UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-K

FOR ANNUAL AND TRANSITIONAL REPORTS PURSUANT TO

SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

x

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2010

or

¨

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 Charter)

DELAWARE

34-1531521

(State of incorporation)

(I.R.S. Employer Identification No.)

 

200 NYALA FARM ROAD, WESTPORT, CONNECTICUT

06880

(Address of principal executive offices)

(Zip Code)

 

Registrant’s Telephone Number, including area code: (203) 222-7170

 

Securities registered pursuant to Section 12(b) of the Act:

COMMON STOCK, $.01 PAR VALUE

(Title of Class)

 

NEW YORK STOCK EXCHANGE

(Name of Exchange on which Registered)

 

Securities registered pursuant to Section 12(g) of the Act: NONE

 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES  
¨                              NO  x

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Act.  
YES  
¨                              NO  x

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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES  x                            NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large Accelerated Filer  x                Accelerated Filer  ¨                              Non-accelerated Filer  ¨       Smaller Reporting Company  ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES  ¨                                NO  x

The aggregate market value of the voting and non-voting common equity stock held by non-affiliates of the Registrant was approximately $1,963 million based on the last sale price on June 30, 2010.

 

THE NUMBER OF SHARES OF THE REGISTRANT’S COMMON STOCK OUTSTANDING WAS
109.1 MILLION AS OF FEBRUARY 14, 2011.

 

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Terex Corporation Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the year covered by this Form 10-K with respect to the 2011 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.

 



 

TEREX CORPORATION AND SUBSIDIARIES

Index to Annual Report on Form 10-K

For the Year Ended December 31, 2010

 

 

 

PAGE

 

PART I

 

 

 

 

Item 1.

Business

4

Item 1A.

Risk Factors

19

Item 1B.

Unresolved Staff Comments

25

Item 2.

Properties

26

Item 3.

Legal Proceedings

28

Item 4.

Removed and Reserved

29

 

 

 

 

PART II

 

 

 

 

Item 5.

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

29

Item 6.

Selected Financial Data

31

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

32

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

56

Item 8.

Financial Statements and Supplementary Data

58

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

58

Item 9A.

Controls and Procedures

59

Item 9B.

Other Information

60

 

 

 

 

PART III

 

 

 

 

Item 10.

Directors, Executive Officers and Corporate Governance

60

Item 11.

Executive Compensation

60

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

60

Item 13.

Certain Relationships and Related Transactions, and Director Independence

60

Item 14.

Principal Accountant Fees and Services

60

 

 

 

 

PART IV

 

 

 

 

Item 15.

Exhibits and Financial Statement Schedules

61

 

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As used in this Annual Report on Form 10-K, unless otherwise indicated, Terex Corporation, together with its consolidated subsidiaries, is hereinafter referred to as “Terex,” the “Registrant,” “us,” “we,” “our” or the “Company.”  This Annual Report generally speaks as of December 31, 2010, unless specifically noted otherwise.

 

Forward-Looking Information

 

Certain information in this Annual Report includes forward-looking statements regarding future events or our future financial performance that involve certain contingencies and uncertainties, including those discussed below in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Contingencies and Uncertainties.”  In addition, when included in this Annual Report or in documents incorporated herein by reference, the words “may,” “expects,” “intends,” “anticipates,” “plans,” “projects,” “estimates” and the negatives thereof and analogous or similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean that the statement is not forward-looking. We have based these forward-looking statements on current expectations and projections about future events. These statements are not guarantees of future performance. Such statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements. Such risks and uncertainties, many of which are beyond our control, include, among others:

 

·                  Our business is cyclical and weak general economic conditions affect the sales of our products and financial results;

·                  our ability to successfully integrate acquired businesses;

·                  our ability to access the capital markets to raise funds and provide liquidity;

·                  our business is sensitive to government spending;

·                  our business is very competitive and is affected by our cost structure, pricing, product initiatives and other actions taken by competitors;

·                  the effects of operating losses;

·                  a material disruption to one of our significant facilities;

·                  our retention of key management personnel;

·                  the financial condition of suppliers and customers, and their continued access to capital;

·                  our providing financing and credit support for some of our customers;

·                  we may experience losses in excess of recorded reserves;

·                  our ability to obtain parts and components from suppliers on a timely basis at competitive prices;

·                  our ability to timely manufacture and deliver products to customers;

·                  the need to comply with restrictive covenants contained in our debt agreements;

·                  our ability to generate sufficient cash flow to service our debt obligations;

·                  our business is global and subject to changes in exchange rates between currencies, as well as international politics, particularly in developing markets;

·                  difficulties in managing and expanding into developing markets;

·                  the effects of changes in laws and regulations, including tax laws;

·                  possible work stoppages and other labor matters;

·                  compliance with applicable environmental laws and regulations;

·                  litigation, product liability claims, patent claims, class action lawsuits and other liabilities;

·                  our ability to comply with an injunction and related obligations resulting from the settlement of an investigation by the United States Securities and Exchange Commission (“SEC”);

·                  our implementation of a global enterprise system and its performance; and

·                  other factors.

 

Actual events or our actual future results may differ materially from any forward-looking statement due to these and other risks, uncertainties and significant factors. The forward-looking statements contained herein speak only as of the date of this Annual Report and the forward-looking statements contained in documents incorporated herein by reference speak only as of the date of the respective documents. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained or incorporated by reference in this Annual Report to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

 

As a result of the final court decree in August 2009 that formalized the settlement of an investigation of Terex by the SEC, for a period of three years, or such earlier time as we are able to obtain a waiver from the SEC, we cannot rely on the safe harbor provisions regarding forward-looking statements provided by the regulations issued under the Securities Exchange Act of 1934.

 

The forward-looking statements and prospective financial information included in this Form 10-K have been prepared by, and are the responsibility of, Terex’s management. PricewaterhouseCoopers LLP (“PwC”) has not performed any procedures with respect to the accompanying forward-looking statements and prospective financial information and, accordingly, PwC does not express an opinion or any other form of assurance with respect thereto. The PwC report included in this Form 10-K relates to the Company’s historical financial information. It does not extend to the forward-looking statements and prospective financial information and should not be read to do so.

 

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PART I

 

ITEM 1.                                                     BUSINESS

 

GENERAL

 

Terex is a diversified global equipment manufacturer of a variety of machinery products.  We are focused on delivering reliable, customer-driven solutions for a wide range of commercial applications, including the construction, infrastructure, quarrying, mining, shipping, transportation, refining, energy and utility industries.  We operate in four reportable segments: (i) Aerial Work Platforms; (ii) Construction; (iii) Cranes; and (iv) Materials Processing.

 

We view our purpose as making products that will be used to improve the lives of people around the world.  Our mission is to provide solutions to our machinery and industrial product customers that yield superior productivity and return on investment.  Our vision focuses on our commitments to our core constituencies of customers, stakeholders and team members by providing our customers with a superior ownership experience, our stakeholders with a profitable enterprise that increases value, and our team members with a preferred place to work.

 

Our Company was incorporated in Delaware in October 1986 as Terex U.S.A., Inc.  We have changed significantly since that time, achieving $4.4 billion of net sales in 2010.  Much of our historic growth has been accomplished through acquisitions, and, over the past five years, we increased our focus on becoming a superb operating company.

 

As we have expanded our operations, our business has become increasingly international in scope, with our products manufactured in North and South America, Europe, Australia and Asia and sold worldwide.  We are focusing on expanding our business globally, with an increased emphasis on developing markets such as China, India, Brazil, Russia and the Middle East.

 

For financial information about our industry and geographic segments, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note B - “Business Segment Information” in the Notes to the Consolidated Financial Statements.

 

AERIAL WORK PLATFORMS

 

Our Aerial Work Platforms (“AWP”) segment designs, manufactures, refurbishes, services and markets aerial work platform equipment, telehandlers, light towers and utility equipment.  Products include material lifts, portable aerial work platforms, trailer-mounted articulating booms, self-propelled articulating and telescopic booms, scissor lifts, telehandlers, trailer-mounted light towers and utility equipment (including truck-mounted digger derricks, auger drills, aerial devices and cable placers) as well as their related components and replacement parts. Customers use our AWP products to construct and maintain industrial, commercial and residential buildings and facilities, construct and maintain utility and telecommunication lines, trim trees, in construction and foundation drilling applications and for other commercial operations, as well as in a wide range of infrastructure projects.  We market our AWP products under the Terex® and Genie® brand names.

 

AWP has the following significant manufacturing operations:

 

·

 

Aerial work platform equipment is manufactured in Redmond and Moses Lake, Washington, Perugia, Italy, Coventry, England and Changzhou, China;

 

 

 

·

 

Telehandlers are manufactured in Moses Lake, Washington and Perugia, Italy;

 

 

 

·

 

Trailer-mounted light towers and trailer-mounted articulated booms are manufactured in Rock Hill, South Carolina; and

 

 

 

·

 

Utility products are manufactured in Watertown and Huron, South Dakota.

 

We have aerial work platform refurbishment facilities located in Waco, Texas and Stockton, California.

 

We have a parts and logistic center located in North Bend, Washington for our aerial work platform equipment. In 2010, we relocated our utilities parts business, along with a portion of our aerial work platform parts business, to a shared Terex facility in Southaven, Mississippi. Our European parts and logistics operations are conducted through an out-sourced facility in Roosendaal, The Netherlands.

 

We own much of the North American distribution channel for the utility products group.  These operations sell, service and rent our utility products as well as other products that service the utility industry.  They provide parts and service support for a variety of other Terex® products, including aerial devices.  We maintain a fleet of rental utility products available in certain areas of the United States.

 

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CONSTRUCTION

 

Our Construction segment designs, manufactures and markets three primary categories of construction equipment and their related components and replacement parts:

 

·                  Heavy construction equipment, including off-highway trucks, scrapers and material handlers;

·                  Compact construction equipment, including loader backhoes, compaction equipment, mini and midi excavators, site dumpers, compact track loaders, skid steer loaders, wheel loaders and tunneling equipment; and

·                Roadbuilding equipment, including asphalt and concrete equipment (including pavers, transfer devices, plants, mixers, reclaimers/stabilizers, placers and cold planers), landfill compactors and bridge inspection equipment.

 

Construction, forestry, rental, mining, industrial and government customers use our products in construction and infrastructure projects, to build roads and bridges and in coal, minerals, sand and gravel operations.  We market our Construction products principally under the Terex® brand name, and for certain products, the Terex® name in conjunction with certain historic brand names.

 

Construction has the following significant manufacturing operations:

 

Heavy Construction Equipment

 

·                  Off-highway rigid haul trucks and articulated haul trucks and scrapers are manufactured in Motherwell, Scotland; and

 

·                  Material handlers are manufactured in Bad Schoenborn, Germany.

 

Compact Construction Equipment

 

·                  Compact track loaders, skid steer loaders and crawler conversion parts for skid steer loaders and aerial work platform products are manufactured in Grand Rapids, Minnesota;

 

·                  Site dumpers, compaction equipment and loader backhoes, as well as products for our AWP segment, are manufactured in Coventry, England;

 

·                  A range of wheel loaders and mini, mobile, and midi excavators are manufactured in Crailsheim, Germany, and parts for the above-referenced products are manufactured in Langenburg and Gerabronn, Germany.  In addition, specialized tunneling equipment is manufactured in Langenburg, Germany; and

 

·                  Loader backhoes and skid steer loaders are manufactured for markets in India and neighboring countries in Greater Noida, Uttar Pradesh, India.

 

Roadbuilding Equipment

 

·                  Cold planers, reclaimers/stabilizers, asphalt plants, asphalt pavers, concrete plants, concrete pavers, concrete placers, transfer devices and landfill compactors, as well as products for our Materials Processing segment, are manufactured in Oklahoma City, Oklahoma;

 

·                  Asphalt plants, asphalt pavers, soil plants, cold planers, and micropaving and asphalt distributor equipment are manufactured in Cachoeirinha, Brazil;

 

·                  Concrete pavers are manufactured in Canton, South Dakota;

 

·                  Bridge inspection equipment is manufactured in Rock Hill, South Carolina; and

 

·                  Front and rear discharge concrete mixer trucks are manufactured in Fort Wayne, Indiana.

 

Construction’s North American distribution center is in Southaven, Mississippi and serves as a parts center for Construction and other Terex operations.

 

We have a minority interest in Inner Mongolia North Hauler Joint Stock Company Limited (“North Hauler”), a company incorporated under the laws of China, which manufactures rigid haulers in China.  Trucks manufactured by North Hauler, which is located in Baotou, Inner Mongolia, are principally used in China under the Terex® brand name.

 

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CRANES

 

Our Cranes segment designs, manufactures, services and markets mobile telescopic cranes, tower cranes, lattice boom crawler cranes, lattice boom truck cranes, truck-mounted cranes (boom trucks) and specialized port and rail equipment including straddle and sprinter carriers, gantry cranes, mobile harbor cranes, ship-to-shore cranes, reach stackers, lift trucks and forklifts, as well as their related replacement parts and components.  Our Cranes products are used primarily for construction, repair and maintenance of commercial buildings, manufacturing facilities and infrastructure, as well as for material handling at port and railway facilities.  We market our Cranes products principally under the Terex® brand name, and for certain products, the Terex® name in conjunction with certain historic brand names.

 

Cranes has the following significant manufacturing operations:

 

·                  Rough terrain and telescopic crawler cranes are manufactured in Crespellano, Italy;

 

·                  All-terrain cranes, truck cranes, truck-mounted cranes and reach stackers are manufactured in Montceau-les-Mines, France;

 

·                  Rough terrain cranes, truck cranes and truck-mounted cranes are manufactured in Waverly, Iowa;

 

·                  Truck cranes and truck-mounted cranes are manufactured in Luzhou, China;

 

·                  Lattice boom crawler cranes are manufactured in Jinan, China;

 

·                  Lift and carry cranes are manufactured in Brisbane, Australia;

 

·                  Tower cranes are manufactured in Fontanafredda, Italy;

 

·                  Lattice boom crawler cranes and tower cranes are manufactured in Wilmington, North Carolina;

 

·                 Lattice boom crawler and lattice boom truck cranes, as well as all terrain cranes, are manufactured in Zweibruecken-Dinglerstrasse and Zweibruecken-Wallerscheid, Germany and Pecs, Hungary;

 

·                  Mobile harbor cranes and ship-to-shore cranes are manufactured in Monfalcone, Italy;

 

·                  Steel assemblies for cranes are manufactured in Bierbach, Germany;

 

·                  Rubber tired gantry cranes, rail mounted gantry cranes, ship-to-shore cranes, reach stackers and lift trucks and forklifts are manufactured in Xiamen, China;

 

·                  Straddle and sprinter carriers are manufactured in Wurzburg, Germany; and

 

·                  Reach stackers, lift trucks and forklifts are manufactured in Lentigione, Italy.

 

MATERIALS PROCESSING

 

Our Materials Processing (“MP”) segment designs, manufactures and markets materials processing equipment, including crushers, washing systems, screens, apron feeders and related components and replacement parts.  Construction, quarrying, mining and government customers use our MP products in construction and infrastructure projects, as well as in various quarrying and mining applications.  We market our MP products principally under the Terex® and Powerscreen® brand names and the Terex® name in conjunction with certain historic brand names.

 

MP has the following significant manufacturing operations:

 

·                  Mobile crushers and mobile screens are manufactured in Omagh and Dungannon, Northern Ireland;

 

·                  Mobile crushers and mobile screens are manufactured in Hosur, India;

 

·                Base crushers and base screens are manufactured in Subang Jaya, Malaysia and at a Terex facility in Oklahoma City, Oklahoma;

 

·                  Screening equipment is manufactured in Durand, Michigan;

 

·                  Mobile crushers and mobile screens are manufactured in Quanzhou, China primarily for the Chinese market; and

 

·                  Base crushers are manufactured in Coalville, England.

