.7)
-------- ------- --------- -------- ------- ---------
Net income
(loss) $ 76.1 $ (6.8) $ 69.3 $ (39.8) $ 80.1 $ 40.3
======== ======= ========= ======== ======= =========
Earnings
per share $ 1.50 $ 1.37 $ (0.84) $ 0.82
EBITDA (1) $ 160.1 $ 9.9 $ 170.0 $ 35.7 $ 102.9 $ 138.6
Backlog $ 916.2 $ 916.2 $ 407.4 $ 407.4
Average
diluted
shares
Outstanding 50.6 50.6 47.4 1.9 49.3
(1) EBITDA is calculated as income from operations plus depreciation
and amortization included in income from operations.
(2) Special items, net of tax, relate to the gain on the sale of
facilities ($13.3 million), costs associated with restructuring
activities, mainly in the Terex-Atlas businesses ($6.1 million),
the net gain related to the favorable settlement of litigation
proceedings regarding the O&K acquisition ($3.4 million), the loss
on the sale of discontinued service parts business activities
($1.8 million), the write-down of investments ($0.8 million), and
the accelerated amortization arising from the early retirement of
debt ($1.2 million).
(3) Special items, net of tax, relate to goodwill impairment for the
Roadbuilding group ($42.5 million), exiting certain businesses and
product rationalization within the Roadbuilding group ($22.0
million), restructuring activities ($8.3 million), charges relates
to the Company's deferred compensation plan ($3.2 million), loss
on retirement of debt ($1.4 million), write-off of remaining
investment in SDC International ($0.8 million), write-down of
certain assets within the EarthKing business ($1.7 million) and
Genie and Demag inventory fair value accounting treatment ($2.1
million), offset partially by a favorable ruling on a legal claim
($1.7 million).
Segment Performance
The comparative segment performance below excludes special items.
See Table I included later in this press release for the
reconciliation to the reported GAAP numbers.
Terex Construction
Second Quarter Year-to-Date
----------------------------- -----------------------------
(dollars in millions)
2004 2003 2004 2003
-------------- -------------- -------------- --------------
% of % of % of % of
sales sales sales sales
----- ----- ----- -----
Net sales $ 475.0 $ 382.7 $ 864.7 $ 700.9
======== ======== ======== ========
Gross
profit $ 71.0 14.9% $ 55.4 14.5% $ 123.4 14.3% $ 97.1 13.9%
SG&A 39.5 8.3% 34.2 8.9% 75.7 8.8% 61.7 8.8%
-------- -------- -------- --------
Operating
profit $ 31.5 6.6% $ 21.2 5.5% $ 47.7 5.5% $ 35.4 5.1%
======== ======== ======== ========
Backlog $ 216.5 $ 89.2 $ 216.5 $ 89.2
Net sales in the Terex Construction group for the second quarter
of 2004 increased $92.3 million to $475.0 million from $382.7 million
in the second quarter of 2003. The increase in sales was driven
primarily by stronger end market demand and benefits from foreign
exchange movements among the Euro, British Pound and U.S. dollar.
Excluding the translation impact of foreign exchange movements, sales
for Terex Construction increased 17% over the prior year period. SG&A
expenses for the second quarter of 2004 were $39.5 million, or 8.3% of
sales, compared to $34.2 million, or 8.9% of sales, for the second
quarter of 2003, reflecting costs associated with investments made in
sales and marketing activities, as well as some unfavorable effects
from foreign currency translation. Income from operations for the
quarter was $31.5 million, or 6.6% of sales, compared to $21.2
million, or 5.5% of sales, for the second quarter of 2003.
"The Terex Construction group had a strong quarter, and we are
beginning to see the leverage in our businesses from previous
restructuring initiatives," commented Colin Robertson, President-Terex
Construction. "The mobile crushing and screening businesses continue
to show broad-based growth in net sales and operating profit, led by
the crushing equipment division of Terex-Pegson. Our compact equipment
businesses also have shown increased performance, benefiting from the
early stages of a North American recovery and the restructuring
activities last year that saw the consolidation of a number of our
operations into our new Coventry facility."
