WESTPORT, Conn.--(BUSINESS WIRE)--Feb. 14, 2007--Terex Corporation
(NYSE: TEX) today announced net income for the fourth quarter of 2006
of $100.9 million, or $0.97 per share, compared to net income of $34.8
million, or $0.34 per share, for the fourth quarter of 2005. Net sales
for Terex totaled $2,029.5 million in the fourth quarter of 2006, an
increase of 29.4% from $1,568.3 million in the fourth quarter of 2005.
Debt, less cash and cash equivalents, decreased by $277.0 million from
September 30, 2006 levels, reflecting strong income from operations
and decreased working capital, offset by period capital expenditures.
All per share amounts are on a fully diluted basis.
For the full year 2006, the Company reported net income of $399.9
million, or $3.88 per share, compared to net income of $188.5 million,
or $1.84 per share, for the full year 2005. Net income for 2006
included a $23.3 million pretax charge related to the early
extinguishment of the Company's 10-3/8% Senior Subordinated Notes and
its previous senior bank credit facilities, which negatively impacted
earnings per share by $0.15, and a loss on the disposition of the
Tatra heavy duty on and off road truck business, net of tax, of $7.7
million, which negatively impacted earnings per share by $0.07. Net
sales for Terex totaled $7,647.6 million in 2006, an increase of 24.2%
from $6,156.5 million in 2005. Debt, less cash and cash equivalents,
decreased by $483.9 million from December 31, 2005 levels.
"2006 was a year of significant progress on many fronts --
financially, operationally and organizationally," commented Ronald M.
DeFeo, Terex Chairman and Chief Executive Officer. "Financially, we
experienced record net sales and net income, and our debt less cash
and cash equivalents of $86 million is at a historic low. We retired
$500 million of our high cost notes, including the $200 million in
notes retired this past January, and substantially strengthened our
balance sheet. Return on Invested Capital, or ROIC, continues to be
the unifying metric we use to measure our operating performance. In
2006, we achieved a record ROIC of 38.4%, compared to 21.5% ROIC in
2005 and our 2006 ROIC target of 27.5%."
Mr. DeFeo continued, "Operationally, we remain committed to making
the Terex Business System our Company's way of life. Lean practices
are being adopted by our facilities at an impressive rate. We have
identified and acted on significant findings for improvement in our
global purchasing. These are both fundamental to our maturing process
as a Company. We are updating our understanding of how we conduct
business, and should conduct business, in preparation for the roll-out
of our global enterprise management system to solidify those
practices."
"Lastly, we have made tremendous steps forward in terms of our
operating team," continued Mr. DeFeo. "Rick Nichols, President -
Materials Processing & Mining, and Steve Filipov, President - Terex
Cranes, have flourished. Late in 2006, we announced the addition of
three new senior team leaders: Tom Riordan as our President and Chief
Operating Officer, Tim Ford as President of our Aerial Work Platforms
group, and Robert Isaman as President of our Construction group. Each
comes to Terex with a strong operating background from well respected
companies. Earlier in the year we added Katia Facchetti as our Chief
Marketing Officer, a major step forward for Terex as we look to
strengthen our distribution, build customer relationships, and
increase our brand awareness. But the talent improvements run far
deeper in the organization, as we continue to attract the best and
brightest individuals, and commit the resources necessary to build a
stronger Company and a bright future."
Mr. DeFeo continued, "Our outlook for 2007 is strong and we expect
to grow our franchise even more than we did in 2006. Back in 2004, I
articulated a three year stretch goal intended to highlight what I
felt was possible for our Company. We clearly outperformed our net
sales goal of $6 billion in 2006, and made great progress towards our
objectives in operating margin and working capital reduction as a
percentage of net sales. Today, I am stating externally what I told
our leadership team in January 2007: our new medium term stretch goal
is to be $12 billion in net sales, with a 12% operating margin, by the
end of 2010, or our "12 by 12 in 10" goal. This goal primarily hinges
on our execution of the internal opportunities of continuous
improvement, supply chain management, and the optimum usage of our
asset base, as well as our making selected acquisitions when the
opportunities arise."
In this press release, Terex refers to various non-GAAP (U.S.
generally accepted accounting principles) financial measures. These
measures may not be comparable to similarly titled measures being
disclosed by other companies. Terex believes that this information is
useful to understanding its operating results and the ongoing
performance of its underlying businesses. Non-GAAP financial measures
are shown in italics the first time referenced and are described in a
glossary at the end of this press release.
