Terex Corporation (NYSE: TEX) today announced net income
for the first quarter of 2005 of $30.3 million, or $0.59 per share,
compared to net income of $17.0 million, or $0.34 per share, for the
first quarter of 2004. Excluding the impact of special items for the
first quarter of 2005, net income was $30.8 million, or $0.60 per
share, while there were no special items during the first quarter of
2004. Special items for the first quarter of 2005 included charges for
investigation costs associated with the Company's internal review and
the restatement of its financial statements for the fiscal periods
2000, 2001, 2002, and 2003, and charges relating to the closure of
certain Terex Utilities branches. As discussed in the "Capital
Structure and Taxes" section of this release, for the period ended
March 31, 2005, the Company is using an estimated tax rate of 35%,
versus the 30.3% rate used for the first quarter of 2004. Net sales
increased to $1,448.9 million in the first quarter of 2005, an
increase of 38.8% from $1,043.8 million in the first quarter of 2004.
Net debt (consisting of long-term debt, including current portion of
long-term debt, less cash and cash equivalents) increased by $92
million from December 31, 2004 levels.
"We continue to be encouraged by current trends and our solid
performance in the first quarter. Although the first quarter still
reflects an imbalance between our input costs and our pricing to our
customers, we are confident that we are doing the right things to
improve this situation," commented Ronald M. DeFeo, Terex's Chairman
and Chief Executive Officer. "We have taken pricing initiatives that
should be more evident in the second quarter, and clearly the demand
for our products is strong."
"We appreciate the patience our stakeholders have shown as we have
diligently pursued historical intercompany imbalances and related
issues. While the issues were deeper and more complex than we
initially expected, we believe that we are nearing completion of our
review. Although the ultimate outcome is not yet finalized, we
continue to expect that the total impact to our 2003 stockholders'
equity value will be immaterial. We have learned a lot in this process
that will make our company better and stronger in the future, and we
are moving on implementing these improvements. In the meantime,
business conditions remain strong."
"We are continuing our Terex Business System initiatives," Mr.
DeFeo added. "The Terex management team continues to drive
improvements in many facets of our business, even though we
acknowledge that we are at the very early stages of this journey. Many
of our businesses continue to deepen their understanding of lean
manufacturing and the emphasis on working capital reduction. The
benefits of this should emerge over time, but we are bolstered by our
team's buy-in and early successes."
"Improvement in our working capital (the sum of accounts
receivable and inventory less accounts payable) relative to sales as
reflected in year-over-year period comparisons demonstrates the value
of our emphasis on process improvement." Mr. DeFeo continued, "Given
the seasonality of our business, we fully expected the first quarter
to show a net use of working capital in anticipation of the seasonally
strong second quarter. However, compared to the same period last year,
the Company's working capital levels are approximately three
percentage points better as measured relative to sales, and should
position Terex for another year of improved working capital to revenue
ratio and debt reduction."
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 provides a reconciliation of the
reported GAAP numbers for the first quarters of 2005 and 2004 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.
While the Company has not yet completed its audited financial
statements for 2004, it currently does not anticipate that the
financial results for the period ended March 31, 2004 included in this
release will be restated.
A financial summary is shown below:
Three months ended March 31,
------------------------------------------------------
2005 2004
-------------------------- --------------------------
(in millions, except per share amounts)
Excluding Excluding
Special Special Special Special
Reported Items(2) Items Reported Items Items
-------------------------- ---------------------------
Net Sales $1,448.9 $ --- $ 1,448.9 $1,043.8 $ --- $ 1,043.8
======== ======= ========= ======== ======= =========
Gross profit $ 207.3 $ 0.1 $ 207.4 $ 160.3 $ --- $ 160.3
SG&A 136.3 (0.7) 135.6 112.0 --- 112.0
-------- ------- --------- -------- ------- ---------
Income from
Operations 71.0 0.8 71.8 48.3 --- 48.3
Other income
(expense) (24.4) --- (24.4) (23.9) --- (23.9)
Provision for
income taxes (16.3) (0.3) (16.6) (7.4) --- (7.4)
-------- ------- --------- -------- ------- ---------
Net income $ 30.3 $ 0.5 $ 30.8 $ 17.0 $ --- $ 17.0
======== ======= ========= ======== ======= =========
Earnings per
share $ 0.59 $ 0.60 $ 0.34 $ 0.34
EBITDA (1) $ 86.4 $ 0.8 $ 87.2 $ 65.2 $ --- $ 65.2
Backlog $1,569.9 $ 1,569.9 $ 793.5 $ 793.5
Average Fully
Diluted Shares
Outstanding 51.1 51.1 50.6 50.6
(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 charges for investigation
costs associated with the Company's internal review ($0.4), and
charges related to the closure of certain Terex Utilities branch
locations ($0.1).
