TEREX CORP
10-Qs and 10-Ks
PROXIES
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
FOR ANNUAL AND TRANSITIONAL REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Fiscal Year Ended
December 31, 2014
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission file number 1-10702
TEREX CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
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34-1531521
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(State of Incorporation)
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(IRS Employer Identification No.)
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200 Nyala Farm Road, Westport, Connecticut
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06880
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code:
(203) 222-7170
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)
NEW YORK STOCK EXCHANGE
(Name of Exchange on which Registered)
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
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YES
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NO
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Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Act.
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YES
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NO
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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 (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
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NO
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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
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Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large Accelerated Filer
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Accelerated Filer
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Non-accelerated Filer
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Smaller Reporting Company
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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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NO
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The aggregate market value of the voting and non-voting common equity stock held by non-affiliates of the Registrant was approximately
$4,367 million
based on the last sale price on
June 30, 2014
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THE NUMBER OF SHARES OF THE REGISTRANT’S COMMON STOCK OUTSTANDING WAS
106.2
MILLION AS OF
February 18, 2015
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DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Terex Corporation Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the year covered by this Form 10-K with respect to the
2015
Annual Meeting of Stockholders are incorporated by reference into Part III hereof.
As used in this Annual Report on Form 10-K, unless otherwise indicated, Terex Corporation, together with its consolidated subsidiaries, is hereinafter referred to as “Terex,” the “Registrant,” “us,” “we,” “our” or the “Company.” This Annual Report generally speaks as of
December 31, 2014
, unless specifically noted otherwise.
Forward-Looking Information
Certain information in this Annual Report includes forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) regarding future events or our future financial performance that involve certain contingencies and uncertainties, including those discussed below in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contingencies and Uncertainties.” In addition, when included in this Annual Report or in documents incorporated herein by reference, the words “may,” “expects,” “should,” “intends,” “anticipates,” “believes,” “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:
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our business is cyclical and weak general economic conditions affect the sales of our products and financial results;
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our ability to successfully integrate acquired businesses;
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our need to comply with restrictive covenants contained in our debt agreements;
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our ability to generate sufficient cash flow to service our debt obligations and operate our business;
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our ability to access the capital markets to raise funds and provide liquidity;
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our business is sensitive to government spending;
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our business is highly competitive and is affected by our cost structure, pricing, product initiatives and actions taken by competitors;
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our retention of key management personnel;
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the financial condition of suppliers and customers, and their continued access to capital;
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our providing financing and credit support for some of our customers;
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we may experience losses in excess of recorded reserves;
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the carrying value of our goodwill and other indefinite-lived intangible assets could become impaired;
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our ability to obtain parts and components from suppliers on a timely basis at competitive prices;
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our business is global and subject to changes in exchange rates between currencies, commodity price changes, regional economic conditions and trade restrictions;
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our operations are subject to a number of potential risks that arise from operating a multinational business, including compliance with changing regulatory environments, the Foreign Corrupt Practices Act and other similar laws, and political instability;
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a material disruption to one of our significant facilities;
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possible work stoppages and other labor matters;
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compliance with changing laws and regulations, particularly environmental and tax laws and regulations;
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litigation, product liability claims, intellectual property claims, class action lawsuits and other liabilities;
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our ability to comply with an injunction and related obligations imposed by the United States Securities and Exchange Commission (“SEC”);
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disruption or breach in our information technology systems; and
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other factors.
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Actual events or our actual future results may differ materially from any forward-looking statement due to these and other risks, uncertainties and significant factors. The forward-looking statements contained herein speak only as of the date of this Annual Report and the forward-looking statements contained in documents incorporated herein by reference speak only as of the date of the respective documents. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained or incorporated by reference in this Annual Report to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
2
TEREX CORPORATION AND SUBSIDIARIES
Index to Annual Report on Form 10-K
For the Year Ended
December 31, 2014
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3
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PART I
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ITEM 1.
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BUSINESS
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GENERAL
Terex is a lifting and material handling solutions company. We are focused on improving our operations and delivering reliable, customer-driven solutions for a wide range of commercial applications, including the construction, infrastructure, quarrying, mining, manufacturing, transportation, energy and utility industries. We report in five business segments: (i) Aerial Work Platforms; (ii) Construction; (iii) Cranes; (iv) Material Handling & Port Solutions; and (v) Materials Processing.
Our Company was incorporated in Delaware in October 1986 as Terex U.S.A., Inc. We have changed significantly since that time, achieving
$7.3 billion
of net sales in
2014
. Much of our growth has been accomplished through acquisitions, and as part of managing our portfolio of companies, we regularly consider the divestiture of non-core businesses and products. In the past ten years, we have also focused on becoming a superb operating company.
As we have expanded our operations, our business has become increasingly international in scope, with our products manufactured in North and South America, Europe, Australia and Asia and sold worldwide. We continue to focus on expanding our business globally, with a continued emphasis on developing markets such as China, India, Brazil and the Middle East.
For financial information about our industry and geographic segments, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note B – “Business Segment Information” in the Notes to the Consolidated Financial Statements.
AERIAL WORK PLATFORMS
Our Aerial Work Platforms (“AWP”) segment designs, manufactures, services and markets aerial work platform equipment, telehandlers and light towers. Products include portable material lifts, portable aerial work platforms, trailer-mounted articulating booms, self-propelled articulating and telescopic booms, scissor lifts, telehandlers and trailer-mounted light towers as well as their related components and replacement parts. Customers use these products to construct and maintain industrial, commercial and residential buildings and facilities and for other commercial operations, as well as in a wide range of infrastructure projects. We market aerial work platform products principally under the Terex
®
and Genie
®
brand names.
AWP has the following significant manufacturing operations:
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Aerial work platform equipment is manufactured in Redmond and Moses Lake, Washington, Rock Hill, South Carolina, Umbertide, Italy, Coventry, England and Changzhou, China;
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Telehandlers are manufactured in Moses Lake, Washington, Oklahoma City, Oklahoma and Umbertide, Italy; and
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Trailer-mounted light towers are manufactured in Rock Hill, South Carolina.
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We have a parts and logistics center located in North Bend, Washington for our aerial work platform equipment. Additionally, a portion of our aerial work platform parts business is conducted at a shared Terex facility in Southaven, Mississippi. Our European parts and logistics operations are conducted through an out-sourced facility in Roosendaal, The Netherlands.
CONSTRUCTION
Our Construction segment designs, manufactures and markets two primary categories of construction equipment and their related components and replacement parts:
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Compact construction equipment, including loader backhoes, mini and midi excavators, wheeled excavators, site dumpers, compaction rollers, skid steer loaders and wheel loaders; and
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Specialty equipment, including material handlers, concrete mixer trucks and concrete pavers.
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Customers use these products in construction and infrastructure projects, in building roads, bridges, residential and commercial buildings, industrial sites and for material handling applications. We market our Construction products principally under the Terex
®
brand name, and for certain products, the Terex
®
name in conjunction with certain historic brand names.
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Construction has the following significant manufacturing operations:
Compact Construction Equipment
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Site dumpers, compaction rollers and loader backhoes, as well as certain products for our AWP segment, are manufactured in Coventry, England;
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A range of wheel loaders, wheeled excavators and mini, mobile, and midi excavators are manufactured in Crailsheim, Germany; and
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Loader backhoes and skid steer loaders are manufactured in Greater Noida, Uttar Pradesh, India for markets in India and neighboring countries .
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Specialty Equipment
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Material handlers are manufactured in Bad Schönborn, Germany;
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Concrete pavers are manufactured in Canton, South Dakota; and
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Front and rear discharge concrete mixer trucks are manufactured in Fort Wayne, Indiana.
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Construction’s Americas distribution center is in Southaven, Mississippi and serves as a machine and parts center for Construction and other Terex operations.
On December 19, 2014, we completed the sale of 51% of A.S.V., Inc. to Manitex International, Inc. (“Manitex”), resulting in a joint venture in compact track and skid steer loaders that is 51% owned by Manitex and 49% owned by Terex.
CRANES
Our Cranes segment designs, manufactures, services, refurbishes and markets mobile telescopic cranes, tower cranes, lattice boom crawler cranes, lattice boom truck cranes, utility equipment and truck-mounted cranes (boom trucks), as well as their related components and replacement parts. Customers use these products primarily for construction, repair and maintenance of commercial buildings, manufacturing facilities, construction and maintenance of utility and telecommunication lines, tree trimming and certain construction and foundation drilling applications and a wide range of infrastructure projects. We market our Cranes products principally under the Terex
®
brand name.
Cranes has the following significant manufacturing operations:
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Rough terrain cranes are manufactured in Crespellano, Italy and Waverly, Iowa;
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All-terrain cranes are manufactured in Montceau-les-Mines, France, Zweibrücken and Bierbach-Homburg, Germany;
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Truck cranes are manufactured in Montceau-les-Mines, France and Waverly, Iowa;
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Truck-mounted cranes are manufactured in Montceau-les-Mines, France and Waverly, Iowa;
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Tower cranes are manufactured in Fontanafredda, Italy;
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Lattice boom crawler cranes are manufactured in Oklahoma City, Oklahoma, Jinan, China, Zweibrücken and Bierbach-Homburg, Germany;
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Pick and carry cranes are manufactured in Brisbane, Australia;
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Lattice boom truck cranes are manufactured in Zweibrücken and Bierbach-Homburg, Germany;
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Steel assemblies for cranes are manufactured in Bierbach-Homburg, Germany and Pecs, Hungary; and
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Utility products are manufactured in Watertown and Huron, South Dakota, Fort Wayne, Indiana, Betim, Brazil and Jinan, China.
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We have a minority interest in a Chinese company which manufactures truck cranes and truck-mounted cranes in China.
We also provide service and support for industrial cranes and aerial products in North America and refurbish aerial products in facilities located in Waco, Texas and Stockton, California.
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MATERIAL HANDLING & PORT SOLUTIONS
Our Material Handling & Port Solutions (“MHPS”) segment designs, manufactures, services and markets industrial cranes, including universal cranes, process cranes, rope and chain hoists, electric motors, light crane systems and crane components as well as a diverse portfolio of port and rail equipment including mobile harbor cranes, straddle and sprinter carriers, rubber tired gantry cranes, rail mounted gantry cranes, ship-to-shore gantry cranes, reach stackers, empty container handlers, full container handlers, general cargo lift trucks, automated stacking cranes, automated guided vehicles and terminal automation technology, including software, as well as their related components and replacement parts. Customers use these products for lifting and material handling at manufacturing, port and rail facilities. Our MHPS segment also operates an extensive global sales and service network. We market our MHPS products under the Terex
®
and Demag
®
brand names and the Terex
®
name in conjunction with the Gottwald
®
brand name.
MHPS has the following significant manufacturing operations:
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Universal cranes are manufactured in Luisenthal, Germany, Banbury, UK, Milan, Italy, Solon, Ohio, Cotia, Brazil, Boksburg, South Africa, Chakan, India and Shanghai, China;
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Process cranes are manufactured in Slany, Czech Republic, Banbury, UK, Solon, Ohio, Boksburg, South Africa, Chakan, India, Shanghai, China and Cotia, Brazil;
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Rope and chain hoists are manufactured in Wetter an der Ruhr, Germany, Shanghai, China, Milan, Italy and Cotia, Brazil;
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Electric motors are manufactured in Uslar, Germany;
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Light crane systems are manufactured in Shanghai, China, Cotia, Brazil, Chakan, India and Wetter an der Ruhr, Germany;
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Mobile harbor cranes are manufactured in Düsseldorf, Germany and Xiamen, China;
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Automated stacking cranes and automated guided vehicles are manufactured in Düsseldorf, Germany;
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Rubber tired gantry cranes, rail mounted gantry cranes, ship-to-shore gantry cranes, reach stackers, empty container handlers and other material handling equipment are manufactured in Xiamen, China;
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Reach stackers are manufactured in Montceau-les-Mines, France;
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Straddle and sprinter carriers are manufactured in Würzburg, Germany; and
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Empty container handlers, full container handlers and general cargo lift trucks are manufactured in Lentigione, Italy.
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We offer a range of services for cranes and lifting equipment, port management software and logistics solutions, and operate a global network of service stations.
We have a 50% interest in a Singapore company that manufactures industrial cranes in eight locations around the world.
MATERIALS PROCESSING
Our Materials Processing (“MP”) segment designs, manufactures and markets materials processing equipment, including crushers, washing systems, screens, apron feeders, biomass and hand-fed chippers and their related components and replacement parts. Customers use these products in construction, infrastructure and recycling projects, in various quarrying and mining applications, as well as in landscaping and biomass production industries. We market our MP products principally under the Terex
®
and Powerscreen
®
brand names and the Terex
®
name in conjunction with certain historic brand names.
MP has the following significant manufacturing operations:
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Mobile crushers, mobile screens and washing systems are manufactured in Omagh and Dungannon, Northern Ireland;
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Mobile crushers, mobile screens, base crushers, base screens and washing systems are manufactured in Hosur, India, primarily for the Indian market;
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Base crushers and base screens are manufactured in Subang Jaya, Malaysia and Oklahoma City, Oklahoma;
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Screening equipment is manufactured in Durand, Michigan;
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Base crushers are manufactured in Coalville, England; and
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Hand-fed chippers and drum-style trailer-mounted and tracked biomass chippers are manufactured in Farwell, Michigan.
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We have a North American distribution center in Louisville, Kentucky and service centers in Australia, Thailand and Turkey.
We have a 50% interest in a Chinese company that manufactures mobile crushers and mobile screens primarily for the Chinese market.
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OTHER
We may assist customers in their rental, leasing and acquisition of our products through Terex Financial Services (“TFS”). TFS uses its equipment financing experience to provide financing solutions to our customers who purchase our equipment. TFS provides financing support primarily: (i) in the United States and on a limited basis in China, originating, underwriting, documenting, funding and servicing financing transactions directly with end-user customers, distributors and rental companies; and (ii) by facilitating loans and leases between our customers and third party financial institutions. Most of the transactions are fixed and floating rate loans. However, TFS also provides sales-type leases, operating leases and rentals. TFS, in the normal course of business, also sells loans and leases to financial institutions with which it has established relationships.
Although the on-book financing activities of TFS have primarily been limited to the United States and China, TFS is continually evaluating the need and opportunity to provide this capability in other countries. Additionally, in those countries in which TFS engages in on-book financing, TFS continually evaluates the level to which it utilizes third party funding versus direct customer financing to meet its business objectives.
DISCONTINUED OPERATIONS
On May 30, 2014, the Company sold its truck business, which was consolidated in the Construction segment, to Volvo Construction Equipment for approximately
$160 million
. The truck business manufactured and sold off-highway rigid and articulated haul trucks. Included in the transaction was the manufacturing facility in Motherwell, Scotland. As a result, the reporting of the truck business has been included in discontinued operations for all periods presented. See Note D – “Discontinued Operations” in the Notes to our Consolidated Financial Statements for more information on our discontinued operations.
BUSINESS STRATEGY
General
We operate a diverse portfolio of specialized machinery businesses that serve numerous end-use applications in several geographic markets. Our diverse portfolio reduces the impact of any one application or market on business results while our focus on machinery-related businesses brings common operational characteristics that enable business efficiency.
Mergers and acquisitions played an important role in the history of our Company and we will continue to evaluate new opportunities that can enhance our business portfolio while creating opportunities to leverage market presence, operational capabilities, or both. However, our current focus is on operational improvement, not acquisitions, as the main driver of financial performance.
Over the past several years, we changed our business portfolio to better balance business drivers and strengthen the capabilities of our Company. We moved from what was predominantly a mining and construction equipment company to a more diverse portfolio that serves numerous end markets. Today, we are a lifting and material handling solutions company. Construction markets are still important to our success and are expected to contribute favorably as the U.S. and some European markets continue to recover, but several other economic drivers are also important to our success. These include global industrial activity, global trade, U.S. electricity demand and infrastructure maintenance. Service to the large installed base of our equipment that is now operating around the world is also an important opportunity that can favorably impact future results.
An important objective in developing our portfolio of businesses is market leadership. We may initially secure smaller positions, but our goal in acquiring and developing businesses is to be a top three competitor in the applications and geographies that we serve. This goal shapes acquisition, divestiture, and operating strategies in our Company. At the end of
2014
, greater than 80% of our revenue was generated in areas where we are a top three competitor in the market served.
Operationally, we focus on three primary objectives:
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Customer Responsiveness
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Operational Efficiency
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Global Growth
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We must excel in each of these areas in order to be a more effective and more profitable company long term, and strong performance in all three areas is central to the daily management of our Company.
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Our Customer Responsiveness goal is to exceed the performance of competitors in providing equipment that goes to work and stays at work, backed by world-class parts and service support. Each of our businesses routinely measures customer satisfaction and develops roadmaps used to drive both step-change and incremental improvement in customer satisfaction. Our goal is annual improvement in our current businesses to achieve improved responsiveness versus our competition.
Our Operational Efficiency goal is to achieve the highest return on invested capital in our peer group. This implies an efficient factory footprint, efficient supply and delivery chains, and a lean mindset that helps eliminate waste throughout our processes for production, delivery, and service to the customer. It is our goal to provide the best value and have the ability to compete on price when necessary. Competition in all of our businesses is intense and we must position ourselves to compete more effectively during all phases of future business cycles.
Global Growth is also critical to our future success. A few of our businesses are focused in specific geographies, but most operate in global industries that require global presence. Collaboration across businesses, sharing of assets, and combined, one company approaches to market development are all critical to the efficient pursuit of global opportunities for growth. This applies in developing markets, where we continue to leverage factory and other investments made over the past several years. The same opportunities also exist in the more established US and European markets, where sharing of assets and infrastructure is also critical. Efficient sharing of underlying resources enables our businesses to focus on the things that customers value most and to better position our company to participate as developed markets recover and as developing markets continue to evolve and grow.
We remain committed to becoming a stronger and more effective company tomorrow than we are today. To succeed, we must focus on what makes our individual businesses strong while also working across businesses to harness the strength of the Company as a whole. Strategy plays an important role but, in the end, our success will be defined and driven by our people. People matter in our company, and it is the way that people work, both individually and collectively, that makes the difference between success and failure. Because of this, we work very hard on the composition of our team, on the values and culture of our company, and on the principles that guide our thinking each and every day. These principles are reflected in our purpose, mission, and vision, in a set of cultural characteristics that we call the Terex Way, and in the processes and practices that define the Terex Business System.
Purpose, Mission, Vision
Our
purpose
is to improve the lives of people around the world. Our
mission
is to provide solutions to our machinery and industrial product customers that yield superior productivity and return on investment.
Our
vision
focuses on the Company’s core constituencies of customers, stakeholders and team members:
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Customers
: We aim to be the most customer responsive company in the industry as determined by our customers.
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Stakeholders
: We aim to be the most profitable company in the industry as measured by return on invested capital.
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Team Members
: We aim to be the best place to work in the industry as determined by our team members.
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The Terex Way
We operate our business based on our value system, “The Terex Way.” The Terex Way shapes the culture of our Company and reflects our collective commitment to what it means to be a part of Terex. The Terex Way is based on six key values:
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Integrity
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Integrity reflects honesty, ethics, transparency and accountability. We are committed to maintaining high ethical standards in all of our business dealings and we never sacrifice our integrity for profit.
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Respect
: Respect incorporates concern for safety, health, teamwork, diversity, inclusion and performance. We treat all our team members, customers and suppliers with respect and dignity.
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Improvement
: Improvement encompasses quality, problem-solving systems, a continuous improvement culture and collaboration. We continuously search for new and better ways of doing things, focusing on continuous improvement and the elimination of waste.
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Servant Leadership
: Servant leadership requires service to others, humility, authenticity and leading by example. We work to serve the needs of our customers, investors and team members.
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Courage
: Courage entails willingness to take risks, responsibility, action and empowerment. We have the courage to make a difference even when it is difficult.
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Citizenship
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Citizenship means social responsibility and environmental stewardship. We comply with all laws, respect all people’s values and cultures, and are good global, national and local citizens.
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The Terex Business System
Our operational principles are based on the “Terex Business System,” or “TBS.” TBS is the framework around which we build our capabilities as a superb operating company to achieve our long-term goals. Founded on lean concepts, TBS is a set of guiding principles and business processes that collectively define how we do what we do. TBS is our playbook to deliver our customer, team member and financial goals. It aligns the Company globally with repeatable, teachable processes that harness the full potential of our team members, with each business segment implementing and adapting TBS to fit its manufacturing processes. TBS is not the business strategy; it supports the business strategy. We anticipate that TBS will provide us a competitive advantage using customer-centric tools that continually enhance responsiveness and eliminate waste.
PRODUCTS
AERIAL WORK PLATFORMS
AERIAL WORK PLATFORMS. Aerial work platform equipment safely positions workers and materials easily and quickly to elevated work areas to enhance productivity. These products have developed as alternatives to scaffolding and ladders. We offer a variety of aerial lifts that are categorized into six product families: portable material lifts; portable aerial work platforms; trailer-mounted articulating booms; self-propelled articulating and self-propelled telescopic booms; and scissor lifts.
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Portable material lifts are used primarily indoors in the construction, industrial and theatrical markets.
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Portable aerial work platforms are used primarily indoors in a variety of markets to perform overhead maintenance.
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Trailer-mounted articulating booms are used both indoors and outdoors. They provide versatile reach, and have the ability to be towed between job sites.
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Self-propelled articulating booms are primarily used in construction and industrial applications, both indoors and outdoors. They feature lifting versatility with up, out and over position capabilities to access difficult to reach overhead areas.
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Self-propelled telescopic booms are used outdoors in commercial and industrial construction, as well as highway and bridge maintenance projects.
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Scissor lifts are used in outdoor and indoor applications in a variety of construction, industrial and commercial settings.
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TELEHANDLERS. Telehandlers move and place materials on residential and commercial construction sites and are used in the energy and infrastructure industries.
LIGHT TOWERS. Trailer-mounted light towers are used primarily to light work areas for construction, entertainment, emergency assistance and security during nighttime or low light applications.
CONSTRUCTION
COMPACT CONSTRUCTION EQUIPMENT. We manufacture a wide variety of compact construction equipment used primarily in the construction and rental industries. Products include loader backhoes, compaction rollers, excavators, site dumpers, skid steer loaders and wheel loaders.
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Loader backhoes incorporate a front-end loader and rear excavator arm. They are used for loading, excavating and lifting in many construction and agricultural related applications.
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Our compaction rollers range from pedestrian single drum to ride-on tandem drum rollers.
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Excavators in the compact equipment category include mini, wheeled and midi excavators used in the general construction, landscaping and rental businesses.
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Wheel loaders are used for loading and unloading materials. Applications include residential and non-residential construction, waste management and general construction.
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Site dumpers are used to move materials from one location to another, and are primarily used for construction applications.
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Skid steer loaders are used for loading and unloading materials in construction, industrial, rental, agricultural and landscaping businesses.
|
9
SPECIALTY EQUIPMENT. We manufacture material handlers, concrete mixer trucks and concrete pavers.
|
•
|
Material handlers are designed for handling logs, scrap, recycling and other bulky materials with clamshell, magnet or grapple attachments.
|
|
•
|
Concrete mixer trucks are machines with a large revolving drum in which cement is mixed with other materials to make concrete. We offer models with custom chassis as well as rear discharge models mounted on commercial chassis, both with configurations from three to seven axles.
|
|
•
|
Our concrete pavers are used to finish bridges, concrete streets, highways and airport surfaces.
|
CRANES
We offer a wide variety of cranes, including mobile telescopic cranes, tower cranes, lattice boom crawler cranes, lattice boom truck cranes and boom trucks.
MOBILE TELESCOPIC CRANES. Mobile telescopic cranes are used primarily for industrial applications, in commercial and public works construction, and in maintenance applications to lift equipment or material. We offer a complete line of mobile telescopic cranes, including rough terrain cranes, truck cranes, all terrain cranes and pick and carry cranes.
|
•
|
Rough terrain cranes move materials and equipment on rough or uneven terrain and are often located on a single construction or work site for long periods. Rough terrain cranes cannot be driven on highways and accordingly must be transported by truck to the work site.
|
|
•
|
Truck cranes have two cabs and can travel rapidly from job site to job site at highway speeds. Truck cranes are often used for multiple local jobs, primarily in urban or suburban areas.
|
|
•
|
All-terrain cranes were developed in Europe as a cross between rough terrain and truck cranes, and are designed to travel across both rough terrain and highways.
|
|
•
|
Pick and carry cranes are designed for a wide variety of applications, including use at mine sites, large fabrication yards, building and construction sites and in machinery maintenance and installation. They combine high road speed with all terrain capability.
|
LATTICE BOOM CRAWLER AND LATTICE BOOM TRUCK CRANES. Lattice boom crawler and lattice boom truck cranes are designed to lift material on rough terrain. The boom is made of tubular steel sections, which, together with the base unit, are transported to and erected at a construction site. Applications include wind turbine erection.
TOWER CRANES. Tower cranes are often used in urban areas where space is constrained and in long-term or very high building sites. Tower cranes lift construction material and place the material at the point where it is being used. We produce the following types of tower cranes:
|
•
|
Self-erecting tower cranes unfold from sections and can be trailer mounted; certain larger models have a telescopic tower and folding jib. These cranes can be assembled on site in a few hours. Applications include residential and small commercial construction.
|
|
•
|
Hammerhead tower cranes have a tower and a horizontal jib assembled from sections. The tower extends above the jib to which suspension cables supporting the jib are attached. These cranes are assembled on-site in one to three days depending on height, and can increase in height with the project.
|
|
•
|
Flat top tower cranes have a tower and a horizontal jib assembled from sections. There is no A-frame above the jib, which is self-supporting and consists of reinforced jib sections. These cranes are assembled on-site in one to two days, and can increase in height with the project.
|
|
•
|
Luffing jib tower cranes have a tower and an angled jib assembled from sections. There is one A-frame above the jib to which suspension cables supporting the jib are attached. Unlike other tower cranes, there is no trolley to control linear movement of the load, which is accomplished by changing the jib angle. These cranes are assembled on-site in two to three days, and can increase in height with the project.
|
TRUCK-MOUNTED CRANES (BOOM TRUCKS). We manufacture telescopic boom cranes and articulated hydraulic cranes for mounting on a commercial truck chassis. Truck-mounted cranes are used primarily in the construction and maintenance industries to lift equipment or materials to various heights. Boom trucks are generally lighter and have less lifting capacity than truck cranes, and are used for many of the same applications when lower lifting capabilities are sufficient. An advantage of a boom truck is that the equipment or material to be lifted by the crane can be transported by the truck, which can travel at highway speeds. Applications include delivery of building materials and the installation of commercial air conditioners and other roof-mounted equipment.
10
UTILITY EQUIPMENT. Our utility products include digger derricks, auger drills, insulated and non-insulated aerial devices and cable placers. These products are used by electric utilities, tree care companies, telecommunications and cable companies, and the related construction industries, as well as by government organizations.
|
•
|
Digger derricks are used to dig holes, hoist and set utility poles, as well as lift transformers and other materials at job sites. Auger drills are used to dig holes for utility poles or construction foundations requiring larger diameter holes in difficult soil conditions.
|
|
•
|
Insulated aerial devices are used to elevate workers and material to work areas at the top of utility poles, energized transmission lines and for trimming trees near energized electrical lines, as well as for miscellaneous purposes such as sign maintenance. Non-insulated aerials are used in applications where energized electrical lines are not a hazard.
|
|
•
|
Cable placers are used to install fiber optic, copper and strand telephone and cable lines.
|
SERVICES. We offer a range of services for aerial work platform, construction, industrial crane and utility equipment consisting of inspections, preventative maintenance, general repairs, reconditioning, refurbishment, modernization and spare parts, as well as consultancy and training services. Our services are provided on our own products and on third-party products and related equipment.
MATERIAL HANDLING & PORT SOLUTIONS
MATERIAL HANDLING. We manufacture universal cranes, process cranes and components, such as rope hoists, chain hoists, light crane systems, travel units and electric motors.
|
•
|
Universal cranes are configured individually from standardized modules for industrial infrastructure applications.
|
|
•
|
Process cranes are also made from largely standardized modules and are integrated individually into the customer’s specific production processes.
|
|
•
|
Rope hoists and chain hoists are used to facilitate the movement of materials in a factory. They can either be integrated as components in universal and process cranes or used as lifting devices in non-crane applications.
|
|
•
|
Light crane systems can be described as railway systems on ceilings that use hoists to move and lift materials in factories.
|
|
•
|
Wheel blocks, electric motors, gearboxes, converters and travel units are components that can be included in tailored solutions for drive applications that aid in the movement of materials in a factory. These components can also be used separately in non-crane applications.
|
|
•
|
Crane sets comprise component packages for customers who are constructing their own girders in a factory.
|
PORT SOLUTIONS. We manufacture mobile harbor cranes, ship-to-shore gantry cranes, rubber tired and rail mounted gantry cranes, straddle carriers, sprinter carriers, reach stackers, empty container handlers, full container handlers, general cargo lift trucks, automated stacking cranes, automated guided vehicles and software solutions for logistic terminals.
|
•
|
Mobile harbor cranes are used for material handling at ports, including general cargo handling, shipping containers and bulk materials such as coal, iron ore and grain. Mobile harbor cranes can travel around the port as needed and have the ability to move large loads. Mobile harbor cranes can be fitted with a variety of attachments for handling different types of cargo.
|
|
•
|
Ship-to-shore gantry cranes are used to load and unload container vessels at ports.
|
|
•
|
Rubber tired and rail mounted gantry cranes are used for space intensive shipping container stacking at port and railway facilities. These products have both horizontal and vertical lifting capabilities and can stack up to six containers on top of each other.
|
|
•
|
Straddle carriers pick up and carry shipping containers from or to a quay-side crane while straddling their load. Straddle carriers have the capability to stack up to four shipping containers on top of each other. Straddle carriers are used in port and railway facilities to move shipping containers and to load and unload shipping containers from on-highway trucks. Straddle carriers have both horizontal and vertical lifting capabilities.
|
|
•
|
Sprinter carriers operate in a similar manner to straddle carriers, but at higher speeds in horizontal transport and can stack up two containers on top of each other.
|
|
•
|
Reach stackers are used to pick up and stack shipping containers at port and railway facilities. At the end of each reach stacker’s boom is a spreader that enables it to attach to shipping containers of varying lengths and weights and to rotate the container.
|
|
•
|
Empty container handlers, full container handlers and general cargo lift trucks are small to medium-sized highly mobile trucks for use with a variety of container handling applications at port and railway facilities and provide general cargo lifting capabilities.
|
11
|
•
|
Automated stacking cranes are able to stack and manage shipping container storage either automatically, semi-automatically or manually. They also form the link between quayside and landside equipment such as ship-to-shore cranes, transport vehicles and trucks.
|
|
•
|
Automated guided vehicles can carry containers of varying size. The vehicles are controlled and supplied with data and orders by our proprietary designed software. Automated guided vehicles find their routes by transponders, i.e. electro-magnetic route markers embedded into the ground of the terminal, which navigate and control the vehicles. In large container terminals involving container transport, storage and transloading, automated guided vehicles work hand-in-hand with automated stacking cranes.
|
MATERIALS PROCESSING
Materials processing equipment is used in processing aggregate materials for building applications and is also used in the quarrying, mining, demolition, recycling, landscaping and biomass production industries. Our materials processing equipment includes crushers, screens and feeders, washing systems as well as wood and biomass chippers.
We manufacture a range of jaw, impactor (both horizontal and vertical shaft) and cone crushers, as well as base crushers for integration within mobile, modular and static plants.
|
•
|
Jaw crushers are used for crushing larger rock, primarily at the quarry face or on recycling duties. Applications include hard rock, sand and gravel and recycled materials. Cone crushers are used in secondary and tertiary applications to reduce a number of materials, including quarry rock and riverbed gravel.
|
|
•
|
Horizontal shaft impactors are primary and secondary crushers. They are typically applied to reduce soft to medium hard materials, as well as recycled materials. Vertical shaft impactors are secondary and tertiary crushers that reduce material utilizing various rotor configurations and are highly adaptable to any application.
|
Our screening and feeder equipment includes:
|
•
|
Heavy duty inclined and horizontal screens and feeders, which are used in low to high tonnage applications and are available as either stationary or heavy-duty mobile equipment. Screens are used in all phases of plant design from handling quarried material to fine screening. Dry screening is used to process materials such as sand, gravel, quarry rock, coal, ore, construction and demolition waste, soil, compost and wood chips.
|
|
•
|
Feeders are used to unload materials from hoppers and bulk material storage at controlled rates. They are available for applications ranging from primary feed hoppers to fine material bin unloading. Our range includes apron feeders, grizzly feeders and pan feeders.
|
Washing system products include a completely mobile, single chassis washing plant incorporating separation, washing, dewatering and stockpiling. We manufacture mobile and stationary screening rinsers, bucket-wheel dewaterers, scrubbing devices for aggregate, a mobile cyclone for maximum retention of sand particles, silt extraction systems, stockpiling conveyors and a sand screw system as an alternative to bucket-wheel dewaterers. We also manufacture washing screens, which are used to separate, wash, scrub, dewater and stockpile sand and gravel.
Biomass chippers are used by biomass producers, land developers and contractors to produce chips for energy or for the clearing of large sites. Hand-fed chippers are used by landscapers, rental companies, utilities, arborists, and municipalities to cut tree limbs or trunks into wood chips.
12
PRODUCT CATEGORY SALES
The following table lists our main product categories and their percentage of our total sales:
|
PERCENTAGE OF SALES
|
||||||||
|
PRODUCT CATEGORY
|
2014
|
2013
|
2012
|
|||||
|
Aerial Work Platforms
|
26
|
%
|
24
|
%
|
20
|
%
|
||
|
Mobile Telescopic & Truck Cranes
|
11
|
|
15
|
|
16
|
|
||
|
Port Equipment
|
11
|
|
9
|
|
9
|
|
||
|
Material Handling
|
10
|
|
10
|
|
7
|
|
||
|
Materials Processing Equipment
|
7
|
|
9
|
|
13
|
|
||
|
Compact Construction Equipment
|
7
|
|
7
|
|
8
|
|
||
|
Services
|
7
|
|
7
|
|
6
|
|
||
|
Lattice Boom Crawler & Tower Cranes
|
7
|
|
6
|
|
5
|
|
||
|
Telehandlers & Light Construction Equipment
|
6
|
|
5
|
|
4
|
|
||
|
Utility Equipment
|
4
|
|
5
|
|
4
|
|
||
|
Specialty Equipment
|
4
|
|
3
|
|
8
|
|
||
|
TOTAL
|
100
|
%
|
100
|
%
|
100
|
%
|
||
BACKLOG
Our backlog as of
December 31, 2014
and
2013
was as follows:
|
December 31,
|
|||||||
|
2014
|
2013
|
||||||
|
(in millions)
|
|||||||
|
AWP
|
$
|
698.4
|
|
$
|
294.4
|
|
|
|
Construction
|
137.9
|
|
165.6
|
|
|||
|
Cranes
|
538.5
|
|
501.2
|
|
|||
|
MHPS
|
574.8
|
|
805.3
|
|
|||
|
MP
|
51.4
|
|
61.2
|
|
|||
|
Total
|
$
|
2,001.0
|
|
$
|
1,827.7
|
|
|
We define backlog as firm orders that are expected to be filled within one year, although there can be no assurance that all such backlog orders will be filled within that time. Our backlog orders represent primarily new equipment orders. Parts orders are generally filled on an as-ordered basis.
Our management views backlog as one of many indicators of the performance of our business. Because many variables can cause changes in backlog, and these changes may or may not be of any significance, we consequently view backlog as an important, but not necessarily determinative, indicator of future results. High backlog can indicate a high level of future sales; however, when backlogs are high, this may also reflect a high level of production delays, which may result in future order cancellations from disappointed customers. Low backlog may indicate less future sales; however, they may also reflect a rapid ability to fill orders that is appreciated by our customers.
Our overall backlog amounts at
December 31, 2014
increased
$173.3 million
from our backlog amounts at
December 31, 2013
, primarily due to timing differences in order patterns in AWP offset by decreases in MHPS due to significant shipments of Port Automation products at year end. The translation effect of foreign exchange rates negatively impacted backlog year-over-year by approximately 7%.
AWP segment backlog at
December 31, 2014
increased approximately
137%
from our backlog amounts at
December 31, 2013
This increase over the prior year was primarily due to timing differences in order patterns from large rental customers where fleet orders were placed at the end of 2014 for deliveries in 2015.
13
Construction segment backlog at
December 31, 2014
decreased approximately
17%
from
December 31, 2013
. This decrease over the prior year was primarily due to timing differences in order patterns for specialty equipment.
The backlog at our Cranes segment increased approximately
7%
from
December 31, 2013
. This increase over the prior year was driven mostly by higher orders of all terrain cranes and utilities products, partially offset by large crawler cranes. Foreign exchange negatively impacted 2014 backlog by approximately 5% when compared to 2013.
Our MHPS segment backlog decreased approximately
29%
from
December 31, 2013
. This decrease was primarily due to delivery of the previously announced major automation projects during 2014.
Our MP segment backlog at
December 31, 2014
decreased approximately
16%
from
December 31, 2013
. This decrease over the prior year was primarily due to a decrease in order intake levels in 2014, particularly for static and modular crushing and screening products.
DISTRIBUTION
We distribute our products through a global network of dealers, rental companies, major accounts and direct sales to customers.
AERIAL WORK PLATFORMS
Our aerial work platform, telehandler and light tower products are distributed principally through a global network of rental companies, independent distributors and, to a lesser extent, strategic accounts. We employ sales representatives who service these channel partners from offices located throughout the world.
CONSTRUCTION
We distribute compact construction equipment primarily through a network of independent and rental distributors throughout the world. We distribute loader backhoes, compaction rollers and skid steer loaders manufactured in India through a network of approximately 50 distributors located in India, Nepal and neighboring countries.
We distribute material handlers primarily through a network of independent distributors throughout the world. Our distributors are predominantly independent businesses, which generally serve the construction, mining, forestry and/or scrap industries. Although these distributors may carry products from a variety of manufacturers, they generally carry only one manufacturer’s “brand” of each particular type of product. We sell concrete pavers to end user customers directly.
We sell concrete mixer trucks primarily directly to customers and through independent distributors in certain regions of the United States and Canada.
CRANES
We market our crane products globally, optimizing assorted channel marketing systems including a distribution network and a direct sales force. We have direct sales, primarily to specialized crane rental companies, in certain crane markets such as Australia, the United Kingdom, Germany, Spain, Belgium, Italy, France and Scandinavia to offer comprehensive service and support to customers. Distribution via a distributor network is often utilized in other geographic areas, including the United States.
We sell utility equipment to the utility and municipal markets through a direct sales effort in certain territories and through a network of independent distributors in North America. Outside of North America, independent distributors sell our utility equipment directly to customers.
MATERIAL HANDLING & PORT SOLUTIONS
Our port equipment products are sold both directly to customers and through independent distributors to port and terminal operators and serviced either by our service organization or independent service providers. Our material handling products are also sold directly or indirectly, via independent distributors, to our end market customers.
MATERIALS PROCESSING
We distribute our products through a global network of independent distributors, rental companies, major accounts and direct sales to customers.
14
RESEARCH AND DEVELOPMENT
We maintain engineering staff primarily at our manufacturing locations to conduct research and development for site-specific products. Our businesses also assess global trends to understand future needs of our customers and help us decide which technologies to implement in future development projects. In addition, our engineering center in India supports our engineering teams worldwide through new product design, existing product design improvement and development of products for local markets. Continually monitoring our materials, manufacturing and engineering costs is essential to identify possible savings, then leverage those savings to improve our competitiveness and our customers’ return on investment. Our engineering expenses are primarily incurred to develop (i) additional applications and extensions of our existing product lines to meet customer needs and take advantage of growth opportunities and (ii) customer responsive enhancements and continuous cost improvements of existing products.
Our engineering focus mirrors the business priorities of delivering customer responsive solutions, growing in developing markets, complying with evolving regulatory standards in our global markets and applying our lean manufacturing principles by standardizing products, rationalizing components and strategically aligning with select global suppliers. Our engineering teams in China and India represent our commitment to engineering products for developing markets. They take equipment technology from the developed markets and translate it to appropriate technology for developing markets using the experience and cultural understanding of engineering teams native to those markets.
Product change driven by regulations requiring Tier 4 emissions compliance in most of our diesel engine powered machinery has been an important part of our engineering priorities over the last several years and will be a major emphasis of our product development programs through 2017 as we move through the engine-horsepower dependent phase-in of Tier 4 regulations across our various diesel-engine equipped products. We have also focused on producing more cost-effective, ecologically sound product solutions with the development of lithium-ion battery-powered automated guided vehicles in our MHPS segment, rough terrain hybrid scissor lifts and booms in our AWP segment, a hybrid utility truck in our Cranes segment, and a diesel-electric jaw crusher in our MP segment.
Costs incurred to develop new products and improve existing products increased in 2013 as compared to 2012 due to new product development, more rigorous test and validation procedures to improve reliability, emissions compliance work, work associated with ramping up production and remained flat in 2014 as compared to 2013. Engineering costs for these activities were
$86.9 million
,
$85.3 million
and
$71.7 million
in
2014
,
2013
and
2012
, respectively. We have continued our commitment to appropriate levels of engineering spending, commensurate with our level of vertical integration, in order to meet our customer needs, uphold competitive functionality of our products and maintain regulatory compliance in all the markets that we serve.
MATERIALS
Information regarding principal materials, components and commodities and any risks associated with these items are included in Item 7A. – “Quantitative and Qualitative Disclosures about Market Risk – Commodities Risk.”
15
COMPETITION
We face a competitive global manufacturing market for all of our products. We compete with other manufacturers based on many factors, particularly price, performance and product reliability. We generally operate under a best value strategy, where we attempt to offer our customers products that are designed to improve the customer’s return on invested capital. However, in some instances, customers may prefer the pricing, performance or reliability aspects of a competitor’s product despite our product pricing or performance. We do not have a single competitor across all business segments. The following table shows the primary competitors for our products in the following categories:
|
BUSINESS SEGMENT
|
PRODUCTS
|
PRIMARY COMPETITORS
|
||
|
Aerial Work Platforms
|
Portable Material Lifts and Portable Aerial Work Platforms
|
Oshkosh (JLG), Vestil, Sumner and Wesco
|
||
|
|
|
|
||
|
Boom Lifts
|
Oshkosh (JLG), Haulotte, Linamar (Skyjack), Xtreme/Tanfield (Snorkel) and Aichi
|
|||
|
Scissor Lifts
|
Oshkosh (JLG), Linamar (Skyjack), Haulotte, Manitou and Xtreme/Tanfield (Snorkel)
|
|||
|
|
|
|||
|
Telehandlers
|
Oshkosh (JLG, Skytrak, Caterpillar and Lull brands), JCB, CNH, Merlo and Manitou (Gehl)
|
|||
|
|
|
|||
|
Trailer-mounted Light Towers
|
Allmand Bros., Generac, Wacker Neuson
and Doosan
|
|||
|
Construction
|
Material Handlers
|
Liebherr, Sennebogen, Linkbelt, Exodus and Caterpillar
|
||
|
|
|
|||
|
Wheel Loaders
|
Caterpillar, Volvo, Kubota, Kawasaki, John Deere, Komatsu, Hitachi, CNH, Liebherr and Doosan
|
|||
|
Loader Backhoes
|
Caterpillar, CNH, JCB, John Deere, Mahindra and Kubota
|
|||
|
|
|
|||
|
Mini Excavators
|
Doosan (Bobcat), Yanmar, Volvo, Takeuchi, IHI, CNH, Caterpillar, John Deere, Neuson and Kubota
|
|||
|
|
|
|||
|
Midi Excavators
|
Komatsu, Hitachi, Volvo and Yanmar
|
|||
|
|
|
|||
|
Wheeled Excavators
|
Wacker Neuson and Doosan (Bobcat)
|
|||
|
Site Dumpers
|
Thwaites, Wacker Neuson and AUSA
|
|||
|
|
|
|||
|
Skid Steer Loaders
|
Doosan (Bobcat), Caterpillar, CNH, John Deere, Takeuchi, Manitou (Gehl), Volvo and Kubota
|
|||
|
|
|
|||
|
Compaction Rollers
|
Bomag, Hamm, JCB and Ammann
|
|||
|
Concrete Pavers
|
Gomaco, Wirtgen, Power Curbers and Guntert & Zimmerman
|
|||
|
|
|
|||
|
Concrete Mixer Trucks
|
Oshkosh, Kimble and Continental Manufacturing
|
|||
|
|
|
|||
|
Cranes
|
Mobile Telescopic Cranes
|
Liebherr, Manitowoc (Grove), Tadano-Faun, Sumitomo (Link-Belt), XCMG, Kato, Zoomlion and Sany
|
||
|
Tower Cranes
|
Liebherr, Manitowoc (Potain), Comansa, Jaso, Zoomlion, XCMG and Wolffkran
|
|||
|
|
|
|||
|
Lattice Boom Crawler Cranes
|
Manitowoc, Sumitomo (Link-Belt), Liebherr, Hitachi, Kobelco, XCMG, Zoomlion, Fushun and Sany
|
|||
|
|
|
|||
|
Lattice Boom Truck Cranes
|
Liebherr
|
|||
|
|
|
|||
|
Truck-Mounted Cranes
|
Manitowoc (National Crane), Altec and Manitex
|
|||
|
|
|
|||
|
Utility Equipment
|
Altec and Time Manufacturing
|
|||
|
Material Handling & Port Solutions
|
Industrial Cranes
|
Konecranes, Columbus McKinnon, ABUS, Kito, GH and OMIS
|
||
|
Mobile Harbor Cranes and Automated Port Technology
|
Liebherr, Konecranes, Cargotec (Kalmar), Zhenua Port Machinery (ZPMC) and Künz
|
|||
16
|
BUSINESS SEGMENT
|
PRODUCTS
|
PRIMARY COMPETITORS
|
||
|
Reach Stackers
|
Cargotec (Kalmar), Hyster, Konecranes (SMV), Taylor, Dalian, CVS Ferrari, Liebherr and Sany
|
|||
|
|
|
|||
|
Straddle and Sprinter Carriers
|
Cargotec (Kalmar), CVS Ferrari, Konecranes and Liebherr
|
|||
|
|
|
|||
|
Rubber Tired and Rail Mounted Gantry Cranes
|
Zhenua Port Machinery (ZPMC), Liebherr, Konecranes, Cargotec (Kalmar), Doosan, Hyundai, Mitsui Engineering & Shipbuilding and Künz
|
|||
|
|
|
|||
|
Ship-to-Shore Gantry Cranes
|
Zhenua Port Machinery (ZPMC), Liebherr, Konecranes, Cargotec (Kalmar), Samsung, Doosan, Hyundai and Mitsui Engineering & Shipbuilding
|
|||
|
|
|
|||
|
Empty Container Handlers, Full Container Handlers and General Cargo Lift Trucks
|
Cargotec (Kalmar), Hyster, Linde, CVS Ferrari, Konecranes (SMV), Svetruck and Sany
|
|||
|
Materials Processing
|
Crushing Equipment
|
Metso, Astec Industries, Sandvik, McCloskey, Komatsu and Kleemann
|
||
|
|
|
|
||
|
Screening Equipment
|
Metso, Astec Industries, McCloskey, Kleeman and Sandvik
|
|||
|
Washing systems
|
McLanahan, Astec Industries, CDE Global and GreyStone
|
|||
|
Chippers
|
Vermeer, Bandit and Morbark
|
|||
MAJOR CUSTOMERS
None of our customers accounted for more than 10% of our consolidated sales in
2014
. In
2014
, our largest customer accounted for less than
4%
of our net sales and our top ten customers in the aggregate accounted for less than
19%
of our net sales.