"Our heavy construction equipment businesses continue to face
competitive end markets and margin pressure from both steel costs and
foreign exchange movements, mainly the British Pound, as much of the
equipment sold into North America is manufactured in the United
Kingdom and Germany," Mr. Robertson added. "These factors effectively
offset the margin improvement that we would have expected from the
heavy equipment group given its top line growth." Mr. Robertson
continued, "Our scrap handling business, however, has benefited from
the increase in steel prices, as order activity and profits have
increased substantially as customers continue to look to increase
production capacity to capitalize on the increase in commodity
prices."
Mr. Robertson continued, "As we look to the second half of 2004,
we will continue to focus on profitable growth. With the backdrop of a
healthier economic environment and a strong order backlog, I would
expect to see continued favorable year-over year comparisons."
Terex Cranes
Second Quarter Year-to-Date
----------------------------- -----------------------------
(dollars in millions)
2004 2003 2004 2003
-------------- -------------- -------------- --------------
% of % of % of % of
sales sales sales sales
----- ----- ----- -----
Net sales $ 276.9 $ 273.0 $ 486.1 $ 510.9
======== ======== ======== ========
Gross
profit $ 34.2 12.4% $ 28.7 10.5% $ 64.0 13.2% $ 58.3 11.4%
SG&A 21.9 7.9% 19.8 7.3% 45.3 9.3% 40.2 7.9%
-------- -------- -------- --------
Operating
profit $ 12.3 4.4% $ 8.9 3.3% $ 18.7 3.8% $ 18.1 3.5%
======== ======== ======== ========
Backlog $ 285.4 $ 153.0 $ 285.4 $ 153.0
Net sales in the Terex Cranes group for the second quarter of 2004
increased $3.9 million to $276.9 million from $273.0 million in the
second quarter of 2003. Excluding the impact of foreign exchange
movements, net sales for the quarter were essentially unchanged,
reflecting continued weak North American markets and a slight
moderation of the Italian rough terrain crane business, substantially
offset by increased performance at the small all-terrain crane
business, increased demand for the stacker product, and good results
at the Italian tower crane business. Additionally, the results for the
second quarter of 2003 included $5.3 million of net sales generated by
certain businesses disposed of by Terex Cranes since June 30, 2003.
SG&A expenses increased to $21.9 million, or 7.9% of sales, in the
second quarter of 2004 compared to $19.8 million, or 7.3% of sales,
for the second quarter of 2003, mainly due to foreign currency
translation. Income from operations for the quarter was $12.3 million,
or 4.4% of sales, compared to $8.9 million, or 3.3% of sales, in the
second quarter of 2003, as margins continue to be under pressure from
competitive pricing in the market place, steel pricing and used
machine sales with very low margins.
"The Terex Cranes group continues to show progress across its
portfolio of businesses," commented Steve Filipov, President - Terex
Cranes. "While North America remains a difficult market, we have made
progress with regard to profitability and expect to continue to see
modest improvements heading into 2005. Our international cranes
businesses, most notably Terex-Demag, delivered improved operating
margins on reduced net sales, mainly attributed to the lower volume of
used crane sales in 2004. The tower crane business, although the
smallest crane operating group, produced superb results for the
quarter."
Mr. Filipov added, "We remain optimistic about Terex Cranes'
future prospects. We continue to see the precursors of a stabilizing
market in North America, a market that has seen an approximate 70%
downturn in demand since 2000. We will continue to focus on cost
containment and are positioning our franchise to be a major
participant in a crane market recovery that we expect in 2005."
Terex Aerial Work Platforms
Second Quarter Year-to-Date
----------------------------- -----------------------------
(dollars in millions)
2004 2003 2004 2003
-------------- -------------- -------------- --------------
% of % of % of % of
sales sales sales sales
----- ----- ----- -----
Net sales $ 238.0 $ 167.8 $ 406.0 $ 315.0
======== ======== ======== ========
Gross
profit $ 48.8 20.5% $ 35.5 21.2% $ 85.5 21.1% $ 65.7 20.9%
SG&A 15.7 6.6% 14.0 8.3% 31.6 7.8% 27.7 8.8%
-------- -------- -------- --------
Operating
profit $ 33.1 13.9% $ 21.5 12.8% $ 53.9 13.3% $ 38.0 12.1%
======== ======== ======== ========
Backlog $ 115.0 $ 21.3 $ 115.0 $ 21.3
Net sales in the Terex Aerial Work Platforms group for the second
quarter of 2004 increased $70.2 million to $238.0 million from $167.8
million in the second quarter of 2003, driven by a growth in sales to
rental customers who continue to see improvement in their rental and
utilization rates. SG&A expenses increased to $15.7 million, or 6.6%
of sales, in the second quarter of 2004 compared to $14.0 million, or
8.3% of sales, for the second quarter of 2003. Income from operations
for the quarter was $33.1 million, or 13.9% of sales, compared to
$21.5 million, or 12.8% of sales, in the second quarter of 2003.