 

We have a North American distribution center in Louisville, Kentucky and four distribution facilities in Australia.

 

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OTHER

 

We assist customers in their rental, leasing and acquisition of our products through Terex Financial Services (“TFS”).  TFS utilizes its equipment and financial leasing experience to provide a variety of financing solutions to assist customers in acquiring our equipment.  TFS facilitates loans and leases between our customers and various financial institutions in the United States and throughout the world.  In addition, TFS extends credit and offers lease structures directly to customers in the United States.

 

DISCONTINUED OPERATIONS

 

On February 19, 2010, we completed the disposition of our Mining business, formerly part of the Materials Processing & Mining segment, to Bucyrus International, Inc. (“Bucyrus”) and received approximately $1 billion in cash and approximately 5.8 million shares of Bucyrus common stock.  The products divested in the transaction included hydraulic mining excavators, high capacity surface mining trucks, track and rotary blasthole drills, drill tools and highwall mining equipment, as well as the related parts and aftermarket service businesses, including Company-owned distribution locations.  Our auger machines and auger tools product lines were not sold as part of this disposition and instead are consolidated within our AWP segment.

 

On December 31, 2009, we sold the assets of our construction trailer business.  The results of this business were formerly consolidated within the AWP segment.

 

In March 2010, we sold the assets of our Powertrain pumps business and gears business.  The results of these businesses were formerly consolidated within the Construction segment.  On March 10, 2010, we entered into a definitive agreement to sell our Atlas heavy construction equipment and knuckle-boom crane businesses.  The results of these businesses were formerly consolidated within the Construction and Cranes segments, respectively.  On April 15, 2010, we completed the portion of this transaction related to the operations in Germany and on August 11, 2010, we completed the portion of this transaction related to the operations in the United Kingdom.

 

Due to the divestiture of these businesses, the reporting of these businesses has been included in discontinued operations for all periods presented.  See Note D – “Discontinued Operations” in the Notes to our Consolidated Financial Statements for more information on our discontinued operations.

 

BUSINESS STRATEGY

 

General

 

For us, 2010 was a year of transition.  Having reached the decision to sell our mining equipment business at the end of 2009, we entered 2010 with a strong balance sheet but faced difficult market conditions in our remaining businesses that we expected to continue throughout 2010.  During 2010, we made additional changes to our business portfolio, including selling our Powertrain pumps and gears business and our Atlas heavy construction equipment and knuckle-boom crane businesses.  At the same time, we continued working to improve our core operations and continued to advance numerous global investments and initiatives that we anticipated will make us a more successful company longer term.  Terex is a smaller but stronger company leaving 2010, and we are excited by the opportunities that lie ahead.

 

We operate a diverse portfolio of machinery businesses that serve numerous end-user applications and geographic markets.  Much of our portfolio is driven by construction-related end-uses, but our equipment also supports a wide array of other applications including infrastructure and facility maintenance, industrial operations, material recycling and container traffic.  In recent years, we have diversified our Company both by application and by geography, but we have done so while remaining focused on machinery-related products that can be made, delivered, and supported via similar facilities and operational processes.  We continue to consider opportunities to diversify our business portfolio, but will seek to do so only in areas where the potential for operational leverage is meaningful.

 

Our operating strategy is defined by the following core elements of the Terex operating model:

 

1.               Customer Responsiveness

2.               Operational Efficiency

3.               Global Growth

 

We must excel in each of these areas in order to be a more effective and profitable company long term.  Strengthening performance in all three areas is central to our improvement agenda for 2011 and beyond.

 

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Our Customer Responsiveness goal is to exceed the performance of competitors in providing equipment that goes to work and stays at work, backed by world class parts and service support.  Each of our businesses routinely measures customer satisfaction and develops roadmaps that are used to drive both step-change and incremental improvement in customer satisfaction.  Our goal is annual improvement in our current businesses to achieve improved responsiveness versus our competition.  Customer Responsiveness is a core agenda item for us and we are taking actions both locally and Company-wide to see that we are successful in meeting our goals in this area.

 

Our Operational Efficiency goal is for all businesses to achieve the lowest total product cost in their peer group.  This implies an efficient factory footprint, efficient supply and delivery chains, and a lean mindset that enables the elimination of waste throughout our processes for production, delivery, and service to the customer using the Terex Business System (as explained below).  It is not our goal to be the lowest priced competitor, but we do have the ability to compete on price when necessary.  Competition in all of our businesses is intense and we must position ourselves to compete more effectively during all phases of the future business cycle.

 

Global Growth is critical to our future success.  We anticipate a continued recovery unfolding in developed markets.  We believe that success in developing markets is both an opportunity and a necessity for many of our businesses.  Developing markets are also increasingly important source countries in our industries.  We have been active for several years at sourcing components and products from developing markets and intend to pursue such opportunities even more aggressively in the future.  We expect our liquidity to provide us with flexibility to put our cash to work to yield higher returns and accelerate growth as well as to be opportunistic on acquisitions.  We continue to evaluate acquisition targets, but it remains difficult to predict the timing of potential transactions.

 

We remain committed to becoming a stronger and more effective company tomorrow than we are today.  To be successful, we must remain focused on what makes our individual businesses strong while also working together across our businesses to harness the strength of the Company as a whole.  We made strides towards these goals in 2010, but there is more to be done as we move into 2011.

 

The Terex Way

 

When considering our strategy and future, we constantly keep in mind our purpose, mission, vision and our core values, all of which combine to create a culture that makes Terex what it is.

 

Our purpose remains to improve the lives of people around the world.  Our mission is to provide solutions to our machinery and industrial product customers that yield superior productivity and return on investment.

 

Our vision focuses on the Company’s core constituencies of customers, stakeholders and team members:

 

·

 

Customers: We aim to be the most customer responsive company in the industry as determined by our customers.

·

 

Stakeholders: We aim to be the most profitable company in the industry as measured by Return on Invested Capital.

·

 

Team Members: We aim to be the best place to work in the industry as determined by our team members.

 

We operate our business based on our value system, “The Terex Way.”  The Terex Way defines our essence and culture as a company and our collective commitment to what it means to be a part of Terex.  The Terex Way is based on six key values:

 

·

 

Integrity: Integrity reflects honesty, ethics, transparency and accountability. We are committed to maintaining high ethical standards in all of our business dealings.

·

 

Respect: Respect incorporates concern for safety, health, teamwork, diversity, inclusion and performance. We treat all our team members, customers and suppliers with respect and dignity.

·

 

Improvement: Improvement encompasses quality, problem-solving systems, a continuous improvement culture and collaboration. We continuously search for new and better ways of doing things, focusing on continuous improvement and the elimination of waste.

·

 

Servant Leadership: Servant leadership requires service to others, humility, authenticity and leading by example. We work to serve the needs of our customers, investors and team members.

·

 

Courage: Courage entails willingness to take risks, responsibility, action and empowerment. We have the courage to make a difference even when it is difficult.

·

 

Citizenship: Citizenship means social responsibility and environmental stewardship. We comply with all laws and respect all people’s values and cultures and are good global, national and local citizens.

 

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The Terex Business System

 

Our operational principles are based on the “Terex Business System,” or “TBS.”  The Terex Business System is the framework around which we are building our capabilities as a superb operating company to achieve our long-term goals.  Founded on lean concepts, TBS is a set of guiding principles and business processes that collectively define who we are and how we do what we do.  TBS is our playbook to deliver our customer, team member and financial goals.  It aligns the Company globally with repeatable, teachable processes that harness the full potential of our team members.  TBS is not the business strategy; it supports the business strategy.  We anticipate that TBS will provide us a competitive advantage through the use of customer-centric tools that continually enhance customer responsiveness and eliminate waste.

 

With our purpose, mission and vision in mind, using the Terex Business System as our framework, and operating based on the values of The Terex Way, we strive to grow and expand our Company.

 

PRODUCTS

 

AERIAL WORK PLATFORMS

 

AERIAL WORK PLATFORMS.  Aerial work platform equipment safely positions workers and materials easily and quickly to elevated work areas to enhance productivity.  These products have developed as alternatives to scaffolding and ladders.  We offer a variety of aerial lifts that are categorized into six product families: material lifts; portable aerial work platforms; trailer-mounted articulating booms; self-propelled articulating booms; self-propelled telescopic booms; and scissor lifts.

 

·

 

Material lifts are used primarily indoors in the construction, industrial and theatrical markets.

·

 

Portable aerial work platforms are used primarily indoors in a variety of markets to perform overhead maintenance.

·

 

Trailer-mounted articulating booms are used both indoors and outdoors. They provide versatile reach, and have the ability to be towed between job sites.

·

 

Self-propelled articulating booms are primarily used in construction and industrial applications, both indoors and outdoors. They feature lifting versatility with up, out and over position capabilities to access difficult to reach overhead areas.

·

 

Self-propelled telescopic booms are used outdoors in commercial and industrial construction, as well as highway and bridge maintenance projects.

·

 

Scissor lifts are used in outdoor and indoor applications in a variety of construction, industrial and commercial settings.

 

TELEHANDLERS.  Telehandlers are used to move and place materials on residential and commercial construction sites and are used in the energy, infrastructure and agricultural industries.

 

LIGHT TOWERS.  Trailer-mounted light towers are used primarily to light work areas for night construction, entertainment, emergency assistance, security and for other nighttime or low light applications.

 

UTILITY EQUIPMENT.  Our utility products include digger derricks, auger drills, insulated and non-insulated aerial devices and cable placers. These products are used by electric utilities, tree care companies, telecommunications and cable companies, and the related construction industries, as well as by government organizations.

 

·

 

Auger drills are used primarily for digging holes prior to placing poles or construction supports and digger derricks are used to dig holes, hoist and set utility poles, as well as lift transformers and other materials at job sites.

·

 

Insulated aerial devices are used to elevate workers and material to work areas at the top of utility poles, energized transmission lines and for trimming trees near energized electrical lines, as well as for miscellaneous purposes such as sign maintenance. Non-insulated aerials are used in applications where energized electrical lines are not a hazard.

·

 

Cable placers are used to install fiber optic, copper and strand telephone and cable lines.

 

CONSTRUCTION

 

HEAVY CONSTRUCTION EQUIPMENT.  We manufacture and/or market off-highway trucks, scrapers and material handlers.

 

·

 

Articulated off-highway trucks are three-axle, six-wheel drive machines with an articulating connection between the cab and body that allows the cab and body to move independently, enabling all six tires to maintain ground contact for traction on rough terrain.

·

 

Rigid off-highway trucks are two-axle machines, which generally have larger capacities than articulated off-highway trucks, but can operate only on improved or graded surfaces, and are used in large construction or infrastructure projects, aggregates and smaller surface mines.

·

 

Scrapers move dirt by elevating it from the ground to a bowl located between the two axles of the machine. Scrapers are used most often in relatively dry, flat terrains.

 

-9-



 

·

 

Material handlers are designed for handling logs, scrap and other bulky materials with clamshell, magnet or grapple attachments.

 

COMPACT CONSTRUCTION EQUIPMENT.  We manufacture a wide variety of compact construction equipment used primarily in the construction and rental industries. Products include compact track loaders, loader backhoes, compaction equipment, excavators, site dumpers, skid steer loaders, wheel loaders and tunneling equipment.

 

·

 

Loader backhoes incorporate a front-end loader and rear excavator arm. They are used for loading, excavating and lifting in many construction and agricultural related applications.

·

 

Our compaction equipment ranges from pedestrian single drum to ride-on tandem rollers.

·

 

Excavators in the compact equipment category include mini, mobile and midi excavators used in the general construction, landscaping and rental businesses.

·

 

Wheel loaders are used for loading and unloading materials. Applications include residential and non-residential construction, waste management and general construction.

·

 

Site dumpers are used to move smaller quantities of materials from one location to another, and are primarily used for construction applications.

·

 

Compact track loaders, skid steer loaders and wheel loaders are used for loading and unloading materials in construction, industrial, rental, agricultural and landscaping businesses.

·

 

Tunneling equipment, including loading machines, tunnel excavators, cutting units, customized tunneling and mining machines, as well as modified standard construction machines, are used to provide a variety of tunneling solutions in train, subway and metropolitan infrastructure projects.

 

ROADBUILDING EQUIPMENT.  We manufacture asphalt pavers, transfer devices, asphalt plants, concrete production plants, concrete mixers, concrete pavers, concrete placers, cold planers, reclaimers/stabilizers, bridge inspection equipment and landfill compactors.

 

·

 

Asphalt pavers are available in a variety of sizes and designs. Smaller units are used for commercial work such as parking lots, development streets and construction overlay projects. Mid-sized pavers are used for mainline and commercial projects. High production pavers are engineered and built for heavy-duty, mainline paving.

·

 

Asphalt transfer devices are available in both self-propelled and paver pushed designs and are intended to reduce segregation in the paver to create a smoother roadway.

·

 

Asphalt plants are used to produce hot mix asphalt and are available in portable, relocatable and stationary configurations.

·

 

Concrete production plants are used in residential, commercial, highway, airport and other markets. Our products include a full range of portable and stationary transit mix and central mix production facilities.

·

 

Concrete mixers are machines with a large revolving drum in which cement is mixed with other materials to make concrete. We offer models mounted on trucks with three, four, five, six or seven axles and other front and rear discharge models.

·

 

Our concrete pavers are used to place and finish concrete streets, highways and airport surfaces.

·

 

Concrete placers transfer materials from trucks in preparation for paving.

·

 

Cold planers mill and reclaim deteriorated asphalt pavement, leaving a level, textured surface upon which new paving material is placed.

·

 

Our reclaimers/stabilizers are used to add load-bearing strength to the base structures of new highways and new building sites. They are also used for in-place reclaiming of deteriorated asphalt pavement.

·

 

Our bridge inspection equipment allows access to many under bridge related tasks, including inspections, painting, sandblasting, repairs, general maintenance, installation and maintenance of under bridge pipe and cables, stripping operations and replacement and maintenance of bearings.

·

 

We produce landfill compactors used to compact refuse at landfill sites.

 

CRANES

 

We offer a wide variety of cranes, including mobile telescopic cranes, tower cranes, lattice boom crawler cranes, boom trucks, as well as specialty cranes and machinery designed specifically for port and railway facility use such as mobile harbor cranes, gantry cranes and reach stackers.

 

MOBILE TELESCOPIC CRANES.  Mobile telescopic cranes are used primarily for industrial applications, in commercial and public works construction, and in maintenance applications to lift equipment or material.  We offer a complete line of mobile telescopic cranes, including rough terrain cranes, truck cranes, all terrain cranes and lift and carry cranes.

 

·

 

Rough terrain cranes move materials and equipment on rough or uneven terrain, and are often located on a single construction or work site such as a building site, a highway or a utility project for long periods.  Rough terrain cranes cannot be driven on highways and accordingly must be transported by truck to the work site.

 

-10-



 

·

 

Truck cranes have two cabs and can travel rapidly from job site to job site at highway speeds. Truck cranes are often used for multiple local jobs, primarily in urban or suburban areas.

·

 

All-terrain cranes were developed in Europe as a cross between rough terrain and truck cranes, and are designed to travel across both rough terrain and highways.

·

 

Lift and carry cranes are designed primarily for site work, such as at mine sites, large fabrication yards, building and construction sites, and combine high road speed and all terrain capability without the need for outriggers.