EMPLOYEES
As of
December 31, 2014
, we had approximately
20,400
employees; including approximately
6,700
employees in the U.S. Approximately
four
percent of our employees in the U.S. are represented by labor unions. Outside of the U.S., we enter into employment contracts and collective agreements in those countries in which such relationships are mandatory or customary. The provisions of these agreements correspond in each case with the required or customary terms in the subject jurisdiction. We generally consider our relations with our employees to be good.
PATENTS, LICENSES AND TRADEMARKS
We use proprietary materials such as patents, trademarks, trade secrets and trade names in our operations and take actions to protect these rights.
We use several significant trademarks and trade names, most notably the Terex
®
, Genie
®
, Demag
®
and Powerscreen
®
trademarks. The other trademarks and trade names that we use include registered trademarks of Terex Corporation or its subsidiaries. The Demag
®
trademark is a registered trademark of Siemens AG which is licensed to certain Terex subsidiaries for certain products.
We have many patents that we use in connection with our operations, and most of our products contain some proprietary technology. Many of these patents and related proprietary technology are important to the production of particular products; however, overall, our patents, taken together, are not material to our business or our financial results, nor do they provide us with a competitive advantage over our competitors.
Currently, we are engaged in various legal proceedings with respect to intellectual property rights. While the outcome of these matters cannot be predicted with certainty, we believe the outcome of such matters will not have a material adverse effect, individually or in the aggregate, on our business or operating performance. For more detail, see “Item 3 – Legal Proceedings.”
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SAFETY AND ENVIRONMENTAL CONSIDERATIONS
As part of The Terex Way, we are committed to providing a safe and healthy environment for our team members, and strive to provide quality products that are safe to use and operate in an environmentally conscious and respectful manner.
We generate hazardous and non-hazardous wastes in the normal course of our manufacturing operations. As a result, we are subject to a wide range of environmental laws and regulations. All of our employees are required to obey all applicable health, safety and environmental laws and regulations and must observe the proper safety rules and environmental practices in work situations. These laws and regulations govern actions that may have adverse environmental effects, such as discharges to air and water, and require compliance with certain practices when handling and disposing of hazardous and non-hazardous wastes. These laws and regulations would also impose liability for the costs of, and damages resulting from, cleaning up sites, past spills, disposals and other releases of hazardous substances, should any of such events occur. We are committed to complying with these standards and monitoring our workplaces to determine if equipment, machinery and facilities meet specified safety standards. Each of our facilities is subject to an environmental audit at least once every three years to monitor compliance and no incidents have occurred which required us to pay material amounts to comply with such laws and regulations. We are dedicated to seeing that safety and health hazards are adequately addressed through appropriate work practices, training and procedures. For example, we continue to reduce lost time injuries in the workplace and work toward a world-class level of safety practices in our industry.
We are dedicated to product safety when designing and manufacturing our equipment. Our equipment is designed to meet all applicable laws, regulations and industry standards for use in their markets. We continually incorporate safety improvements in our products. We maintain an internal product safety team that is dedicated to improving safety and investigating and resolving any product safety issues that may arise.
The use and operation of our equipment in an environmentally conscious manner is an important priority for us. We are aware of global discussions regarding climate change and the impact of greenhouse gas emissions on global warming. We are increasing our production of products that have lower greenhouse gas emissions in response to both regulatory initiatives and anticipated market demand trends. For example, starting in 2010, one of our most significant design priorities was to include Tier 4 emission compliant diesel engines in our machinery. This continued to be a priority in 2014 and will be a major emphasis of our product development programs through 2017 as we move through the engine-horsepower dependent phase-in of Tier 4 regulations across our diesel-engine equipped products. We manufacture a utility truck that uses plug-in electric hybrid technology to save fuel, reduce emissions and reduce noise in residential areas. Similarly, our MHPS segment offers hybrid drive diesel-hydraulic and diesel-electric systems on certain of its port equipment products.
Increasing laws and regulations dealing with the environmental aspects of the products we manufacture can result in significant expenditures in designing and manufacturing new forms of equipment that satisfy such new laws and regulations. Compliance with laws and regulations regarding safety and the environment has required, and will continue to require, us to make expenditures. We currently do not expect that these expenditures will have a material adverse effect on our business or results of operations.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS, GEOGRAPHIC AREAS AND EXPORT SALES
Information regarding foreign and domestic operations, export sales and segment information is included in Note B – “Business Segment Information” in the Notes to the Consolidated Financial Statements.
SEASONAL FACTORS
Over the past several years, our business has become less seasonal. As we have grown, diversified our product offerings and expanded the geographic reach of our products, we have become less dependent on construction products and sales in the United States and Europe. As we enter 2015, we expect the overall economic environment will affect our sales more than historical seasonal trends.
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WORKING CAPITAL
Our businesses are working capital intensive and require funding to purchase production and replacement parts inventories, capital expenditures to repair, replace and upgrade existing facilities, as well as finance receivables from customers and dealers. We have debt service requirements, including semi-annual interest payments on our outstanding notes and quarterly interest payments on our bank credit facility. We believe cash generated from operations, together with availability under our bank credit facility and cash on hand, provide us with adequate liquidity to meet our operating and debt service requirements. See Item 1A “Risk Factors” for a detailed description of the risks resulting from our debt and our ability to generate sufficient cash flow to operate our business. We will continue to pursue cash generation opportunities, including reducing costs and working capital, reviewing alternatives for under-utilized assets, and selectively investing in our businesses to promote growth opportunities.
AVAILABLE INFORMATION
We maintain a website at www.terex.com. We make available on our website under “About Terex” – “Investor Relations” – “SEC Filings,” free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such material with the SEC. References to our website in this report are provided as a convenience, and the information on our website is not, and shall not be deemed to be a part of this report or incorporated into any other filings we make with the SEC. In addition, we make available on our website under “About Terex” – “Investor Relations” – “Corporate Governance,” free of charge, our Audit Committee Charter, Compensation Committee Charter, Corporate Responsibility and Strategy Committee Charter, Governance and Nominating Committee Charter, Corporate Governance Guidelines and Code of Ethics and Conduct. In addition, the foregoing information is available in print, without charge, to any stockholder who requests these materials from us.
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ITEM 1A.
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RISK FACTORS
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You should carefully consider the following risks, together with the cautionary statement under the caption “Forward-Looking Information” above and the other information included in this report. The risks described below are not the only ones we face. Additional risks that are currently unknown to us or that we currently consider immaterial may also impair our business or adversely affect our financial condition or results of operations. If any of the following risks actually occurs, our business, financial condition or results of operation could be adversely affected.
Our business is affected by the cyclical nature of the markets we serve.
Demand for our products tends to be cyclical and is affected by the general strength of the economies in which we sell our products, prevailing interest rates, residential and non-residential construction spending, the capital expenditure allocations of our customers and other factors. The global economy has continued to experience uneven recovery and financial uncertainty continues to exist. We cannot provide any assurance that the global economic weakness of the recent past will not re-occur. There continues to be concern about several important European economies. Further, certain countries in Asia and Latin America have experienced slower growth rates and the Australian market has experienced declines. If the global economy weakens, it may cause customers to continue to forego or postpone new purchases in favor of reducing their existing fleets or refurbishing or repairing existing machinery.
Our sales depend in part upon our customers’ replacement or repair cycles. If our customers are not successful in generating sufficient revenue or are precluded from securing financing, they may not be able to pay, or may delay payment of, accounts receivable that are owed to us. If the global economic weakness of the past several years continues or becomes more severe, or if any economic recovery progresses more slowly than our or market expectations, then there could be an adverse effect on our net sales, financial condition, profitability and/or cash flow and could result in the need for us to record impairments.
We may face limitations on our ability to integrate acquired businesses.
From time to time, we engage in strategic transactions involving risks, including the possible failure to successfully integrate and realize the expected benefits of such transactions. We have consummated many acquisitions in the past and anticipate making additional acquisitions in the future. Our ability to realize the anticipated benefits of these transactions, including the expected combination benefits, will depend, largely on our ability to integrate acquired businesses.
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The risks associated with our past or future acquisitions include:
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the business culture of the acquired business may not match well with our culture;
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technological and product synergies, economies of scale and cost reductions may not occur as expected;
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we may acquire or assume unexpected liabilities;
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faulty assumptions may be made regarding the integration process;
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unforeseen difficulties may arise in integrating operations and systems;
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we may fail to retain, motivate and integrate key management and other employees of the acquired business;
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higher than expected finance costs may arise due to unforeseen changes in tax, trade, environmental, labor, safety, payroll or pension policies in any jurisdiction in which the acquired business conducts its operations; and
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we may experience problems in retaining customers.
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The successful integration of any previously acquired or newly acquired business also requires us to implement effective internal control processes in these acquired businesses. While we believe we have successfully integrated acquisitions to date, we cannot ensure that previously acquired or newly acquired companies will operate profitably, that the intended beneficial effect from these acquisitions will be realized and that we will not encounter difficulties in implementing effective internal control processes in these acquired businesses, particularly when the acquired business operates in foreign jurisdictions and/or was privately owned. See the risk factor entitled “We must comply with an injunction and related obligations imposed by the SEC” for additional consequences if we were to commit a violation of the reporting and internal control provisions of the federal securities laws. Further, we may need to consolidate or restructure our acquired or existing facilities, which may require expenditures related to reductions in workforce and other charges resulting from these consolidations or restructuring activities, such as the write-down of inventory and lease termination costs. Any of the foregoing could adversely affect our business and results of operations.
Many of these factors will be outside of the combined company’s control and any one of them could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy. If we fail to implement our acquisition strategy, including successfully integrating acquired businesses, this could have an adverse effect on our business, financial condition and results of operations.
We have a significant amount of debt outstanding and must comply with restrictive covenants in our debt agreements.
Our total long-term debt at
December 31, 2014
was
$1,788.8 million
. Our credit agreement and other debt agreements contain financial and restrictive covenants that may limit our ability to, among other things, borrow additional funds or take advantage of business opportunities. While we are currently in compliance with the financial covenants, increases in our debt or decreases in our earnings could cause us to fail to comply with these financial covenants. Failing to comply with such covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all our indebtedness or otherwise have a material adverse effect on our financial position, results of operation and debt service capability.
Our level of debt and the financial and restrictive covenants contained in our credit agreement could have important consequences on our financial position and results of operations, including increasing our vulnerability to increases in interest rates because debt under our credit agreement bears interest at variable rates.
We may be unable to generate sufficient cash flow to service our debt obligations.
Servicing our debt requires a significant amount of cash. Our ability to generate sufficient cash depends on numerous factors beyond our control and our business may not generate sufficient cash flow from operating activities. Our ability to make payments on, and refinance, our debt and fund planned capital expenditures will depend on our ability to generate cash in the future. To some extent, this is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Lower sales, or uncollectible receivables, generally will reduce our cash flow.
We cannot assure that our business will generate sufficient cash flow from operations, or that future borrowings will be available to us under our credit facility or otherwise, in an amount sufficient to fund our liquidity needs.
If our cash flows and capital resources are insufficient to service our indebtedness, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.
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Our access to capital markets and borrowing capacity could be limited in certain circumstances.
Our access to capital markets to raise funds through the sale of equity or debt securities is subject to various factors, including general economic and/or financial market conditions. Significant changes in market liquidity conditions could impact access to funding and associated funding costs, which could reduce our earnings and cash flows. If our consolidated cash flow coverage ratio is less than 2.0 to 1.0, we are subject to significant restrictions on the amount of indebtedness that we can incur. Although our cash flow coverage ratio was greater than 2.0 to 1.0 at the end of 2014, there can be no assurance that this will continue to occur.
Our access to debt financing at competitive risk-based interest rates is partly a function of our credit ratings. A downgrade to our credit ratings could increase our interest rates, could limit our access to public debt markets, could limit the institutions willing to provide us credit facilities, and could make any future credit facilities or credit facility amendments more costly and/or difficult to obtain.
Although we believe that the banks participating in our credit facility have adequate capital and resources, we can provide no assurance that all of these banks will continue to operate as a going concern in the future. If any of the banks in our lending group were to fail or be unwilling to renew our credit facility at or prior to its expiration, it is possible that the borrowing capacity under our current or any future credit facility would be reduced. If the availability under our credit facility was reduced significantly, we could be required to obtain capital from alternate sources to finance our capital needs. Our options for addressing such capital constraints would include, but not be limited to (i) obtaining commitments from the remaining banks in the lending group or from new banks to fund increased amounts under the terms of our credit facility, or (ii) accessing the public capital markets. If it becomes necessary to access additional capital, it is possible that any such alternatives in the current market could be on terms less favorable than under our existing credit facility terms, which could have a negative impact on our consolidated financial position, results of operations or cash flows.
Our business is sensitive to government spending.
Many of our customers depend substantially on government funding of highway construction, maintenance and other infrastructure projects. In addition, we sell products to governments and government agencies in the U.S. and other nations. Policies of governments attempting to address local deficit or structural economic issues could have a material impact on our customers and markets. Any decrease or delay in government funding of highway construction and maintenance, other infrastructure projects and overall government spending could cause our revenues and profits to decrease.
We operate in a highly competitive industry.
Our industry is highly competitive. To compete successfully, our products must excel in terms of quality, reliability, productivity, price, features, ease of use, safety and comfort, and we must provide excellent customer service. The greater financial resources of certain of our competitors may put us at a competitive disadvantage. Low-cost competition from China and other developing markets could also result in decreased demand for our products. If competition in our industry intensifies or if our current competitors lower their prices for competing products, we may lose sales or be required to lower the prices we charge for our products. If we are unable to provide continued technological improvements in our equipment that meet our customers’ expectations, or the industry’s expectations, the demand for our equipment could be substantially adversely affected. Our ability to match new product offerings to diverse global customers’ anticipated preferences for different types and sizes of equipment and various equipment features and functionality, at affordable prices, is critical to our success. This requires a thorough understanding of our existing and potential customers on a global basis, particularly in potential high growth markets, including Brazil, China and India. Failure to compete effectively with our competitors could result in lower revenues from our products and services, lower gross margins or cause us to lose market share.
We rely on key management.
We rely on the management and leadership skills of our senior management team, particularly those of the Chief Executive Officer. We have an employment agreement with Ronald M. DeFeo, our current Chairman and CEO, which expires on December 31, 2015. Our Board reviews the performance of the CEO on an annual basis and has an established succession planning process in place relating to the position of CEO. The Board also regularly reviews succession planning for our other senior officers. The loss of the services of key employees or senior officers, or the inability to identify, hire and retain other highly qualified personnel in the future, could adversely affect the quality and profitability of our business operations.
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Some of our customers rely on financing with third parties to purchase our products.
We rely on sales of our products to generate cash from operations. Significant portions of our sales are financed by third party finance companies on behalf of our customers. The availability of financing by third parties is affected by general economic conditions, the credit worthiness of our customers and the estimated residual value of our equipment. Deterioration in the credit quality of our customers or the estimated residual value of our equipment could negatively impact the ability of our customers to obtain the resources they need to purchase our equipment. Given the current economic conditions, there can be no assurance that third party finance companies will continue to extend credit to our customers.
Due to the ongoing uncertainty in certain global economies, some of our customers have been unable to obtain the credit they need to buy our equipment. As a result, some of our customers may need to cancel existing orders. Given the lack of liquidity, our customers may be compelled to sell their equipment at less than fair value to raise cash, which could have a negative impact on residual values of our equipment. These economic conditions could have a material adverse effect on demand for our products and on our financial condition and operating results.
We provide financing and credit support for some of our customers.
We assist customers in their rental, leasing and acquisition of our products through TFS. We provide financing for some of our customers, primarily in the U.S., to acquire and use our equipment through loans, sales-type leases, and operating leases. TFS enters into these financing agreements with the intent either to hold the financing until maturity or to sell the financing to a third party within a short time period. Until such financing obligations are satisfied through either customer payments or a third party sale, we retain the risks associated with such customer financing. Our results could be adversely affected if such customers default on their contractual obligations to us, if the residual values of such equipment on these transactions decline below the original estimated values or we are unable to sell the financing receivable to a third party.
As described above, our customers, from time to time, may fund the acquisition of our equipment through third-party finance companies. In certain instances, we may provide credit guarantees, residual value guarantees or buyback guarantees. With these guarantees, we must assess the probability of losses or non-performance in ways similar to the evaluation of accounts receivable, including consideration of a customer’s payment history, leverage, availability of third party financing, political and exchange risks, and other factors. Many of these factors, including the assessment of a customer’s ability to pay, are influenced by economic and market factors that cannot be predicted with certainty. In circumstances where we believe it is probable that a specific customer will have difficulty meeting its financial obligations, a specific reserve is recorded to recognize a liability for a guarantee we expect to pay, taking into account any amounts that we would anticipate realizing if we are forced to repossess the equipment that supports the customer’s financial obligations to us. During periods of economic weakness, the collateral underlying our guarantees of indebtedness of customers or receivables can decline sharply, thereby increasing our exposure to losses. In the future, we may incur losses in excess of our recorded reserves if the financial condition of our customers were to deteriorate further or the full amount of any anticipated proceeds from the sale of the collateral supporting our customers’ financial obligations is not realized. To date, losses related to guarantees have been negligible; however, there can be no assurance that our historical experience with respect to guarantees will be indicative of future results.
We may experience losses in excess of our recorded reserves for trade receivables.
As of
December 31, 2014
, we had trade receivables of
$1,086.4 million
. We evaluate the collectability of open accounts, finance receivables and note receivables based on a combination of factors and establish reserves based on our estimates of probable losses. In circumstances where we believe it is probable that a specific customer will have difficulty meeting its financial obligations, a specific reserve is recorded to reduce the net recognized receivable to the amount we expect to collect. We also establish additional reserves based upon our perception of the quality of the current receivables, the current financial position of our customers and past collections experience. Continued economic uncertainty could result in additional requirements for specific reserves, which could have a negative impact on our consolidated financial position.
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Impairment in the carrying value of goodwill and other indefinite-lived intangible assets could negatively affect our operating results.
We have a substantial amount of goodwill and purchased intangible assets on our balance sheet as a result of acquisitions we have completed. The carrying value of goodwill represents the fair value of an acquired business in excess of identifiable assets and liabilities as of the acquisition date. The carrying value of indefinite-lived intangible assets represents the fair value of trademarks and trade names as of the acquisition date. We evaluate these assets for impairment at least annually, or more frequently if potential interim indicators exist that could result in impairment. In testing for impairment, if we believe, as a result of a qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the quantitative two-step goodwill impairment test is required. In the two-step goodwill impairment test, if the carrying value of a reporting unit exceeds its current fair value as determined based on the discounted future cash flows of the reporting unit and market comparable sales and earnings multiples, the goodwill or intangible asset is considered impaired and is reduced to fair value via a non-cash charge to earnings. Events and conditions that could result in impairment include a prolonged period of global economic weakness and tight credit markets, further decline in economic conditions or a slow, weak economic recovery, as well as sustained declines in the price of our common stock, adverse changes in interest rates, or other factors leading to reductions in the long-term sales or profitability that we expect. Determination of the fair value of a reporting unit includes developing estimates which are highly subjective and incorporate calculations that are sensitive to minor changes in underlying assumptions. Management’s assumptions change as more information becomes available. Changes in these assumptions could result in an impairment charge in the future, which could have a significant adverse impact on our reported earnings.
We are dependent upon third-party suppliers, making us vulnerable to supply shortages and price increases.
We obtain materials and manufactured components from third-party suppliers. In the absence of labor strikes or other unusual circumstances, substantially all materials and components are normally available from multiple suppliers. However, certain of our businesses receive materials and components from a single source supplier, although alternative suppliers of such materials are generally available. Delays in our suppliers’ abilities, especially any sole suppliers for a particular business, to provide us with necessary materials and components may delay production at a number of our manufacturing locations, or may require us to seek alternative supply sources. Delays in obtaining supplies may result from a number of factors affecting our suppliers, including capacity constraints, labor disputes, suppliers’ impaired financial condition, suppliers’ allocations to other purchasers, weather emergencies or acts of war or terrorism. Any delay in receiving supplies could impair our ability to deliver products to our customers and, accordingly, could have a material adverse effect on our business, results of operations and financial condition.
Principal materials and components used in our various manufacturing processes include steel, castings, engines, tires, hydraulics, cylinders, drive trains, electric controls and motors, and a variety of other commodities and fabricated or manufactured items. Extreme movements in the cost of these materials and components may affect our financial performance. If we are not able to recover increased raw material or component costs from our customers, our margins could be adversely affected.
In addition, we purchase material and services from our suppliers on terms extended based on our overall credit rating. Deterioration in our credit rating may impact suppliers’ willingness to extend terms and in turn increase the cash requirements of our business.
We are subject to currency fluctuations.
Our products are sold in over 100 countries around the world. The reporting currency for our consolidated financial statements is the U.S. dollar. Certain of our assets, liabilities, expenses, revenues and earnings are denominated in other countries’ currencies, including the euro, British pound sterling and Australian dollar. Those assets, liabilities, expenses, revenues and earnings are translated into U.S. dollars at the applicable exchange rates to prepare our consolidated financial statements. Therefore, increases or decreases in exchange rates between the U.S. dollar and those other currencies affect the value of those items as reflected in our consolidated financial statements, even if their value remains unchanged in their original currency. Due to the continued volatility of foreign currency exchange rates to the U.S. dollar, fluctuations in currency exchange rates may have an impact on the accuracy of our financial guidance. Such fluctuations in foreign currency rates relative to the U.S. dollar may cause our actual results to differ materially from those anticipated in our guidance and have a material adverse effect on our business or results of operations.
We may buy protecting or offsetting positions (known as “hedges”) in certain currencies to reduce the risk of an adverse currency exchange movement. We have not engaged in any speculative hedging activities. Although we partially hedge our revenues and costs, currency fluctuations may impact our financial performance in the future.
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We are exposed to political, economic and other risks that arise from operating a multinational business.
Our operations are subject to a number of potential risks. Such risks principally include:
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trade protection measures and currency exchange controls;
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labor unrest;
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global and regional economic conditions;
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political instability;
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terrorist activities and the U.S. and international response thereto;
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restrictions on the transfer of funds into or out of a country;
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export duties and quotas;
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domestic and foreign customs and tariffs;
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current and changing regulatory environments;
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difficulties protecting our intellectual property;
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transportation delays and interruptions;
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costs and difficulties in integrating, staffing and managing international operations, especially in developing markets such as China, India, Brazil, Russia and the Middle East;
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difficulty in obtaining distribution support; and
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current and changing tax laws.
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In addition, many of the nations in which we operate have developing legal and economic systems adding greater uncertainty to our operations in those countries than would be expected in North America and Western Europe. These factors may have an adverse effect on our international operations in the future.
We must comply with all applicable laws, including the Foreign Corrupt Practices Act (“FCPA”) and other laws that prohibit engaging in corruption for the purpose of obtaining or retaining business. These anti-corruption laws prohibit companies and their intermediaries from making improper payments or providing anything of value to improperly influence government officials or private individuals for the purpose of obtaining or retaining a business advantage regardless of whether those practices are legal or culturally expected in a particular jurisdiction. Our global activities and distribution model are subject to the risk of corruption by our employees and in addition, our sales agents, distributors, dealers and other third parties that transact Terex business particularly because these parties are generally not subject to our control. We have an internal policy that expressly prohibits engaging in any commercial bribery and public corruption, including facilitation payments. We conduct corruption risk assessments, we have implemented training programs for our employees with respect to the Company’s prohibition against public corruption and commercial bribery, and we perform reputational due diligence on certain third parties that transact Terex business. In addition, we conduct transaction testing to assess compliance with our internal anti-corruption policy and procedures. However, we cannot assure you that our policies, procedures and programs always will protect us from reckless or criminal acts committed by our employees or third parties that transact Terex business. We have a zero tolerance policy for violations of anti-corruption laws and our anti-corruption policy. In the event that we believe or have reason to believe that our employees, agents, representatives, dealers or distributors or other third parties that transact Terex business have or may have violated applicable anti-corruption laws, including the FCPA, we investigate or have outside counsel investigate the relevant facts and circumstances. Although we have a compliance program in place designed to reduce the likelihood of potential violations of such laws, any violations of the FCPA or other anti-corruption laws could result in significant fines, criminal sanctions against us or our employees, prohibitions on the conduct of our business including our business with the U.S. government, an adverse effect on our reputation, business and results of operations and financial condition and a violation of our injunction or cease and desist order with the SEC. See Risk Factor entitled, “We must comply with an injunction and related obligations resulting from the settlement of an SEC investigation.”
We continue to focus on operational improvement in developing markets such as China, India, Brazil and the Middle East. These efforts will require us to hire, train and retain qualified personnel in countries where language, cultural or regulatory barriers may exist. Any significant difficulties in continuing to improve or expand our operations in developing markets may divert management’s attention from our existing operations and require a greater level of resources than we plan to commit.
Expansion into developing markets may require modification of products to meet local requirements or preferences. Modification to the design of our products to meet local requirements and preferences may take longer or be more costly than we anticipate and could have a material adverse effect on our ability to achieve international sales growth.
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A material disruption to one of our significant manufacturing plants could adversely affect our ability to generate revenue.
We produce most of our machines and aftermarket parts for each product type at one manufacturing facility. If operations at a significant facility were disrupted as a result of equipment failures, natural disasters, work stoppages, power outages or other reasons, our business, financial conditions and results of operations could be adversely affected. Interruptions in production could increase costs and delay delivery of units in production. Production capacity limits could cause us to reduce or delay sales efforts until production capacity is available.
We may be adversely impacted by work stoppages and other labor matters.
As of
December 31, 2014
, we employed approximately
20,400
people worldwide. While we have no reason to believe that we will be impacted by work stoppages or other labor matters, we cannot assure that future issues with our team members or labor unions will be resolved favorably or that we will not encounter future strikes, further unionization efforts or other types of conflicts with labor unions or our team members. Any of these factors may have an adverse effect on us or may limit our flexibility in dealing with our workforce.
Compliance with environmental regulations could be costly and require us to make significant expenditures.
We generate hazardous and nonhazardous wastes in the normal course of our manufacturing operations. As a result, we are subject to a wide range of environmental laws and regulations. These laws and regulations govern actions that may have adverse environmental effects and require compliance with certain practices when handling and disposing of hazardous and nonhazardous wastes. Some environmental laws impose strict, retroactive and joint and several liability for the remediation of the release of hazardous substances, which could subject us to liability without regard to whether we were negligent or at fault. Failure to comply with environmental laws could expose us to substantial fines or penalties and to civil and criminal liability. These liabilities, sanctions, damages and remediation efforts related to any non-compliance with such laws and regulations could have a material adverse effect on our business or results of operations. No such incidents have occurred which required us to pay material amounts to comply with such laws and regulations.
In addition, increasing laws and regulations dealing with the environmental aspects of the products we manufacture can result in significant expenditures in designing and manufacturing new forms of equipment that satisfy such new laws and regulations. In particular, climate change is receiving increasing attention worldwide. Many scientists, legislators and others attribute climate change to increased levels of greenhouse gases, including carbon dioxide, which has led to significant legislative and regulatory efforts to limit greenhouse gas emissions. While additional regulation of emissions in the future appears likely, it is too early to predict how new regulations would ultimately affect our business, operations or financial results, although government policies limiting greenhouse gas emissions of our products will likely require increased compliance expenditures on our part.
We are also continuing the transition to Tier 4 power systems. While plans are in place to comply with the phase-in of Tier 4 regulations, we are dependent on our engine suppliers to continue to timely deliver. A failure to timely receive appropriate engines from our suppliers could result in our being placed in uncompetitive positions or without finished product when needed. Compliance with environmental laws and regulations has required, and will continue to require, us to make expenditures, however we do not expect these expenditures to have a material adverse effect on our business or results of operations.
We face litigation and product liability claims, class action lawsuits and other liabilities.
In our lines of business, numerous suits have been filed alleging damages for accidents that have occurred during the use or operation of our products. We are self-insured, up to certain limits, for these product liability exposures, as well as for certain exposures related to general, workers’ compensation and automobile liability. We obtain insurance coverage for catastrophic losses as well as those risks where insurance is required by law or contract. We do not believe that the outcome of such matters will have a material adverse effect on our consolidated financial position; however, any significant liabilities not covered by insurance could have an adverse effect on our financial condition.
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We are the subject of a securities class action lawsuit, an Employee Retirement Income Security Act of 1974 (“ERISA”) class action lawsuit and a stockholder derivative lawsuit. These lawsuits generally cover the time period from February 2008 to February 2009 and allege, among other things, that certain of our SEC filings and other public statements contained false and misleading statements which resulted in damages to the plaintiffs and the members of the purported class when they purchased our securities and that there were breaches of fiduciary duties and of disclosure requirements under ERISA. We believe that the allegations in the suits are without merit, and Terex, its directors and the named executives will vigorously defend against them. We believe that we have acted, and continue to act, in compliance with federal securities laws and ERISA law with respect to these matters. However, the outcome of the lawsuits cannot be predicted and, if determined adversely, could ultimately result in us incurring significant liabilities.
We must comply with an injunction and related obligations imposed by the SEC.
We and our directors, officers and employees are required to comply at all times with the terms of a settlement with the SEC that includes an injunction barring us from committing or aiding and abetting any future violations of the anti-fraud, books and records, reporting and internal control provisions of the federal securities laws and related SEC rules. In addition, regarding a separate and unrelated SEC matter, we consented to the entry of an administrative cease and desist order prohibiting future violations of certain provisions of the federal securities laws. As a result, if we commit or aid or abet any future violations of the anti-fraud, books and records, reporting and internal control provisions of the federal securities laws and related SEC rules, we are likely to suffer severe penalties, financial and otherwise, that could have a material negative impact on our business and results of operations.
We may be adversely affected by disruption in, or breach in security of, our information technology systems.
We rely on information technology systems, some of which are managed by third parties, to process, transmit and store electronic information (including sensitive data such as confidential business information and personally identifiable data relating to employees, customers and other business partners), and to manage or support a variety of critical business processes and activities. These systems may be damaged, disrupted or shut down due to attacks by computer hackers, computer viruses, employee error or malfeasance, power outages, hardware failures, telecommunication or utility failures, catastrophes or other unforeseen events, and in any such circumstances our system redundancy and other disaster recovery planning may be ineffective or inadequate. A failure of or breach in information technology security could expose us and our customers, distributors and suppliers to risks of misuse of information or systems, the compromise of confidential information, manipulation and destruction of data, defective products, production downtimes and operations disruptions. In addition, such breaches in security could result in litigation, regulatory action and potential liability, as well as the costs and operational consequences of implementing further data protection measures, each of which could have a material adverse effect on our business or results of operations.
|
ITEM 1B.
|
UNRESOLVED STAFF COMMENTS
|
Not applicable.
26
|
ITEM 2.
|
PROPERTIES
|
As of
December 31, 2014
, our principal manufacturing, warehouse, service and office facilities comprised a total of approximately 14 million square feet of space worldwide. The following table outlines the principal manufacturing, warehouse, service and office facilities owned or leased (as indicated below) by the Company and its subsidiaries:
|
BUSINESS UNIT
|
FACILITY LOCATION
|
BUSINESS UNIT
|
FACILITY LOCATION
|
|||
|
Terex (Corporate Offices)
|
Westport, Connecticut
(1)
|
MHPS
|
Solon, Ohio
|
|||
|
Schaeffhausen, Switzerland
|
Salzburg, Austria
|
|||||
|
AWP
|
Oklahoma City, Oklahoma
|
Cotia, Brazil
|
||||
|
Rock Hill, South Carolina
|
Shanghai, China
(1)
|
|||||
|
Moses Lake, Washington
(1)
|
Xiamen, China
|
|||||
|
North Bend, Washington
(1)
|
Slany, Czech Republic
|
|||||
|
Redmond, Washington
(1)
|
Banbury, England
(1)
|
|||||
|
Darra, Australia
(1)
|
Düsseldorf, Germany
|
|||||
|
Changzhou, China
|
Luisenthal, Germany
|
|||||
|
Umbertide, Italy
|
Uslar, Germany
|
|||||
|
Construction
|
Fort Wayne, Indiana
|
Wetter an der Ruhr, Germany
|
||||
|
Southaven, Mississippi
(1)
|
Würzburg, Germany
|
|||||
|
Canton, South Dakota
|
Chakan, India
(1)
|
|||||
|
Coventry, England
(1)
|
Lentigione, Italy
|
|||||
|
Bad Schönborn, Germany
|
Milan, Italy
(1)
|
|||||
|
Crailsheim, Germany
|
Boksburg, South Africa
|
|||||
|
Greater Noida, Uttar Pradesh, India
(1)
|
Dietlikon, Switzerland
|
|||||
|
Cranes
|
Waverly, Iowa
|
MP
|
Louisville, Kentucky
|
|||
|
Watertown, South Dakota
|
Durand, Michigan
|
|||||
|
Huron, South Dakota
|
Farwell, Michigan
(1)
|
|||||
|
Brisbane, Australia
(1)
|
Coalville, England
|
|||||
|
Betim, Brazil
(1)
|
Hosur, India
|
|||||
|
Jinan, China
|
Subang Jaya, Malaysia
(1)
|
|||||
|
Long Crendon, England
|
Omagh, Northern Ireland
(1)
|
|||||
|
Montceau-les-Mines, France
|
Dungannon, Northern Ireland
(1)
|
|||||
|
Bierbach-Homburg, Germany
(1)
|
||||||
|
Zweibrücken-Dinglerstrasse, Germany
|
||||||
|
Zweibrücken-Wallerscheid, Germany
(1)
|
||||||
|
Pecs, Hungary
(1)
|
||||||
|
Crespellano, Italy
|
||||||
|
Fontanafredda, Italy
|
||||||
|
(1)
|
These facilities are either leased or subleased.
|
We also have numerous owned or leased locations for new machine and parts sales and distribution and rebuilding of components located worldwide.
We believe that the properties listed above are suitable and adequate for our use. We have determined that certain of our other properties exceed our requirements. Such properties may be sold, leased or utilized in another manner and have been excluded from the above list. We are actively marketing some of these properties for sale.
27
|
ITEM 3.
|
LEGAL PROCEEDINGS
|
General
We are involved in various legal proceedings, including product liability, general liability, workers’ compensation liability, employment, commercial and intellectual property litigation, which have arisen in the normal course of operations. We are insured for product liability, general liability, workers’ compensation, employer’s liability, property damage and other insurable risk required by law or contract with retained liability to us or deductibles. We believe that the outcome of such matters, individually and in the aggregate, will not have a material adverse effect on our consolidated financial position. However, the outcomes of lawsuits cannot be predicted and, if determined adversely, could ultimately result in us incurring significant liabilities which could have a material adverse effect on our results of operations.
For information concerning other contingencies and uncertainties, including our ERISA, securities and stockholder derivative lawsuits, see Note Q – “Litigation and Contingencies” in the Notes to the Consolidated Financial Statements.
|
ITEM 4.
|
MINE SAFETY DISCLOSURE
|
Not applicable.
|
PART II
|
|
|
ITEM 5.
|
MARKET FOR THE REGISTRANT
’
S COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
(a) Our common stock, par value $.01 per share (“Common Stock”) is listed on the NYSE under the symbol “TEX.” The high and low quarterly stock prices for our Common Stock on the NYSE Composite Tape (for the last two completed years) are as follows:
|
2014
|
2013
|
||||||||||||||||||||||||||||||
|
Fourth
|
Third
|
Second
|
First
|
Fourth
|
Third
|
Second
|
First
|
||||||||||||||||||||||||
|
High
|
$
|
32.54
|
|
$
|
42.53
|
|
$
|
44.72
|
|
$
|
45.46
|
|
$
|
42.36
|
|
$
|
34.87
|
|
$
|
37.12
|
|
$
|
36.78
|
|
|||||||
|
Low
|
$
|
25.40
|
|
$
|
31.52
|
|
$
|
37.99
|
|
$
|
37.02
|
|
$
|
32.52
|
|
$
|
26.39
|
|
$
|
25.60
|
|
$
|
28.27
|
|
|||||||
We declared and paid a
$0.05
per share dividend during each quarter of
2014
and during the fourth quarter of
2013
. Certain of our debt agreements contain restrictions as to the payment of cash dividends to stockholders. In addition, Delaware law limits payment of dividends. It is our intention to pay four quarterly dividends of $0.06 per share, for an aggregate of $0.24 per share, for the calendar year 2015. However, any future payments of cash dividends will depend upon our financial condition, capital requirements and earnings, as well as other factors that the Board of Directors may deem relevant.
As of
February 18, 2015
, there were
836
stockholders of record of our Common Stock.
Performance Graph
The following stock performance graph is intended to show our stock performance compared with that of comparable companies. The stock performance graph shows the change in market value of $100 invested in our Common Stock, the Standard & Poor’s 500 Stock Index, the New Peer Group (as defined below) and the Old Peer Group (as defined below) for the period commencing December 31,
2009
through December 31,
2014
. The cumulative total stockholder return assumes dividends are reinvested. The stockholder return shown on the graph below is not indicative of future performance. The companies in the New Peer Group and Old Peer Group are weighted by market capitalization. We have revised our peer group to match the peer group that is used by our Compensation Committee in benchmarking our executive officer’s compensation.
The Old Peer Group, used in last year’s Annual Report on Form 10-K, consists of the following companies that are in our same industry, of comparable revenue size to us and/or other manufacturing companies: AGCO Corporation, Cameron International Corporation, Carlisle Companies Inc., Crane Company, Cummins Inc., Danaher Corporation, Dover Corporation, Eaton Corporation, Flowserve Corporation, FMC Technologies, Inc., Hubbell Inc., Illinois Tool Works Inc., Ingersoll-Rand Plc, Joy Global Inc., Lennox International Inc., The Manitowoc Company, Inc., Meritor Inc., Nacco Industries Inc., Navistar International Corporation, Oshkosh Corporation, Paccar Inc., Pall Corporation, Parker-Hannifin Corporation, Rockwell Automation, Inc., Roper Industries Inc., SPX Corporation, Textron Inc. and Timken Company.
28
The New Peer Group consists of the same companies in the Old Peer Group with the following exceptions: Danaher Corporation, Eaton Corporation and Nacco Industries, Ltd. were removed and Trinity Industries Inc. and Pentair Ltd. were added.
|
12/09
|
|
12/10
|
|
12/11
|
|
12/12
|
|
12/13
|
|
12/14
|
|
|
|
Terex Corporation
|
100.00
|
|
156.69
|
|
68.20
|
|
141.90
|
|
212.24
|
|
141.70
|
|
|
S&P 500
|
100.00
|
|
115.06
|
|
117.49
|
|
136.30
|
|
180.44
|
|
205.14
|
|
|
Old Peer Group
|
100.00
|
|
143.96
|
|
128.41
|
|
155.28
|
|
215.60
|
|
221.63
|
|
|
New Peer Group
|
100.00
|
|
144.79
|
|
127.53
|
|
154.57
|
|
215.78
|
|
219.53
|
|
|
Copyright© 2015 Standard & Poor's, a division of The McGraw-Hill Companies Inc. All rights reserved. (www.researchdatagroup.com/S&P.htm)
|
||||||||||||
(b) Not applicable.
29
(c) The following table provides information about purchases during the quarter ended December 31,
2014
of our common stock that is registered by us pursuant to the Exchange Act.
|
Issuer Purchases of Equity Securities
|
||||||||
|
Period
|
(a) Total Number of Shares Purchased
|
(b) Average Price Paid per Share
|
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(1)
|
(d) Approximate Dollar Value of Shares that May Yet be Purchased
Under the Plans or Programs (in thousands)
(1)
|
||||
|
October 1, 2014 – October 31, 2014
|
1,976,279
|
$28.84
|
4,367,333
|
$47,773
|
||||
|
November 1, 2014 – November 30, 2014
|
877,365
|
$29.06
|
5,244,698
|
$22,273
|
||||
|
December 1, 2014 – December 31, 2014
|
814,603
|
$27.34
|
6,059,301
|
$—
|
||||
|
Total
|
3,668,247
|
$28.56
|
6,059,301
|
$—
|
||||
|
(1)
|
In December 2013, our Board of Directors authorized and the Company publicly announced the repurchase of up to $200 million of the Company’s outstanding common shares through December 31, 2015.
|
30
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
FIVE-YEAR SELECTED FINANCIAL DATA
The following table summarizes our selected financial data and should be read in conjunction with the more detailed Consolidated Financial Statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(in millions, except per share amounts and employees)
|
AS OF OR FOR THE YEAR ENDED DECEMBER 31,
|
|||||||||||||||||||
|
2014
|
2013
|
2012
|
2011
|
2010
|
|||||||||||||||
|
SUMMARY OF OPERATIONS
|
|||||||||||||||||||
|
Net sales
|
$
|
7,308.9
|
|
$
|
7,084.0
|
|
$
|
6,982.2
|
|
$
|
6,158.0
|
|
$
|
4,207.9
|
|
||||
|
Income (loss) from operations
|
423.1
|
|
419.1
|
|
366.8
|
|
59.9
|
|
(77.2
|
)
|
|||||||||
|
Income (loss) from continuing operations
|
259.5
|
|
203.9
|
|
74.8
|
|
20.2
|
|
(197.6
|
)
|
|||||||||
|
Income (loss) from discontinued operations – net of tax
|
1.4
|
|
14.4
|
|
28.4
|
|
19.7
|
|
(29.2
|
)
|
|||||||||
|
Gain (loss) on disposition of discontinued operations – net of tax
|
58.6
|
|
2.6
|
|
0.4
|
|
0.8
|
|
589.3
|
|
|||||||||
|
Net income (loss) attributable to common stockholders
|
319.0
|
|
226.0
|
|
105.8
|
|
45.2
|
|
358.5
|
|
|||||||||
|
Per Common and Common Equivalent Share:
|
|||||||||||||||||||
|
Basic attributable to common stockholders
|
|||||||||||||||||||
|
Income (loss) from continuing operations
|
$
|
2.36
|
|
$
|
1.88
|
|
$
|
0.70
|
|
$
|
0.22
|
|
$
|
(1.85
|
)
|
||||
|
Income (loss) from discontinued operations – net of tax
|
0.01
|
|
0.13
|
|
0.26
|
|
0.18
|
|
(0.27
|
)
|
|||||||||
|
Gain (loss) on disposition of discontinued operations – net of tax
|
0.54
|
|
0.02
|
|
—
|
|
0.01
|
|
5.42
|
|
|||||||||
|
Net income (loss) attributable to common stockholders
|
2.91
|
|
2.03
|
|
0.96
|
|
0.41
|
|
3.30
|
|
|||||||||
|
Diluted attributable to common stockholders
|
|||||||||||||||||||
|
Income (loss) from continuing operations
|
$
|
2.27
|
|
$
|
1.79
|
|
$
|
0.68
|
|
$
|
0.22
|
|
$
|
(1.85
|
)
|
||||
|
Income (loss) from discontinued operations – net of tax
|
0.01
|
|
0.12
|
|
0.25
|
|
0.18
|
|
(0.27
|
)
|
|||||||||
|
Gain (loss) on disposition of discontinued operations – net of tax
|
0.51
|
|
0.02
|
|
—
|
|
0.01
|
|
5.42
|
|
|||||||||
|
Net income (loss) attributable to common stockholders
|
2.79
|
|
1.93
|
|
0.93
|
|
0.41
|
|
3.30
|
|
|||||||||
|
CURRENT ASSETS AND LIABILITIES
|
|||||||||||||||||||
|
Current assets
|
$
|
3,356.2
|
|
$
|
3,639.4
|
|
$
|
3,797.4
|
|
$
|
4,053.2
|
|
$
|
3,986.9
|
|
||||
|
Current liabilities
|
1,643.1
|
|
1,724.7
|
|
1,708.8
|
|
1,890.9
|
|
1,674.2
|
|
|||||||||
|
PROPERTY, PLANT AND EQUIPMENT
|
|||||||||||||||||||
|
Net property, plant and equipment
|
$
|
690.3
|
|
$
|
789.4
|
|
$
|
806.8
|
|
$
|
829.7
|
|
$
|
567.8
|
|
||||
|
Capital expenditures
|
(80.0
|
)
|
(79.5
|
)
|
(81.2
|
)
|
(77.9
|
)
|
(54.6
|
)
|
|||||||||
|
Depreciation
|
110.5
|
|
104.4
|
|
99.7
|
|
88.5
|
|
77.2
|
|
|||||||||
|
TOTAL ASSETS
|
$
|
5,928.0
|
|
$
|
6,536.7
|
|
$
|
6,746.2
|
|
$
|
7,063.4
|
|
$
|
5,516.4
|
|
||||
|
CAPITALIZATION
|
|||||||||||||||||||
|
Long-term debt and notes payable (includes capital leases)
|
$
|
1,788.8
|
|
$
|
1,976.7
|
|
$
|
2,098.7
|
|
$
|
2,300.4
|
|
$
|
1,686.3
|
|
||||
|
Total Terex Corporation Stockholders’ Equity
|
2,005.9
|
|
2,190.1
|
|
2,007.7
|
|
1,910.3
|
|
2,083.2
|
|
|||||||||
|
Dividends per share of Common Stock
|
0.20
|
|
0.05
|
|
—
|
|
—
|
|
—
|
|
|||||||||
|
Shares of Common Stock outstanding at year end
|
105.4
|
|
109.9
|
|
109.9
|
|
108.8
|
|
108.1
|
|
|||||||||
|
EMPLOYEES
|
20,400
|
|
20,500
|
|
20,900
|
|
22,100
|
|
15,900
|
|
|||||||||
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Notes to the Consolidated Financial Statements for a discussion of “Discontinued Operations,” “Dispositions,” “Goodwill,” “Long-Term Obligations” and “Stockholders’ Equity.”
31
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
BUSINESS DESCRIPTION
Terex is a lifting and material handling solutions company. We are focused on operational improvement and delivering reliable, customer-driven solutions for a wide range of commercial applications, including the construction, infrastructure, quarrying, mining, manufacturing, transportation, energy and utility industries. We operate in
five
reportable segments: (i) AWP; (ii) Construction; (iii) Cranes; (iv) MHPS; and (v) MP. Please refer to Note B – “Business Segment Information” in the accompanying Consolidated Financial Statements for a description of our segments.