"We are very pleased with our second quarter results," said Bob
Wilkerson, President - Terex Aerial Work Platforms. "Our sales were up
meaningfully compared to the second quarter of 2003. While cost
pressures from many of our suppliers, particularly steel, negatively
impacted our gross margin, our operating margin continued its positive
trend as favorable volume leverage more than offset increased material
costs. We also experienced strong top-line growth in the material
handler product, demonstrating some early success of the realignment
that had the Genie management team taking responsibility for this
product line."
Mr. Wilkerson added, "As we look forward, we expect the favorable
performance trend to continue, especially given the increasing order
backlog. As our customers continue to demonstrate improved financial
performance, we expect many will look to expand their rental fleets to
take advantage of the increase in demand for light duty rental
equipment. The increase in our current performance continues to be
mainly driven by replacement demand, as rental companies have stopped
aging their fleets. Additionally, we continue to strengthen our
geographic reach, most notably in Europe, where we have seen
strengthening product demand in the United Kingdom, France and
Germany."
Terex Mining
Second Quarter Year-to-Date
----------------------------- -----------------------------
(dollars in millions)
2004 2003 2004 2003
-------------- -------------- -------------- --------------
% of % of % of % of
sales sales sales sales
----- ----- ----- -----
Net sales $ 99.5 $ 75.0 $ 169.4 $ 155.0
======== ======== ======== ========
Gross
profit $ 18.1 18.2% $ 12.6 16.8% $ 29.3 17.3% $ 24.6 15.9%
SG&A 11.1 11.2% 8.5 11.3% 20.3 12.0% 15.8 10.2%
-------- -------- -------- --------
Operating
profit $ 7.0 7.0% $ 4.1 5.5% $ 9.0 5.3% $ 8.8 5.7%
======== ======== ======== ========
Backlog $ 139.1 $ 44.0 $ 139.1 $ 44.0
Net sales for the Terex Mining group for the second quarter of
2004 increased $24.5 million to $99.5 million from $75.0 million for
the second quarter of 2003, reflecting increased activity in surface
mining customer activity. SG&A expenses for the second quarter of 2004
were $11.1 million, or 11.2% of sales, compared to $8.5 million, or
11.3% of sales, in the second quarter of 2003. Income from operations
increased to $7.0 million, or 7.0% of sales, in the second quarter of
2004 from $4.1 million, or 5.5% of sales, in the second quarter of
2003.
"The Mining group continues to see significant improvement in both
orders and order activity," commented Rick Nichols, President - Terex
Mining. "The stability in the key commodity prices, mainly coal and
iron ore, have allowed our customers to expand production
capabilities, including the expansion of existing truck and shovel
fleets. The $55 million transaction with Henry Walker Eltin announced
this past May, an order that included 15 mining trucks and six
hydraulic mining shovels, most of which will ship in the second half
of 2004, is just one example of this increased demand."
Mr. Nichols continued, "Beyond net sales, we have concentrated on
ensuring that the growth in our business is profitable growth.
Discipline in our sales process, as well as improved factory
performance and better management of our parts business, continue to
drive our margins upward. We remain focused on returning the Terex
Mining group to a double digit operating margin by 2006."