A financial summary is shown below:
Three months ended
December 31,
----------------------
2006 2005
---------- ----------
(in millions, except
per share amounts)
----------------------
Net sales $ 2,029.5 $ 1,568.3
---------- ----------
Gross profit $ 375.5 $ 240.1
SG&A 206.1 171.0
---------- ----------
Income from operations 169.4 69.1
Interest and other (12.4) (18.8)
---------- ----------
Income before income taxes from continuing
operations 157.0 50.3
Income taxes (56.1) (13.0)
---------- ----------
Income from continuing operations 100.9 37.3
Loss from discontinued operations-net of tax - (2.5)
---------- ----------
Net income $ 100.9 $ 34.8
========== ==========
Earnings per share $ 0.97 $ 0.34
EBITDA $ 187.3 $ 86.1
Backlog $ 2,490.7 $ 1,592.7
Weighted Average Fully Diluted Shares
Outstanding 104.0 102.6
Twelve months ended
December 31,
--------------------
2006 2005
--------- ---------
(in millions, except
per share amounts)
--------------------
Net sales $ 7,647.6 $ 6,156.5
--------- ---------
Gross profit $ 1,443.1 $ 947.3
SG&A 733.6 576.9
--------- ---------
Income from operations 709.5 370.4
Interest and other (71.5) (81.5)
Loss on early extinguishment of debt (23.3) -
--------- ---------
Income before income taxes from continuing
operations 614.7 288.9
Income taxes (218.2) (101.3)
--------- ---------
Income from continuing operations 396.5 187.6
Income from discontinued operations-net of tax 11.1 0.9
Loss on disposition of discontinued operations-
net of tax (7.7) -
--------- ---------
Net income $ 399.9 $ 188.5
========= =========
Earnings per share $ 3.88 $ 1.84
EBITDA $ 776.9 $ 437.7
Backlog $ 2,490.7 $ 1,592.7
Weighted Average Fully Diluted Shares Outstanding 103.0 102.2
Segment Performance
As previously announced, commencing with the first quarter of
2006, Terex realigned certain operations in an effort to strengthen
its ability to service customers and to recognize certain
organizational efficiencies. The mobile crushing and screening group,
formerly part of the Terex Construction segment, is now consolidated
with the Terex Materials Processing & Mining segment. The European
telehandler business, formerly part of the Terex Construction segment,
is now part of the Terex Aerial Work Platforms segment. The
comparative segment performance data below reflects this current
organization, and prior period amounts have been reclassified to
conform with this presentation.
All segment performance data for both 2006 and 2005 is presented
in accordance with U.S. GAAP, other than backlog, which is a non-GAAP
measure that is further described in the Glossary included at the end
of this release. These results exclude the performance of the recently
sold Tatra heavy duty on and off road truck business, which is now
included in the financial statements as a discontinued operation.
Terex Aerial Work Platforms
Fourth quarter Year-to-Date
--------------------------- -------------------------------
(dollars in millions)
2006 2005 2006 2005
------------- ------------- --------------- ---------------
% % % %
of of of of
sales sales sales sales
----- ----- ----- -----
Net sales $514.0 $395.6 $2,090.3 $1,479.5
======= ======= ========= =========
Gross
profit $124.1 24.1% $ 85.7 21.7% $ 525.5 25.1% $ 293.0 19.8%
SG&A 40.6 7.9% 27.9 7.1% 152.9 7.3% 102.8 6.9%
------- ------- --------- ---------
Income
from
operations $ 83.5 16.2% $ 57.8 14.6% $ 372.6 17.8% $ 190.2 12.9%
======= ======= ========= =========
Backlog $419.4 $497.8 $ 419.4 $ 497.8
Net sales for the Terex Aerial Work Platforms segment for the
fourth quarter of 2006 increased $118.4 million, or 30%, to $514.0
million from $395.6 million in the fourth quarter of 2005. The
increase in net sales was driven by continued strong order activity
from the rental channel and increasing demand from international
markets, despite slowing demand for telehandlers and trailer mounted
lifts. Gross margin for the quarter was 24.1%, compared to 21.7% for
the quarter ended December 31, 2005, and was favorably impacted by
volume increases of higher margin products combined with the impact of
prior pricing actions. SG&A expenses for the fourth quarter of 2006
were $40.6 million, or 7.9% of net sales, compared to $27.9 million,
or 7.1% of net sales, for the fourth quarter of 2005. The increase was
due to costs of additional resources needed to address higher sales
levels combined with expenses related to expanding the international
sales and service infrastructure. Income from operations increased to
$83.5 million, or 16.2% of net sales, in the fourth quarter of 2006,
from $57.8 million, or 14.6% of net sales, in the fourth quarter of
2005.
"Solid fourth quarter results capped a record year of growth and
profitability for Aerial Work Platforms," said Tim Ford, President -
Terex Aerial Work Platforms. "The fourth quarter is usually the
slowest quarter of the year for aerial work platforms, as our rental
customers typically prefer deliveries that match the construction
season. But in the fourth quarter, we found that strong demand
continued domestically and abroad. Weakness in telehandler sales,
particularly the smaller machines that are used for residential
construction, was more than offset by solid demand for aerial lifts.
The strong operating margin of 17.8% for 2006, as compared to 12.9%
for 2005, directly reflects the hard work and success of our Terex
team members, who continue to improve production efficiency and
product design through the utilization of lean techniques.
International demand was robust, with one-third of our net sales
generated outside of the United States, with profitability on
international sales aided by a favorable foreign exchange rate
stemming from the relatively weaker U.S. Dollar. We are on track to
begin production of a Z-boom model at our facility in Italy during the
first quarter of 2007 as part of our longer term strategy for meeting
European demand with European-based production."
Mr. Ford continued, "We are forecasting 2007 demand to remain at
least as strong as it was in 2006 in the U.S. market, with
accelerating growth from overseas markets. We expect overseas demand
to account for about 40% of our revenue for 2007, up from a third of
net sales for 2006. Our business is primarily tied to non-residential
construction and infrastructure investment, areas where we see
continued spending and growth, both domestically and overseas. We
continue to have lots of hard work ahead of us to meet customer demand
and to exceed our customer's expectations, but we fully expect 2007 to
be a stronger year than 2006."
