-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P24aScITIIwdJ+K9Qm5+Eap9FVTgIv05ulbRRS+2DRjnTV5DItt3HRgG+G9x6hCr jqSUXQYVt6rZ7z06mQoGpQ== 0000097216-96-000029.txt : 19960517 0000097216-96-000029.hdr.sgml : 19960517 ACCESSION NUMBER: 0000097216-96-000029 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEREX CORP CENTRAL INDEX KEY: 0000097216 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL TRUCKS TRACTORS TRAILERS & STACKERS [3537] IRS NUMBER: 341531521 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10702 FILM NUMBER: 96567853 BUSINESS ADDRESS: STREET 1: 500 POST ROAD EAST CITY: WESTPORT STATE: CT ZIP: 06880 BUSINESS PHONE: 203-222-70 MAIL ADDRESS: STREET 1: 500 POST ROAD EAST CITY: WESTPORT STATE: CT ZIP: 06880 FORMER COMPANY: FORMER CONFORMED NAME: BLACK MAMMOTH CONSOLIDATED MINING CO DATE OF NAME CHANGE: 19671002 10-Q 1 1ST QUARTER REPORT ON FORM 10-Q FOR TEREX CORP. SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 F O R M 10 - Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission file number 1-10702 Terex Corporation (Exact name of registrant as specified in its charter) Delaware 34-1531521 (State of (IRS Employer Incorporation) Identification No.) 500 Post Road East, Suite 320, Westport, Connecticut 06880 (Address of principal executive offices) (203) 222-7170 (Registrant's telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES X NO Number of outstanding shares of common stock: 10.6 million as of March 31, 1996. The Exhibit Index appears on page 14. INDEX TEREX CORPORATION AND SUBSIDIARIES Page No. PART I FINANCIAL INFORMATION Item 1 Condensed Consolidated Financial Statements Condensed Consolidated Statements of Operations -- Three months ended March 31, 1996 and 1995................. 3 Condensed Consolidated Balance Sheets -- March 31, 1996 and December 31, 1995....................... 4 Condensed Consolidated Statements of Cash Flows -- Three months ended March 31, 1996 and 1995................. 5 Notes to Condensed Consolidated Financial Statements -- March 31, 1996............................................. 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations........................ 8 PART II OTHER INFORMATION Item 1 Legal Proceedings............................................... 12 Item 5 Other Information............................................... 12 Item 6 Exhibits and Reports on Form 8-K................................ 12 SIGNATURES................................................................. 13 PART 1. FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS TEREX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (in millions, except per share data) For the Three Months Ended March 31, 1996 1995 Net sales ........................................ $ 282.0 $ 214.2 Cost of goods sold ............................... 247.3 191.9 Gross profit ..................................... 34.7 23.1 Engineering, selling and administrative expenses . 23.9 17.1 Income from operations ........................... 10.8 6.0 Other income (expense): Interest income .................................. 0.1 0.3 Interest expense ................................. (11.5) (7.0) Gain on sale of Fruehauf stock ................... -- 1.0 Gain on sale of property, plant and equipment .... 2.4 0.1 Amortization of debt issuance costs .............. (0.6) (0.5) Other income (expense) - net ..................... (0.7) (1.7) Income (loss) before income taxes ................ 0.5 (1.8) Provision for income taxes ....................... -- (0.1) NET INCOME (LOSS) ................................ 0.5 (1.9) Less preferred stock accretion ................... (1.9) (1.7) Income (loss) applicable to common stock ......... $ (1.4) $ (3.6) PER COMMON AND COMMON EQUIVALENT SHARE: Net income (loss) ................................ $ (0.13) $ (0.35) Weighted average common and common equivalent shares outstanding (See Exhibit 11.1) ............................... 10.6 10.3 The accompanying notes are an integral part of these financial statements. TEREX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (in millions) March 31, December 31, 1996 1995 ASSETS Current assets Cash and cash equivalents ............................ $ 12.7 $ 7.8 Cash securing letters of credit ...................... 7.2 7.7 Trade receivables (less allowance of $9.9 at March 31, 1996 and $9.8 at December 31, 1995) ................................. 143.9 127.1 Customer deposit ..................................... 11.0 19.1 Net inventories ...................................... 243.3 249.3 Other current assets ................................. 17.1 15.2 Total current assets ................................. 435.2 426.2 Long-term assets Property, plant and equipment - net .................. 95.3 101.3 Goodwill - net ....................................... 64.5 65.8 Other assets ......................................... 32.6 33.6 Total assets ......................................... $ 627.6 $ 626.9 LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities Notes payable ........................................ $ 7.5 $ 1.9 Current portion of long-term debt and capital lease obligation ........................... 7.3 7.2 Trade accounts payable ............................... 162.2 161.0 Accrued compensation and benefits .................... 18.0 16.8 Accrued warranties and product liability ............. 38.2 38.6 Accrued interest ..................................... 13.2 4.7 Accrued income taxes ................................. 0.5 1.4 Customer deposit ..................................... 11.0 19.1 Other current liabilities ............................ 38.8 44.0 Total current liabilities ............................ 296.7 294.7 Long-term liabilities Long-term debt and capital lease obligations less current portion ................... 326.5 328.4 Accrued warranties and product liability - long-term ........................................ 34.2 33.1 Accrued pension ...................................... 18.9 18.9 Other long-term liabilities .......................... 16.3 16.6 Minority interest, including redeemable preferred stock of a subsidiary (liquidation preference $25.2, subject to adjustment) ...................... 9.4 9.4 Redeemable convertible preferred stock (liquidation preference $41.7 at March 31, 1996 and $41.2 at December 31, 1995) .................... 25.8 24.6 Commitments and contingencies Stockholders' deficit Warrants to purchase common stock .................... 16.5 17.2 Common stock, $.01 par value - authorized 30.0 shares; issued and outstanding 10.6 at March 31, 1996 and 10.6 at December 31, 1995 ....... 0.1 0.1 Additional paid-in capital ........................... 41.9 40.5 Accumulated deficit .................................. (152.3) (150.9) Pension liability adjustment ......................... (2.7) (2.7) Unrealized holding gain on equity securities ......... 0.2 1.0 Cumulative translation adjustment .................... (3.9) (4.0) Total stockholders' deficit .......................... (100.2) (98.8) Total liabilities and stockholders' deficit .......... $ 627.6 $ 626.9 The accompanying notes are an integral part of these financial statements. TEREX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (in millions) For the Three Months Ended March 31, 1996 1995 OPERATING ACTIVITIES Net income (loss) .......................................... $ 0.5 $ (1.9) Adjustments to reconcile net income (loss) to cash used in operating activities: Depreciation ............................................... 5.1 3.9 Amortization ............................................... 2.0 0.8 Gain on sale of property, plant and equipment .............. (2.4) (0.1) Gain on sale of Fruehauf stock ............................. -- (1.0) Other ...................................................... -- 0.3 Changes in operating assets and liabilities: Restricted cash ............................................ 0.5 2.5 Trade receivables .......................................... (16.8) 7.5 Net inventories ............................................ 6.0 (16.3) Trade accounts payable ..................................... 1.2 12.8 Accrued interest ........................................... 8.5 (4.9) Other, net ................................................. (7.4) (4.1) Net cash used in operating activities ...................... (2.8) (0.5) INVESTING ACTIVITIES Capital expenditures ....................................... (1.7) (1.9) Proceeds from sale of property, plant and equipment ........ 3.3 0.5 Proceeds from sale of Fruehauf stock ....................... -- 2.7 Other ...................................................... -- (0.1) Net cash provided by investing activities .................. 1.6 1.2 FINANCING ACTIVITIES Net incremental borrowings under revolving line of credit agreements ...................... 5.2 0.5 Other ...................................................... -- (0.6) Net cash provided by (used in) financing activities ........ 5.2 (0.1) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 0.9 1.4 NET INCREASE IN CASH AND CASH EQUIVALENTS .................. 4.9 2.0 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ........... 7.8 9.7 CASH AND CASH EQUIVALENTS AT END OF PERIOD ................. $ 12.7 $ 11.7 The accompanying notes are an integral part of these financial statements. TEREX CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in millions, unless otherwise denoted) March 31, 1996 NOTE A -- BASIS OF PRESENTATION Basis of Presentation. The accompanying condensed consolidated financial statements of Terex Corporation and subsidiaries as of March 31, 1996 and for the three months ended March 31, 1996 and 1995 have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles to be included in full year financial statements. The accompanying condensed consolidated balance sheet as of December 31, 1995, has been derived from the audited consolidated balance sheet as of that date. The condensed