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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
F O R M   10 – Q
 
(Mark One)
 
S
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2011
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission file number 1-10702
 
Terex Corporation
(Exact name of registrant as specified in its charter)
 
Delaware
(State of Incorporation)
 
34-1531521
(IRS Employer Identification No.)
 
200 Nyala Farm Road, Westport, Connecticut 06880
(Address of principal executive offices)
 
 (203) 222-7170
(Registrant’s telephone number, including area code)
 
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
S
 
NO           
o
 
Indicate by check mark whether the registrant has submitted electronically filed and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES
S
 
NO           
o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a 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.
 
Large accelerated filer S
 
Accelerated filer o
 
 Non-accelerated filer o
Smaller Reporting Company o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 

 

YES
o
 
NO           
S
 
Number of outstanding shares of common stock:  109.6 million as of April 26, 2011.
 
The Exhibit Index begins on page 54.

 

INDEX
 
TEREX CORPORATION AND SUBSIDIARIES
 
GENERAL
 
This Quarterly Report on Form 10-Q filed by Terex Corporation generally speaks as of March 31, 2011 unless specifically noted otherwise, and includes financial information with respect to the subsidiaries of the Company listed below (all of which are wholly-owned) which were guarantors on March 31, 2011 (the “Guarantors”) of the Company’s 4% Convertible Senior Subordinated Notes due 2015 (the "4% Convertible Notes"), its 10-7/8% Senior Notes due 2016 (the “10-7/8% Notes”) and its 8% Senior Subordinated Notes Due 2017 (the “8% Notes”).  See Note Q – “Consolidating Financial Statements” to the Company’s March 31, 2011 Condensed Consolidated Financial Statements included in this Quarterly Report. Unless otherwise indicated, Terex Corporation, together with its consolidated subsidiaries, is hereinafter referred to as “Terex,” the “Registrant,” “us,” “we,” “our” or the “Company.”
 
Guarantor Information
 
Guarantor
State or other jurisdiction of
incorporation or organization
I.R.S. employer
identification number
Amida Industries, Inc.
South Carolina
57-0531390
A.S.V., Inc.
Minnesota
41-1459569
CMI Terex Corporation
Oklahoma
73-0519810
Duvalpilot Equipment Outfitters, LLC
Florida
22-3886719
Fantuzzi Noell USA, Inc.
Illinois
36-3865231
Genie Financial Services, Inc.
Washington
91-1712115
Genie Holdings, Inc.
Washington
91-1666966
Genie Industries, Inc.
Washington
91-0815489
Genie International, Inc.
Washington
91-1975116
Genie Manufacturing, Inc.
Washington
91-1499412
GFS National, Inc.
Washington
91-1959375
Hydra Platforms Mfg. Inc.
North Carolina
56-1714789
Loegering Mfg. Inc.
North Dakota
45-0310755
Powerscreen Holdings USA Inc.
Delaware
61-1265609
Powerscreen International LLC
Delaware
61-1340898
Powerscreen North America Inc.
Delaware
61-1340891
Powerscreen USA, LLC
Kentucky
31-1515625
Schaeff Incorporated
Iowa
42-1097891
Schaeff of North America, Inc.
Delaware
75-2852436
Spinnaker Insurance Company
Vermont
03-0372517
Terex Advance Mixer, Inc.
Delaware
06-1444818
Terex Aerials, Inc.
Wisconsin
39-1028686
Terex Financial Services, Inc.
Delaware
45-0497096
Terex USA, LLC
Delaware
75-3262430
Terex Utilities, Inc.
Oregon
93-0557703
Terex-Telelect, Inc.
Delaware
41-1603748

 

Forward-Looking Information
 
Certain information in this Quarterly 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 Quarterly 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, regional economic conditions and trade restrictions;
our international operations are subject to a number of potential risks, including changing regulatory environments and political instability;
difficulties in managing and expanding into developing markets;
possible work stoppages and other labor matters;
compliance with applicable laws and regulations; particularly environmental and tax laws and regulations;
litigation, product liability claims, patent claims, class action lawsuits and other liabilities;
our ability to comply with an injunction and related obligations resulting from the settlement of an investigation by the United States Securities and Exchange Commission (“SEC”);
our implementation of a global enterprise system and its performance; and
other factors.
 
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 Quarterly 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 Quarterly 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-Q have been prepared by, and are the responsibility of, Terex 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.

2

 

 
 
Page No.
 
 
 
 
 
 
 
TEREX CORPORATION AND SUBSIDIARIES
 
 
 
 
 
Notes to Condensed Consolidated Financial Statements - March 31, 2011                                                                                                                             
Quantitative and Qualitative Disclosures About Market Risk                                                                                                                          
Controls and Procedures                                                                                                                        
 
 
 
 
 
 
 
 
 
 
 
 

3

 

PART I.
FINANCIAL INFORMATION
 
ITEM 1.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(unaudited)
(in millions, except per share data)
 
Three Months Ended
March 31,
 
2011
 
2010
Net sales
$
1,256.2
 
 
$
935.9
 
Cost of goods sold
(1,089.0
)
 
(837.4
)
Gross profit
167.2
 
 
98.5
 
Selling, general and administrative expenses
(176.5
)
 
(165.0
)
Loss from operations
(9.3
)
 
(66.5
)
Other income (expense)
 
 
 
 
Interest income
2.1
 
 
1.1
 
Interest expense
(28.2
)
 
(35.9
)
Loss on early extinguishment of debt
(6.3
)
 
 
Other income (expense) – net 
51.9
 
 
(12.9
)
Income (loss) from continuing operations before income taxes
10.2
 
 
(114.2
)
(Provision for) benefit from income taxes
(6.0
)
 
36.9
 
Income (loss) from continuing operations
4.2
 
 
(77.3
)
Income (loss) from discontinued operations – net of tax
6.4
 
 
(1.5
)
Gain on disposition of discontinued operations – net of tax
0.3
 
 
620.4
 
Net income
10.9
 
 
541.6
 
Less: Net loss (income) attributable to noncontrolling interest
0.8
 
 
(1.7
)
Net income attributable to Terex Corporation
$
11.7
 
 
$
539.9
 
Amounts attributable to Terex Corporation common stockholders:
 
 
 
 
Income (loss) from continuing operations
$
5.0
 
 
$
(79.0
)
Income (loss) from discontinued operations – net of tax
6.4
 
 
(1.5
)
Gain on disposition of discontinued operations – net of tax
0.3
 
 
620.4
 
Net income attributable to Terex Corporation
$
11.7
 
 
$
539.9
 
Basic Earnings (Loss) per Share Attributable to Terex Corporation Common Stockholders:
 
 
 
 
Income (loss) from continuing operations
$
0.05
 
 
$
(0.73
)
Income (loss) from discontinued operations – net of tax
0.06
 
 
(0.01
)
Gain on disposition of discontinued operations – net of tax
 
 
5.72
 
Net income attributable to Terex Corporation
$
0.11
 
 
$
4.98
 
Diluted Earnings (Loss) per Share Attributable to Terex Corporation Common Stockholders:
 
 
 
 
Income (loss) from continuing operations
$
0.04
 
 
$
(0.73
)
Income (loss) from discontinued operations – net of tax
0.06
 
 
(0.01
)
Gain on disposition of discontinued operations – net of tax
 
 
5.72
 
Net income attributable to Terex Corporation
$
0.10
 
 
$
4.98
 
Weighted average number of shares outstanding in per share calculation
 
 
 
 
 
Basic
109.2
 
 
108.4
 
Diluted
116.6
 
 
108.4
 
 

4

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

 

TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
(in millions, except par value)
 
 
March 31,
2011
 
December 31,
2010
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
723.7
 
 
$
894.2
 
Investments in marketable securities
367.3
 
 
521.4
 
Trade receivables (net of allowance of $46.6 and $46.8 at March 31, 2011 and
     December 31, 2010, respectively)
896.6
 
 
782.5
 
Inventories
1,565.9
 
 
1,448.7
 
Deferred taxes
26.6
 
 
23.4
 
Other current assets
229.5
 
 
298.7
 
Total current assets
3,809.6
 
 
3,968.9
 
Non-current assets
 
 
 
 
Property, plant and equipment - net
590.2
 
 
573.5
 
Goodwill
508.6
 
 
492.9
 
Deferred taxes
86.3
 
 
90.5
 
Other assets
418.2
 
 
390.6
 
Total assets
$
5,412.9
 
 
$
5,516.4
 
 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
Current liabilities
 
 
 
 
 
Notes payable and current portion of long-term debt
$
62.8
 
 
$
346.8
 
Trade accounts payable
626.1
 
 
570.0
 
Accrued compensation and benefits
138.9
 
 
128.5
 
Accrued warranties and product liability
90.9
 
 
86.4
 
Customer advances
108.5
 
 
95.8
 
Income taxes payable
189.6
 
 
186.8
 
Other current liabilities
268.4
 
 
259.9
 
Total current liabilities
1,485.2
 
 
1,674.2
 
Non-current liabilities
 
 
 
 
Long-term debt, less current portion
1,354.3
 
 
1,339.5
 
Retirement plans and other
386.7
 
 
391.3
 
Total liabilities
3,226.2
 
 
3,405.0
 
Commitments and contingencies
 
 
 
 
 
Stockholders’ equity
 
 
 
 
 
Common stock, $.01 par value – authorized 300.0 shares; issued 121.7 and 121.2 shares at
     March 31, 2011 and December 31, 2010, respectively
1.2
 
 
1.2
 
Additional paid-in capital
1,260.3
 
 
1,264.2
 
Retained earnings
1,328.4
 
 
1,316.7
 
Accumulated other comprehensive income
165.9
 
 
100.4
 
Less cost of shares of common stock in treasury – 13.0 and 13.1 shares at March 31, 2011 and
     December 31, 2010, respectively
(597.9
)
 
(599.3
)
Total Terex Corporation stockholders’ equity
2,157.9
 
 
2,083.2
 
Noncontrolling interest
28.8
 
 
28.2
 
Total stockholders' equity
2,186.7
 
 
2,111.4
 
Total liabilities and stockholders’ equity
$
5,412.9
 
 
$
5,516.4
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

6

 

TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(in millions)
 
Three Months Ended
March 31,
 
2011
 
2010
Operating Activities of Continuing Operations
 
 
 
Net income
$
10.9
 
 
$
541.6
 
Adjustments to reconcile net income to net cash used in operating activities of continuing operations:
 
 
 
 
 
(Income) loss from discontinued operations
(6.4
)
 
1.5
 
Gain on disposition of discontinued operations - net of tax
(0.3
)
 
(620.4
)
Depreciation
20.1
 
 
20.4
 
Amortization
6.1
 
 
6.8
 
Deferred taxes
8.2
 
 
(49.2
)
Gain on sale of assets
(51.8
)
 
(0.4
)
Loss on investments in derivative securities
0.3
 
 
7.5
 
Stock-based compensation expense
5.6
 
 
8.8
 
Other, net
3.4
 
 
5.2
 
Changes in operating assets and liabilities (net of effects of acquisitions and divestitures):
 
 
 
 
 
Trade receivables
(92.3
)
 
(36.4
)
Inventories
(96.9
)
 
(25.5
)
Trade accounts payable
38.2
 
 
62.3
 
Accrued compensation and benefits
(3.0
)
 
(10.9
)
Income taxes payable
(3.4
)
 
10.2
 
Accrued warranties and product liability
(0.5
)
 