 

TOWER CRANES.  Tower cranes are often used in urban areas where space is constrained and in long-term or very high building sites.  Tower cranes lift construction material and place the material at the point where it is being used.  We produce the following types of tower cranes:

 

·

 

Self-erecting tower cranes are trailer-mounted and unfold from four sections (two for the tower and two for the jib); certain larger models have a telescopic tower and folding jib. These cranes can be assembled on site in a few hours. Applications include residential and small commercial construction.

·

 

Hammerhead tower cranes have a tower and a horizontal jib assembled from sections. The tower extends above the jib to which suspension cables supporting the jib are attached. These cranes are assembled on-site in one to three days depending on height, and can increase in height with the project.

·

 

Flat top tower cranes have a tower and a horizontal jib assembled from sections. There is no A-frame above the jib, which is self-supporting and consists of reinforced jib sections. These cranes are assembled on-site in one to two days, and can increase in height with the project.

·

 

Luffing jib tower cranes have a tower and an angled jib assembled from sections. There is one A-frame above the jib to which suspension cables supporting the jib are attached. Unlike other tower cranes, there is no trolley to control lateral movement of the load, which is accomplished by changing the jib angle. These cranes are assembled on-site in two to three days, and can increase in height with the project.

 

LATTICE BOOM CRAWLER AND LATTICE BOOM TRUCK CRANES.  Lattice boom crawler and lattice boom truck cranes are designed to lift material on rough terrain and can maneuver while bearing a load.  The boom is made of tubular steel sections, which, together with the base unit, are transported to and erected at a construction site.

 

TRUCK-MOUNTED CRANES (BOOM TRUCKS).  We manufacture telescopic boom cranes and articulated hydraulic cranes for mounting on a commercial truck chassis. Truck-mounted cranes are used primarily in the construction and maintenance industries to lift equipment or materials to various heights. Boom trucks are generally lighter and have less lifting capacity than truck cranes, and are used for many of the same applications when lower lifting capabilities are sufficient.  An advantage of a boom truck is that the equipment or material to be lifted by the crane can be transported by the truck, which can travel at highway speeds.  Applications include delivery of building materials and the installation of commercial air conditioners and other roof-mounted equipment.

 

PORT EQUIPMENT.  We manufacture reach stackers, mobile harbor cranes, ship-to-shore gantry cranes, rubber tired and rail mounted gantry cranes, straddle carriers, sprinter carriers, lift trucks and forklifts.

 

·

 

Reach stackers are used to pick up and stack shipping containers at port and railway facilities. At the end of each reach stacker’s boom is a spreader that enables it to attach to shipping containers of varying lengths and weights and to rotate the container.

·

 

Mobile harbor cranes are used for material handling at ports, including general cargo handling and shipping containers. Mobile harbor cranes can travel around the port as needed and have the capability to move large loads. Mobile harbor cranes can be fitted with a variety of attachments for handling different types of cargo.

·

 

Ship-to-shore gantry cranes are used to load and unload container vessels at ports.

·

 

Rubber tired and rail mounted gantry cranes are used for space intensive shipping container stacking at port and railway facilities.

·

 

Straddle carriers pick up and carry shipping containers from or to a quay-side crane while straddling their load. Straddle carriers have the capability to stack up to four shipping containers on top of each other. Straddle carriers are used in port and railway facilities to move shipping containers and to load and unload shipping containers from on-highway trucks. Straddle carriers have both horizontal and vertical lifting capabilities.

·

 

Sprinter carriers operate in a similar manner to straddle carriers, but operate at higher speeds and have only horizontal lifting capabilities.

·

 

Lift trucks and forklifts are small to medium-sized highly mobile trucks for use with a variety of general cargo lifting and handling applications at port and railway facilities.

 

-11-



 

MATERIALS PROCESSING

 

Materials processing equipment is used in processing aggregate materials for roadbuilding applications and is also used in the quarrying, mining, demolition and recycling industries.  Our materials processing equipment includes crushers, screens and feeders.

 

We manufacture a range of track-mounted jaw, impactor and cone crushers, as well as base crushers for integration within static plants.  Our crushing equipment also includes horizontal and vertical shaft impactors.

 

·

 

Jaw crushers are used for crushing larger rock, primarily at the quarry face or on recycling duties. Applications include hard rock, sand and gravel and recycled materials. Impactor crushers are used in quarries for primary and secondary applications, as well as in recycling. Cone crushers are used in secondary and tertiary applications to reduce a number of materials, including quarry rock and riverbed gravel.

·

 

Horizontal shaft impactors are primary and secondary crushers. They are typically applied to reduce soft to medium hard materials, as well as recycled materials. Vertical shaft impactors are secondary and tertiary crushers that reduce material utilizing various rotor configurations and are highly adaptable to any application.

 

Our screening and feeder equipment includes:

 

·

 

Heavy duty inclined screens and feeders are used in high tonnage applications and are available as either stationary or heavy-duty mobile equipment. Inclined screens are used in all phases of plant design from handling quarried material to fine screening.

·

 

Dry screening is used to process materials such as sand, gravel, quarry rock, coal, construction and demolition waste, soil, compost and wood chips.

·

 

Washing screens are used to separate, wash, scrub, dewater and stockpile sand and gravel. Our products include a completely mobile, single chassis washing plant incorporating separation, washing, dewatering and stockpiling. We also manufacture mobile and stationary screening rinsers, bucket-wheel dewaterers, scrubbing devices for aggregate, a mobile cyclone for maximum retention of sand particles, silt extraction systems, stockpiling conveyors and a sand screw system as an alternative to bucket-wheel dewaterers.

·

 

Apron feeders are generally situated at the primary end of the processing facility, and have a rugged design in order to handle the impact of the material being fed from front-end loaders and excavators. The feeder moves material to the crushing and screening equipment in a controlled fashion.

 

PRODUCT CATEGORY SALES

 

The following table lists our main product categories and their percentage of our total sales:

 

 

 

PERCENTAGE OF SALES

 

 

 

 

 

 

 

 

 

PRODUCT CATEGORY

 

2010  

 

2009  

 

2008  

 

Mobile Telescopic & Truck Cranes

 

23

%

28

%

23

%

Aerial Work Platforms

 

15

 

12

 

20

 

Materials Processing Equipment

 

12

 

9

 

12

 

Compact Construction Equipment

 

10

 

7

 

7

 

Heavy Construction Equipment

 

9

 

9

 

13

 

Lattice Boom Crawler & Tower Cranes

 

8

 

16

 

12

 

Port Equipment

 

8

 

4

 

1

 

Utility Equipment

 

7

 

7

 

4

 

Roadbuilding Equipment

 

5

 

5

 

3

 

Telehandlers & Light Construction Equipment

 

3

 

2

 

3

 

Other

 

 

1

 

2

 

TOTAL

 

100

%

100

%

100

%

 

-12-



 

BACKLOG

 

Our backlog as of December 31, 2010 and 2009 was as follows:

 

 

 

December 31,

 

 

 

  2010

 

  2009

 

 

 

(in millions)

 

AWP

 

$

306.4

 

$

156.7

 

Construction

 

139.6

 

67.3

 

Cranes

 

773.8

 

958.0

 

MP

 

78.2

 

58.5

 

Total

 

$

1,298.0

 

$

1,240.5

 

 

We define backlog as firm orders that are expected to be filled within one year, although there can be no assurance that all such backlog orders will be filled within that time. Our backlog orders represent primarily new equipment orders.  Parts orders are generally filled on an as-ordered basis.

 

Our management views backlog as one of many indicators of the performance of our business.  Because many variables can cause changes in backlog, and these changes may or may not be of any significance, we consequently view backlog as an important, but not necessarily determinative, indicator of future results.  High backlog can indicate a high level of future sales; however, when backlogs are high, this may also reflect a high level of production delays, which may result in future order cancellations from disappointed customers.  Small backlog may indicate a low level of future sales; however, they may also reflect a rapid ability to fill orders that is appreciated by our customers.

 

Our overall backlog amounts at December 31, 2010 increased $57.5 million from our backlog amounts at December 31, 2009, primarily due to improved net order activity in the AWP, Construction and MP segments offset by lower net order activity in our Cranes segment.

 

Our AWP segment backlog nearly doubled, increasing $149.7 million from December 31, 2009, as demand for aerial products has strengthened significantly over the last year.  Our customers for aerial work platforms are primarily rental companies.  As utilization and rental rates have consistently improved over the past year, we are now seeing rental companies, particularly in North America, begin to increase capital expenditures to update their fleets, which had increased in age over the past two years.  In addition, we are seeing increased demand for booms and telehandlers in South America, driven by increased commercial and residential construction spending and higher adoption rates for aerial products.  Demand for utility products improved moderately with increasing contractor activity offsetting cautious spending patterns in the utilities and telecommunications sectors.

 

Our Construction segment backlog at December 31, 2010 increased $72.3 million from December 31, 2009.  We are seeing increased customer demand across most businesses particularly for our material handling business and heavy rigid and large articulated truck businesses in developing markets as we continue to see increased orders in these regions.

 

The backlog at our Cranes segment decreased $184.2 million from December 31, 2009.  The decrease in backlog from the prior year reflects the softening demand experienced during 2010, particularly for crawler cranes.  However, there was modest improvement in demand for rough terrain and tower cranes.  Certain other crane categories have experienced mixed levels of orders as uncertainty of recovery continues to plague various regions.

 

Our MP segment backlog at December 31, 2010 increased $19.7 million from December 31, 2009.  Demand for materials processing equipment has increased as dealers have generally stopped reducing inventory and are ordering in line with end markets. Additionally, we have received positive responses from customers for our new product launches.

 

DISTRIBUTION

 

We distribute our products through a global network of dealers, rental companies, major accounts and direct sales to customers.

 

AERIAL WORK PLATFORMS

 

Our aerial work platform, telehandler and light tower products are distributed principally through a global network of rental companies, independent dealers and, to a lesser extent, strategic accounts.  We employ sales representatives who service these channel partners from offices located throughout the world.

 

We sell utility equipment to the utility and municipal markets through a network of both company-owned and independent distributors in North America.  Outside of North America, independent dealers sell our utility equipment directly to customers.

 

-13-



 

CONSTRUCTION

 

We distribute heavy construction equipment and replacement parts primarily through a network of independent dealers and distributors throughout the world. Our dealers are predominantly independent businesses, which generally serve the construction, mining, forestry and/or scrap industries. Although these dealers may carry products from a variety of manufacturers, they generally carry only one manufacturer’s “brand” of each particular type of product.

 

We distribute compact construction equipment primarily through a network of independent dealers and distributors throughout the world.  Although some dealers represent only one of our product lines, we have recently focused on developing the dealer network to represent our complete range of compact equipment.  We distribute loader backhoes and skid steer loaders manufactured in India through a network of approximately 50 dealers located in India, Nepal and neighboring countries.

 

We sell asphalt pavers, transfer devices, reclaimers/stabilizers, cold planers, concrete pavers, concrete placers, concrete plants and landfill compactors to end user customers principally through independent dealers and distributors and, to a lesser extent, on a direct basis in areas where distributors are not established.  We sell asphalt plants and concrete roller pavers primarily direct to end user customers.

 

We sell bridge inspection equipment and concrete mixers primarily directly to customers, but concrete mixers are also available through distributors in certain regions of the United States.

 

CRANES

 

We market our crane products globally, optimizing assorted channel marketing systems including a distribution network and a direct sales force.  We have direct sales, primarily to specialized crane rental companies, in certain crane markets such as the United Kingdom, Germany, Spain, Belgium, Italy, France and Scandinavia to offer comprehensive service and support to customers. Distribution via a dealer network is often utilized in other geographic areas, including the United States.

 

MATERIALS PROCESSING

 

We distribute our products through a global network of independent dealers, rental companies, major accounts and direct sales to customers.

 

RESEARCH AND DEVELOPMENT

 

We maintain engineering staff primarily at our manufacturing locations to conduct research and development for the site-specific products.  In addition, we have an engineering center in India to support our engineering teams worldwide and to develop products for the local market.  Our engineering expenses are primarily incurred in connection with (i) customer responsive enhancements and continuous cost improvements of existing products and (ii) development of additional applications and extensions of our existing product lines to meet customer needs and take advantage of growth opportunities.

 

Our engineering focus mirrors the business priorities of delivering customer responsive solutions, growth in developing markets, maintaining compliance with evolving regulatory standards in our global markets, and a lean enterprise focus through complexity reduction via product standardization, component rationalization, and strategic alignment with select global suppliers.

 

Product change driven by regulations requiring Tier 4 emissions compliance for diesel engines in most of our machinery, commencing in 2011, was an important part of our engineering priorities in 2010 and will continue to be a priority as we move through the engine-horsepower dependent phase-in of Tier 4 regulations across our various products.

 

Our costs incurred in the development of new products, cost reductions, or improvements to existing products of continuing operations were consistent over the past three years amounting to $59.9 million, $58.9 million and $57.7 million in 2010, 2009 and 2008, respectively. We have continued our commitment to appropriate levels of engineering spending, commensurate with our level of vertical integration, in order to meet our customer needs, uphold competitive functionality of our products and maintain regulatory compliance in all the markets that we serve.

 

-14-



 

MATERIALS

 

Principal materials and components that we use in our various manufacturing processes include steel, castings, engines, tires, hydraulics, cylinders, drive trains, electric controls and motors, and a variety of other commodities and fabricated or manufactured items.  Extreme movements in the cost and availability of these materials and components may affect our financial performance. There is a strong potential for increases in prices in tires and certain components, as well as steel and other commodities in general during 2011.  We have been working effectively with our suppliers to provide additional visibility into our production plans and we have had only limited shortages that we generally have been able to work around.  Our supply chain has generally stayed aligned with our requirements, which we expect will continue in 2011.

 

In the absence of labor strikes or other unusual circumstances, substantially all materials and components are normally available from multiple suppliers.  However, certain of our businesses receive materials and components from a single source supplier, although alternative suppliers of such materials may be generally available.  Current and potential suppliers are evaluated on a regular basis on their ability to meet our requirements and standards.  We actively manage our material supply sourcing, and may employ various methods to limit risk associated with commodity cost fluctuations and availability.  The inability of suppliers, especially any single source suppliers for a particular business, to deliver materials and components promptly could result in production delays and increased costs to manufacture our products.  We have designed and implemented plans to mitigate the impact of these risks by using alternate suppliers, expanding our supply base to include Asian suppliers, leveraging our overall purchasing volumes to obtain favorable quantities and developing a closer working relationship with key suppliers.  We continue to search for acceptable alternative supply sources and less expensive supply options on a regular basis, including by improving the globalization of our supply base and using suppliers in China and India.  One key Terex initiative has been developing and implementing world-class capability in supply chain management, logistics and global purchasing.  We are focusing on gaining efficiencies with suppliers based on our global purchasing power and resources.