Terex Roadbuilding, Utility Products and Other
Second Quarter Year-to-Date
----------------------------- -----------------------------
(dollars in millions)
2004 2003 2004 2003
-------------- -------------- -------------- --------------
% of % of % of % of
sales sales sales sales
----- ----- ----- -----
Net sales $ 267.7 $ 169.3 $ 485.1 $ 327.4
======== ======== ======== ========
Gross
profit $ 33.0 12.3% $ 22.5 13.3% $ 63.1 13.0% $ 44.6 13.6%
SG&A 26.4 9.9% 17.9 10.6% 51.3 10.6% 35.9 11.0%
-------- -------- -------- --------
Operating
profit $ 6.6 2.5% $ 4.6 2.7% $ 11.8 2.4% $ 8.7 2.7%
======== ======== ======== ========
Backlog $ 170.4 $ 103.9 $ 170.4 $ 103.9
Net sales for the Terex Roadbuilding, Utility Products and Other
group for the second quarter of 2004 increased $98.4 million to $267.7
million from $169.3 million for the second quarter of 2003, driven
primarily by the acquisition of Tatra and ATC. Excluding Tatra and
ATC, net sales increased 18.4%. SG&A expenses for the second quarter
of 2004 were $26.4 million, or 9.9% of sales, compared to $17.9
million, or 10.6% of sales, in the second quarter of 2003. The
increase in SG&A expenses largely reflects the inclusion of Tatra and
ATC, the settlement of legal claims and an increase in commissions due
to higher sales volume. Income from operations increased to $6.6
million, or 2.5% of sales, in the second quarter of 2004, from $4.6
million, or 2.7% of sales, in the second quarter of 2003.
"The Roadbuilding, Utility Products and Other group continues to
have its ups and downs," commented Mr. DeFeo. "While all of our
manufacturing businesses that comprise this group have demonstrated
top line growth, difficult end markets and increasing steel costs
continue to pressure margins in many of these businesses, namely
Roadbuilding and Utility Products. Conversely, our Terex Light
Construction group posted strong results for the quarter, directly
benefiting from a healthier North American end market and increased
military business."
Mr. DeFeo continued, "Our expectations for the Roadbuilding,
Utility Products and Other group are for a continued modest
improvement over 2003 results for the balance of 2004. Consistent with
our views heading into this year, however, we fully expect that these
businesses will benefit from an external market recovery and internal
TIP initiatives, such as the implementation of lean manufacturing
concepts and component purchasing initiatives, which should be
reflected in 2005 results."
Special Items
Included in special items for the second quarter of 2004 were: (1)
the gain on the sale of facilities ($16.6 million); (2) costs
associated with restructuring activities, mainly in the Terex-Atlas
businesses in the UK and Germany ($7.6 million); (3) the net gain
related to the favorable settlement of litigation proceedings
regarding the O&K acquisition ($4.2 million); (4) the loss on the sale
of certain discontinued service parts businesses ($2.3 million); (5)
the write-down of a joint venture investment ($1.0 million); and (6)
the accelerated amortization arising from the early retirement of $75
million of bank term debt ($1.5 million). Special items recognized in
the second quarter of 2004 amount to $8.4 million, pre-tax income. The
cash component of this is a generation of approximately $18.9 million.
For the second quarter of 2003, special items were: (1) the
goodwill write-down associated with the Roadbuilding business ($51.3
million); (2) a charge for exiting certain businesses and product
rationalization within the Roadbuilding group ($30.6 million); (3) the
closure costs related to the Peiner and Kilbeggan operations ($9.0
million); (4) charges related to the deferred compensation plan ($4.5
million); (5) the loss on the retirement of debt related to the $50
million redemption of 8-7/8% senior subordinated notes ($1.9 million);
(6) the write-off of the remaining investment in SDC International
($1.1 million); (7) costs associated with relocation of businesses
($0.7 million); and (8) Genie inventory fair value accounting
treatment ($0.1 million). Special items recognized in the second
quarter of 2003 amount to $99.2 million, pre-tax loss. The cash
component of this charge was approximately $10 million. Also in the
quarter, the Company recognized $0.7 million in charges from previous
restructuring projects.
Capital Structure
"Cash flow from operations for the second quarter of 2004 was $134
million, bringing the total for the first six months of 2004 to $70
million," commented Phil Widman, Senior Vice President and Chief
Financial Officer. "In the quarter, we generated $59 million in cash
from reductions in working capital (defined as the sum of accounts
receivable plus inventory less accounts payable), with an increase of
$30 million for the first six months of 2004. As we previously
indicated, the dollar reduction in working capital would not be as
significant this year, as we drive to deliver increased volume with
the same or reduced levels of working capital. This is evident from
our working capital as a percent of trailing three month annualized
sales, which decreased to a level of 18% at the end of the second
quarter of 2004 compared to 21% at the end of the second quarter of
2003." Mr. Widman added, "Our cash flow performance was excellent in
the quarter, and bettered our expectations in our traditionally
highest volume quarter. Certainly our property disposition success in
the quarter helped supplement our working capital reduction
initiatives."
