-----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, SUY36ss2UD7flTvFAKGXCyipYVpK5yfX6+0U4JRPAWsUd18JmX6c7tCX1ljvLRgW K9Px0ZHZQB1nbPNa/+aCEQ== 0000097216-05-000274.txt : 20051027 0000097216-05-000274.hdr.sgml : 20051027 20051027171919 ACCESSION NUMBER: 0000097216-05-000274 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050831 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20051027 DATE AS OF CHANGE: 20051027 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10702 FILM NUMBER: 051160769 BUSINESS ADDRESS: STREET 1: 500 POST ROAD EAST STREET 2: STE 320 CITY: WESTPORT STATE: CT ZIP: 06880 BUSINESS PHONE: 2032227170 MAIL ADDRESS: STREET 1: 500 POST ROAD EAST STREET 2: STE 320 CITY: WESTPORT STATE: CT ZIP: 06880 FORMER COMPANY: FORMER CONFORMED NAME: BLACK MAMMOTH CONSOLIDATED MINING CO DATE OF NAME CHANGE: 19671002 8-K 1 f8k10272005.txt TEREX CORP 8-K Q3 2005 EARNINGS RELEASE ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) August 31, 2005 --------------- TEREX CORPORATION - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Delaware 1-10702 34-1531521 - -------------------------------------------------------------------------------- (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 500 Post Road East, Suite 320, Westport, Connecticut 06880 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (203) 222-7170 -------------- NOT APPLICABLE - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ================================================================================ Item 2.02. Results of Operations and Financial Condition. (a) Terex Corporation ("Terex" or the "Company") issued a press release on October 27, 2005, in which Terex provided certain financial results for its fiscal quarter ended September 30, 2005 and updated its outlook for its year ended December 31, 2005. A copy of this press release is included as Exhibit 99.1 to this Form 8-K. As previously disclosed in Current Reports on Form 8-K furnished to the Securities and Exchange Commission ("SEC"), Terex has commenced a detailed internal examination in an effort to reconcile imbalances in certain of the Company's accounts, and previously has announced that the financial statements of Terex for the years ended December 31, 2000, 2001, 2002 and 2003 and for the first and second quarters of 2004 need to be restated to correct certain errors. In addition, Terex is also reviewing other historical accounting issues, including historical revenue recognition practices, certain reserve balances and certain transactions with United Rentals, Inc. Terex has placed an updated list of questions and answers on its website, www.terex.com, under the Investors section, to provide information with respect to the status of Terex's examination and restatement process, as well as the SEC investigation of the Company. A copy of these questions and answers is included as Exhibit 99.2 to this Form 8-K. Safe Harbor Statement. The above contains forward-looking information based on Terex's current expectations. Because forward-looking statements involve risks and uncertainties, actual results could differ materially. Such risks and uncertainties, many of which are beyond Terex's control, include among others: Terex's business is highly cyclical and weak general economic conditions may affect the sales of its products and its financial results; the sensitivity of construction, infrastructure and mining activity and products produced for the military to interest rates and government spending; the ability to successfully integrate acquired businesses; the retention of key management personnel; Terex's businesses are very competitive and may be affected by pricing, product initiatives and other actions taken by competitors; the effects of changes in laws and regulations; Terex's business is international in nature and is subject to changes in exchange rates between currencies, as well as international politics; Terex's continued access to capital and ability to obtain parts and components from suppliers on a timely basis at competitive prices; the financial condition of suppliers and customers, and their continued access to capital; Terex's ability to timely manufacture and deliver products to customers; Terex's significant amount of debt and its need to comply with restrictive covenants contained in Terex's debt agreements; Terex's ability to file its periodic reports with the SEC on a timely basis; the previously announced SEC investigation of Terex; Terex's ability to ensure that all intercompany transactions will be properly recorded; compliance with applicable environmental laws and regulations; and other factors, risks and 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 document. Terex expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement included in this document 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. Item 8.01. Other Events. On August 31, 2005, Joseph Apuzzo, formerly President, Terex Financial Services, resigned from his employment with the Company. Prior to serving as President, Terex Financial Services, Mr. Apuzzo served as Chief Financial Officer of the Company from October 21, 1999 until September 16, 2002. On September 7, 2005, Terex, Terex Financial Services, Inc. ("TFS"; Terex and TFS, collectively, "Employer") and Joseph Apuzzo entered into a Separation Agreement (the "Agreement"). A copy of the Agreement is filed as Exhibit 10.1 to this Form 8-K. The following summary is qualified in its entirety by reference to the attached Agreement. - 2 - Pursuant to the Agreement, Mr. Apuzzo resigned from his employment with Employer as of August 31, 2005. Mr. Apuzzo will be paid severance equal to seventy-eight (78) weeks of salary calculated on his then current base salary and will receive medical and other benefits during this seventy-eight (78) week time period (the "Severance Period"). If Mr. Apuzzo becomes employed during the Severance Period, then the above mentioned severance payments and benefits will be reduced or terminated depending on the circumstances of Mr. Apuzzo's new employment. Other provisions of the Agreement require Mr. Apuzzo to cooperate with Employer to ensure a smooth transition following his departure and to protect any confidential information of Employer that he may have, and also prohibit Mr. Apuzzo from competing with Employer for a one year period. Item 9.01. Financial Statements and Exhibits. (c) Exhibits 10.1 Separation Agreement, made and entered into August 31, 2005, among Terex Corporation, Terex Financial Services, Inc. and Joseph Apuzzo. 99.1 Press release of Terex Corporation issued on October 27, 2005. 99.2 Questions and Answers on Terex's Restatement Process. 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 hereunto duly authorized. Date: October 27, 2005 TEREX CORPORATION By: /s/ Phillip C. Widman Phillip C. Widman Senior Vice President and Chief Financial Officer - 3 - EX-10 2 exh10-1.txt SEPARATION AGREEMENT - J. APUZZO SEPARATION AGREEMENT This SEPARATION AGREEMENT is made and entered into this 31st day of August 2005, by and among Terex Corporation and Terex Financial Services, Inc. (collectively, the "Company") and Joseph Apuzzo (Executive"). 1. Resignation from Employment ---------------------------- Executive resigns from his employment as of the end of the business day on August 31, 2005 (the "Termination Date"). 2. Termination Payment and Benefits -------------------------------- Executive hereby agrees to accept, as full and final consideration for Executive's promises, obligations and release set forth herein, and in settlement of any and all claims as particularly set forth below, the following: (a) Severance Payments -- The Company shall pay Executive Severance equal to seventy-eight (78) week(s) (the "Severance Period") salary. The Severance shall be calculated on Executive's current base salary and shall be paid in regular installments in accordance with the normal payroll processing. Company shall continue to withhold for income and other applicable taxes, or other amounts. (b) Medical Benefits - Medical, Dental, and Vision benefits cease as of the end of the month of separation. All other benefits will end on the Termination Date. If Executive is currently enrolled in Medical, Dental, or Vision benefits and enrolls in COBRA for Medical, Dental, and/or Vision benefits, the Company agrees to contribute an amount equal to the Employer's current contribution toward COBRA on behalf of Executive for the duration of the Severance Period (the "Company's Cobra Continuation"). (c) Vacation Pay - Executive shall be paid a lump-sum amount for unused and accrued vacation time to which Executive is entitled. (d) Automobile - During the Severance Period, Employee may continue to use the 2003 Cadillac Seville, VIN 1G6KY54943U253202, which is the automobile leased by the Company for and provided to him as an employee. The Company shall continue to pay for insurance premiums on the automobile and the cost of maintenance. The Company shall give Executive 30 days notice in the event of any change in level of insurance coverage. The Company shall not pay mileage, gas, moving or other violations or any other incidental expenses, unless such expenses are incurred in the course of performing services requested by the Company. The Employee represents that he will maintain the vehicle in good repair, shall use it only for its intended purpose and will not operate it negligently or recklessly. The Employee shall be responsible for any damage to the automobile that is not regular wear and tear. The Employee shall also indemnify and hold the Company harmless for any damages or injuries caused as a result of the negligent or reckless operation of this automobile during the Severance Period, including but not limited to out of pocket expenses and attorneys fees and cost. Effective from the Termination Date, the Executive agrees that all mileage on the vehicle is for personal usage. On the Termination Date, Executive will report to Laurie Yarrish the odometer reading, the number of miles driven between November 1, 2004 