Terex Announces Second Quarter 2013 Results

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Terex Announces Second Quarter 2013 Results

WESTPORT, Conn.--(BUSINESS WIRE)-- Terex Corporation (NYS: TEX) today announced income from continuing operations of $21.3 million, or $0.18 per share for the second quarter of 2013, as compared to income from continuing operations of $83.6 million, or $0.75 per share for the second quarter of 2012. Excluding the after-tax impacts of: restructuring and related charges of approximately $54.1 million, or $0.47 per share, expenses related to debt retirement of $3.5 million, or $0.03 per share, and the reversal of an accrual for redeemable non-controlling interest of ($3.1) million, or ($0.03) per share, income from continuing operationsas adjusted was $75.8 million, or $0.65 per share in the second quarter of 2013. The Glossary at the end of the release contains more details on these items. There were certain items in the second quarter of 2012 that, in the aggregate, did not have a significant impact on income from continuing operations.

Net sales were $1,908.2 million in the second quarter of 2013, a decrease of 5.1% from $2,011.5 million in the second quarter of 2012. Income from operations was $85.3 million in the second quarter of 2013, a decrease of $89.7 million when compared to income from operations of $175.0 million in the second quarter of 2012. Excluding the pre-tax impact of restructuring and related charges of approximately $65 million, income from operations as adjusted was $150.3 million in the second quarter of 2013.

All results are for continuing operations, unless stated otherwise. All per share amounts are on a fully diluted basis. A comprehensive review of the quarterly financial performance is contained in the presentation that will accompany the Company's earnings conference call.

"As we communicated in mid-June, the marketplace overall has softened compared to what we originally anticipated for 2013," commented Ron DeFeo, Terex Chairman and Chief Executive Officer. "The second quarter results reflect this lighter order environment overall, as our Cranes, Construction and Material Handling & Port Solutions (MHPS) segments all experienced lower revenues than originally expected. However, we do continue to see strong performance from our Aerial Work Platforms (AWP) business, and good operational execution by our Materials Processing business in a challenging environment. Overall by geography, North America continues to improve, but now at a slower pace. Europe remains challenging, particularly for our Cranes, Construction and MHPS segments, and the markets in the rest of the world remain mixed."

Mr. DeFeo continued, "As a result, and as previously previewed, we took substantive actions in the second quarter to further adjust the cost structure of the MHPS, Cranes and Construction organizations. While these actions are difficult, the benefits to our stakeholders are expected to have a meaningful impact on our future results, particularly in 2014 and beyond. We expect stronger MHPS performance in the second half of 2013 as we begin to deliver increased revenue from their large backlog. These actions provide us with confidence in the near-term execution of our revised plan, and are necessary as we pursue our longer term goals."

Outlook: The Company's overall outlook for fiscal year 2013 financial performance is consistent with the guidance provided on June 17, 2013. Mr. DeFeo added, "Terex remains focused on improving profit through continued vigilance on pricing and operating costs. We are working to more thoroughly integrate our businesses and consistently generate free cash flow. We reiterate our earnings per share outlook of 2013 to be between $1.90 and $2.10 per share, excluding restructuring and other unusual items, on net sales of between $7.5 billion and $7.7 billion."

In this press release, Terex refers to various GAAP (U.S. generally accepted accounting principles) and non-GAAP financial measures. These non-GAAP measures may not be comparable to similarly titled measures being disclosed by other companies. Terex believes that this non-GAAP information is useful to understanding its operating results and the ongoing performance of its underlying businesses. Certain financial measures are shown in italics the first time referenced and are described in the text or the Glossary at the end of this press release.

Capital Structure: The Company's liquidity at June 30, 2013 decreased by approximately $189 million compared to March 31, 2013 and totaled $995.9 million, which comprised cash balances of $548.2 million and borrowing availability under the Company's revolving credit facilities of $447.7 million.

Kevin Bradley, Terex Senior Vice President and Chief Financial Officer, commented, "We generated free cash flow in the second quarter of approximately $40 million, bringing the free cash flow total to approximately $175 million for the first six months of 2013. We also retired approximately $220 million of senior bank debt in May, further executing our plan of generating cash and deleveraging the Company. However, based on the lowered outlook for the 2013, we are now anticipating to generate free cash flow in excess of $400 million as compared to the previous guidance of over $500 million."