consolidated financial statements include the accounts of Terex Corporation and its majority owned subsidiaries ("Terex" or the "Company"). All material intercompany balances, transactions and profits have been eliminated. The equity method is used to account for investments in affiliates in which the Company has an ownership interest between 20% and 50%. Investments in affiliates in which the Company has an ownership interest of less than 20% are accounted for on the cost method or at fair value in accordance with Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." In the opinion of management, all adjustments considered necessary for a fair presentation have been made. Such adjustments consist only of those of a normal recurring nature. Certain 1995 amounts have been reclassified to conform with the 1996 presentation. Operating results for the three months ended March 31, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. NOTE B -- INVENTORIES Net inventories consist of the following: March 31, December 31, 1996 1995 Finished equipment ................................. $ 62.8 $ 53.1 Replacement parts .................................. 82.5 94.5 Work-in-process .................................... 19.5 26.0 Raw materials and supplies ......................... 81.7 78.9 246.5 252.5 Less: Excess of FIFO inventory value of LIFO cost .. (3.2) (3.2) Net inventories $ .................................. 243.3 $ 249.3 NOTE C -- PROPERTY, PLANT AND EQUIPMENT Net property, plant and equipment consists of the following: March 31, December 31, 1996 1995 Property, plant and equipment ... $ 149.7 $ 153.9 Less: Accumulated depreciation .. (54.4) (52.6) Net property, plant and equipment $ 95.3 $ 101.3 NOTE D -- LITIGATION AND CONTINGENCIES The Company is subject to a number of contingencies and uncertainties including product liability claims, self-insurance obligations, tax examinations and guarantees. Many of the exposures are unasserted or proceedings are at a preliminary stage, and it is not presently possible to estimate the amount or timing of any cost to the Company. However, management does not believe that these contingencies and uncertainties will, in the aggregate, have a material effect on the Company. When it is probable that a loss has been incurred and possible to make reasonable estimates of the Company's liability with respect to such matters, a provision is recorded for the amount of such estimate or for the minimum amount of a range of estimates when it is not possible to estimate the amount within the range that is most likely to occur. The Company generates hazardous and nonhazardous wastes in the normal course of its operations. As a result, the Company is subject to a wide range of federal, state, local and foreign environmental laws and regulations, including the Comprehensive Environmental Response, Compensation and Liability Act, that (i) govern activities or operations that may have adverse environmental effects, such as discharges to air and water, as well as handling and disposal practices for hazardous and nonhazardous wastes, and (ii) impose liability for the costs of cleaning up, and certain damages resulting from, sites of past spills, disposals or other releases of hazardous substances. Compliance with such laws and regulations has, and will, require expenditures by the Company on a continuing basis. The Internal Revenue Service is currently examining the Company's federal tax returns for the years 1987 through 1989. In December 1994, the Company received an examination report from the IRS proposing a substantial tax deficiency based on this examination. The examination report raises a variety of issues, including the Company's substantiation for certain deductions taken during this period, the Company's utilization of certain net operating loss carryovers ("NOL's") and the availability of such NOL's to offset future taxable income. If the IRS were to prevail on all the issues raised, the amount of the tax assessment would be approximately $56 plus interest and penalties. If the Company were required to pay a significant portion of the assessment, it could have a material adverse impact on the Company and could exceed the Company's resources. The Company has filed its administrative appeal to the examination report. Although management believes that the Company will be able to provide adequate documentation for a substantial portion of the deductions questioned by the IRS and that there is substantial support for the Company's past and future utilization of the NOL's, the ultimate outcome of this matter is subject to the resolution of significant legal and factual issues. If the Company's positions prevail on the most significant issues, management believes that the amounts due would not exceed amounts previously paid or provided; however, even under such circumstances, it is possible that the Company's NOL's could be reduced to some extent. No additional accruals have been made for any amounts which might be due as a result of this matter because the possible loss ranges from zero to $56 plus interest and penalties and the ultimate outcome cannot presently be determined or estimated. If a change in control for tax purposes were to occur, such a change in control could possibly result in a significant reduction in the amount of NOL's available to the Company to offset future taxable income. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The Company operates in three industry segments: Material Handling, Terex Trucks, and Terex Cranes. The Terex Cranes segment results for periods prior to May 1995 consist solely of Koehring's operations. Beginning with the first quarter of 1996, the former heavy equipment segment, which consists of the Terex business and Unit Rig division, referred to as Terex Trucks. Quarter Ended March 31, 1995 The table below is a comparison of net sales, gross profit, engineering, selling and administrative expenses, and income (loss) from operations, by segment, for the three months ended March 31, 1996 and 1995. Three Months Ended Increase March 31, (Decrease) 1996 1995 (in millions of dollars) NET SALES Material Handling $ 108.8 $ 134.0 $ (25.2) Terex Trucks 70.9 57.5 13.4 Terex Cranes 102.5 23.2 79.3 Eliminations (0.2) (0.5) 0.3 Total $ 282.0 $ 214.2 $ 67.8 GROSS PROFIT Material Handling $ 11.3 $ 11.1 $ 2.0 Terex Trucks 9.1 8.7 0.4 Terex Cranes 14.9 3.3 11.6 Eliminations (0.6) --- (0.6) Total $ 34.7 $ 23.1 $ 11.6 ENGINEERING, SELLING AND ADMINISTRATIVE EXPENSES Material Handling $ 8.8 $ 10.4 $ (1.6) Terex Trucks 6.2 5.4 0.8 Terex Cranes 8.7 1.5 7.2 General/Corporate 0.2 (0.2) 0.4 Total $ 23.9 $ 17.1 $ 6.8 INCOME (LOSS) FROM OPERATIONS Material Handling $ 2.5 $ 0.7 $ 1.8 Terex Trucks 2.9 3.3 (0.4) Terex Cranes 6.2 1.8 4.4 General/Corporate (0.8) 0.2 (1.0) Total $ 10.8 $ 6.0 $ 4.8 Net Sales Sales increased $67.8 million, or approximately 32%, to $282.0 million for the three months ended March 31, 1996 over the comparable 1995 period, reflecting the acquisition of PPM Cranes in the second quarter of 1995 and a strong sales quarter for Terex Cranes overall, increased revenue at Terex Trucks, partially offset by an expected slowdown in machine sales at the Material Handling Segment. Material Handling Segment sales were $108.8 million for the three months ended March 31, 1996, a decrease of $25.2 million from $134.0 million in the year earlier period. The sales mix was approximately 23% parts in the three months ended March 31, 1996 compared to 17% in the comparable 1995 period. Machine sales decreased 26% and parts sales, from which the Company generally realizes significantly higher margins than machine sales, increased 9%. Material Handling Segment bookings for the three months ended March 31, 1996 were $114.5 million, a decrease of $25.5 million, or 18%, from the year earlier period. Bookings for parts sales for the three months ended March 31, 1996 increased 6% from the year earlier period. Machine order bookings for the three months ended March 31, 1996 decreased 24% from the year earlier period. Material Handling Segment backlog was $85.1 million at March 31, 1996 compared to $141.9 million at March 31, 1995. The decrease in machine sales and bookings was anticipated and tracked trends in the material handling industry as set forth in independent publications which report on the industry. The Company adjusted its production schedule and material procurement in anticipation of the slowdown in machine sales. The slowdown is not anticipated to have an adverse effect on the profitability of the material handling segment for 1996. Terex Trucks sales increased $13.4 million for the three months ended March 31, 1996 from the three months ended March 31, 1995. Machines sales increased 31%, and parts sales increased 4%. The sales mix was approximately 32% parts for the three months ended March 31, 1996 compared to 38% parts for the comparable 1995 period. Terex Trucks bookings for the three months ended March 31, 1996 were $48.8 million, an increase of $7.9 million, or 19%, from the year earlier period. Bookings for parts sales, from which the Company generally realizes higher margins than machine sales, decreased $4.0 million from the three months ended March 31, 1995. Machine bookings for the three months ended March 31, 1996 increased $11.9 million from the comparable 1995 period reflecting higher international orders. Backlog was $86.5 million at March 31, 1996 compared to $88.8 million at December 31, 1995 and $51.4 million at March 31, 1995. Terex Cranes sales were $102.5 million for the three months ended March 31, 1996, an increase of $79.3 million from $23.2 million in the year earlier period which did not include the PPM business. Terex Cranes backlog was $59.8 million at March 31, 1996, reflecting the additional PPM backlog acquired, compared to $12.8 million at March 31, 1995. The increase in cranes sales was due to the addition of the PPM business, growth