Terex Construction
Fourth quarter Year-to-Date
----------------------------- -------------------------------
(dollars in millions)
2006 2005 2006 2005
-------------- -------------- --------------- ---------------
% % % %
of of of of
sales sales sales sales
------ ------ ----- -----
Net
sales $432.3 $349.4 $1,582.4 $1,489.7
======= ======= ========= =========
Gross
profit $ 40.0 9.3% $ 23.3 6.7% $ 179.1 11.3% $ 166.6 11.2%
SG&A 48.7 11.3% 39.5 11.3% 163.1 10.3% 137.5 9.2%
------- ------- --------- ---------
Income/
(loss)
from
opera-
tions $ (8.7) (2.0%) $(16.2) (4.6%) $ 16.0 1.0% $ 29.1 2.0%
======= ======= ========= =========
Backlog $322.7 $235.5 $ 322.7 $ 235.5
Net sales in the Terex Construction segment for the fourth quarter
of 2006 increased $82.9 million, or 24%, to $432.3 million from $349.4
million in the fourth quarter of 2005. The increase was driven by
strong European demand for compact construction equipment combined
with global demand for heavy truck products, reflecting favorable
global non-residential construction trends. Continued weakness in the
scrap handler product line partially offset this revenue growth. Gross
margin for the fourth quarter of 2006 of 9.3% represented an
improvement over the prior year's fourth quarter gross margin of 6.7%,
due to volume efficiencies and the impact of prior pricing actions for
certain product lines. This was partially offset by production
variances and inventory charges associated with the German based
excavator product line, where the introduction of new generation
products continued to lag behind schedule, and by adverse foreign
currency movements. SG&A expenses for the fourth quarter of 2006 were
$48.7 million, or 11.3% of net sales, compared to $39.5 million, or
11.3% of net sales, in the fourth quarter of 2005. Efficiencies
related to greater sales volume were offset by other costs in the
period, resulting in SG&A being the same percentage of revenue for the
fourth quarter of 2006 as compared to the similar period in 2005. The
increase of $9.2 million in SG&A when comparing the fourth quarter of
2006 to the fourth quarter of 2005 was a result of higher engineering
and product development costs, higher benefit costs for certain
operations and targeted product promotion program costs that were not
incurred in 2005. Loss from operations for the quarter was ($8.7)
million, or (2.0%) of net sales, compared to a loss of ($16.2)
million, or (4.6%) of net sales, for the fourth quarter of 2005.
"Fourth quarter results demonstrated that we still have a way to
go to improve the financial performance of Terex Construction,"
commented Robert Isaman, President - Terex Construction. "I recently
joined Terex and I can fully appreciate the tremendous potential of
this segment. After my initial tours of this business, I am confident
that, over the next few years, we can achieve consistent industry
comparable performance. Focused programs for aftermarket improvements,
geographic growth, margin expansion and productivity, as well as cash
generation, combined with Terex Business System and lean principles
applied throughout our business processes, will provide great
tailwind. Results for the fourth quarter of 2006 certainly reflected
some of our strengths, but these were more than offset by specific
problems and challenges. European demand for our compact construction
line, particularly mini excavators and smaller size wheel loaders
produced in Germany, continued to improve. High volumes combined with
cost cutting and pricing actions drove profitability above comparable
2005 results. However, these positive results were more than offset by
continuing challenges with the scrap material handler and excavator
product lines. We are launching two new material handlers as we
diversify into products suitable for the logging industry. The fourth
quarter witnessed some production inefficiencies related to this
product launch, negatively impacting margins. The German based
excavator business continued to face challenges during the fourth
quarter of 2006, as supplier constraints hampered production and costs
were simply too high."
Mr. DeFeo added, "I remain optimistic about the future profit
potential for this segment. We are making substantial progress,
including lowering costs through Company-wide sourcing initiatives
combined with actions in China that are expected to result in
meaningful cost savings down the road for the Construction segment and
Terex as a whole. We are working to improve our North American
construction equipment distribution network as well. And finally, we
are not launching new products as effectively or efficiently as we
need to in the Construction segment, and we need to develop better
skills in this regard. But I am confident that Bob Isaman's
operational leadership, combined with his extensive emerging markets
experience, will help lead our Construction team members to success."
Terex Cranes
Fourth quarter Year-to-Date
------------------------------ -------------------------------
(dollars in millions)
2006 2005 2006 2005
---------------- ------------- --------------- ---------------
% % % %
of of of of
sales sales sales Sales
----- ----- ----- -----
Net
sales $ 501.8 $347.9 $1,740.1 $1,271.9
========== ======= ========= =========
Gross
profit $ 95.2 19.0% $ 57.2 16.4% $ 293.0 16.8% $ 170.4 13.4%
SG&A 42.5 8.5% 31.1 8.9% 138.5 8.0% 110.2 8.7%
---------- ------- --------- ---------
Income
from
opera-
tions $ 52.7 10.5% $ 26.1 7.5% $ 154.5 8.9% $ 60.2 4.7%
========== ======= ========= =========
Backlog $1,132.3 $452.6 $1,132.3 $ 452.6
Net sales in the Terex Cranes segment for the fourth quarter of
2006 increased $153.9 million to $501.8 million from $347.9 million in
the fourth quarter of 2005, reflecting improvement in all crane
product categories and expansion in Asian markets. Terex's acquisition
of a controlling 50% interest in a Chinese crane manufacturer in April
2006 accounted for approximately 18% of the growth in net sales in the
fourth quarter. Gross margin for the quarter was 19.0%, compared to
16.4% for the quarter ended December 31, 2005, and was favorably
impacted by pricing actions and volume leverage on manufacturing
costs, partially offset by certain cost pressures from suppliers'
difficulty meeting market demand. SG&A expenses increased in the
fourth quarter of 2006, mainly due to increased investment in sales
and administrative infrastructure to support the increasing sales, to
$42.5 million, or 8.5% of net sales, as compared to the fourth quarter
of 2005 rate of 8.9% of net sales on $31.1 million of SG&A expenses.