Terex also announced that it has completed the purchase of approximately 14% of the shares of Terex Material Handling & Port Solutions AG (formerly Demag Cranes AG) (TMHPSAG). With this acquisition of shares, the Company now owns over 95% of the TMHPSAG shares. Terex has also initiated a squeeze-out process that will lead to its owning 100% of the business. These actions are consistent with the Company's plans to simplify its capital structure as this will eliminate the obligation to make guaranteed payments to the minority shareholders and will also remove the complexity and financial cost of maintaining the entity as a German public company.

Return on Invested Capital (ROIC) was 5.6% for the trailing twelve months ended June 30, 2013.

Taxes: The effective tax rate for the second quarter of 2013 was 58.9% as compared to an effective tax rate of 35.4% for the second quarter of 2012.

Working Capital: Working Capital as a percent of Trailing Three Month Annualized Net Sales was 23.4% at June 30, 2013, as compared to 25.7% at March 31, 2013. This decrease was primarily attributable to improved inventory days across the businesses. The Company continues to target its Working Capital as a percent of Trailing Three Month Annualized Net Sales to be approximately 22% at the end of 2013.

Backlog: Backlog for orders deliverable during the next twelve months was approximately $2,178.9 million at June 30, 2013, essentially stable from March 31, 2013 and an increase of approximately 5% from June 30, 2012. Strong demand for AWP products along with existing large port equipment orders for MHPS, which are now deliverable in the next twelve months contributed positively to the increased backlog. This was partially offset by lower demand for Cranes, mainly as a result of softness in Europe, Latin America and Australia.

The Glossary contains further details regarding backlog.

Conference call

The Company will host a conference call to review the financial results on Thursday, July 25, 2013 at 8:30 a.m. ET. Ronald M. DeFeo, Chairman and CEO, will host the call. A simultaneous webcast of this call will be available on the Company's website, www.terex.com. To listen to the call, select "Investor Relations" in the "About Terex" section on the home page and then click on the webcast microphone link. Participants are encouraged to access the call 10 minutes prior to the starting time. The call will also be archived on the Company's website under "Audio Archives" in the "Investor Relations" section of the website.

Forward-Looking Statements

This press release contains forward-looking information regarding future events or the Company's future financial performance based on the current expectations of Terex Corporation. In addition, when included in this press release, the words "may," "expects," "intends," "anticipates," "plans," "projects," "estimates" and the negatives thereof and analogous or similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean that the statement is not forward-looking. The Company has based these forward-looking statements on current expectations and projections about future events. These statements are not guarantees of future performance.

Because forward-looking statements involve risks and uncertainties, actual results could differ materially. Such risks and uncertainties, many of which are beyond the control of Terex, include among others: Our business is cyclical and weak general economic conditions affect the sales of our products and financial results; our ability to successfully integrate acquired businesses, including Terex Material Handling & Port Solutions AG; the need to comply with restrictive covenants contained in our debt agreements; our ability to generate sufficient cash flow to service our debt obligations and operate our business; our ability to access the capital markets to raise funds and provide liquidity; our business is sensitive to government spending; our business is very competitive and is affected by our cost structure, pricing, product initiatives and other actions taken by competitors; our ability to timely manufacture and deliver products to customers; our retention of key management personnel; the financial condition of suppliers and customers, and their continued access to capital; our providing financing and credit support for some of our customers; we may experience losses in excess of recorded reserves; impairment in the carrying value of goodwill and other indefinite-lived intangible assets; our ability to obtain parts and components from suppliers on a timely basis at competitive prices; our business is global and subject to changes in exchange rates between currencies, regional economic conditions and trade restrictions; our operations are subject to a number of potential risks that arise from operating a multinational business, including compliance with changing regulatory environments, the Foreign Corrupt Practices Act and other similar laws and political instability; a material disruption to one of our significant facilities; possible work stoppages and other labor matters; compliance with changing laws and regulations, particularly environmental and tax laws and regulations; litigation, product liability claims, patent claims, class action lawsuits and other liabilities; our ability to comply with an injunction and related obligations resulting from the settlement of an investigation by the United States Securities and Exchange Commission ("SEC"); our implementation of a global enterprise system and its performance; and other factors, risks and uncertainties that are more specifically set forth in our public filings with the SEC.

Actual events or the actual future results of Terex may differ materially from any forward-looking statement due to these 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 expectations with regard thereto or any changes in events, conditions, or circumstances on which any such statement is based.





