WESTPORT, Conn., Mar 3, 2005 (BUSINESS WIRE) -- Terex Corporation
(NYSE: TEX):
-- Full-Year 2004 Earnings to Meet or Exceed Prior Guidance
-- Net Debt at December 31, 2004 Decreased to Approximately $772
Million
-- Updates Status of Accounting Review; Announces Restatement of
Financial Results for 2000
-- Conference Call to Be Held to Discuss This Release on Friday,
March 4, at 9:00 a.m.
Terex Corporation (NYSE: TEX) today confirmed that net income for
the full-year 2004 will meet or exceed the previously indicated range
of $2.40 to $2.50 per share, excluding special items. Additionally,
Terex expects to report 2004 total revenue of approximately $5
billion, an increase of over 28% from net sales of $3.9 billion for
2003. Terex will provide detailed financial results for its full-year
2004 upon the completion of its internal review and independent audit,
the timing of which is discussed below.
Furthermore, third quarter results of operations will exceed the
preliminary operating performance results previously released,
reflecting the impact of capitalizing a portion of increasing
commodity cost variances on inventory value.
"Overall, 2004 was a very good year for Terex, reflecting
generally strengthening end markets, although some of our businesses
have yet to recover," commented Ronald M. DeFeo, Terex's Chairman and
Chief Executive Officer. "For the first time in Terex's history, we
recorded revenue of approximately $5 billion, and we continue to see
an operating environment that is poised to produce another year of
significant growth as evidenced by our backlog of approximately $989
million at the end of 2004. We have continued to focus on our balance
sheet, having reduced net debt by $122 million since the end of 2003
and having achieved a net debt to total capitalization ratio in the
mid 40% range at December 31, 2004. Yet we feel we have even more
opportunities ahead of us. Simply said, 2004 was a good beginning, and
we remain focused and committed to delivering on our stated
performance goals of $6 billion in revenue in 2006, 10% operating
margin and a 15% working capital to revenue relationship."
Mr. DeFeo added, "Unfortunately, improvements made in our
businesses in 2004 were masked to some degree by challenges we faced
throughout the year. Some of these challenges were of our own making,
but many were clearly the result of rapidly improving economic
conditions, especially in North America." Mr. DeFeo continued, "The
continued strong performance in our Aerial Work Platforms segment,
combined with a recovery in our Mining, Compact Construction and Tower
Cranes businesses, helped to partially offset significant increases in
steel and component costs, meaningful currency moves against a weaker
U.S. dollar, operational capacity constraint issues, production
inefficiencies, and challenging end-markets in some of our other
businesses. In addition, other operational issues, such as higher than
expected warranty costs on certain products, asset write-downs, and
margin slippage on certain truck contracts, weighed on our overall
profit margins. On our self-made challenges, namely our intercompany
accounting issue, we feel that the Company is taking the proper steps
to correct its financial control procedures and practices to ensure
the integrity of our financial statements. We continue to be positive
about the direction Terex is headed and remain committed to making any
and all improvements that will deliver sustainable higher returns for
our investors."
Segment revenue and backlog highlights for 2004 include:
Construction: 2004 revenue grew approximately 30% as compared with
2003, reflecting generally strong year over year performance across
all business units, especially the compact equipment line, as well as
continued strong performance in the mobile crushing and screening
product ranges. Excluding the translation impact of foreign exchange
movements, revenue for Construction increased approximately 21% for
2004. Fourth quarter revenue grew approximately 37% as compared with
the fourth quarter of 2003. Construction backlog as of December 31,
2004 was approximately $253 million.
Cranes: 2004 revenue grew approximately 7% as compared with 2003,
reflecting a strong global tower crane market, tempered somewhat by
continued soft North American demand. Excluding the translation impact
of foreign exchange movements, revenue for Cranes was essentially flat
for 2004. Fourth quarter revenue grew approximately 23% as compared
with the fourth quarter of 2003. Cranes backlog as of December 31,
2004 was approximately $249 million.