Income from operations increased $26.6 million to $52.7 million, or
10.5% of net sales, for the fourth quarter of 2006, from $26.1
million, or 7.5% of net sales, for the fourth quarter of 2005.
"The Terex Cranes segment had a terrific quarter, achieving an
operating margin in excess of 10% for the first time in many years.
Additionally, revenue growth continued to be robust, increasing over
44% versus the comparable period in the prior year, highlighting the
continued increasing global demand for our products and our improving
ability to meet this demand," commented Steve Filipov, President -
Terex Cranes. "More importantly, operating profit for the quarter grew
approximately 102% versus the prior year's results. Performance
improvements continued to come from all of our businesses, with all
product lines contributing significantly, and illustrates the value of
our diverse portfolio of lifting equipment and our global
manufacturing footprint. Our Chinese operation, Sichuan Changjiang
Engineering Crane Co., Ltd., had strong results this quarter, and we
remain excited about the future for this business and Terex Cranes in
China."
Mr. Filipov continued, "Our backlog, besides highlighting the
strong business environment in which we operate, also illustrates
issues that we continue to face as we increase our production
schedule. Our customers need our products right away, and we continue
to struggle with the limited supply of certain components. We are
working diligently to eliminate the production bottlenecks at our
various locations and to better utilize the space we have and
implement lean principles in order to improve overall production
rates."
Terex Materials Processing & Mining
Fourth quarter Year-to-Date
--------------------------- -------------------------------
(dollars in millions)
2006 2005 2006 2005
------------- ------------- --------------- ---------------
% % % %
of of of of
sales sales sales sales
----- ----- ----- -----
Net sales $433.9 $348.0 $1,625.0 $1,359.5
======= ======= ========= =========
Gross
profit $ 91.8 21.2% $ 58.3 16.8% $ 341.0 21.0% $ 233.9 17.2%
SG&A 40.5 9.3% 29.9 8.6% 151.0 9.3% 117.7 8.7%
------- ------- --------- ---------
Income
from
operations $ 51.3 11.8% $ 28.4 8.2% $ 190.0 11.7% $ 116.2 8.5%
======= ======= ========= =========
Backlog $396.9 $258.7 $ 396.9 $ 258.7
Net sales for the Terex Materials Processing & Mining segment for
the fourth quarter of 2006 increased $85.9 million, or 25%, to $433.9
million from $348.0 million in the fourth quarter of 2005. The
increase in net sales was attributable to the overall strong demand
for mining products, primarily the mining hydraulic excavators
manufactured in Dortmund, Germany, and the continued growth of the
mobile crushing and screening product lines. Gross profit increased by
$33.5 million for the fourth quarter of 2006 as compared to the fourth
quarter of 2005, with the gross margin dramatically improving by 4.4
percentage points. This improvement was a result of increased sales
volume, the impact of prior pricing actions and a more favorable sales
mix as compared to the fourth quarter of 2005. The increased net sales
volume had a positive impact, as income from operations increased to
$51.3 million, or 11.8% of net sales, in the fourth quarter of 2006,
from $28.4 million, or 8.2% of net sales, in the fourth quarter of
2005.
"The fourth quarter completed a tremendous year for the Terex
Materials Processing & Mining segment. This success was achieved
across all of our various product categories," stated Rick Nichols,
President - Terex Materials Processing & Mining. "Demand for all of
our mining products, as well as our spare parts business, continued to
be robust. As we have stated in the past, the increasing field
population of our equipment will significantly improve our future
parts and service sales outlook, while providing more consistent
business results in the longer term. We continue to foresee strength
in the surface mining end-markets for quite a few more years."
Mr. Nichols continued, "In our materials processing businesses,
continued demand for mobile commercial grade crushing and screening
equipment helped to deliver outstanding results. We are continuing to
see the positive impact of increased infrastructure spending, as
demand for these products is primarily driven by non-residential and
municipal spending activity." Mr. Nichols continued, "The GDP growth
that has provided a platform for our current performance is also the
cornerstone to our growth over the next five years. Emerging market
economies, such as China, India, Latin America and Russia, are
expected to continue their strong growth for the foreseeable future.
And with this bullish outlook for our business drivers, we remain very
optimistic about the prospects for our business, and our industry, for
the next several years."