Non-GAAP Measures
In this document, we refer to various GAAP (U.S. generally accepted accounting principles) and non-GAAP financial measures. These non-GAAP measures may not be comparable to similarly titled measures disclosed by other companies. We present non-GAAP financial measures in reporting our financial results to provide investors with additional analytical tools which we believe are useful in evaluating our operating results and the ongoing performance of our underlying businesses. We do not, nor do we suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
Non-GAAP measures we use include the translation effect of foreign currency exchange rate changes on net sales, gross profit, Selling, general & administrative (“SG&A”) costs and operating profit, as well as the net sales, gross profit, SG&A costs and operating profit excluding the impact of acquisitions.
As changes in foreign currency exchange rates have a non-operating impact on our financial results, we believe excluding the effect of these changes assists in the assessment of our business results between periods. We calculate the translation effect of foreign currency exchange rate changes by translating the current period results at the rates that the comparable prior periods were translated to isolate the foreign exchange component of the fluctuation from the operational component. Similarly, the impact of changes in our results from acquisitions that were not included in comparable prior periods is subtracted from the absolute change in results to allow for better comparability of results between periods.
We calculate a non-GAAP measure of free cash flow. We define free cash flow as Net cash provided by (used in) operating activities, less Capital expenditures. We believe that the measure of free cash flow provides management and investors further information on cash generation or use.
We discuss forward looking information related to expected earnings per share (“EPS”) excluding restructuring charges and other items. This adjusted EPS is a non-GAAP measure that provides guidance to investors about our expected EPS excluding restructuring or other charges that we do not believe are reflective of our ongoing earnings.
Working capital is calculated using the Consolidated Balance Sheet amounts for Trade receivables (net of allowance) plus Inventories, less Trade accounts payable and Customer advances. We view excessive working capital as an inefficient use of resources, and seek to minimize the level of investment without adversely impacting the ongoing operations of the business. Trailing three month annualized net sales is calculated using the net sales for the most recent quarter multiplied by four. The ratio calculated by dividing working capital by trailing three months annualized net sales is a non-GAAP measure that we believe measures our resource use efficiency.
Non-GAAP measures we use also include Net Operating Profit After Tax (“NOPAT”) as adjusted, income (loss) before income taxes as adjusted, income (loss) from operations as adjusted, (benefit from) provision for income taxes as adjusted and stockholders’ equity as adjusted, which are used in the calculation of our after tax return on invested capital (“ROIC”) (collectively the “Non-GAAP Measures”), which are discussed in detail below.
32
Overview
We continued to improve in 2014 despite a more challenging operating environment than anticipated entering the year. In the face of these challenges, we successfully executed on our initiatives in many areas that were within our control, enabling us to strengthen our balance sheet as we enter 2015. We streamlined our business portfolio, reduced costs, introduced innovative new products, and simplified operations. We refinanced our senior credit facility, extending our maturities at the same time that we reduced our borrowing costs. We also generated approximately
$329 million
in free cash flow, allowing us to accelerate our share repurchase program, with the Company purchasing $170 million of stock in 2014. There is more work to do, but we are pleased with our progress.
While we are a stronger company today than we were a year ago, there was mixed operational performance in 2014. We saw continued strength in our AWP segment as net sales increased approximately 11% over the prior year due to strong North American rental channel demand plus a noticeable increase in European performance. However, our operating margins were below our expectations due to higher factory and commodity costs, as well as manufacturing start-up costs. We identified and addressed the underlying issues in the second half of 2014, and expect to deliver improved operating margins in 2015. These operational improvements, combined with our strong backlog, have us optimistic that AWP will perform well in 2015.
Our Construction segment performance improved in 2014 as a result of substantial portfolio and cost management activities, as well as improved performance in certain product categories. Our continued vigilance on cost structure enabled us to improve our profitability by over $25 million, even though sales increased by less than $17 million. We expect strengthening of the U.S. Dollar to be both a challenge and an opportunity for this segment as we enter 2015.
Our Cranes business was disappointing in 2014, as we failed to realize the growth we forecasted for the segment due to global marketplace weakness and increased competition, which weighed on the business. Despite a positive trend in book-to-bill ratios over the first half of 2014, the Cranes order rate dropped significantly in the second half of the year. The decline was driven by reduced demand for mobile cranes partially offset by strength in utilities. In 2015, we expect net sales to decrease primarily due to the strengthening of the U.S. Dollar, although underlying demand is expected to be generally stable. This decline is expected to be partially offset by strength in our utilities business.
Our MHPS segment made meaningful strides in profitability as a result of the restructuring activities implemented in the business over the past 18 months. Execution on our large port automation projects was critical to this segment’s improvement in 2014. Net sales increased from the prior year for our port businesses, particularly in Western Europe and North America, but were partially offset by lower net sales in the material handling business. Actions taken in prior periods to reduce our cost structure for this segment improved results. In 2014, we also continued to take further actions to adjust the cost structure of our MHPS segment. We announced plans to close one of our manufacturing facilities and relocate production in an effort to improve the efficiency of our manufacturing footprint, and we realigned the management structure of our Port Solutions business. See Note L - “Restructuring and Other Charges” in our Consolidated Financial Statements for a detailed description of our restructuring activities, including the reasons, timing and costs associated with such actions. We expect our MHPS net sales to be lower in 2015, primarily due to the strengthening of the U.S. Dollar and a decline in port automation sales.
Our MP segment performance for 2014 did not meet expectations. Although our net sales increased 4%, our operating income decreased by 15%, as an unfavorable geographic mix of sales and startup cost for new product introductions affected our profitability. In 2015, MP looks to benefit from stable core markets and increased contribution from new product introductions made in 2014, partially offset by the translation effect of foreign exchange rates, primarily the strengthening of the U.S. Dollar.
Geographically, North America remains our largest market and Western Europe was our most improved market. Looking ahead to 2015, we do not expect the markets to grow materially, although we expect sales outside of North America to be negatively impacted by the translation effect of foreign exchange rates, primarily the strengthening of the U.S. Dollar.
Our primary areas of focus in 2014 included improving our capital structure, as well as our financial efficiency. We were pleased with our progress in these areas. Our efforts to improve our working capital investment, helped generate approximately
$329 million
in free cash flow in 2014, meaningfully above our expectations. This cash generation, combined with our continued portfolio management, particularly in our Construction segment, enabled us to improve our liquidity by over $340 million. Additionally, we completed our stock repurchase program, purchasing $170 million of stock in 2014 and delivering $0.20 per share in dividends to our shareholders. We are expecting to generate between $200 million and $250 million in free cash flow for the full year 2015. See “Non-GAAP Measures” above to see the definition of free cash flow.
We believe our liquidity continues to be sufficient to meet our business plans. See “Liquidity and Capital Resources” for a detailed description of liquidity and working capital levels, including the primary factors affecting such levels.
33
We expect 2015 earnings per share (“EPS”) to be between $2.00 and $2.30 (excluding restructuring and other unusual items) on net sales of between $6.2 billion and $6.6 billion. We anticipate currency and the A.S.V. disposition will negatively affect net sales by $650 million to $750 million and EPS by $0.15 to $0.20 per share. Our improvement programs targeting $202 million of incremental operating profit over the next few years are progressing as planned. We anticipate approximately $50 million of profit improvements in 2015 from these initiatives. Furthermore, tax and cash generation initiatives remain on track. Market uncertainty from oil prices and currency volatility is a key contributor to our sales outlook. We will continue to focus on what we can influence and believe improved operating conditions will eventually return.
ROIC continues to be a unifying metric that we use to measure our performance. ROIC and the Non-GAAP Measures assist in showing how effectively we utilize the capital invested in our operations. After-tax ROIC is determined by dividing the sum of NOPAT for each of the previous four quarters by the average of the sum of Total Terex Corporation stockholders’ equity plus Debt (as defined below) less Cash and cash equivalents for the previous five quarters. NOPAT for each quarter is calculated by multiplying Income (loss) from continuing operations by a figure equal to one minus the effective tax rate of the Company. We believe that returns on capital deployed in TFS do not represent our primary operations and, therefore, TFS finance receivable assets and results from operations have been excluded from the Non-GAAP Measures. The effective tax rate is equal to the (Provision for) benefit from income taxes divided by Income (loss) before income taxes for the respective quarter. Total Terex Corporation stockholders’ equity is adjusted to include redeemable noncontrolling interest as this item is deemed to be temporary equity and therefore should be included in the denominator of the ROIC ratio. Debt is calculated using the amounts for Notes payable and current portion of long-term debt plus Long-term debt, less current portion. We calculate ROIC using the last four quarters’ NOPAT as this represents the most recent 12-month period at any given point of determination. In order for the denominator of the ROIC ratio to properly match the operational period reflected in the numerator, we include the average of five quarters’ ending balance sheet amounts so that the denominator includes the average of the opening through ending balances (on a quarterly basis) thereby providing, over the same time period as the numerator, four quarters of average invested capital.
Terex management and the Board of Directors use ROIC as one of the primary measures to assess operational performance, including in connection with certain compensation programs. We use ROIC as a unifying metric because we believe that it measures how effectively we invest our capital and provides a better measure to compare ourselves to peer companies to assist in assessing how we drive operational improvement. We believe that ROIC measures return on the amount of capital invested in our primary businesses, excluding TFS, as opposed to another metric such as return on stockholders’ equity that only incorporates book equity, and is thus a more accurate and descriptive measure of our performance. We also believe that adding Debt less Cash and cash equivalents to Total stockholders’ equity provides a better comparison across similar businesses regarding total capitalization, and ROIC highlights the level of value creation as a percentage of capital invested. As the tables below show, our ROIC at
December 31, 2014
was
11.2%
.
The amounts described below are reported in millions of U.S. dollars, except for the effective tax rates. Amounts are as of and for the three months ended for the periods referenced in the tables below (in millions, except percentages).
|
Dec ’14
|
Sep ’14
|
Jun ’14
|
Mar ’14
|
Dec ’13
|
|||||||||||
|
Provision for (benefit from) income taxes
|
$
|
(41.5
|
)
|
$
|
27.7
|
|
$
|
40.0
|
|
$
|
11.5
|
|
|||
|
Divided by: Income (loss) before income taxes
|
39.4
|
|
86.4
|
|
128.4
|
|
43.0
|
|
|||||||
|
Effective tax rate
|
(105.3
|
)%
|
32.1
|
%
|
31.2
|
%
|
26.7
|
%
|
|||||||
|
Income (loss) from operations as adjusted
|
$
|
72.3
|
|
$
|
119.7
|
|
$
|
162.6
|
|
$
|
76.3
|
|
|||
|
Multiplied by: 1 minus Effective tax rate
|
205.3
|
%
|
67.9
|
%
|
68.8
|
%
|
73.3
|
%
|
|||||||
|
Adjusted net operating income (loss) after tax
|
$
|
148.4
|
|
$
|
81.3
|
|
$
|
111.9
|
|
$
|
55.9
|
|
|||
|
Debt (as defined above)
|
$
|
1,788.8
|
|
$
|
1,851.9
|
|
$
|
1,922.5
|
|
$
|
2,055.9
|
|
$
|
1,976.7
|
|
|
Less: Cash and cash equivalents
|
(478.2
|
)
|
(344.5
|
)
|
(364.3
|
)
|
(390.5
|
)
|
(408.1
|
)
|
|||||
|
Debt less Cash and cash equivalents
|
$
|
1,310.6
|
|
$
|
1,507.4
|
|
$
|
1,558.2
|
|
$
|
1,665.4
|
|
$
|
1,568.6
|
|
|
Total Terex Corporation stockholders’ equity as adjusted
|
$
|
1,843.2
|
|
$
|
2,010.5
|
|
$
|
2,138.5
|
|
$
|
2,012.0
|
|
$
|
2,092.4
|
|
|
Debt less Cash and cash equivalents plus Total Terex Corporation stockholders’ equity as adjusted
|
$
|
3,153.8
|
|
$
|
3,517.9
|
|
$
|
3,696.7
|
|
$
|
3,677.4
|
|
$
|
3,661.0
|
|
34
|
December 31, 2014 ROIC
|
11.2
|
%
|
|
|
NOPAT as adjusted (last 4 quarters)
|
$
|
397.5
|
|
|
Average Debt less Cash and cash equivalents plus Total Terex Corporation stockholders’ equity as adjusted (5 quarters)
|
$
|
3,541.4
|
|
|
Three months ended 12/31/14
|
Three months ended 9/30/14
|
Three months ended 06/30/14
|
Three months ended 03/31/14
|
||||||||||||
|
Reconciliation of income (loss) from operations:
|
|||||||||||||||
|
Income (loss) from operations as reported
|
$
|
70.4
|
|
$
|
116.8
|
|
$
|
160.9
|
|
$
|
75.0
|
|
|||
|
(Income) loss from operations for TFS
|
1.9
|
|
2.9
|
|
1.7
|
|
1.3
|
|
|||||||
|
Income (loss) from operations as adjusted
|
$
|
72.3
|
|
$
|
119.7
|
|
$
|
162.6
|
|
$
|
76.3
|
|
|||
|
Reconciliation of Terex Corporation stockholders’ equity:
|
As of 12/31/14
|
As of 9/30/14
|
As of 06/30/14
|
As of 03/31/14
|
As of 12/31/13
|
||||||||||
|
Terex Corporation stockholders’ equity as reported
|
$
|
2,005.9
|
|
$
|
2,217.7
|
|
$
|
2,331.6
|
|
$
|
2,183.2
|
|
$
|
2,190.1
|
|
|
TFS Assets
|
(162.7
|
)
|
(207.2
|
)
|
(193.1
|
)
|
(171.2
|
)
|
(151.6
|
)
|
|||||
|
Redeemable noncontrolling interest
|
—
|
|
—
|
|
—
|
|
—
|
|
53.9
|
|
|||||
|
Terex Corporation stockholders’ equity as adjusted
|
$
|
1,843.2
|
|
$
|
2,010.5
|
|
$
|
2,138.5
|
|
$
|
2,012.0
|
|
$
|
2,092.4
|
|
RESULTS OF OPERATIONS
2014
COMPARED WITH
2013
Terex Consolidated
|
|
2014
|
2013
|
|
|
||||||||||||
|
|
|
% of
Sales
|
|
% of
Sales
|
|
% Change In Reported Amounts
|
||||||||||
|
|
($ amounts in millions)
|
|
|
|||||||||||||
|
Net sales
|
$
|
7,308.9
|
|
—
|
|
$
|
7,084.0
|
|
—
|
|
|
3.2
|
%
|
|||
|
Gross profit
|
$
|
1,453.5
|
|
19.9
|
%
|
$
|
1,439.5
|
|
20.3
|
%
|
|
1.0
|
%
|
|||
|
SG&A
|
$
|
1,030.4
|
|
14.1
|
%
|
$
|
1,020.4
|
|
14.4
|
%
|
|
1.0
|
%
|
|||
|
Income from operations
|
$
|
423.1
|
|
5.8
|
%
|
$
|
419.1
|
|
5.9
|
%
|
|
1.0
|
%
|
|||
Net sales for the year ended
December 31, 2014
increased
$224.9 million
when compared to
2013
. Our AWP segment had significant growth in net sales from continued rental channel replenishment. Our MHPS segment also experienced net sales growth primarily from its port solutions businesses. Net sales in our Construction and MP segments improved slightly in the current year. However, net sales in our Cranes segment were lower in the Middle East and Australia, partially offsetting net sales increases in our other segments.
Gross profit for the year ended
December 31, 2014
increased
$14.0 million
when compared to
2013
. Our Construction and MHPS segments’ gross profit improved from the prior year, partially offset by decreased gross profit in the other three segments.
SG&A costs for the year ended
December 31, 2014
increased
$10.0 million
when compared to
2013
. Cost reduction activities taken in prior periods in our Construction and MHPS segments are reflected in current year SG&A costs. Higher SG&A costs in our AWP and MP segments more than offset those improvements.
Income from operations increased by
$4.0 million
for the year ended
December 31, 2014
when compared to
2013
. The increase was primarily due to improvement in our Construction and MHPS segments, partially offset by weaker performance in our AWP, Cranes and MP segments.
35
Aerial Work Platforms
|
|
2014
|
2013
|
|
|
||||||||||||
|
|
|
% of
Sales
|
|
% of
Sales
|
|
% Change In Reported Amounts
|
||||||||||
|
|
($ amounts in millions)
|
|
|
|||||||||||||
|
Net sales
|
$
|
2,369.7
|
|
|
—
|
|
$
|
2,131.0
|
|
|
—
|
|
|
11.2
|
%
|
|
|
Gross profit
|
$
|
504.3
|
|
|
21.3
|
%
|
$
|
514.9
|
|
|
24.2
|
%
|
|
(2.1
|
)%
|
|
|
SG&A
|
$
|
201.5
|
|
|
8.5
|
%
|
$
|
189.1
|
|
|
8.9
|
%
|
|
6.6
|
%
|
|
|
Income from operations
|
$
|
302.8
|
|
|
12.8
|
%
|
$
|
325.8
|
|
|
15.3
|
%
|
|
(7.1
|
)%
|
|
Net sales for the AWP segment for the year ended
December 31, 2014
increased
$238.7 million
when compared to
2013
. Net sales improvement was primarily due to continued replacement demand and capital expenditures for growth from the North American rental channels, continued replacement demand in Europe and Asia Pacific, and growing demand in China, partially offset by weaker demand in Latin America.
Gross profit for the year ended
December 31, 2014
decreased
$10.6 million
when compared to
2013
. The decrease in gross profit was primarily due to higher factory and manufacturing start-up costs of approximately $33 million, higher commodity costs of approximately $17 million, higher distribution costs associated with the increase in sales volume and unfavorable currency fluctuations, mostly offset by margins associated with higher sales volume.
SG&A costs for the year ended
December 31, 2014
increased
$12.4 million
when compared to
2013
. Higher selling and marketing costs associated with higher net sales increased SG&A spending by approximately $7 million as compared to the prior year. Additionally, allocation of corporate costs was approximately $8 million higher in the current year.
Income from operations for the year ended
December 31, 2014
decreased
$23.0 million
when compared to
2013
. The decrease was due to the items noted above, particularly higher factory and manufacturing start-up costs, higher commodity costs as well as higher SG&A costs, partially offset by margins associated with higher sales volume.
Construction
|
|
2014
|
2013
|
|
|
||||||||||||
|
|
|
% of
Sales
|
|
% of
Sales
|
|
% Change In Reported Amounts
|
||||||||||
|
|
($ amounts in millions)
|
|
|
|||||||||||||
|
Net sales
|
$
|
836.6
|
|
|
—
|
|
$
|
820.0
|
|
|
—
|
|
|
2.0
|
%
|
|
|
Gross profit
|
$
|
90.4
|
|
|
10.8
|
%
|
$
|
83.2
|
|
|
10.1
|
%
|
|
8.7
|
%
|
|
|
SG&A
|
$
|
89.2
|
|
|
10.7
|
%
|
$
|
108.0
|
|
|
13.2
|
%
|
|
(17.4
|
)%
|
|
|
Income (loss) from operations
|
$
|
1.2
|
|
|
0.1
|
%
|
$
|
(24.8
|
)
|
|
(3.0
|
)%
|
|
*
|
|
|
* Not meaningful as a percentage
Net sales for the Construction segment increased by
$16.6 million
for the year ended
December 31, 2014
when compared to
2013
. The majority of the increase was primarily due to higher demand for our concrete mixer trucks in the U.S. and material handling products primarily in Europe, partially offset by decreased net sales as a result of divestitures of our roadbuilding business.
Gross profit for the year ended
December 31, 2014
increased
$7.2 million
when compared to
2013
. The increase was primarily due to improved factory utilization contributing approximately $6 million.
SG&A costs for the year ended
December 31, 2014
decreased
$18.8 million
when compared to
2013
. The impact of divestitures decreased SG&A costs in the current year period by approximately $7 million. Cost reduction activities taken in prior periods also contributed to approximately $3 million of lower SG&A costs in the current year. Additionally, there was approximately $2 million of lower bad debt charges partially due to recoveries in the current year. The allocation of corporate costs was approximately $3 million lower in the current year.
Income (loss) from operations for the year ended
December 31, 2014
improved
$26.0 million
when compared to
2013
. Improvement was primarily due to the impact of lower SG&A costs and improved factory utilization.
36
Cranes
|
|
2014
|
2013
|
|
|
||||||||||||
|
|
|
% of
Sales
|
|
% of
Sales
|
|
% Change In Reported Amounts
|
||||||||||
|
|
($ amounts in millions)
|
|
|
|||||||||||||
|
Net sales
|
$
|
1,791.1
|
|
|
—
|
|
$
|
1,925.5
|
|
|
—
|
|
|
(7.0
|
)%
|
|
|
Gross profit
|
$
|
313.4
|
|
|
17.5
|
%
|
$
|
337.1
|
|
|
17.5
|
%
|
|
(7.0
|
)%
|
|
|
SG&A
|
$
|
227.5
|
|
|
12.7
|
%
|
$
|
226.6
|
|
|
11.8
|
%
|
|
0.4
|
%
|
|
|
Income from operations
|
$
|
85.9
|
|
|
4.8
|
%
|
$
|
110.5
|
|
|
5.7
|
%
|
|
(22.3
|
)%
|
|
Net sales for the Cranes segment for the year ended
December 31, 2014
decreased by
$134.4 million
when compared to
2013
. This decrease was due to decline in demand for mobile cranes in North America, the Middle East and Australia. These declines were partially offset by improving sales for mobile cranes in Western Europe and tower cranes worldwide, as well as utility products in North America.
Gross profit for the year ended
December 31, 2014
decreased by
$23.7 million
when compared to
2013
. Product sales mix and lower volume had an approximately $34 million negative impact on gross profit when compared to 2013. In the prior year, we recorded approximately $10 million in charges for restructuring and related charges.
SG&A costs for the year ended
December 31, 2014
increased
$0.9 million
when compared to
2013
. Approximately $4 million higher engineering costs, primarily related to Tier 4 compliance and new product development, were incurred in the current year.
Income from operations for the year ended
December 31, 2014
decreased
$24.6 million
when compared to
2013
, resulting primarily from lower net sales, product sales mix and higher SG&A costs.
Material Handling & Port Solutions
|
|
2014
|
2013
|
|
|||||||||||||
|
|
|
% of
Sales
|
|
% of
Sales
|
% Change In
Reported Amounts
|
|||||||||||
|
|
($ amounts in millions)
|
|
||||||||||||||
|
Net sales
|
$
|
1,783.4
|
|
—
|
|
$
|
1,698.5
|
|
—
|
|
5.0
|
%
|
||||
|
Gross profit
|
$
|
392.2
|
|
22.0
|
%
|
$
|
345.4
|
|
20.3
|
%
|
13.5
|
%
|
||||
|
SG&A
|
$
|
409.4
|
|
23.0
|
%
|
$
|
387.2
|
|
22.8
|
%
|
5.7
|
%
|
||||
|
Loss from operations
|
$
|
(17.2
|
)
|
(1.0
|
)%
|
$
|
(41.8
|
)
|
(2.5
|
)%
|
*
|
|
||||
|
*
|
Not meaningful as a percentage
|
Net sales for the MHPS segment for the year ended
December 31, 2014
increased by
$84.9 million
when compared to
2013
. The increase was driven by improvement in net sales for our port solutions businesses, with the largest increase in Western Europe related to port automation technology, partially offset by lower net sales in our material handling businesses compared to the prior year.
Gross profit for the year ended
December 31, 2014
increased by
$46.8 million
when compared to
2013
. Increased net sales and improved product mix contributed approximately $34 million to the improvement in gross profit. Restructuring and related charges were approximately $6 million lower in the current year. Additionally, inventory charges were approximately $6 million lower in the current year, contributing to the increase in gross profit.
SG&A costs for the year ended
December 31, 2014
increased by
$22.2 million
when compared to
2013
. Approximately $33 million relates to a loss on sale of an entity, which was incurred in the current year. This loss was partially offset by cost reduction activities taken in prior periods that positively impacted SG&A by approximately $10 million.
37
Loss from operations for the year ended
December 31, 2014
improved by
$24.6 million
when compared to
2013
. These results were primarily driven by lower inventory and restructuring and related charges as well as cost reduction activities taken in prior periods.
Materials Processing
|
|
2014
|
2013
|
|
|
||||||||||||
|
|
|
% of
Sales
|
|
% of
Sales
|
|
% Change In Reported Amounts
|
||||||||||
|
|
($ amounts in millions)
|
|
|
|||||||||||||
|
Net sales
|
$
|
653.1
|
|
|
—
|
|
$
|
628.2
|
|
|
—
|
|
|
4.0
|
%
|
|
|
Gross profit
|
$
|
140.8
|
|
|
21.6
|
%
|
$
|
145.4
|
|
|
23.1
|
%
|
|
(3.2
|
)%
|
|
|
SG&A
|
$
|
80.2
|
|
|
12.3
|
%
|
$
|
73.6
|
|
|
11.7
|
%
|
|
9.0
|
%
|
|
|
Income from operations
|
$
|
60.6
|
|
|
9.3
|
%
|
$
|
71.8
|
|
|
11.4
|
%
|
|
(15.6
|
)%
|
|
Net sales in the MP segment increased by
$24.9 million
for the year ended
December 31, 2014
when compared to
2013
. Net sales improvements were primarily in the North American market but were partially offset by lower net sales in Australia and Latin America, as well as lower parts sales in the current year. Increased demand for washing systems and biomass chippers contributed to the increase.
Gross profit for the year ended
December 31, 2014
decreased by
$4.6 million
when compared to
2013
. This decrease was primarily due to an unfavorable geographic mix of sales, as well as decreased productivity in the current year.
SG&A costs for the year ended
December 31, 2014
increased
$6.6 million
when compared to
2013
. This increase was partially due to approximately $3 million higher selling and marketing costs associated with trade show activity in the beginning of the year, which increased SG&A costs from the prior year. Higher engineering costs of approximately $2 million related to new product development also increased SG&A costs in the current year. Additionally, the reversal of an accrual of approximately $2 million related to a litigation matter contributed to lower SG&A costs in the prior year.
Income from operations for the year ended
December 31, 2014
decreased
$11.2 million
when compared to
2013
. The decrease was driven primarily by higher SG&A costs, an unfavorable geographic mix of sales and lower productivity in the current year.
As of October 1, 2014, we performed our annual goodwill impairment test for the MP segment, which resulted in the fair market value of the MP reporting unit exceeding its carrying value by
24%
. While no evidence of impairment was indicated, due to geopolitical uncertainty and short-term volatility in worldwide commodities markets, we reviewed the MP reporting unit at December 31, 2014 to determine if the results of the October 1 test would be significantly different. We did not find evidence of impairment at December 31, 2014, but we will continue to monitor the performance of the MP reporting unit and update the test as circumstances warrant. If the MP reporting unit is unable to achieve its projected cash flows, the outcome of any prospective tests may result in recording goodwill impairment charges in future periods. The amount of goodwill in the MP segment was
$174.9 million
as of December 31, 2014.
Corporate/Eliminations
|
|
2014
|
2013
|
|
|
|||||||||||
|
|
|
% of
Sales
|
|
% of
Sales
|
|
% Change In Reported Amounts
|
|||||||||
|
|
($ amounts in millions)
|
|
|
||||||||||||
|
Net sales
|
$
|
(125.0
|
)
|
|
—
|
|
$
|
(119.2
|
)
|
|
—
|
|
|
*
|
|
|
Loss from operations
|
$
|
(10.2
|
)
|
|
*
|
|
$
|
(22.4
|
)
|
|
*
|
|
|
*
|
|
|
*
|
Not meaningful as a percentage
|
The net sales amounts include the elimination of intercompany sales activity among segments. Lower loss from operations in the current year was partially due to a gain from a divested business of approximately $17 million.
38
Interest Expense, Net of Interest Income
During the year ended
December 31, 2014
, our interest expense net of interest income was
$112.5 million
, or
$6.9 million
lower than the prior year. This improvement was primarily driven by lower interest rates on our debt.
Loss on Early Extinguishment of Debt
We recorded a loss of
$2.6 million
on early extinguishment of debt during the year ended
December 31, 2014
related to the termination of our 2011 Credit Agreement. A loss of
$5.2 million
on early extinguishment of debt was recorded in the year ended
December 31, 2013
related to repayment of a portion of our term debt.
Other Income (Expense) — Net
Other income (expense) — net for the year ended
December 31, 2014
was expense of
$3.4 million
, a decrease of
$8.7 million
when compared to income of
$5.3 million
in the prior year. This was driven primarily by foreign exchange losses in the current year period compared to gains in the prior year period.
Income Taxes
During the year ended
December 31, 2014
, we recognized income tax expense of
$37.7 million
on income of
$297.2 million
, an effective tax rate of
12.7%
, as compared to an income tax expense of
$87.4 million
on income of
$291.3 million
, an effective tax rate of
30.0%
, for the year ended
December 31, 2013
. The lower effective tax rate for the year ended December 31, 2014 was primarily due to tax benefits derived from divestitures and a more favorable geographic mix of earnings. These items were partially offset by the recording of valuation allowances and reduced benefits from the release of uncertain tax positions when compared to the prior year.
Income (Loss) from Discontinued Operations
Income from discontinued operations for the year ended
December 31, 2014
decreased by approximately
$13 million
when compared to the prior year as the truck business was sold in May 2014.
Gain (Loss) on Disposition of Discontinued Operations
Gain (loss) on disposition of discontinued operations increased by approximately
$56 million
primarily due to the sale of the truck business in the year ended
December 31, 2014
.
2013
COMPARED WITH
2012
Terex Consolidated
|
|
2013
|
2012
|
|
|
||||||||||||
|
|
|
% of
Sales
|
|
% of
Sales
|
|
% Change In Reported Amounts
|
||||||||||
|
|
($ amounts in millions)
|
|
|
|||||||||||||
|
Net sales
|
$
|
7,084.0
|
|
—
|
|
$
|
6,982.2
|
|
—
|
|
|
1.5
|
%
|
|||
|
Gross profit
|
$
|
1,439.5
|
|
20.3
|
%
|
$
|
1,400.1
|
|
20.1
|
%
|
|
2.8
|
%
|
|||
|
SG&A
|
$
|
1,020.4
|
|
14.4
|
%
|
$
|
1,033.3
|
|
14.8
|
%
|
|
(1.2
|
)%
|
|||
|
Income from operations
|
$
|
419.1
|
|
5.9
|
%
|
$
|
366.8
|
|
5.3
|
%
|
|
14.3
|
%
|
|||
Net sales for the year ended
December 31, 2013
increased
$101.8 million
when compared to
2012
. Our AWP segment had significant growth in net sales from continued rental channel replenishment, particularly in North America, Europe and Latin America as well as other international markets. However, the impact of weak demand in European and other markets on our Construction, Cranes, MHPS and MP segments partially offset those net sales increases.
Gross profit for the year ended
December 31, 2013
increased
$39.4 million
when compared to
2012
. Approximately $32 million of restructuring and related charges impacted gross profit in the current year. Our AWP and Construction segments’ gross profit improved from the prior year period, partially offset by decreased gross profit in the other three segments.
39
SG&A costs for the year ended
December 31, 2013
decreased by
$12.9 million
when compared to
2012
. Approximately $29 million of restructuring and related charges affected SG&A costs in the current year. These charges were partially offset by lower SG&A costs resulting from actions taken in prior periods to lower our cost structure as well as from a charge taken in the prior year for an acquisition related note receivable that did not recur in the current year.
Income from operations improved by
$52.3 million
for the year ended
December 31, 2013
when compared to
2012
. The increase was primarily due to improved profitability in our AWP segment and lower overall SG&A costs.
Aerial Work Platforms
|
|
2013
|
2012
|
|
|
||||||||||||
|
|
|
% of
Sales
|
|
% of
Sales
|
|
% Change In Reported Amounts
|
||||||||||
|
|
($ amounts in millions)
|
|
|
|||||||||||||
|
Net sales
|
$
|
2,131.0
|
|
|
—
|
|
$
|
1,742.4
|
|
|
—
|
|
|
22.3
|
%
|
|
|
Gross profit
|
$
|
514.9
|
|
|
24.2
|
%
|
$
|
381.2
|
|
|
21.9
|
%
|
|
35.1
|
%
|
|
|
SG&A
|
$
|
189.1
|
|
|
8.9
|
%
|
$
|
170.3
|
|
|
9.8
|
%
|
|
11.0
|
%
|
|
|
Income from operations
|
$
|
325.8
|
|
|
15.3
|
%
|
$
|
210.9
|
|
|
12.1
|
%
|
|
54.5
|
%
|
|
Net sales for the AWP segment for the year ended
December 31, 2013
increased
$388.6 million
when compared to
2012
. We continued to see growth from replacement-based demand in the North American, Latin American and European rental channels for our aerial work platform products as well as increased demand arising from the early stages of replacement demand in many other international markets.
Gross profit for the year ended
December 31, 2013
increased
$133.7 million
when compared to
2012
. Increased net sales, improved price realization, lower material costs and the mix of product sales, contributed approximately $149 million to the improvement in gross profit. This improvement was slightly offset by approximately $11 million in higher distribution and warranty costs associated with higher net sales volume.
SG&A costs for the year ended
December 31, 2013
increased
$18.8 million
when compared to
2012
. Higher selling and marketing costs associated with higher net sales increased SG&A costs by approximately $7 million as compared to the prior year. Additionally, the allocation of corporate costs was approximately $8 million higher in the current year.
Income from operations for the year ended
December 31, 2013
improved
$114.9 million
when compared to
2012
. The increase was due to the items noted above, particularly increased net sales volume, partially offset by higher SG&A costs.
Construction
|
|
2013
|
2012
|
|
|
||||||||||||
|
|
|
% of
Sales
|
|
% of
Sales
|
|
% Change In Reported Amounts
|
||||||||||
|
|
($ amounts in millions)
|
|
|
|||||||||||||
|
Net sales
|
$
|
820.0
|
|
|
—
|
|
$
|
952.1
|
|
|
—
|
|
|
(13.9
|
)%
|
|
|
Gross profit
|
$
|
83.2
|
|
|
10.1
|
%
|
$
|
68.2
|
|
|
7.2
|
%
|
|
22.0
|
%
|
|
|
SG&A
|
$
|
108.0
|
|
|
13.2
|
%
|
$
|
137.5
|
|
|
14.4
|
%
|
|
(21.5
|
)%
|
|
|
Loss from operations
|
$
|
(24.8
|
)
|
|
(3.0
|
)%
|
$
|
(69.3
|
)
|
|
(7.3
|
)%
|
|
*
|
|
|
* Not meaningful as a percentage
Net sales for the Construction segment decreased by
$132.1 million
for the year ended
December 31, 2013
when compared to
2012
. Demand for our Construction products has weakened, particularly in Western Europe. Decreased demand for our material handlers and compact construction equipment negatively impacted net sales in the current year period. These declines were partially offset by improved net sales from our cement mixer product line.
40
Gross profit for the year ended
December 31, 2013
increased
$15.0 million
when compared to
2012
. The increase was primarily due to approximately $21 million of lower inventory and restructuring charges in the current year compared to the prior year. These were partially offset by lower net sales for our material handlers and compact construction product lines worldwide. Additionally, charges taken in connection with the sale of a portion of the roadbuilding businesses decreased gross profit by approximately $3 million.
SG&A costs for the year ended
December 31, 2013
decreased
$29.5 million
when compared to
2012
. Cost reduction activities taken in prior periods are reflected in lower current year SG&A costs. Additionally, the allocation of corporate costs was approximately $5 million lower in the current year. Approximately $5 million lower restructuring and related charges in the current year decreased SG&A costs.
Loss from operations for the year ended
December 31, 2013
decreased
$44.5 million
when compared to
2012
. The lower loss was primarily due to lower inventory, restructuring and other SG&A costs partially offset by the impact of lower net sales.
Cranes
|
|
2013
|
2012
|
|
|
||||||||||||
|
|
|
% of
Sales
|
|
% of
Sales
|
|
% Change In Reported Amounts
|
||||||||||
|
|
($ amounts in millions)
|
|
|
|||||||||||||
|
Net sales
|
$
|
1,925.5
|
|
|
—
|
|
$
|
1,987.6
|
|
|
—
|
|
|
(3.1
|
)%
|
|
|
Gross profit
|
$
|
337.1
|
|
|
17.5
|
%
|
$
|
393.6
|
|
|
19.8
|
%
|
|
(14.4
|
)%
|
|
|
SG&A
|
$
|
226.6
|
|
|
11.8
|
%
|
$
|
225.6
|
|
|
11.4
|
%
|
|
0.4
|
%
|
|
|
Income from operations
|
$
|
110.5
|
|
|
5.7
|
%
|
$
|
168.0
|
|
|
8.5
|
%
|
|
(34.2
|
)%
|
|
Net sales for the Cranes segment for the year ended
December 31, 2013
decreased by
$62.1 million
when compared to
2012
. We have experienced declines in net sales in Australia and Latin America, partially offset by stronger sales in the Middle East. These declines were primarily related to lower commodity driven demand.
Gross profit for the year ended
December 31, 2013
decreased by
$56.5 million
when compared to
2012
. Approximately $10 million of restructuring and related charges impacted gross profit in the current year period. The decrease in net sales and lower margin mix of product sales were the primary drivers of the remaining decrease in gross profit.
SG&A costs for the year ended
December 31, 2013
increased
$1.0 million
when compared to
2012
. Approximately $5 million of higher engineering costs for new product development were incurred in the current year period. Additionally, the allocation of corporate costs was approximately $7 million higher in the current year period. However, a $12 million charge in the prior year period related to the write down of an acquisition related note did not recur in the current year period.
Income from operations for the year ended
December 31, 2013
decreased
$57.5 million
when compared to
2012
, resulting primarily from restructuring and related costs and lower net sales.
41
Material Handling & Port Solutions
|
|
2013
|
2012
|
|
|||||||||||||
|
|
|
% of
Sales
|
|
% of
Sales
|
% Change In
Reported Amounts
|
|||||||||||
|
|
($ amounts in millions)
|
|
||||||||||||||
|
Net sales
|
$
|
1,698.5
|
|
—
|
|
$
|
1,742.1
|
|
—
|
|
(2.5
|
)%
|
||||
|
Gross profit
|
$
|
345.4
|
|
20.3
|
%
|
$
|
386.7
|
|
22.2
|
%
|
(10.7
|
)%
|
||||
|
SG&A
|
$
|
387.2
|
|
22.8
|
%
|
$
|
381.1
|
|
21.9
|
%
|
1.6
|
%
|
||||
|
Income (loss) from operations
|
$
|
(41.8
|
)
|
(2.5
|
)%
|
$
|
5.6
|
|
0.3
|
%
|
*
|
|
||||
* Not meaningful as a percentage
Net sales for the MHPS segment for the year ended
December 31, 2013
decreased by
$43.6 million
when compared to
2012
. Weak demand across several geographies, including Europe, South Africa and India, has reduced net sales in both businesses in this segment. However, net sales were approximately 40% higher in the second half of the current year than in the first half of the year.
Gross profit for the year ended
December 31, 2013
decreased by
$41.3 million
when compared to
2012
. Approximately $21 million of restructuring and related charges impacted gross profit in the current year period. The remaining decrease in gross profit was primarily attributable to the reduced overall net sales volume.
SG&A costs for the year ended
December 31, 2013
increased by
$6.1 million
when compared to
2012
. Approximately $25 million of restructuring and related charges affected SG&A costs in the current year period. This was partially offset by cost reduction activities taken in prior periods that positively impacted SG&A by approximately $15 million.
Income (loss) from operations for the year ended
December 31, 2013
declined by
$47.4 million
when compared to
2012
. These results were primarily driven by restructuring and related charges.
Materials Processing
|
|
2013
|
2012
|
|
|
||||||||||||
|
|
|
% of
Sales
|
|
% of
Sales
|
|
% Change In Reported Amounts
|
||||||||||
|
|
($ amounts in millions)
|
|
|
|||||||||||||
|
Net sales
|
$
|
628.2
|
|
|
—
|
|
$
|
661.5
|
|
|
—
|
|
|
(5.0
|
)%
|
|
|
Gross profit
|
$
|
145.4
|
|
|
23.1
|
%
|
$
|
149.6
|
|
|
22.6
|
%
|
|
(2.8
|
)%
|
|
|
SG&A
|
$
|
73.6
|
|
|
11.7
|
%
|
$
|
74.3
|
|
|
11.2
|
%
|
|
(0.9
|
)%
|
|
|
Income from operations
|
$
|
71.8
|
|
|
11.4
|
%
|
$
|
75.3
|
|
|
11.4
|
%
|
|
(4.6
|
)%
|
|
Net sales in the MP segment decreased by
$33.3 million
for the year ended
December 31, 2013
when compared to
2012
. The translation effect of foreign currency exchange rate changes negatively impacted net sales by approximately $12 million. Additionally, the decline in net sales was impacted by weakness in minerals driven markets such as Australia and South America, as well as general construction weakness in Europe. However, our business remained strong in North America driven by replacement demand.
Gross profit for the year ended
December 31, 2013
decreased by
$4.2 million
when compared to
2012
. The decrease was primarily due to lower net sales volume and a negative impact from the translation effect of foreign currency exchange rate changes. However, improved manufacturing cost structure partially offset this decrease.
SG&A costs for the year ended
December 31, 2013
decreased
$0.7 million
when compared to
2012
. SG&A costs in the current year reflected reduced spending on selling and marketing costs, partially offset by increased engineering costs for investments in new products and markets.
42
Income from operations for the year ended
December 31, 2013
decreased
$3.5 million
when compared to
2012
. This was driven primarily by lower net sales partially offset by manufacturing costs controls.
Corporate/Eliminations
|
|
2013
|
2012
|
|
|
|||||||||||
|
|
|
% of
Sales
|
|
% of
Sales
|
|
% Change In Reported Amounts
|
|||||||||
|
|
($ amounts in millions)
|
|
|
||||||||||||
|
Net sales
|
$
|
(119.2
|
)
|
|
—
|
|
$
|
(103.5
|
)
|
|
—
|
|
|
*
|
|
|
Loss from operations
|
$
|
(22.4
|
)
|
|
18.8
|
%
|
$
|
(23.7
|
)
|
|
22.9
|
%
|
|
*
|
|
* Not meaningful as a percentage
The net sales amounts include the elimination of intercompany sales activity among segments.
Interest Expense, Net of Interest Income
During the year ended
December 31, 2013
, our interest expense net of interest income was
$119.4 million
, or
$36.4 million
lower than the prior year. This improvement was primarily driven by the capital market activities in 2012 and continued paydown of debt in 2013, which generally resulted in lower cost debt being used to pay off higher cost debt as well as decreasing our debt balances.
Loss on Early Extinguishment of Debt
We recorded a loss of $5.2 million on early extinguishment of debt during the year ended December 31, 2013 related to the redemption of a portion of our term debt. A loss of $83.0 million on early extinguishment of debt was recorded in the year ended December 31, 2012 related to the redemption of certain of our senior notes and convertible debt.
Other Income (Expense) — Net
Other income (expense) — net for the year ended
December 31, 2013
was income of
$5.3 million
, a decrease of
$2.6 million
when compared to income of
$7.9 million
in the prior year. This was driven primarily by losses incurred from the sale of assets in the current year.
Income Taxes
During the year ended
December 31, 2013
, we recognized income tax expense of
$87.4 million
on income of
$291.3 million
, an effective tax rate of
30.0%
, as compared to income tax expense of
$51.5 million
on income of
$126.3 million
, an effective tax rate of
40.8%
, for the year ended
December 31, 2012
. The lower effective tax rate for the year ended December 31, 2013 was primarily due to reductions in the provision for uncertain tax positions and losses for which no tax benefit was recognized in the current year when compared to the prior year.
Income (Loss) from Discontinued Operations
Income from discontinued operations for the year ended
December 31, 2013
decreased by approximately $14 million when compared to the prior year primarily due to lower demand for our trucks in the current year.
Gain (Loss) on Disposition of Discontinued Operations
For the year ended
December 31, 2013
, we recognized a gain from contractually obligated earnings based payments from the purchaser of a business sold in 2010. For the year ended
December 31, 2012
, we recognized a gain from contractually obligated earnings based payments from the purchaser of a business sold in 2010 partially offset by a loss associated with settlement of claims related to the sale of the Mining business.
43
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Changes in the estimates and assumptions used by management could have significant impact on our financial results. Actual results could differ from those estimates.
We believe that the following are among our most significant accounting policies which are important in determining the reporting of transactions and events and which utilize estimates about the effect of matters that are inherently uncertain and therefore are based on management judgment. Please refer to Note A – “Basis of Presentation” in the accompanying Consolidated Financial Statements for a complete listing of our accounting policies.
Inventories
–
In valuing inventory, we are required to make assumptions regarding the level of reserves required to value potentially obsolete or over-valued items at the lower of cost or market. These assumptions require us to analyze the aging of and forecasted demand for our inventory, forecast future products sales prices, pricing trends and margins, and to make judgments and estimates regarding obsolete or excess inventory. Future product sales prices, pricing trends and margins are based on the best available information at that time including actual orders received, negotiations with our customers for future orders, including their plans for expenditures, and market trends for similar products. Our judgments and estimates for excess or obsolete inventory are based on analysis of actual and forecasted usage. The valuation of used equipment taken in trade from customers requires us to use the best information available to determine the value of the equipment to potential customers. This value is subject to change based on numerous conditions. Inventory reserves are established taking into account age, frequency of use, or sale, and in the case of repair parts, the installed base of machines. While calculations are made involving these factors, significant management judgment regarding expectations for future events is involved. Future events that could significantly influence our judgment and related estimates include general economic conditions in markets where our products are sold, new equipment price fluctuations, actions of our competitors, including the introduction of new products and technological advances, as well as new products and design changes we introduce. We make adjustments to our inventory reserve based on the identification of specific situations and increase our inventory reserves accordingly. As further changes in future economic or industry conditions occur, we will revise the estimates that were used to calculate its inventory reserves.
If actual conditions are less favorable than those we have projected, we will increase our reserves for lower of cost or market (“LCM”), excess and obsolete inventory accordingly. Any increase in our reserves will adversely impact our results of operations. The establishment of a reserve for LCM, excess and obsolete inventory establishes a new cost basis in the inventory. Such reserves are not reduced until the product is sold.
Accounts Receivable
–
We are required to judge our ability to collect accounts receivable from our customers. Valuation of receivables includes evaluating customer payment histories, customer leverage, availability of third-party financing, political and exchange risks and other factors. Many of these factors, including the assessment of a customer’s ability to pay, are influenced by economic and market factors that cannot be predicted with certainty. Given current economic conditions, there can be no assurance that our historical accounts receivable collection experience will be indicative of future results.
Guarantees
–
As of
December 31, 2014
, we have issued guarantees to financial institutions related to customer financing of equipment purchases by our customers. We must assess the probability of losses or non-performance in ways similar to the evaluation of accounts receivable, including consideration of a customer’s payment history, leverage, availability of third party financing, political and exchange risks, and other factors. Many of these factors, including the assessment of a customer’s ability to pay, are influenced by economic and market factors that cannot be predicted with certainty.