in sales at the PPM business, and continued strong performance by Koehring. Gross Profit Gross profit for the three months ended March 31, 1996 increased $11.6 million compared to the three months ended March 31, 1995. The Material Handling Segment's gross profit of $11.3 million for the three months ended March 31, 1996, an increase of $0.2 million from $11.1 million for the prior year's period. The gross profit percentage in the Material Handling Segment was 10% for the three months ended March 31, 1996 and 8.3% for the comparable 1995 period. The increase in profit was due to higher parts sales and therefore margins coupled with improved manufacturing efficiencies. Terex Trucks' gross profit increased $0.4 million to $9.1 million for the three months ended March 31, 1996 compared to $8.7 million for the comparable 1995 period. The gross profit percentage in the Terex Trucks decreased to 13% for the three months ended March 31, 1996 from 15% for the three months ended March 31, 1995, primarily due to the negative impact on Unit Rig of the inability of a major supplier to adhere to its delivery schedule. This resulted in Unit Rig having to shut down production for a period in March, with an estimated negative profit impact of $800 thousand, due to lost sales volume and unabsorbed overhead. The Company understands that the supplier has corrected the problem and it is not expected to recur. Terex Cranes' gross profit increased $11.6 million to $14.9 million for the three months ended March 31, 1996, compared to $3.3 million for the prior year's period, reflecting the PPM Acquisition, the effect of cost reduction actions put in place at PPM, and improved performance at Koehring. Engineering, Selling and Administrative Expenses Engineering, selling and administrative expenses increased to $23.9 million for the three months ended March 31, 1996 from $17.1 million for the three months ended March 31, 1995, reflecting the effects of the PPM acquisition in May 1995. Material Handling Segment engineering, selling and administrative expenses to $8.8 million for the three months ended March 31, 1996 from $10.4 million for the comparable 1995 period. Terex Trucks engineering, selling and administrative expenses increased to $6.2 million for the three months ended March 31, 1996 from $5.4 million for the comparable 1995 period primarily due to costs associated with a new parts sales office and a new U.K. dealership. Terex Cranes engineering, selling and administrative expenses increased to $8.7 million for the three months ended March 31, 1996 from $1.5 million for the comparable 1995 period, reflecting the PPM acquisition in May 1995. Income (Loss) from Operations Material Handling Segment income from operations of $2.5 million for the three months ended March 31, 1996 represents a $1.8 million improvement over the $0.7 million income in the comparable 1995 period. As discussed above, reduced costs contributed to the increase in income from operations for the three months ended March 31, 1996. Terex Trucks income from operations decreased by $0.4 million to $2.9 million for the three months ended March 31, 1996 from $3.3 million in the comparable 1995 period, primarily due to the factors mentioned above under "Gross Profit". Terex Cranes income from operations of $6.2 million for the three months ended March 31, 1996 increased by $4.4 million over the comparable 1995 period, primarily due to the effect of cost control initiatives implemented at PPM during Terex's ownership of that business, and continued strong performance by Koehring. On a consolidated basis, the Company had operating income of $10.8 million for the three months ended March 31, 1996, compared to operating income of $6.0 million for the comparable 1995 period, for the reasons mentioned above. Other Income (Expense) Net interest expense increased to $11.4 million for the three months ended March 31, 1996 from $6.7 million in the comparable 1995 period as a result of incremental borrowings associated with the PPM acquisition in May 1995. The Company realized a gain in the three months ended March 31, 1996 of $2.4 million from the sale of excess property in Scotland. In 1995, the Company had a gain of $1.0 million from the sale of Fruehauf stock. LIQUIDITY AND CAPITAL RESOURCES The Company's businesses are working capital intensive and require funding for purchases of production and replacement parts inventories, capital expenditures for repair, replacement and upgrading of existing facilities as well as financing of receivables from customers and dealers. The Company has significant debt service requirements including semi-annual interest payments on senior debt and monthly interest payments on its credit facility. Debt reduction and an improved capital structure are major focal points for the Company. In this regard, the Company regularly reviews its alternatives to improve its capital structure and to reduce debt through debt financings, issuance of