Terex Roadbuilding, Utility Products and Other
Fourth quarter Year-to-Date
---------------------------- ---------------------------
(dollars in millions)
2006 2005 2006 2005
------------- -------------- ------------- -------------
% % % %
of of of of
sales sales sales sales
----- ------ ----- -----
Net sales $193.7 $158.4 $746.0 $665.3
======= ======= ======= =======
Gross profit $ 23.4 12.1% $ 15.9 10.0% $102.4 13.7% $ 80.7 12.1%
SG&A 22.5 11.6% 19.1 12.1% 77.2 10.3% 72.0 10.8%
Goodwill
impairment - - 3.3 2.1% - - 3.3 0.5%
------- ------- ------- -------
Income from
operations $ 0.9 0.5% $ (6.5) (4.1%) $ 25.2 3.4% $ 5.4 0.8%
======= ======= ======= =======
Backlog $219.4 $169.3 $219.4 $169.3
Net sales for the Terex Roadbuilding, Utility Products and Other
segment for the fourth quarter of 2006 increased 22% from the prior
year's results to $193.7 million. Gross margin for the quarter was
12.1%, an increase when compared to the prior year results of 10.0%,
and was favorably impacted by prior pricing actions, combined with the
favorable impact of certain ongoing reorganization activities. This
was partially offset by costs associated with the reduction in the
Company's re-rental fleet in the fourth quarter. SG&A expense for the
fourth quarter of 2006 was $22.5 million, or 11.6% of net sales,
compared to $19.1 million, or 12.1% of net sales, in the fourth
quarter of 2005, reflecting the current consolidation of an existing
distribution joint venture, increased selling expenses related to
asphalt products and the Brazilian Roadbuilding operation which
resulted from strong year over year net sales improvement, as well as
increased spending in support of Terex Business System and lean
manufacturing initiatives. There was a goodwill impairment charge in
the fourth quarter of 2005 of $3.3 million that did not reoccur in
2006. Income from operations increased to $0.9 million, or 0.5% of net
sales, from a loss of ($6.5) million, or (4.1)% of net sales, in the
fourth quarter of 2005.
"We are pleased with the 22% increase in net sales and 2.1
percentage point improvement in gross margin for the fourth quarter of
2006 over the fourth quarter of 2005," commented Tom Riordan, Terex
President and Chief Operating Officer. "Both the roadbuilding and
utility product businesses are making steady progress on their
internal improvement initiatives, and their end-markets are beginning
to provide the opportunity for growth. Both businesses had increased
sales in the quarter and, excluding our concrete mixing truck
business, are starting the new year with greatly improved backlogs."
Mr. Riordan continued, "Overall, the utility industry has improved
and is investing in capital equipment, so we remain confident that the
improving trend of our utility business will continue in 2007. The
price of oil has eased somewhat, our roadbuilding customers are busy
with profitable work, and the budget environment at the state level
appears to support increased investment in U.S. infrastructure linked
to the passage of the federal highway and energy spending bills. Based
on these facts, we remain cautiously optimistic in our views and would
expect a positive year for our roadbuilding business, tempered to some
extent by expected softness for the concrete truck mixer business due
to the slowdown in residential construction. Unfortunately, a loss
associated with a reduction in our Company's re-rental fleet in the
fourth quarter masked the marked improvement the core utility and
roadbuilding businesses made in 2006."
Terex Corporate / Eliminations
Fourth quarter Year-to-Date
--------------------------- -----------------------------
(dollars in millions)
2006 2005 2006 2005
------------- ------------- -------------- --------------
% % % %
of of of of
sales sales sales sales
----- ----- ----- -----
Net sales $(46.2) $(31.0) $(136.2) $(109.4)
======= ======= ======== ========
Loss from
operations $(10.3) 22.3% $(20.5) 66.1% $ (48.8) 35.8% $ (30.7) 28.1%
======= ======= ======== ========
The Company's consolidated results throughout 2006 continue to
show a more significant amount of general and administrative costs not
reflected in the total segment detail. These unallocated expenses are
primarily attributable to certain equity and long term compensation
programs, as well as certain unallocated expenses related to Terex's
global enterprise system implementation.
Capital Structure and Taxes
"Debt at the end of the fourth quarter of 2006 was $763 million,
down from $792 million at the end of the third quarter of 2006. Cash
and cash equivalents increased during the fourth quarter by $248
million from the third quarter balance and now stand at $677 million,
reflecting strong operating cash flow in the quarter," commented Phil
Widman, Senior Vice President and Chief Financial Officer. "We
generated solid cash performance for the quarter, driven by strong
profitability and to a lesser extent, by a reduction in working
capital. Working capital decreased $44 million as compared to
September 30, 2006 levels on higher sales."
Mr. Widman continued, "Working capital as a percent of trailing
three month annualized sales was approximately 17.4% at the end of the
fourth quarter of 2006, a slight increase when compared to
approximately 17.3% at the end of the fourth quarter in 2005. This
quarter's performance has led the Company to a ratio of debt less cash
and cash equivalents to total capitalization of approximately 4.7% at
the end of the fourth quarter of 2006, meaningful progress when
compared to the approximate 32.9% result achieved at December 31,
2005. Terex announced the redemption of the outstanding $200 million
principal amount of its 9 1/4% Senior Subordinated Notes due 2011 in
mid-December 2006. The redemption was effective January 16, 2007, with
total cash paid of $218.5 million that included principal of $200
million, accrued interest of $9.25 million and a call premium of $9.25
million. Total debt at December 31, 2006 of $763 million includes the
$200 million principal amount of these Notes."