(7.6
)
Customer advances
8.4
 
 
(17.8
)
Other current assets
78.5
 
 
(9.5
)
Other, net
(1.7
)
 
29.3
 
Net cash used in operating activities of continuing operations
(76.6
)
 
(84.1
)
Investing Activities of Continuing Operations
 
 
 
 
 
Capital expenditures
(13.4
)
 
(8.5
)
Proceeds from disposition of discontinued operations
 
 
1,002.0
 
Investments in derivative securities
 
 
(21.1
)
Proceeds from sale of assets
166.1
 
 
4.3
 
Net cash provided by investing activities of continuing operations
152.7
 
 
976.7
 
Financing Activities of Continuing Operations
 
 
 
 
 
Principal repayments of long-term debt
(297.6
)
 
(0.6
)
Net borrowings (repayments) under revolving line of credit agreements
12.6
 
 
(10.1
)
Purchase of noncontrolling interest
 
 
(12.9
)
Other, net
3.6
 
 
(0.9
)
Net cash used in financing activities of continuing operations
(281.4
)
 
(24.5
)
Cash Flows from Discontinued Operations
 
 
 
 
 
Net cash used in operating activities of discontinued operations
 
 
(11.8
)
Net cash provided by financing activities of discontinued operations
 
 
0.1
 
Net cash used in discontinued operations
 
 
(11.7
)
Effect of Exchange Rate Changes on Cash and Cash Equivalents
34.8
 
 
(31.4
)
Net (Decrease) Increase in Cash and Cash Equivalents
(170.5
)
 
825.0
 
Cash and Cash Equivalents at Beginning of Period
894.2
 
 
971.2
 
Cash and Cash Equivalents at End of Period
$
723.7
 
 
$
1,796.2
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

7

 

TEREX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
(unaudited)
NOTE A – BASIS OF PRESENTATION
 
Basis of Presentation.  The accompanying unaudited Condensed Consolidated Financial Statements of Terex Corporation and subsidiaries as of March 31, 2011 and for the three months ended March 31, 2011 and 2010 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America to be included in full-year financial statements.  The accompanying Condensed Consolidated Balance Sheet as of December 31, 2010 has been derived from the audited Consolidated Balance Sheet as of that date.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.
 
The Condensed Consolidated Financial Statements include the accounts of Terex Corporation, its majority-owned subsidiaries and other controlled subsidiaries (“Terex” or the “Company”).  The Company consolidates all majority-owned and controlled subsidiaries, applies the equity method of accounting for investments in which the Company is able to exercise significant influence, and applies the cost method for all other investments.  All material intercompany balances, transactions and profits have been eliminated.
 
In the opinion of management, all adjustments considered necessary for fair statement of these interim financial statements have been made.  Except as otherwise disclosed, all such adjustments consist only of those of a normal recurring nature.  Operating results for the three months ended March 31, 2011 are not necessarily indicative of results that may be expected for the year ending December 31, 2011.
 
Cash and cash equivalents at March 31, 2011 and December 31, 2010 include $14.9 million and $16.3 million, respectively, which was not immediately available for use.  These consist primarily of cash balances held in escrow to secure various obligations of the Company.
 
Reclassification and Out of Period Adjustments. Certain prior year amounts have been reclassified to conform to the current year’s presentation.  The Company revised its Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2010 to reclassify investments in derivative securities of $21.1 million as cash used in investing activities.  Previously, these investments had been classified on the Condensed Consolidated Statement of Cash Flows as cash used in operating activities.  The Company revised its Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2010 to reclassify tax amounts of $86.1 million to Deferred taxes within the operating activities section.  Previously, these amounts had been classified on the Condensed Consolidated Statement of Cash Flows as Other, net within the operating activities section.
 
Recent Accounting Pronouncements.  In October 2009, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update 2009-13, “Multiple-Deliverable Revenue Arrangements,” which amended Accounting Standards Codification ("ASC") 605, “Revenue Recognition.”  This guidance addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting, and how to allocate the consideration to each unit of accounting.  In an arrangement with multiple deliverables, the delivered item(s) shall be considered a separate unit of accounting if the delivered items have value to the customer on a stand-alone basis.  Items have value on a stand-alone basis if they are sold separately by any vendor or the customer could resell the delivered items on a stand-alone basis and if the arrangement includes a general right of return relative to the delivered items, delivery or performance of the undelivered items is considered probable and substantially in the control of the vendor.
 

8

 

Arrangement consideration shall be allocated at the inception of the arrangement to all deliverables based on their relative selling price, except under certain circumstances such as items recorded at fair value and items not contingent upon the delivery of additional items or meeting other specified performance conditions.  The selling price for each deliverable shall be determined using vendor specific objective evidence (“VSOE”) of selling price, if it exists, otherwise third-party evidence of selling price.  If neither VSOE nor third-party evidence exists for a deliverable, then the vendor shall use its best estimate of the selling price for that deliverable.  This guidance eliminates the use of the residual value method for determining allocation of arrangement consideration and it allows for the use of an entity's best estimate to determine the selling price if VSOE and third-party evidence cannot be determined.  It also requires additional disclosures such as the nature of the arrangement, certain provisions within the arrangement, significant factors used to determine selling prices and the timing of revenue recognition related to the arrangement.  This guidance is effective for fiscal years beginning on or after June 15, 2010, with early adoption permitted.  Adoption of this guidance did not have a significant impact on the determination or reporting of the Company’s financial results.
 
In January 2010, the FASB issued Accounting Standards Update 2010-06, “Improving Disclosures about Fair Value Measurements,” which amends ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”).  This amendment requires new disclosures, including the reasons for and amounts of significant transfers in and out of Levels 1 and 2 fair value measurements and separate presentation of purchases, sales, issuances and settlements in the reconciliation of activity for Level 3 fair value measurements.  It also clarified guidance related to determining the appropriate classes of assets and liabilities and the information to be provided for valuation techniques used to measure fair value.  This guidance with respect to Level 3 fair value measurements is effective for the Company in its interim and annual reporting periods beginning after December 15, 2010.  Adoption of this guidance did not have a significant impact on the determination or reporting of the Company’s financial results.
 
In December 2010, the FASB issued Accounting Standards Update 2010-29, “Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations.” The amendments in this update clarify the acquisition date that should be used for reporting the pro forma financial information disclosures in Topic 805 when comparative financial statements are presented. The amendments also improve the usefulness of the pro forma revenue and earnings disclosures by requiring a description of the nature and amount of material, nonrecurring pro forma adjustments that are directly attributable to the business combination(s). The amendments in this update are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The effects of this guidance will depend on any future acquisitions the Company may complete.
 
Accounts Receivable and Allowance for Doubtful Accounts.  Trade accounts receivable are recorded at the invoiced amount and do not bear interest.  The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable.  The Company determines the allowance based on historical customer review and current financial conditions.  The Company reviews its allowance for doubtful accounts at least quarterly.  Past due balances over 90 days and over a specified amount are reviewed individually for collectibility.  All other balances are reviewed on a pooled basis by type of receivable.  Account balances are charged off against the allowance when the Company determines it is probable the receivable will not be recovered.  There can be no assurance that the Company’s historical accounts receivable collection experience will be indicative of future results.  The Company has off-balance sheet credit exposure related to guarantees provided to financial institutions as disclosed in Note N - “Litigation and Contingencies.”  Substantially all receivables were trade receivables at March 31, 2011 and December 31, 2010.
 
Impairment of Long-Lived Assets. The Company’s policy is to assess the realizability of its long-lived assets, including intangible assets, and to evaluate such assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets (or group of assets) may not be recoverable.  Impairment is determined to exist if the estimated future undiscounted cash flows are less than the carrying value.  Future cash flow projections include assumptions for future sales levels and the level of working capital needed to support each business.  The Company uses data developed by business segment management as well as macroeconomic data in making these calculations.  The amount of any impairment then recognized would be calculated as the difference between estimated fair value and the carrying value of the asset.  The Company recognized $4.1 million of asset impairments for the three months ended March 31, 2010 of which $2.4 million was recognized as part of restructuring costs.  See Note K – “Restructuring and Other Charges.” The Company recognized fixed asset impairments of $0.1 million for the three months ended March 31, 2011.  
 
Accrued Warranties.  The Company records accruals for potential warranty claims based on its claim experience.  The Company’s products are typically sold with a standard warranty covering defects that arise during a fixed period.  Each business provides a warranty specific to the products it offers.  The specific warranty offered by a business is a function of customer expectations and competitive forces.  Warranty length is generally a fixed period of time, a fixed number of operating hours, or both.
 

9

 

A liability for estimated warranty claims is accrued at the time of sale.  The non-current portion of the warranty accrual is included in Retirement plans and other in the Company’s Condensed Consolidated Balance Sheet.  The liability is established using historical warranty claim experience for each product sold.  Historical claim experience may be adjusted for known design improvements or for the impact of unusual product quality issues.  Warranty reserves are reviewed quarterly to ensure critical assumptions are updated for known events that may affect the potential warranty liability.
 
The following table summarizes the changes in the consolidated product warranty liability (in millions):
 
 
Three Months Ended
 
March 31, 2011
Balance at beginning of period
$
103.0
 
Accruals for warranties issued during the period
18.1
 
Changes in estimates
0.1
 
Settlements during the period
(17.8
)
Foreign exchange effect/other
3.7
 
Balance at end of period
$
107.1
 
 
NOTE B – BUSINESS SEGMENT INFORMATION
 
Terex is a diversified global equipment manufacturer of a variety of machinery products. The Company is 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. The Company operates in four reportable segments: (i) Aerial Work Platforms (“AWP”); (ii) Construction; (iii) Cranes; and (iv) Materials Processing (“MP”).
 
The 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 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, the Company owns a majority of the North American distribution channel for its utility products group and operates a small fleet of rental utility products in certain areas of the United States.
 
The 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. Customers use these products in construction and infrastructure projects to build roads and bridges and in quarrying and mining operations.
 
The 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. 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.
 
The 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 MP products in construction and infrastructure projects and various quarrying and mining applications.
 
The Company assists customers in their rental, leasing and acquisition of its products through Terex Financial Services (“TFS”). TFS utilizes its equipment and financial leasing experience to provide a variety of financing solutions to the Company's customers when they purchase equipment manufactured by the Company.
 

10

 

Business segment information is presented below:
 
 
Three Months Ended
March 31,
 
2011
 
2010
Net Sales
 
 
 
AWP
$
376.8
 
 
$
215.7
 
Construction
342.9
 
 
204.5
 
Cranes
398.3
 
 
413.7
 
MP
152.2
 
 
108.2
 
Corporate and Other / Eliminations
(14.0
)
 
(6.2
)
Total
$
1,256.2
 
 
$
935.9
 
(Loss) Income from Operations
 
 
 
 
AWP
$
6.0
 
 
$
(20.3
)
Construction
(3.5
)
 
(22.8
)
Cranes
(22.5
)
 
(3.1
)
MP
12.3
 
 
(0.3
)
Corporate and Other / Eliminations
(1.6
)
 
(20.0
)
Total
$
(9.3
)
 
$
(66.5
)
 
 
March 31,
2011
 
December 31,
2010
Identifiable Assets
 
 
 
AWP
$
922.8
 
 
$
825.9
 
Construction
1,266.7
 
 
1,197.8
 
Cranes
2,303.3
 
 
2,227.8
 
MP
952.3
 
 
913.2
 
Corporate and Other / Eliminations
(32.2
)
 
351.7
 
Total
$
5,412.9
 
 
$
5,516.4
 
 
 
NOTE C – INCOME TAXES
 
During the three months ended March 31, 2011, the Company recognized an income tax expense of $6.0 million on income of $10.2 million, an effective tax rate of 58.8% as compared to an income tax benefit of $36.9 million on a loss of $114.2 million, an effective tax rate of 32.3%, for the three months ended March 31, 2010.  The higher tax rate recorded in 2011 was mainly due to the inability of the Company to record tax benefits on losses in certain jurisdictions. The Company does not recognize tax benefits for losses where it is not more likely than not, based on the weight of current objective evidence, that the losses will be used in the future. As the absolute value of earnings or losses decreases, the items that affect income tax expense or benefit have a more significant impact on the effective tax rate. When income from continuing operations before income tax (instead of loss from continuing operations before income tax) is reported, tax expense items increase the effective tax rate and tax benefit items decrease the effective tax rate.
 