Net debt (defined as total debt less cash) at the end of the
second quarter of 2004 decreased $160 million to $808 million from
$968 million at the end of the first quarter of 2004 and $86 million
from the end of 2003. Net debt to book capitalization at the end of
the second quarter of 2004 was 46.4%, an all time low, compared to
50.5% at the end of 2003. Mr. Widman added, "With our strong cash flow
results, we accelerated the paydown of debt with gross debt reduction
of $113 million in the second quarter. Subsequent to the close of the
second quarter, we repaid an additional $50 million of bank debt,
bringing the total gross debt reduction year to date to $149 million,
well on the way toward our goal of $200 million for the year."
Taxes
Commenting on the effective tax rate, Mr. Widman stated, "Terex's
effective tax rate is influenced by various factors including, but not
limited to, the mix of income between jurisdictions, changes in tax
asset valuation allowances, and the resolution of tax audits." Mr.
Widman continued, "The effective tax rate for the quarter was 19.7%,
as compared to 30.3% for the first quarter. The effective tax rate for
the second quarter is lower than the anticipated annual effective tax
rate due to the strong financial performance of our Terex-Fermec
business, where it became clear that we would be able to realize the
benefits of certain tax assets, and, therefore, the valuation
allowance held for this business was removed. The financial impact of
these items is recognized in the second quarter, resulting in a
quarterly effective tax rate that is significantly lower than the
anticipated annual tax rate. We expect the full year 2004 effective
tax rate to be close to 28%, which is indicative of an average
effective rate for the third and fourth quarters of 36%. As our
profitability continues to grow, the effective tax rate, excluding the
impact of the discrete items, will move closer to the statutory rate."
Outlook
"We remain enthusiastic about the full year business prospects for
the Company," commented Mr. DeFeo. "We continue to see strong order
activity, as evidenced by our backlog. Return on invested capital
(calculated as the trailing four quarters operating income divided by
the sum of the trailing four quarters average shareholders' equity and
the trailing four quarter average net debt) was 12.4% at the end of
the second quarter, a 1.7% improvement from the end of the first
quarter."
"We are optimistic about the near term performance of the Aerial
Work Platforms and Mining segments, as well as the continued
improvements in the Construction group," Mr. DeFeo continued. "While
we continue to expect challenging markets with regard to North
American Cranes and our Roadbuilding and Utilities groups, there are
enough signs of strength to indicate improving business conditions."
"In our previous outlook, we expected earnings per share ("EPS")
increases of between 30% and 50% versus 2003 results. Based on the
current trend, we expect improved performance to result in an EPS of
between $2.25 and $2.45 for 2004, excluding special items. This would
equate to an increase of between 56% and 70% over prior year results.
We would expect the third quarter results to be slightly better than
the traditionally lower fourth quarter. Our projected annual results
are consistent with our medium term goal of $6 billion in net sales
and 10% operating margin by 2006."
Safe Harbor Statement
The above contains forward-looking statements based on Terex's
current expectations and projections about future events. 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, infrastructure and mining activity and
products produced for the military 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 significant 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 with 2003
net sales of $3.9 billion. The Company operates in five business
segments: Terex Construction, Terex Cranes, Terex Aerial Work
Platforms, Terex Mining, and Terex Roadbuilding, Utility Products and
Other. Terex manufactures a broad range of equipment for use in
various industries, including the construction, infrastructure,
quarrying, recycling, surface mining, shipping, transportation,
refining, utility and maintenance industries. 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.