and the Termination Date and of those miles, how many were driven for personal use. (e) Club Memberships - During the Severance Period, the Company shall continue to pay (i) Executive's dues to Rolling Hills Country Club and (ii) Executive's monthly membership fees to the New York Sports Club or reimburse Executive for the monthly membership fees (but not 1 of 7 initiation fees) to a successor health club of up to $80.00 a month, inclusive of sales tax. To receive reimbursement for the monthly membership fees to a successor health club, Executive shall submit to Stacey Babson-Smith a receipt from the successor health club evidencing payment by Executive. Executive shall be responsible for all assessments or other charges as a result of his country club membership. Effective from the termination date, Executive agrees that the use of the country club membership shall be treated as personal use for tax purposes and confirms that the use of the New York Sports Club membership is for personal use. (f) Legal Fees - The Company shall reimburse Executive for up to $9000.00 in legal fees incurred by him in connection with the review and execution of this Agreement (g) Other Expenses - Upon submission of invoices, the Company shall reimburse Executive for his monthly usage costs for his mobile telephone and blackberry. (h) Outplacement Services - During the Severance Period, Executive shall receive Executive level outplacement services from either Right Management Consultants or Lee Hecht Harrison to assist with his transition. (i) Executive expressly agrees that Executive shall not be entitled to and shall not receive any other payments or benefits of any kind from the Company, including without limitation any bonus payments or any right to participate in the Company's 401(k) Plan, other than the benefits expressly provided for in this Paragraph 2 (collectively, "Termination Payments"). Executive further agrees that Executive would not receive the moneys and/or benefits specified in this Agreement except for Executive's execution of this Agreement and Executive's fulfillment of the promises and obligations contained herein. (j) Other Employment -On or about the 1st of each month during the Severance Period, Executive or his counsel, will notify Stacey Babson-Smith via e-mail or telephone if he has been employed, including self employment, or retained as a contractor or consultant in the preceding month, including the income that he has earned and whether he has any plans in the current month to continue or begin employment, including self-employment, or to act as a consultant or contractor including that income that he anticipates earning. The Company may require additional documentation from Executive to confirm employment or engagement as a contractor, including income earned. The Company will suspend Termination Payments in any month in which notification is not made (or the requested documentation is not received) and will not reinstate Termination Payments until notification and/or documentation has been provided to Stacey Babson-Smith. (k) If Executive is employed on a full-time basis, including self employment, or re-employed by the Company, or is retained as a contractor or consultant, Executive agrees that Executive's Termination Payments will be affected as follows: (i) The Company's obligation to provide outplacement services will terminate; (ii) The Company's Cobra Continuation payments will end on the first day that Executive becomes eligible to participate in medical benefits; (iii) Severance Payments will be reduced by the income earned by Executive ("Reduced Severance"). Reduced Severance will be effective on the first day of Executive's employment or engagement and will be made on a going forward basis only. Reduced Severance shall be calculated by subtracting Executive's projected annualized income/78 from Severance/78 multiplied by 2 of 7 the number of weeks remaining in the Severance Period. Where the income earned by Executive varies during the Severance Period, Reduced Severance may be adjusted by the Company. (iv) Executive will return the automobile to the Company; (v) The Company's obligation to pay club membership dues and reimburse Executive for his monthly mobile phone and blackberry costs will terminate; (vi) Under the circumstance where Reduced Severance is $0.00 as a result of the projected annualized income to be earned by Executive, the Severance Period shall end and the Company shall have no further obligation to Executive under this Agreement. (vii) All Termination Payments provided to Executive will be deemed adequate consideration for this Agreement, including but not limited to adequate consideration for the Waiver and Release of Claims, Cooperation with Company, and Protection of Confidential Information, Return of Company Property, Non-Disparagement, Non-solicitation and Non-compete covenants set forth in Paragraphs 3, 4, 5 and 7 below. The elimination or reduction of Termination Payments shall not affect the adequacy of consideration for this Agreement. 3. Cooperation with Company ------------------------ (a) In consideration for the Termination Payments, Executive agrees to fully cooperate with the Company in ensuring a smooth transition following Executive's departure. Executive expressly agrees to cooperate with and make self available to the Company, as the Company may reasonably request under the totality of the circumstances, to assist it in any matter, including but not limited to meeting with Company Executives or agents, promptly and fully responding to inquiries from the Company and giving truthful testimony in any litigation or investigation or potential litigation or investigation, over which Executive may have knowledge, information, or expertise. Executive's obligation to fully cooperate with the Company survives the termination of the Severance Period. (b) To the extent that Executive is an Executive Officer or Director for the Company, its parent company, subsidiaries or affiliates, Executive resigns from those positions effective as of the Termination Date. 4. Waiver and Release of Claims ---------------------------- (a) Executive Understanding of Laws -- Executive understands that there are various state, federal, and local laws that prohibit employment discrimination on the basis of age, sex, race, color, national origin, religion, handicap, veteran status, and other protected categories and that these laws are enforced through the Equal Employment Opportunity Commission, the U. S. Department of Labor, and other agencies. (b) Executive's Release of Company -- In consideration for the Termination Payments, Executive hereby irrevocably, unconditionally and generally releases, and agrees not to commence in any forum, any action or proceeding against the Company and its parent, subsidiaries, affiliates, successors and assigns for damages, judgments, or any liability, claims or demands, known or unknown and of any nature whatsoever and whenever, arising directly or indirectly out of Executive's employment with the Company or the termination of such employment or services. Without in any way limiting the generality of the foregoing, Executive hereby waives and releases any rights, claims or causes of action that Executive may have for salary, bonus, severance pay, pay or distributions pursuant to any Company Long Term 3 of 7 Incentive Plan or Supplemental Executive Retirement Plan or any other benefit plan (excluding 401k), vacation pay, any rights, claims or causes of action arising under the Age Discrimination in Employment Act of 1967 (the "ADEA"), as amended, the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, as amended, the Civil Rights Act of 1866, the Americans with Disabilities Act of 1990, the National Labor Relations Act, the Employee Retirement Income Security Act of 1974, the Fair Labor Standards Act, the Occupational Safety and Health Act, the Consolidated Omnibus Budget Reconciliation Act of 1985, the Federal Family and Medical Leave Act, the Workers Adjustment and Retraining Notification Act, the Connecticut Fair Employment Practices Act, and any rights, claims or causes of action in tort or in contract or pursuant to any other applicable state or local laws. Executive intends to waive and release any rights Executive has under these and other laws of contract or tort, but Executive does not intend to and does not waive any rights or claims that Executive may have after the date Executive signs this Agreement. Executive acknowledges that Executive does not have any current action, proceeding, charge or complaint against the Company pending regarding Executive's employment. Nothing in this Agreement may affect the rights and responsibilities of the Equal Employment Opportunity Commission (the "Commission) to enforce the ADEA, or used to justify interfering with the protected right of Executive to file a charge or participate in an investigation or proceeding conducted by the Commission under the ADEA. However, Executive agrees not to accept any relief or recovery from any charge or complaint filed against the Company with any federal, state, or local administrative agency or court with regard to claims arising from Executive's employment. Nothing contained herein waives or expands any rights that Executive may have to indemnification or the advancement of legal fees pursuant to any applicable Directors and Officers Insurance Policy or the Amended and Restated Bylaws of Terex Corporation, dated as of March 9, 1998 (the "Bylaws"), or as otherwise amended to comply with applicable law, for any actions or investigations, or claims, issues or matters associated with any action or investigation. Any right or limitations to indemnification of Executive are derived only from the Bylaws and/or any applicable Directors and Officers Insurance Policy. 