The Company conducts business globally and the Company and its subsidiaries file income tax returns in U.S. federal, state and foreign jurisdictions, as required. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Australia, Germany, Italy, the United Kingdom and the U.S. Various entities of the Company are currently under audit in Australia, Germany, Italy, the United Kingdom, the U.S. and elsewhere. The Company assesses uncertain tax positions for recognition, measurement and effective settlement. Where the Company has determined that its tax return filing position does not satisfy the more likely than not recognition threshold of ASC 740, “Income Taxes,” it has recorded no tax benefits. Where the Company has determined that its tax return filing positions are more likely than not to be sustained, the Company has measured and recorded the largest amount of tax benefit greater than 50% likely to be realized.

11

 

 
It is reasonably possible that changes to unrecognized tax benefits of the Company could be material in the next twelve months due to potential tax audit settlements.  The nature of the uncertainties with respect to uncertain tax positions relate primarily to intercompany transactions and acquisitions.  The timing and impact of income tax audits and their resolution is highly uncertain.  New laws and judicial decisions can change assessments concerning technical merit and measurement.  It is not possible to predict with any degree of certainty the amounts or periods in which changes to reserves for uncertain tax positions will occur.  The estimate, at this time, of the reasonably possible change to the reserve for existing uncertain tax positions over the next twelve months is that it could decrease by approximately $35 million.  Such decrease may occur as a result of uncertain tax positions being considered effectively settled, re-measured, paid, recognized as the result of a change in law or judicial decision, or due to the expiration of the of the relevant statute of limitations. 
 
The Company evaluates the net realizable value of its deferred tax assets each reporting period. The Company must consider all objective evidence, both positive and negative, in evaluating the future realization of its deferred tax assets, including tax loss carry forwards. Historical information is supplemented by currently available information about future tax years. Realization requires sufficient taxable income to use deferred tax assets. The Company records a valuation allowance for each deferred tax asset for which realization is assessed as not more likely than not. In particular, the assessment by the Company that deferred tax assets will be realized considered the following: (i) estimates of future taxable income generated from various sources, including the expected recovery of operations in the U.S. and the United Kingdom, (ii) the reversal of taxable temporary differences, (iii) increased profitability due to cost reductions in recent years, (iv) losses in late 2008 through 2010 as a result of the economic downturn, and (v) the combination of certain businesses in the United Kingdom. If the current estimates of future taxable income are not realized or future estimates of taxable income are reduced, then the assessment regarding the realization of deferred tax assets in certain jurisdictions, including the U.S. and the United Kingdom, could change and have a material impact on the statement of income.  
 
The Company does not provide for foreign income and withholding, U.S. federal, or state income taxes or tax benefits on the undistributed earnings of its foreign subsidiaries because such earnings are reinvested and, in the Company's opinion, will continue to be reinvested indefinitely. The Company reviews its plan to indefinitely reinvest on a quarterly basis. In making its decision to indefinitely reinvest, the Company evaluates its plans of reinvestment, its ability to control repatriation, and the need, if any, to repatriate funds to support U.S. operations. If the assessment of the Company with respect to earnings of foreign subsidiaries changes, deferred U.S. income taxes, foreign income taxes, and foreign withholding taxes may have to be accrued. The Company does not accrue deferred income taxes on the temporary difference between book and tax basis in domestic subsidiaries where permissible. At this time, determination of the unrecognized deferred tax liabilities for temporary differences related to the investment in subsidiaries is not practical. The Company records deferred tax assets and liabilities on the temporary differences between the financial statement basis and the tax basis in the investment in subsidiaries when such deferred taxes are required to be recognized.
 
 
NOTE D – DISCONTINUED OPERATIONS
 
On February 19, 2010, the Company completed the disposition of its Mining business to Bucyrus International, Inc. (“Bucyrus”)
and received approximately $1 billion in cash and approximately 5.8 million shares of Bucyrus common stock.  Following this transaction the Company is investing in its current businesses and focusing on products and services where it can maintain and build a strong market presence.  The products divested by the Company 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 the Company-owned distribution locations.  The Company recorded a cumulative gain on the sale of its Mining business of approximately $607 million, net of tax through March 31, 2011.  The Company is involved in a dispute with Bucyrus regarding the calculation of the value of the net assets of the Mining business.  Bucyrus has provided the Company with their calculation of the net asset value of the Mining business, which seeks a payment of approximately $149 million from the Company to Bucyrus.  The Company believes that the Bucyrus calculation of the net asset value is incorrect and not in accordance with the terms of the definitive agreement.  The Company has objected to Bucyrus' calculation and has provided Bucyrus with its calculation of the net asset value, which does not require any payment from the Company to Bucyrus.  The Company 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 its rights under the definitive agreement.  The Company believes its calculation of the net asset value, not requiring any payment from the Company to Bucyrus, is correct and does not currently believe it will be required to make a future payment to Bucyrus. Therefore, the Company has not included the effects of the Bucyrus claim in the determination of the gain recognized in connection with the sale. While the Company believes Bucyrus' position is without merit and it is vigorously opposing it, no assurance can be given as to the final resolution of this dispute or that the Company will not ultimately be required to make a substantial payment to Bucyrus.
 

12

 

The Company accounts for the shares of Bucyrus common stock received as “available for sale” securities as defined in ASC 320, “Investments – Debt and Equity Securities.”  As such, the carrying value of the Bucyrus common stock is adjusted on a quarterly basis based on changes in fair value of the stock with the corresponding entry for unrealized gains and losses recorded in Accumulated other comprehensive income.  This stock is traded in an active market and measured under the Level 1 fair value category as defined in Note J – “Fair Value Measurements.” In March 2011, the Company sold approximately 1.8 million shares of Bucyrus common stock for net proceeds of $165.8 million, resulting in a gain of $51.6 million. As of March 31, 2011 the Company had approximately 4 million shares of Bucyrus stock remaining. The market value of these shares at March 31, 2011 was approximately $365 million.
 
In March 2010, the Company sold the assets of its Powertrain gears business and pumps business, which were formerly part of the Construction segment.  Total proceeds on the sale of these businesses were approximately $2 million.
 
On March 10, 2010, the Company entered into an agreement to sell all of its Atlas heavy construction equipment and knuckle-boom crane business (collectively "Atlas") to Atlas Maschinen GmbH ("Atlas Maschinen").  Fil Filipov, a former Terex executive and the father of Steve Filipov, the Company’s President, Developing Markets and Strategic Accounts, is the Chairman of Atlas Maschinen.  The Atlas product lines divested in the transaction included crawler, wheel and rail excavators, knuckle-boom truck loader cranes and Terex ® Atlas branded material handlers.  The transaction also includes the Terex Atlas UK distribution business for truck loader cranes in the United Kingdom and the Terex minority ownership position in an Atlas Chinese joint venture.  The Atlas business was previously reported in the Construction segment, with the exception of the knuckle-boom truck loader cranes business, which was reported in the Cranes segment.  On April 15, 2010, the Company completed the portion of this transaction related to the Atlas operations in Germany and completed the portion of the transaction related to the operations in the United Kingdom on August 11, 2010.  The Company recorded a cumulative loss on the sale of Atlas of approximately $17 million, net of tax, through March 31, 2011.
 
The following amounts related to the discontinued operations were derived from historical financial information and have been segregated from continuing operations and reported as discontinued operations in the Condensed Consolidated Statement of Income (in millions):
 
 
Three Months Ended
 
 
March 31,
 
 
2011
 
2010
 
Net sales
$
 
 
$
154.4
 
 
Loss from discontinued operations before income taxes
$
 
 
$
(5.5
)
 
Benefit from income taxes
6.4
 
 
4.0
 
 
Income (loss) from discontinued operations – net of tax
$
6.4
 
 
$
(1.5
)
 
 
 
 
 
 
Gain on disposition of discontinued operations
$
0.2
 
 
$
870.5
 
 
Benefit from (provision for) income taxes
0.1
 
 
(250.1
)
 
Gain on disposition of discontinued operations – net of tax
$
0.3
 
 
$
620.4
 
 
 
During the three months ended March 31, 2011, tax benefit of $6.4 million was recognized in discontinued operations for the effective settlement and re-measurement of certain Australian uncertain tax positions of the Mining business in relation to 2008 and prior years. During the three months ended March 31, 2011, the Company recorded a $0.3 million gain on the sale of its Mining business. No assets and liabilities were remaining in discontinued operations entities in the Condensed Consolidated Balance Sheet as of March 31, 2011 and December 31, 2010.
 
 

13

 

NOTE E – EARNINGS PER SHARE
 
(in millions, except per share data)
Three Months Ended
March 31,
 
2011
 
2010
Net income (loss) from continuing operations attributable to
     Terex Corporation common stockholders
$
5.0
 
 
$
(79.0
)
Income (loss) from discontinued operations-net of tax
6.4
 
 
(1.5
)
Gain on disposition of discontinued operations-net of tax
0.3
 
 
620.4
 
Net income attributable to Terex Corporation
$
11.7
 
 
$
539.9
 
Basic shares:
 
 
 
 
Weighted average shares outstanding
109.2
 
 
108.4
 
Earnings per share - basic:
 
 
 
 
 
Income (loss) from continuing operations
$
0.05
 
 
$
(0.73
)
Income (loss) from discontinued operations-net of tax
0.06
 
 
(0.01
)
Gain on disposition of discontinued operations-net of tax
 
 
5.72
 
Net income attributable to Terex Corporation
$
0.11
 
 
$
4.98
 
Diluted shares:
 
 
 
 
 
Weighted average shares outstanding
109.2
 
 
108.4
 
Effect of dilutive securities:
 
 
 
 
 
Stock options, restricted stock awards and convertible notes
7.4
 
 
 
Diluted weighted average shares outstanding
116.6
 
 
108.4
 
Earnings per share - diluted:
 
 
 
 
 
Income (loss) from continuing operations
$
0.04
 
 
$
(0.73
)
Income (loss) from discontinued operations-net of tax
0.06
 
 
(0.01
)
Gain on disposition of discontinued operations-net of tax
 
 
5.72
 
Net income attributable to Terex Corporation
$
0.10
 
 
$
4.98
 
 
The following table provides information to reconcile amounts reported on the Condensed Consolidated Statement of Income to amounts used to calculate earnings per share attributable to Terex Corporation common stockholders (in millions):
 
Noncontrolling Interest Attributable to Common Stockholders
 
Three Months Ended
March 31,
 
2011
 
2010
Income (loss) from continuing operations - as reported
$
4.2
 
 
$
(77.3
)
Noncontrolling interest attributed to income (loss) from
     continuing operations
0.8
 
 
(1.7
)
Income (loss) from continuing operations attributable to
     common stockholders
$
5.0
 
 
$
(79.0
)
 
Weighted average options to purchase 0.2 million and 0.6 million shares of the Company’s common stock, par value $0.01 per share (“Common Stock”) were outstanding during the three months ended March 31, 2011 and March 31, 2010, respectively, but were not included in the computation of diluted shares as the effect would be anti-dilutive.  Weighted average restricted stock awards of 0.4 million and 1.4 million shares were outstanding during the three months ended March 31, 2011 and March 31, 2010, respectively, but were not included in the computation of diluted shares because the effect would be anti-dilutive or performance targets were not yet achieved for awards contingent upon performance.  ASC 260, “Earnings per Share” requires that employee stock options and non-vested restricted shares granted by the Company be treated as potential common shares outstanding in computing diluted earnings per share. Under the treasury stock method, the amount the employee must pay for exercising stock options, the amount of compensation cost for future services that the Company has not yet recognized and the amount of tax benefits that would be recorded in additional paid-in capital when the award becomes deductible are assumed to be used to repurchase shares.  The Company includes the impact of pro forma deferred tax assets in determining the amount of tax benefits for potential windfalls and shortfalls (the differences between tax deductions and book expense) in this calculation.