Commenting on the effective tax rate, Mr. Widman stated, "The
effective tax rate for continuing operations for the fourth quarter
and full year 2006 was 35.7% and 35.5%, respectively, both subject to
the completion of the Company's year-end review process. This compared
to an effective tax rate for continuing operations for the fourth
quarter and full year 2005 of 25.8% and 35.1%, respectively."
2007 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.
"For Terex, 2006 marked the third consecutive year of sharp
increases in demand for many of our products," said Mr. DeFeo. "We
expect 2007 to be another record year of demand for our equipment, and
another record year for our operating performance. It is our
expectation that Terex's total revenue for 2007 will be between $8.2
and $8.5 billion, and earnings per share in the range of $5.00-5.40
per share, including the impact of certain one-time items, such as the
approximately $10 million expense associated with the early
extinguishment of debt that we incurred in January 2007," continued
Mr. DeFeo. "Expectations are for earnings in the first half of 2007 to
be slightly less than our earnings in the second half of 2007.
Additionally, expectations are for our first quarter results to be
approximately one-third of our first half guidance."
Other key financial information for 2007 guidance includes:
Assumptions - The effective tax rate is expected to be 36% for
2007 and the average number of shares that will be outstanding for
2007 is estimated at 104 million. Depreciation and amortization for
the Company is estimated to be in the range of $65-70 million. Capital
expenditures are estimated to be approximately $120 million, or
approximately 1.5% of revenue, including expenditures related to the
Company's investment in a global enterprise management system and
capacity expansion.
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 fourth quarter
annualized net sales to 17.4% at the end of 2006, and we are currently
projecting a similar level for the end of 2007. Terex will concentrate
on the implementation of best practices across its locations, and the
Company will continue to strive for a target of 15% working capital
investment as a percentage of revenue, driven mainly by inventory turn
improvement.
Capital Structure and Taxes - In 2007, Terex will increase
expenditures to support certain business initiatives and objectives,
taking advantage of its improved balance sheet position. For example,
the Company aims to expand its Terex Financial Services business,
primarily to expand the financing opportunities available to assist
with the sale of Terex equipment. Terex will also continue to look
toward investment in the "Dealer of the Future" distribution concept
and growth in Asian manufacturing capability, which may involve
additional working capital investment.
Also impacting 2007 cash flow expectations is the Company's
increased level of cash taxes, when compared with prior years, as
Terex has substantially utilized all of its domestic net operating
loss carry-forward benefit. The current expectation for the Company's
2007 effective tax rate is 36%. Lastly, during 2007, Terex may
repurchase Terex common stock in the open market as part of its
previously announced $200 million stock buyback authorization.
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; Terex's business is sensitive
to fluctuations in 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; possible work stoppages and other labor
matters; Terex's debt outstanding and the need to comply with
restrictive covenants contained in Terex's debt agreements; Terex's
ability to maintain adequate disclosure controls and procedures,
maintain adequate internal controls over financial reporting and file
its periodic reports with the SEC on a timely basis; Terex's
implementation of a global enterprise system and its performance; the
previously announced investigations of Terex by the SEC and the
Department of Justice; limitation on Terex's ability to access the
capital markets using short form SEC documents; compliance with
applicable environmental laws and regulations; product liability
claims and other liabilities arising out of Terex's business; 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 2006
sales of approximately $7.6 billion. Terex operates in five business
segments: Terex Aerial Work Platforms, Terex Construction, Terex
Cranes, 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, surface mining, shipping, transportation,
refining and utility 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
CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share data)
(unaudited)
Three Months Twelve Months
Ended December 31, Ended December 31,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Net sales $2,029.5 $1,568.3 $7,647.6 $6,156.5
Cost of goods sold 1,654.0 1,328.2 6,204.5 5,209.2
--------- --------- --------- ---------
Gross profit 375.5 240.1 1,443.1 947.3
Selling, general and
administrative expenses 206.1 167.7 733.6 573.6
Goodwill Impairment - 3.3 - 3.3
--------- --------- --------- ---------
Income from operations 169.4 69.1 709.5 370.4
Other income (expense)
Interest income 3.3 1.9 15.5 7.7
Interest expense (18.8) (26.0) (90.7) (96.3)
Loss on early extinguishment
of debt - - (23.3) -
Amortization of debt
issuance costs (0.7) (0.9) (3.2) (3.5)
Other income - net 3.8 6.2 6.9 10.6
--------- --------- --------- ---------
Income from continuing
operations before income
taxes 157.0 50.3 614.7 288.9
Provision for income taxes (56.1) (13.0) (218.2) (101.3)
--------- --------- --------- ---------
Income from continuing
operations 100.9 37.3 396.5 187.6
Income (loss) from discontinued