 

COMPETITION

 

We face a competitive global manufacturing market for all of our products.  We compete with other manufacturers based on many factors, particularly price, performance and product reliability.  We generally operate under a best value strategy, where we attempt to offer our customers products that are designed to improve the customer’s return on invested capital.  However, in some instances, customers may prefer the pricing, performance or reliability aspects of a competitor’s product despite our product pricing or performance.  We do not have a single competitor across all business segments.  The following table shows the primary competitors for our products in the following categories:

 

BUSINESS SEGMENT

 

PRODUCTS

 

PRIMARY COMPETITORS

 

 

 

 

 

Aerial Work Platforms

 

Boom Lifts

 

Oshkosh (JLG), Haulotte, Linamar (Skyjack), Tanfield (Snorkel and Upright) and Aichi

 

 

 

 

 

 

 

Scissor Lifts

 

Oshkosh (JLG), Linamar (Skyjack), Haulotte and Tanfield (Snorkel and Upright)

 

 

 

 

 

 

 

Telehandlers

 

Oshkosh (JLG, Skytrak, Caterpillar, Gradall and Lull brands), JCB, CNH, Merlo and Manitou (Gehl)

 

 

 

 

 

 

 

Trailer-mounted Light Towers

 

Allmand Bros., Magnum and Doosan

 

 

 

 

 

 

 

Utility Equipment

 

Altec and Time Manufacturing (Versalift)

 

 

 

 

 

Construction

 

Articulated Off-highway Trucks & Rigid Off-highway Trucks

 

Volvo, Caterpillar, Moxy, John Deere, Bell and Komatsu

 

 

 

 

 

 

 

Scrapers

 

Caterpillar

 

 

 

 

 

 

 

Excavators

 

Caterpillar, Komatsu, Volvo, John Deere, Hitachi, CNH, Sumitomo (Link-Belt), Doosan, Hyundai and Liebherr

 

 

 

 

 

 

 

Material Handlers

 

Liebherr, Sennebogen and Caterpillar

 

 

 

 

 

 

 

Wheel Loaders

 

Caterpillar, Volvo, Kubota, Kawasaki, John Deere, Komatsu, Hitachi, CNH, Liebherr and Doosan

 

-15-



 

BUSINESS SEGMENT

 

PRODUCTS

 

PRIMARY COMPETITORS

 

 

 

 

 

 

 

Loader Backhoes

 

Caterpillar, CNH, JCB, Komatsu, Volvo and John Deere

 

 

 

 

 

 

 

Compaction Equipment

 

Caterpillar, Bomag, Amman, Dynapac and Hamm

 

 

 

 

 

 

 

Mini Excavators

 

Doosan (Bobcat), Yanmar, Volvo, Takeuchi, IHI, CNH, Caterpillar, John Deere, Neuson and Kubota

 

 

 

 

 

 

 

Midi Excavators

 

Komatsu, Hitachi, Volvo and Yanmar

 

 

 

 

 

 

 

Site Dumpers

 

Thwaites and AUSA

 

 

 

 

 

 

 

Skid Steer Loaders

 

Doosan (Bobcat), Caterpillar, CNH, John Deere, Komatsu, Gehl and JCB

 

 

 

 

 

 

 

Compact Track Loaders

 

Doosan (Bobcat), Caterpillar, CNH, John Deere, Takeuchi and Gehl

 

 

 

 

 

 

 

Tunneling Equipment

 

Caterpillar and Liebherr

 

 

 

 

 

 

 

Asphalt Pavers and Transfer Devices

 

Volvo (Blaw-Knox), Fayat (Bomag), Caterpillar, Wirtgen (Ciber), Atlas Copco (Dynapac), Astec (Roadtec) and Wirtgen (Vogele)

 

 

 

 

 

 

 

Asphalt Plants

 

Astec Industries, Gencor Corporation, All-Mix, Ciber and ADM

 

 

 

 

 

 

 

Bridge Inspection Equipment

 

Moog USA and Barin

 

 

 

 

 

 

 

Cold Planers

 

Fayat (Bomag), Caterpillar, Atlas Copco (Dynapac), Wirtgen and Astec Industries (Roadtec)

 

 

 

 

 

 

 

Concrete Production Plants

 

Con-E-Co, Astec Industries, Erie Strayer, Helco, Hagen and Stephens

 

 

 

 

 

 

 

Concrete Pavers

 

Gomaco, Wirtgen, Power Curbers and Guntert & Zimmerman

 

 

 

 

 

 

 

Concrete Placers

 

Gomaco, Wirtgen and Guntert & Zimmerman

 

 

 

 

 

 

 

Concrete Mixers

 

Oshkosh, London and Continental Manufacturing

 

 

 

 

 

 

 

Landfill Compactors

 

Al-Jon, Fayat (Bomag) and Caterpillar

 

 

 

 

 

 

 

Reclaimers/Stabilizers

 

Caterpillar, Astec Industries (Roadtec), Wirtgen and Fayat (Bomag)

 

 

 

 

 

Cranes

 

Mobile Telescopic Cranes

 

Liebherr, Manitowoc (Grove), Tadano-Faun, Sumitomo (Link-Belt), XCMG, Kato, Zoomlion and Sany

 

-16-



 

BUSINESS SEGMENT

 

PRODUCTS

 

PRIMARY COMPETITORS

 

 

 

 

 

 

 

Tower Cranes

 

Liebherr, Manitowoc (Potain), Comansa and Wolffkran

 

 

 

 

 

 

 

Lattice Boom Crawler Cranes

 

Manitowoc, Sumitomo (Link-Belt), Liebherr, Hitachi, Kobelco, XCMG, Zoomlion, Fushun and Sany

 

 

 

 

 

 

 

Lattice Boom Truck Cranes

 

Liebherr

 

 

 

 

 

 

 

Truck-Mounted Cranes

 

Manitowoc (National Crane), Altec and Manitex

 

 

 

 

 

 

 

Reach Stackers

 

Cargotec (Kalmar), Hyster, Konecranes (SMV), Taylor, Dalian, CVS Ferrari and Liebherr

 

 

 

 

 

 

 

Straddle Carriers

 

Cargotec (Kalmar), CVS Ferrari and Konecranes

 

 

 

 

 

 

 

Rubber Tired and Rail Mounted Gantry Cranes

 

Zhenua Port Machinery, Liebherr, Konecranes, Cargotec (Kalmar), Doosan, Hyundai and Mitsui Engineering & Shipbuilding

 

 

 

 

 

 

 

Mobile Harbor Cranes

 

Gottwald, Italgru and Liebherr

 

 

 

 

 

 

 

Ship-to-Shore Gantry Cranes

 

Zhenua Port Machinery, Liebherr, Konecranes, Cargotec (Kalmar), Samsung, Doosan, Hyundai and Mitsui Engineering & Shipbuilding

 

 

 

 

 

 

 

Lift Trucks and Forklifts

 

Cargotec (Kalmar), Hyster, Linde, CVS Ferrari, Konecranes (SMV), Svetruck and Sany

 

 

 

 

 

Materials Processing

 

Crushing Equipment

 

Metso, Astec Industries, Sandvik, Komatsu and Kleemann

 

 

 

 

 

 

 

Screening Equipment

 

Metso, Astec Industries and Sandvik

 

MAJOR CUSTOMERS

 

None of our customers accounted for more than 10% of our consolidated sales in 2010.  We are not dependent upon any single customer.

 

EMPLOYEES

 

As of December 31, 2010, we had approximately 16,300 employees, including approximately 5,600 employees in the U.S. Approximately 5% of our employees in the U.S. are represented by labor unions.  Outside of the U.S., we enter into employment contracts and collective agreements in those countries in which such relationships are mandatory or customary.  The provisions of these agreements correspond in each case with the required or customary terms in the subject jurisdiction.  We generally consider our relations with our employees to be good.

 

PATENTS, LICENSES AND TRADEMARKS

 

We use proprietary materials such as patents, trademarks, trade secrets and trade names in our operations and take actions to protect these rights.

 

We use several significant trademarks and trade names, most notably the Terex®, Genie® and Powerscreen® trademarks.  The other trademarks and trade names of the Company referred to in this Annual Report include registered trademarks of Terex Corporation or its subsidiaries.

 

-17-



 

We have many patents that we use in connection with our operations, and most of our products contain some proprietary components. Many of these patents and related proprietary technology are important to the production of particular products; however, overall, our patents, taken together, are not material to our business or our financial results, nor does our proprietary technology provide us with a competitive advantage over our competitors.

 

We protect our proprietary rights through registration, agreements and litigation to the extent we deem appropriate.  We own and maintain trademark registrations and patents in countries where we conduct business, and monitor the status of our trademark registrations and patents to maintain them in force and renew them as appropriate.  The duration of active registrations varies based upon the relevant statutes in the applicable jurisdiction.  We also take further actions to protect our proprietary rights when circumstances warrant, including the initiation of legal proceedings, if necessary.

 

Currently, we are engaged in various legal proceedings with respect to intellectual property rights, both as a plaintiff and as a defendant.  While the final outcome of these matters cannot be predicted with certainty, we believe the outcome of such matters will not have a material adverse effect, individually or in the aggregate, on our business or operating performance.  For more detail, see “Item 3 – Legal Proceedings.”

 

SAFETY AND ENVIRONMENTAL CONSIDERATIONS

 

As part of The Terex Way, we are committed to provide a safe and healthy environment for our team members, and strive to provide quality products that are safe to use and operate in an environmentally conscious and respectful manner.

 

We generate hazardous and non-hazardous wastes in the normal course of our manufacturing operations.  As a result, we are subject to a wide range of federal, state, local and foreign environmental laws and regulations.  All of our employees are required to obey all applicable health, safety and environmental laws and regulations and must observe the proper safety rules and environmental practices in work situations.  These laws and regulations govern actions that may have adverse environmental effects, such as discharges to air and water, and require compliance with certain practices when handling and disposing of hazardous and non-hazardous wastes.  These laws and regulations would also impose liability for the costs of, and damages resulting from, cleaning up sites, past spills, disposals and other releases of hazardous substances, should any of such events occur.  We are committed to complying with these standards and monitoring our workplaces to determine if equipment, machinery and facilities meet specified safety standards.  Each of our facilities is subject to an environmental audit at least once every three years to monitor compliance and no incidents have occurred which required us to pay material amounts to comply with such laws and regulations.  We are dedicated to seeing that safety and health hazards are adequately addressed through appropriate work practices, training and procedures.  Three years ago, we made it a goal to reduce lost time injuries in the workplace by 25% annually.  We have been able to successfully reach and exceed this three-year target.

 

We are dedicated to product safety when designing and manufacturing our equipment.  Our equipment is designed to meet all applicable laws, regulations and industry standards for use in their markets.  We continually incorporate safety improvements in our products.  We maintain an internal product safety team that is dedicated to improving safety and investigating and resolving any product safety issues that may arise.

 

The use and operation of our equipment in an environmentally conscious manner is a growing concern for Terex.  We are aware of the global discussions regarding climate change and the impact of greenhouse gas emissions on global warming.  We are increasing our production of products that have lower greenhouse gas emissions in response to both regulatory initiatives and anticipated market demand trends.  For example, starting in 2010, one of our most significant design priorities was inclusion of Tier 4 emission compliant diesel engines in most of our machinery and will continue to be a priority in 2011 as we move through the engine-horsepower dependent phase-in of Tier 4 regulations across our various products.  We have also begun to utilize plug-in electric hybrid technology to produce a utility truck that saves fuel, reduces emissions and eliminates noise in residential areas.

 

Increasing laws and regulations dealing with the environmental aspects of the products we manufacture can result in significant expenditures in designing and manufacturing new forms of equipment that satisfy such new laws and regulations.  Compliance with laws and regulations regarding safety and the environment has required, and will continue to require, us to make expenditures.  We currently do not expect that these expenditures will have a material adverse effect on our business or results of operations.

 

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS, GEOGRAPHIC AREAS AND EXPORT SALES

 

Information regarding foreign and domestic operations, export sales and segment information is included in Note B - “Business Segment Information” in the Notes to the Consolidated Financial Statements.

 

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SEASONAL FACTORS

 

Over the past several years, our business has become less seasonal.  As we have grown, diversified our product offerings and expanded the geographic reach of our products, our sales have become less dependent on construction products and sales in the United States and Europe.  As we enter 2011, we expect the overall economic environment will be more of a factor on our sales than historical seasonal trends.

 

WORKING CAPITAL

 

Our 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 trade financing for receivables from customers and dealers.  We have debt service requirements, including semi-annual interest payments on our outstanding notes and monthly interest payments on our bank credit facility.  We believe that cash generated from operations, together with availability under our bank credit facility and cash on hand, provide us with adequate liquidity to meet our operating and debt service requirements.  We expect our liquidity to provide us with flexibility to put our cash to work to yield higher returns and accelerate growth as well as to be opportunistic on acquisitions.  We are redeploying our cash in areas where we see a potential for high return or accelerated growth and market presence, such as developing markets and internal improvement initiatives.

 

During 2011, we plan to monetize the 5.8 million shares of Bucyrus stock we received as a portion of the proceeds of the sale of our Mining business in 2010.  We may monetize these shares either through open market sales, tendering to Caterpillar Inc. (“Caterpillar”) in connection with Caterpillar’s offer to acquire all shares of Bucyrus stock for consideration of $92 per share in cash, or a combination of both.  The market value of these shares at December 31, 2010 was approximately $519 million.  For more detail on working capital matters, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”

 

AVAILABLE INFORMATION

 

We maintain a website at www.terex.com.  We make available on our website under “About Terex” - “Investor Relations” - “SEC Filings,” free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such material with the SEC.  In addition, we make available on our website under “About Terex” - “Investor Relations” - “Corporate Governance,” free of charge, our Audit Committee Charter, Compensation Committee Charter, Corporate Responsibility and Strategy Committee Charter, Governance and Nominating Committee Charter, Corporate Governance Guidelines and Code of Ethics and Conduct.  In addition, the foregoing information is available in print, without charge, to any stockholder who requests these materials from us.

 

ITEM 1A.               RISK FACTORS

 

You should carefully consider the following risks, together with the cautionary statement under the caption “Forward-Looking Information” above and the other information included in this report.  The risks described below are not the only ones we face. Additional risks that are currently unknown to us or that we currently consider immaterial may also impair our business or adversely affect our financial condition or results of operations.  If any of the following risks actually occurs, our business, financial condition or results of operation could be adversely affected.

 

Our business is affected by the cyclical nature of the markets we serve.

 

Demand for our products depends upon general economic conditions in the markets in which we compete.  We cannot provide any assurance that the global economic weakness of the past several years will not continue or become more severe.  If the global economy does not improve it may cause customers to continue to forego or postpone new purchases in favor of reducing their existing fleets or refurbishing or repairing existing machinery.  Our sales depend in part upon our customers’ replacement or repair cycles.  If our customers are not successful in generating sufficient revenue or are precluded from securing financing, they may not be able to pay, or may delay payment of, accounts receivable that are owed to us.  If the global economic weakness of the past several years continues or becomes more severe, or if any economic recovery progresses more slowly than our or market expectations, then there could be an adverse effect on our net sales, financial condition, profitability and/or cash flow and could result in the need for us to record inventory impairments.

 

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We may face limitations on our ability to integrate acquired businesses.

 

From time to time we make acquisitions and we anticipate making additional acquisitions in the future.  However, the successful integration of any previously acquired or newly acquired business depends on our ability to manage these new businesses, coordinate their activities with those of other Terex operations to realize expected synergies, and implement effective internal control processes in these acquired businesses.  While we believe we have successfully integrated acquisitions to date, we cannot ensure that previously acquired or newly acquired companies will operate profitably, that the intended beneficial effect from these acquisitions will be realized and that we will not encounter difficulties in implementing effective internal control processes in these acquired businesses, particularly when the acquired business operates in foreign jurisdictions and/or was privately owned.  See the risk factor entitled “We must comply with an injunction and related obligations resulting from the settlement of an SEC investigation” for additional consequences if we were to commit a violation of the reporting and internal control provisions of the federal securities laws.  In addition, to the extent that we are seeking acquisitions in machinery and industrial businesses that are significantly different from our existing operations, there will be added risks and challenges for managing and integrating these businesses.  Further, we may need to consolidate or restructure our acquired or existing facilities, which may require expenditures related to reductions in workforce and other charges resulting from the consolidations or restructurings, such as the write-down of inventory and lease termination costs. Any of the foregoing could adversely affect our business and results of operations.

 

Our access to capital markets and borrowing capacity has been and could continue to be limited.

