- Record revenue in 2005 of $6.4 billion
- Full-year 2005 earnings expected to increase approximately 64%
versus 2004, excluding special items
- Net debt at December 31, 2005 decreased $209 million to $571
million
- Backlog increased 62% compared with 2004, to $1,643 million
- Conference call to be held to discuss this release on Friday,
March 10 at 8:30 a.m.
WESTPORT, Conn.--(BUSINESS WIRE)--March 9, 2006--Terex Corporation
(NYSE: TEX): Terex Corporation (NYSE: TEX) today announced updated full year
2005 earnings per share guidance in a range of $3.90 to $4.00,
excluding special items. This assumes an effective tax rate of 35%,
which will likely change upon finalization of the Company's 2005
financial results, which should be completed within several weeks.
Additionally, Terex expects to report 2005 revenue of approximately
$6.4 billion, an increase of roughly 28% from revenue of $5.0 billion
for 2004. Net debt (defined as total debt less cash) decreased by $209
million during the year, with $192 million of this reduction occurring
in the fourth quarter. Terex will provide detailed full-year 2005
financial results when these results are completed and audited, the
timing of which is discussed in more detail below.
"In general, 2005 was a very good year for Terex, reflecting
continued strengthening end markets in many of our product categories
and the early stages of a recovery in others," commented Ronald M.
DeFeo, Terex's Chairman and Chief Executive Officer. "In 2003, we set
out to achieve $6 billion in revenue by 2006. We have already
surpassed that objective in 2005. We continue to benefit from an
operating environment that is poised to produce another year of
significant growth, as evidenced by our backlog of approximately $1.6
billion at the end of 2005, up 62% from our backlog at the end of
2004. We have maintained our focus on improving the balance sheet, and
thus have reduced our net debt by $209 million in 2005 and anticipate
a net debt to total capitalization ratio of approximately 33% at
December 31, 2005, a significant accomplishment for Terex."
Mr. DeFeo added, "Our strong business performance in the fourth
quarter of 2005, particularly in the Terex Aerial Work Platforms
segment, which outperformed our operating profit expectations by
approximately $15 million in the quarter, unfortunately was more than
offset by certain charges we incurred during the quarter. The Terex
Construction segment incurred charges in the quarter related to
physical inventory results at four locations of approximately $4
million, additional inventory valuation charges of approximately $6
million, and an increased bad debt provision largely related to
customers of the compact construction business of approximately $4
million. The Terex Cranes segment had a field retrofit program, which
caused the Company to accrue approximately $4 million in the quarter.
The Terex Roadbuilding, Utility Products and Other segment was
impacted by expenses at the American Truck Company ("ATC") and Tatra
and the write-down of certain assets at Tatra related to the inability
of ATC to complete the tender for a U.S. Marine Corps truck
procurement, and the fact that the Israeli Ministry of Defense did not
exercise its option to purchase additional trucks from ATC. Lastly,
the Company incurred charges of approximately $9 million resulting
from increased accruals for equity based compensation and other plans,
as well as audit and other professional fees largely related to the
Company's ongoing effort to improve its financial reporting process."
Segment revenue and backlog highlights for 2005 are included
below. Please note that the segment reporting for 2005 does not
reflect the recently announced realignment that was put into effect in
January 2006, and is consistent with the presentation of financial
information provided during the 2005 fiscal year.
Terex Construction: 2005 revenue increased approximately 23% as
compared with 2004, reflecting generally strong year-over-year
performance across many business units, especially the scrap handling,
mobile crushing and screening and European telehandler product
categories. Fourth quarter revenue was essentially flat when compared
with the prior year, as Terex prepared to introduce several new
products in this segment in January 2006. Terex Construction backlog
as of December 31, 2005 was approximately $290 million, up
approximately 9% from the prior year-end.