Our customers, from time to time, may fund acquisition of our equipment through third-party finance companies. In certain instances, we may provide a credit guarantee to the finance company by which we agree to make payments to the finance company should the customer default. Our maximum liability is limited to the remaining payments due to the finance company at the time of default. In the event of customer default, we have generally been able to recover and dispose of the equipment at a minimum loss, if any, to us. There can be no assurance that our historical credit default experience will be indicative of future results. Our ability to recover losses experienced from our guarantees may be affected by economic conditions in effect at the time of loss.
We issue 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 point in time. We are generally able to mitigate the risk associated with these guarantees because the maturity of the guarantees is staggered, which limits the amount of used equipment entering the marketplace at any one time.
44
We guarantee, from time to time, that we will buy equipment from our 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. We are generally able to mitigate the risk of these guarantees because the maturity of the guarantees is staggered, limiting the amount of used equipment entering the marketplace at any one time and through leveraging our access to the used equipment markets provided by our original equipment manufacturer status.
We record a liability for the estimated fair value of guarantees issued pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 460, “Guarantees” (“ASC 460”). We recognize a loss under a guarantee when our obligation to make payment under the guarantee is probable and the amount of the loss can be estimated. A loss would be recognized if our payment obligation under the guarantee exceeds the value we could expect to recover to offset such payment, primarily through the sale of the equipment underlying the guarantee.
There can be no assurances that our historical experience in used equipment markets will be indicative of future results. Our ability to recover losses experienced from our guarantees may be affected by economic conditions in the used equipment markets at the time of loss.
See Note Q – “Litigations and Contingencies” in the Notes to the Consolidated Financial Statements for further information regarding our guarantees.
Revenue Recognition
– Revenue and related costs are generally recorded when products are shipped and invoiced to either independently owned and operated dealers or to end-customers.
Revenue generated in the United States is recognized when title and risk of loss pass from us to our customers, which generally occurs upon shipment depending upon the shipping terms negotiated. We also have a policy requiring that certain criteria be met in order to recognize revenue, including satisfaction of the following requirements:
|
a)
|
Persuasive evidence that an arrangement exists;
|
|
b)
|
The price to the buyer is fixed or determinable;
|
|
c)
|
Collectability is reasonably assured; and
|
|
d)
|
We have no significant obligations for future performance.
|
In the United States, we have the ability to enter into a security agreement and receive a security interest in the product by filing an appropriate Uniform Commercial Code (“UCC”) financing statement. However, a significant portion of our revenue is generated outside of the United States. In many countries outside of the United States, as a matter of statutory law, a seller retains title to a product until payment is made. The laws do not provide for a seller’s retention of a security interest in goods in the same manner as established in the UCC. In these countries, we retain title to goods delivered to a customer until the customer makes payment so that we can recover the goods in the event of customer default on payment. In these circumstances, where we only retain title to secure our recovery in the event of customer default, we also have a policy, which requires meeting certain criteria in order to recognize revenue, including satisfaction of the following requirements:
|
a)
|
Persuasive evidence that an arrangement exists;
|
|
b)
|
Delivery has occurred or services have been rendered;
|
|
c)
|
The price to the buyer is fixed or determinable;
|
|
d)
|
Collectability is reasonably assured;
|
|
e)
|
We have no significant obligations for future performance; and
|
|
f)
|
We are not entitled to direct the disposition of the goods, cannot rescind the transaction, cannot prohibit the customer from moving, selling, or otherwise using the goods in the ordinary course of business and have no other rights of holding title that rest with a titleholder of property that is subject to a lien under the UCC.
|
In circumstances where the sales transaction requires acceptance by the customer for items such as testing on site, installation, trial period or performance criteria, revenue is not recognized unless the following criteria have been met:
|
a)
|
Persuasive evidence that an arrangement exists;
|
|
b)
|
Delivery has occurred or services have been rendered;
|
|
c)
|
The price to the buyer is fixed or determinable;
|
|
d)
|
Collectability is reasonably assured; and
|
|
e)
|
The customer has given their acceptance, the time period for acceptance has elapsed or we have otherwise objectively demonstrated that the criteria specified in the acceptance provisions have been satisfied.
|
45
In addition to performance commitments, we analyze factors such as the reason for the purchase to determine if revenue should be recognized. This analysis is done before the product is shipped and includes the evaluation of factors that may affect the conclusion related to the revenue recognition criteria as follows:
|
a)
|
Persuasive evidence that an arrangement exists;
|
|
b)
|
Delivery has occurred or services have been rendered;
|
|
c)
|
The price to the buyer is fixed or determinable; and
|
|
d)
|
Collectability is reasonably assured.
|
Revenue from sales-type leases is recognized at the inception of the lease. Income from operating leases is recognized ratably over the term of the lease. We routinely sell equipment subject to operating leases and the related lease payments. If we do not retain a substantial risk of ownership in the equipment, the transaction is recorded as a sale. If we do retain a substantial risk of ownership, the transaction is recorded as a borrowing, the operating lease payments are recognized as revenue over the term of the lease and the debt is amortized over a similar period.
We, from time to time, issue buyback guarantees in conjunction with certain sales agreements. These primarily relate to trade value agreements (“TVAs”) in which a customer may trade in equipment in the future at a stated price/credit if the customer meets certain conditions. The trade-in price/credit is determined at the time of the original sale of equipment. In conjunction with the trade-in, these conditions include a requirement to purchase new equipment at fair market value at the time of trade-in, which fair value is required to be of equal or greater value than the original equipment cost. Other conditions also include the general functionality and state of repair of the machine. We have concluded that any credit provided to customers under a TVA/buyback guarantee, which is expected to be equal to or less than the fair value of the equipment returned on the trade-in date, is a guarantee to be accounted for in accordance with ASC 460.
The original sale of equipment, accompanied by a buyback guarantee, is a multiple element transaction wherein we offer our customer the right, after some period of time, for a limited period of time, to exchange purchased equipment for a fixed price trade-in credit toward another of our products. The fixed price trade-in credit is accounted for under the guidance provided by ASC 460. Pursuant to this right, we have agreed to make a payment (in the form of a trade-in credit) to the customer contingent upon the customer exercising its right to trade in the original purchased equipment. Under the guidance of ASC 460, we record the fixed price trade-in credit at its fair value. Accordingly, as noted above, we have accounted for the trade-in credit as a separate deliverable in a multiple element arrangement.
When a sales transaction includes multiple deliverables, such as sales of multiple products or sales of products and services that are delivered over multiple reporting periods, the multiple deliverables are evaluated to determine the units of accounting, and the entire fee from the arrangement is allocated to each unit of accounting based on the relative selling price. The selling price of a unit of accounting is determined using a selling price hierarchy. Vendor-specific objective evidence (“VSOE”) is established based upon the price charged for products and services that are sold separately in standalone transactions. If VSOE cannot be established, third-party evidence (“TPE”) is evaluated based on competitor prices for similar deliverables when sold separately. If neither VSOE or TPE is available, management's best estimate of selling price is established based upon the price at which we would sell the product on a standalone basis taking into consideration factors including, but not limited to, internal costs, gross margin objectives, pricing practices and market conditions. Revenue is recognized when the revenue recognition criteria for each unit of accounting are met.
Goodwill –
Goodwill, representing the difference between the total purchase price and the fair value of assets (tangible and intangible) and liabilities at the date of acquisition, is reviewed for impairment annually, and more frequently as circumstances warrant, and written down only in the period in which the recorded value of such assets exceed their fair value. We selected October 1 as the date for our required annual impairment test.
Goodwill is tested for impairment at the reporting unit level, which is defined as an operating segment or a component of an operating segment that constitutes a business for which discrete financial information with similar economic characteristics is available and the operating results are regularly reviewed by our management. The AWP, Construction, Cranes and MP operating segments plus the Material Handling business and Port Solutions business of MHPS, comprise the six reporting units for goodwill impairment testing purposes.
46
We may elect to perform a qualitative analysis for our reporting units to determine whether it is more likely than not that the fair value of the reporting unit is greater than its carrying value. If the qualitative analysis indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount or if we elect not to perform a qualitative analysis, we perform a quantitative analysis to determine whether a goodwill impairment exists.
The quantitative goodwill impairment analysis is a two-step process. The first step used to identify potential impairment involves comparing each reporting unit’s estimated fair value to its carrying value, including goodwill. We use an income approach derived from the discounted cash flow model to estimate the fair value of our reporting units. The aggregate fair value of our reporting units is compared to our market capitalization on the valuation date to assess its reasonableness. The initial recognition of goodwill, as well as the annual review of the carrying value of goodwill, requires that we develop estimates of future business performance. These estimates are used to derive expected cash flow and include assumptions regarding future sales levels and the level of working capital needed to support a given business. We rely on data developed by business segment management as well as macroeconomic data in making these calculations. The discounted cash flow model also includes a determination of our weighted average cost of capital. The cost of capital is based on assumptions about interest rates as well as a risk-adjusted rate of return required by our equity investors. Changes in these estimates can impact the present value of the expected cash flow that is used in determining the fair value of acquired intangible assets as well as the overall expected value of a given business.
The second step of the process involves the calculation of an implied fair value of goodwill for each reporting unit for which step one indicated impairment. The implied fair value of goodwill is determined by measuring the excess of the estimated fair value of the reporting unit over the estimated fair values of the individual assets, liabilities and identifiable intangibles as if the reporting unit was being acquired in a business combination. If the implied fair value of goodwill exceeds the carrying value of goodwill assigned to the reporting unit, there is no impairment. If the carrying value of goodwill assigned to a reporting unit exceeds the implied fair value of the goodwill, an impairment charge is recorded for the excess. An impairment loss cannot exceed the carrying value of goodwill assigned to a reporting unit and subsequent reversal of goodwill impairment losses is not permitted.
There were no indicators of goodwill impairment in the tests performed as of October 1,
2014
,
2013
and
2012
. See Note J – “Goodwill and Intangible Assets, Net” in the Notes to the Consolidated Financial Statements.
In order to evaluate the sensitivity of any quantitative fair value calculations on the goodwill impairment test, we applied a hypothetical 10% decrease to the fair values of any reporting unit calculated. This hypothetical 10% decrease would still result in excess fair value over carrying value for the reporting units as of October 1,
2014
.
Impairment of Long-Lived Assets
– Our policy is to assess the realizability of our 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 fair value based on the estimated future undiscounted cash flows are less than the asset’s carrying value. Future cash flow projections include assumptions regarding future sales levels and the level of working capital needed to support each business. We use data developed by business segment management as well as macroeconomic data in making these calculations. There are no assurances that future cash flow assumptions will be achieved. The amount of any impairment then recognized would be calculated as the difference between the estimated fair value and the carrying value of the asset.
Accrued Warranties
– We record accruals for unasserted warranty claims based on our claim experience. Warranty costs are accrued at the time revenue is recognized. However, adjustments to the initial warranty accrual are recorded if actual claim experience indicates that adjustments are necessary. These warranty costs are based upon management’s assessment of past claims and current experience. However, actual claims could be higher or lower than amounts estimated, as the amount and value of warranty claims are subject to variation as a result of many factors that cannot be predicted with certainty, including the performance of new products, models and technology, changes in weather conditions for product operation, different uses for products and other similar factors.
Accrued Product Liability –
We record accruals for product liability claims when deemed probable and estimable based on facts and circumstances and our prior claim experience. Accruals for product liability claims are valued based upon our prior claims experience, including consideration of the jurisdiction, circumstances of the accident, type of loss or injury, identity of plaintiff, other potential responsible parties, analysis of outside legal counsel, analysis of internal product liability counsel and the experience of our product safety team. Actual product liability costs could be different due to a number of variables such as the decisions of juries or judges.
47
Defined Benefit Plans
– Pension benefits represent financial obligations that will be ultimately settled in the future with employees who meet eligibility requirements. As of
December 31, 2014
, we maintained one qualified defined benefit pension plan and one nonqualified plan covering certain U.S. employees. 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. Participation in the qualified plan is frozen and participants are only credited with post-freeze service for purposes of determining vesting and retirement eligibility. It is our policy, generally, to fund the qualified U.S. plan based on the requirements of the Employee Retirement Income Security Act of 1974. See Note O – “Retirement Plans and Other Benefits” in the Notes to the Consolidated Financial Statements. The nonqualified plan provides retirement benefits to certain senior executives of the Company and is unfunded. Generally, the nonqualified plan 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. Participation in the nonqualified plan is frozen; however, eligible participants are credited with post-freeze service for purposes of determining vesting and the amount of benefits.
We maintain defined benefit plans in France, Germany, India, Switzerland and the United Kingdom (“U.K.”) for some of our subsidiaries. The plans in France, Germany and India are unfunded plans. The plan in the U.K. is frozen. For our operations in Austria and Italy there are mandatory termination indemnity plans providing a benefit that is payable upon termination of employment in substantially all cases of termination. We record 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.
Plan assets consist primarily of common stocks, bonds and short-term cash equivalent funds. For the U.S. plan, approximately
32%
of the assets are in equity securities and
68%
are in fixed income securities. For the non-U.S. funded plans, approximately
30%
of the assets are in equity securities,
64%
are in fixed income securities and
6%
are in real estate investment securities. These allocations are reviewed periodically and updated to meet the long-term goals of the plans.
Determination of defined benefit pension and postretirement plan obligations and their associated expenses requires the use of actuarial valuations to estimate the benefits that employees earn while working, as well as the present value of those benefits. We use the services of independent actuaries to assist with these calculations. Inherent in these valuations are economic assumptions, including expected returns on plan assets, discount rates at which liabilities may be settled, rates of increase of health care costs, rates of future compensation increases as well as employee demographic assumptions such as retirement patterns, mortality and turnover. The actuarial assumptions used may differ materially from actual results due to changing market and economic conditions, higher or lower turnover rates, or longer or shorter life spans of participants. During 2014, the Society of Actuaries released a new mortality table, which is believed to better reflect mortality improvements and is to be used in calculating defined benefit pension obligations. The Company adopted these new tables for its U.S. pension plans for use in determining its projected benefit obligations. Actual results that differ from the actuarial assumptions used are recorded as unrecognized gains and losses. Unrecognized gains and losses that exceed 10% of the greater of the plan’s projected benefit obligations or the market-related value of assets are amortized to earnings over the shorter of the estimated future service period of the plan participants or the period until any anticipated final plan settlements. The assumptions used in the actuarial models are evaluated periodically and are updated to reflect experience. We believe the assumptions used in the actuarial calculations are reasonable and are within accepted practices in each of the respective geographic locations in which we operate.
Expected long-term rates of return on pension plan assets were
7.50%
for the U.S. plan,
6.00%
for the U.K. plan and
3.00%
for the Swiss plan at
December 31, 2014
. Our strategy with regard to the investments in the pension plans is to earn a rate of return sufficient to match or exceed the long-term growth of pension liabilities. The expected rate of return of plan assets represents an estimate of long-term returns on the investment portfolio. These rates are determined annually by management based on a weighted average of current and historical market trends, historical portfolio performance and the portfolio mix of investments. The expected long-term rate of return on plan assets at December 31 is used to measure the earnings effects for the subsequent year. The difference between the expected return and the actual return on plan assets affects the calculated value of plan assets and, ultimately, future pension expense (income).
The discount rates for pension plan liabilities were
4.02%
for U.S. plan and
1.21%
to
12.54%
with a weighted average of
2.54%
for non-U.S. plans at
December 31, 2014
. The discount rate enables us to estimate the present value of expected future cash flows on the measurement date. The rate used reflects a rate of return on high-quality fixed income investments that match the duration of expected benefit payments at the December 31 measurement date. The discount rate at December 31 is used to measure the year-end benefit obligations and the earnings effects on the subsequent year. Typically, a higher discount rate decreases the present value of benefit obligations and increases pension expense.
48
The expected rates of compensation increase for our non-U.S. pension plans were
1.00%
to
9.00%
with a weighted average of
1.51%
at
December 31, 2014
. These estimated annual compensation increases are determined by management every year and are based on historical trends and market indices.
We have recorded the underfunded status on our balance sheet as a liability and the unrecognized prior service costs and actuarial gains (losses) as an adjustment to Stockholders’ equity on the Consolidated Balance Sheet. The net increase in the liability and funded status of
$43.5 million
was due to changes in assumptions from the previous year, primarily decreases in the discount rates.
Actual results in any given year will often differ from actuarial assumptions because of demographic, economic and other factors. The market value of plan assets can change significantly in a relatively short period of time. Additionally, the measurement of plan benefit obligations is sensitive to changes in interest rates. As a result, if the equity market declines and/or interest rates decrease, the plans’ estimated benefit obligations could increase, causing an increase in liabilities and a reduction in Stockholders’ Equity.
We expect that any future obligations under our plans that are not currently funded will be funded from future cash flows from operations. If our contributions are insufficient to adequately fund the plans to cover our future obligations, or if the performance of the assets in our plans does not meet expectations, or if our assumptions are modified, contributions could be higher than expected, which would reduce cash available for our business. Changes in U.S. or foreign laws governing these plans could require additional contributions. In addition, changes in generally accepted accounting principles in the U.S. could require recording additional liabilities and costs related to these plans.
Assumptions used in computing our net pension expense and projected benefit obligation have a significant effect on the amounts reported. A 0.25% change in each assumption below would have the following effects upon net pension expense and projected benefit obligation, respectively, as of and for the year ended
December 31, 2014
:
|
Increase
|
Decrease
|
||||||||||||||
|
Discount Rate
|
Expected long-
term rate of return
|
Discount Rate
|
Expected long-
term rate of return
|
||||||||||||
|
($ amounts in millions)
|
|||||||||||||||
|
U. S. Plan:
|
|||||||||||||||
|
Net pension expense
|
$
|
(0.1
|
)
|
$
|
(0.3
|
)
|
$
|
0.1
|
|
$
|
0.3
|
|
|||
|
Projected benefit obligation
|
$
|
(4.1
|
)
|
$
|
—
|
|
$
|
4.1
|
|
$
|
—
|
|
|||
|
Non-U.S. Plans:
|
|||||||||||||||
|
Net pension expense
|
$
|
(0.8
|
)
|
$
|
(0.4
|
)
|
$
|
0.8
|
|
$
|
0.4
|
|
|||
|
Projected benefit obligation
|
$
|
(10.8
|
)
|
$
|
—
|
|
$
|
11.5
|
|
$
|
—
|
|
|||
Income Taxes
– We estimate income taxes based on enacted tax laws in the various jurisdictions where we conduct business. We recognize deferred income tax assets and liabilities, which represent future tax benefits or obligations of our legal entities. These deferred income tax balances arise from temporary differences due to divergent treatment of certain items for accounting and income tax purposes.
We evaluate our deferred tax assets each period to ensure that estimated future taxable income will be sufficient in character, amount and timing to result in the use of our deferred tax assets. “Character” refers to the type (ordinary income versus capital gain) as well as the source (foreign vs. domestic) of the income we generate. “Timing” refers to the period in which future income is expected to be generated. Timing is important because, in certain jurisdictions, net operating losses (“NOLs”) and other tax attributes expire if not used within an established statutory time frame. Based on these evaluations, we have determined that it is more likely than not that expected future earnings will be sufficient to use most of our deferred tax assets.
We do not provide for income taxes or tax benefits on the differences between financial reporting basis and tax basis of our non-U.S. subsidiaries where such differences are reinvested and, in our opinion, will continue to be indefinitely reinvested. If earnings of foreign subsidiaries are not considered indefinitely reinvested, deferred U.S. income taxes, foreign income taxes, and foreign withholding taxes may have to be provided. We do not record deferred income taxes on the temporary difference between the 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 practicable.
49
Judgments and estimates are required to determine tax expense and deferred tax valuation allowances and in assessing uncertain tax positions. Tax returns are subject to audit and local taxing authorities could challenge tax-filing positions we take. Our practice is to file income tax returns that conform to the requirements of each jurisdiction and to record provisions for tax liabilities, including interest and penalties, in accordance with ASC 740, “Income Taxes.” As our business has grown in geographic scope, size and complexity, so has our potential exposure to uncertain tax positions. Given the subjective nature of applicable tax laws, the results of an audit of some of our tax returns could have a significant impact on our financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
Please refer to Note A – “Basis of Presentation” in the accompanying Consolidated Financial Statements for a listing of recent accounting pronouncements.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity (cash and availability under our revolving credit line) increased from
December 31, 2013
to
December 31, 2014
by approximately
$342 million
. This was a result of a number of actions taken in 2014, including our continued focus on cash generation. We had free cash flow of approximately
$329 million
in the year ended
December 31, 2014
, which was meaningfully above our expectations to generate between $200 million and $250 million during 2014. This was primarily due to improved working capital efficiency and net income for the year. During 2014, we entered into a new credit facility, which extended the maturity dates on our term debt and revolving line of credit, increased borrowing capacity by $100 million on our revolving line of credit and lowered our interest cost. Please refer to Note M – “Long-Term Obligations” in the accompanying Consolidated Financial Statements for further information on the new credit facility. Additionally, we repaid approximately
$118 million
under our revolving credit line with cash generated from operations.
The following table reconciles Net cash provided by (used in) operating activities to free cash flow (in millions):
|
Year Ended
12/31/2014 |
||||
|
Net cash provided by (used in) operating activities
|
410.7
|
|
||
|
Less: Capital expenditures
|
(81.5
|
)
|
||
|
Free cash flow
|
$
|
329.2
|
|
|
Our main sources of funding are cash generated from operations, loans from our bank credit facilities, and funds raised in capital markets. We had cash and cash equivalents of
$478.2 million
at
December 31, 2014
. We expect the majority of the cash held by our foreign subsidiaries to be maintained locally because we plan to reinvest such cash and cash equivalents to support our operations and continued growth plans outside the United States through funding of capital expenditures, acquisitions, operating expenses or other similar cash needs of these operations. Such cash could be used in the U.S., if necessary, however cash repatriated to the U.S. could be subject to incremental local and U.S. taxation. Currently, there are no trends, demands or uncertainties as a result of the Company’s cash re-investment policy that are reasonably likely to have a material effect on us as a whole or that may be relevant to our financial flexibility.
We believe cash generated from operations together with access to our bank credit facilities and cash on hand, provide adequate liquidity to continue to support our internal operating initiatives and meet our operating and debt service requirements. See Item 1A “Risk Factors” for a detailed description of the risks resulting from our debt and our ability to generate sufficient cash flow to operate our business.
50
Our ability to generate cash from operations is subject to numerous factors, including the following:
|
•
|
Many of our customers fund their purchases through third-party finance companies that extend credit based on the credit-worthiness of the customers and the expected residual value of our equipment. Changes either in the customers’ credit profile or used equipment values may affect the ability of customers to purchase equipment. There can be no assurance that third-party finance companies will continue to extend credit to our customers as they have in the past.
|
|
•
|
As our sales change, the absolute amount of working capital needed to support our business may change.
|
|
•
|
Our suppliers extend payment terms to us based on our overall credit rating. Declines in our credit rating may influence suppliers’ willingness to extend terms and in turn increase the cash requirements of our business.
|
|
•
|
Sales of our products are subject to general economic conditions, weather, competition, the translation effect of foreign currency exchange rate changes, and other factors that in many cases are outside our direct control. For example, during periods of economic uncertainty, our customers have delayed purchasing decisions, which reduces cash generated from operations.
|
For certain products, primarily port equipment and process cranes, we negotiate, when possible, advance payments from our customers for products with long lead times to help fund the substantial working capital investment in these products.
Typically, we have invested our cash in a combination of highly rated, liquid money market funds and in short-term bank deposits with large, highly rated banks. Our investment objective is to preserve capital and liquidity while earning a market rate of interest.
Our investment in financial services assets was approximately
$163 million
, net at
December 31, 2014
. We remain focused on expanding TFS in key markets like the U.S., Europe and China. We also anticipate using TFS to drive incremental sales by increasing end-customer financing through TFS when we believe the investments are justified. We intend to expand our investment in financial services assets in 2015 to leverage these assets for further reductions in borrowing costs.
During 2014, our cash used in inventory was approximately
$27 million
as we made investments in businesses showing improved order and inquiry activity. Working capital as a percent of trailing three month annualized net sales was
22.5%
at
December 31, 2014
.
The following tables show the calculation of our working capital and trailing three months annualized sales as of
December 31, 2014
(in millions):
|
Three months ended 12/31/14
|
|||
|
Net Sales
|
$
|
1,789.4
|
|
|
x
|
4
|
|
|
|
Trailing Three Month Annualized Net Sales
|
$
|
7,157.6
|
|
|
As of 12/31/14
|
|||
|
Inventories
|
$
|
1,460.9
|
|
|
Trade Receivables
|
1,086.4
|
|
|
|
Less: Trade Accounts Payable
|
(736.1
|
)
|
|
|
Less: Customer advances
|
(197.4
|
)
|
|
|
Total Working Capital
|
$
|
1,613.8
|
|
We have a credit agreement that provides us with a revolving line of credit of up to
$600 million
. See Note M – “Long-Term Obligations,” in our Consolidated Financial Statements for information concerning our credit agreement. We had
$600.0 million
available for borrowing under our revolving credit facilities at
December 31, 2014
. The credit agreement also allows incremental commitments, which may be extended at the option of the lenders and can be in the form of revolving credit commitments, term loan commitments, or a combination of both as long as we satisfy a secured debt financial ratio contained in the credit facilities. We had
no
outstanding borrowings under our revolving credit facilities as of
December 31, 2014
. Our U.S. dollar and Euro denominated term loans had
$467.9 million
outstanding under our credit agreement as of
December 31, 2014
.
51
Interest rates charged under our credit agreement are subject to adjustment based on our consolidated leverage ratio. The U.S. dollar term loans bear interest at a rate of London Interbank Offer Rate (“LIBOR”) plus 2.75%, with a floor of 0.75% on LIBOR. The Euro term loans bear interest at a rate of Euro Interbank Offer Rate (“EURIBOR”) plus 3.25%, with a floor of 0.75% on EURIBOR. At
December 31, 2014
, the weighted average interest rate on these term loans was
3.76%
.
We manage our interest rate risk by maintaining a balance between fixed and floating rate debt, including the use of interest rate derivatives when appropriate. Over the long term, we believe this mix will produce lower interest cost than a purely fixed rate mix while reducing interest rate risk.
The revolving line of credit under our credit facility matures in August 2019 and our term loans under our credit facility mature in August 2021. Our 4% Convertible Senior Subordinated Notes mature in June 2015, our 6-1/2% Senior Notes mature April 1, 2020 and our 6% Senior Notes mature May 15, 2021. See Note M – “Long-Term Obligations,” in our Consolidated Financial Statements.
In December 2013, our Board of Directors authorized the repurchase of up to
$200 million
of our outstanding shares of common stock through December 31, 2015. During
2014
, we repurchased approximately 5.3 million shares for approximately $170 million, which brought our total amount purchased under this program to
$200 million
. We announced in February 2015 that our Board of Directors authorized the repurchase of up to an additional $200 million of our outstanding shares of common stock. In each quarter of 2014, we paid a $0.05 cash dividend to our shareholders. It is our intention to pay four quarterly dividends of $0.06 per share, for an aggregate of $0.24 per share, for the calendar year 2015. However, future declarations of quarterly dividends and the establishment of future record and payment dates are subject to the determination of our Board of Directors.
Our ability to access the capital markets to raise funds, through the sale of equity or debt securities, is subject to various factors, some specific to us, and others related to general economic and/or financial market conditions. These include results of operations, projected operating results for future periods and debt to equity leverage. Our ability to access the capital markets is also subject to our timely filing of periodic reports with the Securities and Exchange Commission (“SEC”). In addition, the terms of our bank credit facilities, senior notes and senior subordinated notes contain restrictions on our ability to make further borrowings and to sell substantial portions of our assets.
In January 2014, we paid approximately $71 million for the remaining outstanding shares of Terex Material Handling & Port Solutions AG (“TMHPS”). We now own 100% of TMHPS AG.
Cash Flows
Cash provided by operations for the
year ended
December 31, 2014
totaled
$410.7 million
, compared to cash provided by operations of
$188.5 million
for the
year ended
December 31, 2013
. The change in cash from operations was primarily driven by higher net income in the current year and less cash used in working capital in the current year.
Cash provided by investing activities for the
year ended
December 31, 2014
was
$95.0 million
, compared to
$37.4 million
cash used in investing activities for the
year ended
December 31, 2013
. Proceeds from the sale of the truck business, partially offset by investments in securities was the primary driver of the change.
Cash used in financing activities was
$396.7 million
for the
year ended
December 31, 2014
, compared to cash used in financing activities for the
year ended
December 31, 2013
of
$420.1 million
. The decreased cash used in financing was primarily due to lower debt repayments net of borrowing in the current year. There were higher share repurchases and dividends paid in the current year, mostly offset by lower purchases of noncontrolling interest shares in the current year.
52
Contractual Obligations
The following table sets out our specified contractual obligations at
December 31, 2014
(in millions):
|
Payments due by period
|
|||||||||||||||||||
|
Total
|
< 1 year
|
1-3 years
|
3-5 years
|
> 5 years
|
|||||||||||||||
|
Long-term debt obligations
|
$
|
2,358.5
|
|
$
|
248.4
|
|
$
|
205.8
|
|
$
|
197.6
|
|
$
|
1,706.7
|
|
||||
|
Capital lease obligations
|
4.0
|
|
0.7
|
|
1.0
|
|
1.0
|
|
1.3
|
|
|||||||||
|
Operating lease obligations
|
215.0
|
|
55.8
|
|
82.6
|
|
39.5
|
|
37.1
|
|
|||||||||
|
Purchase obligations
(1)
|
710.3
|
|
709.3
|
|
0.8
|
|
0.2
|
|
—
|
|
|||||||||
|
Total
|
$
|
3,287.8
|
|
$
|
1,014.2
|
|
$
|
290.2
|
|
$
|
238.3
|
|
$
|
1,745.1
|
|
||||
|
(1)
|
Purchase obligations include non-cancellable and cancellable commitments. In many cases, cancellable commitments contain penalty provisions for cancellation.
|
Long-term debt obligations include expected interest expense. Interest expense is calculated using fixed interest rates for indebtedness that has fixed rates and the implied forward rates as of
December 31, 2014
for indebtedness that has floating interest rates.
As of
December 31, 2014
, our liability for uncertain income tax positions was
$74.2 million
. With respect to our tax audits worldwide, it is reasonably possible that we will make payments in 2015 of up to $5.1 million. Payments may be made in part to mitigate the accrual of interest in connection with income tax audit assessments that may be issued and that we would contest, or may in part be made to settle the matter with the tax authorities. Due to the high degree of uncertainty regarding the timing of potential future cash flows associated with the remaining liabilities, we are unable to make a reasonable estimate of the amount and period in which these remaining liabilities might be paid.
Additionally, at
December 31, 2014
, we had outstanding letters of credit that totaled
$291.9 million
and had issued
$42.6 million
in credit guarantees of customer financing to purchase equipment and
$24.3 million
in buyback guarantees.
We maintain defined benefit pension plans for some of our operations in the United States and Europe. It is our policy to fund the retirement plans at the minimum level required by applicable regulations. In
2014
, we made cash contributions and payments to the retirement plans of
$27.9 million
, and we estimate that our retirement plan contributions will be approximately
$19 million
in 2015. Changes in market conditions, changes in our funding levels or actions by governmental agencies may result in accelerated funding requirements in future periods.
OFF-BALANCE SHEET ARRANGEMENTS
Guarantees
Our customers, from time to time, fund the acquisition of our equipment through third-party finance companies. In certain instances, we may provide a credit guarantee to the finance company by which we agree to make payments to the finance company should the customer default. Our maximum liability is generally limited to our customer’s remaining payments due to the finance company at the time of default. In the event of a customer default, we are generally able to recover and dispose of the equipment at a minimum loss, if any, to us.
We issue, from time to time, 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. We are generally able to mitigate the risk associated with these guarantees because the maturity of the guarantees is staggered, which limits the amount of used equipment entering the marketplace at any one time.
We guarantee, from time to time, that we will buy equipment from our 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. We are generally able to mitigate the risk of these guarantees by staggering the timing of the buybacks and through leveraging our access to the used equipment markets provided by our original equipment manufacturer status.
53
See Note Q – “Litigations and Contingencies” in the Notes to the Consolidated Financial Statements for further information regarding our guarantees.
There can be no assurance that our historical experience in used equipment markets will be indicative of future results. Our ability to recover losses from our guarantees may be affected by economic conditions in the used equipment markets at the time of loss.
CONTINGENCIES AND UNCERTAINTIES
Foreign Currencies and Interest Rate Risk
Our products are sold in over 100 countries around the world and, accordingly, our revenues are generated in foreign currencies, while the costs associated with those revenues are only partly incurred in the same currencies. The major foreign currencies, among others, in which we do business are the Euro, Australian Dollar and British Pound. We may, from time to time, hedge specifically identified committed and forecasted cash flows in foreign currencies using forward currency sale or purchase contracts. At
December 31, 2014
, we had foreign exchange contracts with a notional value of
$378.5 million
that were initially designated as hedge contracts. The fair market value of these arrangements, which represents the cost to settle these contracts, was a net loss of
$0.4 million
at
December 31, 2014
. See Risk Factor entitled, “We are subject to currency fluctuations,”
for further information on our foreign exchange risk.
We manage exposure to interest rates by incurring a mix of indebtedness bearing interest at both floating and fixed rates at inception and maintaining an ongoing balance between floating and fixed rates on this mix of indebtedness using interest rate swaps when necessary.
See “Quantitative and Qualitative Disclosures About Market Risk” below for a discussion of the impact that changes in foreign currency exchange rates and interest rates may have on our financial performance.
Other
We are subject to a number of contingencies and uncertainties including, without limitation, product liability claims, workers’ compensation liability, intellectual property litigation, self-insurance obligations, tax examinations, guarantees, class action lawsuits and other matters. See Note Q – “Litigation and Contingencies” in the Notes to the Consolidated Financial Statements for more information concerning contingencies and uncertainties, including our ERISA, securities and stockholder derivative lawsuits. We are insured for product liability, general liability, workers’ compensation, employer’s liability, property damage, intellectual property and other insurable risk required by law or contract with retained liability to us or deductibles. Many of the exposures are unasserted or proceedings are at a preliminary stage, and it is not presently possible to estimate the amount or timing of any of our costs. However, we do not believe that these contingencies and uncertainties will, individually or in the aggregate, have a material adverse effect on our operations. For contingencies and uncertainties other than income taxes, when it is probable that a loss will be incurred and possible to make reasonable estimates of our liability with respect to such matters, a provision is recorded for the amount of such estimate or for the minimum amount of a range of estimates when it is not possible to estimate the amount within the range that is most likely to occur.
See Item 1. Business – Safety and Environmental Considerations for additional discussion of safety and environmental items.
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
We are exposed to certain market risks that exist as part of our ongoing business operations and we use derivative financial instruments, where appropriate, to manage these risks. As a matter of policy, we do not engage in trading or speculative transactions. For further information on accounting policies related to derivative financial instruments, refer to Note K – “Derivative Financial Instruments” in our Consolidated Financial Statements.
Foreign Exchange Risk
We are exposed to fluctuations in foreign currency cash flows related to third-party purchases and sales, intercompany product shipments and intercompany loans. We are also exposed to fluctuations in the value of foreign currency investments in subsidiaries and cash flows related to repatriation of these investments. Additionally, we are exposed to volatility in the translation of foreign currency earnings to U.S. Dollars. Primary exposures include the U.S. Dollar when compared to functional currencies of our major markets, which include the Euro, Australian Dollar and British Pound. We assess foreign currency risk based on transactional cash flows, identify naturally offsetting positions and purchase hedging instruments to partially offset anticipated exposures. See Risk Factor entitled, “We are subject to currency fluctuations,” for further information on our foreign exchange risk.
54
At
December 31, 2014
, we performed a sensitivity analysis on the impact that aggregate changes in the translation effect of foreign currency exchange rate changes would have on our operating income. Based on this sensitivity analysis, we have determined that a change in the value of the U.S. dollar relative to currencies outside the U.S. by 10% to amounts already incorporated in the financial statements for the year ended
December 31, 2014
would have had an approximately
$6 million
impact on the translation effect of foreign currency exchange rate changes already included in our reported operating income for the period.
Interest Rate Risk
We are exposed to interest rate volatility with regard to future issuances of fixed rate debt and existing issuances of variable rate debt. Primary exposure includes movements in the U.S. prime rate, LIBOR and EURIBOR. We manage interest rate risk by incurring a mix of indebtedness bearing interest at both floating and fixed rates at inception and maintain an ongoing balance between floating and fixed rates on this mix of indebtedness using interest rate swaps when necessary. At
December 31, 2014
, approximately
28%
of our debt was floating rate debt and the weighted average interest rate for all debt was
5.88%
.
At
December 31, 2014
, we performed a sensitivity analysis for our derivatives and other financial instruments that have interest rate risk. We calculated the pretax earnings effect on our interest sensitive instruments. Based on this sensitivity analysis, we have determined that an increase of 10% in our average floating interest rates at
December 31, 2014
would have increased interest expense by approximately
$2 million
for the year ended
December 31, 2014
.
Commodities Risk
Principal materials and components that we use in our manufacturing processes include steel, castings, engines, tires, hydraulics, cylinders, drive trains, electric controls and motors, and a variety of other commodities and fabricated or manufactured items. Extreme movements in the cost and availability of these materials and components may affect our financial performance. In 2014, input cost increases in certain purchased components were offset by reductions in European and Chinese steel prices, as well as global rubber prices and competitive sourcing activities. We continued to incur some net material cost increases as a result of legislation (primarily Tier 4 emission standards) and performance based changes in certain product areas, particularly engines.
In the absence of labor strikes or other unusual circumstances, substantially all materials and components are normally available from multiple suppliers. However, certain of our businesses receive materials and components from a single source supplier, although alternative suppliers of such materials may be generally available. Current and potential suppliers are evaluated regularly on their ability to meet our requirements and standards. We actively manage our material supply sourcing, and employ various methods to limit risk associated with commodity cost fluctuations and availability. The inability of suppliers, especially any single source suppliers for a particular business, to deliver materials and components promptly could result in production delays and increased costs to manufacture our products. We have designed and implemented plans to mitigate the impact of these risks by using alternate suppliers, expanding our supply base globally, leveraging our overall purchasing volumes to obtain favorable quantities and developing a closer working relationship with key suppliers. We are focusing on gaining efficiencies with suppliers based on our global purchasing power and resources.
55
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
The report of our independent registered public accounting firm and our Consolidated Financial Statements and Financial Statement Schedule are filed pursuant to this Item 8 and are included later in this report. See Index to Consolidated Financial Statements and Financial Statement Schedule on page F-1.
Unaudited Quarterly Financial Data
Certain amounts reported below have been changed from those previously reported on Forms 10-Q to reflect the impact of discontinued operations for all periods. Summarized quarterly financial data for
2014
and
2013
are as follows (in millions, except per share amounts):
|
2014
|
2013
|
||||||||||||||||||||||||||||||
|
Fourth
|
Third
|
Second
|
First
|
Fourth
|
Third
|
Second
|
First
|
||||||||||||||||||||||||
|
Net sales
|
$
|
1,789.4
|
|
$
|
1,809.8
|
|
$
|
2,055.1
|
|
$
|
1,654.6
|
|
$
|
1,811.8
|
|
$
|
1,757.0
|
|
$
|
1,861.5
|
|
$
|
1,653.7
|
|
|||||||
|
Gross profit
|
339.0
|
|
357.3
|
|
423.8
|
|
333.4
|
|
385.7
|
|
381.4
|
|
351.2
|
|
321.2
|
|
|||||||||||||||
|
Net income (loss) from continuing operations attributable to common stockholders
|
79.9
|
|
58.7
|
|
87.8
|
|
32.6
|
|
84.8
|
|
84.5
|
|
20.4
|
|
19.3
|
|
|||||||||||||||
|
Income (loss) from discontinued operations – net of tax
|
—
|
|
—
|
|
0.5
|
|
0.9
|
|
1.6
|
|
10.3
|
|
0.9
|
|
1.6
|
|
|||||||||||||||
|
Gain (loss) on disposition of discontinued operations – net of tax
|
0.1
|
|
5.5
|
|
51.5
|
|
1.5
|
|
—
|
|
(0.4
|
)
|
—
|
|
3.0
|
|
|||||||||||||||
|
Net income (loss) attributable to Terex Corporation
|
80.0
|
|
64.2
|
|
139.8
|
|
35.0
|
|
86.4
|
|
94.4
|
|
21.3
|
|
23.9
|
|
|||||||||||||||
|
Per share:
|
|||||||||||||||||||||||||||||||
|
Basic
|
|||||||||||||||||||||||||||||||
|
Net income (loss) from continuing operations attributable to common stockholders
|
$
|
0.74
|
|
$
|
0.53
|
|
$
|
0.80
|
|
$
|
0.30
|
|
$
|
0.76
|
|
$
|
0.76
|
|
$
|
0.18
|
|
$
|
0.18
|
|
|||||||
|
Income (loss) from discontinued operations – net of tax
|
—
|
|
—
|
|
—
|
|
0.01
|
|
0.02
|
|
0.09
|
|
0.01
|
|
0.01
|
|
|||||||||||||||
|
Gain (loss) on disposition of discontinued operations – net of tax
|
—
|
|
0.05
|
|
0.47
|
|
0.01
|
|
—
|
|
—
|
|
—
|
|
0.03
|
|
|||||||||||||||
|
Net income (loss) attributable to Terex Corporation
|
0.74
|
|
0.58
|
|
1.27
|
|
0.32
|
|
0.78
|
|
0.85
|
|
0.19
|
|
0.22
|
|
|||||||||||||||
|
Diluted
|
|||||||||||||||||||||||||||||||
|
Net income (loss) from continuing operations attributable to common stockholders
|
$
|
0.71
|
|
$
|
0.51
|
|
$
|
0.76
|
|
$
|
0.28
|
|
$
|
0.72
|
|
$
|
0.73
|
|
$
|
0.17
|
|
$
|
0.17
|
|
|||||||
|
Income (loss) from discontinued operations – net of tax
|
—
|
|
—
|
|
—
|
|
0.01
|
|
0.02
|
|
0.08
|
|
0.01
|
|
0.01
|
|
|||||||||||||||
|
Gain (loss) on disposition of discontinued operations – net of tax
|
—
|
|
0.05
|
|
0.45
|
|
0.01
|
|
—
|
|
—
|
|
—
|
|
0.03
|
|
|||||||||||||||
|
Net income (loss) attributable to Terex Corporation
|
0.71
|
|
0.56
|
|
1.21
|
|
0.30
|
|
0.74
|
|
0.81
|
|
0.18
|
|
0.21
|
|
|||||||||||||||
The accompanying unaudited quarterly financial data has been prepared in accordance with generally accepted accounting principles in the United States for interim financial information and with Item 302 of Regulation S-K. In our opinion, all adjustments considered necessary for a fair statement have been made and were of a normal recurring nature.
56
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
Not applicable.
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required financial disclosure. In connection with the preparation of this Annual Report on Form 10-K, our management carried out an evaluation, under the supervision and with the participation of our management, including the CEO and CFO, as of
December 31, 2014
, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) under the Exchange Act. Based upon this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of
December 31, 2014
.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that: pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has conducted an assessment, including testing, of the effectiveness of our internal control over financial reporting as of
December 31, 2014
. In making its assessment of internal control over financial reporting, management used the criteria in
Internal Control — Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, the Company’s management has concluded that, as of
December 31, 2014
, the Company’s internal control over financial reporting was effective.
The effectiveness of our internal control over financial reporting as of
December 31, 2014
has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in this Annual Report on Form 10-K.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our quarter ended
December 31, 2014
, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The effectiveness of any system of controls and procedures is subject to certain limitations, and, as a result, there can be no assurance that our controls and procedures will detect all errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be attained.
|
ITEM 9B.
|
OTHER INFORMATION
|
None.
57
|
PART III
|
|
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
The information required by Item 10 is incorporated by reference to the definitive Terex Corporation Proxy Statement to be filed with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
The information required by Item 11 is incorporated by reference to the definitive Terex Corporation Proxy Statement to be filed with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
Equity Compensation Plan Information
The following table summarizes information about the Company’s equity compensation plans as of
December 31, 2014
:
|
Plan Category
|
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)
|
|
Weighted average exercise price of outstanding options, warrants and rights (b)
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
|
|
Equity compensation plans approved by stockholders
|
|
149,959 (1)
|
|
$46.07
|
|
4,420,358
|
|
Equity compensation plans not approved by stockholders
|
|
—
|
|
—
|
|
—
|
|
Total
|
|
149,959
|
|
$46.07
|
|
4,420,358
|
|
(1)
|
This does not include 3,195,321 of restricted stock awards, which are also not included in the calculation of the weighted average exercise price of outstanding options, warrants and rights in column (b) of this table.
|
The other information required by Item 12 is incorporated by reference to the definitive Terex Corporation Proxy Statement to be filed with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
The information required by Item 13 is incorporated by reference to the definitive Terex Corporation Proxy Statement to be filed with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
|
ITEM 14.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
The information required by Item 14 is incorporated by reference to the definitive Terex Corporation Proxy Statement to be filed with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
58
|
PART IV
|
|
|
ITEM 15.
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
(a) (1) and (2) Financial Statements and Financial Statement Schedules.
See “Index to Consolidated Financial Statements and Financial Statement Schedule” on Page F-1.
(3) Exhibits
See “Exhibit Index” on Page E-1.