 

Our access to capital markets to raise funds through the sale of equity or debt securities is subject to various factors, including general economic and/or financial market conditions.  Significant changes in market liquidity conditions could impact access to funding and associated funding costs, which could reduce our earnings and cash flows.  Currently, as our consolidated cash flow coverage ratio is less than 2.0 to 1.0, we are subject to significant restrictions on the amount of indebtedness that we can incur.  Although we expect our cash flow coverage ratio to be greater than 2.0 to 1.0 by the end of 2011, there can be no assurance that this will occur.

 

Our access to debt financing at competitive risk-based interest rates is partly a function of our credit ratings.  A downgrade to our credit ratings could increase our interest rates, could limit our access to public debt markets, could limit the institutions willing to provide us credit facilities, and could make any future credit facilities or credit facility amendments more costly and/or difficult to obtain.

 

In addition, in the past several years a number of large financial institutions have either failed or relied on the assistance of sovereign governments to continue to operate as a going concern.  Although we believe that the banks participating in our credit facility have adequate capital and resources, we can provide no assurance that all of these banks will continue to operate as a going concern in the future.  If any of the banks in our lending group were to fail or be unwilling to renew our credit facility at or prior to its expiration, it is possible that the borrowing capacity under our current or any future credit facility would be reduced.  If the availability under our credit facility was reduced significantly, we could be required to obtain capital from alternate sources to finance our capital needs. Our options for addressing such capital constraints would include, but not be limited to (i) obtaining commitments from the remaining banks in the lending group or from new banks to fund increased amounts under the terms of our credit facility, or (ii) accessing the public capital markets.  If it becomes necessary to access additional capital, it is possible that any such alternatives in the current market could be on terms less favorable than under our existing credit facility terms, which could have a negative impact on our consolidated financial position, results of operations or cash flows.

 

Our business is sensitive to government spending.

 

Many of our customers depend substantially on government funding of highway construction, maintenance and other infrastructure projects.  In addition, we sell products to governments and government agencies in the U.S. and other nations.  Any decrease or delay in government funding of highway construction and maintenance, other infrastructure projects and overall government spending could cause our revenues and profits to decrease.

 

We operate in a highly competitive industry.

 

Our industry is highly competitive.  To compete successfully, our products must excel in terms of quality, price, features, ease of use, safety and comfort, and we must also provide excellent customer service.  The greater financial resources of certain of our competitors may put us at a competitive disadvantage.  Low-cost competition from China and other developing markets could also result in decreased demand for our products.  If competition in our industry intensifies or if our current competitors lower their prices for competing products, we may lose sales or be required to lower the prices we charge for our products.  If we are unable to provide continued technological improvements in our equipment that meet our customers’ expectations, or the industry’s expectations, the demand for our equipment could be substantially adversely affected.  This may reduce revenue from our products and services, lower our gross margins or cause us to lose market share.

 

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We have suffered and may suffer further losses from operations.

 

Terex had a loss from operations of $401.7 million for the year ended December 31, 2009 and a loss from operations of $73.8 million for the year ended December 31, 2010.  Although we have taken substantial steps to improve our operating performance, there can be no assurances that we will be profitable in the 2011 fiscal year or in any future years.  If we remain unable to generate sufficient revenues to become profitable, this can have a number of negative impacts on the Company.  For example, continued losses may require us to record goodwill impairments in some of our reporting units or impair the value of some of our long-lived assets. Sustained operating losses may also impact our compliance with our covenants under our bank credit facility and the indentures for our various outstanding debt securities.

 

A material disruption to one of our significant manufacturing plants could adversely affect our ability to generate revenue.

 

We produce most of our machines and aftermarket parts for each product type at one manufacturing facility.  If operations at a significant facility were to be disrupted as a result of equipment failures, natural disasters, work stoppages, power outages or other reasons, our business, financial conditions and results of operations could be adversely affected.  Interruptions in production could increase costs and delay delivery of units in production.  Production capacity limits could cause us to reduce or delay sales efforts until production capacity is available.

 

We rely on key management.

 

We rely on the management and leadership skills of our senior management team, particularly Ronald M. DeFeo, our Chairman of the Board and Chief Executive Officer.  Mr. DeFeo has been with us since 1992, serving as Chief Executive Officer since 1995 and Chairman since 1998, guiding the transformation of Terex during that time.  We have an employment agreement with Mr. DeFeo, which expires on December 31, 2012.  The loss of his services could have a significant impact on our business.  Our other senior executives are not bound by employment agreements.  We could be harmed by the loss of any of these senior executives or other key personnel in the future.

 

Some of our customers rely on financing with third parties to purchase our products.

 

We rely on sales of our products to generate cash from operations.  Significant portions of our sales are financed by third party finance companies on behalf of our customers.  The availability of financing by third parties is affected by general economic conditions, the credit worthiness of our customers and the estimated residual value of our equipment.  Deterioration in the credit quality of our customers or the estimated residual value of our equipment could negatively impact the ability of our customers to obtain the resources they need to purchase our equipment.  Given the current economic conditions, there can be no assurance that third party finance companies will continue to extend credit to our customers.

 

Due to the ongoing weakness in certain global economies, some of our customers have been unable to obtain the credit they need to buy our equipment.  As a result, some of our customers may need to cancel existing orders.  Given the lack of liquidity, our customers may be compelled to sell their equipment at less than fair value to raise cash, which could have a negative impact on residual values of our equipment.  These economic conditions could have a material adverse effect on demand for our products and on our financial condition and operating results.

 

We provide financing and credit support for some of our customers.

 

We assist customers in their rental, leasing and acquisition of our products through TFS.  We provide financing for some of our customers, primarily in the U.S. to acquire and use our equipment through loans, sales-type leases, and operating leases.  TFS enters into these financing agreements with the intent either to hold the financing until maturity or to sell the financing to a third party within a short time period.  Until such financing obligations are satisfied through either customer payments or a third party sale, we retain the risks associated with such customer financing.  Our results could be adversely affected if such customers default on their contractual obligations to us or if the residual values of such equipment on these transactions decline below the original estimated values.

 

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As described above, our customers, from time to time, may fund the acquisition of our equipment through third-party finance companies. In certain instances, we may provide credit guarantees, residual value guarantees or buyback guarantees.  With these guarantees we must assess the probability of losses or non-performance in ways similar to the evaluation of accounts receivable, including consideration of a customer’s payment history, leverage, availability of third party financing, political and exchange risks, and other factors.  Many of these factors, including the assessment of a customer’s ability to pay, are influenced by economic and market factors that cannot be predicted with certainty.  In circumstances where we believe it is probable that a specific customer will have difficulty meeting its financial obligations, a specific reserve is recorded to recognize a liability for a guarantee we expect to pay, taking into account any amounts that we would anticipate realizing if we are forced to repossess the equipment that supports the customer’s financial obligations to us.  During periods of economic weakness, the collateral underlying our guarantees of indebtedness of customers or receivables can decline sharply, thereby increasing our exposure to losses.  In the future, we may incur losses in excess of our recorded reserves if the financial condition of our customers were to deteriorate further or the full amount of any anticipated proceeds from the sale of the collateral supporting our customers’ financial obligations is not realized.  To date, losses related to guarantees have been negligible, however there can be no assurance that our historical experience with respect to guarantees will be indicative of future results.

 

We may experience losses in excess of our recorded reserves for doubtful accounts.

 

As of December 31, 2010, we had trade receivables of $782.5 million.  We evaluate the collectability of open accounts, finance receivables and notes receivable based on a combination of factors and establish reserves based on our estimates of potential losses. In circumstances where we believe it is probable that a specific customer will have difficulty meeting its financial obligations, a specific reserve is recorded to reduce the net recognized receivable to the amount we expect to collect.  We also establish additional reserves based upon our perception of the quality of the current receivables, the current financial position of our customers and past collections experience.  Continued economic weakness could result in additional requirements for specific reserves, which could have a negative impact on our consolidated financial position.

 

We are dependent upon third-party suppliers, making us vulnerable to supply shortages and price increases.

 

We obtain materials and manufactured components from third-party suppliers.  In the absence of labor strikes or other unusual circumstances, substantially all materials and components are normally available from multiple suppliers.  However, certain of our businesses receive materials and components from a single source supplier, although alternative suppliers of such materials are generally available.  Delays in our suppliers’ abilities, especially any sole suppliers for a particular business, to provide us with necessary materials and components may delay production at a number of our manufacturing locations, or may require us to seek alternative supply sources.  Delays in obtaining supplies may result from a number of factors affecting our suppliers, including capacity constraints, labor disputes, impaired supplier financial condition, suppliers’ allocations to other purchasers, weather emergencies or acts of war or terrorism.  Any delay in receiving supplies could impair our ability to deliver products to our customers and, accordingly, could have a material adverse effect on our business, results of operations and financial condition.

 

In addition, we purchase material and services from our suppliers on terms extended based on our overall credit rating.  Deterioration in our credit rating may impact suppliers’ willingness to extend terms and in turn increase the cash requirements of our business.

 

We have debt outstanding and must comply with restrictive covenants in our debt agreements.

 

Our existing debt agreements contain a number of significant covenants, which limit our ability to, among other things, borrow additional money, make capital expenditures, pay dividends, dispose of assets and acquire new businesses.  These covenants also require us to maintain liquidity of not less than $250 million on the last day of each fiscal quarter through June 30, 2011 and, thereafter, maintain a specified senior secured debt leverage ratio.  These covenants could affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise.  If we are unable to comply with these covenants, there would be a default under these debt agreements.  Changes in economic or business conditions, results of operations or other factors could cause us to default under our debt agreements.  A default, if not waived by our lenders, could result in acceleration of our debt and possibly bankruptcy.

 

We may be unable to generate sufficient cash flow to service our debt obligations.

 

Servicing our debt requires a significant amount of cash.  Our ability to generate sufficient cash depends on numerous factors beyond our control and our business may not generate sufficient cash flow from operating activities.  Our ability to make payments on, and to refinance, our debt and to fund planned capital expenditures will depend on our ability to generate cash in the future.  To some extent, this is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Lower sales, or uncollectible receivables, generally will reduce our cash flow.

 

We cannot assure that our business will generate sufficient cash flow from operations, or that future borrowings will be available to us under our credit facility or otherwise, in an amount sufficient to fund our liquidity needs.

 

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If our cash flows and capital resources are insufficient to service our indebtedness, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness.  These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.  Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time.  Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.

 

We are subject to currency fluctuations.

 

Our products are sold in over 100 countries around the world.  Our revenues are generated in U.S. dollars and foreign currencies, including the Euro and British Pound Sterling, while costs incurred to generate our revenues are only partly incurred in the same currencies.  Since our financial statements are denominated in U.S. Dollars, changes in currency exchange rates between the U.S. Dollar and other currencies, such as the Euro and British Pound Sterling, have had, and will continue to have, an impact on our earnings.  To reduce this currency exchange risk, we may buy protecting or offsetting positions (known as “hedges”) in certain currencies to reduce the risk of an adverse currency exchange movement.  We have not engaged in any speculative hedging activities. Although we partially hedge our revenues and costs, currency fluctuations may impact our financial performance in the future.

 

We are exposed to political, economic and other risks that arise from operating a multinational business.

 

Our international operations are subject to a number of potential risks. Such risks principally include:

 

·                  trade protection measures and currency exchange controls;

·                  labor unrest;

·                  regional economic conditions;

·                  political instability;

·                  terrorist activities and the U.S. and international response thereto;

·                  restrictions on the transfer of funds into or out of a country;

·                  export duties and quotas;

·                  domestic and foreign customs and tariffs;

·                  current and changing regulatory environments;

·                  difficulties protecting our intellectual property;

·                  transportation delays and interruptions;

·                  costs and difficulties in integrating, staffing and managing international operations, especially in developing markets such as China, India, Brazil, Russia and the Middle East;

·                  difficulty in obtaining distribution support; and

·                  current and changing tax laws.

 

In addition, many of the nations in which we operate have developing legal and economic systems adding greater uncertainty to our operations in those countries than would be expected in North America and Western Europe.  These factors may have an adverse effect on our international operations in the future.

 

We are subject to the Foreign Corrupt Practice Act (“FCPA”) and other laws that prohibit improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business.  Our international activities create the risk of unauthorized payments or offers of payments in violation of the FCPA by one of our employees, consultants, sales agents or distributors, because these parties are not always subject to our control.  Any violations of the FCPA could result in significant fines, criminal sanctions against us or our employees, and prohibitions on the conduct of our business, including our business with the U.S. government.

 

Difficulties in managing and expanding into developing markets could divert management’s attention from our existing operations.

 

We plan to increase our presence in developing markets such as China, India, Brazil, Russia and the Middle East.  Increasing these efforts will require us to hire, train and retain qualified personnel in countries where language, cultural or regulatory barriers may exist.  Any significant difficulties in expanding our operations in developing markets may divert management’s attention from our existing operations.

 

Expansion into developing markets may require modification of products to meet local requirements or preferences.  Modification to the design of our products to meet local requirements and preferences may take longer or be more costly than we anticipate and could have a material adverse effect on our ability to achieve international sales growth.

 

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We may be adversely impacted by work stoppages and other labor matters.

 

As of December 31, 2010, we employed approximately 16,300 people worldwide, including approximately 5,600 employees in the U.S.  Approximately 5% of our employees in the U.S. are represented by labor unions.  Outside of the U.S., we enter into employment contracts and collective agreements in those countries in which such relationships are mandatory or customary.  The provisions of these agreements correspond in each case with the required or customary terms in the subject jurisdiction.  We have collective agreements that are set to expire in 2011.  While we have no reason to believe that we will be impacted by work stoppages or other labor matters, we cannot assure that future issues with our labor unions will be resolved favorably or that we will not encounter future strikes, further unionization efforts or other types of conflicts with labor unions or our employees.  Any of these factors may have an adverse effect on us or may limit our flexibility in dealing with our workforce.

 

Compliance with environmental regulations could be costly and require us to make significant expenditures.

 

We generate hazardous and nonhazardous wastes in the normal course of our manufacturing operations.  As a result, we are subject to a wide range of federal, state, local and foreign environmental laws and regulations.  These laws and regulations govern actions that may have adverse environmental effects and require compliance with certain practices when handling and disposing of hazardous and nonhazardous wastes.  These laws and regulations also impose liability for the costs of, and damages resulting from, cleaning up sites, past spills, disposals and other releases of hazardous substances, should any of such events occur.  No such incidents have occurred which required us to pay material amounts to comply with such laws and regulations.

 

In addition, increasing laws and regulations dealing with the environmental aspects of the products we manufacture can result in significant expenditures in designing and manufacturing new forms of equipment that satisfy such new laws and regulations.  In particular, climate change is receiving increasing attention worldwide.  Many scientists, legislators and others attribute climate change to increased levels of greenhouse gases, including carbon dioxide, which has led to significant legislative and regulatory efforts to limit greenhouse gas emissions.  While additional regulation of emissions in the future appears likely, it is too early to predict how this regulation will ultimately affect our business, operations or financial results, although government policies limiting greenhouse gas emissions of our products will likely require increased compliance expenditures on our part.

 

Compliance with these laws and regulations has required, and will continue to require, us to make expenditures, however we do not expect these expenditures to have a material adverse effect on our business or results of operations.

 

We face litigation and product liability claims, class action lawsuits and other liabilities.

 

In our lines of business, numerous suits have been filed alleging damages for accidents that have occurred during the use or operation of our products.  We are also engaged as a defendant in various legal proceedings with respect to intellectual property rights.  For more detail, see “Item 3 – Legal Proceedings.”  We are self-insured, up to certain limits, for these product liability exposures, as well as for certain exposures related to general, workers’ compensation and automobile liability.  Insurance coverage is obtained for catastrophic losses as well as those risks required to be insured by law or contract.  We do not believe that the outcome of such matters will have a material adverse effect on our consolidated financial position; however, any significant liabilities not covered by insurance could have an adverse effect on our financial condition.