operations - net of tax - (2.5) 11.1 0.9
Loss on disposition of
discontinued operations - net
of tax - - (7.7) -
--------- --------- --------- ---------
Net income $ 100.9 $ 34.8 $ 399.9 $ 188.5
========= ========= ========= =========
PER COMMON SHARE:
Basic
Income from continuing
operations $ 0.99 $ 0.37 $ 3.94 $ 1.89
Income from discontinued
operations - (0.02) 0.11 0.01
Loss on disposition of
discontinued operations - - (0.08) -
--------- --------- --------- ---------
Net income $ 0.99 $ 0.35 $ 3.97 $ 1.90
========= ========= ========= =========
Diluted
Income from continuing
operations $ 0.97 $ 0.36 $ 3.85 $ 1.84
Income (loss) from
discontinued operations - (0.02) 0.10 -
Loss on disposition of
discontinued operations - - (0.07) -
--------- --------- --------- ---------
Net income $ 0.97 $ 0.34 $ 3.88 $ 1.84
========= ========= ========= =========
Weighted average number of
shares outstanding in per
share calculation
Basic 101.6 99.8 100.7 99.4
========= ========= ========= =========
Diluted 104.0 102.6 103.0 102.2
========= ========= ========= =========
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions, except par value)
(unaudited)
December 31, December 31,
2006 2005
------------ -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 676.7 $ 553.6
Trade receivables (net of allowance of
$60.3 at December 31, 2006 and $48.7 at
December 31, 2005) 950.5 735.0
Inventories 1,502.0 1,318.2
Deferred taxes 137.4 172.8
Other current assets 170.7 123.9
------------ -------------
Total current assets 3,437.3 2,903.5
LONG-TERM ASSETS
Property, plant and equipment - net 338.5 329.9
Goodwill 632.8 555.7
Deferred taxes 177.6 159.8
Other assets 209.3 251.4
------------ -------------
TOTAL ASSETS $ 4,795.5 $ 4,200.3
============ =============
CURRENT LIABILITIES
Notes payable and current portion of
long-term debt $ 227.0 $ 48.1
Trade accounts payable 1,034.3 913.4
Accrued compensation and benefits 169.3 133.3
Accrued warranties and product liability 107.6 82.8
Other current liabilities 497.5 347.0
------------ -------------
Total current liabilities 2,035.7 1,524.6
NON-CURRENT LIABILITIES
Long-term debt, less current portion 536.1 1,075.8
Other 472.7 438.9
------------ -------------
TOTAL LIABILITIES 3,044.5 3,039.3
------------ -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value -
authorized 150.0 shares; issued 104.7
and 51.3 shares at December 31, 2006
and December 31, 2005, respectively 1.0 0.5
Additional paid-in capital 923.7 861.9
Retained earnings 707.3 307.4
Accumulated other comprehensive income 155.2 26.2
Less cost of shares of common stock in
treasury - 3.6 shares at December 31,
2006 and 2.0 shares at December 31,
2005 (36.2) (35.0)
------------ -------------
Total stockholders' equity 1,751.0 1,161.0
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,795.5 $ 4,200.3
============ =============
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
(unaudited)
Twelve Months
Ended December 31,
-------------------
2006 2005
--------- ---------
Operating Activities
Net income $ 399.9 $ 188.5
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 61.2 61.4
Amortization 11.8 14.2
Deferred taxes 72.1 19.1
Loss on early extinguishment of debt 7.2 -
Gain on sale of assets (2.5) (3.3)
Impairment charges and asset writedowns - 3.7
Loss on disposition of discontinued
operations 6.5 -
Stock-based compensation 43.5 10.7
Excess tax benefit from stock-based
compensation (16.9) -
Changes in operating assets and liabilities
(net of effects of acquisitions and
divestitures):
Trade receivables (214.2) (100.9)
Inventories (168.5) (128.3)
Trade accounts payable 103.0 89.0
Accrued compensation and benefits 32.6 29.1
Income taxes payable 10.2 37.3
Other, net 138.5 52.9
--------- ---------
Net cash provided by operating
activities 484.4 273.4
--------- ---------
Investing Activities
Acquisition of businesses, net of cash acquired (33.2) (5.1)
Capital expenditures (78.9) (48.6)
Investments in and advances to affiliates (7.1) (4.6)
Proceeds from sale of discontinued operations,
net of cash divested 55.2 -
Proceeds from sale of assets 12.1 1.6
--------- ---------
Net cash used in investing activities (51.9) (56.7)
--------- ---------
Financing Activities
Principal repayments of long-term debt (300.0) -
Excess tax benefit from stock-based compensation 16.9 -
Proceeds from stock options exercised 15.3 5.1
Net repayments under credit facilities (73.4) (35.5)
Other, net (3.6) (18.6)
--------- ---------
Net cash used in financing activities (344.8) (49.0)
--------- ---------
Effect of Exchange Rate Changes on Cash and Cash
Equivalents 35.4 (32.9)
--------- ---------
Net Increase in Cash and Cash Equivalents 123.1 134.8
Cash and Cash Equivalents at Beginning of Period 553.6 418.8
--------- ---------
Cash and Cash Equivalents at End of Period $ 676.7 $ 553.6
========= =========
GLOSSARY
In this press release, in an effort to provide investors with
additional information regarding the Company's results, Terex refers
to various non-GAAP (U.S. generally accepted accounting principles)
financial measures which management believes provides useful
information to investors. These measures may not be comparable to
similarly titled measures being disclosed by other companies. In
addition, the Company believes that non-GAAP financial measures should
be considered in addition to, and not in lieu of, GAAP financial
measures.
Terex believes that this information is useful to understanding
its operating results and the ongoing performance of its underlying
businesses. Management of Terex uses these non-GAAP financial measures
to establish internal budgets and targets and to evaluate the
Company's financial performance against such budgets and targets.