14

 

 
The 4% Convertible Senior Subordinated Notes due 2015 (the “4% Convertible Notes”) described in Note L – “Long-Term Obligations” were dilutive and included in the computation of weighted average diluted shares outstanding as the volume-weighted average price of the Common Stock of the 4% Convertible Notes for the three months ended March 31, 2011 was greater than $16.25 per share and earnings from continuing operations were positive. The number of shares that were contingently issuable for the 4% Convertible Notes during the three months ended March 31, 2010 was 2.7 million, but were not included in the computation of diluted shares because the effect would have been anti-dilutive.
 
NOTE F – INVENTORIES
 
Inventories consist of the following (in millions):
 
 
March 31,
2011
 
December 31,
2010
Finished equipment
$
492.2
 
 
$
494.6
 
Replacement parts
236.6
 
 
228.9
 
Work-in-process
351.5
 
 
298.5
 
Raw materials and supplies
485.6
 
 
426.7
 
Inventories
$
1,565.9
 
 
$
1,448.7
 
 
Reserves for lower of cost or market value, excess and obsolete inventory were $108.4 million and $106.7 million at March 31, 2011 and December 31, 2010, respectively.
 
 
NOTE G – PROPERTY, PLANT AND EQUIPMENT
 
Property, plant and equipment – net consist of the following (in millions):
 
 
March 31,
2011
 
December 31,
2010
Property
$
82.0
 
 
$
78.4
 
Plant
326.9
 
 
316.8
 
Equipment
545.4
 
 
527.1
 
Property, plant and equipment – gross 
954.3
 
 
922.3
 
Less: Accumulated depreciation
(364.1
)
 
(348.8
)
Property, plant and equipment – net
$
590.2
 
 
$
573.5
 
 
 

15

 

NOTE H – GOODWILL
 
An analysis of changes in the Company’s goodwill by business segment is as follows (in millions):
 
 
Aerial
Work
Platforms
 
Construction
 
Cranes
 
Materials
Processing
 
Total
Balance at December 31, 2010, gross
$
149.6
 
 
$
438.8
 
 
$
212.4
 
 
$
196.9
 
 
$
997.7
 
Accumulated impairment
(42.8
)
 
(438.8
)
 
 
 
(23.2
)
 
(504.8
)
Balance at December 31, 2010, net
106.8
 
 
 
 
212.4
 
 
173.7
 
 
492.9
 
Foreign exchange effect and other
0.9
 
 
 
 
10.5
 
 
4.3
 
 
15.7
 
Balance at March 31, 2011, gross
150.5
 
 
438.8
 
 
222.9
 
 
201.2
 
 
1,013.4
 
Accumulated impairment
(42.8
)
 
(438.8
)
 
 
 
(23.2
)
 
(504.8
)
Balance at March 31, 2011, net
$
107.7
 
 
$
 
 
$
222.9
 
 
$
178.0
 
 
$
508.6
 
 
Due to uncertainty and short-term volatility in the cranes market, the Company reviewed the Cranes reporting unit at March 31, 2011 to determine if the results would be significantly different from its annual October 1 test.  The Cranes reporting unit's fair value exceeded its carrying value by approximately 16%.
 
The Company did not find evidence of impairment at March 31, 2011, but will continue to monitor the performance of the Cranes reporting unit and update the test as circumstances warrant.  If the Cranes reporting unit is unable to achieve its projected cash flows, the outcome of any prospective tests may result in the Company recording goodwill impairment charges in future periods.
The amount of goodwill in the Cranes reporting unit was $222.9 million as of March 31, 2011.
 
NOTE I – DERIVATIVE FINANCIAL INSTRUMENTS
 
In the normal course of business, the Company enters into two types of derivatives to hedge its interest rate exposure and foreign currency exposure: hedges of fair value exposures and hedges of cash flow exposures.  Fair value exposures relate to recognized assets or liabilities and firm commitments, while cash flow exposures relate to the variability of future cash flows associated with recognized assets or liabilities or forecasted transactions.  Additionally, the Company had entered into derivative contracts that were intended to partially mitigate risks associated with the shares of common stock of Bucyrus acquired in connection with the sale of the Mining business.  These contracts were not designated as hedges because they did not meet the requirements for hedge accounting.
 
The Company operates internationally, with manufacturing and sales facilities in various locations around the world, and uses certain financial instruments to manage its foreign currency, interest rate and fair value exposures.  To qualify a derivative as a hedge at inception and throughout the hedge period, the Company formally documents the nature and relationships between hedging instruments and hedged items, as well as its risk-management objectives and strategies for undertaking various hedge transactions, and the method of assessing hedge effectiveness.  Additionally, for hedges of forecasted transactions, the significant characteristics and expected terms of a forecasted transaction must be specifically identified, and it must be probable that each forecasted transaction will occur.  If it is deemed probable that the forecasted transaction will not occur, then the gain or loss would be recognized in current earnings.  Financial instruments qualifying for hedge accounting must maintain a specified level of effectiveness between the hedging instrument and the item being hedged, both at inception and throughout the hedged period.  The Company does not engage in trading or other speculative use of financial instruments.
 
The Company has used and may use forward contracts and options to mitigate its exposure to changes in foreign currency exchange rates on third party and intercompany forecasted transactions.  The primary currencies to which the Company is exposed are the Euro and British Pound.  The effective portion of unrealized gains and losses associated with forward contracts and the intrinsic value of option contracts are deferred as a component of Accumulated other comprehensive income until the underlying hedged transactions are reported in the Company’s Condensed Consolidated Statement of Income.  The Company uses interest rate swaps to mitigate its exposure to changes in interest rates related to existing issuances of variable rate debt and to fair value changes of fixed rate debt.  Primary exposure includes movements in the London Interbank Offer Rate (“LIBOR”).
 
Changes in the fair value of derivatives designated as fair value hedges are recognized in earnings as offsets to changes in fair value of exposures being hedged.  The change in fair value of derivatives designated as cash flow hedges are deferred in Accumulated other comprehensive income and are recognized in earnings as hedged transactions occur.  Transactions deemed

16

 

ineffective are recognized in earnings immediately.
 
In the Condensed Consolidated Statement of Income, the Company records hedging activity related to debt instruments in interest expense and hedging activity related to foreign currency in the accounts for which the hedged items are recorded.  On the Condensed Consolidated Statement of Cash Flows, the Company records cash flows from hedging activities in the same manner as it records the underlying item being hedged.
 
In November 2007, the Company entered into an interest rate swap agreement that converted a fixed rate interest payment into a variable rate interest payment.  At March 31, 2011, the Company had $400.0 million notional amount of this interest rate swap agreement outstanding, which matures in 2017.  The fair market value of this swap at March 31, 2011 and December 31, 2010 was a gain of $45.4 million and $39.3 million, respectively, which is recorded in Other assets.
 
The Company had entered into a prior interest rate swap agreement that converted a fixed rate interest payment into a variable rate interest payment.  At December 31, 2006, the Company had $200.0 million notional amount of this interest rate swap agreement outstanding, which would have matured in 2014.  To maintain an appropriate balance between floating and fixed rate obligations on its mix of indebtedness, the Company exited this interest rate swap agreement on January 15, 2007 and paid $5.4 million.  This loss was recorded as an adjustment to the carrying value of the hedged debt and was amortized through January 15, 2011, which was the effective date that the hedged debt was extinguished.
 
The Company is also a party to currency exchange forward contracts that generally mature within one year to manage its exposure to changing currency exchange rates.  At March 31, 2011, the Company had $450.3 million notional amount of currency exchange forward contracts outstanding, most of which mature on or before March 31, 2012.  The fair market value of these contracts at March 31, 2011 was a net gain of $2.2 million.  At March 31, 2011, $383.3 million notional amount ($1.6 million of fair value gains) of these forward contracts have been designated as, and are effective as, cash flow hedges of specifically identified transactions.  During 2011 and 2010, the Company recorded the change in fair value for these cash flow hedges to Accumulated other comprehensive income and reclassified to earnings a portion of the deferred gain or loss from Accumulated other comprehensive income as the hedged transactions occurred and were recognized in earnings.
 
The Company entered into a stockholders agreement with Bucyrus that contained certain restrictions, including providing for Terex’s commitment that it will not directly or indirectly sell or otherwise transfer its economic interest in the shares of Bucyrus stock received by it for a period of one year, subject to certain exceptions. As a result, in order to partially mitigate the risks associated with the shares of Bucyrus stock, the Company entered into derivative contracts using a basket of stocks whose prices have historically been highly correlated with the Bucyrus stock price.  During the three months ended March 31, 2010, the Company paid premiums of approximately $21 million to enter into derivative trades to mitigate the risk of approximately 95% of the notional value of the Bucyrus stock based on historic prices.  The one year lock-up contained in the stockholders agreement expired on February 19, 2011.  Substantially all of the derivative contracts purchased by the Company expired unexercised during the three months ended March 31, 2011.
 