 

We are the subject of a securities class action lawsuit, an Employee Retirement Income Security Act of 1974 (“ERISA”) class action lawsuit and a stockholder derivative lawsuit.  These lawsuits generally cover the time period from February 2008 to February 2009 and allege, among other things, that certain of our SEC filings and other public statements contained false and misleading statements which resulted in damages to the plaintiffs and the members of the purported class when they purchased our securities and that there were breaches of fiduciary duties and of disclosure requirements under ERISA.  We believe that the allegations in the suits are completely without merit, and Terex, its directors and the named executives will vigorously defend against them. We believe that we have acted, and continue to act, in compliance with federal securities laws and ERISA law with respect to these matters.  However, the outcome of the lawsuits cannot be predicted and, if determined adversely, could ultimately result in us incurring significant liabilities.

 

We must comply with an injunction and related obligations resulting from the settlement of an SEC investigation.

 

In August 2009, a final court decree formalized the settlement that was entered into to resolve the previously disclosed SEC investigation of Terex related mainly to (1) certain transactions between us and United Rentals, Inc. that took place in 2000 and 2001, and one transaction between United Rentals, Inc. and one of our subsidiaries that took place in 2001 before that subsidiary was acquired by Terex, and (2) the circumstances of the restatement of certain of our financial statements for the years 2000-2004.  The settlement resolved all matters relating to the potential liability of Terex, but did not address our current or former employees.  Under the terms of the settlement, we paid a civil penalty of $8 million in August 2009 and we consented, without admitting or denying the SEC’s allegations, to the entry of a judgment which enjoins us from committing or aiding and abetting any future violations of the anti-fraud, books and records, reporting and internal control provisions of the federal securities laws and related SEC rules.

 

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We and our directors, officers and employees are required to comply at all times with the terms of this injunction.  In addition, in 1999 regarding a separate and unrelated SEC investigation, we consented to the entry of an administrative cease and desist order prohibiting future violations of certain provisions of the federal securities laws.  As a result, if we commit or aid or abet any future violations of the anti-fraud, books and records, reporting and internal control provisions of the federal securities laws and related SEC rules, we are likely to suffer severe penalties, financial and otherwise, that could have a material negative impact on our business and results of operations.

 

Further, as a result of the settlement and final court decree in August 2009, for a period of three years, or such earlier time as we are able to obtain a waiver from the SEC, (i) we are no longer qualified as a “well known seasoned issuer” (“WKSI”) as defined in Rule 405 of the Securities Act of 1933, and cannot take advantage of the benefits available to a WKSI, (ii) we cannot rely on the safe harbor provisions regarding forward-looking statements provided by the regulations issued under the Securities Exchange Act of 1934 and (iii) we cannot utilize Regulation A or D.  Taken together, these rules limit our ability to access the capital markets and utilize certain provisions available generally to other U.S. public companies.

 

We are in the process of implementing a global enterprise system.

 

We are implementing a global enterprise resource planning system to replace many of our existing operating and financial systems. Such an implementation is a major undertaking, both financially and from a management and personnel perspective.  Should the system not be implemented successfully and within budget, or if the system does not perform in a satisfactory manner, it could disrupt and might adversely affect our operations and results of operations, including our ability to report accurate and timely financial results.

 

ITEM 1B.               UNRESOLVED STAFF COMMENTS

 

Not applicable.

 

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ITEM 2.                  PROPERTIES

 

The following table outlines the principal manufacturing, warehouse and office facilities owned or leased (as indicated below) by the Company and its subsidiaries:

 

BUSINESS UNIT

 

FACILITY LOCATION

 

TYPE AND APPROXIMATE SIZE OF FACILITY

 

 

 

 

 

Terex (Corporate Offices)

 

Westport, Connecticut (1)

 

Office

 

 

 

 

167,000 sq. ft.

Aerial Work Platforms

 

Redmond, Washington (1)

 

Office, manufacturing and warehouse

 

 

 

 

750,000 sq. ft.

 

 

Moses Lake, Washington (1)

 

Office, manufacturing and warehouse

 

 

 

 

422,000 sq. ft.

 

 

North Bend, Washington (1)

 

Manufacturing and warehouse

 

 

 

 

192,000 sq. ft

 

 

Rock Hill, South Carolina

 

Office, manufacturing and warehouse

 

 

 

 

121,000 sq. ft.

 

 

Perugia, Italy

 

Office, manufacturing and warehouse

 

 

 

 

114,000 sq. ft.

 

 

Darra, Australia (1)

 

Warehouse

 

 

 

 

56,000 sq. ft.

 

 

Maddington, Australia (1)

 

Warehouse

 

 

 

 

54,000 sq. ft.

 

 

Watertown, South Dakota

 

Office, manufacturing and warehouse

 

 

 

 

250,000 sq. ft.

 

 

Huron, South Dakota

 

Office and manufacturing

 

 

 

 

88,000 sq. ft.

 

 

Changzhou, China

 

Office, manufacturing and warehouse

 

 

 

 

312,000 sq. ft.

Construction

 

Motherwell, Scotland (1)

 

Office, manufacturing and warehouse

 

 

 

 

473,000 sq. ft.

 

 

Bad Schoenborn, Germany

 

Office, manufacturing and warehouse

 

 

 

 

238,000 sq. ft.

 

 

Grand Rapids, Minnesota

 

Office, manufacturing and warehouse

 

 

 

 

199,000 sq. ft.

 

 

Coventry, England (1)

 

Office, manufacturing and warehouse

 

 

 

 

326,000 sq. ft.

 

 

Langenburg, Germany

 

Office, manufacturing and warehouse

 

 

 

 

102,000 sq. ft.

 

 

Gerabronn, Germany

 

Office and manufacturing

 

 

 

 

147,000 sq. ft.

 

 

Rothenburg, Germany (2)

 

Office and warehouse

 

 

 

 

97,000 sq. ft.

 

 

Crailsheim, Germany

 

Office and manufacturing

 

 

 

 

185,000 sq. ft.

 

 

Southaven, Mississippi (1)

 

Office and warehouse

 

 

 

 

505,000 sq. ft.

 

 

Greater Noida, Uttar Pradesh, India (1)

 

Office, manufacturing and warehouse

 

 

 

 

155,000 sq. ft.

 

 

Cachoeirinha, Brazil

 

Office, manufacturing and warehouse

 

 

 

 

78,000 sq. ft.

 

 

Oklahoma City, Oklahoma

 

Office, manufacturing and warehouse

 

 

 

 

620,000 sq. ft.

 

 

Canton, South Dakota

 

Office, manufacturing and warehouse

 

 

 

 

71,000 sq. ft.

 

 

Rock Hill, South Carolina

 

Office, manufacturing and warehouse

 

 

 

 

47,000 sq. ft.

 

 

Fort Wayne, Indiana

 

Office, manufacturing and warehouse

 

 

 

 

178,000 sq. ft.

Cranes

 

Crespellano, Italy

 

Office, manufacturing and warehouse

 

 

 

 

66,000 sq. ft.

 

 

Montceau-les-Mines, France

 

Office, manufacturing and warehouse

 

 

 

 

418,000 sq. ft.

 

-26-



 

BUSINESS UNIT

 

FACILITY LOCATION

 

TYPE AND APPROXIMATE SIZE OF FACILITY

 

 

 

 

 

 

 

Waverly, Iowa

 

Office, manufacturing and warehouse

 

 

 

 

312,000 sq. ft.

 

 

Brisbane, Australia (1)

 

Office, manufacturing and warehouse

 

 

 

 

42,000 sq. ft.

 

 

Fontanafredda, Italy

 

Office, manufacturing and warehouse

 

 

 

 

118,000 sq. ft.

 

 

Wilmington, North Carolina

 

Office, manufacturing and warehouse

 

 

 

 

559,000 sq. ft.

 

 

Zweibruecken-Dinglerstrasse, Germany

 

Office, manufacturing and warehouse

 

 

 

 

483,000 sq. ft.

 

 

Zweibruecken-Wallerscheid, Germany (1)

 

Office, manufacturing and warehouse

 

 

 

 

336,000 sq. ft.

 

 

Bierbach, Germany (1)

 

Warehouse and manufacturing

 

 

 

 

198,000 sq. ft.

 

 

Pecs, Hungary (1)

 

Office and manufacturing

 

 

 

 

82,000 sq. ft.

 

 

Luzhou, China

 

Office, manufacturing and warehouse

 

 

 

 

1,100,000 sq. ft.

 

 

Jinan, China

 

Office, manufacturing and warehouse

 

 

 

 

416,000 sq. ft.

 

 

Long Crendon, England

 

Office and warehouse

 

 

 

 

140,000 sq. ft.

 

 

Lentigione, Italy

 

Office, manufacturing and warehouse

 

 

 

 

323,000 sq. ft

 

 

Monfalcone, Italy

 

Office, manufacturing and warehouse

 

 

 

 

538,000 sq. ft.

 

 

Würzburg, Germany

 

Office, manufacturing and warehouse

 

 

 

 

323,000 sq. ft.

 

 

Xiamen, China

 

Office, manufacturing and warehouse

 

 

 

 

538,000 sq. ft.

Materials Processing

 

Subang Jaya, Malaysia (1)

 

Manufacturing and warehouse

 

 

 

 

111,000 sq. ft.

 

 

Hosur, India

 

Manufacturing

 

 

 

 

215,000 sq. ft.

 

 

Durand, Michigan

 

Office, manufacturing and warehouse

 

 

 

 

114,000 sq. ft.

 

 

Omagh, Northern Ireland (1)

 

Office, manufacturing and warehouse

 

 

 

 

153,000 sq. ft.

 

 

Dungannon, Northern Ireland (1)

 

Office, manufacturing and warehouse

 

 

 

 

330,000 sq. ft.

 

 

Coalville, England

 

Office, manufacturing and warehouse

 

 

 

 

119,000 sq. ft.

 

 

Quanzhou, China

 

Office and manufacturing

 

 

 

 

19,000 sq. ft.

 

(1)                                  These facilities are either leased or subleased.

(2)                                  Includes approximately 54,000 sq. ft., which are leased.

 

We also have numerous owned or leased locations for new machine and parts sales and distribution and rebuilding of components located worldwide.  Our Terex Utilities distribution network has sales locations throughout the southern and western United States.

 

We believe that the properties listed above are suitable and adequate for our use.  We have determined that certain of our other properties in the United States and elsewhere exceed our requirements.  Such properties may be sold, leased or utilized in another manner and have been excluded from the above list.  We are actively marketing some of these properties for sale.

 

-27-



 

ITEM 3.                  LEGAL PROCEEDINGS

 

General

 

As described in Note R - “Litigation and Contingencies” in the Notes to the Consolidated Financial Statements, we are involved in various legal proceedings, including product liability, general liability, workers’ compensation liability, employment, commercial and intellectual property litigation, which have arisen in the normal course of operations.  We are insured for product liability, general liability, workers’ compensation, employer’s liability, property damage and other insurable risk required by law or contract with retained liability to us or deductibles.  We believe that the outcome of such matters will not have a material adverse effect on our consolidated financial position.

 

ERISA, Securities and Stockholder Derivative Lawsuits

 

We have received complaints seeking certification of class action lawsuits in an ERISA lawsuit, a securities lawsuit and a stockholder derivative lawsuit as follows:

 

·

 

A consolidated complaint in the ERISA lawsuit was filed in the United States District Court, District of Connecticut on September 20, 2010 and is entitled In Re Terex Corp. ERISA Litigation.

 

 

 

·

 

A consolidated class action complaint for violations of securities laws in the securities lawsuit was filed in the United States District Court, District of Connecticut on November 18, 2010 and is entitled Sheet Metal Workers Local 32 Pension Fund and Ironworkers St. Louis Council Pension Fund, individually and on behalf of all others similarly situated v. Terex Corporation, et al.

 

 

 

·

 

A stockholder derivative complaint for violation of the Securities and Exchange Act of 1934, breach of fiduciary duty, waste of corporate assets and unjust enrichment was filed on April 12, 2010 in the United States District Court, District of Connecticut and is entitled Peter Derrer, derivatively on behalf of Terex Corporation v. Ronald M. DeFeo, Phillip C. Widman, Thomas J. Riordan, G. Chris Andersen, Donald P. Jacobs, David A. Sachs, William H. Fike, Donald DeFosset, Helge H. Wehmeier, Paula H.J. Cholmondeley, Oren G. Shaffer, Thomas J. Hansen, and David C. Wang, and Terex Corporation.

 

These lawsuits generally cover the period from February 2008 to February 2009 and allege, among other things, that certain of our SEC filings and other public statements contained false and misleading statements which resulted in damages to the Company, the plaintiffs and the members of the purported class when they purchased our securities and in the ERISA lawsuit and the stockholder derivative complaint, that there were breaches of fiduciary duties and of ERISA disclosure requirements.  The stockholder derivative complaint also alleges waste of corporate assets relating to the repurchase of our shares in the market and unjust enrichment as a result of securities sales by certain officers and directors. The complaints all seek, among other things, unspecified compensatory damages, costs and expenses.  The stockholder derivative complaint also seeks amendments to our corporate governance procedures in addition to unspecified compensatory damages from the individual defendants in our favor.

 

We believe that the allegations in the suits are without merit, and Terex, its directors and the named executives will continue to vigorously defend against them.  We believe that we have acted, and continue to act, in compliance with federal securities laws and ERISA law with respect to these matters.  Accordingly, on November 19, 2010 we filed a motion to dismiss the ERISA lawsuit and on January 18, 2011 we filed a motion to dismiss the securities lawsuit.  These motions are currently in the briefing stage and pending before the court.  The plaintiff in the stockholder derivative lawsuit has agreed with us to put this lawsuit on hold pending the outcome of the motion to dismiss in connection with the securities lawsuit.

 

Post-Closing Dispute with Bucyrus

 

We are involved in a dispute with Bucyrus regarding the calculation of the value of the net assets of the Mining business.  Bucyrus has provided us with their calculation of the net asset value of the Mining business, which seeks a payment of approximately $149 million from us to Bucyrus.  We believe that the Bucyrus calculation of the net asset value is incorrect and not in accordance with the terms of the definitive agreement.  We have objected to Bucyrus’ calculation and have provided Bucyrus with our own calculation of the net asset value, which does not require any payment from the Company to Bucyrus.  We initiated a court proceeding on October 29, 2010 in the Supreme Court of the State of New York, County of New York, to enforce and protect our rights under the definitive agreement for the Mining business sale.  While we believe Bucyrus’ position is without merit and we are vigorously opposing it, no assurance can be given as to the final resolution of this dispute or that we will not ultimately be required to make a substantial payment to Bucyrus.

 

-28-



 

Powerscreen Patent Infringement Lawsuit

 

On December 6, 2010, we received an adverse jury verdict in a patent infringement lawsuit brought against Powerscreen International Distribution Limited (“Powerscreen”) and Terex by Metso Minerals Inc. (“Metso”) in the United States District Court for the Eastern District of New York.  The lawsuit involved the claim by Metso that the folding side conveyor of Powerscreen screening plants violates a patent held by Metso in the United States.  We do not agree that the accused Powerscreen mobile screening plants or their folding conveyor infringe the subject patent held by Metso. These types of patent cases are very complex and we strongly believe that the verdict is contrary to both the law and the facts.  Accordingly, we will be appealing the verdict and believe that we will ultimately prevail on appeal.  This verdict only relates to certain models of Powerscreen mobile screening plants with the alleged infringing folding side conveyor design sold in the United States.  We do not expect this verdict will have a material impact on our consolidated business or overall operating results.