5. Protection of Confidential Information; Return of Company Property; --------------------------------------------------------------------------- Non-Disparagement ---------------- In consideration for the Termination Payments: (a) No Use of Company Confidential Information -- Executive acknowledges that: (i) As a result of Executive's employment with the Company, Executive has obtained secret and confidential information concerning the business of the Company, including, without limitation, the operations and finances, the identity of customers and sources of supply, their needs and requirements, the nature and extent of contracts with them, and related costs, price, and sales information ("Confidential Information"). (ii) Executive agrees that Executive will not at any time divulge to any person, firm, or corporation, or use for Executive's own benefit, any Confidential Information obtained or learned by Executive during the course of Executive's employment with the Company, except (i) with the Company's express written consent; (ii) to the extent that any such information is in or becomes part of the public domain other than as a result of Executive's breach of any of Executive's obligations hereunder; or, (iii) where required to be disclosed by court order, subpoena, or other government or legal process by law, in which event Executive shall promptly notify the Company. 4 of 7 (iii) The existence and terms of this Agreement are Confidential Information. Except to his spouse and legal and financial advisors, Executive agrees not to disclose, either directly or indirectly, any information whatsoever regarding the existence or substance of this Agreement, including specifically any of the details of Executive's Termination Payments. (b) Executive to Return Company Property -- Except as provided herein, within 5 business days from the Termination Date, Executive shall deliver to the Company all memoranda, notes, software, records, reports, manuals, drawings, blueprints, and other documents (in any format and all copies thereof) and other tools provided to Executive by Company in Executive's possession relating to the business of the Company and all property associated therewith which Executive may possess or have under Executive's control. Executive shall have the right to retain all of Executive's personal property. (c) Non-disparagement -- Executive agrees to conduct self in a professional manner and not to make any disparaging, negative, or false statements regarding the Company, its parents, subsidiaries, affiliates, directors, officers, or Executives which could in any way have an adverse effect on the business or affairs of the Company. Employee shall direct all employment references only to the Company's Vice President, Human Resources. The Company agrees that Ron DeFeo, the Chairman and CEO of Terex Corporation, and his direct reports as of the Termination Date, will not make any disparaging statements regarding Employee's character. 6. Consultation with Attorney and Review of Agreement and Release -------------------------------------------------------------- By executing this Agreement, Executive acknowledges that (i) Executive has been advised in writing by the Company to consult with an attorney before executing this Agreement; (ii) Executive had adequate time to review this Agreement and to consider whether to sign this Agreement; (iii) Executive understands each and every term of this Agreement and the full effect of signing this Agreement, including Executive's obligations to the Company and Executive's release and waiver of any and all claims; (iv) Executive has been provided a period of at least twenty-one (21) days within which to consider this Agreement and consult with counsel; and (v) for a period of seven (7) days following execution of this Agreement, Executive may revoke this Agreement and this Agreement will not be effective until the revocation period expires. In the event Executive revokes in accordance with this provision, Executive shall return to the Company all consideration received under this Agreement, if any. 7. Non-solicitation and Non-compete -------------------------------- In consideration for the Termination Payments, Executive hereby agrees that for the period commencing on the date of the signing of this Agreement and continuing for one (1) year thereafter ("Non-solicitation Period"), Executive will not without Company's prior written consent, directly or indirectly (i) solicit or encourage any of the Executives of Company to leave the employ of Company or to terminate or alter their contractual relationships, if any, in a way that is adverse to Company's best business interests; (ii) solicit, divert or take away, or attempt to solicit, divert or take away, any customers, business, or suppliers of Company upon whom Executive called, serviced, or solicited during Executive's employment with Company or with whom Executive became acquainted as a result of employment with Company; or (iii) be involved in any business or enterprise, whether as any owner, member of a partnership, trustee, principal shareholder (stock ownership in a public or private company in excess of 5%), officer or director of a corporation, or as an Executive, agent, associate, consultant or otherwise, which competes with any of the financial products and services offered by the Company, its subsidiaries or affiliates to assist with in the acquisition of construction equipment. 5 of 7 8. Third Party Agreements ---------------------- Executive hereby warrants and represents that Executive has not entered into any third party agreements in Company's name or on Company's behalf of which Company has not been previously advised in writing. Executive further warrants and represents that during the period of Executive's employment with Company, Executive has not knowingly or intentionally engaged in any conduct or activity related to the Company, which constitutes a violation of law, misconduct, or a material violation of Company's policies. 9. No Admission by the Company --------------------------- This Agreement and/or any payments made hereunder are not intended to be an admission or concession by the Company of any wrongdoing or illegal or actionable acts or omissions and the Company affirmatively states that it has not engaged in any such acts or omissions. In consideration for the Termination Payments, Executive shall not directly or indirectly make any written or oral statements, suggestions, or representations that the Company has made or implied any such admission or concession. 10. Breach of this Agreement ------------------------ In the event Executive materially breaches any of the provisions of this Agreement, Company's obligation hereunder to provide Executive any further Termination Payments and/or benefits shall immediately cease. 11. Miscellaneous ------------- Except for Non-Disclosure Agreement dated October 9, 1995, this Agreement contains all the understandings and agreements with respect to the matters set forth herein, and there are no others made either contemporaneously herewith, or otherwise. This Agreement shall be governed by the laws of the state of Connecticut applicable to contracts made and wholly performed therein, without reference to conflicts of law principles. This Agreement may not be modified, altered, or changed except upon express written consent of both parties wherein specific reference is made to this Agreement. The construction and interpretation of this Agreement shall not be strictly construed against the drafter. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, all of which shall remain in full force and effect. The headings in this Agreement are for reference only, and shall not affect the interpretation of this Agreement. 12. Voluntary Signing - - ----------------- Executive acknowledges that this Agreement and all the terms hereof are fair, reasonable, and are not the 6 of 7 result of any fraud, duress, coercion, pressure, or undue influence exercised by the Company and that Executive has approved and/or entered into this Agreement and all of the terms hereof, knowingly, freely and voluntarily. /s/ Joseph Apuzzo Joseph Apuzzo Dated: September 2, 2005 TEREX CORPORATION By: /s/ Ronald M. DeFeo Dated: September 7, 2005 TEREX FINANCIAL SERVICES, INC. By: /s/ Eric I Cohen Eric I Cohen Vice President Dated: September 7, 2005 7 of 7 EX-99 3 exh99-1.txt TEREX Q3 2005 EARNINGS RELEASE ISSUED 10/27/05 [TEREX LOGO] NEWS RELEASE NEWS RELEASE NEWS RELEASE For information contact: Tom Gelston - Director, Investor Relations (203) 222-5943 TEREX REPORTS THIRD QUARTER RESULTS o Net sales in the third quarter totaled $1,528 million, an increase of 22% o Net income of $1.06 per share for the third quarter of 2005 o Backlog is $1,285 million, up 56% as compared with third quarter 2004 WESTPORT, CT, October 27, 2005 -- Terex Corporation (NYSE: TEX) today announced net income for the third quarter of 2005 of $54.4 million, or $1.06 per share, compared to net income of $46.0 million, or $0.89 per share, for the third quarter of 2004. Excluding the impact of special items, net income for the third quarter of 2005 was $56.1 million, or $1.10 per share, compared to net income of $47.8 million, or $0.93 per share, for the third quarter of 2004. Special items for the third quarter of 2005 included charges for investigation costs associated with the Company's internal review and restatement of its financial statements for the fiscal years 2000, 2001, 2002, and 2003 and the first and second quarters of 2004, charges relating to previously announced restructuring programs, an asset impairment charge for the Company's American Truck Company joint venture, and the gain on the sale of a facility in the Czech Republic. Special items for the third quarter of 2004 primarily included costs associated with announced restructuring activities, costs associated with the restructuring of the compact equipment parts business, write-down of certain assets associated with a discontinued parts business, accelerated amortization arising from the early retirement of debt, and gain on the sale of facilities. The estimated effective tax rate for the third quarter of 2005 was 34.8%, as compared with 6.9% for the third quarter of 2004. Further information regarding the effective