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share data)
(unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
----------------------- -----------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Net sales $ 1,336.4 $ 1,048.8 $ 2,380.2 $ 1,976.5
Cost of goods sold 1,141.4 932.1 2,024.9 1,730.1
----------- ----------- ----------- -----------
Gross profit 195.0 116.7 355.3 246.4
Selling, general and
administrative
expenses 119.2 100.9 231.2 190.1
Goodwill impairment --- 51.3 --- 51.3
----------- ----------- ----------- -----------
Income (loss) from
operations 75.8 (35.5) 124.1 5.0
Other income (expense):
Interest income 1.4 2.1 2.4 3.8
Interest expense (23.4) (26.6) (45.9) (52.5)
Other income
(expense) - net 19.8 (4.9) 17.4 (4.6)
----------- ----------- ----------- -----------
Income (loss) before
income taxes 73.6 (64.9) 98.0 (48.3)
Benefit from (provision
for) income taxes (14.5) 13.1 (21.9) 8.5
----------- ----------- ----------- -----------
Net income (loss) $ 59.1 $ (51.8) $ 76.1 $ (39.8)
=========== =========== =========== ===========
Per common share:
Basic $ 1.20 $ (1.09) $1.55 $ (0.84)
=========== =========== ========== ===========
Diluted $ 1.17 $ (1.09) $1.50 $ (0.84)
=========== =========== ========== ===========
Weighted average number
of common and common
equivalent shares
outstanding in per
share calculation:
Basic 49.3 47.6 49.1 47.4
Diluted 50.7 47.6 50.6 47.4
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions, except par value)
(unaudited)
June 30, December 31,
2004 2003
------------ ------------
CURRENT ASSETS
Cash and cash equivalents $ 454.5 $ 467.5
Trade receivables 660.9 540.2
Inventories 1,075.9 1,009.7
Other current assets 179.7 176.6
------------ -------------
Total Current Assets 2,371.0 2,194.0
LONG-TERM ASSETS
Property, plant and equipment 354.2 370.1
Goodwill 615.9 603.5
Other assets 525.4 556.2
------------ -------------
TOTAL ASSETS $ 3,866.5 $ 3,723.8
============ =============
CURRENT LIABILITIES
Notes payable and current portion of
long-term debt $ 75.7 $ 86.8
Trade accounts payable 776.7 608.6
Accrued compensation and benefits 100.8 94.5
Accrued warranties and product liability 84.6 88.5
Other current liabilities 284.1 281.0
------------ -------------
Total Current Liabilities 1,321.9 1,159.4
NON CURRENT LIABILITIES
Long-term debt, less current portion 1,187.1 1,274.8
Other 425.5 412.9
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock, $0.01 par value --
Authorized 150.0 shares; issued 50.5
and 48.6 shares at June 30, 2004 and
December 31, 2003, respectively 0.5 0.5
Additional paid-in capital 802.9 795.1
Retained earnings 118.0 41.9
Accumulated other comprehensive income
(loss) 29.3 57.0
Less cost of shares of common stock in
treasury (1.2 shares at June 30, 2004
and December 31, 2003) (18.7) (17.8)
------------ -------------
Total Stockholders' Equity 932.0 876.7
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,866.5 $ 3,723.8
============ =============
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
(unaudited)
For the Six Months
Ended June 30,
--------------------------
2004 2003
------------ -------------
OPERATING ACTIVITIES
Net income (loss) $ 76.1 $ (39.8)
Adjustments to reconcile net income (loss)
to cash provided by (used in) operating
activities:
Depreciation 29.1 27.5
Amortization 8.0 5.9
Impairment charges and asset write downs --- 72.5
Loss on retirement of debt 1.4 1.4
Gain on sale of fixed assets (19.0) (2.9)
Changes in operating assets and
liabilities (net of effects of
acquisitions):
Trade receivables (125.5) 3.4