59
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TEREX CORPORATION
|
By:
|
/s/ Ronald M. DeFeo
|
February 23, 2015
|
|
|
Ronald M. DeFeo
|
|||
|
Chairman, Chief Executive
Officer and Director
|
|||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
NAME
|
TITLE
|
DATE
|
|
/s/ Ronald M. DeFeo
|
Chairman, Chief Executive Officer,
|
February 23, 2015
|
|
Ronald M. DeFeo
|
and Director
|
|
|
(Principal Executive Officer)
|
||
|
/s/ Kevin P. Bradley
|
Senior Vice President and Chief Financial
|
February 23, 2015
|
|
Kevin P. Bradley
|
Officer
|
|
|
(Principal Financial Officer)
|
||
|
/s/ Mark I. Clair
|
Vice President, Controller and Chief
|
February 23, 2015
|
|
Mark I. Clair
|
Accounting Officer
|
|
|
(Principal Accounting Officer)
|
||
|
/s/ G. Chris Andersen
|
Director
|
February 23, 2015
|
|
G. Chris Andersen
|
||
|
/s/ Paula H. J. Cholmondeley
|
Director
|
February 23, 2015
|
|
Paula H. J. Cholmondeley
|
||
|
/s/ Don DeFosset
|
Director
|
February 23, 2015
|
|
Don DeFosset
|
||
|
/s/ Thomas J. Hansen
|
Director
|
February 23, 2015
|
|
Thomas J. Hansen
|
||
|
/s/ Raimund Klinkner
|
Director
|
February 23, 2015
|
|
Raimund Klinkner
|
||
|
/s/ David A. Sachs
|
Lead Director
|
February 23, 2015
|
|
David A. Sachs
|
||
|
/s/ Oren G. Shaffer
|
Director
|
February 23, 2015
|
|
Oren G. Shaffer
|
||
|
/s/ David C. Wang
|
Director
|
February 23, 2015
|
|
David C. Wang
|
||
|
/s/ Scott W. Wine
|
Director
|
February 23, 2015
|
|
Scott W. Wine
|
||
60
THIS PAGE IS INTENTIONALLY BLANK
NEXT PAGE IS NUMBERED “E-1”
61
EXHIBIT INDEX
|
3.1
|
Restated Certificate of Incorporation of Terex Corporation (incorporated by reference to Exhibit 3.1 of the Form S-1 Registration Statement of Terex Corporation, Registration No. 33-52297).
|
|
3.2
|
Certificate of Elimination with respect to the Series B Preferred Stock (incorporated by reference to Exhibit 4.3 of the Form 10-K for the year ended December 31, 1998 of Terex Corporation, Commission File No. 1-10702).
|
|
3.3
|
Certificate of Amendment to Certificate of Incorporation of Terex Corporation dated September 5, 1998 (incorporated by reference to Exhibit 3.3 of the Form 10-K for the year ended December 31, 1998 of Terex Corporation, Commission File No. 1-10702).
|
|
3.4
|
Certificate of Amendment of the Certificate of Incorporation of Terex Corporation dated July 17, 2007 (incorporated by reference to Exhibit 3.1 of the Form 8-K Current Report, Commission File No. 1-10702, dated July 17, 2007 and filed with the Commission on July 17, 2007).
|
|
3.5
|
Amended and Restated Bylaws of Terex Corporation (incorporated by reference to Exhibit 3.1 of the Form 8-K Current Report, Commission File No. 1-10702, dated December 5, 2013 and filed with the Commission on December 10, 2013).
|
|
4.1
|
Indenture, dated July 20, 2007, between Terex Corporation and HSBC Bank USA, National Association, as Trustee, relating to senior debt securities (incorporated by reference to Exhibit 4.1 of the Form S-3 Registration Statement of Terex Corporation, Registration No. 333-144796).
|
|
4.2
|
Indenture, dated July 20, 2007, between Terex Corporation and HSBC Bank USA, National Association, as Trustee, relating to subordinated debt securities (incorporated by reference to Exhibit 4.2 of the Form S-3 Registration Statement of Terex Corporation, Registration No. 333-144796).
|
|
4.3
|
Second Supplemental Indenture, dated June 3, 2009, between Terex Corporation and HSBC Bank USA, National Association relating to 4% Convertible Senior Subordinated Notes Due 2015 (incorporated by reference to Exhibit 4.2 of the Form 8-K Current Report, Commission File No. 1-10702, dated June 3, 2009 and filed with the Commission on June 8, 2009).
|
|
4.4
|
Supplemental Indenture, dated as of February 7, 2011, to the Second Supplemental Indenture dated as of June 3, 2009 to the Subordinated Debt Indenture dated as of July 20, 2007, with HSBC Bank USA, National Association as Trustee relating to the 4% Convertible Senior Subordinated Notes due 2015 (incorporated by reference to Exhibit 4.3 of the Form 8-K Current Report, Commission File No. 1-10702, dated February 7, 2011 and filed with the Commission on February 10, 2011).
|
|
4.5
|
Third Supplemental Indenture, dated as of March 27, 2012, to Senior Debt Indenture dated as of July 20, 2007, with HSBC Bank USA, National Association as Trustee relating to the 6.50% Senior Notes due 2020 (incorporated by reference to Exhibit 4.1 of the Form 8-K Current Report, Commission File No. 1-10702, dated March 27, 2012 and filed with the Commission on March 30, 2012).
|
|
4.6
|
Fourth Supplemental Indenture, dated as of November 26, 2012, to the Senior Debt Indenture dated as of July 20, 2007, with HSBC Bank USA, National Association as Trustee relating to 6% Senior Notes due 2021 (incorporated by reference to Exhibit 4.1 of the Form 8-K Current Report, Commission File No. 1-10702, dated November 26, 2012 and filed with the Commission on November 30, 2012).
|
|
10.1
|
Terex Corporation Amended and Restated Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.2 of the Form 10-Q for the quarter ended June 30, 2007 of Terex Corporation, Commission File No. 1-10702). ***
|
|
10.2
|
1996 Terex Corporation Long Term Incentive Plan (incorporated by reference to Exhibit 10.1 of the Form S-8 Registration Statement of Terex Corporation, Registration No. 333-03983). ***
|
|
10.3
|
Amendment No. 1 to 1996 Terex Corporation Long Term Incentive Plan (incorporated by reference to Exhibit 10.5 of the Form 10-K for the year ended December 31, 1999 of Terex Corporation, Commission File No. 1-10702). ***
|
|
10.4
|
Amendment No. 2 to 1996 Terex Corporation Long Term Incentive Plan (incorporated by reference to Exhibit 10.6 of the Form 10-K for the year ended December 31, 1999 of Terex Corporation, Commission File No. 1-10702). ***
|
|
10.5
|
Terex Corporation Amended and Restated 2000 Incentive Plan (incorporated by reference to Exhibit 10.3 of the Form 8-K Current Report, Commission File No. 1-10702, dated October 14, 2008 and filed with the Commission on October 17, 2008). ***
|
E-1
|
10.6
|
Form of Restricted Stock Agreement under the Terex Corporation 2000 Incentive Plan between Terex Corporation and participants of the 2000 Incentive Plan (incorporated by reference to Exhibit 10.4 of the Form 8-K Current Report, Commission File No. 1-10702, dated January 1, 2005 and filed with the Commission on January 5, 2005). ***
|
|
10.7
|
Form of Option Agreement under the Terex Corporation 2000 Incentive Plan between Terex Corporation and participants of the 2000 Incentive Plan (incorporated by reference to Exhibit 10.5 of the Form 8-K Current Report, Commission File No. 1-10702, dated January 1, 2005 and filed with the Commission on January 5, 2005). ***
|
|
10.8
|
Terex Corporation Amended and Restated Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.10 of the Form 10-K for the year ended December 31, 2008 of Terex Corporation, Commission File No. 1-10702). ***
|
|
10.9
|
Terex Corporation Amended and Restated Deferred Compensation Plan (incorporated by reference to Exhibit 10.11 of the Form 10-Q for the quarter ended June 30, 2004 of Terex Corporation, Commission File No. 1-10702). ***
|
|
10.10
|
Amendment to the Terex Corporation Amended and Restated Deferred Compensation Plan (incorporated by reference to Exhibit 10.1 of the Form 8-K Current Report, Commission File No. 1-10702, dated October 14, 2008 and filed with the Commission on October 17, 2008). ***
|
|
10.11
|
Terex Corporation Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 of the Form 8-K Current Report, Commission File No. 1-10702, dated May 9, 2013 and filed with the Commission on May, 14, 2013). ***
|
|
10.12
|
Terex Corporation Amended and Restated 2009 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 of the Form 8-K Current Report, Commission File No. 1-10702, dated May 9, 2013 and filed with the Commission on May, 14, 2013). ***
|
|
10.13
|
Form of Restricted Stock Agreement (time based) under the Terex Corporation Amended and Restated 2009 Omnibus Incentive Plan between Terex Corporation and participants of the 2009 Omnibus Incentive Plan. ***
|
|
10.14
|
Form of Restricted Stock Agreement (performance based) under the Terex Corporation Amended and Restated 2009 Omnibus Incentive Plan between Terex Corporation and participants of the 2009 Omnibus Incentive Plan. ***
|
|
10.15
|
Credit Agreement dated as of August 13, 2014, among Terex Corporation, certain of its subsidiaries, the Lenders named therein and Credit Suisse AG, as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 of the Form 8-K Current Report, Commission File No. 1-10702, dated August 15, 2014 and filed with the Commission August 15, 2014).
|
|
10.16
|
Guarantee and Collateral Agreement dated as of August 13, 2014, among Terex Corporation, certain of its subsidiaries, and Credit Suisse AG, as Collateral Agent (incorporated by reference to Exhibit 10.2 of the Form 8-K Current Report, Commission File No. 1-10702, dated August 15, 2014 and filed with the Commission August 15, 2014).
|
|
10.17
|
Amended and Restated Employment and Compensation Agreement, dated August 9, 2012, between Terex Corporation and Ronald M. DeFeo (incorporated by reference to Exhibit 10.1 of the Form 8-K Current Report, Commission File No. 1-10702, dated August 9, 2012 and filed with the Commission on August 13, 2012). ***
|
|
10.18
|
Life Insurance Agreement, dated as of October 13, 2006, between Terex Corporation and Ronald M. DeFeo (incorporated by reference to Exhibit 10.1 of the Form 8-K Current Report, Commission File No. 1-10702, dated October 13, 2006 and filed with the Commission on October 16, 2006). ***
|
|
10.19
|
Transition and Retirement Agreement between Terex Corporation and Phillip C. Widman, dated October 19, 2012 (incorporated by reference to Exhibit 10.1 of the Form 8-K Current Report, Commission File No. 1-10702, dated October 19, 2012 and filed with the Commission on October 22, 2012). ***
|
|
10.20
|
Form of Change in Control and Severance Agreement between Terex Corporation and certain executive officers (incorporated by reference to Exhibit 10.1 of the Form 8-K Current Report, Commission File No. 1-10702, dated March 29, 2011 and filed with the Commission on March 31, 2011). ***
|
|
10.21
|
Form of Change in Control and Severance Agreement between Terex Corporation and certain executive officers (incorporated by reference to Exhibit 10.2 of the Form 8-K Current Report, Commission File No. 1-10702, dated March 29, 2011 and filed with the Commission on March 31, 2011). ***
|
|
12
|
Calculation of Ratio of Earnings to Fixed Charges. *
|
|
21.1
|
Subsidiaries of Terex Corporation.*
|
E-2
|
23.1
|
Consent of Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP, Stamford, Connecticut.*
|
|
24.1
|
Power of Attorney.*
|
|
31.1
|
Chief Executive Officer Certification pursuant to Rule 13a-14(a)/15d-14(a). *
|
|
31.2
|
Chief Financial Officer Certification pursuant to Rule 13a-14(a)/15d-14(a). *
|
|
32
|
Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes –Oxley Act of 2002. **
|
|
101.INS
|
XBRL Instance Document. *
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document. *
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document. *
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document. *
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document. *
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document. *
|
|
*
|
Exhibit filed with this document.
|
|
**
|
Exhibit furnished with this document.
|
|
***
|
Denotes a management contract or compensatory plan or arrangement.
|
E-3
TEREX CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
TEREX CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS AS OF
DECEMBER 31, 2014
AND
2013
AND FOR EACH OF THE THREE YEARS
IN THE PERIOD ENDED
December 31, 2014
|
|
Page
|
|
|
|
FINANCIAL STATEMENT SCHEDULE
All other schedules for which provision is made in the applicable regulations of the Securities and Exchange Commission are not required under the related instructions, or are not applicable, and therefore have been omitted.
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
and Stockholders of Terex Corporation
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Terex Corporation and its subsidiaries at
December 31, 2014
and
2013
, and the results of their operations and their cash flows for each of the three years in the period ended
December 31, 2014
in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2014
, based on criteria established in
Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/PricewaterhouseCoopers LLP
Stamford, Connecticut
February 23, 2015
F-2
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share data)
|
Year Ended
December 31, |
|||||||||||
|
|
2014
|
2013
|
2012
|
||||||||
|
Net sales
|
$
|
7,308.9
|
|
$
|
7,084.0
|
|
$
|
6,982.2
|
|
||
|
Cost of goods sold
|
(5,855.4
|
)
|
(5,644.5
|
)
|
(5,582.1
|
)
|
|||||
|
Gross profit
|
1,453.5
|
|
1,439.5
|
|
1,400.1
|
|
|||||
|
Selling, general and administrative expenses
|
(1,030.4
|
)
|
(1,020.4
|
)
|
(1,033.3
|
)
|
|||||
|
Income (loss) from operations
|
423.1
|
|
419.1
|
|
366.8
|
|
|||||
|
Other income (expense)
|
|||||||||||
|
Interest income
|
6.6
|
|
6.7
|
|
8.8
|
|
|||||
|
Interest expense
|
(119.1
|
)
|
(126.1
|
)
|
(164.6
|
)
|
|||||
|
Loss on early extinguishment of debt
|
(2.6
|
)
|
(5.2
|
)
|
(83.0
|
)
|
|||||
|
Amortization of debt issuance costs
|
(7.4
|
)
|
(8.5
|
)
|
(9.6
|
)
|
|||||
|
Other income (expense) – net
|
(3.4
|
)
|
5.3
|
|
7.9
|
|
|||||
|
Income (loss) from continuing operations before income taxes
|
297.2
|
|
291.3
|
|
126.3
|
|
|||||
|
(Provision for) benefit from income taxes
|
(37.7
|
)
|
(87.4
|
)
|
(51.5
|
)
|
|||||
|
Income (loss) from continuing operations
|
259.5
|
|
203.9
|
|
74.8
|
|
|||||
|
Income (loss) from discontinued operations – net of tax
|
1.4
|
|
14.4
|
|
28.4
|
|
|||||
|
Gain (loss) on disposition of discontinued operations – net of tax
|
58.6
|
|
2.6
|
|
0.4
|
|
|||||
|
Net income (loss)
|
319.5
|
|
220.9
|
|
103.6
|
|
|||||
|
Net loss (income) attributable to noncontrolling interest
|
(0.5
|
)
|
5.1
|
|
2.2
|
|
|||||
|
Net income (loss) attributable to Terex Corporation
|
$
|
319.0
|
|
$
|
226.0
|
|
$
|
105.8
|
|
||
|
Amounts attributable to Terex Corporation common stockholders:
|
|||||||||||
|
Income (loss) from continuing operations
|
$
|
259.0
|
|
$
|
209.0
|
|
$
|
77.0
|
|
||
|
Income (loss) from discontinued operations – net of tax
|
1.4
|
|
14.4
|
|
28.4
|
|
|||||
|
Gain (loss) on disposition of discontinued operations – net of tax
|
58.6
|
|
2.6
|
|
0.4
|
|
|||||
|
Net income (loss) attributable to Terex Corporation
|
$
|
319.0
|
|
$
|
226.0
|
|
$
|
105.8
|
|
||
|
Basic Earnings (Loss) per Share Attributable to Terex Corporation Common Stockholders:
|
|||||||||||
|
Income (loss) from continuing operations
|
$
|
2.36
|
|
$
|
1.88
|
|
$
|
0.70
|
|
||
|
Income (loss) from discontinued operations – net of tax
|
0.01
|
|
0.13
|
|
0.26
|
|
|||||
|
Gain (loss) on disposition of discontinued operations – net of tax
|
0.54
|
|
0.02
|
|
—
|
|
|||||
|
Net income (loss) attributable to Terex Corporation
|
$
|
2.91
|
|
$
|
2.03
|
|
$
|
0.96
|
|
||
|
Diluted Earnings (Loss) per Share Attributable to Terex Corporation Common Stockholders:
|
|||||||||||
|
Income (loss) from continuing operations
|
$
|
2.27
|
|
$
|
1.79
|
|
$
|
0.68
|
|
||
|
Income (loss) from discontinued operations – net of tax
|
0.01
|
|
0.12
|
|
0.25
|
|
|||||
|
Gain (loss) on disposition of discontinued operations – net of tax
|
0.51
|
|
0.02
|
|
—
|
|
|||||
|
Net income (loss) attributable to Terex Corporation
|
$
|
2.79
|
|
$
|
1.93
|
|
$
|
0.93
|
|
||
|
Weighted average number of shares outstanding in per share calculation
|
|||||||||||
|
Basic
|
109.7
|
|
111.1
|
|
110.3
|
|
|||||
|
Diluted
|
114.2
|
|
117.0
|
|
113.9
|
|
|||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)
|
Year Ended December 31,
|
||||||||||
|
2014
|
2013
|
2012
|
||||||||
|
Net income (loss)
|
$
|
319.5
|
|
$
|
220.9
|
|
$
|
103.6
|
|
|
|
Other comprehensive income (loss), net of tax:
|
||||||||||
|
Cumulative translation adjustment, net of (provision for) benefit from taxes of $0.9, $(9.5) and $(5.1), respectively
|
(237.7
|
)
|
(21.6
|
)
|
54.2
|
|
||||
|
Derivative hedging adjustment, net of (provision for) benefit from taxes of $1.2, $(0.8) and $(2.5), respectively
|
(3.4
|
)
|
3.1
|
|
3.2
|
|
||||
|
Debt and equity securities adjustment, net of (provision for) benefit from taxes of $0.0, $0.6 and $(0.5), respectively
|
1.6
|
|
(1.9
|
)
|
1.0
|
|
||||
|
Pension liability adjustment:
|
||||||||||
|
Net gain (loss), net of (provision for) benefit from taxes of $11.4, $(13.7) and $22.5, respectively
|
(94.0
|
)
|
24.6
|
|
(57.8
|
)
|
||||
|
Amortization of actuarial (gain) loss, net of provision for (benefit from) taxes of $(1.2), $(3.1) and $(1.6), respectively
|
4.9
|
|
6.5
|
|
4.1
|
|
||||
|
Foreign exchange and other effects, net of (provision for) benefit from taxes of $(1.2), $0.9 and $1.1, respectively
|
15.2
|
|
(2.7
|
)
|
(2.8
|
)
|
||||
|
Total pension liability adjustment
|
(73.9
|
)
|
28.4
|
|
(56.5
|
)
|
||||
|
Other comprehensive income (loss)
|
(313.4
|
)
|
8.0
|
|
1.9
|
|
||||
|
Comprehensive income (loss)
|
6.1
|
|
228.9
|
|
105.5
|
|
||||
|
Comprehensive loss (income) attributable to noncontrolling interest
|
(0.4
|
)
|
4.7
|
|
1.7
|
|
||||
|
Comprehensive income (loss) attributable to Terex Corporation
|
$
|
5.7
|
|
$
|
233.6
|
|
$
|
107.2
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-4
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions, except par value)
|
December 31,
|
|||||||
|
2014
|
2013
|
||||||
|
Assets
|
|||||||
|
Current assets
|
|||||||
|
Cash and cash equivalents
|
$
|
478.2
|
|
$
|
408.1
|
|
|
|
Trade receivables (net of allowance of $30.5 and $47.6 at December 31, 2014 and 2013, respectively)
|
1,086.4
|
|
1,176.8
|
|
|||
|
Inventories
|
1,460.9
|
|
1,613.2
|
|
|||
|
Prepaid assets
|
248.0
|
|
220.9
|
|
|||
|
Other current assets
|
82.7
|
|
91.1
|
|
|||
|
Current assets – discontinued operations
|
—
|
|
129.3
|
|
|||
|
Total current assets
|
3,356.2
|
|
3,639.4
|
|
|||
|
Non-current assets
|
|||||||
|
Property, plant and equipment – net
|
690.3
|
|
789.4
|
|
|||
|
Goodwill
|
1,131.0
|
|
1,245.6
|
|
|||
|
Intangible assets – net
|
325.4
|
|
444.8
|
|
|||
|
Other assets
|
425.1
|
|
401.9
|
|
|||
|
Non-current assets – discontinued operations
|
—
|
|
15.6
|
|
|||
|
Total assets
|
$
|
5,928.0
|
|
$
|
6,536.7
|
|
|
|
Liabilities and Stockholders’ Equity
|
|||||||
|
Current liabilities
|
|||||||
|
Notes payable and current portion of long-term debt
|
$
|
152.5
|
|
$
|
86.8
|
|
|
|
Trade accounts payable
|
736.1
|
|
689.1
|
|
|||
|
Accrued compensation and benefits
|
204.0
|
|
234.3
|
|
|||
|
Accrued warranties and product liability
|
74.2
|
|
96.2
|
|
|||
|
Customer advances
|
197.4
|
|
302.1
|
|
|||
|
Other current liabilities
|
278.9
|
|
270.1
|
|
|||
|
Current liabilities – discontinued operations
|
—
|
|
46.1
|
|
|||
|
Total current liabilities
|
1,643.1
|
|
1,724.7
|
|
|||
|
Non-current liabilities
|
|||||||
|
Long-term debt, less current portion
|
1,636.3
|
|
1,889.9
|
|
|||
|
Retirement plans
|
432.5
|
|
388.2
|
|
|||
|
Other non-current liabilities
|
177.0
|
|
259.5
|
|
|||
|
Non-current liabilities – discontinued operations
|
—
|
|
5.7
|
|
|||
|
Total liabilities
|
3,888.9
|
|
4,268.0
|
|
|||
|
Commitments and contingencies
|
|
|
|
|
|||
|
Redeemable noncontrolling interest
|
—
|
|
53.9
|
|
|||
|
Stockholders’ equity
|
|||||||
|
Common stock, $.01 par value – authorized 300.0 shares; issued 124.6 and 123.7 shares at December 31, 2014 and 2013, respectively
|
1.2
|
|
1.2
|
|
|||
|
Additional paid-in capital
|
1,251.5
|
|
1,247.5
|
|
|||
|
Retained earnings
|
1,984.9
|
|
1,688.1
|
|
|||
|
Accumulated other comprehensive (loss) income
|
(429.8
|
)
|
(116.5
|
)
|
|||
|
Less cost of shares of common stock in treasury – 19.2 and 13.8 shares at December 31, 2014 and 2013, respectively
|
(801.9
|
)
|
(630.2
|
)
|
|||
|
Total Terex Corporation stockholders’ equity
|
2,005.9
|
|
2,190.1
|
|
|||
|
Noncontrolling interest
|
33.2
|
|
24.7
|
|
|||
|
Total stockholders’ equity
|
2,039.1
|
|
2,214.8
|
|
|||
|
Total liabilities, redeemable noncontrolling interest and stockholders’ equity
|
$
|
5,928.0
|
|
$
|
6,536.7
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-5
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(in millions)
|
Outstanding
Shares
|
Common
Stock
|
Additional
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Common
Stock in
Treasury
|
Non-controlling
Interest
|
Total
|
|||||||||||||||||||||||
|
Balance at December 31, 2011
|
108.8
|
|
$
|
1.2
|
|
$
|
1,271.8
|
|
$
|
1,361.9
|
|
$
|
(125.5
|
)
|
$
|
(599.1
|
)
|
$
|
278.1
|
|
$
|
2,188.4
|
|
|||||||
|
Net Income (Loss)
|
—
|
|
—
|
|
—
|
|
105.8
|
|
—
|
|
—
|
|
(2.2
|
)
|
103.6
|
|
||||||||||||||
|
Other Comprehensive Income (Loss) – net of tax:
|
—
|
|
—
|
|
—
|
|
—
|
|
1.4
|
|
—
|
|
0.5
|
|
1.9
|
|
||||||||||||||
|
Issuance of Common Stock
|
1.0
|
|
—
|
|
13.5
|
|
—
|
|
—
|
|
—
|
|
—
|
|
13.5
|
|
||||||||||||||
|
Compensation under Stock-based Plans – net
|
0.2
|
|
—
|
|
7.3
|
|
—
|
|
—
|
|
5.1
|
|
—
|
|
12.4
|
|
||||||||||||||
|
Acquisition
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2.1
|
|
2.1
|
|
||||||||||||||
|
Divestiture
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(7.4
|
)
|
(7.4
|
)
|
||||||||||||||
|
Redeemable noncontrolling interest
|
—
|
|
—
|
|
(12.5
|
)
|
—
|
|
—
|
|
—
|
|
(247.5
|
)
|
(260.0
|
)
|
||||||||||||||
|
Purchase of noncontrolling interest
|
—
|
|
—
|
|
(0.3
|
)
|
—
|
|
—
|
|
—
|
|
0.3
|
|
—
|
|
||||||||||||||
|
Distributions to noncontrolling interest
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(0.3
|
)
|
(0.3
|
)
|
||||||||||||||
|
Convertible Debt
|
—
|
|
—
|
|
(19.1
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(19.1
|
)
|
||||||||||||||
|
Acquisition of Treasury Stock
|
(0.1
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(3.8
|
)
|
—
|
|
(3.8
|
)
|
||||||||||||||
|
Balance at December 31, 2012
|
109.9
|
|
1.2
|
|
1,260.7
|
|
1,467.7
|
|
(124.1
|
)
|
(597.8
|
)
|
23.6
|
|
2,031.3
|
|
||||||||||||||
|
Net Income (Loss)
|
—
|
|
—
|
|
—
|
|
226.0
|
|
—
|
|
—
|
|
(5.1
|
)
|
220.9
|
|
||||||||||||||
|
Other Comprehensive Income (Loss) – net of tax:
|
—
|
|
—
|
|
—
|
|
—
|
|
7.6
|
|
—
|
|
0.4
|
|
8.0
|
|
||||||||||||||
|
Issuance of Common Stock
|
0.8
|
|
—
|
|
17.9
|
|
—
|
|
—
|
|
—
|
|
—
|
|
17.9
|
|
||||||||||||||
|
Compensation under Stock-based Plans – net
|
0.1
|
|
—
|
|
22.1
|
|
—
|
|
—
|
|
1.3
|
|
—
|
|
23.4
|
|
||||||||||||||
|
Acquisition
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
7.8
|
|
7.8
|
|
||||||||||||||
|
Dividends
|
—
|
|
—
|
|
0.1
|
|
(5.6
|
)
|
—
|
|
—
|
|
—
|
|
(5.5
|
)
|
||||||||||||||
|
Divestiture
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(2.0
|
)
|
(2.0
|
)
|
||||||||||||||
|
Purchase of noncontrolling interest
|
—
|
|
—
|
|
(54.0
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(54.0
|
)
|
||||||||||||||
|
Convertible Debt
|
—
|
|
—
|
|
0.7
|
|
—
|
|
—
|
|
—
|
|
—
|
|
0.7
|
|
||||||||||||||
|
Acquisition of Treasury Stock
|
(0.9
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(33.7
|
)
|
—
|
|
(33.7
|
)
|
||||||||||||||
|
Balance at December 31, 2013
|
109.9
|
|
1.2
|
|
1,247.5
|
|
1,688.1
|
|
(116.5
|
)
|
(630.2
|
)
|
24.7
|
|
2,214.8
|
|
||||||||||||||
|
Net Income (Loss)
|
—
|
|
—
|
|
—
|
|
319.0
|
|
—
|
|
—
|
|
0.5
|
|
319.5
|
|
||||||||||||||
|
Other Comprehensive Income (Loss) – net of tax:
|
—
|
|
—
|
|
—
|
|
—
|
|
(313.3
|
)
|
—
|
|
(0.1
|
)
|
(313.4
|
)
|
||||||||||||||
|
Issuance of Common Stock
|
0.9
|
|
—
|
|
21.7
|
|
—
|
|
—
|
|
—
|
|
—
|
|
21.7
|
|
||||||||||||||
|
Compensation under Stock-based Plans – net
|
—
|
|
—
|
|
8.8
|
|
—
|
|
—
|
|
1.2
|
|
—
|
|
10.0
|
|
||||||||||||||
|
Acquisition
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
8.1
|
|
8.1
|
|
||||||||||||||
|
Dividends
|
—
|
|
—
|
|
0.4
|
|
(22.2
|
)
|
—
|
|
—
|
|
—
|
|
(21.8
|
)
|
||||||||||||||
|
Purchase of noncontrolling interest
|
—
|
|
—
|
|
(26.9
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(26.9
|
)
|
||||||||||||||
|
Acquisition of Treasury Stock
|
(5.4
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(172.9
|
)
|
—
|
|
(172.9
|
)
|
||||||||||||||
|
Balance at December 31, 2014
|
105.4
|
|
$
|
1.2
|
|
$
|
1,251.5
|
|
$
|
1,984.9
|
|
$
|
(429.8
|
)
|
$
|
(801.9
|
)
|
$
|
33.2
|
|
$
|
2,039.1
|
|
|||||||
The accompanying notes are an integral part of these financial statements.
F-6
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
|
Year Ended December 31,
|
|||||||||||
|
2014
|
2013
|
2012
|
|||||||||
|
OPERATING ACTIVITIES
|
|||||||||||
|
Net income (loss)
|
$
|
319.5
|
|
$
|
220.9
|
|
$
|
103.6
|
|
||
|
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
|
|||||||||||
|
(Gain) loss on disposition of discontinued operations
|
(58.6
|
)
|
(2.6
|
)
|
(0.4
|
)
|
|||||
|
Depreciation and amortization
|
155.7
|
|
152.3
|
|
153.0
|
|
|||||
|
Deferred taxes
|
(17.8
|
)
|
(2.3
|
)
|
(25.2
|
)
|
|||||
|
(Gain) loss on sale of assets
|
16.6
|
|
4.3
|
|
(5.9
|
)
|
|||||
|
Loss on early extinguishment of debt
|
2.6
|
|
5.2
|
|
99.0
|
|
|||||
|
Stock-based compensation expense
|
46.5
|
|
43.9
|
|
29.1
|
|
|||||
|
Other non-cash charges
|
32.3
|
|
53.1
|
|
70.1
|
|
|||||
|
Changes in operating assets and liabilities (net of effects of acquisitions and divestitures):
|
|||||||||||
|
Trade receivables
|
(4.2
|
)
|
(153.1
|
)
|
122.5
|
|
|||||
|
Inventories
|
(27.1
|
)
|
(70.4
|
)
|
(55.0
|
)
|
|||||
|
Trade accounts payable
|
85.8
|
|
86.9
|
|
(126.3
|
)
|
|||||
|
Income taxes payable / receivable
|
(68.3
|
)
|
(80.7
|
)
|
(144.8
|
)
|
|||||
|
Customer advances
|
(75.2
|
)
|
(16.5
|
)
|
97.1
|
|
|||||
|
Other assets and liabilities
|
(17.4
|
)
|
(46.4
|
)
|
(31.6
|
)
|
|||||
|
Other operating activities, net
|
20.3
|
|
(6.1
|
)
|
7.1
|
|
|||||
|
Net cash provided by (used in) operating activities
|
410.7
|
|
188.5
|
|
292.3
|
|
|||||
|
INVESTING ACTIVITIES
|
|||||||||||
|
Capital expenditures
|
(81.5
|
)
|
(82.8
|
)
|
(82.5
|
)
|
|||||
|
Other investments
|
(20.0
|
)
|
—
|
|
(24.1
|
)
|
|||||
|
Proceeds from disposition of discontinued operations
|
162.2
|
|
0.7
|
|
3.5
|
|
|||||
|
Proceeds from sale of assets
|
43.3
|
|
46.1
|
|
34.6
|
|
|||||
|
Other investing activities, net
|
(9.0
|
)
|
(1.4
|
)
|
(7.8
|
)
|
|||||
|
Net cash provided by (used in) investing activities
|
95.0
|
|
(37.4
|
)
|
(76.3
|
)
|
|||||
|
FINANCING ACTIVITIES
|
|||||||||||
|
Repayments of debt
|
(1,801.8
|
)
|
(571.8
|
)
|
(1,533.0
|
)
|
|||||
|
Proceeds from issuance of debt
|
1,684.2
|
|
425.2
|
|
1,234.3
|
|
|||||
|
Purchase of noncontrolling interest
|
(80.3
|
)
|
(228.1
|
)
|
(3.5
|
)
|
|||||
|
Distributions to noncontrolling interest
|
—
|
|
(18.5
|
)
|
(4.9
|
)
|
|||||
|
Share repurchases
|
(171.2
|
)
|
(31.4
|
)
|
—
|
|
|||||
|
Dividends paid
|
(21.8
|
)
|
(5.5
|
)
|
—
|
|
|||||
|
Other financing activities, net
|
(5.8
|
)
|
10.0
|
|
(16.2
|
)
|
|||||
|
Net cash provided by (used in) financing activities
|
(396.7
|
)
|
(420.1
|
)
|
(323.3
|
)
|
|||||
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
(38.9
|
)
|
(0.9
|
)
|
11.2
|
|
|||||
|
Net Increase (Decrease) in Cash and Cash Equivalents
|
70.1
|
|
(269.9
|
)
|
(96.1
|
)
|
|||||
|
Cash and Cash Equivalents at Beginning of Period
|
408.1
|
|
678.0
|
|
774.1
|
|
|||||
|
Cash and Cash Equivalents at End of Period
|
$
|
478.2
|
|
$
|
408.1
|
|
$
|
678.0
|
|
||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(dollar amounts in millions, unless otherwise noted, except per share amounts)
NOTE A – BASIS OF PRESENTATION
Principles of Consolidation
. The Consolidated Financial Statements include the accounts of Terex Corporation and its majority-owned 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.
Reclassification.
Certain prior year amounts have been reclassified to conform to the current year’s presentation. On May 30, 2014, the Company sold its truck business, which was consolidated in the Construction segment, to Volvo Construction Equipment for approximately
$160 million
. As a result, reporting of the truck business has been included in discontinued operations for all periods presented. See Note D – “Discontinued Operations” for more information on discontinued operations.
Use of Estimates.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates.
Cash and Cash Equivalents.
Cash equivalents consist of highly liquid investments with original maturities of three months or less. The carrying amount of cash and cash equivalents approximates their fair value. Cash and cash equivalents at
December 31, 2014
and
2013
include
$13.5 million
and
$14.5 million
, respectively, which were not immediately available for use. These consist primarily of cash balances held in escrow to secure various obligations of the Company.
Inventories.
Inventories are stated at the lower of cost or market (“LCM”) value. Cost is determined by the average cost and first-in, first-out (“FIFO”) methods (approximately
52%
and
48%
, respectively). In valuing inventory, the Company is required to make assumptions regarding the level of reserves required to value potentially obsolete or over-valued items at the lower of cost or market. These assumptions require the Company to analyze the aging of and forecasted demand for its inventory, forecast future products sales prices, pricing trends and margins, and to make judgments and estimates regarding obsolete or excess inventory. Future product sales prices, pricing trends and margins are based on the best available information at that time including actual orders received, negotiations with the Company’s customers for future orders, including their plans for expenditures, and market trends for similar products. The Company’s judgments and estimates for excess or obsolete inventory are based on analysis of actual and forecasted usage. The valuation of used equipment taken in trade from customers requires the Company to use the best information available to determine the value of the equipment to potential customers. This value is subject to change based on numerous conditions. Inventory reserves are established taking into account age, frequency of use, or sale, and in the case of repair parts, the installed base of machines. While calculations are made involving these factors, significant management judgment regarding expectations for future events is involved. Future events that could significantly influence the Company’s judgment and related estimates include general economic conditions in markets where the Company’s products are sold, new equipment price fluctuations, actions of the Company’s competitors, including the introduction of new products and technological advances, as well as new products and design changes the Company introduces. The Company makes adjustments to its inventory reserve based on the identification of specific situations and increases its inventory reserves accordingly. As further changes in future economic or industry conditions occur, the Company will revise the estimates that were used to calculate its inventory reserves. At
December 31, 2014
and
2013
, reserves for LCM, excess and obsolete inventory totaled
$116.3 million
and
$132.5 million
, respectively.
If actual conditions are less favorable than those the Company has projected, the Company will increase its reserves for LCM, excess and obsolete inventory accordingly. Any increase in the Company’s reserves will adversely impact its results of operations. The establishment of a reserve for LCM, excess and obsolete inventory establishes a new cost basis in the inventory. Such reserves are not reduced until the product is sold.
Debt Issuance Costs.
Debt issuance costs incurred in securing the Company’s financing arrangements are capitalized and amortized over the term of the associated debt. Capitalized debt issuance costs related to debt that is extinguished early are charged to expense at the time of retirement. Debt issuance costs were
$31.2 million
and
$31.0 million
(net of accumulated amortization of
$21.9 million
and
$17.0 million
) at
December 31, 2014
and
2013
, respectively.
F-8
Intangible Assets.
Intangible assets include purchased patents, trademarks, customer relationships and other specifically identifiable assets and are amortized on a straight-line basis over the respective estimated useful lives, which range from
one
to
fifty-seven
years. Intangible assets are reviewed for impairment when circumstances warrant. The Company has indefinite-lived intangible assets, consisting of tradenames. These indefinite-lived intangibles are tested annually for impairment, or when events or changes in circumstances indicate the potential for impairment. If the carrying amount of the indefinite-lived intangible exceeds the fair value, the intangible asset is written down to its fair value.
Goodwill.
Goodwill, representing the difference between the total purchase price and the fair value of assets (tangible and intangible) and liabilities at the date of acquisition, is reviewed for impairment annually, and more frequently as circumstances warrant, and written down only in the period in which the recorded value of such assets exceed their fair value. The Company selected October 1 as the date for the required annual impairment test.
Goodwill is tested for impairment at the reporting unit level, which is defined as an operating segment or a component of an operating segment that constitutes a business for which discrete financial information with similar economic characteristics is available and the operating results are regularly reviewed by the Company’s management. The Aerial Work Platforms (“AWP”), Construction, Cranes and Materials Processing (“MP”) operating segments plus the Material Handling business and Port Solutions business of the Material Handling & Port Solutions (“MHPS”) segment, comprise the six reporting units for goodwill impairment testing purposes.
We may elect to perform a qualitative analysis for our reporting units to determine whether it is more likely than not that the fair value of the reporting unit is greater than its carrying value. If the qualitative analysis indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount or if we elect not to perform a qualitative analysis, we perform a quantitative analysis to determine whether a goodwill impairment exists.
The quantitative goodwill impairment analysis is a two-step process. The first step used to identify potential impairment involves comparing each reporting unit’s estimated fair value to its carrying value, including goodwill. The Company uses an income approach derived from a discounted cash flow model to estimate the fair value of its reporting units. The aggregate fair value of the Company’s reporting units is compared to the Company’s market capitalization on the valuation date to assess its reasonableness. The initial recognition of goodwill, as well as the annual review of the carrying value of goodwill, requires that the Company develop estimates of future business performance. These estimates are used to derive expected cash flow and include assumptions regarding future sales levels and the level of working capital needed to support a given business. The Company relies on data developed by business segment management as well as macroeconomic data in making these calculations. The discounted cash flow model also includes a determination of the Company’s weighted average cost of capital. The cost of capital is based on assumptions about interest rates as well as a risk-adjusted rate of return required by the Company’s equity investors. Changes in these estimates can impact the present value of the expected cash flow that is used in determining the fair value of acquired intangible assets as well as the overall expected value of a given business.
The second step of the process involves the calculation of an implied fair value of goodwill for each reporting unit for which step one indicated impairment. The implied fair value of goodwill is determined by measuring the excess of the estimated fair value of the reporting unit over the estimated fair values of the individual assets, liabilities and identifiable intangibles as if the reporting unit was being acquired in a business combination. If the implied fair value of goodwill exceeds the carrying value of goodwill assigned to the reporting unit, there is no impairment. If the carrying value of goodwill assigned to a reporting unit exceeds the implied fair value of the goodwill, an impairment charge is recorded for the excess. An impairment loss cannot exceed the carrying value of goodwill assigned to a reporting unit and the subsequent reversal of goodwill impairment losses is not permitted.
There were no indicators of goodwill impairment in the tests performed as of October 1,
2014
,
2013
and
2012
. See Note J – “Goodwill and Intangible Assets, Net” in the Notes to the Consolidated Financial Statements.
Property, Plant and Equipment
.
Property, plant and equipment are stated at cost. Expenditures for major renewals and improvements are capitalized while expenditures for maintenance and repairs not expected to extend the life of an asset beyond its normal useful life are charged to expense when incurred. Plant and equipment are depreciated over the estimated useful lives (
1
-
40
years and
2
-
20
years, respectively) of the assets under the straight-line method of depreciation for financial reporting purposes and both straight-line and other methods for tax purposes.
F-9
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 fair value based on 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. Included in Selling, general & administrative (“SG&A”) costs are
$3.9 million
of asset impairments for the years ended
December 31, 2014
and
2013
and
$8.9 million
for the year ended
December 31, 2012
. See Note L – “Restructuring and Other Charges” for information on asset impairments recorded as part of restructuring activities.
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 collectability. 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 Q – “Litigation and Contingencies.” Substantially all receivables were trade receivables at
December 31, 2014
and
2013
.
Revenue Recognition.
Revenue and related costs are generally recorded when products are shipped and invoiced to either independently owned and operated dealers or to end-customers. Shipping and handling charges are recorded in Cost of goods sold.
Revenue generated in the United States is recognized when title and risk of loss pass from the Company to its customers which generally occurs upon shipment depending upon the shipping terms negotiated. The Company also has a policy which requires it to meet certain criteria in order to recognize revenue, including satisfaction of the following requirements:
a)
Persuasive evidence that an arrangement exists;
b)
The price to the buyer is fixed or determinable;
c)
Collectability is reasonably assured; and
d)
The Company has no significant obligations for future performance.
In the United States, the Company has the ability to enter into a security agreement and receive a security interest in the product by filing an appropriate Uniform Commercial Code (“UCC”) financing statement. However, a significant portion of the Company’s revenue is generated outside of the United States. In many countries outside of the United States, as a matter of statutory law, a seller retains title to a product until payment is made. The laws do not provide for a seller’s retention of a security interest in goods in the same manner as established in the UCC. In these countries, the Company retains title to goods delivered to a customer until the customer makes payment so that the Company can recover the goods in the event of customer default on payment. In these circumstances, where the Company only retains title to secure its recovery in the event of customer default, the Company also has a policy requiring it to meet certain criteria in order to recognize revenue, including satisfaction of the following requirements:
a)
Persuasive evidence that an arrangement exists;
b)
Delivery has occurred or services have been rendered;
c)
The price to the buyer is fixed or determinable;
d)
Collectability is reasonably assured;
e)
The Company has no significant obligations for future performance; and
f)
The Company is not entitled to direct the disposition of the goods, cannot rescind the transaction, cannot prohibit the customer from moving, selling, or otherwise using the goods in the ordinary course of business and has no other rights of holding title that rest with a titleholder of property that is subject to a lien under the UCC.
F-10
In circumstances where the sales transaction requires acceptance by the customer for items such as testing on site, installation, trial period or performance criteria, revenue is not recognized unless the following criteria have been met:
a)
Persuasive evidence that an arrangement exists;
b)
Delivery has occurred or services have been rendered;
c)
The price to the buyer is fixed or determinable;
d)
Collectability is reasonably assured; and
e)
The customer has given their acceptance, the time period has elapsed or the Company has otherwise objectively demonstrated that the criteria specified in the acceptance provisions have been satisfied.
In addition to performance commitments, the Company analyzes factors such as the reason for the purchase to determine if revenue should be recognized. This analysis is done before the product is shipped and includes the evaluation of factors that may affect the conclusion related to the revenue recognition criteria as follows:
a)
Persuasive evidence that an arrangement exists;
b)
Delivery has occurred or services have been rendered;
c)
The price to the buyer is fixed or determinable; and
d)
Collectability is reasonably assured.
Revenue from sales-type leases is recognized at the inception of the lease. Income from operating leases is recognized ratably over the term of the lease. The Company routinely sells equipment subject to operating leases and the related lease payments. If the Company does not retain a substantial risk of ownership in the equipment, the transaction is recorded as a sale. If the Company does retain a substantial risk of ownership, the transaction is recorded as a borrowing, the operating lease payments are recognized as revenue over the term of the lease and the debt is amortized over a similar period.
The Company, from time to time, issues buyback guarantees in conjunction with certain sales agreements. These primarily relate to trade value agreements (“TVAs”) in which a customer may trade in equipment in the future at a stated price/credit if the customer meets certain conditions. The trade-in price/credit is determined at the time of the original sale of equipment. In conjunction with the trade-in, these conditions include a requirement to purchase new equipment at fair market value at the time of trade-in, which fair value is required to be of equal or greater value than the original equipment cost. Other conditions also include the general functionality and state of repair of the machine. The Company has concluded that any credit provided to customers under a TVA/buyback guarantee, which is expected to be equal to or less than the fair value of the equipment returned on the trade-in date, is a guarantee to be accounted for in accordance with Accounting Standards Codification (“ASC”) 460, “Guarantees” (“ASC 460”).
The original sale of equipment, accompanied by a buyback guarantee, is a multiple element transaction wherein the Company offers its customer the right, after some period of time, for a limited period of time, to exchange purchased equipment for a fixed price trade-in credit toward another of our products. The fixed price trade-in credit is accounted for under the guidance provided by ASC 460. Pursuant to this right, the Company has agreed to make a payment (in the form of a trade-in credit) to the customer contingent upon the customer exercising its right to trade in the original purchased equipment. Under the guidance of ASC 460, the Company records the fixed price trade-in credit at its fair value. Accordingly, as noted above, the Company has accounted for the trade-in credit as a separate deliverable in a multiple element arrangement.
When a sales transaction includes multiple deliverables, such as sales of multiple products or sales of products and services that are delivered over multiple reporting periods, the multiple deliverables are evaluated to determine the units of accounting, and the entire fee from the arrangement is allocated to each unit of accounting based on the relative selling price. The selling price of a unit of accounting is determined using a selling price hierarchy. Vendor-specific objective evidence (“VSOE”) is established based upon the price charged for products and services that are sold separately in standalone transactions. If VSOE cannot be established, third-party evidence (“TPE”) is evaluated based on competitor prices for similar deliverables when sold separately. If neither VSOE or TPE is available, management's best estimate of selling price is established based upon the price at which the Company would sell the product on a standalone basis taking into consideration factors including, but not limited to, internal costs, gross margin objectives, pricing practices and market conditions. Revenue is recognized when the revenue recognition criteria for each unit of accounting are met.
Guarantees
.
The Company records a liability for the estimated fair value of guarantees issued pursuant to ASC 460. The Company recognizes a loss under a guarantee when its obligation to make payment under the guarantee is probable and the amount of the loss can be estimated. A loss would be recognized if the Company’s payment obligation under the guarantee exceeds the value it can expect to recover to offset such payment, primarily through the sale of the equipment underlying the guarantee.
F-11
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.
A liability for estimated warranty claims is accrued at the time of sale. The non-current portion of the warranty accrual is included in Other non-current liabilities in the Company’s 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):
|
Balance as of December 31, 2012
|
$
|
104.8
|
|
|
Accruals for warranties issued during the period
|
84.6
|
|
|
|
Changes in estimates
|
(1.1
|
)
|
|
|
Settlements during the year
|
(84.0
|
)
|
|
|
Foreign exchange effect/other
|
1.8
|
|
|
|
Balance as of December 31, 2013
|
106.1
|
|
|
|
Accruals for warranties issued during the period
|
73.6
|
|
|
|
Changes in estimates
|
1.8
|
|
|
|
Settlements during the year
|
(88.7
|
)
|
|
|
Foreign exchange effect/other
|
(6.3
|
)
|
|
|
Balance as of December 31, 2014
|
$
|
86.5
|
|
Accrued Product Liability.
The Company records accruals for product liability claims when deemed probable and estimable based on facts and circumstances, and prior claim experience. Accruals for product liability claims are valued based upon the Company’s prior claims experience, including consideration of the jurisdiction, circumstances of the accident, type of loss or injury, identity of plaintiff, other potential responsible parties, analysis of outside legal counsel, analysis of internal product liability counsel and the experience of the Company’s director of product safety. Actual product liability costs could be different due to a number of variables such as the decisions of juries or judges.