tax rates for the periods provided is included in the "Taxes" section towards the end of this release. Net sales increased to $1,528.3 million in the third quarter of 2005, an increase of 22% from $1,251.8 million in the third quarter of 2004. Net debt (consisting of long-term debt, including current portion of long-term debt, less cash and cash equivalents) at September 30, 2005 increased by $30 million from June 30, 2005 levels. For the nine months ended September 30, 2005, net sales totaled $4,741.3 million, an increase of 31% from $3,632.0 million for the nine months ended September 30, 2004. Net income for the first nine months of 2005 was $162.9 million, or $3.19 per share, compared to net income of $131.1 million, or $2.56 per share, for the first nine months of 2004. Net income, excluding special items, was $167.0 million, or $3.27 per share, for the first nine months of 2005, compared to net income, excluding special items, of $125.3 million, or $2.45 per share, for the first nine months of 2004. Net debt decreased by $17 million in the nine months ended September 30, 2005. "Overall, Terex had a strong third quarter," commented Ronald M. DeFeo, Terex's Chairman and Chief Executive Officer. "We are pleased with our operational and financial performance, which reflects continued positive end-market trends for many of our products and builds on the operational improvements we have undertaken to date. We are seeing more meaningful signs that the struggling businesses in our portfolio are in the early stages of recovery, while at the same time our stronger businesses continue to post even better results than originally anticipated." Mr. DeFeo continued, "We also saw a meaningful improvement in operating margins resulting from improved pricing and growth leverage. For the second consecutive quarter, we posted a double digit percentage incremental margin (defined as the year over year change in income from operations divided by the year over year change in net sales), with a third quarter reported total Company incremental margin of approximately 12%, a particularly strong performance in this difficult input cost environment." "We continue to operate in a challenging environment. We view these challenges as opportunities to deliver even stronger results in the future," added Mr. DeFeo. "Supplier issues, most notably, but not exclusively, steel and tires, resulted in cost pressures and shortages impacting several of our products. Couple these issues with the overtime needed to meet customer demand, and we have good but difficult problems to solve. These reinforce the importance of all the work we are doing as part of the Terex Business System to bring Terex together. As I have indicated before, we are still in the early stages of these initiatives." "The metric that we will continue to use to measure our business performance is: Return on Invested Capital ("ROIC"), and this is the measure for which we would expect our shareholders to hold us accountable. We define ROIC as the last twelve months operating profit excluding special items divided by the sum of average book equity and average net debt over the same twelve month period," said Mr. DeFeo. "Despite being an industry leader with regard to performance in this area and a substantially reduced asset base compared to prior years, we still feel our operating margin is too low and our working capital (defined as the sum of accounts receivable and inventory less accounts payable) is too high as measured as a percentage of revenue. Our percentage of working capital to the trailing three months sales annualized at the end of the third quarter was approximately 21%, and we continue to target 18% and 15% for the end of 2005 and 2006, respectively. This effort to control working capital investment relative to our pre-tax earnings stream will drive cash flow, and enable the Company to pay down its high cost debt, most notably the $300 million of 10 3/8% bonds callable in April 2006." In this press release Terex refers to various non-GAAP financial measures. These measures may not be comparable to similarly titled measures being disclosed by other companies. The tables below and the tables included elsewhere in this press release provide a reconciliation of the reported GAAP numbers for the third quarters and first nine months 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. A financial summary is shown on the following page. Please note that, as previously announced on March 3, 2005, third quarter 2004 results of operations set out below will exceed the preliminary operating performance results previously released for that period, reflecting the impact of capitalizing a portion of increasing commodity cost variances on inventory value. Additionally, due to the valuation allowance established as of December 31, 2003, Terex's provision for U.S. taxes in the quarters ended March 31, 2004, June 30, 2004 and September 30, 2004 will be substantially reversed, thereby increasing net income in those periods. The tables below reflect the changes in all periods impacted. 2
Three months ended September 30, ------------------------------------------------------------------------------------------- 2005 2004 ---------------------------------------- -------------------------------------------- (in millions, except per share amounts) Special Excluding Special Excluding Reported Items (2) Special Reported Items (3) Special Items Items -------------------------------------- ----------------------------------------- Net sales................ $ 1,528.3 $ --- $ 1,528.3 $ 1,251.8 $ --- $ 1,251.8 ============ ============ ============ ============= =========== ============= Gross profit ............ $ 241.9 $ 2.5 $ 244.4 $ 186.0 $ 0.9 $ 186.9 SG&A..................... 139.7 (1.2) 138.5 114.0 --- 114.0 ------------ ------------ ------------ ------------- ----------- ------------- Income from operations .. 102.2 3.7 105.9 72.0 0.9 72.9 Other income (expense)... (18.8) (1.1) (19.9) (22.6) 1.0 (21.6) Provision for income taxes (29.0) (0.9) (29.9) (3.4) (0.1) (3.5) ------------ ------------ ------------ ------------- ----------- ------------- Net income .............. $ 54.4 $ 1.7 $ 56.1 $ 46.0 $ 1.8 $ 47.8 ============ ============ ============ ============= =========== ============= Earnings per share....... $ 1.06 $ 1.10 $ 0.89 $ 0.93 EBITDA (1)............... $ 116.4 $ 3.7 $ 120.1 $ 85.6 $ 0.9 $ 86.5 Backlog ................. $ 1,284.5 $ 1,284.5 $ 824.6 $ 824.6 Average diluted shares Outstanding.......... 51.2 51.2 51.4 51.4
(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 ($0.8 million), charges related to previously announced restructuring activities, namely at the Kilbeggan facility, Atlas UK operation and Terex Utilities branch locations ($1.4 million), an asset impairment charge in the American Truck Company joint venture ($0.2 million), and the gain on the sale of a facility in the Czech Republic ($0.7 million). (3) Special items, net of tax, relate to previously announced restructuring initiatives ($0.3 million), the accelerated amortization arising from the early retirement of debt ($0.9 million), costs associated with the restructuring of the compact equipment parts business ($0.4 million) and businesses held for sale or to be closed ($1.8 million), offset by a gain on the sale of a facility ($1.6 million).
Nine months ended September 30, ------------------------------------------------------------------------------------------- 2005 2004 ---------------------------------------- -------------------------------------------- (in millions, except per share amounts) Special Excluding Special Excluding Reported Items (2) Special Reported Items (3) Special Items Items -------------------------------------- ----------------------------------------- Net sales................ $ 4,741.3 $ --- $ 4,741.3 $ 3,632.0 $ --- $ 3,632.0 ============ ============ ============ ============= =========== ============= Gross profit ............ $ 731.9 $ 3.7 $ 735.6 $ 541.3 $ 10.8 $ 552.1 SG&A..................... 417.9 (3.3) 414.6 345.2 (1.6) 343.6 ------------ ------------ ------------ ------------- ----------- ------------- Income from operations .. 314.0 7.0 321.0 196.1 12.4 208.5 Other income (expense)... (66.1) (1.1) (67.2) (48.7) (18.9) (67.6) Benefit from/(provision for) income taxes...... (85.0) (1.8) (86.8) (16.3) 0.7 (15.6) ------------ ------------ ------------ ------------- ----------- ------------- Net income (loss)........ $ 162.9 $ 4.1 $ 167.0 $ 131.1 $ (5.8) $ 125.3 ============ ============ ============ ============= =========== ============= Earnings per share....... $ 3.19 $ 3.27 $ 2.56 $ 2.45 EBITDA (1)............... $ 359.4 $ 7.0 $ 366.4 $ 244.1 $ 12.4 $ 256.5 Backlog ................. $ 1,284.5 $ 1,284.5 $ 824.6 $ 824.6 Average diluted shares Outstanding.......... 51.1 51.1 51.2 51.2
(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 ($1.6 million), charges related to restructuring activities, namely at the corporate level, and at the business units of Cedarapids, Terex UK, Terex Utilities branch locations and the Kilbeggan facility ($2.9 million), an asset impairment charge in the American Truck Company joint venture ($0.2 million), charges relating to the closure of certain Terex Utilities branch locations ($0.1 million) and the gain on the sale of a facility in the Czech Republic ($0.7 million). (3) Special items, net of tax, relate to the gain on the sale of facilities ($16.7 million), costs associated with restructuring activities, mainly in the Terex-Atlas businesses ($7.3 million), the net gain related to the favorable settlement of litigation proceedings regarding the O&K acquisition ($3.8 million), the loss on the sale of discontinued business activities ($4.3 million), the write-down of investments ($0.9 million), and the accelerated amortization arising from the early retirement of debt ($2.2 million). 3 Segment Performance The comparative segment performance data below reflects Terex's current business segment organization. Comparative segment performance data also excludes special items.