 

For information concerning other contingencies and uncertainties, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Contingencies and Uncertainties.”

 

ITEM 4.

 

REMOVED AND RESERVED

 

PART II

 

ITEM 5.

 

MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

(a) Our common stock, par value $.01 per share (“Common Stock”) is listed on the NYSE under the symbol “TEX.”  The high and low quarterly stock prices for our Common Stock on the NYSE Composite Tape (for the last two completed years) are as follows:

 

 

 

2010

 

2009

 

 

 

Fourth

 

Third

 

Second

 

First

 

Fourth

 

Third

 

Second

 

First

 

High

 

$

31.35

 

$

23.13

 

$

28.71

 

$

23.89

 

$

25.61

 

$

21.27

 

$

17.92

 

$

21.11

 

Low

 

$

21.55

 

$

16.79

 

$

18.57

 

$

17.32

 

$

18.08

 

$

10.24

 

$

8.90

 

$

7.34

 

 

No dividends were declared or paid in 2010 or 2009.  Certain of our debt agreements contain restrictions as to the payment of cash dividends to stockholders. In addition, Delaware law limits payment of dividends.  We intend generally to retain earnings, if any, to fund the development and growth of our business, pay down debt or repurchase stock.  We may consider paying dividends on the Common Stock at some point in the future, subject to the limitations described above.  Any future payments of cash dividends will depend upon our financial condition, capital requirements and earnings, as well as other factors that the Board of Directors may deem relevant.

 

As of February 14, 2011, there were 1,066 stockholders of record of our Common Stock.

 

-29-



 

Performance Graph

 

The following stock performance graph is intended to show our stock performance compared with that of comparable companies.  The stock performance graph shows the change in market value of $100 invested in our Common Stock, the Standard & Poor’s 500 Stock Index and a peer group of comparable companies (“Peer Group”) for the period commencing December 31, 2005 through December 31, 2010.  The cumulative total stockholder return assumes dividends are reinvested.  The stockholder return shown on the graph below is not indicative of future performance.

 

The Peer Group consists of the following companies, which are in similar lines of business to Terex: Astec Industries, Inc., Caterpillar Inc., CNH Global N.V., Deere & Co., JLG Industries, Inc. (ended December 6, 2006), Joy Global Inc., Manitowoc Co. and Oshkosh Corporation (since December 7, 2006).  The companies in the Peer Group are weighted by market capitalization.

 

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Terex Corporation, the S&P 500 Index

and a Peer Group.

 

GRAPHIC

 

 

 

*$100 invested on 12/31/05 in stock or index, including reinvestment of dividends.

Fiscal year ending December 31.

 

 

 

 

 

Copyright © 2011 S&P, a division of The McGraw-Hill Companies Inc. All right reserved.

 

 

 

 

12/05

 

12/06

 

12/07

 

12/08

 

12/09

 

12/10

 

Terex Corporation

 

100.00

 

217.44

 

220.77

 

58.32

 

66.70

 

104.51

 

S&P 500

 

100.00

 

115.80

 

122.16

 

76.96

 

97.33

 

111.99

 

Peer Group

 

100.00

 

117.34

 

175.61

 

80.19

 

116.98

 

190.06

 

Copyright© 2011 Standard & Poor’s, a division of The McGraw-Hill Companies Inc. All rights reserved. (www.researchdatagroup.com/S&P.htm)

 

 

(b) Not applicable.

 

(c) Not applicable.

 

-30-



 

ITEM 6.  SELECTED FINANCIAL DATA

 

FIVE-YEAR SELECTED FINANCIAL DATA

 

The following table summarizes our selected financial data and should be read in conjunction with the more detailed Consolidated Financial Statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

(in millions, except per share amounts and employees)

 

 

 

AS OF OR FOR THE YEAR ENDED DECEMBER 31,

 

 

 

2010

 

2009

 

2008

 

2007

 

2006

 

SUMMARY OF OPERATIONS

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

4,418.2

 

$

3,858.4

 

$

7,958.9

 

$

7,568.5

 

$

6,436.6

 

Goodwill impairment

 

 

 

(459.9

)

 

 

(Loss) income from operations

 

(73.8

)

(401.7

)

170.8

 

821.1

 

632.1

 

(Loss) income from continuing operations

 

(211.5

)

(406.4

)

(74.7

)

527.6

 

358.4

 

(Loss) income from discontinued operations – net of tax

 

(15.3

)

21.7

 

150.4

 

91.6

 

52.9

 

Gain (loss) on disposition of discontinued operations – net of tax

 

589.3

 

(12.6

)

 

 

(7.7

)

Net income (loss) attributable to common stockholders

 

358.5

 

(398.4

)

71.9

 

613.9

 

399.9

 

Per Common and Common Equivalent Share:

 

 

 

 

 

 

 

 

 

 

 

Basic attributable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from continuing operations

 

$

(1.98)

 

$

(3.97

)

$

(0.80

)

$

5.10

 

$

3.52

 

(Loss) income from discontinued operations – net of tax

 

(0.14)

 

0.21

 

1.53

 

0.90

 

0.53

 

Gain (loss) on disposition of discontinued operations – net of tax

 

5.42

 

(0.12

)

 

 

(0.08

)

Net income (loss) attributable to common stockholders

 

3.30

 

(3.88

)

0.73

 

6.00

 

3.97

 

Diluted attributable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from continuing operations

 

$

(1.98)

 

$

(3.97

)

$

(0.80

)

$

4.98

 

$

3.44

 

(Loss) income from discontinued operations – net of tax

 

(0.14)

 

0.21

 

1.53

 

0.87

 

0.51

 

Gain (loss) on disposition of discontinued operations – net of tax

 

5.42

 

(0.12

)

 

 

(0.07

)

Net income (loss) attributable to common stockholders

 

3.30

 

(3.88

)

0.73

 

5.85

 

3.88

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS AND LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

$

3,968.9

 

$

3,914.6

 

$

4,040.9

 

$

4,776.9

 

$

3,432.8

 

Current liabilities

 

1,674.2

 

1,554.7

 

1,824.6

 

2,175.3

 

2,027.2

 

PROPERTY, PLANT AND EQUIPMENT

 

 

 

 

 

 

 

 

 

 

 

Net property, plant and equipment

 

$

573.5

 

$

605.0

 

$

408.4

 

$

345.0

 

$

278.5

 

Capital expenditures

 

55.0

 

50.4

 

103.6

 

94.1

 

55.4

 

Depreciation

 

78.6

 

70.2

 

62.9

 

52.3

 

49.0

 

TOTAL ASSETS

 

$

5,516.4

 

$

5,713.8

 

$

5,445.4

 

$

6,316.3

 

$

4,785.9

 

 

 

 

 

 

 

 

 

 

 

 

 

CAPITALIZATION

 

 

 

 

 

 

 

 

 

 

 

Long-term debt and notes payable (includes capital leases)

 

$

1,686.3

 

$

1,966.4

 

$

1,435.5

 

$

1,351.2

 

$

754.6

 

Total Terex Corporation Stockholders’ Equity

 

2,083.2

 

1,650.2

 

1,721.7

 

2,343.2

 

1,751.0

 

Dividends per share of Common Stock

 

 

 

 

 

 

Shares of Common Stock outstanding at year end

 

108.1

 

107.3

 

94.0

 

100.3

 

101.1

 

EMPLOYEES

 

16,300

 

15,000

 

16,500

 

17,600

 

15,500

 

 

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Notes to the Consolidated Financial Statements for a discussion of “Discontinued Operations,” “Acquisitions,” “Goodwill,” “Long-Term Obligations” and “Stockholders’ Equity.”

 

-31-



 

ITEM 7.                  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

 

BUSINESS DESCRIPTION

 

Terex is a diversified global equipment manufacturer of a variety of machinery products.  We are focused on delivering reliable, customer-driven solutions for a wide range of commercial applications, including the construction, infrastructure, quarrying, mining, shipping, transportation, refining, energy and utility industries.  We operate in four reportable segments: (i) AWP; (ii) Construction; (iii) Cranes; and (iv) MP.

 

Our AWP segment designs, manufactures, refurbishes, services and markets aerial work platform equipment, telehandlers, light towers and utility equipment, as well as their related replacement parts and components.  Customers use our AWP products to construct and maintain industrial, commercial and residential buildings and facilities, construct and maintain utility and telecommunication lines, trim trees in construction and foundation drilling applications and for other commercial operations, as well as in a wide range of infrastructure projects.  Additionally, we own much of the North American distribution channel for our utility products group and operate a fleet of rental utility products in certain areas of the United States.

 

Our Construction segment designs, manufactures and markets heavy and compact construction equipment, as well as roadbuilding equipment, including asphalt and concrete equipment, landfill compactors and bridge inspection equipment, as well as their related replacement parts and components.  Construction, forestry, rental, mining, industrial and government customers use these products in construction and infrastructure projects, to build roads and bridges and in coal, minerals, sand and gravel operations.  We acquired A.S.V., Inc. (“ASV”) on February 26, 2008. The results of ASV are included in the Construction segment from its date of acquisition.

 

Our Cranes segment designs, manufactures, services and markets mobile telescopic cranes, tower cranes, lattice boom crawler cranes, lattice boom truck cranes, truck-mounted cranes (boom trucks) and specialized port and rail equipment, including straddle and sprinter carriers, gantry cranes, mobile harbor cranes, ship-to-shore cranes, reach stackers, lift trucks and forklifts, as well as their related replacement parts and components.  Our Cranes products are used primarily for construction, repair and maintenance of commercial buildings, manufacturing facilities and infrastructure and material handling at port and railway facilities.  We acquired the port equipment businesses of Reggiane Cranes and Plants S.p.A. and Noell Crane Holding GmbH (collectively, “Terex Port Equipment” or the “Port Equipment Business”) on July 23, 2009.  The results of the Port Equipment Business are included in the Cranes segment from its date of acquisition.

 

Our MP segment designs, manufactures and markets materials processing equipment, including crushers, washing systems, screens, apron feeders and related components and replacement parts.  Construction, quarrying, mining and government customers use our MP products in construction and infrastructure projects and various quarrying and mining applications.

 

We also assist customers in their rental, leasing and acquisition of our products through TFS.

 

On February 19, 2010, we completed the disposition of our Mining business to Bucyrus.  The results of the Mining business were consolidated within the former Materials Processing & Mining Segment.  On December 31, 2009, we sold the assets of our construction trailer business.  The results of this business were formerly consolidated within the AWP segment.  In March 2010, we sold the assets of our Powertrain pumps business and gears business.  The results of these businesses were formerly consolidated within the Construction segment.  On March 10, 2010, we entered into a definitive agreement to sell our Atlas heavy construction equipment and knuckle-boom crane businesses.  The results of these businesses were formerly consolidated within the Construction and Cranes segments, respectively.  On April 15, 2010, we completed the portion of this transaction related to the operations in Germany and completed the portion of this transaction related to the operation in the United Kingdom on August 11, 2010.  Due to the divestiture of these businesses, the reporting of these businesses has been included in discontinued operations for all periods presented.

 

Non-GAAP Measures

 

In this document, we refer to various GAAP (U.S. generally accepted accounting principles) and non-GAAP financial measures.  These non-GAAP measures may not be comparable to similarly titled measures disclosed by other companies.  We present non-GAAP financial measures in reporting our financial results to provide investors with additional analytical tools which we believe are useful in evaluating our operating results and the ongoing performance of our underlying businesses.  We do not, nor do we suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

 

Non-GAAP measures we use include the translation effect of foreign currency exchange rate changes on net sales, gross profit, Selling, General & Administrative (“SG&A”) costs and operating profit, as well as the net sales, gross profit, SG&A costs and operating profit excluding the impact of acquisitions.

 

-32-



 

As changes in foreign currency exchange rates have a non-operating impact on our financial results, we believe excluding the effect of these changes assists in the assessment of our business results between periods.  We calculate the translation effect of foreign currency exchange rate changes by translating the current period results at the rates that the comparable prior periods were translated to isolate the foreign exchange component of the fluctuation from the operational component.  Similarly, the impact of changes in our results from acquisitions that were not included in comparable prior periods is subtracted from the absolute change in results to allow for better comparability of results between periods.

 

Non-GAAP measures we use also include Net Operating Profit After Tax (“NOPAT”), which is used in the calculation of our after tax return on invested capital (“ROIC”), which is discussed in detail below.

 

Overview

 

Our results for 2010 reveal a mix of performances.  Over the year, we saw our AWP, Construction and MP segments show significant improvement from the lowest levels experienced during 2009.  However, our Cranes segment weakened more than anticipated.  Production schedules continued to increase in most of our businesses, resulting in higher manufacturing utilization and better absorption of fixed costs, which was a primary contributor to our year-over-year operating profit improvement.  In addition, the impact of restructuring activities continued to result in improved financial results, which we believe will continue going forward.  See Note M —“Restructuring and Other Charges” in our Consolidated Financial Statements for a detailed description of our restructuring activities, including the reasons, timing and costs associated with such actions.

 

For 2011, our focus will continue to be on growth.  We continue to invest in developing markets.  We are building a new facility in Brazil and have recently started production in our new Chinese AWP facility, as well as in our MP facility in India.  These are critical steps in our goal to manufacture in markets that are growing, and are expected to continue to grow, their non-residential construction spending substantially.  In 2010, our Cranes and MP businesses also entered into new joint ventures in China.  In addition, we also invested approximately $83 million in net additional financing receivables as part of our initiatives to provide solutions to our customers and help accelerate the growth of our businesses.  We expect to continue this trend into 2011, with an anticipated $150 million of net additional funding being used to expand TFS in key markets like China, in addition to continuing to support our base business activities.

 

We continue to have significant liquidity, which was $1,397.6 million at December 31, 2010.  In October 2010, we repaid the entire $270.2 million principal amount of our term loans.  Additionally, in January 2011, we repaid the entire $297.6 million principal amount of our 7-3/8% Senior Subordinated Notes due 2014 (“7-3/8% Notes”).  We continue to research and analyze potential acquisition targets; however, it remains difficult to predict when appropriate transactions might present themselves.

 

Our performance for 2010 was generally in line with our expectations, except for weaker than anticipated sales in the Cranes business.  Net sales increased approximately 15% on a year-over-year basis and we incurred an operating loss of approximately $74 million compared to an operating loss of approximately $402 million in 2009.  We continue to see an improving business environment, with backlog growing in three of our four segments when compared to 2009 levels, except for Cranes, where all-terrain and crawler cranes showed weakness.

 

For our AWP business, stable demand and increasing fleet age are leading rental and utility customers to address equipment requirements as evidenced by recent orders.  Furthermore, we have successfully captured additional market share in some developing markets and recent customer meetings have reinforced our confidence in an improving environment for AWP in 2011.  We sharply reduced operating losses in our Construction segment compared to the prior year.  This segment undertook a significant restructuring and, while there are still a few challenges ahead, 2011 looks to be a turning point.  Our Construction segment is seeing positive demand from certain markets, such as Central Europe and Brazil.  Additionally, we expect that new product offerings, such as our skid steer loaders, will begin to favorably impact our results as we move through 2011.  In contrast, our Cranes segment experienced a challenging year.  We experienced a significant drop in net sales for our all-terrain and crawler crane products with a recovery in rough terrain cranes.  And while we expect Cranes results to improve as we move through the year, many of our large crane orders, both in mobile cranes and port equipment, will not ship until the latter part of 2011.  We believe we are at the bottom of the business cycle for our Cranes segment in North America, growing in developing markets, but uncertain about 2011 in Europe.  Our MP segment continued to gain momentum with new product launch successes and planned increases in production in our Indian facility.  North American and European markets are recovering in line with expectations and the mining application for rock-crushing equipment continued to provide demand in Australia, primarily for coal.