The following table provides the location and fair value amounts of derivative instruments designated as hedging instruments that are reported in the Condensed Consolidated Balance Sheet (in millions):
 
Asset Derivatives
Balance Sheet Account
March 31,
2011
 
December 31,
2010
Foreign exchange contracts
Other current assets
$
8.0
 
 
$
2.9
 
Interest rate contract
Other assets
45.4
 
 
39.3
 
Total asset derivatives
 
$
53.4
 
 
$
42.2
 
Liability Derivatives
 
 
 
 
 
 
Foreign exchange contracts
Other current liabilities
$
5.8
 
 
$
6.0
 
Interest rate contract
Long-term debt, less current portion
45.4
 
 
38.1
 
Total liability derivatives
 
$
51.2
 
 
$
44.1
 
Total Derivatives
 
$
2.2
 
 
$
(1.9
)
 

17

 

The following table provides the location and fair value amounts of derivative instruments not designated as hedging instruments that are reported in the Condensed Consolidated Balance Sheet (in millions):
 
Asset Derivatives
Balance Sheet Account
March 31,
2011
 
December 31,
2010
Option derivative contracts
Other current assets
$
 
 
$
0.3
 
 
The following tables provide the effect of derivative instruments that are designated as hedges in the Condensed Consolidated Statement of Income and Accumulated other comprehensive income (“OCI”) (in millions):
 
Gain Recognized on Derivatives in Income:
Three Months Ended
March 31,
Fair Value Derivatives
Location
2011
 
2010
Interest rate contract
Interest expense
$
4.9
 
 
$
4.9
 
Gain Recognized on Derivatives in OCI:
Three Months Ended
March 31,
Cash Flow Derivatives
 
2011
 
2010
Foreign exchange contracts
 
$
3.4
 
 
$
4.9
 
Loss Reclassified from Accumulated OCI into Income
     (Effective):
Three Months Ended
March 31,
Account
 
2011
 
2010
Cost of goods sold
 
$
(1.6
)
 
$
(2.2
)
Other income (expense) - net
 
 
 
0.3
 
Total
 
$
(1.6
)
 
$
(1.9
)
Gain (Loss) Recognized on Derivatives (Ineffective) in
     Income:
Three Months Ended
March 31,
Account
 
2011
 
2010
Other income (expense) - net
 
$
0.5
 
 
$
(2.1
)
 
The following table provides the effect of derivative instruments that are not designated as hedges in the Condensed Consolidated Statement of Income and OCI (in millions):
 
Loss Recognized on Derivatives not designated as hedges in Income:
Three Months Ended
March 31,
Account
2011
 
2010
Other income (expense) - net
$
(0.3
)
 
$
(7.5
)
 
Counterparties to the Company’s interest rate swap agreement and currency exchange forward contracts are major financial institutions with credit ratings of investment grade or better and no collateral is required.  There are no significant risk concentrations.  Management continues to monitor counterparty risk and believes the risk of incurring losses on derivative contracts related to credit risk is unlikely and any losses would be immaterial.
 
Unrealized net gains (losses), net of tax, included in OCI are as follows (in millions):
 
 
Three Months Ended
March 31,
 
2011
 
2010
Balance at beginning of period
$
(2.1
)
 
$
(3.6
)
Additional gains (losses) - net
3.4
 
 
5.0
 
Amounts reclassified to earnings
 
 
(0.3
)
Balance at end of period
$
1.3
 
 
$
1.1
 
 

18

 

The estimated amount of existing gains for derivative contracts recorded in OCI as of March 31, 2011 that are expected to be reclassified into earnings in the next twelve months is $1.3 million.
 
 
NOTE J – FAIR VALUE MEASUREMENTS
 
Assets and liabilities measured at fair value on a recurring basis under the provisions of ASC 820, include interest rate swap and foreign currency forward contracts discussed in Note I - “Derivative Financial Instruments.”  These contracts are valued using a market approach, which uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.  ASC 820 establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs).  The hierarchy consists of three levels:
 
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 - Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
 
Determining which category an asset or liability falls within this hierarchy requires judgment.  The Company evaluates its hierarchy disclosures each quarter.  As discussed in Note I - “Derivative Financial Instruments,” the Company has two types of derivative instruments that it records at fair value on a recurring basis: the interest rate swap and foreign exchange contracts.  The interest rate swap is categorized under Level 2 of the hierarchy above and is recorded at March 31, 2011 and December 31, 2010 as an asset of $45.4 million and $39.3 million, respectively.  The foreign exchange contracts are categorized under Level 1 of the hierarchy above and are recorded at March 31, 2011 and December 31, 2010 as an asset of $2.2 million and a liability of $3.3 million, respectively.  The fair value of the interest rate swap agreement is based on LIBOR yield curves at the reporting date.  The fair values of the foreign exchange forward contracts are based on quoted forward foreign exchange prices at the reporting date.
 
NOTE K – RESTRUCTURING AND OTHER CHARGES
 
The Company continually evaluates its cost structure to be appropriately positioned to respond to changing market conditions.  Given economic trends from 2008 into 2010, the Company initiated certain restructuring programs across all segments to better utilize its workforce and optimize facility utilization to match the demand for its products.
 
Workforce restructuring activities reduced the number of team members at all levels and caused the Company to incur costs for employee termination benefits related to headcount reductions.  The existing reserve balance as of March 31, 2011 for the workforce restructuring activities is expected to be paid during 2011, except for certain activities in the Cranes segment, which are dependent on the expiration of certain government mandated benefits.  
 
The following table provides information by segment of the number of team members reduced pursuant to workforce reduction activities during the three months ended March 31, 2011:
 
 
Number of headcount reductions
Cranes
141
 
MP
7
 
Total
148
 
 
To optimize facility utilization, the Company established a restructuring program to move its crushing and screening manufacturing business from Cedar Rapids, Iowa within the MP segment to other facilities, primarily in North America. Engineering, sales and service functions for materials processing equipment currently made at the plant will be retained at the facility for the near future.  The program is expected to cost $3.3 million, which has all been incurred to date, result in reductions of approximately 186 team members and be completed during 2011.  Costs of $0.2 million were charged to Cost of goods sold (“COGS”) in the three months ended March 31, 2011 for this program.
 

19

 

The Company established a restructuring program within the MP segment to realize cost synergies and support its joint brand strategy by consolidating certain of its crushing equipment manufacturing businesses.  This program will result in the relocation of its Pegson operations in Coalville, United Kingdom to Omagh, Northern Ireland. The global design center for crushing equipment and certain component manufacturing will be retained at Coalville for the near future.  The program is expected to cost $6.4 million, which has all been incurred to date, result in reductions of approximately 215 team members and be completed during 2011.  
 
During the second quarter of 2010, the Company executed a restructuring program to better utilize facility space in its Port Equipment Business, which is included in the Cranes segment.  The program cost $11.4 million and resulted in reductions of approximately 149 team members. This program was completed in 2010 except for certain benefits mandated by governmental agencies.  
 
The following table provides information for all restructuring activities by segment of the amount of expense incurred during the three months ended March 31, 2011, the cumulative amount of expenses incurred since inception and the total amount expected to be incurred  (in millions):
 
 
Amount incurred
during the
three months ended
March 31, 2011
 
Cumulative amount
incurred through
March 31, 2011 and total amount expected to be incurred
AWP
$
 
 
$
23.6
 
Construction
0.2
 
 
37.7
 
Cranes
0.1
 
 
16.8
 
MP
0.2
 
 
11.3
 
Corporate and Other
 
 
6.1
 
Total
$
0.5
 
 
$
95.5
 
 
The following table provides information by type of restructuring activity with respect to the amount of expense incurred during the three months ended March 31, 2011, the cumulative amount of expenses incurred since inception and the total amount expected to be incurred  (in millions):
 
 
Employee
Termination Costs
 
Facility
Exit Costs
 
Asset Disposal and Other Costs
 
Total
Amount incurred in the three months ended March 31, 2011
$
0.2
 
 
$
 
 
$
0.3
 
 
$
0.5
 
Cumulative amount incurred through March 31, 2011 and total amount expected to be incurred
$
73.1
 
 
$
10.6
 
 
$
11.8
 
 
$
95.5
 
 
The following table provides a roll forward of the restructuring reserve by type of restructuring activity for the three months ended March 31, 2011 (in millions):
 
 
Employee
Termination Costs
 
Facility
Exit Costs
 
Asset Disposal and Other Costs
 
Total
Restructuring reserve at December 31, 2010
$
9.8
 
 
$
1.6
 
 
$
1.1
 
 
$
12.5
 
Cash expenditures
(1.7
)
 
0.1
 
 
(0.2
)
 
(1.8
)
Restructuring reserve at March 31, 2011
$
8.1
 
 
$
1.7
 
 
$
0.9
 
 
$
10.7
 
 
In the aggregate, the restructuring charges described above incurred during the three months ended March 31, 2011 and 2010 were included in COGS ($0.5 million and $6.4 million). There were no charges in selling, general and administrative expenses for the three months ended March 31, 2011, however $6.5 million of charges were recorded in selling, general and administrative expenses for the three months ended March 31, 2010.  Included in the restructuring costs for the three months ended March 31, 2010 are $2.4 million of asset impairments.

20

 

 
 
NOTE L – LONG-TERM OBLIGATIONS
 
2006 Credit Agreement
 
On July 14, 2006, the Company and certain of its subsidiaries entered into a Credit Agreement (the “2006 Credit Agreement”) with the lenders party thereto (the “Lenders”) and Credit Suisse, as administrative and collateral agent.  The 2006 Credit Agreement provides the Company with a revolving line of credit of up to $550 million available through July 14, 2012.  The revolving line of credit consists of $350 million of domestic revolving loans and $200 million of multicurrency revolving loans. The credit facilities also provide for incremental loan commitments of up to $163.5 million, which may be extended at the option of the lenders, in the form of revolving credit loans, term loans or a combination of both.  The 2006 Credit Agreement was amended on January 11, 2008, February 24, 2009, June 3, 2009, January 15, 2010 and October 4, 2010.
 
Pursuant to the October 2010 amendment, the Company was permitted to make par offers for its 10-7/8% Senior Notes due 2016 (the “10-7/8% Notes”) and its 7-3/8% Senior Subordinated Notes due 2014 (the “7-3/8% Notes”) in accordance with the governing indentures and to redeem or repurchase debt if the minimum liquidity of the Company is greater than $250 million.  In addition, the amendment removed the previous $200 million annual limitation on acquisitions and provided the Company with added flexibility in certain other restrictive covenants.  In connection with the amendment, on October 14, 2010, the Company repaid the entire $270.2 million principal amount of its term loans then outstanding under the 2006 Credit Agreement with a portion of the net proceeds from the sale of its Mining business.
 
Pursuant to the January 2010 amendment, the Company was permitted to (i) acquire shares of common stock of Bucyrus in connection with the disposition of its Mining business and (ii) enter into hedging agreements for the purpose of managing risk associated with its investment in Bucyrus stock.  In accordance with this amendment, Terex Mining Australia Pty Ltd was replaced as the Australian borrower by Terex Lifting Australia Pty. Ltd.
 
Pursuant to the June 2009 amendment, the Company reduced its domestic revolving credit commitments under the 2006 Credit Agreement by $150 million, repaid $58.4 million principal amount of its term loans thereunder, and increased the interest rates charged thereunder.  The amendment also eliminated certain existing financial covenants dealing with the Company’s consolidated leverage ratio and consolidated fixed charge coverage ratio, and instead will require the Company 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.  Liquidity is defined as Cash and cash equivalents plus availability under the 2006 Credit Agreement.  Pursuant to the amendment, the Company added flexibility in various restrictive covenants and agreed to provide certain collateral to secure the Company’s obligations under the 2006 Credit Agreement.  Additionally, under the amendment, at any time on or prior to June 30, 2011, if the Company’s consolidated leverage ratio (as defined in the 2006 Credit Agreement) is greater than 2.50 to 1.00, the Company will be prohibited from repurchasing shares of its Common Stock, paying dividends or redeeming debt except with the proceeds of equity offerings and other than regularly scheduled payments of debt and debt under the 2006 Credit Agreement and incurring additional debt.  The amendment also included certain other technical changes.
 
As of March 31, 2011 and December 31, 2010, the Company had no term loans outstanding under the 2006 Credit Agreement.  The Company had no revolving credit amounts outstanding as of March 31, 2011 or December 31, 2010.
 