Terex Construction Third Quarter Year-to-Date -------------------------------------------- ------------------------------------------- (dollars in millions) 2005 2004 2005 2004 -------------------------------------------- --------------------- --------------------- % of % of % of % of sales sales sales Sales ---------- ---------- --------- --------- Net sales..................... $ 481.2 $ 418.5 $1,554.2 $1,283.2 ============ ============ =========== =========== Gross profit ................. $ 70.1 14.6% $ 57.0 13.6% $ 219.7 14.1% $ 180.4 14.1% SG&A ......................... 43.5 9.0% 36.2 8.6% 128.0 8.2% 111.9 8.7% ------------ ------------ ----------- ----------- Operating profit.............. $ 26.6 5.5% $ 20.8 5.0% $ 91.7 5.9% $ 68.5 5.3% ============ ============ =========== =========== Backlog....................... $ 281.9 $ 162.8 $ 281.9 $ 162.8
Net sales in the Terex Construction group for the third quarter of 2005 increased $62.7 million to $481.2 million from $418.5 million in the third quarter of 2004. The 15% increase in net sales was primarily driven by the heavy construction equipment businesses, including the scrap handler business, and the mobile crushing and screening businesses. Gross margin in the third quarter of 2005 was 14.6%, a 1.0% improvement when compared with the third quarter of 2004. SG&A expenses for the third quarter of 2005 were $43.5 million, or 9.0% of sales, compared to $36.2 million, or 8.6% of sales, in the third quarter of 2004, with the increase due mainly to higher sales and marketing costs related to increased sales volume and higher bad debt expense in the period. Income from operations for the quarter was $26.6 million, or 5.5% of sales, an increase of 28% when compared to $20.8 million, or 5.0% of sales, for the third quarter of 2004. "Net sales across our various product categories continue to show impressive growth," commented Colin Robertson, President-Terex Construction. "It is difficult to limit the positive comments on the revenue growth to just one or two products, as the scrap handler, North American off-highway truck, wheeled excavator, European telehandler and mobile crushing and screening businesses all posted strong year over year revenue growth. Our compact construction equipment business grew modestly year over year, as it continues to battle with an extremely competitive marketplace and significant pricing pressure, particularly in North America." "We continue to face the financial headwinds that are making margin expansion more challenging. Input costs remain elevated, and the weak dollar, as compared to the British Pound Sterling and Euro, although improving somewhat, still provides challenges," Mr. Robertson added. "Our focus remains on cost savings and supplier rationalization opportunities that we have identified, and we feel that many of these opportunities will be in place for the 2006 fiscal year." Mr. Robertson continued, "In the near term, we fully expect that demand will provide us with the opportunity to realign our prices to ensure that supply pressures we, and the industry in general, are experiencing are addressed and our margins reflect the robustness of the recovery." 4
Terex Cranes Third Quarter Year-to-Date -------------------------------------------- ------------------------------------------- (dollars in millions) 2005 2004 2005 2004 --------------------- ---------------------- --------------------- --------------------- % of % of % of % of sales sales Sales sales --------- ---------- --------- --------- Net sales..................... $ 289.7 $ 269.3 $ 930.7 $ 755.4 ============ ============ =========== =========== Gross profit ................. $ 36.8 12.7% $ 32.6 12.1% $ 113.7 12.2% $ 96.6 12.8% SG&A ......................... 24.2 8.4% 24.7 9.2% 79.1 8.5% 70.0 9.3% ------------ ------------ ----------- ----------- Operating profit.............. $ 12.6 4.3% $ 7.9 2.9% $ 34.6 3.7% $ 26.6 3.5% ============ ============ =========== =========== Backlog....................... $ 385.4 $ 243.8 $ 385.4 $ 243.8
Net sales in the Terex Cranes group for the third quarter of 2005 increased $20.4 million to $289.7 million from $269.3 million in the third quarter of 2004, reflecting improvement in most businesses, particularly in the tower crane business. SG&A expenses remained relatively flat at $24.2 million, or 8.4% of sales, in the third quarter of 2005 when compared to SG&A expenses in the third quarter of 2004 of $24.7 million, or 9.2% of sales. Income from operations increased $4.7 million to $12.6 million, or 4.3% of sales, for the third quarter of 2005 from $7.9 million, or 2.9% of sales, for the third quarter of 2004. "As in the first half of this year, our global presence continues to help balance our performance in the third quarter," commented Steve Filipov, President - Terex Cranes. "The North American market, however, has shown signs of demand improvement. The backlog is strong, and the order book continues to grow. We now need to increase our production rate. We have a new leadership team in place that is firmly focused on lean implementation, better purchasing and customer service. Additionally, the Waverly, Iowa team initiated an additional price increase of roughly 5% to help offset cost pressures. We continue to see improvements in our other product ranges, including the tower crane business, and an improving all-terrain crane global market." Mr. Filipov continued, "What has turned out to be a real success for Terex is our under-300-ton lattice boom crane relationship with IHI. This month, Terex will be delivering the 300th crawler crane sold under this relationship. This product, combined with our 300-ton and up range out of Germany, has made Terex one of the market leaders in this category. The small range of crawler lattice-boom cranes has continued to grow in market penetration in North America, and positions out product well for the recovering crane economy."
Terex Aerial Work Platforms Third Quarter Year-to-Date -------------------------------------------- ------------------------------------------- (dollars in millions) 2005 2004 2005 2004 --------------------- ---------------------- --------------------- --------------------- % of % of % of % of sales sales Sales sales --------- ---------- --------- --------- Net sales..................... $ 370.4 $ 235.8 $1,041.8 $ 677.9 ============ ============ =========== =========== Gross profit ................. $ 76.1 20.5% $ 45.9 19.5% $ 197.7 19.0% $ 138.1 20.4% SG&A ......................... 26.3 7.1% 16.4 7.0% 71.4 6.9% 52.5 7.7% ------------ ------------ ----------- ----------- Operating profit.............. $ 49.8 13.4% $ 29.5 12.5% $ 126.3 12.1% $ 85.6 12.6% ============ ============ =========== =========== Backlog....................... $ 202.8 $ 118.5 $ 202.8 $ 118.5
Net sales for the Terex Aerial Work Platforms group for the third quarter of 2005 increased $134.6 million to $370.4 million from $235.8 million in the third quarter of 2004. The increase in sales was driven primarily by continued strong order activity from the rental channel. Gross margin slightly improved in the quarter versus the prior year results, as pricing actions and 5 volume leverage has offset the negative impact of continued cost pressures on components used in production as well as some cost inefficiencies resulting from ramp-up in manufacturing resources to respond to this segment's significant revenue growth. Income from operations increased to $49.8 million, or 13.4% of sales, in the third quarter of 2005 from $29.5 million, or 12.5% of sales, in the third quarter of 2004. "During the third quarter, we continued to see strong demand for all our products," said Bob Wilkerson, Terex Executive Vice President and President - Terex Aerial Work Platforms. "Demand on a worldwide basis remained strong, with particular strength in Asia and the Americas. Additionally, we saw an increase in order activity for many of our products due to Hurricane Katrina, but this increase was mainly due to the replacement of lost or damaged equipment already in the region, and does not reflect the reconstruction needs that will undoubtedly materialize." Mr. Wilkerson added, "We are full of optimism as we look forward into 2006, and we expect our favorable performance trend to continue. We continue to tackle the challenges that emerge from input pricing and supply concerns, but feel we are doing reasonably well in managing these items. The management team remains focused and will continue to work to ensure that input costs and sales prices are closely linked. Our optimism is strong, and the demand for our products is solid today and is still improving. It is important to remember that approximately 65% of our business is North American focused, and the largest driver of this business is commercial construction. With commercial construction in the U.S. only recently recovering, and a consensus view of a multi-year projected favorable outlook for commercial construction in the U.S., we remain optimistic that revenues and operating profit will continue to improve."