Inventories (78.7) 82.8
Trade accounts payable 174.1 42.0
Other, net 4.4 (9.1)
------------ -------------
Net cash provided by operating
activities 69.9 183.7
------------ -------------
INVESTING ACTIVITIES
Acquisition of businesses, net of cash
acquired (1.1) (8.7)
Capital expenditures (15.7) (14.1)
Proceeds from sale of assets 24.0 3.5
------------ -------------
Net cash provided by (used in)
investing activities 7.2 (19.3)
------------ -------------
FINANCING ACTIVITIES
Principal repayments of long-term debt (75.0) (53.0)
Net repayments under revolving line of
credit agreements (2.2) (36.5)
Stock options exercised 5.5 0.7
Payment of premium on early retirement
of debt --- (2.2)
Other (15.1) (16.4)
------------ -------------
Net cash used in financing activities (86.8) (107.4)
------------ -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (3.3) 11.2
------------ -------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (13.0) 68.2
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 467.5 352.2
------------ -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 454.5 $ 420.4
============ =============
Table I
TEREX CORPORATION AND SUBSIDIARIES
(in millions)
(unaudited)
For the Three Months Ended June 30,
-----------------------------------------------------
2004 2003
-------------------------- --------------------------
Excluding Excluding
Special Special Special Special
GAAP Items Items GAAP Items Items
-------------------------- --------------------------
Sales
Construction
(1) $ 475.0 $ --- $ 475.0 $ 382.7 $ --- $ 382.7
Cranes (2) 276.9 --- 276.9 273.0 --- 273.0
Aerial Work
Platforms 238.0 --- 238.0 167.8 --- 167.8
Mining (3) 99.5 --- 99.5 75.0 --- 75.0
Roadbuilding,
Utility
Products &
Other (4) 267.7 --- 267.7 169.3 --- 169.3
Corp /
Eliminations (20.7) --- (20.7) (19.0) --- (19.0)
-------- ------- --------- -------- ------- ---------
Total $1,336.4 $ --- $ 1,336.4 $1,048.8 $ --- $ 1,048.8
======== ======= ========= ======== ======= =========
Gross Profit
Construction
(1) $ 62.5 $ 8.5 $ 71.0 $ 53.3 $ 2.1 $ 55.4
Cranes (2) 33.5 0.7 34.2 21.8 6.9 28.7
Aerial Work
Platforms 48.8 --- 48.8 35.4 0.1 35.5
Mining (3) 17.7 0.4 18.1 12.5 0.1 12.6
Roadbuilding,
Utility
Products &
Other (4) 32.7 0.3 33.0 (6.4) 28.9 22.5
Corp /
Eliminations (0.2) --- (0.2) 0.1 --- 0.1
-------- ------- --------- -------- ------- ---------
Total $ 195.0 $ 9.9 $ 204.9 $ 116.7 $ 38.1 $ 154.8
======== ======= ========= ======== ======= =========
SG&A
Construction
(1) $ 40.1 $ (0.6)$ 39.5 $ 34.3 $ (0.1)$ 34.2
Cranes (2) 22.9 (1.0) 21.9 20.3 (0.5) 19.8
Aerial Work
Platforms 15.7 --- 15.7 14.0 --- 14.0
Mining (3) 11.1 --- 11.1 8.5 --- 8.5
Roadbuilding,
Utility
Products &
Other (4) 26.4 --- 26.4 19.6 (1.7) 17.9
Corp /
Eliminations 3.0 --- 3.0 4.2 (4.5) (0.3)
-------- ------- --------- -------- ------- ---------
Total $ 119.2 $ (1.6)$ 117.6 $ 100.9 $ (6.8)$ 94.1
======== ======= ========= ======== ======= =========
Income (Loss)
from Operations
Construction
(1) $ 22.4 $ 9.1 $ 31.5 $ 19.0 $ 2.2 $ 21.2
Cranes (2) 10.6 1.7 12.3 1.5 7.4 8.9
Aerial Work
Platforms 33.1 --- 33.1 21.4 0.1 21.5
Mining (3) 6.6 0.4 7.0 4.0 0.1 4.1
Roadbuilding,
Utility
Products &
Other (4) 6.3 0.3 6.6 (77.3) 81.9 4.6
Corp /
Eliminations (3.2) --- (3.2) (4.1) 4.5 0.4
-------- ------- --------- -------- ------- ---------
Total $ 75.8 $ 11.5 $ 87.3 $ (35.5)$ 96.2 $ 60.7
======== ======= ========= ======== ======= =========
(1) Special items relate primarily to the restructuring of
Terex-Atlas, as well as a liability associated with a
pre-acquisition commitment at O&K