(in millions, except per share data)

Three Months

Ended June 30,

Six Months

Ended June 30,

2013   2012 2013     2012
Net sales $ 1,908.2 $ 2,011.5 $ 3,631.3 $ 3,830.9
Cost of goods sold   (1,551.7 )   (1,582.9 )   (2,947.3 )   (3,071.5 )
Gross profit 356.5 428.6 684.0 759.4
Selling, general and administrative expenses   (271.2 )   (253.6 )   (530.3 )   (520.6 )
Income (loss) from operations 85.3 175.0 153.7 238.8
Other income (expense)
Interest income 1.8 2.5 3.5 5.1
Interest expense (31.4 ) (46.9 ) (64.8 ) (87.4 )
Loss on early extinguishment of debt (5.2 ) (2.4 ) (5.2 ) (2.4 )
Other income (expense) - net   (2.8 )   (3.6 )   (4.9 )   0.9  
Income (loss) from continuing operations before income taxes 47.7 124.6 82.3 155.0
(Provision for) benefit from income taxes   (28.1 )   (44.1 )   (43.4 )   (52.9 )
Income (loss) from continuing operations 19.6 80.5 38.9 102.1
Income (loss) from discontinued operations - net of tax - - - 2.5
Gain (loss) on disposition of discontinued operations- net of tax   -     2.3     3.0     2.3  
Net income (loss) 19.6 82.8 41.9 106.9
Net (income) loss attributable to noncontrolling interest   1.7     3.1     3.3     2.0  
Net income (loss) attributable to Terex Corporation $ 21.3   $ 85.9   $ 45.2   $ 108.9  
Amounts attributable to Terex Corporation common stockholders:
Income (loss) from continuing operations $ 21.3 $ 83.6 $ 42.2 $ 104.1
Income (loss) from discontinued operations - net of tax - - - 2.5
Gain (loss) on disposition of discontinued operations - net of tax   -     2.3     3.0     2.3  
Net income (loss) attributable to Terex Corporation $ 21.3   $ 85.9   $ 45.2   $ 108.9  
Basic Earnings (loss) Per Share Attributable to Terex Corporation Common Stockholders:
Income (loss) from continuing operations $ 0.19 $ 0.76 $ 0.38 $ 0.95
Income (loss) from discontinued operations - net of tax - - - 0.02
Gain (loss) on disposition of discontinued operations - net of tax   -     0.02     0.03     0.02  
Net income (loss) attributable to Terex Corporation $ 0.19   $ 0.78   $ 0.41   $ 0.99  
Diluted Earnings (loss) Per Share Attributable to Terex Corporation Common Stockholders:
Income (loss) from continuing operations $ 0.18 $ 0.75 $ 0.36 $ 0.94
Income (loss) from discontinued operations - net of tax - - - 0.02
Gain (loss) on disposition of discontinued operations - net of tax   -     0.02     0.03     0.02  
Net income (loss) attributable to Terex Corporation $ 0.18   $ 0.77   $ 0.39   $ 0.98  
Weighted average number of shares outstanding in per share calculation
Basic   111.2     110.4     111.0     110.2  
Diluted   115.8     111.4     115.8     111.5  




(in millions, except par value)

June 30,


December 31,


Current assets
Cash and cash equivalents $ 548.2 $ 678.0
Trade receivables (net of allowance of $34.9 and $38.8 at June 30, 2013 and December 31, 2012, respectively) 1,179.7 1,077.7
Inventories 1,670.0 1,715.6
Other current assets   310.7     326.1  
Total current assets 3,708.6 3,797.4
Non-Current assets
Property, plant and equipment - net 780.1 813.3
Goodwill 1,207.5 1,245.3
Intangible assets - net 447.2 474.4
Other assets   411.6     415.8  
Total assets $ 6,555.0   $ 6,746.2  
Liabilities and Stockholders' Equity
Current liabilities
Notes payable and current portion of long-term debt $ 70.3 $ 83.8
Trade accounts payable 735.8 635.5
Accrued compensation and benefits 239.2 226.2
Accrued warranties and product liability 96.8 97.6
Customer advances 331.1 312.9
Other current liabilities   365.8     352.8  
Total current liabilities 1,839.0 1,708.8
Non-current liabilities
Long-term debt, less current portion 1,800.1 2,014.9
Retirement plans 421.9 430.7
Other non-current liabilities   285.4     313.6  
Total liabilities   4,346.4     4,468.0  
Commitments and contingencies
Redeemable noncontrolling interest 226.6 246.9
Stockholders' equity
Common stock, $.01 par value - authorized 300.0 shares; issued 123.5 and 122.9 shares at June 30, 2013 and December 31, 2012, respectively 1.2 1.2
Additional paid-in capital 1,277.2 1,260.7
Retained earnings 1,512.9
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