Terex Cranes: 2005 revenue increased approximately 18% as compared
with 2004, reflecting a continued strong global tower crane market and
modest improvement in the North American and international cranes
business. Fourth quarter revenue grew approximately 8% as compared
with the fourth quarter of 2004. Terex Cranes backlog as of December
31, 2005 was approximately $452 million, up 80% versus the prior
year-end, highlighted by the strengthening of the North American
market.
Terex Aerial Work Platforms: Terex Aerial Work Platforms continued
its strong 2005 performance, posting a year-over-year revenue increase
of over 56%, continuing to reflect the sharp increase in demand for
these products by the rental channel. For the fourth quarter, revenue
increased over 60% as compared with the fourth quarter of 2004. Terex
Aerial Work Platforms backlog as of December 31, 2005 was
approximately $482 million, more than three times the backlog at the
prior year-end.
Terex Materials Processing & Mining: Completing a solid year,
Terex Materials Processing & Mining experienced a 2005 increase in
revenue of over 38% versus the prior year's results, primarily due to
the resurgence in end market activity in surface mining, driven by
significantly higher commodity prices. The addition of the Sherman,
Texas based drilling equipment business acquired by Terex in December
2004 accounted for 13% of the year-over-year growth. For the fourth
quarter, revenue grew approximately 53% versus the fourth quarter of
2004. Terex Materials Processing & Mining had backlog as of December
31, 2005 of approximately $220 million, up 29% compared with the prior
year-end.
Terex Roadbuilding, Utility Products and Other: 2005 revenue in
the Terex Roadbuilding, Utility Products and Other segment grew
approximately 11% as compared with 2004, reflecting a mix of
performances. The concrete mixing truck and utilities businesses both
showed double digit percentage increases in annual revenue. The
roadbuilding business had a more modest year-over-year growth, as did
the Tatra truck business. For the fourth quarter of 2005, revenue was
basically flat versus the same quarter of 2004, but when ATC is
excluded, the segment showed increased revenue of just over 13%. Terex
Roadbuilding, Utility Products and Other backlog as of December 31,
2005 was approximately $219 million, up 18% compared with the prior
year-end.
Capital Structure
"Net debt at the end of the fourth quarter of 2005 decreased to
approximately $571 million, down $209 million from $780 million at the
end of 2004," commented Phil Widman, Terex's Senior Vice President and
Chief Financial Officer. "Our reduction of net debt in the fourth
quarter of 2005 was approximately $192 million, leading the Company to
anticipate a ratio of net debt to total capitalization of
approximately 33% at year end, meaningful progress when compared to
the 41% result achieved at the end of 2004."
"We are pleased with our fourth quarter cash flow performance and
our ongoing efforts in managing our balance sheet, especially in light
of the continued economic expansion. We continue to improve on working
capital efficiency, and focusing on managing growth with minimal
additional investment," said Mr. Widman. "We had stated an objective
in 2003 to deliver a 20% working capital to revenue relationship as a
percent of trailing three month annualized sales at the end of 2004,
and an 18% ratio at the end of 2005. We have met our goals in these
years, with our most recently delivered result of 17.6% at the end of
2005. By comparison, Terex had a 36% ratio invested in working capital
at the end of 2002. Our future success on working capital improvements
will need to come from managing our revenue growth with continued
discipline and realizing benefits from the implementation of lean
manufacturing principles."
2006 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 2005, Terex experienced a second consecutive year of sharp
increase in demand for many of our products," said Mr. DeFeo.
"Additionally, the pricing actions we have taken and the cost
environments of our markets began to yield improvements in margin for
many of our businesses. We see meaningful growth in revenue in 2006,
and our expectation is for the growth to be more broadly based across
our segments, as early indications are for a strong start to 2006 for
our later cycle businesses, such as Terex Cranes."