Aerial Work Platforms: Aerial Work Platforms continued their
strong 2004 performance, posting a year over year revenue increase of
over 42%, continuing to reflect the sharp increase in demand for
rental channel products. For the fourth quarter, revenue increased
over 59% as compared with the fourth quarter of 2003. Aerial Work
Platforms backlog as of December 31, 2004 was approximately $153
million.
Materials Processing & Mining: Completing a solid year, Materials
Processing & Mining experienced a 2004 increase in revenue of over 35%
versus the prior year's results, primarily due to the resurgence in
end market activity in surface mining, driven by significantly higher
commodity costs. For the fourth quarter, revenue grew approximately
51% versus the fourth quarter of 2003. Materials Processing & Mining
backlog as of December 31, 2004 was approximately $165 million.
Roadbuilding, Utility Products and Other: 2004 revenue grew
approximately 45% as compared with 2003, reflecting a mix of
performances. The concrete mixing trucks and military vehicles product
lines both continued strong year over year growth, whereas the utility
and roadbuilding businesses remained relatively flat, as those end
markets remain at or near the bottom of their demand cycle. For the
fourth quarter, revenue grew approximately 22% versus the same quarter
of 2003. Roadbuilding, Utility Products and Other backlog as of
December 31, 2004 was approximately $185 million.
Capital Structure
"Net debt (defined as total debt less cash) at the end of the
fourth quarter of 2004 decreased to approximately $772 million, down
about $122 million from $894 million at the end of 2003," commented
Phil Widman, Senior Vice President and Chief Financial Officer. "Gross
debt reduction totaled approximately $179 million, exclusive of the
currency translation impact on debt. Our net debt is the lowest it has
been since the third quarter of 2001, a time when Terex's total
revenue was roughly 40% of what it is today. Remember, this debt
reduction occurred despite the fact that Terex has completed numerous
acquisitions over the past several years, the most significant being
the acquisitions in 2002 of the Genie Aerial Work Platforms business
and the Demag Mobile Cranes operation.
"We are pleased with our efforts in managing our balance sheet,
especially in light of a rapidly expanding economy with its resulting
working capital challenges. We continue to make progress on working
capital efficiency, although significant improvement opportunities
still exist in many of our businesses," said Mr. Widman. "With our
anticipated significant revenue growth for the next few years, we will
need to continue our discipline with our investment in working
capital."
2005 Outlook
The following outlook consists of forward-looking information
based on Terex's current expectations. Actual results could differ
materially from these projections. For further details on this, see
the Safe Harbor Statement below.
"During 2004, Terex experienced a sharp increase in demand for
many of its products," said Mr. DeFeo. "However, the leverage we
expected to materialize in our margins was substantially offset by the
rapidly increasing costs of materials and components, namely steel. We
will continue to strive to meaningfully grow revenues; however the
number one financial priority throughout Terex in 2005 will be an
emphasis on margin improvement."
"As previously stated in our press release dated February 3, 2005,
we expect Terex's total revenue for 2005 to be between $5.4 and $5.6
billion, with earnings per share in the range of $3.40 to $3.60 per
share," continued Mr. DeFeo. "Although many of our businesses continue
to experience increased demand, the challenges of supplier issues,
particularly steel pricing, continue to put pressure on overall
increased profitability. However, we are confident that we will see
the positive impact of our price increases in the near term, and
between increased product prices and better purchasing, we fully
expect 2005 to be a more normal year where volume leverage can be
turned into margin improvement.
"We expect total earnings for Terex in 2005 to reflect a
significant improvement versus the prior year. Expectations are for
first half earnings to be approximately 50%-55% of our full year
results, as price increases for our products begin to increasingly
offset the cost pressures already being experienced by our businesses.
Additionally, our expectations are for first quarter results to be
approximately 20%-25% of our first half guidance, reflecting the
current cost environment. This annual guidance includes modest
improvements in many of our challenged businesses, such as Cranes and
Roadbuilding, and improvements in their end-market health may provide
even more upside as the year progresses."
Other key financial information for 2005 guidance includes:
Assumptions - The effective tax rate is expected to be 35% for
2005 and the average number of shares that will be outstanding for
2005 is estimated at 51.7 million. Depreciation and amortization for
the Company is estimated to be in the range of $65 million. Capital
expenditures are estimated to be approximately $50 to $60 million, or
approximately 1% of revenue.