Segment Performance
As previously announced, starting with the third quarter of 2004,
Terex has realigned certain operations in an effort to strengthen its
ability to service customers and to recognize certain organizational
efficiencies.
The Materials Processing Group, formerly part of the Terex
Roadbuilding, Utility Products and Other Segment, is now consolidated
with the Terex Mining Group under the Terex Materials Processing &
Mining Segment. The Terex Light Construction and Load King businesses,
formerly part of the Terex Roadbuilding, Utility Products and Other
Segment, are 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. Comparative segment performance
data also excludes special items.
Terex Construction
Three months ended March 31,
---------------------------------------
(in millions)
---------------------------------------
2005 2004
------------------- -------------------
% of % of
sales sales
--------- ---------
Net sales $ 468.5 $ 389.7
========= =========
Gross profit $ 58.1 12.4% $ 52.4 13.4%
SG&A 42.0 9.0% 36.2 9.3%
--------- ---------
Income from operations $ 16.1 3.4% $ 16.2 4.2%
========= =========
Backlog $ 343.5 $ 222.5
Net sales in the Terex Construction group for the first quarter of
2005 increased $78.8 million to $468.5 million from $389.7 million in
the first quarter of 2004. The increase in sales was driven primarily
by the heavy construction product lines of articulated and rigid
trucks, wheeled excavators and scrap handling machines. Additionally,
the mobile crushing and screening businesses continued to achieve
consistently strong growth, increasing their revenues over 25% versus
the first quarter of 2004. Gross margins, however, were pressured by
continued high costs for raw materials and components, as well as the
negative transactional impact of exchange rates. SG&A expenses for the
first quarter of 2005 were $42.0 million, or 9.0% of sales, compared
to $36.2 million, or 9.3% of sales, in the first quarter of 2004, with
the increase being due to the impact of currency translation and
increased sales and marketing costs related to the increased sales
volume. Income from operations for the quarter was $16.1 million, or
3.4% of sales, compared to $16.2 million, or 4.2% of sales, for the
first quarter of 2004.
"The first quarter reflected a mixture of results. Our businesses
continue to be negatively impacted by the weak U.S. dollar, steel cost
pressures, and carry over pricing at 2004 levels. This is mostly
behind us now as pricing and costs have virtually caught up and most
of our businesses continue to see strong demand," commented Colin
Robertson, President - Terex Construction. "The crushing and screening
businesses were most affected by increased steel pricing and the
delayed impact of our price increases. Across our entire group we have
implemented a process to assure that new pricing has been fully
implemented. We are beginning to see the effects of this in the second
quarter. Our heavy construction business began to show some positive
trends, with the group posting revenue gains of over 27% and
positively impacting this quarter's income from operations."
"Looking forward, there are clear reasons for Terex Construction
to be excited about the prospects for 2005 and improving margin,"
commented Mr. Robertson. "Operationally, we had experienced some
difficulties in the first quarter in moving the balance of our
Atlas-Terex production into the Atlas-Terex German facilities. The
production has now been transferred, and in April we achieved the
planned production for the units affected. At Fuchs-Terex, our scrap
material handling unit, the business has continued to expand, and this
April they achieved a record monthly production in terms of units. Our
2005 price increases will have a positive impact on our second quarter
performance, helping to offset continued cost pressures from our
supply base. Many of our businesses continue to show stronger order
intake and backlog today when measured against 2004 first quarter
results. The challenge remains for us to capitalize on the continued
revenue uplift and drive operating profitability."