equity, assets sales, including the sale of business units, or any combination thereof. Currently, the Company has focused its attention on the sale of assets, including business units, and has taken steps to explore the opportunities available to it in this regard. It is the Company's intention that certain such assets be sold during 1996, provided that favorable terms and conditions can be attained. Net cash of $2.8 million was used in operating activities during the three months ended March 31, 1996. Net cash provided by investing activities was $1.6 million during the three months ended March 31, 1996 principally due to the sale of excess property. Net cash provided by financing activities during the three months ended March 31, 1996 was $5.2 million, primarily from use of the lending facility in the U.K. Cash and cash equivalents totaled $12.7 million at March 31, 1996. The balance outstanding under the Credit Facility as of March 31, 1996 was $65.7 million, and the additional amount the Company could have borrowed was $21.3 million as of that date. TEL entered into a new bank working capital facility in 1995, and PPM Europe is in negotiations to secure a working capital facility in 1996. Management intends to seek additional working capital financing facilities for the Company's international operations to provide additional liquidity worldwide. CONTINGENCIES AND UNCERTAINTIES The Internal Revenue Service is currently examining the Company's federal tax returns for the years 1987 through 1989. In December 1994, the Company received an examination report from the IRS proposing a substantial tax deficiency based on this examination. The examination report raises a variety of issues, including the Company's substantiation for certain deductions taken during this period, the Company's utilization of certain net operating loss carryovers ("NOL's") and the availability of such NOL's to offset future taxable income. If the IRS were to prevail on all the issues raised, the amount of the tax assessment would be approximately $56 million plus interest and penalties. If the Company were required to pay a significant portion of the assessment, it could have a material adverse impact on the Company and could exceed the Company's resources. The Company has filed its administrative appeal to the examination report. Although management believes that the Company will be able to provide adequate documentation for a substantial portion of the deductions questioned by the IRS and that there is substantial support for the Company's past and future utilization of the NOL's, the ultimate outcome of this matter is subject to the resolution of significant legal and factual issues. If the Company's positions prevail on the most significant issues, management believes that the amounts due would not exceed amounts previously paid or provided; however, even under such circumstances, it is possible that the Company's NOL's could be reduced to some extent. No additional accruals have been made for any amounts which might be due as a result of this matter because the possible loss ranges from zero to $56 million plus interest and penalties and the ultimate outcome cannot presently be determined or estimated. A change in control of the Company for tax purposes could possibly result in a significant reduction in the amount of NOL's available to the Company to offset future taxable income. The Securities and Exchange Commission (the "Commission") in March of 1994 initiated a private investigation, which included the Company and certain of its affiliates, to determine whether violations of certain aspects of the Federal securities laws have taken place. The Company is cooperating with the Commission in its investigation and it is not possible at this time to determine the outcome of the Commission's investigation. The Company received a letter from the Department of Labor (the "DOL") in May of 1995, alleging that the Company's former Chairman of the Board, at the time a fiduciary for the Company's retirement plans, violated certain provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") in making certain investments which may have been imprudent and by possibly engaging in prohibited transactions under ERISA. The Company and its former Chairman of the Board are currently in discussions with the DOL concerning the allegations and it is not possible at this time to determine the outcome of this matter; however, the Company does not believe that the resolution of the allegations will have a material adverse effect on the Company. The Company is subject to a number of contingencies and uncertainties including product liability claims, self-insurance obligations, tax examinations and guarantees. Many of the exposures are unasserted or proceedings are at a preliminary stage, and it is not presently possible to estimate the amount or timing of any cost to the Company. However, management does not believe that these contingencies and uncertainties