Defined Benefit Pension and Other Postretirement Benefits.
The Company provides postretirement benefits to certain former salaried and hourly employees and certain hourly employees covered by bargaining unit contracts that provide such benefits. The Company accounts for these benefits under ASC 715, “Compensation-Retirement Benefits” (“ASC 715”). ASC 715 requires balance sheet recognition of the overfunded or underfunded status of pension and postretirement benefit plans. Under ASC 715, actuarial gains and losses, prior service costs or credits, and any remaining transition assets or obligations that have not been recognized under previous accounting standards must be recognized in Accumulated other comprehensive income, net of tax effects, until they are amortized as a component of net periodic benefit cost. See Note O – “Retirement Plans and Other Benefits.”
Deferred Compensation.
The Company maintains a Deferred Compensation Plan, which is described more fully in Note O – “Retirement Plans and Other Benefits.” The Company’s common stock, par value
$0.01
per share (“Common Stock”) held in a rabbi trust pursuant to the Company’s Deferred Compensation Plan, is treated in a manner similar to treasury stock and is recorded at cost within Stockholders’ equity as of
December 31, 2014
and
2013
. The plan obligations for participant deferrals in the Company’s Common Stock are classified as Additional paid-in capital within Stockholders’ equity. The total of the Company’s Common Stock required to settle this deferred compensation obligation is included in the denominator in both basic and diluted earnings per share calculations.
Stock-Based Compensation
.
At
December 31, 2014
, the Company had stock-based employee compensation plans, which are described more fully in Note P – “Stockholders’ Equity.” The Company accounts for those plans under the recognition and measurement principles of ASC 718, “Compensation–Stock Compensation” (“ASC 718”). ASC 718 requires that expense resulting from all share-based payment transactions be recognized in the financial statements at fair value.
F-12
Foreign Currency Translation.
Assets and liabilities of the Company’s non-U.S. operations are translated at year-end exchange rates. Income and expenses are translated at average exchange rates prevailing during the year. For operations whose functional currency is the local currency, translation adjustments are recorded in the Accumulated other comprehensive income component of Stockholders’ equity. Gains or losses resulting from foreign currency transactions are recorded in the accounts based on the underlying transaction.
Derivatives.
Derivative financial instruments are recorded in the Consolidated Balance Sheet at their fair value as either assets or liabilities. Changes in the fair value of derivatives are recorded each period in earnings or Accumulated other comprehensive income, depending on whether a derivative is designated and effective as part of a hedge transaction and, if it is, the type of hedge transaction. Gains and losses on derivative instruments reported in Accumulated other comprehensive income are included in earnings in the periods in which earnings are affected by the hedged item. See Note K – “Derivative Financial Instruments.”
Environmental Policies.
Environmental expenditures that relate to current operations are either expensed or capitalized depending on the nature of the expenditure. Expenditures relating to conditions caused by past operations that do not contribute to current or future revenue generation are expensed. Liabilities are recorded when environmental assessments and/or remedial actions are probable and the costs can be reasonably estimated. Such amounts were not material at
December 31, 2014
and
2013
.
Research and Development Costs.
Research and development costs are expensed as incurred. Such costs incurred in the development of new products or significant improvements to existing products are included in Selling, general and administrative expenses. Research and development costs were
$86.9 million
,
$85.3 million
and
$71.7 million
during
2014
,
2013
and
2012
, respectively.
Income Taxes
.
The Company accounts for income taxes using the asset and liability method. This method requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities. See Note C – “Income Taxes.”
Earnings Per Share.
Basic (loss) earnings per share is computed by dividing Net (loss) income attributable to Terex Corporation for the period by the weighted average number of shares of Common Stock outstanding. Diluted earnings per share is computed by dividing Net (loss) income attributable to Terex Corporation for the period by the weighted average number of shares of Common Stock outstanding and potential dilutive common shares. See Note E – “Earnings Per Share.”
Fair Value Measurements.
Assets and liabilities measured at fair value on a recurring basis under the provisions of ASC 820, “Fair Value Measurement and Disclosure” (“ASC 820”) include interest rate swap and foreign currency forward contracts discussed in Note K – “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.
Recent Accounting Pronouncements.
In March 2013, the FASB issued ASU 2013-05, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity,” (“ASU 2013-05”). The objective of ASU 2013-05 is to clarify the applicable guidance for the release into net income of the cumulative translation adjustment upon derecognition of a subsidiary or group of assets within a foreign entity. ASU 2013-05 is effective for annual and interim reporting periods beginning after December 15, 2013 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. The future effects of ASU 2013-05 will depend on whether the Company derecognizes any foreign subsidiaries or groups of assets within a foreign entity.
F-13
In July 2013, the FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,” (“ASU 2013-11”), an amendment to ASC 740, “Income Taxes.” ASU 2013-11 clarifies that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax benefit is disallowed. In situations where a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction or the tax law of the jurisdiction does not require, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be netted with the deferred tax asset. The amendments in ASU 2013-11 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. Adoption of this guidance did not have a significant impact on the determination or reporting of the Company’s financial results.
In April 2014, the FASB issued ASU 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” (“ASU 2014-08”). Under ASU 2014-08, only disposals representing a strategic shift in operations that have a major effect on the Company’s operations and financial results should be presented as discontinued operations. Additionally, ASU 2014-08 requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The amendments in ASU 2014-08 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. However, ASU 2014-08 should not be applied to a component that is classified as held for sale before the effective date even if the component is disposed of after the effective date. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued. The effects of ASU 2014-08 will depend on any future disposals by the Company.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” (“ASU 2014-09”). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. ASU 2014-09 is effective for reporting periods beginning after December 15, 2016, and early adoption is not permitted. The Company is evaluating the impact that adoption of this guidance will have on the determination or reporting of its financial results.
In June 2014, the FASB issued ASU 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved after the Requisite Service Period,” (“ASU 2014-12”). ASU 2014-12 requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. ASU 2014-12 is effective for reporting periods beginning after December 15, 2015. Early adoption is permitted. Adoption of this guidance is not expected to have a significant impact on the determination or reporting of the Company’s financial results.
In August 2014, the FASB issued ASU 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” (“ASU 2014-15”). ASU 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern for a one year period subsequent to the date of the financial statements. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The guidance is effective for all entities for the first annual period ending after December 15, 2016 and interim periods thereafter, with early adoption permitted. Adoption of this guidance is not expected to have any impact on the determination or reporting of the Company’s financial results.
NOTE B – BUSINESS SEGMENT INFORMATION
Terex is a lifting and material handling solutions company. The Company is focused on operational improvement and delivering reliable, customer-driven solutions for a wide range of commercial applications, including the construction, infrastructure, quarrying, mining, manufacturing, transportation, energy and utility industries. The Company operates in
five
reportable segments: (i) AWP; (ii) Construction; (iii) Cranes; (iv) MHPS; and (v) MP.
The AWP segment designs, manufactures, services and markets aerial work platform equipment, telehandlers and light towers. Customers use these products to construct and maintain industrial, commercial and residential buildings and facilities and for other commercial operations, as well as in a wide range of infrastructure projects.
F-14
The Construction segment designs, manufactures and markets compact construction and specialty equipment, as well as their related replacement parts and components. Customers use these products in construction and infrastructure projects, in building roads, bridges, residential and commercial buildings, industrial sites and for material handling applications.
On May 30, 2014, the Company sold its truck business, which was consolidated in the Construction segment, to Volvo Construction Equipment for approximately
$160 million
. The truck business manufactured and sold off-highway rigid and articulated haul trucks. Included in the transaction was the manufacturing facility in Motherwell, Scotland. As a result of this sale, the reporting of the truck business has been included in discontinued operations for all periods presented.
The Cranes segment designs, manufactures, services, refurbishes and markets mobile telescopic cranes, tower cranes, lattice boom crawler cranes, lattice boom truck cranes, utility equipment and truck-mounted cranes (boom trucks), as well as their related components and replacement parts. Customers use these products primarily for construction, repair and maintenance of commercial buildings, manufacturing facilities, construction and maintenance of utility and telecommunication lines, tree trimming and certain construction and foundation drilling applications and a wide range of infrastructure projects. The segment also provides service and support for industrial cranes and aerial products in North America.
The MHPS segment designs, manufactures, services and markets industrial cranes, including universal cranes, process cranes, rope and chain hoists, electric motors, light crane systems and crane components as well as a diverse portfolio of port and rail equipment including mobile harbor cranes, straddle and sprinter carriers, rubber tired gantry cranes, rail mounted gantry cranes, ship-to-shore gantry cranes, reach stackers, empty container handlers, full container handlers, general cargo lift trucks, automated stacking cranes, automated guided vehicles and terminal automation technology, including software, as well as their related components and replacement parts. Customers use these products for lifting and material handling at manufacturing, port and rail facilities. The segment operates an extensive global sales and service network.
The MP segment designs, manufactures and markets materials processing equipment, including crushers, washing systems, screens, apron feeders, biomass and hand-fed chippers and their related components and replacement parts. Customers use these products in construction, infrastructure and recycling projects, in various quarrying and mining applications, as well as in landscaping and biomass production industries.
The Company assists customers in their rental, leasing and acquisition of its products through Terex Financial Services (“TFS”). TFS uses its equipment financing experience to provide financing solutions to customers who purchase the Company’s equipment.
The Company has
no
customers that accounted for more than
10%
of consolidated sales in
2014
. The results of businesses acquired during
2014
,
2013
and
2012
are included from the dates of their respective acquisitions.
F-15
Included in Eliminations/Corporate are the eliminations among the
five
segments, as well as general and corporate items. Business segment information is presented below (in millions):
|
|
Year Ended December 31,
|
||||||||||
|
|
2014
|
2013
|
2012
|
||||||||
|
Net Sales
|
|||||||||||
|
AWP
|
$
|
2,369.7
|
|
$
|
2,131.0
|
|
$
|
1,742.4
|
|
||
|
Construction
|
836.6
|
|
820.0
|
|
952.1
|
|
|||||
|
Cranes
|
1,791.1
|
|
1,925.5
|
|
1,987.6
|
|
|||||
|
MHPS
|
1,783.4
|
|
1,698.5
|
|
1,742.1
|
|
|||||
|
MP
|
653.1
|
|
628.2
|
|
661.5
|
|
|||||
|
Corporate and Other / Eliminations
|
(125.0
|
)
|
(119.2
|
)
|
(103.5
|
)
|
|||||
|
Total
|
$
|
7,308.9
|
|
$
|
7,084.0
|
|
$
|
6,982.2
|
|
||
|
Income (loss) from Operations
|
|||||||||||
|
AWP
|
$
|
302.8
|
|
$
|
325.8
|
|
$
|
210.9
|
|
||
|
Construction
|
1.2
|
|
(24.8
|
)
|
(69.3
|
)
|
|||||
|
Cranes
|
85.9
|
|
110.5
|
|
168.0
|
|
|||||
|
MHPS
|
(17.2
|
)
|
(41.8
|
)
|
5.6
|
|
|||||
|
MP
|
60.6
|
|
71.8
|
|
75.3
|
|
|||||
|
Corporate and Other / Eliminations
|
(10.2
|
)
|
(22.4
|
)
|
(23.7
|
)
|
|||||
|
Total
|
$
|
423.1
|
|
$
|
419.1
|
|
$
|
366.8
|
|
||
|
Depreciation and Amortization
|
|||||||||||
|
AWP
|
$
|
11.6
|
|
$
|
9.9
|
|
$
|
12.0
|
|
||
|
Construction
|
19.3
|
|
22.2
|
|
23.5
|
|
|||||
|
Cranes
|
29.9
|
|
31.5
|
|
29.6
|
|
|||||
|
MHPS
|
65.8
|
|
61.2
|
|
64.3
|
|
|||||
|
MP
|
6.0
|
|
5.9
|
|
5.1
|
|
|||||
|
Corporate
|
22.8
|
|
20.8
|
|
17.7
|
|
|||||
|
Total
|
$
|
155.4
|
|
$
|
151.5
|
|
$
|
152.2
|
|
||
|
Capital Expenditures
|
|||||||||||
|
AWP
|
$
|
28.6
|
|
$
|
19.5
|
|
$
|
15.1
|
|
||
|
Construction
|
3.7
|
|
3.8
|
|
6.6
|
|
|||||
|
Cranes
|
14.0
|
|
15.1
|
|
13.8
|
|
|||||
|
MHPS
|
21.8
|
|
24.1
|
|
32.9
|
|
|||||
|
MP
|
4.4
|
|
5.6
|
|
4.9
|
|
|||||
|
Corporate
|
7.5
|
|
11.4
|
|
7.9
|
|
|||||
|
Total
|
$
|
80.0
|
|
$
|
79.5
|
|
$
|
81.2
|
|
||
Sales between segments are generally priced to recover costs plus a reasonable markup for profit, which is eliminated in consolidation.
F-16
|
December 31,
|
|||||||
|
|
2014
|
2013
|
|||||
|
Identifiable Assets
|
|
|
|||||
|
AWP
|
$
|
1,143.5
|
|
$
|
937.2
|
|
|
|
Construction
|
1,246.0
|
|
1,012.5
|
|
|||
|
Cranes
|
1,959.7
|
|
2,040.3
|
|
|||
|
MHPS
|
2,744.0
|
|
2,989.5
|
|
|||
|
MP
|
813.6
|
|
945.6
|
|
|||
|
Corporate and Other / Eliminations
|
(1,978.8
|
)
|
(1,533.3
|
)
|
|||
|
Discontinued operations
|
—
|
|
144.9
|
|
|||
|
Total
|
$
|
5,928.0
|
|
$
|
6,536.7
|
|
|
Geographic segment information is presented below (in millions):
|
|
Year Ended December 31,
|
||||||||||
|
|
2014
|
2013
|
2012
|
||||||||
|
Net Sales
|
|
|
|
|
|
|
|||||
|
United States
|
$
|
2,746.2
|
|
$
|
2,592.3
|
|
$
|
2,260.2
|
|
||
|
United Kingdom
|
401.7
|
|
247.2
|
|
263.8
|
|
|||||
|
Germany
|
642.8
|
|
621.4
|
|
659.2
|
|
|||||
|
Other European countries
|
1,480.5
|
|
1,226.6
|
|
1,343.7
|
|
|||||
|
All other
|
2,037.7
|
|
2,396.5
|
|
2,455.3
|
|
|||||
|
Total
|
$
|
7,308.9
|
|
$
|
7,084.0
|
|
$
|
6,982.2
|
|
||
|
|
December 31,
|
||||||
|
|
2014
|
2013
|
|||||
|
Long-lived Assets
|
|
|
|
|
|||
|
United States
|
$
|
191.6
|
|
$
|
200.6
|
|
|
|
United Kingdom
|
23.9
|
|
28.3
|
|
|||
|
Germany
|
253.0
|
|
305.3
|
|
|||
|
Other European countries
|
91.3
|
|
106.9
|
|
|||
|
All other
|
130.5
|
|
148.3
|
|
|||
|
Total
|
$
|
690.3
|
|
$
|
789.4
|
|
|
The Company attributes sales to unaffiliated customers in different geographical areas based on the location of the customer. Long-lived assets consist of net fixed assets, which can be attributed to the specific geographic regions.
NOTE C – INCOME TAXES
The components of income (loss) from continuing operations before income taxes are as follows (in millions):
|
|
Year Ended December 31,
|
|||||||||||
|
2014
|
2013
|
2012
|
||||||||||
|
United States
|
$
|
314.1
|
|
$
|
340.7
|
|
$
|
127.2
|
|
|||
|
Foreign
|
(16.9
|
)
|
(49.4
|
)
|
(0.9
|
)
|
||||||
|
Income (loss) from continuing operations before income taxes
|
$
|
297.2
|
|
$
|
291.3
|
|
$
|
126.3
|
|
|||
Income (loss) before income taxes including Income (loss) from discontinued operations and Gain (loss) from disposition of discontinued operations attributable to the Company was
$365.0 million
,
$305.1 million
and
$156.7 million
for the years ended
December 31, 2014
,
2013
and
2012
, respectively.
F-17
The major components of the Company’s provision for (benefit from) income taxes on continuing operations before income taxes are summarized below (in millions):
|
|
Year Ended December 31,
|
|||||||||||
|
|
2014
|
2013
|
2012
|
|||||||||
|
Current:
|
|
|
|
|
|
|
||||||
|
Federal
|
$
|
6.8
|
|
$
|
49.3
|
|
$
|
29.7
|
|
|||
|
State
|
7.6
|
|
5.4
|
|
3.8
|
|
||||||
|
Foreign
|
41.0
|
|
36.5
|
|
45.9
|
|
||||||
|
Current income tax provision (benefit)
|
55.4
|
|
91.2
|
|
79.4
|
|
||||||
|
Deferred:
|
|
|
|
|
|
|
||||||
|
Federal
|
7.1
|
|
22.2
|
|
(8.8
|
)
|
||||||
|
State
|
(0.7
|
)
|
1.3
|
|
(0.6
|
)
|
||||||
|
Foreign
|
(24.1
|
)
|
(27.3
|
)
|
(18.5
|
)
|
||||||
|
Deferred income tax (benefit) provision
|
(17.7
|
)
|
(3.8
|
)
|
(27.9
|
)
|
||||||
|
Total provision for (benefit from) income taxes
|
$
|
37.7
|
|
$
|
87.4
|
|
$
|
51.5
|
|
|||
Including discontinued operations and disposition of discontinued operations, the total (benefit from) provision for income taxes was
$45.5 million
,
$84.2 million
and
$53.1 million
for the years ended
December 31, 2014
,
2013
and
2012
, respectively.
Deferred tax assets and liabilities result from differences in the bases of assets and liabilities for tax and financial statement purposes. The tax effects of the basis differences and loss carry forwards as of
December 31, 2014
and
2013
for continuing operations are summarized below for major balance sheet captions (in millions):
|
2014
|
2013
|
|||||||
|
Property, plant and equipment
|
$
|
(79.0
|
)
|
$
|
(76.2
|
)
|
||
|
Intangibles
|
(105.3
|
)
|
(140.2
|
)
|
||||
|
Customer advances
|
(17.0
|
)
|
(9.8
|
)
|
||||
|
Inventories
|
31.0
|
|
40.2
|
|
||||
|
Accrued warranties and product liability
|
17.0
|
|
18.7
|
|
||||
|
Loss carry forwards
|
241.8
|
|
210.7
|
|
||||
|
Retirement plans
|
61.6
|
|
39.3
|
|
||||
|
Accrued compensation and benefits
|
54.0
|
|
54.1
|
|
||||
|
Investments
|
(10.4
|
)
|
(10.6
|
)
|
||||
|
Currency translation adjustments
|
17.5
|
|
(3.2
|
)
|
||||
|
Credit carry forwards
|
8.9
|
|
12.1
|
|
||||
|
Other
|
61.9
|
|
50.1
|
|
||||
|
Deferred tax assets valuation allowance
|
(229.1
|
)
|
(181.8
|
)
|
||||
|
Net deferred tax assets (liabilities)
|
$
|
52.9
|
|
$
|
3.4
|
|
||
Deferred tax assets for continuing operations total
$329.5 million
before valuation allowances of
$229.1 million
at
December 31, 2014
. Total deferred tax liabilities for continuing operations of
$47.5 million
include
$6.7 million
in current liabilities and
$40.8 million
in non-current liabilities on the Consolidated Balance Sheet at
December 31, 2014
. There were
no
net deferred tax assets for discontinued operations as of
December 31, 2014
. There were
$3.0 million
net deferred tax assets for discontinued operations as of
December 31, 2013
.
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. To the extent that estimates of future taxable income decrease or do not materialize, additional valuation allowances may be required. The Company records a valuation allowance for each deferred tax asset for which realization is not assessed as more likely than not. The valuation allowance for deferred tax assets as of
December 31, 2014
and
2013
was
$229.1 million
and
$181.8 million
, respectively. The net change in the total valuation allowance for the years ended
December 31, 2014
and
2013
was an increase of
$47.3 million
and
$9.6 million
, respectively.
F-18
As of December 31, 2014, the Company determined that it was appropriate to retain its valuation allowance on deferred tax assets of its Italian subsidiaries. However, it is reasonably possible that, in the near term, continuing improvement in operating performance and other evidence could change the Company’s assessment of the realizability of the Italian deferred tax assets resulting in the reversal of all, or part of, the related valuation allowance. As of December 31, 2014, the Company has recorded a valuation allowance on deferred tax assets of its German subsidiaries. During the fourth quarter of 2014, the German subsidiaries recognized unanticipated losses, including foreign exchange losses, increased pension liability accruals, and business restructuring expense. These events created sufficient objective negative evidence to outweigh the positive evidence supporting realization of the deferred tax assets of the German subsidiaries. For the year ended
December 31, 2014
, (Provision for) benefit from income tax included expense of
$6.7 million
related to the valuation allowance on the deferred tax assets of the Company’s German subsidiaries. The Company recognized valuation allowances totaling
$33.6 million
almost completely offsetting deferred tax assets recorded for capital loss carry forwards generated by dispositions in 2014.
The Company’s Provision for (benefit from) income taxes is different from the amount that would be provided by applying the statutory federal income tax rate to the Company’s Income (loss) from continuing operations before income taxes. The reasons for the difference are summarized as follows (in millions):
|
|
Year Ended December 31,
|
|||||||||||
|
2014
|
2013
|
2012
|
||||||||||
|
Tax at statutory federal income tax rate
|
$
|
104.0
|
|
$
|
102.0
|
|
$
|
44.2
|
|
|||
|
State taxes (net of Federal benefit)
|
4.5
|
|
4.4
|
|
2.0
|
|
||||||
|
Change in valuation allowance
|
27.4
|
|
6.9
|
|
14.2
|
|
||||||
|
Foreign tax differential on income/losses of foreign subsidiaries
|
(10.7
|
)
|
1.4
|
|
(7.8
|
)
|
||||||
|
U.S. tax on multi-national operations
|
4.4
|
|
(12.3
|
)
|
(0.4
|
)
|
||||||
|
Change in foreign statutory rates
|
2.5
|
|
3.6
|
|
3.2
|
|
||||||
|
U.S. manufacturing and export incentives
|
(6.0
|
)
|
(7.1
|
)
|
(4.0
|
)
|
||||||
|
Tax effect of dispositions
|
(84.9
|
)
|
(1.5
|
)
|
(6.3
|
)
|
||||||
|
Other
|
(3.5
|
)
|
(10.0
|
)
|
6.4
|
|
||||||
|
Total provision for (benefit from) income taxes
|
$
|
37.7
|
|
$
|
87.4
|
|
$
|
51.5
|
|
|||
The effective tax rate on gain (loss) on disposition of discontinued operations in 2014 differs from the statutory rate primarily due to the majority of gains from sale of the truck business not being subject to tax. The effective tax rate on income from discontinued operations in 2013 differs from the statutory rate primarily due to recognition of uncertain tax positions.
Except for a limited number of immaterial subsidiaries and joint ventures accounted under the equity method, the Company does not provide for foreign income and withholding, U.S. Federal, or state income taxes or tax benefits on the financial reporting basis over the tax basis of its investments in foreign subsidiaries because such amounts are indefinitely reinvested to support operations and continued growth plans outside the U.S. At
December 31, 2014
, the Company’s net unremitted retained earnings of its foreign subsidiaries was approximately
$800 million
. 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 to mobilize funds without triggering basis differences, and the profitability of U.S. operations and their cash requirements and the need, if any, to repatriate funds. 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. At this time, determination of the unrecognized deferred tax liabilities for temporary differences related to the investment in foreign subsidiaries is not practicable.
At
December 31, 2014
, the Company has various state net operating loss carry forwards available to reduce future state taxable income and income taxes. These net operating loss carry forwards expire at various dates through 2034. In addition, the gross amount of the U.S. federal capital loss carryforward is
$72.2 million
which expires in 2019.
At
December 31, 2014
, the Company’s foreign subsidiaries had approximately
$718 million
of loss carry forwards, consisting of
$288 million
in Germany,
$159 million
in Italy,
$80 million
in the United Kingdom,
$56 million
in China,
$49 million
in Spain, and
$86 million
in other countries, which are available to offset future foreign taxable income. The majority of these foreign tax loss carry forwards are available without expiration. In addition, the gross amount of the Australian capital loss carryforward is
$31 million
, and it has an unlimited carryforward period.
The Company had total net income tax (refunds) payments including discontinued operations of
$124.1 million
,
$171.1 million
and
$224.2 million
in
2014
,
2013
and
2012
, respectively. At
December 31, 2014
and
2013
, Other current assets included net income tax receivable amounts of
$87.9 million
and
$12.3 million
respectively.
F-19
The Company and its subsidiaries conduct business globally and file income tax returns in U.S. federal, state and foreign jurisdictions, as required. From a tax perspective, major jurisdictions where the Company is often subject to examination by tax authorities include Australia, Germany, Italy, the United Kingdom and the U.S. Currently, various entities of the Company are under audit in Germany, Italy, the U.S. and elsewhere. With few exceptions, including certain subsidiaries in Germany that are under audit, the statute of limitations for the Company and most of its subsidiaries has, expired for tax years prior to 2010. 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. The Company recognizes accrued interest and penalties, if any, related to income taxes as (Provision for) benefit from income taxes in its Consolidated Statement of Income.
The following table summarizes the activity related to the Company’s total (including discontinued operations) unrecognized tax benefits (in millions):
|
Balance as of January 1, 2012
|
$
|
169.6
|
|
|
Additions for current year tax positions
|
—
|
|
|
|
Additions for prior year tax positions
|
15.1
|
|
|
|
Reductions for prior year tax positions
|
(22.3
|
)
|
|
|
Reductions for tax positions related to current year
|
—
|
|
|
|
Reductions related to expiration of statute of limitations
|
(23.2
|
)
|
|
|
Settlements
|
(1.3
|
)
|
|
|
Acquired balances
|
10.7
|
|
|
|
Balance as of December 31, 2012
|
148.6
|
|
|
|
Additions for current year tax positions
|
—
|
|
|
|
Additions for prior year tax positions
|
10.6
|
|
|
|
Reductions for prior year tax positions
|
(17.0
|
)
|
|
|
Reductions for tax positions related to current year
|
—
|
|
|
|
Reductions related to expiration of statute of limitations
|
(42.7
|
)
|
|
|
Settlements
|
(15.8
|
)
|
|
|
Acquired balances
|
—
|
|
|
|
Balance as of December 31, 2013
|
83.7
|
|
|
|
Additions for current year tax positions
|
1.9
|
|
|
|
Additions for prior year tax positions
|
1.2
|
|
|
|
Reductions for prior year tax positions
|
(10.1
|
)
|
|
|
Reductions for tax positions related to current year
|
—
|
|
|
|
Reductions related to expiration of statute of limitations
|
(2.4
|
)
|
|
|
Settlements
|
(0.1
|
)
|
|
|
Acquired balances
|
—
|
|
|
|
Balance as of December 31, 2014
|
$
|
74.2
|
|
The Company evaluates each reporting period whether it is reasonably possible that material changes to its uncertain tax position liability could occur in the next 12 months. Changes may occur as a result of uncertain tax positions being considered effectively settled, re-measured, paid, acquired or divested, as the result of a change in the accounting rules, tax law or judicial decision, or due to the expiration of the relevant statute of limitations. It is not possible to predict which uncertain tax positions, if any, may be challenged by tax authorities. The timing and impact of income tax audits and their resolution is highly uncertain. New facts, laws, pronouncements and judicial decisions can change assessments concerning technical merit and measurement. The amounts of or periods in which changes to reserves for uncertain tax positions will occur is rarely ascertainable. The Company believes it is reasonably possible that the total amount of unrecognized tax benefits disclosed as of
December 31, 2014
may decrease approximately
$30 million
in the fiscal year ending
December 31, 2015
. Such possible decrease relates primarily to audit settlements for valuation, transfer pricing, deductibility issues and the expiration of statutes of limitation.
F-20
As of
December 31, 2014
and
2013
, the Company had
$74.2 million
and
$83.7 million
, respectively, of unrecognized tax benefits. Of the
$74.2 million
at
December 31, 2014
,
$41.3 million
, if recognized, would affect the effective tax rate. As of
December 31, 2014
and
2013
, the liability for potential penalties and interest was
$12.9 million
and
$13.5 million
, respectively. During each of the years ended
December 31, 2014
and
2013
, the Company recognized tax (benefit) expense of
$(0.6) million
for interest and penalties.
NOTE D – DISCONTINUED OPERATIONS
On May 30, 2014, the Company sold its truck business, which was consolidated in the Construction segment, to Volvo Construction Equipment for approximately
$160 million
. The truck business manufactured and sold off-highway rigid and articulated haul trucks. Included in the transaction was the manufacturing facility in Motherwell, Scotland.
Due to this divestiture, reporting of the truck business has been included in discontinued operations for all periods presented. Cash flows from the Company’s discontinued operations are included in the Consolidated Statements of Cash Flows.
The following amounts related to discontinued operations were derived from historical financial information and have been segregated from continuing operations and reported as discontinued operations in the Consolidated Statement of Income (in millions):
|
|
Year Ended December 31,
|
||||||||||
|
|
2014
|
2013
|
2012
|
||||||||
|
Net sales
|
$
|
94.8
|
|
$
|
225.8
|
|
$
|
366.2
|
|
||
|
Income (loss) from discontinued operations before income taxes
|
$
|
1.7
|
|
$
|
10.3
|
|
$
|
30.5
|
|
||
|
(Provision for) benefit from income taxes
|
(0.3
|
)
|
4.1
|
|
(2.1
|
)
|
|||||
|
Income (loss) from discontinued operations – net of tax
|
$
|
1.4
|
|
$
|
14.4
|
|
$
|
28.4
|
|
||
|
Gain (loss) on disposition of discontinued operations
|
$
|
66.1
|
|
$
|
3.5
|
|
$
|
(0.1
|
)
|
||
|
(Provision for) benefit from income taxes
|
(7.5
|
)
|
(0.9
|
)
|
0.5
|
|
|||||
|
Gain (loss) on disposition of discontinued operations – net of tax
|
$
|
58.6
|
|
$
|
2.6
|
|
$
|
0.4
|
|
||
During the year ended
December 31, 2014
, the Company recorded a gain of
$57.1 million
related to the sale of its truck business. During the years ended
December 31, 2014
,
2013
, and
2012
the Company recorded a
$1.5 million
,
$2.6 million
and
$2.3 million
gain, respectively, primarily related to the sale of its Atlas heavy construction equipment and knuckle-boom cranes businesses based on contractually obligated earnings based payments from the purchaser. During the year ended
December 31, 2012
, the Company recorded a
$1.9 million
loss related to the settlement of a dispute with Bucyrus International, Inc.
F-21
The following table provides the amounts of assets and liabilities reported in discontinued operations in the Consolidated Balance Sheet (in millions) related to the truck business:
|
December 31
|
|||||||
|
2014
|
2013
|
||||||
|
Trade receivables, net
|
$
|
—
|
|
$
|
49.7
|
|
|
|
Inventories
|
—
|
|
73.6
|
|
|||
|
Other current assets
|
—
|
|
6.0
|
|
|||
|
Current assets – discontinued operations
|
$
|
—
|
|
$
|
129.3
|
|
|
|
Property, plant and equipment - net
|
$
|
—
|
|
$
|
9.5
|
|
|
|
Other assets
|
—
|
|
6.1
|
|
|||
|
Non-current assets – discontinued operations
|
—
|
|
15.6
|
|
|||
|
Trade accounts payable
|
$
|
—
|
|
$
|
35.9
|
|
|
|
Other current liabilities
|
—
|
|
10.2
|
|
|||
|
Current liabilities – discontinued operations
|
$
|
—
|
|
$
|
46.1
|
|
|
|
Non-current liabilities – discontinued operations
|
$
|
—
|
|
$
|
5.7
|
|
|
NOTE E – EARNINGS PER SHARE
|
For the year ended December 31,
|
|||||||||||
|
(in millions, except per share data)
|
|||||||||||
|
|
2014
|
2013
|
2012
|
||||||||
|
Net income (loss) from continuing operations attributable to Terex Corporation common stockholders
|
$
|
259.0
|
|
$
|
209.0
|
|
$
|
77.0
|
|
||
|
Income (loss) from discontinued operations-net of tax
|
1.4
|
|
14.4
|
|
28.4
|
|
|||||
|
Gain (loss) on disposition of discontinued operations-net of tax
|
58.6
|
|
2.6
|
|
0.4
|
|
|||||
|
Net income (loss) attributable to Terex Corporation
|
$
|
319.0
|
|
$
|
226.0
|
|
$
|
105.8
|
|
||
|
Basic shares:
|
|||||||||||
|
Weighted average shares outstanding
|
109.7
|
|
111.1
|
|
110.3
|
|
|||||
|
Earnings per share - basic:
|
|||||||||||
|
Income (loss) from continuing operations
|
$
|
2.36
|
|
$
|
1.88
|
|
$
|
0.70
|
|
||
|
Income (loss) from discontinued operations-net of tax
|
0.01
|
|
0.13
|
|
0.26
|
|
|||||
|
Gain (loss) on disposition of discontinued operations-net of tax
|
0.54
|
|
0.02
|
|
—
|
|
|||||
|
Net income (loss) attributable to Terex Corporation
|
$
|
2.91
|
|
$
|
2.03
|
|
$
|
0.96
|
|
||
|
Diluted shares:
|
|||||||||||
|
Weighted average shares outstanding
|
109.7
|
|
111.1
|
|
110.3
|
|
|||||
|
Effect of dilutive securities:
|
|||||||||||
|
Stock options, restricted stock awards and convertible notes
|
4.5
|
|
5.9
|
|
3.6
|
|
|||||
|
Diluted weighted average shares outstanding
|
114.2
|
|
117.0
|
|
113.9
|
|
|||||
|
Earnings per share - diluted:
|
|||||||||||
|
Income (loss) from continuing operations
|
$
|
2.27
|
|
$
|
1.79
|
|
$
|
0.68
|
|
||
|
Income (loss) from discontinued operations-net of tax
|
0.01
|
|
0.12
|
|
0.25
|
|
|||||
|
Gain (loss) on disposition of discontinued operations-net of tax
|
0.51
|
|
0.02
|
|
—
|
|
|||||
|
Net income (loss) attributable to Terex Corporation
|
$
|
2.79
|
|
$
|
1.93
|
|
$
|
0.93
|
|
||
F-22
The following table provides information to reconcile amounts reported on the Consolidated Statement of Income to amounts used to calculate earnings per share attributable to Terex Corporation common stockholders (in millions) for the year ended December 31:
|
Reconciliation of amounts attributable to common stockholders:
|
2014
|
2013
|
2012
|
||||||||
|
Income (loss) from continuing operations
|
$
|
259.5
|
|
$
|
203.9
|
|
$
|
74.8
|
|
||
|
Noncontrolling interest attributed to income (loss) from continuing operations
|
(0.5
|
)
|
5.1
|
|
2.2
|
|
|||||
|
Income (loss) from continuing operations attributable to common stockholders
|
$
|
259.0
|
|
$
|
209.0
|
|
$
|
77.0
|
|
||
Weighted average options to purchase
0.1 million
shares,
0.2 million
shares and
0.2 million
shares of the Company’s common stock, par value
$0.01
per share (“Common Stock”), were outstanding during
2014
,
2013
and
2012
, 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
shares,
0.3 million
shares and
0.3 million
shares were outstanding during
2014
,
2013
and
2012
, 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.
The
4%
Convertible Senior Subordinated Notes due 2015 (the “
4%
Convertible Notes”) described in Note M – “Long-Term Obligations” are dilutive to the extent the volume-weighted average price of the Common Stock for the period evaluated 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
2014
,
2013
and
2012
was
3.4 million
,
4.6 million
and
2.9 million
, respectively.
NOTE F – INVENTORIES
Inventories consist of the following (in millions):
|
December 31,
|
|||||||
|
|
2014
|
2013
|
|||||
|
Finished equipment
|
$
|
425.7
|
|
$
|
450.0
|
|
|
|
Replacement parts
|
170.5
|
|
168.4
|
|
|||
|
Work-in-process
|
454.2
|
|
527.3
|
|
|||
|
Raw materials and supplies
|
410.5
|
|
467.5
|
|
|||
|
Inventories
|
$
|
1,460.9
|
|
$
|
1,613.2
|
|
|
Reserves for lower of cost or market value, excess and obsolete inventory were
$116.3 million
and
$132.5 million
at
December 31, 2014
and
2013
, respectively.
F-23
NOTE G – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment – net consist of the following (in millions):
|
December 31,
|
|||||||
|
|
2014
|
2013
|
|||||
|
Property
|
$
|
104.3
|
|
$
|
121.2
|
|
|
|
Plant
|
359.5
|
|
412.5
|
|
|||
|
Equipment
|
699.5
|
|
720.1
|
|
|||
|
Property, Plant and Equipment – Gross
|
1,163.3
|
|
1,253.8
|
|
|||
|
Less: Accumulated depreciation
|
(473.0
|
)
|
(464.4
|
)
|
|||
|
Property, plant and equipment – net
|
$
|
690.3
|
|
$
|
789.4
|
|
|
Depreciation expense for the years ended
December 31, 2014
,
2013
and
2012
, was
$110.4 million
,
$104.4 million
and
$99.7 million
, respectively.
NOTE H – EQUIPMENT SUBJECT TO OPERATING LEASES
Operating leases arise from leasing the Company’s products to customers. Initial non-cancellable lease terms typically range up to
84
months. The net book value of equipment subject to operating leases was approximately
$72 million
and
$80 million
(net of accumulated depreciation of approximately
$40 million
and
$40 million
) at
December 31, 2014
and
2013
, respectively, and is included in Other assets on the Company’s Consolidated Balance Sheet. The equipment is depreciated on a straight-line basis over its estimated useful life.
Future minimum lease payments to be received under non-cancellable operating leases with lease terms in excess of one year are as follows (in millions):
|
Years ending December 31,
|
|
|
|
|
2015
|
$
|
11.8
|
|
|
2016
|
8.4
|
|
|
|
2017
|
2.9
|
|
|
|
2018
|
1.7
|
|
|
|
2019
|
1.7
|
|
|
|
Thereafter
|
1.3
|
|
|
|
|
$
|
27.8
|
|
The Company received approximately
$15 million
and
$16 million
of rental income from assets subject to operating leases with lease terms greater than one year during
2014
and
2013
, respectively, none of which represented contingent rental payments.
NOTE I – DISPOSITIONS
On December 19, 2014, the Company completed the sale of
51%
of A.S.V., Inc. to Manitex International, Inc. (“Manitex”), resulting in a joint venture in compact track loaders and skid steers that is
51%
owned by Manitex and
49%
owned by Terex and accounted for it as an equity method investment. On December 31, 2014, the Company sold
100%
of Demag Cranes and Components Pty. Ltd. The Company recorded a net loss on these dispositions of approximately
$16 million
in Selling, general and administrative expenses on the Consolidated Statement of Income. Cash received from these dispositions is included in the Consolidated Statement of Cash Flows investing activities.
F-24
NOTE J – GOODWILL AND INTANGIBLE ASSETS, NET
An analysis of changes in the Company’s goodwill by business segment is as follows (in millions):
|
|
AWP
|
Construction
|
Cranes
|
MHPS
|
MP
|
Total
|
|||||||||||||||||
|
Balance at December 31, 2012, gross
|
$
|
139.9
|
|
$
|
274.4
|
|
$
|
233.9
|
|
$
|
732.8
|
|
$
|
204.7
|
|
$
|
1,585.7
|
|
|||||
|
Accumulated impairment
|
(38.6
|
)
|
(274.4
|
)
|
(4.2
|
)
|
—
|
|
(23.2
|
)
|
(340.4
|
)
|
|||||||||||
|
Balance at December 31, 2012, net
|
101.3
|
|
—
|
|
229.7
|
|
732.8
|
|
181.5
|
|
1,245.3
|
|
|||||||||||
|
Foreign exchange effect and other
|
0.7
|
|
—
|
|
2.0
|
|
(5.3
|
)
|
2.9
|
|
0.3
|
|
|||||||||||
|
Balance at December 31, 2013, gross
|
140.6
|
|
274.4
|
|
235.9
|
|
727.5
|
|
207.6
|
|
1,586.0
|
|
|||||||||||
|
Accumulated impairment
|
(38.6
|
)
|
(274.4
|
)
|
(4.2
|
)
|
—
|
|
(23.2
|
)
|
(340.4
|
)
|
|||||||||||
|
Balance at December 31, 2013, net
|
102.0
|
|
—
|
|
231.7
|
|
727.5
|
|
184.4
|
|
1,245.6
|
|
|||||||||||
|
Acquisitions
|
—
|
|
—
|
|
—
|
|
12.0
|
|
—
|
|
12.0
|
|
|||||||||||
|
Divestiture
|
—
|
|
(141.6
|
)
|
—
|
|
(6.1
|
)
|
—
|
|
(147.7
|
)
|
|||||||||||
|
Foreign exchange effect and other
|
(2.1
|
)
|
—
|
|
(18.3
|
)
|
(90.6
|
)
|
(9.5
|
)
|
(120.5
|
)
|
|||||||||||
|
Balance at December 31, 2014, gross
|
138.5
|
|
|
132.8
|
|
217.6
|
|
642.8
|
|
|
198.1
|
|
1,329.8
|
|
|||||||||
|
Accumulated impairment
|
(38.6
|
)
|
(132.8
|
)
|
(4.2
|
)
|
—
|
|
(23.2
|
)
|
(198.8
|
)
|
|||||||||||
|
Balance at December 31, 2014, net
|
$
|
99.9
|
|
$
|
—
|
|
$
|
213.4
|
|
$
|
642.8
|
|
$
|
174.9
|
|
$
|
1,131.0
|
|
|||||
As of October 1, 2014, the Company performed its annual goodwill impairment test for the MP segment, which resulted in the fair market value of the MP reporting unit exceeding its carrying value by
24%
. While no evidence of impairment was indicated, due to geopolitical uncertainty and short-term volatility in worldwide commodities markets, the Company reviewed the MP reporting unit at December 31, 2014 to determine if the results of the October 1 test would be significantly different. The Company did not find evidence of impairment at December 31, 2014, but it will continue to monitor the performance of the MP reporting unit and update the test as circumstances warrant. If the MP reporting unit is unable to achieve its projected cash flows, the outcome of any prospective tests may result in recording goodwill impairment charges in future periods.
Intangible assets, net were comprised of the following as of
December 31, 2014
and
2013
(in millions):
|
December 31, 2014
|
December 31, 2013
|
||||||||||||||||||||||||
|
Weighted Average Life
(in years) |
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
|||||||||||||||||||
|
Definite-lived intangible assets:
|
|||||||||||||||||||||||||
|
Technology
|
6
|
$
|
58.8
|
|
$
|
38.4
|
|
$
|
20.4
|
|
$
|
91.6
|
|
$
|
48.7
|
|
$
|
42.9
|
|
||||||
|
Customer Relationships
|
16
|
251.9
|
|
78.4
|
|
173.5
|
|
354.7
|
|
105.2
|
|
249.5
|
|
||||||||||||
|
Land Use Rights
|
57
|
18.0
|
|
1.8
|
|
16.2
|
|
18.4
|
|
1.5
|
|
16.9
|
|
||||||||||||
|
Other
|
7
|
44.6
|
|
38.2
|
|
6.4
|
|
52.2
|
|
40.4
|
|
11.8
|
|
||||||||||||
|
Total definite-lived intangible assets
|
$
|
373.3
|
|
$
|
156.8
|
|
$
|
216.5
|
|
$
|
516.9
|
|
$
|
195.8
|
|
$
|
321.1
|
|
|||||||
|
Indefinite-lived intangible assets:
|
|||||||||||||||||||||||||
|
Tradenames
|
$
|
108.9
|
|
$
|
123.7
|
|
|||||||||||||||||||
|
Total indefinite-lived intangible assets
|
$
|
108.9
|
|
$
|
123.7
|
|
|||||||||||||||||||
|
For the Year Ended December 31,
|
|||||||||||
|
(in millions)
|
2014
|
2013
|
2012
|
||||||||
|
Aggregate Amortization Expense
|
$
|
37.6
|
|
$
|
38.6
|
|
$
|
43.0
|
|
||
F-25
Estimated aggregate intangible asset amortization expense (in millions) for the next five years is as follows:
|
2015
|
$
|
26.0
|
|
|
|
2016
|
$
|
24.1
|
|
|
|
2017
|
$
|
19.7
|
|
|
|
2018
|
$
|
15.1
|
|
|
|
2019
|
$
|
14.8
|
|
|
NOTE K – 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.
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, British Pound and Australian Dollar. 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 Consolidated Statement of Income. The Company has used and may use interest rate swaps to mitigate its exposure to changes in interest rates related to existing issuances of variable rate debt and changes in the fair value 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. Contracts deemed ineffective are recognized in earnings immediately.
In the 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 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. In November 2012, this interest rate swap agreement was terminated. Furthermore, as discussed in Note M – “Long-Term Obligations,” the Company redeemed the
8%
Senior Subordinated notes associated with this swap and therefore, as a result of the termination and redemption, recorded a gain of approximately
$16 million
which decreased the Loss on early extinguishment of debt associated with the redemption.
F-26
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
December 31, 2014
, the Company had
$378.5 million
notional amount of currency exchange forward contracts outstanding that were initially designated as hedge contracts, most of which mature on or before December 31,
2015
. The fair market value of these contracts at
December 31, 2014
was a net loss of
$0.4 million
. At
December 31, 2014
,
$313.4 million
notional amount (
$0.6 million
of fair value losses) of these forward contracts have been designated as, and are effective as, cash flow hedges of forecasted and specifically identified transactions. During
2014
and
2013
, 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 records the interest rate swap and foreign exchange contracts at fair value on a recurring basis. There were no interest rate swaps recorded as of
December 31, 2014
and
2013
. The foreign exchange contracts designated as hedging instruments are categorized under Level 2 of the ASC 820 hierarchy and are recorded at
December 31, 2014
and
2013
as a net liability of
$0.4 million
and a net asset of
$3.8 million
, respectively. See Note A – “Basis of Presentation,” for an explanation of the ASC 820 hierarchy. The fair values of these foreign exchange forward contracts are derived using quoted forward foreign exchange prices to interpolate values of outstanding trades at the reporting date based on their maturities.
The Company
uses forward foreign exchange contracts to mitigate its exposure to changes in foreign currency exchange rates on third party and intercompany forecasted transactions. Certain of these contracts have not been designated as hedging instruments. Changes in the fair value of derivative financial instruments are recognized as gains or losses in Cost of goods sold or Other income (expense) - net in the Consolidated Statement of Income.
Concurrent with the sale of part of A.S.V., Inc. to Manitex, the Company invested in a subordinated convertible promissory note from Manitex, which included an embedded derivative, the conversion feature. At the date of issuance, the embedded derivative was measured at fair value. The derivative is marked-to-market each period with changes in fair value recorded in Other income (expense) - net in the Consolidated Statement of Income.