Terex Cranes
Three months ended March 31,
---------------------------------------
(in millions)
---------------------------------------
2005 2004
------------------- -------------------
% of % of
sales sales
--------- ---------
Net sales $ 299.5 $ 209.2
========= =========
Gross profit $ 32.1 10.7% $ 29.8 14.2%
SG&A 25.8 8.6% 23.4 11.2%
--------- ---------
Income from operations $ 6.3 2.1% $ 6.4 3.1%
========= =========
Backlog $ 307.0 $ 238.9
Net sales in the Terex Cranes group for the first quarter of 2005
increased $90.3 million to $299.5 million from $209.2 million in the
first quarter of 2004, reflecting general improvement in all
businesses, but particular strength in the tower crane group. SG&A
expenses increased in the first quarter of 2005 to $25.8 million, or
8.6% of sales, significantly lower as a percentage of sales when
compared to the first quarter of 2004 rate of 11.2% on $23.4 million
of SG&A expenses, mainly due to the revenue increase of approximately
43%. Income from operations decreased $0.1 million to $6.3 million, or
2.1% of sales, for the first quarter of 2005 from $6.4 million, or
3.1% of sales, for the first quarter of 2004. Continuing to negatively
impact this segment is the relatively weak market in North America for
lattice boom cranes, the expiration of favorable long-term steel
pricing contracts, mainly in our German crane operation, as well as
the impact of a five week strike at the Waverly, Iowa facility.
"The Cranes segment continued to show strong revenue growth from
its recent cyclical lows," commented Steve Filipov, President - Terex
Cranes. "Our first quarter deliveries were over 40% higher than the
same quarter the prior year. This is even more impressive when you
factor in the five week strike at our Waverly facility, negatively
impacting our ability to ship our planned order book. With the strike
behind us now, having signed a 3-year labor agreement with our union,
we are focused on ramping our production back up and adding workers
and a second shift to our Waverly, Iowa facility. The end result of
these actions will be higher productivity in the factory and
substantially more shipments of cranes with higher pricing versus 2004
levels."
Mr. Filipov continued, "We continue to see strong results from our
tower crane business and our French operation, where we have a strong
backlog. These companies should also continue to see margin expansion
moving into the second quarter, as price increases taken in late 2004
are beginning to flow through production. Our crawler crane business,
although showing modest signs of improvement, remains under pressure.
As Terex moves further into 2005, that business should begin to show
some positive trends as Asian demand is projected to remain strong and
the potential exists for a few large crawler crane project orders."
Terex Aerial Work Platforms
Three months ended March 31,
---------------------------------------
(in millions)
---------------------------------------
2005 2004
------------------- -------------------
% of % of
sales sales
--------- ---------
Net sales $ 295.1 $ 185.0
========= =========
Gross profit $ 51.0 17.3% $ 39.8 21.5%
SG&A 23.3 7.9% 18.0 9.7%
--------- ---------
Income from operations $ 27.7 9.4% $ 21.8 11.8%
========= =========
Backlog $ 499.5 $ 81.9
Net sales for the Terex Aerial Work Platforms group for the first
quarter of 2005 increased $110.1 million to $295.1 million from $185.0
million in the first quarter of 2004. The increase in sales was driven
by continued strong order activity by the rental channel. Gross
margins were negatively impacted by continued cost pressures on
components used in production, as well as a delay in the impact of
pricing actions taken in late 2004 due to the substantial backlog that
existed entering 2005. Income from operations increased to $27.7
million, or 9.4% of sales, in the first quarter of 2005 from $21.8
million, or 11.8% of sales, in the first quarter of 2004, reflects the
higher cost base for purchased components, such as steel, increased
energy costs and higher in-bound freight costs.