(2) Special items relate primarily to the costs associated with the
sale of discontinued parts business activities, the gain
associated with the closure and sale of the Aerials Ireland
facility and costs associated with a previously announced Crane
group restructuring program
(3) Special items relate primarily to the costs associated with the
sale of discontinued parts business activities
(4) Special items relate primarily to the restructuring of a Terex
Utilities distribution location
Table I (continued)
TEREX CORPORATION AND SUBSIDIARIES
(in millions)
(unaudited)
For the Six Months Ended June 30,
-----------------------------------------------------
2004 2003
-------------------------- --------------------------
Excluding Excluding
Special Special Special Special
GAAP Items Items GAAP Items Items
-------------------------- --------------------------
Sales
Construction
(1) $ 864.7 $ --- $ 864.7 $ 700.9 $ --- $ 700.9
Cranes (2) 486.1 --- 486.1 510.9 --- 510.9
Aerial Work
Platforms 406.0 --- 406.0 315.0 --- 315.0
Mining (3) 169.4 --- 169.4 155.0 --- 155.0
Roadbuilding,
Utility
Products &
Other (4) 485.1 --- 485.1 327.4 --- 327.4
Corp /
Eliminations (31.1) --- (31.1) (32.7) --- (32.7)
-------- ------- --------- -------- ------- ---------
Total $2,380.2 $ --- $ 2,380.2 $1,976.5 $ --- $ 1,976.5
======== ======= ========= ======== ======= =========
Gross Profit
Construction
(1) $ 114.9 $ 8.5 $ 123.4 $ 95.0 $ 2.1 $ 97.1
Cranes (2) 63.3 0.7 64.0 49.0 9.3 58.3
Aerial Work
Platforms 85.5 --- 85.5 64.9 0.8 65.7
Mining (3) 28.9 0.4 29.3 24.4 0.2 24.6
Roadbuilding,
Utility
Products &
Other (4) 62.8 0.3 63.1 13.3 31.3 44.6
Corp /
Eliminations (0.1) --- (0.1) (0.2) --- (0.2)
-------- ------- --------- -------- ------- ---------
Total $ 355.3 $ 9.9 $ 365.2 $ 246.4 $ 43.7 $ 290.1
======== ======= ========= ======== ======= =========
SG&A
Construction
(1) $ 76.3 $ (0.6)$ 75.7 $ 61.8 $ (0.1)$ 61.7
Cranes (2) 46.3 (1.0) 45.3 40.7 (0.5) 40.2
Aerial Work
Platforms 31.6 --- 31.6 27.7 --- 27.7
Mining (3) 20.3 --- 20.3 15.8 --- 15.8
Roadbuilding,
Utility
Products &
Other (4) 51.3 --- 51.3 37.9 (2.0) 35.9
Corp /
Eliminations 5.4 --- 5.4 6.2 (5.3) 0.9
-------- ------- --------- -------- ------- ---------
Total $ 231.2 $ (1.6)$ 229.6 $ 190.1 $ (7.9)$ 182.2
======== ======= ========= ======== ======= =========
Income (Loss)
from Operations
Construction
(1) $ 38.6 $ 9.1 $ 47.7 $ 33.2 $ 2.2 $ 35.4
Cranes (2) 17.0 1.7 18.7 8.3 9.8 18.1
Aerial Work
Platforms 53.9 --- 53.9 37.2 0.8 38.0
Mining (3) 8.6 0.4 9.0 8.6 0.2 8.8
Roadbuilding,
Utility
Products &
Other (4) 11.5 0.3 11.8 (75.9) 84.6 8.7
Corp /
Eliminations (5.5) --- (5.5) (6.4) 5.3 (1.1)
-------- ------- --------- -------- ------- ---------
Total $ 124.1 $ 11.5 $ 135.6 $ 5.0 $ 102.9 $ 107.9
======== ======= ========= ======== ======= =========
(1) Special items relate primarily to the restructuring of
Terex-Atlas, as well as a liability associated with a
pre-acquisition commitment at O&K
(2) Special items relate primarily to the costs associated with the
sale of discontinued parts business activities, the gain
associated with the closure and sale of the Aerials Ireland
facility and costs associated with a previously announced Crane
group restructuring program
(3) Special items relate primarily to the costs associated with the
sale of discontinued parts business activities
(4) Special items relate primarily to the restructuring of a Terex
Utilities distribution location
CONTACT: Terex Corporation
Tom Gelston, 203-222-5943
Director, Investor Relations
SOURCE: Terex Corporation