Terex Materials Processing & Mining Third Quarter Year-to-Date -------------------------------------------- ------------------------------------------- (dollars in millions) 2005 2004 2005 2004 --------------------- ---------------------- --------------------- --------------------- % of % of % of % of sales sales sales sales --------- ---------- --------- --------- Net sales..................... $ 217.2 $ 160.4 $ 636.0 $ 389.7 ============ ============ =========== =========== Gross profit ................. $ 39.5 18.2% $ 23.3 14.5% $ 112.8 17.7% $ 62.0 15.9% SG&A ......................... 20.4 9.4% 14.1 8.8% 61.3 9.6% 40.3 10.3% ------------ ------------ ----------- ----------- Operating profit.............. $ 19.1 8.8% $ 9.2 5.7% $ 51.5 8.1% $ 21.7 5.6% ============ ============ =========== =========== Backlog....................... $ 237.6 $ 124.6 $ 237.6 $ 124.6
Net sales for the Terex Materials Processing & Mining group for the third quarter of 2005 increased $56.8 million to $217.2 million from $160.4 million in the third quarter of 2004. As in the first half of 2005, the increase in sales was attributable to the overall strong demand for mining products, mainly the mining hydraulic excavators manufactured in Dortmund, Germany, as well as to the acquisition of the Reedrill mining business in the fourth quarter of 2004. Excluding the acquisition of Reedrill, net sales increased 18% compared to the comparable year ago period. This increased sales volume had a positive impact on operating income, as income from operations more than doubled to $19.1 million, or 8.8% of sales, in the third quarter of 2005 from $9.2 million, or 5.7% of sales, in the third quarter of 2004. "The Materials Processing & Mining group had a solid third quarter of 2005, continuing the positive earnings and profit performance that reflects the improving end-market," commented Rick Nichols, President - Terex Materials Processing & Mining. "This trend is a direct result of solid global GDP growth supporting commodity prices at levels where mining companies are encouraged to promote investment in production and capacity related projects. This quarter, we saw a strong demand for Terex's hydraulic shovel and electric drive mining trucks, increasing the field population of our products and significantly 6 improving our parts and service sales outlook. Additionally, the performance of Reedrill and the Materials Processing group, specifically our Cedarapids operation, continue to meaningfully contribute to our earnings." Mr. Nichols continued, "We continue to look forward with a sense of optimism. 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 and Russia, are expected to continue their strong growth for the foreseeable future. Additionally, we have some engineering projects in our new product development pipeline, such as a larger truck, a more complete shovel line and new drill products, which should be additive to the revenue and profit of this segment. With this global economic backdrop, added with our pricing actions, low-cost sourcing initiatives and new product development, we remain firm in our belief that our operating margins will exceed 10% in 2006."
Terex Roadbuilding, Utility Products and Other Third Quarter Year-to-Date -------------------------------------------- ------------------------------------------- (dollars in millions) 2005 2004 2005 2004 --------------------- ---------------------- --------------------- --------------------- % of % of % of % of sales sales Sales sales --------- ---------- --------- --------- Net sales..................... $ 198.8 $ 190.4 $ 669.7 $ 579.5 ============ ============ =========== =========== Gross profit ................. $ 21.1 10.6% $ 25.7 13.5% $ 89.0 13.3% $ 72.7 12.5% SG&A ......................... 21.4 10.8% 20.6 10.8% 67.5 10.1% 61.5 10.6% ------------ ------------ ----------- ----------- Operating profit (loss)....... $ (0.3) (0.2%) $ 5.1 2.7% $ 21.5 3.2% $ 11.2 1.9% ============ ============ =========== =========== Backlog....................... $ 196.1 $ 188.4 $ 196.1 $ 188.4
Net sales for the Terex Roadbuilding, Utility Products and Other group for the third quarter of 2005 increased $8.4 million to $198.8 million from $190.4 million for the third quarter of 2004, with substantially all the sales growth coming from the concrete mixing truck and utility businesses. SG&A expenses for the third quarter of 2005 were $21.4 million, or 10.8% of sales, compared to $20.6 million, or 10.8% of sales, in the third quarter of 2004. Income from operations decreased to a loss of $0.3 million from a profit of $5.1 million, or 2.7% of sales, in the third quarter of 2004. "The Roadbuilding, Utility Products and Other group continued to struggle, although signs of improvement are beginning to materialize," commented Chris Ragot, President - Terex Roadbuilding and Utilities. "We have some internal issues that are being addressed, namely operating inefficiencies at our installation sites for our Utilities group in the western United States. The Utilities group had a strong showing at the ICUEE show, North America's largest utilities show, held every two years. We unveiled our new range of products targeting the transmission line business, as well as a new product focused on the home market for DSL installation. All customers, whether investor owned utilities, telecom or contractors, have indicated a growing need for equipment. This favorable outlook is bolstered by this group's growth in both backlog and bookings." Mr. Ragot continued, "Our expectations for the Roadbuilding business for the end of 2005 and on into 2006 is positive. Our concrete focused businesses, including mixing trucks, batch plants and slip-form pavers, all continue to perform well. This strong performance is a result of a continued strong North American housing market and the beginning of a material recovery in non-residential work. Our main challenge on the Roadbuilding side remains the asphalt plant business." Regarding the Company's specialty vehicle businesses, Mr. DeFeo commented, "We incurred charges in the third quarter related to the inventory associated with the IMOD contract as well as costs associated with the continuation of 7 proposal efforts, including testing, for the previously announced LVSR project. We are evaluating our participation in the American Truck Company joint-venture, as the financial results to date have not met our expectations." Mr. DeFeo continued, "Terex's special programs group also had a challenging quarter, reflecting costs associated with a reduction in the fleet size of the re-rental program." Capital Structure "Net debt at the end of the third quarter of 2005 increased $30 million to $763 million from $733 million at the end of the second quarter of 2005," commented Phil Widman, Terex's Senior Vice President and Chief Financial Officer. "This reflects a decrease of $61 million from the net debt balance of $824 million as of the end of the third quarter of 2004." Mr. Widman added, "We have said that our expectations are for cash flow to closely follow the seasonal pattern of the business. With a stronger third quarter than originally anticipated, much of the anticipated cash flow has been reinvested in working capital to supply current product demand, and as such, it has deferred much of the cash benefit into the fourth quarter. Working capital as a percent of trailing three month annualized sales was approximately 21% at the end of both the third quarter of 2005 and 2004. However, our goal is still to achieve an 18% level at the end of 2005." Taxes Commenting on the effective tax rate used in this release, Mr. Widman stated, "The effective tax rate in the third quarter of 2005 is estimated to be 34.8%, compared to 6.9% in the third quarter of 2004." Mr. Widman continued, "The 2004 rate is lower than the statutory rate due to discrete items in the quarter, including the favorable resolution of a jurisdictional audit, the release of valuation allowances in certain businesses as their profitability indicated that deferred tax assets would more likely than not be realized, and the impact of a full valuation allowance on the U.S. deferred tax assets not being reversed until the fourth quarter of 2004." Outlook "Looking forward, we remain optimistic about our earnings outlook, said Mr. DeFeo. For 2005 we are forecasting the full year earnings per share ("EPS") to be in the range of $4.15 - $4.25, as compared to our prior guidance of $3.90 to $4.10, both before special items. Our revenue expectations for 2005 are towards the high end of the $6.0 - $6.2 billion range. We continue to see solid order activity, best illustrated by our year to date revenue increase of 31% and our backlog increase of 56% when compared with the same period last year. We are currently in the middle of 2006 budget reviews, and as such we cannot give specific guidance at this time, but we expect that next year will be substantially better in regard to revenues, margins and cash flow when compared to 2005. We continue to believe that there are significantly better days ahead for Terex, and our focus will be on doing those things necessary to drive results and deliver industry leading returns on invested capital for our shareholders." Update on Restatement Process As previously disclosed in Current Reports on Form 8-K furnished to the Securities and Exchange Commission ("SEC"), Terex has commenced a detailed internal examination in an effort to reconcile imbalances in certain of the Company's accounts, and previously has announced that the financial statements of Terex for the years ended December 31, 2000, 2001, 2002 and 2003 and for the first and second quarters of 2004 need to be restated to correct certain errors. In addition, Terex is also reviewing other historical accounting issues, including historical revenue recognition practices, certain reserve balances and certain transactions with United Rentals, Inc. Terex has placed an updated list of questions and answers on its website, www.terex.com, under the Investors section, to provide information with respect to the status of Terex's examination and restatement process, as well as the SEC investigation of the Company. 