"Our first quarter performance reflects many different pressures
that we are experiencing in our business," said Bob Wilkerson,
President-Terex Aerial Work Platforms. "Our first quarter sales were
up 60% and our backlog is up 509% when compared to the first quarter
of 2004, clearly highlighting the growing demand and applications for
our products. However, cost pressures for our production components,
namely steel, continue to weigh on our business, especially compared
to the first quarter of 2004. Fortunately, we see these pressures
stabilizing, and our pricing actions should begin to offset the cost
increases and return our margins to their historic levels." Mr.
Wilkerson added, "Our telehandler business posted year over year
revenue increases in excess of 50%, and our light construction and
trailer businesses also posted strong operating performances. Overall,
the quarter highlights our current challenges, but our second quarter
outlook is strong, with operating margins expected to be in the 12%
range versus the 9.4% we generated this first quarter."
Terex Materials Processing & Mining
Three months ended March 31,
---------------------------------------
(in millions)
---------------------------------------
2005 2004
------------------- -------------------
% of % of
sales sales
--------- ---------
Net sales $ 196.3 $ 96.3
========= =========
Gross profit $ 32.2 16.4% $ 15.4 16.0%
SG&A 20.0 10.2% 12.4 12.8%
--------- ---------
Income from operations $ 12.2 6.2% $ 3.0 3.1%
========= =========
Backlog $ 233.9 $ 100.7
Net sales for the Terex Materials Processing & Mining group for
the first quarter of 2005 increased $100.0 million to $196.3 million
from $96.3 million in the first quarter of 2004. The increase in sales
is attributable to the acquisition of the Reedrill mining business in
the fourth quarter of 2004 and the overall strong demand for mining
products, mainly the mining hydraulic excavators manufactured in
Dortmund, Germany. This increased sales volume had a positive impact
on operating income, as income from operations increased to $12.2
million, or 6.2% of sales, in the first quarter of 2005 from $3.0
million, or 3.1% of sales, in the first quarter of 2004.
"The Materials Processing & Mining group is continuing to see
significant improvement in both orders and order activity," commented
Rick Nichols, President - Terex Materials Processing & Mining.
"Reedrill, acquired in late December 2004, was an immediate
contributor to our overall profitability. Additionally, the hydraulic
shovel and electric drive mining trucks continue the recovery from a
seven year cyclical downturn. We believe that commodity prices have
reached and stabilized at a level where we should continue to see
solid demand for our machine sales, which, in turn, will drive our
parts business, a critical component to our overall profitability. Our
North American Materials Processing business posted a solid quarter,
with revenue growth of approximately 25% and an improvement in its
operating margin."
Terex Roadbuilding, Utility Products and Other
Three months ended March 31,
---------------------------------------
(in millions)
---------------------------------------
2005 2004
------------------- -------------------
% of % of
sales sales
--------- ---------
Net sales $ 218.0 $ 174.1
========= =========
Gross profit $ 34.2 15.7% $ 22.9 13.2%
SG&A 23.1 10.6% 19.7 11.3%
--------- ---------
Income from operations $ 11.1 5.1% $ 3.2 1.8%
========= =========
Backlog $ 210.7 $ 178.8
Net sales for the Terex Roadbuilding, Utility Products and Other
group for the first quarter of 2005 increased $43.9 million to $218.0
million from $174.1 million for the first quarter of 2004, with
meaningful growth being achieved in all business units and product
categories, but especially in the Tatra and concrete mixer truck
businesses. SG&A expenses for the first quarter of 2005 were $23.1
million, or 10.6% of sales, compared to $19.7 million, or 11.3% of
sales, in the first quarter of 2004. Income from operations increased
to $11.1 million, or 5.1% of sales, from $3.2 million, or 1.8% of
sales, in the first quarter of 2004. This was driven not only by the
Tatra and concrete mixer truck businesses, but also by the Terex
Utilities and Terex Roadbuilding businesses, as improvement
initiatives taken over the past few years begin to impact their
financial performance.
"The Roadbuilding, Utility Products and Other group had a
generally positive quarter," commented Mr. DeFeo. "In the Terex
Utilities business, backlog increased over 20% versus a year ago, and
the parts and service business is beginning to show strength, a
positive development for both demand and margin improvement. The Terex
Utilities team continues their implementation of the Terex Business
System, with the focus now mainly on improving productivity at the
branch locations."