will, in the aggregate, have a material effect on the Company. When it is probable that a loss has been incurred and possible to make reasonable estimates of the Company's liability with respect to such matters, a provision is recorded for the amount of such estimate or for the minimum amount of a range of estimates when it is not possible to estimate the amount within the range that is most likely to occur. The Company generates hazardous and nonhazardous wastes in the normal course of its operations. As a result, the Company is subject to a wide range of federal, state, local and foreign environmental laws and regulations, including the Comprehensive Environmental Response, Compensation and Liability Act, that (i) govern activities or operations that may have adverse environmental effects, such as discharges to air and water, as well as handling and disposal practices for hazardous and nonhazardous wastes, and (ii) impose liability for the costs of cleaning up, and certain damages resulting from, sites of past spills, disposals or other releases of hazardous substances. Compliance with such laws and regulations has, and will, require expenditures by the Company on a continuing basis. PART II OTHER INFORMATION Item 1. Legal Proceedings For information concerning other contingencies see "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Contingencies and Uncertainties." Item 5. Other Information FORWARD LOOKING INFORMATION. Forward looking information included in this report involves risks and uncertainties that could significantly impact expected results. The Company's expectations are predominantly based on what it considers key economic assumptions. Construction and mining activity are sensitive to interest rates, government spending and general economic conditions. Some of the other significant factors for the Company include foreign currency movements, political uncertainty in various areas of the world, pricing, product initiatives and other actions taken by competitors, disruptions in production capacity, excess inventory levels, the effects of changes in laws and regulations, employee relations and other factors. Item 6. Exhibits and Reports on Form 8-K (a) The following exhibits have been filed as part of this Form 10-Q: Exhibit No. 11.1 Computation of earnings per share 27 Financial data schedule (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended March 31, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TEREX CORPORATION (Registrant) Date May 15, 1996 /s/ Ralph T. Brandifino ------------ Ralph T. Brandifino Senior Vice President and Chief Financial Officer (Principal Financial Officer) Date May 15, 1996 /s/ Joseph F. Apuzzo ------------ Joseph F. Apuzzo Vice President Finance and Controller (Principal Accounting Officer) EXHIBIT INDEX Exhibit No. 11.1 Computation of Earnings per Share 27 Financial Data Schedule EX-11 2 EX 11.1 EXHIBIT 11.1 (Page 1 of 2) TEREX CORPORATION AND SUBSIDIARIES Computation of Earnings per Common Share (in millions except per share amounts) Three Months Ended March 31, 1996 1995 PRIMARY: Net income (loss) ..................................... $ 0.5 $ (1.9) Less: Accretion of Preferred Stock .................... (1.9) (1.7) Net income (loss) applicable to common stock .......... $ (1.4) $ (3.6) Weighted average shares outstanding during the period . 10.6 10.3 Assumed exercise of warrants at ratio determined as of March 31, 1995 ..................... --- (a) --- (a) Assumed exercise of stock options ..................... --- (a) --- (a) Primary shares outstanding ............................ 10.6 10.3 Primary income (loss) per common share ................ $ (0.13)$ (0.35) (a) Excluded from the computation because the effect is anti-dilutive. EXHIBIT 11.1 (Page 2 of 2) TEREX CORPORATION AND SUBSIDIARIES Computation of Earnings per Common Share (in millions except per share amounts) Three Months Ended March 31, 1996 1995 FULLY DILUTED: Net income (loss) ................................ $ 0.5 $ (1.9) Less: Accretion of Preferred Stock ............... (1.9) (1.7) Net income (loss) applicable to common stock ..... $ (1.4) $ (3.6) Weighted average shares outstanding during the period 10.6 10.3 Assumed exercise of warrants at ratio determined as of March 31, 1995 .................. --- (a) --- (a) Assumed exercise of stock options ................ --- (a) --- (a) Primary shares outstanding ....................... 10.6 10.3 Fully diluted income (loss) per common share ..... $ (0.13)$ (0.35) (a) Excluded from the computation because the effect is anti-dilutive. EX-27 3 FDS --
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE TEREX CORPORATION MARCH 31, 1996 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1996 MAR-31-1996 12,700 0 153,800 9,900 243,300 435,200 149,700 54,400 627,600 296,700 326,500 25,800 0 100 (100,300) 627,600 282,000 282,000 247,300 247,300 0 0 11,500 500 0 500 0 0 0 500 (0.13) (0.13)
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