The 2006 Credit Agreement incorporates facilities for issuance of letters of credit up to $250 million.  Letters of credit issued under the 2006 Credit Agreement letter of credit facility decrease availability under the $550 million revolving line of credit.  As of March 31, 2011 and December 31, 2010, the Company had letters of credit issued under the 2006 Credit Agreement that totaled $54.7 million and $46.6 million, respectively.  The 2006 Credit Agreement also permits the Company to have additional letter of credit facilities up to $100 million, and letters of credit issued under such additional facilities do not decrease availability under the revolving line of credit.  As of March 31, 2011 and December 31, 2010, the Company had letters of credit issued under the additional letter of credit facilities of the 2006 Credit Agreement that totaled $9.0 million and $9.2 million, respectively.  The Company also has bilateral arrangements to issue letters of credit with various other financial institutions.  These additional letters of credit do not reduce the Company's availability under the 2006 Credit Agreement.  The Company had letters of credit issued under these additional arrangements of $134.7 million and $132.9 million as of March 31, 2011 and December 31, 2010, respectively.  In total, as of March 31, 2011 and December 31, 2010, the Company had letters of credit outstanding of $198.4 million and $188.8 million, respectively.
 

21

 

The 2006 Credit Agreement requires the Company to comply with a number of covenants.  These covenants require the Company to meet certain financial tests, namely (a) to maintain liquidity (as defined in the 2006 Credit Agreement) of not less than $250 million on the last day of each fiscal quarter through June 30, 2011, and (b) thereafter, to maintain a senior secured debt leverage ratio (as defined in the 2006 Credit Agreement) not in excess of 3.50 to 1.00 at the end of each fiscal quarter, with the ratio declining to 3.00 to 1.00 effective October 1, 2012 and 2.50 to 1.00 effective October 1, 2013.  The covenants also limit, in certain circumstances, the Company’s ability to take a variety of actions, including:  incur indebtedness; create or maintain liens on its property or assets; make investments, loans and advances; engage in acquisitions, mergers, consolidations and asset sales; redeem debt; and pay dividends and distributions, including share repurchases.  The 2006 Credit Agreement also contains customary events of default.  The Company’s future compliance with its financial covenants under the 2006 Credit Agreement will depend on its ability to generate earnings and manage its assets effectively.  The 2006 Credit Agreement also has various non-financial covenants, both requiring the Company to refrain from taking certain future actions (as described above) and requiring the Company to take certain actions, such as keeping in good standing its corporate existence, maintaining insurance, and providing its bank lending group with financial information on a timely basis.
 
The Company currently is subject to certain restrictions under the 2006 Credit Agreement with respect to its uses of cash, including (i) limitations in making acquisitions, (ii) repurchasing shares of its Common Stock, (iii) paying dividends, (iv) redeeming debt except with the proceeds of equity offerings and other than regularly scheduled payments of debt including debt under the 2006 Credit Agreement and, (v) incurring additional debt.
 
The Company and certain of its subsidiaries agreed to take certain actions to secure borrowings under the 2006 Credit Agreement.  As a result, the Company and certain of its subsidiaries entered into an Amended and Restated Guarantee and Collateral Agreement with Credit Suisse, as collateral agent for the Lenders, granting security to the Lenders for amounts borrowed under the 2006 Credit Agreement.  The Company is required to (a) pledge as collateral the capital stock of the Company’s material domestic subsidiaries and 65% of the capital stock of certain of the Company’s material foreign subsidiaries, and (b) provide a first priority security interest in, and mortgages on, substantially all of the Company’s domestic assets.
 
The Company's consolidated cash flow coverage ratio as defined in the indentures for its 10-7/8% Notes and 8% Senior Subordinated Notes Due 2017 (“8% Notes”) is currently less than 2.0 to 1.0. As a result, the Company is subject to significant restrictions under its indentures on the amount of indebtedness that it can incur.
 
10-7/8% Senior Notes
 
On June 3, 2009, the Company sold and issued $300 million aggregate principal amount of 10-7/8% Notes at 97.633%.  The Company used a portion of the approximately $293 million proceeds from the offering of the 10-7/8% Notes, together with a portion of the proceeds from the 4% Convertible Notes discussed below, to prepay a portion of its term loans under the 2006 Credit Agreement and to pay off the outstanding balance under the revolving credit component of the 2006 Credit Agreement.  The 10-7/8% Notes are redeemable by the Company beginning in June 2013 at an initial redemption price of 105.438% of principal amount. As a result of the Company's redemption of the 7-3/8% Notes, as of February 7, 2011, the 10-7/8% Notes are jointly and severally guaranteed by certain of the Company's domestic subsidiaries (see Note Q - “Consolidating Financial Statements”).
 
4% Convertible Senior Subordinated Notes
 
On June 3, 2009, the Company sold and issued $172.5 million aggregate principal amount of 4% Convertible Notes.  In certain circumstances and during certain periods, the 4% Convertible Notes will be convertible at an initial conversion rate of 61.5385 shares of Common Stock per $1,000 principal amount of convertible notes, equivalent to an initial conversion price of approximately $16.25 per share of Common Stock, subject to adjustment in some events.  Upon conversion, Terex will deliver cash up to the aggregate principal amount of the 4% Convertible Notes to be converted and shares of Common Stock with respect to the remainder, if any, of Terex’s convertible obligation in excess of the aggregate principal amount of the 4% Convertible Notes being converted. As a result of the Company's redemption of of the 7-3/8% Notes, as of February 7, 2011, the 4% Convertible Notes are jointly and severally guaranteed by certain of the Company's domestic subsidiaries (see Note Q - "Consolidating Financial Statements").  
 

22

 

The Company, as issuer of the 4% Convertible Notes, must separately account for the liability and equity components of the 4% Convertible Notes in a manner that reflects the Company’s nonconvertible debt borrowing rate at the date of issuance when interest cost is recognized in subsequent periods.  The Company allocated $54.3 million of the $172.5 million principal amount of the 4% Convertible Notes to the equity component, which represents a discount to the debt and will be amortized into interest expense using the effective interest method through June 2015.  The Company recorded a related deferred tax liability of $19.4 million on the equity component.  The balance of the 4% Convertible Notes was $131.2 million at March 31, 2011.  The Company recognized interest expense of $3.7 million on the 4% Convertible Notes for the three months ended March 31, 2011.  The interest expense recognized for the 4% Convertible Notes will increase as the discount is amortized using the effective interest method, which accretes the debt balance over its term to $172.5 million at maturity.  Interest expense on the 4% Convertible Notes throughout its term includes 4% annually of cash interest on the maturity balance of $172.5 million plus non-cash interest expense accreted to the debt balance as described.
 
8% Senior Subordinated Notes
 
On November 13, 2007, the Company sold and issued $800 million aggregate principal amount of 8% Notes. The 8% Notes are redeemable by the Company beginning in November 2012 at an initial redemption price of 104.000% of principal amount. As a result of the Company's redemption of the 7-3/8% Notes, as of February 7, 2011, the 8% Notes are jointly and severally guaranteed by certain of the Company's domestic subsidiaries (see Note Q - “Consolidating Financial Statements”).
 
7-3/8% Senior Subordinated Notes
 
On November 25, 2003, the Company sold and issued $300 million aggregate principal amount of 7-3/8% Notes discounted to yield 7-1/2%.  The 7-3/8% Notes were jointly and severally guaranteed by certain domestic subsidiaries of the Company (see Note Q - “Consolidating Financial Statements”).  The 7-3/8% Notes were redeemable by the Company beginning in January 2009 at an initial redemption price of 103.688% of principal amount. On January 18, 2011, the Company exercised its early redemption option and repaid the outstanding $297.6 million principal amount of its 7-3/8% Notes. The total cash paid to redeem the 7-3/8% Notes was $312.3 million which included a call premium of 1.229% as set forth in the indenture for the 7-3/8% Notes, totaling $3.6 million plus accrued and unpaid interest of $36.875 per $1,000 principal amount at the redemption date.
 
The $6.3 million in the Condensed Consolidated Statement of Income includes (a) cash payments of $3.6 million for call premiums associated with the repayment of $297.6 million of outstanding debt and (b) $2.7 million of non-cash charges for accelerated amortization of debt acquisition costs, original issue discount and loss on a terminated swap associated with the outstanding debt, which all flow into the calculation of Net income. In preparing the Condensed Consolidated Statement of Cash Flows, the non-cash item (b) was added to Net income to reflect cash flow appropriately.
 
Based on indicative price quotations from financial institutions multiplied by the amount recorded on the Company’s Condensed Consolidated Balance Sheet  (“Book Value”), the Company estimates the fair values (“FV”) of its debt set forth below as of March 31, 2011, as follows (in millions, except for quotes):
 
 
Book Value
 
Quote
 
FV
8% Notes
$
800.0
 
 
$
1.05000
 
 
$
840
 
4% Convertible Notes (net of discount)
$
131.2
 
 
$
2.39500
 
 
$
314
 
10-7/8% Notes
$
294.7
 
 
$
1.16500
 
 
$
343
 
 
The Company believes that the carrying value of its other borrowings approximates fair market value based on discounted future cash flows using rates currently available for debt of similar terms and remaining maturities.
 
 

23

 

NOTE M – RETIREMENT PLANS AND OTHER BENEFITS
 
Pension Plans
 
U.S. Plans - As of March 31, 2011, the Company maintained one qualified defined benefit pension plan covering certain domestic employees (the “Terex Plan”).  Participation in the plan for all employees has been frozen.  Participants are credited with post-freeze service for purposes of determining vesting and retirement eligibility only.  The benefits covering salaried employees are based primarily on years of service and employees’ qualifying compensation during the final years of employment.  The benefits covering bargaining unit employees are based primarily on years of service and a flat dollar amount per year of service.  It is the Company’s policy generally to fund the Terex Plan based on the requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”).  Plan assets consist primarily of common stocks, bonds and short-term cash equivalent funds.
 
The Company maintains a nonqualified Supplemental Executive Retirement Plan (“SERP”). The SERP provides retirement benefits to certain senior executives of the Company. Generally, the SERP provides a benefit based on average total compensation earned over a participant’s final five years of employment and years of service reduced by benefits earned under any Company retirement program, excluding salary deferrals and matching contributions. In addition, benefits are reduced by Social Security Primary Insurance Amounts attributable to Company contributions.  The SERP is unfunded.  Participation in the SERP has been frozen.
 
Other Postemployment Benefits
 
The Company has several non-pension post-retirement benefit programs.  The Company provides postemployment health and life insurance benefits to certain former salaried and hourly employees.  The health care programs are contributory, with participants’ contributions adjusted annually, and the life insurance plan is noncontributory.
 
Information regarding the Company's U.S. plans, including the SERP, was as follows (in millions):
 
 
Pension Benefits
 
Three Months Ended
March 31,
 
2011
 
2010
Components of net periodic cost:
 
 
 
Service cost
$
0.5
 
 
$
0.5
 
Interest cost
2.1
 
 
2.1
 
Expected return on plan assets
(2.1
)
 
(1.8
)
Amortization of prior service cost
 
 
0.1
 
Recognized actuarial loss
0.9
 
 
0.9
 
Net periodic cost 
$
1.4
 
 
$
1.8
 
 
 
Other Benefits
 
Three Months Ended
March 31,
 
2011
 
2010
Components of net periodic cost:
 
 
 
Interest cost
$
0.1
 
 
$
0.2
 
Recognized actuarial loss
 
 
0.1
 
Net periodic cost 
$
0.1
 
 
$
0.3
 
 
The Company plans to contribute approximately $16 million to its U.S. defined benefit pension and post-retirement plans for the year ending December 31, 2011.  During the three months ended March 31, 2011, the Company contributed $10.7 million to its U.S. defined benefit pension plans, which included an approximately $10 million payment to eliminate the impact of potential plan restrictions.
 