Working Capital - In 2004, Terex delivered on its stated objective
of improving working capital efficiency, having successfully reduced
its working capital as a percentage of net debt to below 20%. Terex
will continue to concentrate on the implementation of best practices
across its locations, and for 2005, the Company is targeting an 18%
working capital investment as a percentage of revenue.
Status of Accounting Review
In a Current Report on Form 8-K furnished to the Securities and
Exchange Commission on January 13, 2005, Terex announced that, in
connection with its previously disclosed review of accounting entries
related to certain intercompany accounts and other accounting
treatments, the management of Terex and the Audit Committee of the
Board of Directors of Terex concluded that the financial statements of
Terex for the years ended December 31, 2001, 2002 and 2003 need to be
restated to correct certain errors and, accordingly, such financial
statements should no longer be relied upon.
Based on the results of its internal review to date, management of
Terex and the Audit Committee of the Board of Directors of Terex have
now concluded that the financial statements of Terex for the year
ended December 31, 2000 also need to be restated to correct certain
errors and, accordingly, such financial statements should no longer be
relied upon.
While Terex's review activities are still ongoing, significant
progress has been made in identifying and correcting the issues giving
rise to the intercompany account imbalances. As part of this
accounting review, other items were identified that will also be
corrected, including goodwill and cumulative translation adjustment.
It is still management's opinion that, although adjustments in any one
year's financial statements may be material, the cumulative
adjustments required to be made to shareholders' equity at December
31, 2003 resulting from all errors identified to date are not expected
to be material to total shareholders' equity, as analyzed in
accordance with applicable SEC and accounting guidelines. However,
until the conclusion of Terex's internal review activities and the
completion of procedures by Terex's independent registered public
accounting firm, there can be no assurance that there will not be
additional errors discovered that may affect the periods indicated
above, which may impact management's determination of the effect of
the adjustments necessary to correct any misstatements, or which may
require Terex to determine that financial statements of Terex for
other fiscal years should no longer be relied upon.
With respect to the timing of Terex's filings with the SEC, Terex
is currently working aggressively to complete its internal accounting
review and the audit of its financial statements by its independent
registered public accounting firm in order to timely file its Annual
Report on Form 10-K for the year ended December 31, 2004. However,
while Terex has made significant progress and believes that it is
nearing conclusion of its internal review and independent audit, there
is still a significant amount of work to be completed. Accordingly,
there is a substantial likelihood that the prior year adjustments and
the current year audit will not be completed in a time frame which
will allow Terex to file its Annual Report on Form 10-K for the year
ended December 31, 2004 by March 16, 2005.
Conference Call Details
Terex will be hosting a conference call to review the items
discussed in this release on Friday, March 4, 2005. The live call will
begin at 9:00 a.m., Eastern Time. Mr. DeFeo will host the call. To
access the conference call, please call (877) 726-6603 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 Friday, March 11, 2005 at 6:00 p.m., Eastern
Time. To access the replay, please call (800) 642-1687 and enter
conference id #4586624.
International participants should call (706) 634-5517 at least 15
minutes before the start of the conference call. To access the replay,
please call (706) 645-9291 and enter conference id #4586624.
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 Investors 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 press release 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, 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; Terex's continued access to capital and ability to obtain
parts and components from suppliers on a timely basis 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; Terex's ability to file its periodic reports with the
SEC on a timely basis; Terex's ability to ensure that all intercompany
transactions will be properly recorded; compliance with applicable
environmental laws and regulations; and other factors, risks,
uncertainties more specifically set forth in Terex's public filings
with the SEC. In addition, until the previously announced review by
Terex of its accounts is concluded, no assurance can be given with
respect to the financial statement adjustments, impacts and periods
resulting from such review, nor can there be assurance that additional
adjustments to the financial statements will not be identified. 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
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 2004
net sales of approximately $5 billion. Terex operates in five business
segments: Terex Construction, Terex Cranes, Terex Aerial Work
Platforms, Terex Materials Processing & 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.
SOURCE: Terex Corporation
Terex Corporation
Tom Gelston, 203-222-5943