8 Safe Harbor Statement The press release contains forward-looking information based on Terex's current expectations. Because forward-looking statements involve risks and uncertainties, actual results could differ materially. Such risks and uncertainties, many of which are beyond Terex's control, include among others: Terex's business is highly cyclical and weak general economic conditions may affect the sales of its products and its financial results; the sensitivity of construction, infrastructure and mining activity and products produced for the military to interest rates and government spending; the ability to successfully integrate acquired businesses; the retention of key management personnel; Terex's businesses are very competitive and may be affected by pricing, product initiatives and other actions taken by competitors; the effects of changes in laws and regulations; Terex's business is international in nature and is subject to changes in exchange rates between currencies, as well as international politics; Terex's continued access to capital and ability to obtain parts and components from suppliers on a timely basis at competitive prices; the financial condition of suppliers and customers, and their continued access to capital; Terex's ability to timely manufacture and deliver products to customers; Terex's significant amount of debt and its need to comply with restrictive covenants contained in Terex's debt agreements; Terex's ability to file its periodic reports with the SEC on a timely basis; the previously announced SEC investigation of Terex; Terex's ability to ensure that all intercompany transactions will be properly recorded; compliance with applicable environmental laws and regulations; and other factors, risks and 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. ### Terex Corporation 500 Post Road East, Suite 320, Westport, Connecticut 06880 Telephone: (203) 222-7170, Fax: (203) 222-7976, www.terex.com 9 EX-99 4 exh99-2.txt Q&A ON TEREX RESTATEMENT PROCESS UPDATE ON TEREX'S RESTATEMENT PROCESS QUESTIONS AND ANSWERS (October 27, 2005) Q. What is the current status of the SEC investigation? A. The SEC is continuing its investigation of four transactions involving Terex and its subsidiaries, on the one hand, and United Rentals, Inc. on the other, in 2000 and 2001. The SEC is examining, among other things, whether Terex properly accounted for those transactions. It is also investigating the Company's previously disclosed intercompany imbalances, and has suggested that the Company review other historical accounting issues, including historical revenue recognition practices and changes in certain reserves. The Company is continuing to cooperate with the Commission and is conducting an extensive review in response to the SEC's inquiry. Q. What matters is the Company reviewing at this time? A. Based on the questions raised by the SEC, the Company has designed work plans for the review of its historical financial statements that provide a significant level of testing of revenue recognition and analysis regarding certain reserve balances, including reserves for bad debt, excess and obsolete inventory, restructuring activities and certain acquisition related accounting adjustments. The Company is also reviewing the original accounting treatment of the four transactions involving Terex and its subsidiaries, on the one hand, and United Rentals, Inc. on the other, in 2000 and 2001. To expedite this review process, the Company is working with outside providers to assist in bringing this matter to a conclusion as soon as practicable. Q. Did the previously announced Audit Committee investigation reach any conclusions about issues concerning intercompany transactions and the reconciliation of imbalances identified in certain of the Company's accounts? A. Yes. The investigation concluded that the Company had inadequate controls, procedures and processes for implementing timely reconciliation of intercompany account balances arising between the Company's many separate business units and its corporate financial accounts. The investigation found that, rather than remedy these problems, certain members of the Company's corporate financial staff had authorized and/or recorded accounting adjustments that were not consistent with GAAP in order to reconcile the imbalances. In addition, the investigation found that the Company's decentralized financial reporting structure and the existence of a complex pass through accounting system at the Company's North American Distribution Center contributed significantly to the imbalance issues. The investigation also found that accounting entries not consistent with GAAP had been recorded at certain of the Company's separate business units. The financial effects of the items that were uncovered or confirmed by the investigation are set forth in a separate question and answer item contained in this Q&A. As a result of its investigation, the Audit Committee instructed management to implement a number of remedial, disciplinary and restructuring actions. Those actions are among the remedial steps taken by the Company described in a separate question and 1 answer item contained in this Q&A. In addition, the Company's former Chief Financial Officer and, as previously announced by the Company on February 22, 2005, its Chief Accounting Officer have resigned and are no longer with the Company. Q: Has the Audit Committee expanded its investigation in light of the issues raised by the SEC? A. Yes. The Audit Committee has directed its independent counsel to pursue the additional issues that have been brought to the Company's attention by the SEC. The expanded investigation is already well underway. Q. Since the Company has announced that it will require additional time to complete the filing of its Form 10-K for the fiscal year ended December 31, 2004 and the Form 10-K would have disclosed material weaknesses in the Company's assessment of the effectiveness of its internal control over financial reporting, at this time can the Company provide any insight as to the material weaknesses identified? For the material weaknesses that have been identified, what specific actions has the Company taken? A. The response to this question describes the material weaknesses identified to date by management in the Company's internal control over financial reporting as of December 31, 2004 and management's remediation initiatives. A complete description and listing of the material weaknesses identified by management in the Company's internal control over financial reporting as of December 31, 2004 and management's remediation initiatives will be provided in the Company's Form 10-K for the fiscal year ended December 31, 2004. Management has conducted an assessment, including testing, of the effectiveness of the Company's internal control over financial reporting as of December 31, 2004. Management has identified the following material weaknesses as of December 31, 2004: o The Company did not maintain effective controls, including monitoring, over its financial reporting process due to an insufficient complement of personnel with a level of accounting knowledge, experience and training in the application of generally accepted accounting principles commensurate with the Company's financial reporting requirements. o Management has determined that the Company did not maintain effective controls over the proper accounting for and monitoring of the recording of its intercompany transactions. o The Company's policies and procedures with respect to its accounting for income taxes were ineffective. Specifically, the Company did not maintain sufficiently detailed financial information in support of its income tax balances, including reconciliations with applicable general ledger accounts. In response to the material weaknesses identified, the Company has taken a number of substantial actions including the following: 2 o The Company has changed the reporting relationship for operating financial personnel, so that they now report directly to the corporate finance group, and ultimately the Company's Chief Financial Officer, rather than to operational managers. o The Company has taken disciplinary actions and/or made changes with respect to certain personnel as a result of the accounting errors. o The Company now requires periodic activity balancing, so that both parties recognize intercompany transactions at the same time. o The Company has added additional personnel, including hiring a new Vice President of Information Technology and a new human resources director dedicated to the Company's financial organization, appointing an Acting Chief Accounting Officer and Controller, hiring a new Vice President of Internal Audit, and hiring an intercompany controller. o The Company has engaged an outside service provider to review the Company's existing set of internal controls and recommend process improvements specifically related to the treatment of intercompany activity. o The Company established procedures to more effectively and accurately accumulate detailed support for approximately eighty foreign tax basis balance sheets, and related processes. o The Company conducted income tax training sessions with financial personnel. o The Company revised its tax provision process (including a redesign of U.S. state tax provision processes) to improve visibility, accuracy and support. o The Company's Chairman and Chief Executive Officer, Chief Financial Officer, General Counsel, Vice President of Human Resources and several others are conducting full day mandatory meetings for approximately 350 of the Company's executives on a worldwide basis concerning best business practices, the Company's Code of Ethics and Conduct, compliance, full disclosure and leadership. The Company intends to take further actions to remediate the three material weaknesses identified and improve controls overall, including: o Providing enhanced and ongoing training for financial and tax personnel. o Adding additional personnel in key areas throughout the Company, including naming a new Chief Accounting Officer and Controller for the Company. o Increasing internal audit capabilities and other oversight to verify compliance with the Company's policies and procedures. o Implementing transaction level intercompany matching. 