Mr. DeFeo continued, "The Terex Roadbuilding business had a good
quarter, and came in slightly ahead of our plan. The concrete mixer
truck business continues to post strong results, and the paver and
reclaimer businesses are markedly improved versus one year ago. These
products, as well as our new asphalt plant drum technology, were very
well received at ConExpo, North America's largest construction
equipment show." Mr. DeFeo added, "With the improved performance in
our operations, and our hopes for approval of the long anticipated
transportation bill, the Roadbuilding business is positioned for
meaningful growth, in both revenues and profits, for the foreseeable
future."
Capital Structure and Taxes
"Net debt at the end of the first quarter of 2005 increased $92
million to $872 million, from $780 million at the end of 2004, as the
Company invested in working capital in preparation for the seasonally
strong second quarter sales," commented Phil Widman, Senior Vice
President and Chief Financial Officer. "This is consistent with our
comments provided at the beginning of the year that cash flow will
continue to closely reflect the seasonal trends of our business. As
part of this, we would expect to be a net user of cash in the first
half of 2005, but would expect positive cash flow in the second half
of the year, as we benefit from our working capital reductions. As
stated in our March 3, 2005 release, we are targeting a 15% working
capital to revenue relationship by 2006, and target 18% for the end of
2005. Working capital as a percent of trailing three month annualized
sales was approximately 21% at the end of the first quarter of 2005,
as compared to approximately 24% at the end of the first quarter in
2004."
Commenting on the effective tax rate used in this release, Mr.
Widman stated, "The effective tax rate for the first quarter of 2005
is estimated to be 35%, and we do not expect the final effective tax
rate for the period to be materially different. While the full year
effective tax rate is expected to be approximately 35%, the rate can
fluctuate quarter to quarter as a result of changes during the period
in the assumptions related to valuation allowances, the mix of income
by jurisdiction, and other discrete items."
Outlook
"We continue to be quite positive regarding our prospects for the
2005 fiscal year," commented Mr. DeFeo. "Our first quarter results
illustrate the strong demand in the marketplace for Terex products,
and revenues remain at or above the pace needed to achieve our Company
goal of $6 billion in revenues in 2006. We remain committed to
delivering margin improvement, both in the near term and throughout
the balance of 2005 into 2006. This will be accomplished through
continued focus on rationalizing our input costs with suppliers across
the organization, as well as continued adjustments to our prices to
better reflect the current cost environment."
Mr. DeFeo continued, "Our recent performance validates our bullish
view of our prospects for 2006 and beyond. With regard to full year
2005 expectations, we now anticipate earnings per share will be higher
than anticipated at the beginning of the year and will be in the $3.50
to $3.70 range. In addition, it is important to remember that Terex is
a diverse portfolio of businesses, and a substantial portion of our
product categories are later cycle businesses that have just begun to
positively contribute to our overall profitability. As we move further
into the year, we believe that enhanced performance from these
businesses, as well as our continued efforts to reduce our debt, will
create an accelerator towards achieving our objectives and should
provide a real boost in Terex's overall operating performance for the
next several years."
Financial Restatement and Waiver
As previously announced, Terex has not yet finalized its third
quarter 2004, full year 2004 and first quarter 2005 results pending
completion of its detailed internal accounting review, the restatement
of Terex's financial statements for the years ended December 31, 2000,
2001, 2002 and 2003, and the completion of its audited financial
statements for 2004. Terex continues to work diligently to complete
its restatement, audit and assessment of internal control over
financial reporting. Terex believes that it is nearing completion of
this process, and currently anticipates filing all appropriate
documents, including applicable financial statements, with the SEC in
the near future.
Additionally, Terex has obtained a waiver from its senior bank
lending group that extends the period to June 30, 2005 to provide its
lenders with its financial information for the year ended December 31,
2004 and the quarter ended March 31, 2005.
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
Investor Relations:
Tom Gelston, 203-222-5943