The amounts described below are unaudited, are reported in
millions of U.S. dollars, and are as of or for the period ended
December 31, 2006, unless otherwise indicated.
Backlog is defined as firm orders that are expected to be filled
within one year. The disclosure of backlog aids in the analysis of the
Company's customers' demand for product, as well as the ability of the
Company to meet that demand. The backlog of Terex's business is not
necessarily indicative of revenues to be recognized in a specified
future period.
Debt is calculated using the Consolidated Balance Sheet amounts
for Notes payable and current portion of long-term debt plus Long-term
debt, less current portion. It is a measure that aids in the
evaluation of the Company's financial condition.
Long term debt, less current portion $536.1
Notes payable and current portion of long-term debt 227.0
----------------------------------------------------------- --------
Debt $763.1
========
EBITDA is defined as earnings before interest, taxes, depreciation
and amortization. The Company calculates this by adding the amount of
depreciation and amortization expenses that have been deducted from
Income from operations back into Income from operations to arrive at
EBITDA. Depreciation and amortization amounts reported in the
Consolidated Statement of Cash Flows include amortization of debt
issuance costs that are recorded in Other income (expense) - net and,
therefore, are not included in EBITDA. Terex believes that disclosure
of EBITDA will be helpful to those reviewing its performance, as
EBITDA provides information on Terex's ability to meet debt service,
capital expenditure and working capital requirements, and is also an
indicator of profitability.
Three months ended Twelve months ended
Dec. 31, Dec. 31,
-------------------- -------------------
2006 2005 2006 2005
--------- --------- ---------- --------
Income from operations $ 169.4 $ 69.1 $ 709.5 $ 370.4
Depreciation 15.9 14.6 61.2 61.4
Amortization 2.7 4.2 11.8 14.2
D&A, discontinued operations - (0.9) (2.4) (4.8)
Bank fee amortization not
included in Income from
operations (0.7) (0.9) (3.2) (3.5)
--------- --------- ---------- --------
EBITDA $ 187.3 $ 86.1 $ 776.9 $ 437.7
========= ========= ========== ========
ROIC, or Return on Invested Capital, is calculated by Terex by
dividing the last four quarters' Income from operations (adjusted for
certain non-recurring items) by the average of the sum of Total
stockholders' equity plus Debt (as defined above) less Cash and cash
equivalents for the last five quarter ended Consolidated Balance
Sheets. ROIC measures how effectively the Company uses money invested
in its operations. For example, Return on Invested Capital highlights
the level of value creation when compared to the Company's cost of
capital. Terex management and the Board of Directors of Terex use ROIC
as one of the primary measures to assess operational performance,
including in connection with certain compensation programs.
Dec-06 Sep-06 Jun-06 Mar-06 Dec-05
-------------------------------------------------
Income from
operations $ 169.4 $ 191.1 $ 207.2 $ 141.9
plus: Income from
operations from
Disc. Ops. - 5.7 6.0 2.9
-------------------- --------- --------- --------- ---------
Income from
operations adjusted
for Disc. Ops. $ 169.4 $ 196.8 $ 213.2 $ 144.8
========= ========= ========= =========
Debt (as defined
above) $ 763.1 $ 791.7 $1,055.8 $1,122.3 $1,123.9
less: Cash and cash
equivalents (676.7) (428.3) (525.7) (506.9) (553.6)
-------------------- --------- --------- --------- --------- ---------
Debt less Cash and
cash equivalents $ 86.4 $ 363.4 $ 530.1 $ 615.4 $ 570.3
========= ========= ========= ========= =========
Total stockholders'
equity $1,751.0 $1,591.7 $1,490.5 $1,274.1 $1,161.0
Debt less Cash and
cash equivalents
plus Total
stockholders'
equity $1,837.4 $1,955.1 $2,020.6 $1,889.5 $1,731.3
========= ========= ========= ========= =========
------------------------------
ROIC (last four
quarters) 38.4%
------------------------------
Income from
operations, as
adjusted $ 724.2
Average Debt less
Cash and cash
equivalents plus
Total stockholders'
equity $1,886.8
Total Capitalization is a measure that aids in the evaluation of
the Company's balance sheet. It is an integral component of certain
financial metrics that are often used to evaluate the Company's
valuation, liquidity and overall health. Total capitalization is
defined as the sum of:
- Total stockholders' equity;
- Debt (as defined above); and
- Less: Cash and cash equivalents.
Total stockholders' equity $1,751.0
Debt (as defined above) 763.1
less: Cash and cash equivalents (676.7)
---------------------------------------------------------- ---------
Total Capitalization $1,837.4
=========
Working Capital is calculated using the Consolidated Balance Sheet
amounts for Trade receivables (net of allowance) plus Inventories less
Trade accounts payable. The Company views excessive working capital as
an inefficient use of resources, and seeks to minimize the level of
investment without adversely impacting the ongoing operations of the
business.
Trade receivables, net of allowance $950.5
Inventories 1,502.0
less: Trade accounts payable (1,034.3)
--------------------------------------------------------- ---------
Total Working Capital $1,418.2
=========
CONTACT: Terex Corporation
Tom Gelston, 203-222-5943
Director, Investor Relations and
Financial Planning & Analysis
Fax: 203-222-0130
tgelston@terex.com
SOURCE: Terex Corporation