The following table provides the location and fair value amounts of derivative instruments designated as hedging instruments that are reported in the Consolidated Balance Sheet (in millions):
|
Asset Derivatives
|
Balance Sheet Account
|
December 31,
2014 |
December 31,
2013 |
|||||
|
Foreign exchange contracts
|
Other current assets
|
$
|
10.1
|
|
$
|
10.0
|
|
|
|
Liability Derivatives
|
|
|
|
|
|
|||
|
Foreign exchange contracts
|
Other current liabilities
|
10.5
|
|
6.2
|
|
|||
|
Total Derivatives
|
|
$
|
(0.4
|
)
|
$
|
3.8
|
|
|
The following table provides the location and fair value amounts of derivative instruments not designated as hedging instruments that are reported in the Consolidated Balance Sheet (in millions):
|
Asset Derivatives
|
Balance Sheet Account
|
December 31,
2014 |
December 31,
2013 |
|||||
|
Foreign exchange contracts
|
Other current assets
|
$
|
2.2
|
|
$
|
4.1
|
|
|
|
Debt conversion feature
|
Other assets
|
3.0
|
|
—
|
|
|||
|
Total asset derivatives
|
$
|
5.2
|
|
$
|
4.1
|
|
||
|
Liability Derivatives
|
||||||||
|
Foreign exchange contracts
|
Other current liabilities
|
1.0
|
|
0.8
|
|
|||
|
Total liability derivatives
|
$
|
1.0
|
|
$
|
0.8
|
|
||
|
Total Derivatives
|
$
|
4.2
|
|
$
|
3.3
|
|
||
F-27
The following tables provide the effect of derivative instruments that are designated as hedges in the Consolidated Statements of Income, Comprehensive Income and Accumulated other comprehensive income (“OCI”) (in millions):
|
Gain Recognized on Derivatives in Income:
|
Year Ended
December 31, |
|||||||||||
|
Fair Value Derivatives
|
Location
|
2014
|
2013
|
2012
|
||||||||
|
Interest rate contract
|
Interest expense
|
$
|
—
|
|
$
|
—
|
|
$
|
16.3
|
|
||
|
Interest rate contract
|
Loss on early extinguishment of debt
|
—
|
|
—
|
|
16.0
|
|
|||||
|
Total
|
$
|
—
|
|
$
|
—
|
|
$
|
32.3
|
|
|||
|
(Loss) Gain Recognized on Derivatives in OCI:
|
Year Ended
December 31, |
|||||||||||
|
Cash Flow Derivatives
|
|
2014
|
2013
|
2012
|
||||||||
|
Foreign exchange contracts
|
|
$
|
(3.4
|
)
|
$
|
3.1
|
|
$
|
3.2
|
|
||
|
(Loss) Gain Reclassified from Accumulated OCI into Income (Effective):
|
Year Ended
December 31, |
|||||||||||
|
Account
|
|
2014
|
2013
|
2012
|
||||||||
|
Cost of goods sold
|
|
$
|
3.0
|
|
$
|
1.2
|
|
$
|
(5.2
|
)
|
||
|
Other income (expense) – net
|
0.5
|
|
3.2
|
|
(5.1
|
)
|
||||||
|
Total
|
|
$
|
3.5
|
|
$
|
4.4
|
|
$
|
(10.3
|
)
|
||
|
Gain (Loss) Recognized on Derivatives (Ineffective) in Income:
|
Year Ended
December 31, |
|||||||||||
|
Account
|
|
2014
|
2013
|
2012
|
||||||||
|
Other income (expense) – net
|
$
|
(0.4
|
)
|
$
|
(2.8
|
)
|
$
|
4.9
|
|
|||
The following table provides the effect of derivative instruments that are not designated as hedges in the Consolidated Statements of Income and Comprehensive Income (in millions):
|
Gain (Loss) Recognized on Derivatives not designated as hedges in Income:
|
Year Ended
December 31, |
||||||||||
|
Account
|
2014
|
2013
|
2012
|
||||||||
|
Cost of Goods Sold
|
$
|
—
|
|
$
|
0.7
|
|
$
|
(0.8
|
)
|
||
|
Other income (expense) – net
|
—
|
|
1.6
|
|
—
|
|
|||||
|
Total
|
$
|
—
|
|
$
|
2.3
|
|
$
|
(0.8
|
)
|
||
Counterparties to the Company’s 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 low and any losses would be immaterial.
Unrealized net gains (losses), net of tax, included in OCI are as follows (in millions):
|
|
Year Ended December 31,
|
||||||||||
|
|
2014
|
2013
|
2012
|
||||||||
|
Balance at beginning of period
|
$
|
2.7
|
|
$
|
(0.4
|
)
|
$
|
(3.6
|
)
|
||
|
Additional gains (losses) – net
|
(1.4
|
)
|
6.1
|
|
(1.9
|
)
|
|||||
|
Amounts reclassified to earnings
|
(2.0
|
)
|
(3.0
|
)
|
5.1
|
|
|||||
|
Balance at end of period
|
$
|
(0.7
|
)
|
$
|
2.7
|
|
$
|
(0.4
|
)
|
||
The estimated amount of existing losses for derivative contracts recorded in OCI as of
December 31, 2014
that are expected to be reclassified into earnings in the next 12 months is
$0.7 million
.
F-28
NOTE L – RESTRUCTURING AND OTHER CHARGES
The Company continually evaluates its cost structure to be appropriately positioned to respond to changing market conditions. Given economic trends in recent years, the Company initiated certain restructuring programs to better utilize its workforce and optimize facility utilization to match the demand for its products.
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 resulted in the relocation of its crusher manufacturing operations in Coalville, England to Omagh, Northern Ireland. The global design center for crushing equipment and certain component manufacturing was retained at Coalville. The program was completed in 2011. The Company has subsequently revised its plans for this site and intends to invest in its design and engineering team and re-implement manufacturing based at this location. The Coalville facility will become the MP center for research and development, with responsibility for providing new and innovative products. As a result of these revised plans,
$2.4 million
of restructuring reserve was reversed in the
year ended
December 31, 2012.
During the
year ended
December 31, 2012, the Company established a restructuring program in the MHPS segment to realize cost synergies and to optimize the SG&A expense structure. This program resulted in the closing of a production site in Spain and outsourcing of the related future production. The program cost
$3.0 million
, resulted in the reduction of
26
team members and was completed in 2014.
During the
year ended
December 31, 2012, the Company established a restructuring program in the Construction segment related to its compact construction operations in Germany to concentrate the segment on its core processes and competencies. This program resulted in the sale, closure or phase-out of several businesses in Germany. The program cost
$11.7 million
, resulted in the reduction of
250
team members and was completed in 2013 except for certain payments mandated by governmental agencies. During the year ended December 31, 2013,
$2.6 million
of restructuring reserves were reversed based on more team members staying with the sold business than originally anticipated.
During the
year ended
December 31, 2013, the Company established a restructuring program in the MHPS segment resulting in the consolidation of certain production facilities and the redesign of certain back office functions. The program cost
$19.4 million
, resulted in the reduction of
299
team members and was completed in 2014.
During the
year ended
December 31, 2013, the Company established a restructuring program in the Construction segment related to the distribution organization for Europe, the Middle East and Asia. This program will result in a more decentralized distribution function. The program cost
$1.9 million
, resulted in the reduction of
19
team members and was completed in 2014.
During the
year ended
December 31, 2014, the Company established restructuring programs in the MHPS segment primarily focused on operations in Germany. The programs included the closure of one of its materials handling manufacturing facilities, the consolidation of several materials handling sales and service locations, and realignment of the management structure for port solutions. The programs are expected to cost
$35.5 million
, result in the reduction of
199
team members and be completed in 2015.
The following table provides information for all restructuring activities by segment of the amount of expense incurred during the
year ended
December 31, 2014
, the cumulative amount of expenses incurred since inception of the programs and the total amount expected to be incurred (in millions):
|
|
Amount incurred
during the year ended
December 31, 2014
|
Cumulative amount
incurred through
December 31, 2014
|
Total amount expected to be incurred
|
||||||||
|
Construction
|
$
|
(0.1
|
)
|
$
|
11.0
|
|
$
|
11.0
|
|
||
|
MHPS
|
30.4
|
|
58.6
|
|
58.6
|
|
|||||
|
Total
|
$
|
30.3
|
|
$
|
69.6
|
|
$
|
69.6
|
|
||
F-29
The following table provides information by type of restructuring activity with respect to the amount of expense incurred during the
year ended
December 31, 2014
, the cumulative amount of expenses incurred since inception of the programs 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 year ended December 31, 2014
|
$
|
30.3
|
|
$
|
—
|
|
$
|
—
|
|
$
|
30.3
|
|
|||
|
Cumulative amount incurred through December 31, 2014
|
$
|
60.1
|
|
$
|
0.3
|
|
$
|
9.2
|
|
$
|
69.6
|
|
|||
|
Total amount expected to be incurred
|
$
|
60.1
|
|
$
|
0.3
|
|
$
|
9.2
|
|
$
|
69.6
|
|
|||
The following table provides a roll forward of the restructuring reserve by type of restructuring activity for the
year ended
December 31, 2014
(in millions):
|
|
Employee
Termination Costs
|
Facility
Exit Costs
|
Asset Disposal and Other Costs
|
Total
|
|||||||||||
|
Restructuring reserve at December 31, 2013
|
$
|
25.4
|
|
$
|
—
|
|
$
|
—
|
|
$
|
25.4
|
|
|||
|
Restructuring charges
|
30.3
|
|
—
|
|
—
|
|
30.3
|
|
|||||||
|
Cash expenditures
|
(15.6
|
)
|
—
|
|
—
|
|
(15.6
|
)
|
|||||||
|
Restructuring reserve at December 31, 2014
|
$
|
40.1
|
|
$
|
—
|
|
$
|
—
|
|
$
|
40.1
|
|
|||
During the years ended
December 31, 2014
,
2013
and
2012
$19.0 million
,
$11.0 million
and
$8.4 million
, respectively, of restructuring charges were included in Cost of goods sold (“COGS”). During the years ended
December 31, 2014
,
2013
and
2012
$11.3 million
,
$9.9 million
and
$3.5 million
, respectively, of restructuring charges were included in SG&A costs. There were
no
asset impairments included in restructuring costs for the year ended
December 31, 2013
. There were
$3.7 million
and
$5.7 million
of asset impairments included in restructuring costs for the years ended
December 31, 2014
and
2012
, respectively.
NOTE M – LONG-TERM OBLIGATIONS
Long-term debt is summarized as follows (in millions):
|
|
December 31,
|
||||||
|
|
2014
|
2013
|
|||||
|
6-1/2% Senior Notes due April 1, 2020
|
$
|
300.0
|
|
$
|
300.0
|
|
|
|
6% Senior Notes due May 15, 2021
|
850.0
|
|
850.0
|
|
|||
|
4% Convertible Senior Subordinated Notes due June 1, 2015
|
125.0
|
|
116.7
|
|
|||
|
2014/2011 Credit Agreement – term debt
|
467.9
|
|
495.3
|
|
|||
|
2014/2011 Credit Agreement – revolver
|
—
|
|
117.7
|
|
|||
|
Capital lease obligations
|
3.9
|
|
5.0
|
|
|||
|
Other
|
42.0
|
|
92.0
|
|
|||
|
Total debt
|
1,788.8
|
|
1,976.7
|
|
|||
|
Less: Notes payable and current portion of long-term debt
|
(152.5
|
)
|
(86.8
|
)
|
|||
|
Long-term debt, less current portion
|
$
|
1,636.3
|
|
$
|
1,889.9
|
|
|
2014 Credit Agreement
On August 13, 2014 the Company entered into a Credit Agreement (the “2014 Credit Agreement”), with the lenders party thereto and Credit Suisse AG, as administrative agent and collateral agent. In connection with the 2014 Credit Agreement, the Company terminated its existing amended and restated credit agreement, dated as of August 5, 2011, as amended (the “2011 Credit Agreement”), among the Company and certain of its subsidiaries, the lenders thereunder and Credit Suisse AG, as administrative agent and collateral agent, and related agreements and documents.
F-30
The 2014 Credit Agreement provides the Company with a senior secured revolving line of credit of up to
$600 million
that is available through August 13, 2019, a
$230.0 million
senior secured term loan and a
€200.0 million
senior secured term loan, which both mature on August 13, 2021. The 2014 Credit Agreement allows unlimited incremental commitments, which may be extended at the option of the existing or new lenders and can be in the form of revolving credit commitments, term loan commitments, or a combination of both as long as the Company satisfies a senior secured debt financial ratio contained in the 2014 Credit Agreement.
The 2014 Credit Agreement requires the Company to comply with a number of covenants. The covenants limit, in certain circumstances, the Company’s ability to take a variety of actions, including but not limited to: incur indebtedness; create or maintain liens on its property or assets; make investments, loans and advances; repurchase shares of its Common Stock; engage in acquisitions, mergers, consolidations and asset sales; redeem debt; and pay dividends and distributions. If the Company’s borrowings under its revolving line of credit are greater than
30%
of the total revolving credit commitments, the 2014 Credit Agreement requires the Company to comply with certain financial tests, as defined in the 2014 Credit Agreement. If applicable, the minimum required levels of the interest coverage ratio would be
2.5
to 1.0 and the maximum permitted levels of the senior secured leverage ratio would be
2.75
to 1.0. The 2014 Credit Agreement also contains customary default provisions. The 2014 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 its corporate existence in good standing, maintaining insurance, and providing its bank lending group with financial information on a timely basis.
In connection with the termination of the 2011 Credit Agreement, the Company recorded charges of
$2.6 million
for the accelerated amortization of debt acquisition costs and original issue discount as a loss on early extinguishment of debt for the
year ended
December 31, 2014
.
On May 16, 2013, the Company repaid
$110.0 million
of the outstanding U.S. dollar denominated term loan and
€83.5 million
of the outstanding Euro denominated term loan under the 2011 Credit Agreement. As a result of the repayment the Company recorded a loss on early extinguishment of debt of
$5.2 million
in the Consolidated Statement of Income for the
year ended
December 31, 2014
.
On October 12, 2012, the Company and its lenders entered into an amendment of the 2011 Credit Agreement (the “2012 Amendment”). As a result of the 2012 Amendment, the Company recorded a loss on early extinguishment of debt of
$1.9 million
in the Consolidated Statement of Income for the
year ended
December 31, 2012
, which included non-cash charges for accelerated amortization of debt acquisition costs and original issue discount. In preparing the Consolidated Statement of Cash Flows, these non-cash items were added to net income.
As of
December 31, 2014
and
2013
, the Company had
$467.9 million
and
$495.3 million
, respectively, in U.S. dollar and Euro denominated term loans outstanding under its credit agreements. The weighted average interest rate on the term loans at
December 31, 2014
and
2013
was
3.76%
and
3.66%
, respectively. The Company had
no
outstanding U.S. dollar and Euro denominated revolving credit amounts as of
December 31, 2014
. The Company had
$117.7 million
in U.S. dollar denominated revolving credit amounts outstanding as of
December 31, 2013
. The weighted average interest rate on the revolving credit amounts at
December 31, 2013
was
5.30%
.
The 2014 Credit Agreement incorporates facilities for issuance of letters of credit up to
$400 million
. Letters of credit issued under the 2014 Credit Agreement letter of credit facility decrease availability under the
$600 million
revolving line of credit. As of
December 31, 2014
the Company had
no
letters of credit issued under the 2014 Credit Agreement. As of
December 31, 2013
, the Company had letters of credit issued under the 2011 Credit Agreement that totaled
$54.2 million
. The 2014 Credit Agreement also permits the Company to have additional letter of credit facilities up to
$300 million
, and letters of credit issued under such additional facilities do not decrease availability under the revolving line of credit. The Company had letters of credit issued under the additional letter of credit facilities of the 2014 Credit Agreement and 2011 Credit Agreement that totaled
$30.4 million
and
$3.1 million
as of
December 31, 2014
and
2013
, 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 2014 Credit Agreement. The Company had letters of credit issued under these additional arrangements of
$261.5 million
and
$283.1 million
as of
December 31, 2014
and
2013
, respectively.
In total, as of
December 31, 2014
and
2013
, the Company had letters of credit outstanding of
$291.9 million
and
$340.4 million
, respectively. The letters of credit generally serve as collateral for certain liabilities included in the Consolidated Balance Sheet. Certain letters of credit serve as collateral guaranteeing the Company’s performance under contracts.
F-31
The Company and certain of its subsidiaries agreed to take certain actions to secure borrowings under the 2014 Credit Agreement. As a result, the Company and certain of its subsidiaries entered into a Guarantee and Collateral Agreement with Credit Suisse, as collateral agent for the lenders, granting security to the lenders for amounts borrowed under the 2014 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.
6-1/2%
Senior Notes
On March 27, 2012, the Company sold and issued
$300 million
aggregate principal amount of Senior Notes Due 2020 (“
6-1/2%
Notes”) at par. The proceeds from these notes were used for general corporate purposes. The
6-1/2%
Notes are redeemable by the Company beginning in April 2016 at an initial redemption price of
103.25%
of principal amount. The
6-1/2%
Notes are jointly and severally guaranteed by certain of the Company’s domestic subsidiaries (see Note R – “Consolidating Financial Statements”).
6%
Senior Notes
On November 26, 2012, the Company sold and issued
$850 million
aggregate principal amount of Senior Notes due 2021 (“
6%
Notes”) at par. The proceeds from this offering plus other cash was used to redeem all
$800 million
principal amount of the outstanding
8%
Notes. The
6%
Notes are redeemable by the Company beginning in November 2016 at an initial redemption price of
103.00%
of principal amount. The
6%
Notes are jointly and severally guaranteed by certain of the Company’s domestic subsidiaries (see Note R – “Consolidating Financial Statements”).
10-7/8%
Senior Notes
On June 3, 2009, the Company sold and issued
$300 million
aggregate principal amount of Senior Notes Due 2016 (“
10-7/8%
Notes”). On September 28, 2012, the Company repaid the outstanding
$299.9 million
principal amount of its
10-7/8%
Notes. The total cash paid to redeem the
10-7/8%
Notes was
$347.3 million
which included a make whole call premium of
12.265%
, totaling
$36.8 million
plus accrued and unpaid interest of
$10.6 million
at the redemption date.
The Company recorded a loss on early extinguishment of debt of
$42.9 million
in the Consolidated Statement of Income for the year ended December 31, 2012, which includes (a) cash payments of
$36.8 million
for call premiums associated with the repayment of
$299.9 million
of outstanding debt and (b)
$6.1 million
of non-cash charges for accelerated amortization of debt acquisition costs related to the redemption of the
10-7/8%
Notes, and original issue discount, which all flow into the calculation of net income. In preparing the Consolidated Statement of Cash Flows, the non-cash item (b) was added to net income to reflect cash flow appropriately.
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. The
4%
Convertible Notes are jointly and severally guaranteed by certain of the Company’s domestic subsidiaries (see Note R – “Consolidating Financial Statements”).
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. During the third quarter of 2012, the Company purchased approximately
25%
of the principal amount outstanding of its
4%
Convertible Notes due 2015 for approximately
$64 million
, including
$0.3 million
of accrued interest. These purchases reduced the balance of the
4%
Convertible Notes outstanding by
$36.1 million
and reduced equity by
$19.1 million
. The Company recorded a loss on early retirement of debt in the Consolidated Statement of Income of
$6.5 million
for the year ended December 31, 2012, which includes (a) cash payments of
$5.9 million
for debt principal over book value and (b)
$0.6 million
for non-cash charges for accelerated amortization of debt issuance costs.
F-32
The balance of the
4%
Convertible Notes was
$125.0 million
and
$116.7 million
at
December 31, 2014
and
2013
, respectively, reflecting the impact of the purchase discussed above. The Company recognized interest expense of
$13.5 million
and
$12.6 million
on the
4%
Convertible Notes for the years ended
December 31, 2014
and
2013
, respectively. 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
$128.8 million
at maturity. Interest expense on the
4%
Convertible Notes throughout its term includes
4%
annually of cash interest on the maturity balance of
$128.8 million
plus non-cash interest expense accreted to the debt balance as described.
The Company paid a dividend of
$0.05
per share in each quarter of
2014
. Under the terms of the
4%
Convertible Notes, cumulative dividends have changed the initial conversion ratio from
61.5385
to
61.9685
shares of common stock.
8%
Senior Subordinated Notes
On November 13, 2007, the Company sold and issued
$800 million
aggregate principal amount of
8%
Notes. The
8%
Notes were redeemable by the Company beginning in November 2012 at an initial redemption price of
104.00%
of principal amount.
In the fourth quarter of 2012, the Company used the net proceeds from the
6%
Notes offering plus other cash to redeem, via tender and subsequent call, all
$800 million
principal amount of its outstanding
8%
Notes. Total cash paid to redeem the
8%
Notes was
$837.3 million
and included tender/call premiums of
$34.6 million
and accrued interest of
$2.7 million
.
The Company recorded a loss on early extinguishment of debt of
$28.7 million
in the Consolidated Statement of Income for the year ended
December 31, 2012
, which includes (a) cash payments of
$35.4 million
for call premiums and other expenses associated with the repayment of outstanding debt, (b)
$9.3 million
of non-cash charges for accelerated amortization of debt acquisition costs related to the redemption of the
8%
Notes and (c)
$16.0 million
of gain related to the termination of the swap agreement associated with the redemption of the Notes, which all flow into the calculation of net income. In preparing the Consolidated Statement of Cash Flows, the non-cash item (b) was added to net income and the swap termination item (c) was added to Loss on early extinguishment of debt, to reflect cash flow appropriately.
Schedule of Debt Maturities
Scheduled annual maturities of the principal portion of long-term debt outstanding at
December 31, 2014
in the successive five-year period are summarized below. Amounts shown are exclusive of minimum lease payments for capital lease obligations disclosed in Note N – “Lease Commitments” (in millions):
|
2015
|
$
|
151.8
|
|
|
2016
|
9.1
|
|
|
|
2017
|
13.7
|
|
|
|
2018
|
6.7
|
|
|
|
2019
|
6.6
|
|
|
|
Thereafter
|
1,597.0
|
|
|
|
Total
|
$
|
1,784.9
|
|
Based on indicative price quotations from financial institutions multiplied by the amount recorded on the Company’s Consolidated Balance Sheet (“Book Value”), the Company estimates the fair values (“FV”) of its debt set forth below as of
December 31, 2014
and
2013
, as follows (in millions, except for quotes):
|
2014
|
Book Value
|
Quote
|
FV
|
||||||||
|
6-1/2% Notes
|
$
|
300.0
|
|
$
|
1.04500
|
|
$
|
314
|
|
||
|
6% Notes
|
$
|
850.0
|
|
$
|
1.02000
|
|
$
|
867
|
|
||
|
4% Convertible Notes (net of discount)
|
$
|
125.0
|
|
$
|
1.73392
|
|
$
|
217
|
|
||
|
2014 Credit Agreement Term Loan (net of discount) – USD
|
$
|
227.5
|
|
$
|
0.99000
|
|
$
|
225
|
|
||
|
2014 Credit Agreement Term Loan (net of discount) – EUR
|
$
|
240.4
|
|
$
|
0.99500
|
|
$
|
239
|
|
||
F-33
|
2013
|
Book Value
|
Quote
|
FV
|
||||||||
|
6-1/2% Senior Notes
|
$
|
300.0
|
|
$
|
1.06750
|
|
$
|
320
|
|
||
|
6% Notes
|
$
|
850.0
|
|
$
|
1.03250
|
|
$
|
878
|
|
||
|
4% Convertible Notes (net of discount)
|
$
|
116.7
|
|
$
|
2.62875
|
|
$
|
307
|
|
||
|
2011 Credit Agreement Term Loan (net of discount) – USD
|
$
|
340.4
|
|
$
|
1.00500
|
|
$
|
342
|
|
||
|
2011 Credit Agreement Term Loan (net of discount) – EUR
|
$
|
154.9
|
|
$
|
1.00250
|
|
$
|
155
|
|
||
The fair value of debt reported in the tables above is based on price quotations on the debt instrument in an active market and therefore categorized under Level 1 of the ASC 820 hierarchy. See Note A – “Basis of Presentation,” for an explanation of the ASC 820 hierarchy. The Company believes that the carrying value of its other borrowings, including amounts outstanding for the revolving line of credit under the 2011 Credit Agreement, approximates fair market value based on maturities for debt of similar terms. The fair value of these other borrowings are categorized under Level 2 of the ASC 820 hierarchy.
The Company paid
$109.6 million
,
$114.8 million
and
$156.0 million
of interest in
2014
,
2013
and
2012
, respectively.
NOTE N – LEASE COMMITMENTS
The Company leases certain facilities, machinery, equipment and vehicles with varying terms. Under most leasing arrangements, the Company pays the property taxes, insurance, maintenance and expenses related to the leased property. Certain of the equipment leases are classified as capital leases and the related assets have been included in Property, Plant and Equipment. Net assets under capital leases were
$11.0 million
and
$13.0 million
, net of accumulated amortization of
$4.9 million
and
$5.2 million
, at
December 31, 2014
and
2013
, respectively.
Future minimum capital and noncancellable operating lease payments and the related present value of capital lease payments at
December 31, 2014
are as follows (in millions):
|
|
Capital
Leases
|
Operating
Leases
|
|||||
|
2015
|
$
|
0.7
|
|
$
|
55.8
|
|
|
|
2016
|
0.5
|
|
47.3
|
|
|||
|
2017
|
0.5
|
|
35.3
|
|
|||
|
2018
|
0.5
|
|
23.4
|
|
|||
|
2019
|
0.5
|
|
16.1
|
|
|||
|
Thereafter
|
1.3
|
|
37.1
|
|
|||
|
Total minimum obligations
|
4.0
|
|
$
|
215.0
|
|
||
|
Less: amount representing interest
|
(0.1
|
)
|
|
|
|||
|
Present value of net minimum obligations
|
3.9
|
|
|
|
|||
|
Less: current portion
|
(0.6
|
)
|
|
|
|||
|
Long-term obligations
|
$
|
3.3
|
|
|
|
||
Most of the Company’s operating leases provide the Company with the option to renew the leases for varying periods after the initial lease terms. These renewal options enable the Company to renew the leases based upon the fair rental values at the date of expiration of the initial lease. Total rental expense under operating leases was
$79.3 million
,
$77.1 million
, and
$78.5 million
in
2014
,
2013
and
2012
, respectively.
NOTE O – RETIREMENT PLANS AND OTHER BENEFITS
U.S. Pension Plan
As of
December 31, 2014
, the Company maintained
one
qualified defined benefit pension plan covering certain domestic employees (the “Terex Plan”). Participation in the Terex 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.
F-34
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 and participation in the SERP has been frozen. There is a defined contribution plan for certain senior executives of the Company.
During July 2012, the Moving Ahead for Progress in the 21st Century Act (“MAP 21”) was enacted in the U.S. MAP 21 provided short-term relief of minimum contribution requirements by increasing the interest rates used to value pension liabilities beginning January 1, 2012 and increased the premiums due to the Pension Benefit Guaranty Corporation beginning in 2013 through 2015. As a result of the enactment of MAP 21, and existing funding commitments, there were
no
minimum contribution requirements for the 2014, 2013 and 2012 plan years.
During 2014, the Society of Actuaries released a new mortality table, which is believed to better reflect mortality improvements and is to be used in calculating defined benefit pension obligations. The Company adopted these new tables for its U.S. pension plans for use in determining its projected benefit obligations. Adoption of the new mortality tables increased the Company’s projected benefit obligation by approximately
$16 million
at December 31, 2014.
Non-U.S. Plans
The Company maintains defined benefit plans in France, Germany, India, Switzerland and the United Kingdom for some of its subsidiaries. Participation in the United Kingdom plan has been frozen. 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 France, Germany and India are unfunded plans. For the Company’s operations in Austria and 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.
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.
Savings Plans
The Company sponsors various tax deferred savings plans into which eligible employees may elect to contribute a portion of their compensation. The Company may, but is not obligated to, contribute to certain of these plans. The Company’s Common Stock held in a rabbi trust pursuant to the Deferred Compensation Plan is treated in a manner similar to treasury stock. The number of shares of the Company’s Common Stock held in the rabbi trust was
0.8 million
at
December 31, 2014
and
2013
.
Charges recognized for the Deferred Compensation Plan and these other savings plans were
$20.2 million
,
$16.6 million
and
$16.3 million
for the years ended
December 31, 2014
,
2013
and
2012
, respectively. For the years ended
December 31, 2014
and
2013
, Company matching contribution to tax deferred savings plans were invested at the direction of plan participants.
F-35
Information regarding the Company’s plans, including SERP, was as follows (in millions, except percent values):
|
|
U.S. Pension Benefits
|
Non-U.S. Pension Benefits
|
Other Benefits
|
||||||||||||||||||||
|
|
2014
|
2013
|
2014
|
2013
|
2014
|
2013
|
|||||||||||||||||
|
Accumulated benefit obligation at end of year
|
$
|
177.2
|
|
$
|
155.8
|
|
$
|
533.6
|
|
$
|
492.8
|
|
|
|
|
|
|||||||
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Benefit obligation at beginning of year
|
$
|
162.1
|
|
$
|
182.3
|
|
$
|
504.0
|
|
$
|
511.6
|
|
$
|
5.8
|
|
$
|
7.6
|
|
|||||
|
Service cost
|
0.9
|
|
1.1
|
|
5.4
|
|
6.0
|
|
—
|
|
—
|
|
|||||||||||
|
Interest cost
|
7.2
|
|
6.6
|
|
18.1
|
|
16.6
|
|
0.2
|
|
0.3
|
|
|||||||||||
|
Acquisitions and divestitures
|
(0.9
|
)
|
—
|
|
4.7
|
|
(4.7
|
)
|
—
|
|
—
|
|
|||||||||||
|
Actuarial loss (gain)
|
25.6
|
|
(17.9
|
)
|
91.3
|
|
(20.1
|
)
|
0.3
|
|
(1.4
|
)
|
|||||||||||
|
Benefits paid
|
(10.0
|
)
|
(10.0
|
)
|
(23.7
|
)
|
(21.2
|
)
|
(0.6
|
)
|
(0.7
|
)
|
|||||||||||
|
Foreign exchange effect
|
—
|
|
—
|
|
(59.1
|
)
|
15.8
|
|
—
|
|
—
|
|
|||||||||||
|
Benefit obligation at end of year
|
184.9
|
|
162.1
|
|
540.7
|
|
504.0
|
|
5.7
|
|
5.8
|
|
|||||||||||
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Fair value of plan assets at beginning of year
|
125.8
|
|
123.6
|
|
141.9
|
|
132.5
|
|
—
|
|
—
|
|
|||||||||||
|
Acquisitions
|
—
|
|
—
|
|
2.2
|
|
—
|
|
—
|
|
—
|
|
|||||||||||
|
Actual return on plan assets
|
15.2
|
|
6.4
|
|
14.9
|
|
8.5
|
|
—
|
|
—
|
|
|||||||||||
|
Employer contribution
|
5.8
|
|
5.8
|
|
21.5
|
|
18.5
|
|
0.6
|
|
0.7
|
|
|||||||||||
|
Employee contribution
|
—
|
|
—
|
|
0.6
|
|
0.6
|
|
—
|
|
—
|
|
|||||||||||
|
Benefits paid
|
(10.0
|
)
|
(10.0
|
)
|
(23.7
|
)
|
(21.2
|
)
|
(0.6
|
)
|
(0.7
|
)
|
|||||||||||
|
Foreign exchange effect
|
—
|
|
—
|
|
(10.6
|
)
|
3.0
|
|
—
|
|
—
|
|
|||||||||||
|
Fair value of plan assets at end of year
|
136.8
|
|
125.8
|
|
146.8
|
|
141.9
|
|
—
|
|
—
|
|
|||||||||||
|
Funded status
|
$
|
(48.1
|
)
|
$
|
(36.3
|
)
|
$
|
(393.9
|
)
|
$
|
(362.1
|
)
|
$
|
(5.7
|
)
|
$
|
(5.8
|
)
|
|||||
|
Amounts recognized in the statement of financial position consist of:
|
|
|
|
|
|
|
|||||||||||||||||
|
Current liabilities
|
$
|
1.1
|
|
$
|
0.2
|
|
$
|
13.4
|
|
$
|
15.0
|
|
$
|
0.7
|
|
$
|
0.8
|
|
|||||
|
Non-current liabilities
|
47.0
|
|
36.1
|
|
380.5
|
|
347.1
|
|
5.0
|
|
5.0
|
|
|||||||||||
|
Total liabilities
|
$
|
48.1
|
|
$
|
36.3
|
|
$
|
393.9
|
|
$
|
362.1
|
|
$
|
5.7
|
|
$
|
5.8
|
|
|||||
|
Amounts recognized in accumulated other comprehensive income consist of:
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Actuarial net loss
|
$
|
77.8
|
|
$
|
60.9
|
|
$
|
159.6
|
|
$
|
93.7
|
|
$
|
1.2
|
|
$
|
0.9
|
|
|||||
|
Prior service cost
|
0.6
|
|
0.7
|
|
0.3
|
|
0.4
|
|
(0.1
|
)
|
(0.1
|
)
|
|||||||||||
|
Total amounts recognized in accumulated other comprehensive income
|
$
|
78.4
|
|
$
|
61.6
|
|
$
|
159.9
|
|
$
|
94.1
|
|
$
|
1.1
|
|
$
|
0.8
|
|
|||||
|
|
U.S. Pension Benefits
|
Non-U.S.Pension Benefits
|
Other Benefits
|
|||||||||||||||||||||||
|
|
2014
|
2013
|
2012
|
2014
|
2013
|
2012
|
2014
|
2013
|
2012
|
|||||||||||||||||
|
Weighted-average assumptions as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Discount rate
|
4.02
|
%
|
4.64
|
%
|
3.75
|
%
|
2.54
|
%
|
3.78
|
%
|
3.39
|
%
|
3.74
|
%
|
4.17
|
%
|
3.75
|
%
|
||||||||
|
Expected return on plan assets
|
7.50
|
%
|
7.50
|
%
|
7.50
|
%
|
5.49
|
%
|
5.49
|
%
|
5.59
|
%
|
N/A
|
|
N/A
|
|
N/A
|
|
||||||||
|
Rate of compensation increase
|
3.75
|
%
|
3.75
|
%
|
3.75
|
%
|
1.51
|
%
|
1.56
|
%
|
1.67
|
%
|
N/A
|
|
N/A
|
|
N/A
|
|
||||||||
F-36
|
|
U.S. Pension Benefits
|
Non-U.S. Pension Benefits
|
Other Benefits
|
||||||||||||||||||||||||||||||||
|
|
2014
|
2013
|
2012
|
2014
|
2013
|
2012
|
2014
|
2013
|
2012
|
||||||||||||||||||||||||||
|
Components of net periodic cost:
|
|||||||||||||||||||||||||||||||||||
|
Service cost
|
$
|
0.9
|
|
$
|
1.1
|
|
$
|
1.2
|
|
$
|
5.4
|
|
$
|
6.0
|
|
$
|
7.8
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
||||||||
|
Interest cost
|
7.2
|
|
6.6
|
|
7.2
|
|
18.1
|
|
16.6
|
|
17.0
|
|
0.2
|
|
0.3
|
|
0.3
|
|
|||||||||||||||||
|
Expected return on plan assets
|
(9.2
|
)
|
(9.0
|
)
|
(8.8
|
)
|
(7.7
|
)
|
(7.0
|
)
|
(6.8
|
)
|
—
|
|
—
|
|
—
|
|
|||||||||||||||||
|
Recognition of prior service cost
|
0.1
|
|
0.1
|
|
0.1
|
|
2.5
|
|
—
|
|
10.8
|
|
—
|
|
—
|
|
—
|
|
|||||||||||||||||
|
Amortization of actuarial loss
|
2.1
|
|
4.0
|
|
4.8
|
|
3.1
|
|
5.3
|
|
0.4
|
|
0.1
|
|
0.1
|
|
—
|
|
|||||||||||||||||
|
Other
|
—
|
|
—
|
|
—
|
|
(0.6
|
)
|
(0.6
|
)
|
(0.5
|
)
|
—
|
|
—
|
|
—
|
|
|||||||||||||||||
|
Net periodic cost
|
$
|
1.1
|
|
$
|
2.8
|
|
$
|
4.5
|
|
$
|
20.8
|
|
$
|
20.3
|
|
$
|
28.7
|
|
$
|
0.3
|
|
$
|
0.4
|
|
$
|
0.3
|
|
||||||||
Due to clarification of requirements in Brazil, during the
year ended
December 31, 2012, the Company recognized a liability of
$10.8 million
related to a provision for post-employment benefits. This amount is included above in Net periodic cost as Recognition of prior service cost.
|
U.S. Pension Benefits
|
Non-U.S. Pension
Benefits
|
Other Benefits
|
|||||||||||||||||||||
|
|
2014
|
2013
|
2014
|
2013
|
2014
|
2013
|
|||||||||||||||||
|
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income:
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Net (gain) loss
|
$
|
19.9
|
|
$
|
(15.3
|
)
|
$
|
85.2
|
|
$
|
(21.6
|
)
|
$
|
0.3
|
|
$
|
(1.4
|
)
|
|||||
|
Amortization of actuarial losses
|
(3.0
|
)
|
(4.0
|
)
|
(3.1
|
)
|
(5.5
|
)
|
—
|
|
(0.1
|
)
|
|||||||||||
|
Amortization of prior service cost
|
(0.1
|
)
|
(0.1
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||||
|
Foreign exchange effect
|
—
|
|
—
|
|
(16.3
|
)
|
3.9
|
|
—
|
|
—
|
|
|||||||||||
|
Total recognized in other comprehensive income
|
$
|
16.8
|
|
$
|
(19.4
|
)
|
$
|
65.8
|
|
$
|
(23.2
|
)
|
$
|
0.3
|
|
$
|
(1.5
|
)
|
|||||
|
U.S. Pension
Benefits
|
Non-U.S. Pension
Benefits
|
Other
Benefits
|
|||||||||
|
Amounts expected to be recognized as components of net periodic cost for the year ending December 31, 2015:
|
|||||||||||
|
Actuarial net loss
|
$
|
3.7
|
|
$
|
8.0
|
|
$
|
—
|
|
||
|
Prior service cost
|
0.1
|
|
—
|
|
—
|
|
|||||
|
Total amount expected to be recognized as components of net periodic cost for the year ending December 31, 2015
|
$
|
3.8
|
|
$
|
8.0
|
|
$
|
—
|
|
||
For the Company’s plans, including the SERP, that have accumulated benefit obligations in excess of plan assets the projected benefit obligation, accumulated benefit obligation and fair value of plan assets were (in millions):
|
U.S. Pension
Benefits
|
Non-U.S. Pension
Benefits
|
||||||||||||||
|
2014
|
2013
|
2014
|
2013
|
||||||||||||
|
Projected benefit obligation
|
$
|
184.9
|
|
$
|
162.1
|
|
$
|
540.7
|
|
$
|
504.0
|
|
|||
|
Accumulated benefit obligation
|
$
|
177.2
|
|
$
|
155.8
|
|
$
|
533.6
|
|
$
|
492.8
|
|
|||
|
Fair value of plan assets
|
$
|
136.8
|
|
$
|
125.8
|
|
$
|
146.8
|
|
$
|
141.9
|
|
|||
Determination of plan obligations and associated expenses requires the use of actuarial valuations based on certain economic assumptions, which includes discount rates and expected rates of returns on plan assets. The discount rate enables the Company to estimate the present value of expected future cash flows on the measurement date. The rate used reflects a rate of return on high-quality fixed income investments that matches the duration of expected benefit payments at the December 31 measurement date.
F-37
The rate used for the expected return on plan assets for the U.S. plan is based on a review of long-term historical asset performances aligned with the Company’s investment strategy and portfolio mix. While the Company examines performance annually, it also views historic asset portfolios and performance over a long period of years before recommending a change. In the short term, there may be fluctuations of positive and negative yields year-over-year, but over the long-term, the return is expected to be approximately
7.5%
.
The Company’s overall investment strategy for the U.S. defined benefit plan balances two objectives, investing in fixed income securities whose maturity broadly matches the maturity of the pension liabilities and investing in equities and other assets expected to generate higher returns. The Company invests through a number of investment funds with diversified asset types, strategies and managers. Equity securities, including investments in large to small-cap companies in the U.S. and internationally, constitute approximately
32%
of the portfolio at
December 31, 2014
and
2013
. Fixed income securities including corporate bonds of companies from diversified industries, U.S. Treasuries and other securities, which may include mortgage-backed securities, asset-backed securities and collateralized mortgage obligations, constitute approximately
68%
of the portfolio at
December 31, 2014
and
2013
. The target investment allocation for
2015
is approximately
23%
to
36%
for equity securities and approximately
64%
to
77%
for fixed income securities.
The methodology used to determine the rate of return on non-U.S. pension plan assets was based on average rate of earnings on funds invested and to be invested. Based on historical returns and future expectations, the Company believes the investment return assumptions are reasonable. The expected rate of return of plan assets represents an estimate of long-term returns on the investment portfolio. This assumption is reviewed by the trustees and varies with each of the plans.
The overall investment strategy for the Non-U.S. defined benefit plans is to achieve a mix of investments to support long-term growth and minimize volatility while maximizing rates of return by diversification of asset types, fund strategies and fund managers. Fixed income investments include investments in European government securities and European corporate bonds and constitute approximately
64%
and
58%
of the portfolio at
December 31, 2014
and
2013
, respectively. Equity investments, multi-asset investment funds and real estate investments that invest in a diversified range of property principally in the retail, office and industrial/warehouse sectors constitute approximately
36%
and
42%
of the portfolio at
December 31, 2014
and
2013
, respectively. Investments of the plans primarily include investments in companies from diversified industries with approximately
93%
invested internationally and
7%
invested in North America. The target investment allocations to support the investment strategy for
2015
are approximately
76%
to
84%
fixed income securities and approximately
16%
to
24%
equity securities, multi-asset investment funds and real estate investments.
The fair value of cash in the table below is based on price quotations in an active market and therefore categorized under Level 1 of the ASC 820 hierarchy. The fair value of the investment funds is priced on the market value of the underlying investments in the portfolio and therefore categorized as Level 2 of the ASC 820 hierarchy. See Note A – “Basis of Presentation,” for an explanation of the ASC 820 hierarchy.
The fair value of the Company’s plan assets at
December 31, 2014
are as follows (in millions):
|
U.S. Pension Plan
|
Non-U.S. Pension Plans
|
||||||||||||||||||||||
|
|
Total
|
Level 1
|
Level 2
|
Total
|
Level 1
|
Level 2
|
|||||||||||||||||
|
Cash, including money market funds
|
$
|
6.0
|
|
$
|
6.0
|
|
$
|
—
|
|
$
|
4.3
|
|
$
|
4.3
|
|
$
|
—
|
|
|||||
|
U.S. equities
|
31.0
|
|
—
|
|
31.0
|
|
9.3
|
|
—
|
|
9.3
|
|
|||||||||||
|
Non-U.S. equities
|
10.0
|
|
—
|
|
10.0
|
|
34.4
|
|
—
|
|
34.4
|
|
|||||||||||
|
U.S. corporate bonds
|
63.8
|
|
—
|
|
63.8
|
|
1.1
|
|
—
|
|
1.1
|
|
|||||||||||
|
Non-U.S. corporate bonds
|
—
|
|
—
|
|
—
|
|
29.8
|
|
—
|
|
29.8
|
|
|||||||||||
|
U.S. government securities
|
15.3
|
|
—
|
|
15.3
|
|
0.6
|
|
—
|
|
0.6
|
|
|||||||||||
|
Non-U.S. government securities
|
0.9
|
|
—
|
|
0.9
|
|
44.2
|
|
—
|
|
44.2
|
|
|||||||||||
|
Real estate
|
—
|
|
—
|
|
—
|
|
8.8
|
|
—
|
|
8.8
|
|
|||||||||||
|
Other securities
|
9.8
|
|
—
|
|
9.8
|
|
14.3
|
|
—
|
|
14.3
|
|
|||||||||||
|
Total investments measured at fair value
|
$
|
136.8
|
|
$
|
6.0
|
|
$
|
130.8
|
|
$
|
146.8
|
|
$
|
4.3
|
|
$
|
142.5
|
|
|||||
F-38
The fair value of the Company’s plan assets at
December 31, 2013
are as follows (in millions):
|
U.S. Pension Plan
|
Non-U.S. Pension Plans
|
||||||||||||||||||||||
|
|
Total
|
Level 1
|
Level 2
|
Total
|
Level 1
|
Level 2
|
|||||||||||||||||
|
Cash, including money market funds
|
$
|
9.4
|
|
$
|
9.4
|
|
$
|
—
|
|
$
|
3.5
|
|
$
|
3.5
|
|
$
|
—
|
|
|||||
|
U.S. equities
|
25.0
|
|
—
|
|
25.0
|
|
8.4
|
|
—
|
|
8.4
|
|
|||||||||||
|
Non-U.S. equities
|
10.2
|
|
—
|
|
10.2
|
|
35.0
|
|
—
|
|
35.0
|
|
|||||||||||
|
U.S. corporate bonds
|
56.9
|
|
—
|
|
56.9
|
|
1.0
|
|
—
|
|
1.0
|
|
|||||||||||
|
Non-U.S. corporate bonds
|
—
|
|
—
|
|
—
|
|
28.0
|
|
—
|
|
28.0
|
|
|||||||||||
|
U.S. government securities
|
18.1
|
|
—
|
|
18.1
|
|
0.1
|
|
—
|
|
0.1
|
|
|||||||||||
|
Non-U.S. government securities
|
0.8
|
|
—
|
|
0.8
|
|
42.7
|
|
—
|
|
42.7
|
|
|||||||||||
|
Real estate
|
—
|
|
—
|
|
—
|
|
9.0
|
|
—
|
|
9.0
|
|
|||||||||||
|
Other securities
|
5.4
|
|
—
|
|
5.4
|
|
14.2
|
|
—
|
|
14.2
|
|
|||||||||||
|
Total investments measured at fair value
|
$
|
125.8
|
|
$
|
9.4
|
|
$
|
116.4
|
|
$
|
141.9
|
|
$
|
3.5
|
|
$
|
138.4
|
|
|||||
The Company plans to contribute approximately
$1 million
to its U.S. defined benefit pension and post-retirement plans and approximately
$18 million
to its non-U.S. defined benefit pension plans in
2015
. During the
year ended
December 31, 2014
, the Company contributed
$6.4 million
to its U.S. defined benefit pension plans and post-retirement plans and
$21.5 million
to its non-U.S. defined benefit pension plans.
The Company’s estimated future benefit payments under its plans are as follows (in millions):
|
Year Ending December 31,
|
U.S. Pension
Benefits
|
Non-U.S.