24

 

Non-U.S. Plans – The Company maintains defined benefit plans in Germany, France, China, India and the United Kingdom for some of its subsidiaries. During 2010, the United Kingdom plan was frozen and a curtailment gain was recognized as part of other comprehensive income. The United Kingdom plan is a funded plan and the Company funds this plan in accordance with funding regulations in the United Kingdom and a negotiated agreement between the Company and the plan's trustees. The plans in Germany, China, India and France are unfunded plans. For the Company's operations in Italy there are mandatory termination indemnity plans providing a benefit that is payable upon termination of employment in substantially all cases of termination. The Company records this obligation based on the mandated requirements. The measure of the current obligation is not dependent on the employees' future service and therefore is measured at current value.
 
Information regarding the Company's non-U.S. plans was as follows (in millions):
 
 
Pension Benefits
 
Three Months Ended
March 31,
 
2011
 
2010
Components of net periodic cost:
 
 
 
Service cost
$
1.3
 
 
$
1.3
 
Interest cost
1.5
 
 
2.3
 
Expected return on plan assets
(1.1
)
 
(1.2
)
Recognized actuarial loss
0.1
 
 
0.4
 
Net periodic cost
$
1.8
 
 
$
2.8
 
 
The Company plans to contribute approximately $6 million to its non-U.S. defined benefit pension plans for the year ending December 31, 2011.  During the three months ended March 31, 2011, the Company contributed $2.0 million to its non-U.S. defined benefit pension plans.
 
NOTE N – LITIGATION AND CONTINGENCIES
 
General
 
The Company is 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. The Company is 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 it or deductibles. The Company has recorded and maintains an estimated liability in the amount of management’s estimate of the Company’s aggregate exposure for such retained liabilities and deductibles. For such retained liabilities and deductibles, the Company determines its exposure based on probable loss estimations, which requires such losses to be both probable and the amount or range of probable loss to be estimable. The Company believes it has made appropriate and adequate reserves and accruals for its current contingencies and that the likelihood of a material loss beyond the amounts accrued is remote except for those cases disclosed below where the Company includes a range of the possible loss. The Company believes that the outcome of such matters will not have a material adverse effect on its consolidated financial position. However, the outcomes of lawsuits cannot be predicted and, if determined adversely, could ultimately result in the Company incurring significant liabilities which could have a material adverse effect on its results of operations.
 
ERISA, Securities and Stockholder Derivative Lawsuits
 
The Company has 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.

25

 

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 the Company's SEC filings and other public statements contained false and misleading statements which resulted in damages to it, the plaintiffs and the members of the purported class when they purchased the Company's 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 the Company's 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.  As a result, it is not possible for the Company to estimate a loss or range of losses for these lawsuits. The stockholder derivative complaint also seeks amendments to the Company's corporate governance procedures in addition to unspecified compensatory damages from the individual defendants in its favor.
 
The Company believes that the allegations in the suits are without merit, and Terex, its directors and the named executives will continue to vigorously defend against them.  The Company believes that it has acted, and continues to act, in compliance with federal securities laws and ERISA law with respect to these matters.  Accordingly, on November 19, 2010 the Company filed a motion to dismiss the ERISA lawsuit and on January 18, 2011 the Company 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 shareholder derivative lawsuit has agreed with the Company to put this lawsuit on hold pending the outcome of the motion to dismiss in connection with the securities lawsuit.
 
Powerscreen Patent Infringement Lawsuit
 
On December 6, 2010, the Company received an adverse jury verdict in the amount of approximately $16 million 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.  Metso has made a motion to receive treble damages of up to approximately $47 million plus costs related to this lawsuit in connection with this verdict. 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.  The Company does 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 the Company strongly believes that the verdict is contrary to both the law and the facts.  Accordingly, the Company will be appealing the verdict and believes that it 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.  The Company does not expect this verdict will have a material impact on its consolidated business or overall operating results. However, the outcomes of lawsuits cannot be predicted and, if determined adversely, could ultimately result in the Company incurring significant liabilities which could have a material adverse effect on its results of operations.
 
Post-Closing Dispute with Bucyrus
 
See Note D - "Discontinued Operations" for further information on the Company's dispute with Bucyrus regarding the calculation of the value of the net assets of the Mining business.
 
Other
 
The Company is involved in various other legal proceedings, including workers’ compensation liability and intellectual property litigation, which have arisen in the normal course of its operations.  The Company has recorded provisions for estimated losses in circumstances where a loss is probable and the amount or range of possible amounts of the loss is estimable.
 
The Company’s outstanding letters of credit totaled $198.4 million at March 31, 2011.  The letters of credit generally serve as collateral for certain liabilities included in the Consolidated Balance Sheet.  Certain of the letters of credit serve as collateral guaranteeing the Company’s performance under contracts.
 
The Company has a letter of credit outstanding covering losses related to two former subsidiaries’ workers’ compensation obligations.  The Company has recorded liabilities for these contingent obligations in circumstances where a loss is probable and the amount or range of possible amounts of the loss is estimable.

26

 

 
Credit Guarantees
 
Customers of the Company from time to time may fund the acquisition of the Company’s equipment through third-party finance companies.  In certain instances, the Company may provide a credit guarantee to the finance company, by which the Company agrees to make payments to the finance company should the customer default.  The maximum liability of the Company generally is limited to the finance company’s net exposure to the customer at the time of default.  In the event of customer default, the Company is generally able to recover and dispose of the equipment at a minimum loss, if any, to the Company.
 
As of March 31, 2011 and December 31, 2010, the Company’s maximum exposure to such credit guarantees was $196.9 million and $211.1 million, respectively, including total guarantees issued by Terex Demag GmbH, part of the Cranes segment, of $106.3 million and $113.5 million, respectively; Sichuan Changjiang Engineering Crane Co., Ltd, part of the Cranes segment, of $49.4 and $53.2, respectively; and Genie Holdings, Inc. and its affiliates (“Genie”), part of the AWP segment, of $29.1 million and $31.1 million, respectively. The terms of these guarantees coincide with the financing arranged by the customer and generally do not exceed five years. Given the Company’s position as the original equipment manufacturer and its knowledge of end markets, the Company, when called upon to fulfill a guarantee, generally has been able to liquidate the financed equipment at a minimal loss, if any, to the Company.
 
There can be no assurance that historical credit default experience will be indicative of future results.  The Company’s ability to recover losses experienced from its guarantees may be affected by economic conditions in effect at the time of loss.
 
Residual Value and Buyback Guarantees
 
The Company issues residual value guarantees under sales-type leases.  A residual value guarantee involves a guarantee that a piece of equipment will have a minimum fair market value at a future date.  The maximum exposure for residual value guarantees issued by the Company totaled $13.3 million and $13.4 million as of March 31, 2011 and December 31, 2010, respectively.  The Company is generally able to mitigate some of the risk associated with these guarantees because the maturity of the guarantees is staggered, limiting the amount of used equipment entering the marketplace at any one time.
 
The Company from time to time guarantees that it will buy equipment from its customers in the future at a stated price if certain conditions are met by the customer.  Such guarantees are referred to as buyback guarantees.  These conditions generally pertain to the functionality and state of repair of the machine.  As of March 31, 2011 and December 31, 2010, the Company’s maximum exposure pursuant to buyback guarantees was $82.3 million and $102.1 million, respectively, including total guarantees issued by Genie of $77.6 million and $97.4 million, respectively.  The Company is generally able to mitigate some of the risk of these guarantees by staggering the timing of the buybacks and through leveraging its access to the used equipment markets provided by the Company’s original equipment manufacturer status.
 
The Company has recorded an aggregate liability within Other current liabilities and Retirement plans and other in the Condensed Consolidated Balance Sheet of approximately $16 million and $19 million as of March 31, 2011 and December 31, 2010, respectively, for the estimated fair value of all guarantees provided.
 
There can be no assurance that the Company's historical experience in used equipment markets will be indicative of future results.  The Company's ability to recover losses experienced from its guarantees may be affected by economic conditions in the used equipment markets at the time of loss.
 
 

27

 

NOTE O – STOCKHOLDERS’ EQUITY
 
Total non-stockholder changes in equity (comprehensive income) include all changes in equity during a period except those resulting from investments by, and distributions to, stockholders.  The specific components include: net income, deferred gains and losses resulting from foreign currency translation, pension liability adjustments, equity security adjustments and deferred gains and losses resulting from derivative hedging transactions.  Total non-stockholder changes in equity were as follows (in millions):
 
 
Three Months Ended
March 31,
 
 
2011
 
2010
 
Net income
$
10.9
 
 
$
541.6
 
 
Other comprehensive income (loss):
 
 
 
 
 
Pension liability adjustment
0.2
 
 
6.7
 
 
Translation adjustment
87.4
 
 
(108.7
)
 
Equity security adjustment
(25.5
)
 
19.7
 
 
Derivative hedging adjustment
3.4
 
 
4.7
 
 
Comprehensive income (loss)
76.4
 
 
464.0
 
 
Comprehensive loss (income) attributable to noncontrolling
     interest
0.8
 
 
(1.7
)
 
Comprehensive income (loss) attributable to Terex Corporation
$
77.2
 
 
$
462.3
 
 
 
During the three months ended March 31, 2011, the Company granted 0.9 million shares of restricted stock to its employees with a weighted average grant date fair value of $37.92 per share.  Approximately 51% of these restricted stock awards vest ratably over a three-year period and approximately 49% cliff vest at the end of a three-year period.  Approximately 14% of the shares granted are based on performance targets containing a market condition.  The Company used the Monte Carlo method to determine grant date fair values of $41.96 per share for the awards with a market condition.  The Monte Carlo method is a statistical simulation technique used to provide the grant date fair value of an award.  The following table presents the weighted-average assumptions used in the valuation:
 
Dividend yields
%
Expected volatility
80.29
%
Risk free interest rate
1.04
%
Expected life (in years)
2.78
 
 
During the three months ended March 31, 2011, the Company issued 10 thousand shares of its outstanding Common Stock which were contributed into a deferred compensation plan under a Rabbi Trust.
 
 
NOTE P – RELATED PARTY TRANSACTION
 
Genie Australia Pty. Ltd., a subsidiary of the Company, paid approximately five hundred dollars for certain excess luggage costs for the family of Timothy A. Ford, President Terex Aerial Work Platforms, during Mr. Ford’s and his family’s visit to Australia in January 2011. Mr. Ford has subsequently repaid all amounts in full. This inadvertent arrangement may have constituted a non-permissible extension of credit under Section 402 of the Sarbanes-Oxley Act of 2002, and, accordingly, this arrangement has been terminated with respect to Mr. Ford.
 