"It is our expectation that Terex's total revenue for 2006 will be
between $6.7 and $7.1 billion, as we continue to focus on margin
improvement over increases in volume alone, with earnings per share in
the range of $5.50 to $6.00 per share, excluding special items such as
the costs associated with the early retirement of debt that we plan
for 2006," continued Mr. DeFeo. "Expectations are for earnings in the
first half of 2006 to be slightly less than our earnings in the second
half of 2006. Additionally, expectations are for our first quarter
results to be approximately one-third of our first half guidance."
"Our earnings per share guidance reflects the timing of some
significant corporate costs," explained Mr. DeFeo. "This includes
increased equity based benefit costs of approximately $24 million
resulting from the delay in our ability to make certain grants in 2005
due to our delayed SEC filings, coupled with the increase in the
Company's stock price since we communicated our determination of the
proposed equity awards for 2005. Expenses for stock options will be
approximately $7.5 million in 2006 (approximately a $0.09 per share
impact in 2006). Additionally, the final year accrual for the
Company's Long Term Incentive Plan has resulted in an increase in
expense of $6.5 million for 2006 over 2005, and a total expense of $21
million in 2006. We expect that more than half of these expenses,
totaling $52 million, will not reoccur in 2007. This, coupled with
anticipated future margin improvement initiatives, reinforces our
confidence toward achieving the 10% margin goal we have previously
targeted."
"Lastly, we will continue to evaluate our entire portfolio of
operations during the year. At this point in time, we believe that the
Tatra on/off road heavy duty truck operation, as well as the related
American Truck Company joint venture, are not core businesses. As
such, we will evaluate our alternatives with respect to these
businesses over the next few months."
Other key financial information for 2006 guidance includes:
Assumptions - The effective tax rate is expected to be 35% for
2006 and the average number of shares that will be outstanding for
2006 is estimated at 52.1 million. Depreciation and amortization for
the Company is estimated to be in the range of $65 million. Capital
expenditures are estimated to be approximately $60 to $65 million, or
slightly less then 1% of revenue, including expenditures related to
the Company's investment in a global enterprise information technology
and management system.
Working Capital - Terex has made significant progress towards its
stated objective of improving working capital efficiency as measured
by a ratio of working capital compared to revenue. Terex already has
reduced its working capital as a percentage of revenue to 17.6% at the
end of 2005. Terex will concentrate on the implementation of best
practices across its locations, and the Company will continue to
strive in 2006 for a target of 15% working capital investment as a
percentage of revenue, driven mainly by inventory turn improvement.
Corporate Expense - As stated previously, Terex has identified
certain expenses that will occur in 2006 at the corporate level.
Additionally, in 2006 the Company will expense approximately $8
million related to its global enterprise system implementation. These
amounts have been budgeted as unallocated corporate expenses, and the
earnings reports throughout 2006 will have a more significant balance
of general and administrative costs not reflected in the total segment
detail, but which will be included in the Company's consolidated
results.
Status of 2005 Audit and SEC Filings
The Company was not able to complete its audited financial
statements for 2004, including a restatement of the Company's
financial statements for 2000-2003, until February 17, 2006. This
effort required Terex to devote a significant amount of resources,
and, as a result, the Company has not yet been able to complete its
interim unaudited financial statements for the 2005 quarterly periods
or its audited full year 2005 financial statements. The Company
currently estimates that it is approximately four to six weeks behind
schedule with regard to completion of its 2005 audited financial
statements. While the Company is working hard to shorten the timeframe
needed to complete its 2005 audited financial statements and submit
its quarterly and annual filings for 2005, Terex will file a Form
12b-25 notification of late filing with the Securities and Exchange
Commission indicating that more time is required beyond the March 16th
deadline to complete its 2005 Annual Report on Form 10-K.
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; the previously announced SEC investigation of
Terex; Terex's ability to maintain adequate disclosure controls and
procedures and adequate internal controls over financial reporting;
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 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 2005
revenue of approximately $6.4 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.
CONTACT: Investor Relations:
Tom Gelston, 203-222-5943
SOURCE: Terex Corporation