 

-33-



 

We expect 2011 to reflect continued strengthening trends in AWP, Construction and MP.  In addition, we have seen a recent sequential upturn in order rates in our Cranes business as we secured several large contracts in the fourth quarter of 2010 for longer term delivery schedules.  Consequently, we expect net sales in 2011 of $5.0 billion to $5.4 billion, an increase of approximately 13-22% from 2010, and expect to generate income from operations in 2011 of $220 million to $250 million.  As a result, we expect earnings per share to be approximately $0.60 to $0.75 per share for 2011 based on an average share count of approximately 118 million shares, excluding the impact of restructuring and unusual items.  We expect to incur a loss of approximately $0.10 to $0.15 per share, excluding the impact of restructuring and unusual items, in the first quarter of 2011, with a return to profitability in the second quarter.  The estimated average share count includes shares that are contingently issuable upon conversion of our outstanding convertible notes and assumes an estimated volume weighted average stock price of $40 per share.

 

The mid and longer term expectations for Terex remain unchanged.  We are building the business in each product category, both in developed and developing markets. AWP, Construction and MP customers are optimistic for 2011, and we expect the Cranes business to reach its low point in 2011.  Although our Port Equipment Business is showing increasing quotation activity, we still expect this business to report an operating loss in 2011.  We continue to restructure this business and expect it to return to profitability in 2012.

 

ROIC continues to be the unifying metric that we use to measure our operating performance.  ROIC measures how effectively we utilize the capital invested in our operations.  After tax ROIC is determined by dividing the sum of NOPAT (as defined below) for each of the previous four quarters by the average of the sum of Total stockholders’ equity plus Debt (as defined below) less Cash and cash equivalents for the previous five quarters.  NOPAT, which is a non-GAAP measure, for each quarter is calculated by multiplying Income (loss) from continuing and discontinued operations by a figure equal to one minus the effective tax rate of the Company.  We believe that earnings from discontinued operations, as well as the net assets that comprise those operations invested capital, should be included in this calculation because it captures the financial returns on our capital allocation decisions for the measured periods.  Furthermore, we believe that return on capital deployed in TFS does not represent management of our primary operations and, therefore, TFS assets and results from operations have been excluded from the calculation below.  Additionally, we do not believe that the deferred gain on shares of Bucyrus stock held from the sale of our Mining business reflects our operations and, therefore, such deferred gain has been excluded from the calculation below.  The effective tax rate is equal to the (Provision for) benefit from income taxes divided by Income (loss) before income taxes for the respective quarter.  Debt is calculated using the amounts for Notes payable and current portion of long-term debt plus Long-term debt, less current portion.  We calculate ROIC using the last four quarters’ NOPAT as this represents the most recent 12-month period at any given point of determination.  In order for the denominator of the ROIC ratio to properly match the operational period reflected in the numerator, we include the average of five quarters’ ending balance sheet amounts so that the denominator includes the average of the opening through ending balances (on a quarterly basis) over the same time period as the numerator (four quarters of average invested capital).

 

Terex management and the Board of Directors use ROIC as one of the primary measures to assess operational performance, including in connection with certain compensation programs.  We use ROIC as a unifying metric because we believe that it measures how effectively we invest our capital and provides a better measure to compare ourselves to peer companies to assist in assessing how we drive operational improvement.  We believe that ROIC measures return on the amount of capital invested in our primary businesses excluding TFS, as opposed to another metric such as return on stockholders’ equity that only incorporates book equity, and is thus a more accurate and descriptive measure of our performance.  We also believe that adding Debt less Cash and cash equivalents to Total stockholders’ equity provides a better comparison across similar businesses regarding total capitalization, and ROIC highlights the level of value creation as a percentage of capital invested.  Consistent with this belief, we use ROIC in evaluating executive performance and compensation, as we have disclosed in the Compensation Discussion and Analysis in our proxy statement for the 2010 annual meeting of stockholders.  In 2008, we performed our annual goodwill impairment test, which resulted in a non-cash impairment charge for goodwill of $459.9 million, which represented all of the goodwill recorded in the Construction segment and all of the goodwill originally in the Utilities reporting unit, which is now part of the AWP segment.  However, we do not believe that non-cash impairment charges are indicative of returns on our invested capital.  Therefore, we have excluded the effect of these impairment charges from the metrics used in our calculation of ROIC.  As the tables below show, our ROIC at December 31, 2010 was negative 1.7%, up from negative 9.6% at December 31, 2009, mainly due to improved operating earnings and cash flow from operations in recent periods.

 

-34-



 

The amounts described below are reported in millions of U.S. dollars, except for the effective tax rates.

 

 

 

Dec ‘10

 

 

Sep ‘10

 

 

Jun ‘10

 

 

Mar ‘10

 

 

Dec ‘09

 

Provision for (benefit from) income taxes as adjusted

 

$

3.2

 

 

$

41.8

 

 

$

(25.5

)

 

$

(40.9

)

 

 

 

Divided by: Loss before income taxes as adjusted

 

(37.7

)

 

(51.4

)

 

(39.4

)

 

(119.7

)

 

 

 

Effective tax rate as adjusted

 

(8.5

%)

 

(81.3%

)

 

64.7%

 

 

34.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations as adjusted

 

$

0.8

 

 

$

4.7

 

 

$

(13.5

)

 

$

(72.9

)

 

 

 

Multiplied by: 1 minus Effective tax rate as adjusted

 

108.5

%

 

181.3%

 

 

35.3%

 

 

65.8%

 

 

 

 

Adjusted net operating income (loss) after tax

 

$

0.9

 

 

$

8.5

 

 

$

(4.8

)

 

$

(48.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt (as defined above)

 

$

1,686.3

 

 

$

1,973.2

 

 

$

1,960.8

 

 

$

1,968.0

 

 

$

1,966.4

 

Less: Cash and cash equivalents as adjusted

 

(894.2

)

 

(1,354.3

)

 

(1,513.6

)

 

(1,796.2

)

 

(971.2

)

Debt less Cash and cash equivalents as adjusted

 

$

792.1

 

 

$

618.9

 

 

$

447.2

 

 

$

171.8

 

 

$

995.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Terex Corporation stockholders’ equity as adjusted

 

$

1,907.2

 

 

$

2,000.4

 

 

$

1,908.1

 

 

$

2,082.7

 

 

$

1,649.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt less Cash and cash equivalents plus Total Terex Corporation stockholders’ equity as adjusted

 

$

2,699.3

 

 

$

2,619.3

 

 

$

2,355.3

 

 

$

2,254.5

 

 

$

2,645.0

 

 

2010 ROIC

 

(1.7%)

 

Adjusted net operating loss after tax (last 4 quarters)

 

$

(43.4)

 

Average Debt less Cash and cash equivalents plus Total Terex Corporation stockholders’ equity as adjusted (5 quarters)

 

$

2,514.7

 

 

 

Reconciliation of Loss before income taxes:

 

Three months
ended
12/31/10

 

 

Three months
ended
9/30/10

 

 

Three months
ended
6/30/10

 

 

Three months
ended
3/31/10

 

 

 

 

Loss from continuing operations before income taxes

 

$

(37.6

)

 

$

(51.2

)

 

$

(35.3

)

 

$

(114.2

)

 

 

 

Loss from discontinued operations before income taxes

 

(0.1

)

 

(0.2

)

 

(4.1

)

 

(5.5

)

 

 

 

Loss before income taxes as adjusted

 

$

(37.7

)

 

$

(51.4

)

 

$

(39.4

)

 

$

(119.7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of income (loss) from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations as reported

 

$

(0.5

)

 

$

3.6

 

 

$

(10.4

)

 

$

(66.5

)

 

 

 

Less: Loss from operations for TFS

 

1.3

 

 

1.3

 

 

1.6

 

 

1.6

 

 

 

 

Plus: Loss from operations for discontinued operations

 

-

 

 

(0.2

)

 

(4.7

)

 

(8.0

)

 

 

 

Income (loss) from operations as adjusted

 

$

0.8

 

 

$

4.7

 

 

$

(13.5

)

 

$

(72.9

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of (Benefit from) provision for income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Benefit from) provision for income taxes as reported

 

$

(4.9

)

 

$

38.6

 

 

$

(23.6

)

 

$

(36.9

)

 

 

 

(Benefit from) provision for income taxes for discontinued operations

 

8.1

 

 

3.2

 

 

(1.9

)

 

(4.0

)

 

 

 

(Benefit from) provision for income taxes as adjusted

 

$

3.2

 

 

$

41.8

 

 

$

(25.5

)

 

$

(40.9

)

 

 

 

 

Reconciliation of Cash and Cash Equivalents:

 

As of
12/31/10

 

 

As of
9/30/10

 

 

As of
6/30/10

 

 

As of
3/31/10

 

 

As of
12/31/09

 

Cash and Cash Equivalents as reported

 

$

894.2

 

 

$

1,354.3

 

 

$

1,513.6

 

 

$

1,796.2

 

 

$

929.5

 

Cash and Cash Equivalents in discontinued operations

 

-

 

 

-

 

 

-

 

 

-

 

 

41.7

 

Cash and Cash Equivalents as adjusted

 

$

894.2

 

 

$

1,354.3

 

 

$

1,513.6

 

 

$

1,796.2

 

 

$

971.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Terex Corporation stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Terex Corporation stockholders’ equity as reported

 

$

2,083.2

 

 

$

2,064.3

 

 

$

1,881.1

 

 

$

2,102.4

 

 

$

1,650.2

 

TFS assets

 

(76.2

)

 

(38.9

)

 

(29.8

)

 

(0.3

)

 

(0.4

)

Deferred (gain) loss on BUCY shares

 

(99.8

)

 

(25.0

)

 

56.8

 

 

(19.4

)

 

-

 

Terex Corporation stockholders’ equity as adjusted

 

$

1,907.2

 

 

$

2,000.4

 

 

$

1,908.1

 

 

$

2,082.7

 

 

$

1,649.8

 

 

-35-



 

 

 

Dec ‘09

 

Sep ‘09

 

Jun ‘09

 

Mar ‘09

 

Dec ‘08

Provision for (benefit from) income taxes as adjusted

 

$

21.8

 

 

$

(24.5

)

 

$

(30.8

)

 

$

(24.0

)

 

 

 

Divided by: Loss before income taxes as adjusted

 

(121.6

)

 

(126.9

)

 

(108.5

)

 

(98.5

)

 

 

 

Effective tax rate as adjusted

 

(17.9

)%

 

19.3

%

 

28.4

%

 

24.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations as adjusted

 

$

(62.6

)

 

$

(94.5

)

 

$

(85.7

)

 

$

(72.5

)

 

 

 

Multiplied by: 1 minus Effective tax rate as adjusted

 

117.9

%

 

80.7

%

 

71.6

%

 

75.6

%

 

 

 

Adjusted net operating loss after tax

 

$

(73.8

)

 

$

(76.3

)

 

$

(61.4

)

 

$

(54.8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt (as defined above)

 

$

1,966.4

 

 

$

2,002.9

 

 

$

1,736.6

 

 

$

1,482.8

 

 

$

1,435.8

 

Less: Cash and cash equivalents as adjusted

 

(971.2

)

 

(1,033.2

)

 

(938.5

)

 

(344.3

)

 

(484.4

)

Debt less Cash and cash equivalents as adjusted

 

$

995.2

 

 

$

969.7

 

 

$

798.1

 

 

$

1,138.5

 

 

$

951.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Terex Corporation stockholders’ equity as adjusted

 

$

1,650.2

 

 

$

1,819.5

 

 

$

1,860.2

 

 

$

1,569.8

 

 

$

2,181.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt less Cash and cash equivalents plus Total Terex Corporation stockholders’ equity as adjusted

 

$

2,645.4

 

 

$

2,789.2

 

 

$

2,658.3

 

 

$

2,708.3

 

 

$

3,132.6

 

 

2009 ROIC

 

(9.6)% 

 

Adjusted net operating loss after tax (last 4 quarters)

 

$

(266.3)

 

Average Debt less Cash and cash equivalents plus Total Terex Corporation stockholders’ equity as adjusted (5 quarters)

 

$

2,786.8

 

 

 

 

 

 

 

Reconciliation of ROIC table amounts adjusted for impairment:

 

Three months
ended 12/31/08

Loss before income taxes

 

$

(422.9)

 

Less: Goodwill impairment

 

(459.9)

 

Income before income taxes as adjusted

 

$

37.0

 

 

 

 

 

Benefit from income taxes as reported

 

$

2.7

 

Less: Benefit from income taxes on impairment

 

1.7

 

Benefit from income taxes as adjusted

 

$

1.0

 

 

 

 

 

Income before income taxes as adjusted

 

$

37.0

 

Plus: Benefit from income taxes as adjusted

 

1.0

 

Net income as adjusted

 

$

38.0

 

 

 

 

 

Total Terex Corporation stockholders’ equity as reported

 

$

1,721.7

 

Less: Net loss as reported

 

(421.5)

 

Add: Net income as adjusted

 

38.0

 

Total Terex Corporation stockholders’ equity as adjusted

 

$

2,181.2

 

 

 

RESULTS OF OPERATIONS

 

2010 COMPARED WITH 2009

 

Terex Consolidated

 

 

 

2010

 

2009

 

 

 

 

 

 

 

% of
Sales

 

 

 

% of
Sales

 

% Change In
Reported Amounts

 

 

 

($ amounts in millions)

 

 

 

Net sales

 

$

4,418.2

 

-   

 

$

3,858.4

 

-   

 

14.5%

 

Gross profit

 

$

602.9

 

13.6% 

 

$

297.0

 

7.7% 

 

103.0%

 

SG&A

 

$

676.7

 

15.3% 

 

$

698.7

 

18.1% 

 

(3.1)%

 

Loss from operations

 

$

(73.8

)

(1.7)%

 

$

(401.7

)

(10.4)%

 

81.6%

 

 

Net sales for the year ended December 31, 2010 increased $559.8 million when compared to the same period in 2009.  Each of our segments, with the exception of Cranes, experienced higher net sales compared to the same period in 2009, primarily as a result of improved economic conditions, increased dealer purchases of rental equipment and our internal initiatives to improve sales performance.

 

-36-



 

Gross profit for the year ended December 31, 2010 increased $305.9 million when compared to the same period in 2009.  Higher manufacturing utilization and the effect of prior cost reduction efforts contributed approximately $216 million to the year-over-year improvement.  Lower restructuring charges, when compared with the prior year period, favorably impacted results by approximately $13 million.  Additionally, lower inventory charges in the current year period of approximately $31 million contributed to the increase in gross profit.

 

SG&A costs decreased by $22.0 million when compared to the same period in 2009.  SG&A costs in AWP and Construction decreased. SG&A costs in MP were essentially flat and increased in Cranes.  Prior cost reduction activities lowered general and administrative costs by approximately $27 million.  The decrease was also due to lower restructuring charges of approximately $19 million when compared with the prior year period, as well as $8 million recorded in the prior year period for the settlement of certain SEC matters.  The lower SG&A costs were partially offset by approximately $34 million from the impact of acquisitions in 2009.

 

Loss from operations decreased by $327.9 million for the year ended December 31, 2010 versus the comparable period in 2009.  The decrease was due to the items noted above, particularly improved net sales volume, improved manufacturing utilization, the effect of prior cost reductions and lower SG&A costs.

 

Aerial Work Platforms

 

 

 

2010

 

2009

 

 

 

 

 

 

 

% of
Sales

 

 

 

% of
Sales

 

% Change In
Reported Amounts

 

 

 

($ amounts in millions)

 

 

 

Net sales

$

 

1,069.6