28

 

NOTE Q – CONSOLIDATING FINANCIAL STATEMENTS
 
On January 18, 2011, the Company repaid the outstanding $297.6 million principal amount outstanding of its 7-3/8% Notes (see Note L - “Long-Term Obligations”).  As a result of the Company's redemption of the 7-3/8% Notes, as of February 7, 2011, the 4% Convertible Notes, 8% Notes and 10-7/8% Notes were jointly and severally guaranteed by the following wholly-owned subsidiaries of the Company (the “Wholly-owned Guarantors”): Amida Industries, Inc., A.S.V., Inc., CMI Terex Corporation, Duvalpilot Equipment Outfitters, LLC, Fantuzzi Noell USA, Inc., Genie Financial Services, Inc., Genie Holdings, Inc., Genie Industries, Inc., Genie International, Inc., Genie Manufacturing, Inc., GFS National, Inc., Hydra Platforms Mfg. Inc., Loegering Mfg. Inc., Powerscreen Holdings USA Inc., Powerscreen International LLC, Powerscreen North America Inc., Powerscreen USA, LLC, Schaeff Incorporated, Schaeff of North America, Inc., Spinnaker Insurance Company, Terex Advance Mixer, Inc., Terex Aerials, Inc., Terex Financial Services, Inc., Terex USA, LLC, Terex Utilities, Inc. and Terex-Telelect, Inc.  All of the guarantees are full and unconditional.  No subsidiaries of the Company except the Wholly-owned Guarantors have provided a guarantee of the 4% Convertible Notes, 8% Notes and 10-7/8% Notes.
 
The following summarized condensed consolidating financial information for the Company segregates the financial information of Terex Corporation, the Wholly-owned Guarantors and the non-guarantor subsidiaries.  The results and financial position of businesses acquired are included from the dates of their respective acquisitions.
 
Terex Corporation consists of parent company operations and non-guarantor subsidiaries directly owned by the parent company.  Subsidiaries of the parent company are reported on the equity basis.  Wholly-owned Guarantors combine the operations of the Wholly-owned Guarantor subsidiaries.  Subsidiaries of Wholly-owned Guarantors that are not themselves guarantors are reported on the equity basis.  Non-guarantor subsidiaries combine the operations of subsidiaries which have not provided a guarantee of the obligations of Terex Corporation under the 4% Convertible Notes, 8% Notes and 10-7/8% Notes.  Debt and goodwill allocated to subsidiaries are presented on a “push-down” accounting basis.
 

29

 

TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 2011
(in millions)
 
 
Terex
Corporation
 
Wholly-owned
Guarantors
 
Non-guarantor
Subsidiaries
 
Intercompany
Eliminations
 
Consolidated
Net sales
$
85.4
 
 
$
524.1
 
 
$
823.4
 
 
$
(176.7
)
 
$
1,256.2
 
Cost of goods sold
(75.3
)
 
(465.0
)
 
(725.4
)
 
176.7
 
 
(1,089.0
)
Gross profit
10.1
 
 
59.1
 
 
98.0
 
 
 
 
167.2
 
Selling, general and administrative expenses
2.3
 
 
(60.2
)
 
(118.6
)
 
 
 
(176.5
)
Income (loss) from operations
12.4
 
 
(1.1
)
 
(20.6
)
 
 
 
(9.3
)
Interest income
0.1
 
 
0.1
 
 
1.9
 
 
 
 
2.1
 
Interest expense
(25.4
)
 
 
 
(2.8
)
 
 
 
(28.2
)
(Loss) income from subsidiaries
(7.4
)
 
 
 
 
 
7.4
 
 
 
Loss on early extinguishment of debt
(6.3
)
 
 
 
 
 
 
 
(6.3
)
Other income (expense) - net
49.5
 
 
(3.2
)
 
5.6
 
 
 
 
51.9
 
Income (loss) from continuing operations before income taxes
22.9
 
 
(4.2
)
 
(15.9
)
 
7.4
 
 
10.2
 
(Provision for) benefit from income taxes
(11.0
)
 
1.5
 
 
3.5
 
 
 
 
(6.0
)
Income (loss) from continuing operations
11.9
 
 
(2.7
)
 
(12.4
)
 
7.4
 
 
4.2
 
Income from discontinued operations - net of tax
 
 
 
 
6.4
 
 
 
 
6.4
 
(Loss) gain on disposition of discontinued operations - net of tax
(0.2
)
 
 
 
0.5
 
 
 
 
0.3
 
Net income (loss)
11.7
 
 
(2.7
)
 
(5.5
)
 
7.4
 
 
10.9
 
Less: Net loss attributable to noncontrolling interest
 
 
 
 
0.8
 
 
 
 
0.8
 
Net income (loss) attributable to Terex Corporation
$
11.7
 
 
$
(2.7
)
 
$
(4.7
)
 
$
7.4
 
 
$
11.7
 
  

30

 

TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 2010
(in millions)
 
 
Terex
Corporation
 
Wholly-owned
Guarantors
 
Non-guarantor
Subsidiaries
 
Intercompany
Eliminations
 
Consolidated
Net sales
$
39.1
 
 
$
314.3
 
 
$
690.1
 
 
$
(107.6
)
 
$
935.9
 
Cost of goods sold
(39.3
)
 
(299.4
)
 
(606.3
)
 
107.6
 
 
(837.4
)
Gross profit
(0.2
)
 
14.9
 
 
83.8
 
 
 
 
98.5
 
Selling, general and administrative expenses
(20.3
)
 
(44.6
)
 
(100.1
)
 
 
 
(165.0
)
Loss from operations
(20.5
)
 
(29.7
)
 
(16.3
)
 
 
 
(66.5
)
Interest income
0.3
 
 
0.1
 
 
0.7
 
 
 
 
1.1
 
Interest expense
(26.6
)
 
(1.8
)
 
(7.5
)
 
 
 
(35.9
)
Income (loss) from subsidiaries
616.3
 
 
 
 
 
 
(616.3
)
 
 
Other expense - net
(7.1
)
 
(0.3
)
 
(5.5
)
 
 
 
(12.9
)
Income (loss) from continuing operations before income taxes
562.4
 
 
(31.7
)
 
(28.6
)
 
(616.3
)
 
(114.2
)
Benefit from income taxes
21.3
 
 
10.4
 
 
5.2
 
 
 
 
36.9
 
Income (loss) from continuing operations
583.7
 
 
(21.3
)
 
(23.4
)
 
(616.3
)
 
(77.3
)
(Loss) income from discontinued operations – net of tax
(1.1
)
 
(1.6
)
 
1.2
 
 
 
 
(1.5
)
(Loss) gain on disposition of discontinued operations - net of tax
(42.7
)
 
81.5
 
 
581.6
 
 
 
 
620.4
 
Net income (loss)
539.9
 
 
58.6
 
 
559.4
 
 
(616.3
)
 
541.6
 
Less: Net income attributable to noncontrolling interest
 
 
 
 
(1.7
)
 
 
 
(1.7
)
Net income (loss) attributable to Terex Corporation
$
539.9
 
 
$
58.6
 
 
$
557.7
 
 
$
(616.3
)
 
$
539.9
 
 
 
 
 
 

31

 

TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 2011
(in millions)
 
 
Terex
Corporation
 
Wholly-owned
Guarantors
 
Non-guarantor
Subsidiaries
 
Intercompany
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
5.6
 
 
$
1.8
 
 
$
716.3
 
 
$
 
 
$
723.7
 
Investments in marketable securities
366.6
 
 
0.7
 
 
 
 
 
 
367.3
 
Trade receivables - net
41.0
 
 
284.2
 
 
571.4
 
 
 
 
896.6
 
Intercompany receivables
7.8
 
 
104.4
 
 
75.2
 
 
(187.4
)
 
 
Inventories
62.1
 
 
377.8
 
 
1,126.0
 
 
 
 
1,565.9
 
Other current assets
75.8
 
 
41.1
 
 
139.2
 
 
 
 
256.1
 
Total current assets
558.9
 
 
810.0
 
 
2,628.1
 
 
(187.4
)
 
3,809.6
 
Property, plant and equipment - net
56.8
 
 
110.2
 
 
423.2
 
 
 
 
590.2
 
Goodwill
 
 
154.2
 
 
354.4
 
 
 
 
508.6
 
Non-current intercompany receivables
745.5
 
 
50.3
 
 
40.5
 
 
(836.3
)
 
 
Investment in and advances to (from) subsidiaries
3,228.3
 
 
(687.1
)
 
2,487.5
 
 
(5,002.0
)
 
26.7
 
Other assets
76.1
 
 
184.3
 
 
217.4
 
 
 
 
477.8
 
Total assets
$
4,665.6
 
 
$
621.9
 
 
$
6,151.1
 
 
$
(6,025.7
)
 
$
5,412.9
 
Liabilities and stockholders’ equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes payable and current portion of long-term debt
$
 
 
$
0.2
 
 
$
62.6
 
 
$
 
 
$
62.8
 
Trade accounts payable
23.3
 
 
176.1
 
 
426.7
 
 
 
 
626.1
 
Intercompany payables
(34.5
)
 
50.2
 
 
171.7
 
 
(187.4
)
 
 
Accruals and other current liabilities
120.0
 
 
96.7
 
 
579.6
 
 
 
 
796.3
 
Total current liabilities
108.8
 
 
323.2
 
 
1,240.6
 
 
(187.4
)
 
1,485.2
 
Long-term debt, less current portion
1,271.3
 
 
 
 
83.0
 
 
 
 
1,354.3
 
Non-current intercompany payables
985.3
 
 
(936.0
)
 
787.0
 
 
(836.3
)
 
 
Retirement plans and other
142.3
 
 
37.7
 
 
206.7
 
 
 
 
386.7
 
Total stockholders’ equity
2,157.9
 
 
1,197.0
 
 
3,833.8
 
 
(5,002.0
)
 
2,186.7
 
Total liabilities and stockholders’ equity
$
4,665.6
 
 
$
621.9
 
 
$
6,151.1
 
 
$
(6,025.7
)
 
$
5,412.9
 
 

32

 

TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2010
(in millions)
 
 
Terex
Corporation
 
Wholly-owned
Guarantors
 
Non-guarantor
Subsidiaries
 
Intercompany
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
164.2
 
 
$
2.0
 
 
$
728.0
 
 
$
 
 
$
894.2
 
Investments in marketable securities
520.9
 
 
0.5
 
 
 
 
 
 
521.4
 
Trade receivables - net
22.9
 
 
208.7
 
 
550.9
 
 
 
 
782.5
 
Intercompany receivables
9.5
 
 
93.1
 
 
44.1
 
 
(146.7
)
 
 
Inventories
66.0
 
 
342.7
 
 
1,040.0
 
 
 
 
1,448.7
 
Other current assets
154.7
 
 
37.1
 
 
130.3
 
 
 
 
322.1
 
Total current assets
938.2
 
 
684.1
 
 
2,493.3
 
 
(146.7
)
 
3,968.9
 
Property, plant and equipment - net
54.6
 
 
112.5
 
 
406.4
 
 
 
 
573.5
 
Goodwill
 
 
154.1
 
 
338.8
 
 
 
 
492.9
 
Non-current intercompany receivables
709.3
 
 
48.6
 
 
39.1
 
 
(797.0
)
 
 
Investment in and advances to (from) subsidiaries
2,761.7
 
 
(504.3
)
 
2,721.5
 
 
(4,950.2
)
 
28.7
 
Other assets
69.6
 
 
187.3
 
 
195.5
 
 
 
 
452.4
 
Total assets
$
4,533.4
 
 
$
682.3
 
 
$
6,194.6
 
 
$
(5,893.9
)
 
$
5,516.4
 
Liabilities and stockholders’ equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes payable and current portion of long-term debt
$
297.2
 
 
$
0.2
 
 
$
49.4
 
 
$
 
 
$
346.8
 
Trade accounts payable
24.9
 
 
130.3
 
 
414.8
 
 
 
 
570.0
 
Intercompany payables
43.1
 
 
26.5
 
 
77.1
 
 
(146.7
)
 
 
Accruals and other current liabilities
127.6
 
 
87.2
 
 
542.6
 
 
 
 
757.4