3 o Simplifying the Company's legal and reporting entity structure to facilitate the processing of intercompany transactions and simplify the tax reporting processes. o Implementing a common information technology platform/business management system worldwide to facilitate the accounting for and reconciliation of intercompany transactions. Q: Can the Company provide an update of its review and examination of intercompany transactions and related errors and the reconciliation of imbalances identified in certain of the Company's accounts? A. The issues identified to date giving rise to the need to restate the Company's previously issued financial statements, and the pre-tax adjustments resulting therefrom, are summarized below: North American Cranes (Cranes Segment): Certain items, mainly related to disputed charges, inventory shortages, warranty and third party payables activity, were erroneously recorded to intercompany accounts that were not timely reconciled, leading to costs totaling $7.4 million in the year ended December 31, 2003, $6.9 million during the year ended December 31, 2002, $4.2 million in the year ended December 31, 2001, and $0.1 million during the year ended December 31, 2000 not being recorded as expenses. During the period from 2001 through 2003, the Company initiated a series of facility consolidations in its crane facilities in North America, which the Company believes was a contributing factor to these errors. North American Distribution (Construction Segment): The Company failed to timely and accurately reconcile certain intercompany imbalances which resulted in costs totaling $1.4 million in the year ended December 31, 2003 and $11.6 million during the year ended December 31, 2002 not being recorded as expenses. Errors in the amount of $1.2 million in the year ended December 31, 2001 were also identified in the review process and resulted in additional costs for that year. The Company believes that the consolidation of its North American distribution for its construction products during 2002 was a contributing factor to these errors. Light Construction (Aerial Work Platforms Segment): The Company failed to timely and accurately reconcile certain intercompany imbalances, which resulted in errors in the recording of intercompany transactions and, as a result, costs totaling $2.1 million in the year ended December 31, 2003, $4.8 million during the year ended December 31, 2002, $1.3 million in the year ended December 31, 2001 and $0.2 million in the year ended December 31, 2000 were not recorded as expenses. The Company believes that the integration of several operations in its Light Construction business beginning in 2000 was a contributing factor to these errors. German Mining Business (Materials Processing & Mining Segment): As part of the review and subsequent correction of an imbalance in intercompany notes, errors in the accounting for costs associated with warranty and inventory charges were identified as having been improperly offset against intercompany accounts at the Company's German mining operations. This resulted in costs of $7.4 million in the year ended December 31, 2001, and costs of $4.6 million in the year ended December 31, 2000, not being recorded as expenses. 4 Compact and Heavy Equipment (Construction Segment): The Company failed to reconcile the accrual for goods received not invoiced to underlying detailed records for raw material and parts inventory in connection with assessing the appropriateness of the accrued liability. As a result, costs were not recorded as expenses totaling $3.8 million in the year ended December 31, 2003, $0.3 million during the year ended December 31, 2002, $0.1 million during the year ended December 31, 2001, and $0.0 million in the year ended December 31, 2000. Other Intercompany Imbalances and Other Items: The Company's various business units buy and sell products and services from each other in the normal course of operations. Errors were identified as a result of not reconciling intercompany activity in a timely manner between certain business units. Other errors, not specifically related to intercompany activity, were identified during the review and will be corrected in the restatement. These errors relate mainly to the reconciliation of certain accruals, foreign currency adjustments, and the disposition of a foreign sales distribution business. As a result of these aggregate errors, costs were not recorded totaling $1.9 million in the year ended December 31, 2003, $6.7 million in the year ended December 31, 2002, $3.4 million in the year ended December 31, 2001, and ($0.3) million in the year ended December 31, 2000. These errors occurred mainly in the Construction and Cranes segments. Schaeff Goodwill: On January 14, 2002, the Company completed the acquisition of the Schaeff Group of Companies, a German manufacturer of compact construction equipment and a full range of scrap material handlers. An error in the recording of the Company's investment led to an overstatement of goodwill and the cumulative translation adjustment account within other comprehensive income within stockholders' equity in the amount of $23.5 million, beginning in 2002. Cumulative Translation Adjustment: Management has also determined that the accounting treatment of certain of its goodwill related to foreign acquisitions did not meet the requirements of Statement of Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation." At the time these foreign acquisitions were completed, mainly in 1999 and 2002, the Company valued goodwill at the historic exchange rate, and failed to translate this goodwill in subsequent reporting periods at current exchange rates as required by SFAS No. 52. The cumulative impact of this correction has increased (decreased) the Company's goodwill and the translation adjustment account within stockholders' equity by approximately $32 million as of December 31, 2003, ($1) million as of December 31, 2002, ($23) million as of December 31, 2001, ($19) million as of December 31, 2000 and ($5) million as of December 31, 1999. In addition, the reconciliation of intercompany imbalances described in the previous paragraphs affected the translation adjustment within stockholders' equity. Foreign Defined Benefit Plans: During the Company's review of its foreign defined benefit plans during 2004, an error was identified in the application of SFAS No. 87, "Employers' Accounting for Pensions." The Company did not record the minimum pension liability adjustment for these plans to other comprehensive income (net of taxes) within stockholders' equity and other non-current liabilities. The net result of correcting this error is a reduction in other comprehensive income (net of taxes) as of December 31, 2003, 2002, 2001, 2000 and 1999 totaling $6.9 million, $10.7 million, $3.3 million, $0.0 million and $0.0 million, respectively. In 5 addition, non-current liabilities increased as of December 31, 2003, 2002 and 2001 by $9.8 million, $15.3 million and $4.7 million, respectively. U.S. Valuation Allowance for Deferred Tax Assets: As a result of the impact of the restatement items, previously discussed, on the pre-tax income of the Company's U.S. business, a reassessment was performed as to the likely realization of the Company's U.S. deferred tax assets at each reporting date. The reassessment of the realizability of the Company's increased U.S. deferred tax assets resulted in a valuation allowance being recorded at December 31, 2003 in the financial statements being restated. This increased the Company's deferred tax valuation allowance and corresponding tax expense in 2003 by $196.5 million. Based on the profitability of the Company in 2004 and significant, profitable backlog generated in early 2005, the valuation allowance was reversed in the quarter ended December 31, 2004. The Company's reassessment began with an analysis of the Company's cumulative three-year historical U.S. pre-tax earnings. As of December 31, 2003, the Company had a cumulative three-year historical U.S. pre-tax loss, which is considered significant objective evidence that a valuation allowance may be required, unless there existed objective evidence of a significant magnitude that would indicate that it is more likely than not that the U.S. deferred tax assets would be realized. It was determined that only the evidence that was available as of the time of the filing of the original financial statements could be used in this assessment. During the Company's evaluation of other evidence available as of the original issuance date of the December 31, 2003 financial statements, several items were considered, including the cyclical nature of the Company's industry, the impact of its restructuring activities, the goodwill impairment in the Company's Roadbuilding, Utility Products and Other segment, profitable U.S. acquisitions (mainly Genie Holdings, Inc. and its affiliates and Advance Mixer, Inc.) made during the three-year period but not available for the whole period, the timeframe of expiration of the Company's net operating loss carry-forwards, the favorable impact of the Company's debt reduction activities, and the indication of an industry recovery based on trends in non-residential construction spending and rental channel capital expenditure projections. The Company concluded that the weight of the objective negative evidence available at the time of the original financial statement filing (without the benefit of current hindsight) could not be overcome by these other factors, and therefore a valuation allowance was recorded at December 31, 2003 in the financial statements being restated. The Company is restating its deferred tax accounts at December 31, 2003 to increase long term deferred tax liabilities by $5.4 million, to increase goodwill by $7.0 million at December 31, 2003 and to decrease deferred income tax expense by $1.6 million for the year ended December 31, 2003. As of December 31, 2001, the Company is restating its deferred tax accounts to reduce deferred tax liabilities by approximately $12 million and to increase retained earnings by approximately $12 million. These adjustments primarily relate to income tax accounting for goodwill and accounting for tax contingencies. Summary: After examining the intercompany transactions and the imbalances in certain of the Company's accounts and after giving effect to the foregoing adjustments, as of the date of this Q&A, the Company has determined that the cumulative adjustments of the intercompany items, other errors and the tax valuation allowance to the Company's previously issued 6 financial statements was to increase (reduce) retained earnings as of December 31, 2003, 2002, 2001, 2000 and 1999 by approximately ($233.2) million (of which $196.5 million relates to the tax valuation allowance), ($29.0) million, ($6.6) million, $7.5 million and $13.4 million, respectively, which includes tax benefits (expense) of approximately ($187.6) million, $7.9 million, $3.5 million, ($1.0) million and $12.0 million, respectively. Total stockholders' equity as of December 31, 2003, 2002, 2001, 2000 and 1999 increased (decreased) by approximately ($171.7) million (of which $196.5 million relates to the tax valuation allowance), ($16.9) million, ($20.5) million, ($5.1) million and $7.1 million, respectively. The reduction in the Company's total stockholders' equity for 2003 was primarily due to a valuation allowance on the Company's U.S. deferred tax asset in the amount of ($196.5) million which was subsequently reversed in 2004 with a corresponding gain of $196.5 million. The Company's total stockholders' equity as of December 31, 2004 is estimated to be approximately $1.1 billion, as previously disclosed. We note that the Company's restatement process has not yet been completed and that following the additional review process undertaken by the Company the adjustments noted in this Q&A may change and/or additional adjustments may be identified. 7 -----END PRIVACY-ENHANCED MESSAGE-----