Pension Benefits
|
Other Benefits
|
|||||||||
|
2015
|
$
|
11.1
|
|
$
|
19.7
|
|
$
|
0.7
|
|
|||
|
2016
|
$
|
11.0
|
|
$
|
19.6
|
|
$
|
0.6
|
|
|||
|
2017
|
$
|
11.0
|
|
$
|
20.5
|
|
$
|
0.5
|
|
|||
|
2018
|
$
|
11.0
|
|
$
|
21.5
|
|
$
|
0.4
|
|
|||
|
2019
|
$
|
11.0
|
|
$
|
21.8
|
|
$
|
0.4
|
|
|||
|
2020-2024
|
$
|
55.7
|
|
$
|
117.4
|
|
$
|
1.9
|
|
|||
For the other benefits, for measurement purposes, a
7.00%
rate of increase in the per capita cost of covered health care benefits was assumed for
2015
, decreasing one-percentage-point per year until it reaches
5.00%
for 2017 and thereafter. Assumed health care cost trend rates may have a significant effect on the amounts reported for the health care plan.
A one-percentage-point change in assumed health care cost trend rates would have the following effects (in millions):
|
|
1-Percentage-
Point Increase
|
1-Percentage-
Point Decrease
|
|||||
|
Effect on total service and interest cost components
|
$
|
0.2
|
|
$
|
(0.1
|
)
|
|
|
Effect on postretirement benefit obligation
|
$
|
1.7
|
|
$
|
(1.4
|
)
|
|
NOTE P– STOCKHOLDERS’ EQUITY
On
December 31, 2014
, there were
124.6 million
shares of Common Stock issued and
105.4 million
shares of Common Stock outstanding. Of the
175.4 million
unissued shares of Common Stock at that date,
3.3 million
shares of Common Stock were reserved for issuance for the exercise of stock options and the vesting of restricted stock. Additionally,
7.9 million
shares of Common Stock were reserved for issuance for the shares that are contingently issuable for the
4%
Convertible Notes.
Common Stock in Treasury.
The Company values treasury stock on an average cost basis. As of
December 31, 2014
, the Company held
19.2 million
shares of Common Stock in treasury totaling
$801.9 million
, including
0.8 million
shares held in a trust for the benefit of the Company’s Deferred Compensation Plan at a total of
$17.8 million
.
Preferred Stock.
The Company’s certificate of incorporation was amended in June 1998 to authorize
50.0 million
shares of preferred stock,
$0.01
par value per share. As of
December 31, 2014
and
2013
, there were
no
shares of preferred stock outstanding.
F-39
Long-Term Incentive Plans.
In May 2009, the stockholders approved the Terex Corporation 2009 Omnibus Incentive Plan (the “2009 Plan”). The purpose of the 2009 Plan is to provide a means whereby employees, directors and third-party service providers of the Company develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its stockholders. The 2009 Plan provides for incentive compensation in the form of (i) options to purchase shares of Common Stock, (ii) stock appreciation rights, (iii) restricted stock awards and restricted stock units, (iv) other stock awards, (v) cash awards, and (vi) performance awards. In May 2013, the stockholders approved an increase in the number of shares of Common Stock authorized for issuance under the 2009 Plan from
5.0 million
shares to
8.0 million
shares. The maximum number of shares available for issuance under the 2009 Plan is
8.0 million
shares plus the number of shares remaining available for issuance under the Terex Corporation 2000 Incentive Plan (the “2000 Plan”) and the 1996 Terex Corporation Long-Term Incentive Plan (the “1996 Plan”). As of
December 31, 2014
,
4.4 million
shares were available for grant under the 2009 Plan.
In May 2000, the stockholders approved the 2000 Plan. The purpose of the 2000 Plan is to assist the Company in attracting and retaining selected individuals to serve as directors, officers, consultants, advisers and employees of the Company and its subsidiaries and affiliates who will contribute to the Company’s success and to achieve long-term objectives which will inure to the benefit of all stockholders of the Company through the additional incentive inherent in the ownership of the Common Stock. The maximum number of shares available for issuance under the 2000 Plan is
12.0 million
shares plus any shares related to awards under the 2000 Plan that were not issued or were subsequently forfeited, expired or otherwise terminated.
In May 1996, the stockholders approved the 1996 Plan. The maximum number of shares available for issuance under the 1996 Plan is
4.0 million
shares plus any shares related to awards under the 1996 Plan that were not issued or were subsequently forfeited, expired or otherwise terminated.
Substantially all stock option grants under the 2000 Plan and the 1996 Plan vested over a
four
year period and have a contractual life of
ten
years. There were
no
options granted during the years ended
December 31, 2014
,
2013
or
2012
. The total intrinsic value of options exercised during the years ended
December 31, 2014
,
2013
and
2012
was
$0.2 million
,
$1.2 million
and
$0.2 million
, respectively.
The following table is a summary of stock options under all of the Company’s plans.
|
|
Number of
Options
|
Weighted
Average
Exercise Price
per Share
|
Weighted
Average
Remaining
Contractual
Life (in years)
|
Aggregate
Intrinsic
Value
|
|||||||||
|
Outstanding at December 31, 2013
|
209,557
|
|
$
|
38.92
|
|
|
|
|
|||||
|
Exercised
|
(52,098
|
)
|
$
|
17.36
|
|
|
|
|
|||||
|
Canceled or expired
|
(7,500
|
)
|
$
|
45.75
|
|
|
|
|
|||||
|
Outstanding at December 31, 2014
|
149,959
|
|
$
|
46.07
|
|
1.46
|
$
|
0.29
|
|
||||
|
Exercisable at December 31, 2014
|
149,959
|
|
$
|
46.07
|
|
1.46
|
$
|
0.29
|
|
||||
|
Vested at December 31, 2014
|
149,959
|
|
$
|
46.07
|
|
1.46
|
$
|
0.29
|
|
||||
Under the 2009 Plan, 2000 Plan and the 1996 Plan, approximately
11%
of all restricted stock awards vest over a
four
year period, with
25%
of each grant vesting on each of the first four anniversary dates of the grant; approximately
5%
of all restricted stock awards vest over a
five
year period and approximately
83%
of all restricted stock awards vest over a
three
year period with approximately
52%
of these awards vesting on the first three anniversary dates and approximately
48%
vesting at the end of the three year period. Approximately
49%
of the outstanding restricted stock awards are subject to performance targets that may or may not be met and for which the performance period has not yet been completed.
F-40
The fair value of the restricted stock awards is based on the market price at the date of grant except for
0.9 million
shares of performance grants based on a market condition. The Company uses the Monte Carlo method to provide grant date fair value for 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 valuations:
|
|
February 26, 2014
|
February 27, 2013
|
February 29, 2012
|
March 27, 2012
|
|||
|
Dividend yields
|
0.46%
|
—%
|
—%
|
—%
|
|||
|
Expected volatility
|
56.84%
|
60.03%
|
59.15%
|
56.83%
|
|||
|
Risk free interest rate
|
0.63%
|
0.35%
|
0.41%
|
0.47%
|
|||
|
Expected life (in years)
|
3
|
3
|
3
|
3
|
|||
|
Grant date fair value per share
|
$53.17
|
$43.64
|
$32.58
|
$29.50
|
|||
As of
December 31, 2014
, unrecognized compensation costs related to restricted stock totaled approximately
$43.4 million
, which will be expensed over a weighted average period of
1.7 years
. The grant date weighted average fair value for restricted stock awards during the years ended
December 31, 2014
,
2013
and
2012
was
$44.23
,
$33.84
and
$25.74
, respectively. The total fair value of shares vested for restricted stock awards was
$36.2 million
,
$19.0 million
and
$16.1 million
for the years ended
December 31, 2014
,
2013
and
2012
, respectively.
During the year ended
December 31, 2014
, the Company issued
33 thousand
shares of its outstanding Common Stock which were contributed into a deferred compensation plan under a Rabbi Trust.
The following table is a summary of restricted stock awards under all of the Company’s plans:
|
|
Restricted Stock
Awards
|
Weighted
Average Grant
Date Fair Value
|
|||||
|
Nonvested at December 31, 2013
|
3,721,424
|
|
$
|
26.14
|
|
||
|
Granted
|
999,622
|
|
$
|
44.23
|
|
||
|
Vested
|
(1,245,147
|
)
|
$
|
29.11
|
|
||
|
Canceled or expired
|
(280,578
|
)
|
$
|
32.44
|
|
||
|
Nonvested at December 31, 2014
|
3,195,321
|
|
$
|
33.56
|
|
||
Compensation expense recognized under all stock-based compensation arrangements was
$46.1 million
,
$44.7 million
and
$29.8 million
for the years ended
December 31, 2014
,
2013
and
2012
, respectively. The stock-based compensation expense was included in Selling, general and administrative expenses in the Consolidated Statements of Income. The related tax benefit was
$14.6 million
,
$13.5 million
and
$9.1 million
for the years ended
December 31, 2014
,
2013
and
2012
, respectively.
Cash received from option exercises under all stock-based compensation arrangements totaled
$1.0 million
.
The excess tax benefit for all stock-based compensation is included in the Consolidated Statement of Cash Flows as an operating cash outflow and a financing cash inflow.
Comprehensive Income (Loss).
The following table reflects the accumulated balances of other comprehensive income (loss) (in millions):
Accumulated Other Comprehensive Income (Loss) Attributable to Terex Corporation
|
Cumulative
Translation
Adjustment
|
Derivative
Hedging
Adjustment
|
Debt & Equity
Securities
Adjustment
|
Pension
Liability
Adjustment
|
Accumulated
Other
Comprehensive
Income (Loss)
|
||||||||||||||||
|
Balance at January 1, 2012
|
$
|
(39.6
|
)
|
$
|
(3.6
|
)
|
$
|
0.9
|
|
$
|
(83.2
|
)
|
$
|
(125.5
|
)
|
|||||
|
Current year change
|
53.7
|
|
3.2
|
|
1.0
|
|
(56.5
|
)
|
1.4
|
|
||||||||||
|
Balance at December 31, 2012
|
14.1
|
|
(0.4
|
)
|
1.9
|
|
(139.7
|
)
|
(124.1
|
)
|
||||||||||
|
Current year change
|
(22.0
|
)
|
3.1
|
|
(1.9
|
)
|
28.4
|
|
7.6
|
|
||||||||||
|
Balance at December 31, 2013
|
(7.9
|
)
|
2.7
|
|
—
|
|
(111.3
|
)
|
(116.5
|
)
|
||||||||||
|
Current year change
|
(237.6
|
)
|
(3.4
|
)
|
1.6
|
|
(73.9
|
)
|
(313.3
|
)
|
||||||||||
|
Balance at December 31, 2014
|
$
|
(245.5
|
)
|
$
|
(0.7
|
)
|
$
|
1.6
|
|
$
|
(185.2
|
)
|
$
|
(429.8
|
)
|
|||||
F-41
Accumulated Other Comprehensive Income (Loss) Attributable to Noncontrolling Interest
|
Cumulative
Translation
Adjustment
|
Derivative
Hedging
Adjustment
|
Debt & Equity
Securities
Adjustment
|
Pension
Liability
Adjustment
|
Accumulated
Other
Comprehensive
Income (Loss)
|
||||||||||||||||
|
Balance at January 1, 2012
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|||||
|
Current year change
|
0.5
|
|
—
|
|
—
|
|
—
|
|
0.5
|
|
||||||||||
|
Balance at December 31, 2012
|
0.5
|
|
—
|
|
—
|
|
—
|
|
0.5
|
|
||||||||||
|
Current year change
|
0.4
|
|
—
|
|
—
|
|
—
|
|
0.4
|
|
||||||||||
|
Balance at December 31, 2013
|
0.9
|
|
—
|
|
—
|
|
—
|
|
0.9
|
|
||||||||||
|
Current year change
|
(0.1
|
)
|
—
|
|
—
|
|
—
|
|
(0.1
|
)
|
||||||||||
|
Balance at December 31, 2014
|
$
|
0.8
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
0.8
|
|
|||||
Accumulated Other Comprehensive Income (Loss)
|
Cumulative
Translation
Adjustment
|
Derivative
Hedging
Adjustment
|
Debt & Equity
Securities
Adjustment
|
Pension
Liability
Adjustment
|
Accumulated
Other
Comprehensive
Income (Loss)
|
||||||||||||||||
|
Balance at January 1, 2012
|
$
|
(39.6
|
)
|
$
|
(3.6
|
)
|
$
|
0.9
|
|
$
|
(83.2
|
)
|
$
|
(125.5
|
)
|
|||||
|
Current year change
|
54.2
|
|
3.2
|
|
1.0
|
|
(56.5
|
)
|
1.9
|
|
||||||||||
|
Balance at December 31, 2012
|
14.6
|
|
(0.4
|
)
|
1.9
|
|
(139.7
|
)
|
(123.6
|
)
|
||||||||||
|
Current year change
|
(21.6
|
)
|
3.1
|
|
(1.9
|
)
|
28.4
|
|
8.0
|
|
||||||||||
|
Balance at December 31, 2013
|
(7.0
|
)
|
2.7
|
|
—
|
|
(111.3
|
)
|
(115.6
|
)
|
||||||||||
|
Current year change
|
(237.7
|
)
|
(3.4
|
)
|
1.6
|
|
(73.9
|
)
|
(313.4
|
)
|
||||||||||
|
Balance at December 31, 2014
|
$
|
(244.7
|
)
|
$
|
(0.7
|
)
|
$
|
1.6
|
|
$
|
(185.2
|
)
|
$
|
(429.0
|
)
|
|||||
As of
December 31, 2014
, accumulated other comprehensive income for the pension liability adjustment and the derivative hedging adjustment are net of a tax benefit of
$54.2 million
and a tax provision of
$0.1 million
, respectively.
Changes in Accumulated Other Comprehensive Income
The table below presents changes in AOCI by component for the year ended
December 31, 2014
and
2013
. All amounts are net of tax (in millions).
|
Year ended December 31, 2014
|
Year ended December 31, 2013
|
||||||||||||||||||||||||||||||
|
|
CTA
(1)
|
Derivative
Hedging
Adj.
|
Debt &
Equity
Securities
Adj.
|
Pension
Liability
Adj.
|
Total
|
CTA
|
Derivative
Hedging
Adj.
|
Debt &
Equity
Securities
Adj.
|
Pension
Liability
Adj.
|
Total
|
|||||||||||||||||||||
|
Beginning balance
|
$
|
(7.0
|
)
|
$
|
2.7
|
|
$
|
—
|
|
$
|
(111.3
|
)
|
$
|
(115.6
|
)
|
$
|
14.6
|
|
$
|
(0.4
|
)
|
$
|
1.9
|
|
$
|
(139.7
|
)
|
$
|
(123.6
|
)
|
|
|
Other comprehensive income before reclassifications
|
(264.6
|
)
|
(1.4
|
)
|
1.6
|
|
(78.8
|
)
|
(343.2
|
)
|
(19.0
|
)
|
6.1
|
|
—
|
|
21.9
|
|
9.0
|
|
|||||||||||
|
Amounts reclassified from AOCI
|
26.9
|
|
(2.0
|
)
|
—
|
|
4.9
|
|
29.8
|
|
(2.6
|
)
|
(3.0
|
)
|
(1.9
|
)
|
6.5
|
|
(1.0
|
)
|
|||||||||||
|
Net Other Comprehensive Income (Loss)
|
(237.7
|
)
|
(3.4
|
)
|
1.6
|
|
(73.9
|
)
|
(313.4
|
)
|
(21.6
|
)
|
3.1
|
|
(1.9
|
)
|
28.4
|
|
8.0
|
|
|||||||||||
|
Ending balance
|
$
|
(244.7
|
)
|
$
|
(0.7
|
)
|
$
|
1.6
|
|
$
|
(185.2
|
)
|
$
|
(429.0
|
)
|
$
|
(7.0
|
)
|
$
|
2.7
|
|
$
|
—
|
|
$
|
(111.3
|
)
|
$
|
(115.6
|
)
|
|
(1)
Reclassification from dispositions of Demag Cranes and Components Pty. Ltd. and the truck business of
$22.9 million
and
$4.0 million
was recorded in Selling, general and administrative expenses and Gain (loss) on disposition of discontinued operations, respectively, for year ended December 31, 2014.
F-42
Share Repurchases and Dividends
In December 2013, the Company’s Board of Directors announced authorization for the repurchase of up to
$200 million
of the Company’s outstanding shares of common stock through December 31, 2015. During the year ended December 31, 2014 the Company repurchased approximately
5.3 million
shares for approximately
$170 million
under this program. In total, the Company has purchased approximately
6.1 million
shares under this program for approximately
$200 million
. In February 2015, the Company’s Board of Directors announced authorization for the repurchase of up to an additional
$200 million
of the Company’s outstanding shares of common stock. The Company declared and paid a dividend of
$0.05
per share in each quarter of
2014
. Additionally in February 2015, the Company declared a
$0.06
per share dividend to be paid in March 2015.
Redeemable Noncontrolling Interest
Noncontrolling interest with redemption features that are not solely within the Company’s control (“redeemable noncontrolling interest”) are presented separately from Total stockholders’ equity in the Consolidated Balance Sheet at the maximum redemption value. If the maximum redemption value is greater than carrying value, the increase is adjusted directly to additional paid in capital and does not impact net income.
The following is a summary of redeemable noncontrolling interest as of
December 31, 2014
and
2013
(in millions):
|
Balance at January 1, 2013
|
$
|
246.9
|
|
|
|
Redemptions and Purchases
|
(174.1
|
)
|
||
|
Accrued guaranteed payment obligation
|
3.7
|
|
||
|
Payments of guaranteed obligations
|
(18.4
|
)
|
||
|
Reversal of guaranteed obligations
|
(5.7
|
)
|
||
|
Foreign currency translation
|
1.5
|
|
||
|
Balance at December 31, 2013
|
$
|
53.9
|
|
|
|
Purchases
|
(53.7
|
)
|
||
|
Foreign currency translation
|
(0.2
|
)
|
||
|
Balance at December 31, 2014
|
$
|
—
|
|
|
In January 2014, the Company paid
$71.3 million
for the remaining outstanding shares of Terex Material Handling & Port Solutions AG (“TMHPS”), of which
$53.7 million
was recorded as a reduction of redeemable noncontrolling interest and
$17.6 million
was recorded as a reduction in additional paid-in capital for the excess of the purchase price over the carrying value of redeemable noncontrolling interest. The Company now owns
100%
of TMHPS.
NOTE Q – 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 or deductibles. The Company records 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. The Company believes that the outcome of such matters, individually and in the aggregate, will not have a material adverse effect on its financial statements as a whole. 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.
F-43
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.
|
|
•
|
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 the Company, 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, the Company is unable to estimate a possible loss or a 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, the Company has filed motions to dismiss the ERISA lawsuit and the securities lawsuit. These motions are currently pending before the court. The plaintiff in the stockholder 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.
Other
The Company is involved in various other legal proceedings, 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.
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 is generally limited to its customer’s remaining payments due to the finance company 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
December 31, 2014
and
2013
, the Company’s maximum exposure to such credit guarantees was
$42.6 million
and
$53.6 million
, respectively, including total guarantees issued by Terex Cranes Germany GmbH, part of the Cranes segment, of
$23.4 million
and
$34.7 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.
F-44
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.
Buyback Guarantees
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
December 31, 2014
and
2013
, the Company’s maximum exposure pursuant to buyback guarantees was
$24.3 million
and
$46.7 million
, respectively, including total guarantees issued by entities in the MHPS segment of
$20.1 million
and
$35.1 million
. The Company is generally able to mitigate some of the risk of these guarantees because the maturity of the guarantees is staggered, limiting the amount of used equipment entering the marketplace at any one time and through leveraging its access to the used equipment markets provided by the Company’s original equipment manufacturer status.
See Note A – “Basis of Presentation – Revenue Recognition,” for a discussion of revenue recognition on arrangements with buyback guarantees.
The Company has recorded an aggregate liability within Other current liabilities and Other non-current liabilities in the Consolidated Balance Sheet of approximately
$3 million
and
$4 million
as of
December 31, 2014
and
2013
, 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.
NOTE R – CONSOLIDATING FINANCIAL STATEMENTS
During 2009, the Company sold and issued the
4%
Convertible Notes and during 2012 sold and issued the
6%
Notes and the
6-1/2%
Notes (collectively the “Notes”) (see Note M – “Long-Term Obligations”). The Notes are jointly and severally guaranteed by the following wholly-owned subsidiaries of the Company (the “Wholly-owned Guarantors”): CMI Terex Corporation, Fantuzzi Noell USA, Inc., Genie Financial Services, Inc., Genie Holdings, Inc., Genie Industries, Inc., Genie International, Inc., GFS National, Inc., Powerscreen Holdings USA Inc., Powerscreen International LLC, Powerscreen North America Inc., Powerscreen USA, LLC, Schaeff Incorporated, Schaeff of North America, Inc., Terex Advance Mixer, Inc., Terex Aerials, Inc., Terex Financial Services, Inc., Terex South Dakota, Inc., Terex USA, LLC, Terex Utilities, Inc. and Terex Washington, Inc. Wholly-owned Guarantors are 100% owned by the Company. All of the guarantees are full and unconditional. The guarantees of the Wholly-owned Guarantors are subject to release in limited circumstances only upon the occurrence of certain customary conditions. No subsidiaries of the Company except the Wholly-owned Guarantors have provided a guarantee of the 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. 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 Notes. Subsidiaries of non-guarantor subsidiaries that are guarantors are reported on the equity basis. Debt and goodwill allocated to subsidiaries are presented on a “push-down” accounting basis.
F-45
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME
YEAR ENDED
DECEMBER 31, 2014
(in millions)
|
|
Terex
Corporation
|
Wholly-owned
Guarantors
|
Non-guarantor
Subsidiaries
|
Intercompany
Eliminations
|
Consolidated
|
||||||||||||||
|
Net sales
|
$
|
42.5
|
|
$
|
3,352.1
|
|
$
|
4,958.3
|
|
$
|
(1,044.0
|
)
|
$
|
7,308.9
|
|
||||
|
Cost of goods sold
|
(39.2
|
)
|
(2,762.3
|
)
|
(4,097.9
|
)
|
1,044.0
|
|
(5,855.4
|
)
|
|||||||||
|
Gross profit
|
3.3
|
|
589.8
|
|
860.4
|
|
—
|
|
1,453.5
|
|
|||||||||
|
Selling, general and administrative expenses
|
7.3
|
|
(250.9
|
)
|
(786.8
|
)
|
—
|
|
(1,030.4
|
)
|
|||||||||
|
Income (loss) from operations
|
10.6
|
|
338.9
|
|
73.6
|
|
—
|
|
423.1
|
|
|||||||||
|
Interest income
|
129.7
|
|
73.8
|
|
4.5
|
|
(201.4
|
)
|
6.6
|
|
|||||||||
|
Interest expense
|
(165.6
|
)
|
(16.5
|
)
|
(138.4
|
)
|
201.4
|
|
(119.1
|
)
|
|||||||||
|
Income (loss) from subsidiaries
|
390.0
|
|
14.6
|
|
(2.5
|
)
|
(402.1
|
)
|
—
|
|
|||||||||
|
Loss on early extinguishment of debt
|
(1.5
|
)
|
—
|
|
(1.1
|
)
|
—
|
|
(2.6
|
)
|
|||||||||
|
Other income (expense) – net
|
(56.8
|
)
|
5.2
|
|
40.8
|
|
—
|
|
(10.8
|
)
|
|||||||||
|
Income (loss) from continuing operations before income taxes
|
306.4
|
|
416.0
|
|
(23.1
|
)
|
(402.1
|
)
|
297.2
|
|
|||||||||
|
(Provision for) benefit from income taxes
|
4.7
|
|
(22.3
|
)
|
(20.1
|
)
|
—
|
|
(37.7
|
)
|
|||||||||
|
Income (loss) from continuing operations
|
311.1
|
|
393.7
|
|
(43.2
|
)
|
(402.1
|
)
|
259.5
|
|
|||||||||
|
Income from discontinued operations – net of tax
|
0.6
|
|
—
|
|
0.8
|
|
—
|
|
1.4
|
|
|||||||||
|
Gain (loss) on disposition of discontinued operations – net of tax
|
7.3
|
|
—
|
|
51.3
|
|
—
|
|
58.6
|
|
|||||||||
|
Net income (loss)
|
319.0
|
|
393.7
|
|
8.9
|
|
(402.1
|
)
|
319.5
|
|
|||||||||
|
Net loss (income) attributable to noncontrolling interest
|
—
|
|
—
|
|
(0.5
|
)
|
—
|
|
(0.5
|
)
|
|||||||||
|
Net income (loss) attributable to Terex Corporation
|
$
|
319.0
|
|
$
|
393.7
|
|
$
|
8.4
|
|
$
|
(402.1
|
)
|
$
|
319.0
|
|
||||
|
Comprehensive income (loss), net of tax
|
$
|
5.7
|
|
$
|
390.3
|
|
$
|
(241.5
|
)
|
$
|
(148.4
|
)
|
$
|
6.1
|
|
||||
|
Comprehensive loss (income) attributable to noncontrolling interest
|
—
|
|
—
|
|
(0.4
|
)
|
—
|
|
(0.4
|
)
|
|||||||||
|
Comprehensive income (loss) attributable to Terex Corporation
|
$
|
5.7
|
|
$
|
390.3
|
|
$
|
(241.9
|
)
|
$
|
(148.4
|
)
|
$
|
5.7
|
|
||||
F-46
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME
YEAR ENDED
DECEMBER 31, 2013
(in millions)
|
|
Terex
Corporation
|
Wholly-owned
Guarantors
|
Non-guarantor
Subsidiaries
|
Intercompany
Eliminations
|
Consolidated
|
||||||||||||||
|
Net sales
|
$
|
173.2
|
|
$
|
3,156.1
|
|
$
|
4,814.2
|
|
$
|
(1,059.5
|
)
|
$
|
7,084.0
|
|
||||
|
Cost of goods sold
|
(162.3
|
)
|
(2,542.4
|
)
|
(3,999.3
|
)
|
1,059.5
|
|
(5,644.5
|
)
|
|||||||||
|
Gross profit
|
10.9
|
|
613.7
|
|
814.9
|
|
—
|
|
1,439.5
|
|
|||||||||
|
Selling, general and administrative expenses
|
(23.9
|
)
|
(234.1
|
)
|
(762.4
|
)
|
—
|
|
(1,020.4
|
)
|
|||||||||
|
Income (loss) from operations
|
(13.0
|
)
|
379.6
|
|
52.5
|
|
—
|
|
419.1
|
|
|||||||||
|
Interest income
|
272.4
|
|
337.8
|
|
11.9
|
|
(615.4
|
)
|
6.7
|
|
|||||||||
|
Interest expense
|
(431.6
|
)
|
(151.1
|
)
|
(158.8
|
)
|
615.4
|
|
(126.1
|
)
|
|||||||||
|
Income (loss) from subsidiaries
|
392.6
|
|
35.0
|
|
(0.6
|
)
|
(427.0
|
)
|
—
|
|
|||||||||
|
Loss on early extinguishment of debt
|
—
|
|
—
|
|
(5.2
|
)
|
—
|
|
(5.2
|
)
|
|||||||||
|
Other income (expense) – net
|
(57.4
|
)
|
3.6
|
|
50.6
|
|
—
|
|
(3.2
|
)
|
|||||||||
|
Income (loss) from continuing operations before income taxes
|
163.0
|
|
604.9
|
|
(49.6
|
)
|
(427.0
|
)
|
291.3
|
|
|||||||||
|
(Provision for) benefit from income taxes
|
50.6
|
|
(125.6
|
)
|
(12.4
|
)
|
—
|
|
(87.4
|
)
|
|||||||||
|
Income (loss) from continuing operations
|
213.6
|
|
479.3
|
|
(62.0
|
)
|
(427.0
|
)
|
203.9
|
|
|||||||||
|
Income (loss) from discontinued operations – net of tax
|
12.8
|
|
—
|
|
1.6
|
|
—
|
|
14.4
|
|
|||||||||
|
Gain (loss) on disposition of discontinued operations – net of tax
|
(0.4
|
)
|
—
|
|
3.0
|
|
—
|
|
2.6
|
|
|||||||||
|
Net income (loss)
|
226.0
|
|
479.3
|
|
(57.4
|
)
|
(427.0
|
)
|
220.9
|
|
|||||||||
|
Net loss (income) attributable to noncontrolling interest
|
—
|
|
—
|
|
5.1
|
|
—
|
|
5.1
|
|
|||||||||
|
Net income (loss) attributable to Terex Corporation
|
$
|
226.0
|
|
$
|
479.3
|
|
$
|
(52.3
|
)
|
$
|
(427.0
|
)
|
$
|
226.0
|
|
||||
|
Comprehensive income (loss), net of tax
|
233.6
|
|
484.3
|
|
(95.7
|
)
|
(393.3
|
)
|
228.9
|
|
|||||||||
|
Comprehensive loss (income) attributable to noncontrolling interest
|
—
|
|
—
|
|
4.7
|
|
—
|
|
4.7
|
|
|||||||||
|
Comprehensive income (loss) attributable to Terex Corporation
|
$
|
233.6
|
|
$
|
484.3
|
|
$
|
(91.0
|
)
|
$
|
(393.3
|
)
|
$
|
233.6
|
|
||||
F-47
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME
YEAR ENDED
DECEMBER 31, 2012
(in millions)
|
|
Terex
Corporation
|
Wholly-owned
Guarantors
|
Non-guarantor
Subsidiaries
|
Intercompany
Eliminations
|
Consolidated
|
||||||||||||||
|
Net sales
|
$
|
195.8
|
|
$
|
2,656.1
|
|
$
|
4,992.8
|
|
$
|
(862.5
|
)
|
$
|
6,982.2
|
|
||||
|
Cost of goods sold
|
(177.3
|
)
|
(2,226.5
|
)
|
(4,040.8
|
)
|
862.5
|
|
(5,582.1
|
)
|
|||||||||
|
Gross profit
|
18.5
|
|
429.6
|
|
952.0
|
|
—
|
|
1,400.1
|
|
|||||||||
|
Selling, general and administrative expenses
|
(31.9
|
)
|
(208.2
|
)
|
(793.2
|
)
|
—
|
|
(1,033.3
|
)
|
|||||||||
|
Income (loss) from operations
|
(13.4
|
)
|
221.4
|
|
158.8
|
|
—
|
|
366.8
|
|
|||||||||
|
Interest income
|
225.5
|
|
258.2
|
|
10.6
|
|
(485.5
|
)
|
8.8
|
|
|||||||||
|
Interest expense
|
(364.3
|
)
|
(109.3
|
)
|
(176.5
|
)
|
485.5
|
|
(164.6
|
)
|
|||||||||
|
Income (loss) from subsidiaries
|
310.3
|
|
(4.1
|
)
|
(0.6
|
)
|
(305.6
|
)
|
—
|
|
|||||||||
|
Loss on early extinguishment of debt
|
(79.6
|
)
|
—
|
|
(3.4
|
)
|
—
|
|
(83.0
|
)
|
|||||||||
|
Other income (expense) – net
|
(33.1
|
)
|
32.4
|
|
(1.0
|
)
|
—
|
|
(1.7
|
)
|
|||||||||
|
Income (loss) from continuing operations before income taxes
|
45.4
|
|
398.6
|
|
(12.1
|
)
|
(305.6
|
)
|
126.3
|
|
|||||||||
|
(Provision for) benefit from income taxes
|
50.2
|
|
(76.3
|
)
|
(25.4
|
)
|
—
|
|
(51.5
|
)
|
|||||||||
|
Income (loss) from continuing operations
|
95.6
|
|
322.3
|
|
(37.5
|
)
|
(305.6
|
)
|
74.8
|
|
|||||||||
|
Income (loss) from discontinued operations – net of tax
|
12.1
|
|
—
|
|
16.3
|
|
—
|
|
28.4
|
|
|||||||||
|
Gain (loss) on disposition of discontinued operations – net of tax
|
(1.9
|
)
|
—
|
|
2.3
|
|
—
|
|
0.4
|
|
|||||||||
|
Net income (loss)
|
105.8
|
|
322.3
|
|
(18.9
|
)
|
(305.6
|
)
|
103.6
|
|
|||||||||
|
Net loss (income) attributable to noncontrolling interest
|
—
|
|
—
|
|
2.2
|
|
—
|
|
2.2
|
|
|||||||||
|
Net income (loss) attributable to Terex Corporation
|
$
|
105.8
|
|
$
|
322.3
|
|
$
|
(16.7
|
)
|
$
|
(305.6
|
)
|
$
|
105.8
|
|
||||
|
Comprehensive income (loss), net of tax
|
$
|
107.2
|
|
$
|
323.3
|
|
$
|
(69.0
|
)
|
$
|
(256.0
|
)
|
$
|
105.5
|
|
||||
|
Comprehensive loss (income) attributable to noncontrolling interest
|
—
|
|
—
|
|
1.7
|
|
—
|
|
1.7
|
|
|||||||||
|
Comprehensive income (loss) attributable to Terex Corporation
|
$
|
107.2
|
|
$
|
323.3
|
|
$
|
(67.3
|
)
|
$
|
(256.0
|
)
|
$
|
107.2
|
|
||||
F-48
TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2014
(in millions)
|
|
Terex
Corporation
|
Wholly-owned
Guarantors
|
Non-guarantor
Subsidiaries
|
Intercompany
Eliminations
|
Consolidated
|
||||||||||||||
|
Assets
|
|
|
|
|
|
||||||||||||||
|
Current assets
|
|
|
|
|
|
||||||||||||||
|
Cash and cash equivalents
|
$
|
99.0
|
|
$
|
1.9
|
|
$
|
377.3
|
|
$
|
—
|
|
$
|
478.2
|
|
||||
|
Trade receivables – net
|
7.7
|
|
307.4
|
|
771.3
|
|
—
|
|
1,086.4
|
|
|||||||||
|
Intercompany receivables
|
55.3
|
|
85.9
|
|
136.3
|
|
(277.5
|
)
|
—
|
|
|||||||||
|
Inventories
|
—
|
|
374.5
|
|
1,086.4
|
|
—
|
|
1,460.9
|
|
|||||||||
|
Prepaid assets
|
100.8
|
|
32.9
|
|
114.3
|
|
—
|
|
248.0
|
|
|||||||||
|
Other current assets
|
65.7
|
|
0.1
|
|
16.9
|
|
—
|
|
82.7
|
|
|||||||||
|
Current assets – discontinued operations
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
|
Total current assets
|
328.5
|
|
802.7
|
|
2,502.5
|
|
(277.5
|
)
|
3,356.2
|
|
|||||||||
|
Property, plant and equipment – net
|
65.4
|
|
117.0
|
|
507.9
|
|
—
|
|
690.3
|
|
|||||||||
|
Goodwill
|
—
|
|
170.1
|
|
960.9
|
|
—
|
|
1,131.0
|
|
|||||||||
|
Non-current intercompany receivables
|
1,501.4
|
|
2,059.9
|
|
41.9
|
|
(3,603.2
|
)
|
—
|
|
|||||||||
|
Investment in and advances to (from) subsidiaries
|
3,564.2
|
|
199.3
|
|
152.0
|
|
(3,809.2
|
)
|
106.3
|
|
|||||||||
|
Other assets
|
43.8
|
|
142.7
|
|
457.7
|
|
—
|
|
644.2
|
|
|||||||||
|
Non-current assets – discontinued operations
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
|
Total assets
|
$
|
5,503.3
|
|
$
|
3,491.7
|
|
$
|
4,622.9
|
|
$
|
(7,689.9
|
)
|
$
|
5,928.0
|
|
||||
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Notes payable and current portion of long-term debt
|
$
|
125.0
|
|
$
|
2.0
|
|
$
|
25.5
|
|
$
|
—
|
|
$
|
152.5
|
|
||||
|
Trade accounts payable
|
18.0
|
|
212.6
|
|
505.5
|
|
—
|
|
736.1
|
|
|||||||||
|
Intercompany payables
|
19.8
|
|
117.8
|
|
139.9
|
|
(277.5
|
)
|
—
|
|
|||||||||
|
Accruals and other current liabilities
|
74.6
|
|
118.1
|
|
561.8
|
|
—
|
|
754.5
|
|
|||||||||
|
Current liabilities – discontinued operations
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
|
Total current liabilities
|
237.4
|
|
450.5
|
|
1,232.7
|
|
(277.5
|
)
|
1,643.1
|
|
|||||||||
|
Long-term debt, less current portion
|
1,150.0
|
|
7.6
|
|
478.7
|
|
—
|
|
1,636.3
|
|
|||||||||
|
Non-current intercompany payables
|
2,047.1
|
|
41.8
|
|
1,514.3
|
|
(3,603.2
|
)
|
—
|
|
|||||||||
|
Other non-current liabilities
|
62.9
|
|
27.2
|
|
519.4
|
|
—
|
|
609.5
|
|
|||||||||
|
Non-current liabilities – discontinued operations
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
|
Redeemable noncontrolling interest
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
|
Total stockholders’ equity
|
2,005.9
|
|
2,964.6
|
|
877.8
|
|
(3,809.2
|
)
|
2,039.1
|
|
|||||||||
|
Total liabilities, redeemable noncontrolling interest and stockholders’ equity
|
$
|
5,503.3
|
|
$
|
3,491.7
|
|
$
|
4,622.9
|
|
$
|
(7,689.9
|
)
|
$
|
5,928.0
|
|
||||
F-49
TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2013
(in millions)
|
|
Terex
Corporation
|
Wholly-owned
Guarantors
|
Non-guarantor
Subsidiaries
|
Intercompany
Eliminations
|
Consolidated
|
||||||||||||||
|
Assets
|
|
|
|
|
|
||||||||||||||
|
Current assets
|
|
|
|
|
|
||||||||||||||
|
Cash and cash equivalents
|
$
|
16.3
|
|
$
|
3.9
|
|
$
|
387.9
|
|
$
|
—
|
|
$
|
408.1
|
|
||||
|
Trade receivables – net
|
34.9
|
|
328.2
|
|
813.7
|
|
—
|
|
1,176.8
|
|
|||||||||
|
Intercompany receivables
|
52.8
|
|
121.8
|
|
124.0
|
|
(298.6
|
)
|
—
|
|
|||||||||
|
Inventories
|
28.6
|
|
392.6
|
|
1,192.0
|
|
—
|
|
1,613.2
|
|
|||||||||
|
Prepaid assets
|
47.9
|
|
40.3
|
|
132.7
|
|
—
|
|
220.9
|
|
|||||||||
|
Other current assets
|
42.5
|
|
0.4
|
|
48.2
|
|
—
|
|
91.1
|
|
|||||||||
|
Current assets – discontinued operations
|
21.3
|
|
—
|
|
108.0
|
|
—
|
|
129.3
|
|
|||||||||
|
Total current assets
|
244.3
|
|
887.2
|
|
2,806.5
|
|
(298.6
|
)
|
3,639.4
|
|
|||||||||
|
Property, plant and equipment – net
|
72.5
|
|
118.6
|
|
598.3
|
|
—
|
|
789.4
|
|
|||||||||
|
Goodwill
|
—
|
|
170.1
|
|
1,075.5
|
|
—
|
|
1,245.6
|
|
|||||||||
|
Non-current intercompany receivables
|
1,586.4
|
|
2,157.8
|
|
42.0
|
|
(3,786.2
|
)
|
—
|
|
|||||||||
|
Investment in and advances to (from) subsidiaries
|
3,874.9
|
|
191.7
|
|
162.3
|
|
(4,138.9
|
)
|
90.0
|
|
|||||||||
|
Other assets
|
36.7
|
|
178.2
|
|
541.8
|
|
—
|
|
756.7
|
|
|||||||||
|
Non-current assets – discontinued operations
|
1.2
|
|
—
|
|
14.4
|
|
—
|
|
15.6
|
|
|||||||||
|
Total assets
|
$
|
5,816.0
|
|
$
|
3,703.6
|
|
$
|
5,240.8
|
|
$
|
(8,223.7
|
)
|
$
|
6,536.7
|
|
||||
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Notes payable and current portion of long-term debt
|
$
|
3.7
|
|
$
|
0.7
|
|
$
|
82.4
|
|
$
|
—
|
|
$
|
86.8
|
|
||||
|
Trade accounts payable
|
14.0
|
|
221.7
|
|
453.4
|
|
—
|
|
689.1
|
|
|||||||||
|
Intercompany payables
|
46.9
|
|
97.2
|
|
154.5
|
|
(298.6
|
)
|
—
|
|
|||||||||
|
Accruals and other current liabilities
|
68.1
|
|
130.9
|
|
703.7
|
|
—
|
|
902.7
|
|
|||||||||
|
Current liabilities – discontinued operations
|
3.9
|
|
—
|
|
42.2
|
|
—
|
|
46.1
|
|
|||||||||
|
Total current liabilities
|
136.6
|
|
450.5
|
|
1,436.2
|
|
(298.6
|
)
|
1,724.7
|
|
|||||||||
|
Long-term debt, less current portion
|
1,271.0
|
|
4.8
|
|
614.1
|
|
—
|
|
1,889.9
|
|
|||||||||
|
Non-current intercompany payables
|
2,143.2
|
|
41.8
|
|
1,601.2
|
|
(3,786.2
|
)
|
—
|
|
|||||||||
|
Other non-current liabilities
|
75.1
|
|
27.1
|
|
545.5
|
|
—
|
|
647.7
|
|
|||||||||
|
Non-current liabilities – discontinued operations
|
—
|
|
—
|
|
5.7
|
|
—
|
|
5.7
|
|
|||||||||
|
Redeemable non-controlling interest
|
—
|
|
—
|
|
53.9
|
|
—
|
|
53.9
|
|
|||||||||
|
Total stockholders’ equity
|
2,190.1
|
|
3,179.4
|
|
984.2
|
|
(4,138.9
|
)
|
2,214.8
|
|
|||||||||
|
Total liabilities, redeemable noncontrolling interest and stockholders’ equity
|
$
|
5,816.0
|
|
$
|
3,703.6
|
|
$
|
5,240.8
|
|
$
|
(8,223.7
|
)
|
$
|
6,536.7
|
|
||||
F-50
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED
DECEMBER 31, 2014
(in millions)
|
|
Terex
Corporation
|
Wholly-owned
Guarantors
|
Non-guarantor
Subsidiaries
|
Intercompany
Eliminations
|
Consolidated
|
||||||||||||||
|
Net cash provided by (used in) operating activities
|
$
|
(113.4
|
)
|
$
|
691.4
|
|
$
|
245.7
|
|
$
|
(413.0
|
)
|
$
|
410.7
|
|
||||
|
Cash flows from investing activities
|
|
|
|||||||||||||||||
|
Capital expenditures
|
(4.4
|
)
|
(32.2
|
)
|
(44.9
|
)
|
—
|
|
(81.5
|
)
|
|||||||||
|
Other investments
|
(20.0
|
)
|
—
|
|
—
|
|
—
|
|
(20.0
|
)
|
|||||||||
|
Proceeds from disposition of discontinued operations
|
31.3
|
|
—
|
|
130.9
|
|
—
|
|
162.2
|
|
|||||||||
|
Proceeds from sale of assets
|
25.0
|
|
12.1
|
|
6.2
|
|
—
|
|
43.3
|
|
|||||||||
|
Intercompany investing activities
(1)
|
363.5
|
|
—
|
|
—
|
|
(363.5
|
)
|
—
|
|
|||||||||
|
Other investing activities, net
|
—
|
|
(1.6
|
)
|
(7.4
|
)
|
—
|
|
(9.0
|
)
|
|||||||||
|
Net cash provided by (used in) investing activities
|
395.4
|
|
(21.7
|
)
|
84.8
|
|
(363.5
|
)
|
95.0
|
|
|||||||||
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Repayments of debt
|
(1,018.8
|
)
|
(3.2
|
)
|
(779.8
|
)
|
—
|
|
(1,801.8
|
)
|
|||||||||
|
Proceeds from issuance of debt
|
1,011.0
|
|
51.9
|
|
621.3
|
|
—
|
|
1,684.2
|
|
|||||||||
|
Purchase of noncontrolling interest
|
—
|
|
—
|
|
(80.3
|
)
|
—
|
|
(80.3
|
)
|
|||||||||
|
Intercompany financing activities
(1)
|
—
|
|
(717.5
|
)
|
(59.0
|
)
|
776.5
|
|
—
|
|
|||||||||
|
Share repurchases
|
(171.2
|
)
|
—
|
|
—
|
|
—
|
|
(171.2
|
)
|
|||||||||
|
Dividends paid
|
(21.8
|
)
|
—
|
|
—
|
|
—
|
|
(21.8
|
)
|
|||||||||
|
Other financing activities, net
|
1.5
|
|
(2.9
|
)
|
(4.4
|
)
|
—
|
|
(5.8
|
)
|
|||||||||
|
Net cash provided by (used in) financing activities
|
(199.3
|
)
|
(671.7
|
)
|
(302.2
|
)
|
776.5
|
|
(396.7
|
)
|
|||||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
—
|
|
(38.9
|
)
|
—
|
|
(38.9
|
)
|
|||||||||
|
Net increase (decrease) in cash and cash equivalents
|
82.7
|
|
(2.0
|
)
|
(10.6
|
)
|
—
|
|
70.1
|
|
|||||||||
|
Cash and cash equivalents, beginning of period
|
16.3
|
|
3.9
|
|
387.9
|
|
—
|
|
408.1
|
|
|||||||||
|
Cash and cash equivalents, end of period
|
$
|
99.0
|
|
$
|
1.9
|
|
$
|
377.3
|
|
$
|
—
|
|
$
|
478.2
|
|
||||
|
(1)
|
Intercompany investing and financing activities include cash pooling activity between Terex Corporation and Wholly-Owned Guarantors.
|
F-51
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED
DECEMBER 31, 2013
(in millions)
|
|
Terex
Corporation
|
Wholly-owned
Guarantors
|
Non-guarantor
Subsidiaries
|
Intercompany
Eliminations
|
Consolidated
|
||||||||||||||
|
Net cash provided by (used in) operating activities
|
$
|
(244.1
|
)
|
$
|
599.9
|
|
$
|
7.7
|
|
$
|
(175.0
|
)
|
$
|
188.5
|
|
||||
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
||||||||||||
|
Capital expenditures
|
(9.4
|
)
|
(24.5
|
)
|
(48.9
|
)
|
—
|
|
(82.8
|
)
|
|||||||||
|
Proceeds from disposition of discontinued operations
|
(2.8
|
)
|
—
|
|
3.5
|
|
—
|
|
0.7
|
|
|||||||||
|
Proceeds from sale of assets
|
4.4
|
|
35.1
|
|
6.6
|
|
—
|
|
46.1
|
|
|||||||||
|
Intercompany investing activities
(1)
|
253.1
|
|
(18.7
|
)
|
(0.6
|
)
|
(233.8
|
)
|
—
|
|
|||||||||
|
Other investing activities, net
|
—
|
|
—
|
|
(1.4
|
)
|
—
|
|
(1.4
|
)
|
|||||||||
|
Net cash provided by (used in) investing activities
|
245.3
|
|
|
(8.1
|
)
|
(40.8
|
)
|
(233.8
|
)
|
|
(37.4
|
)
|
|||||||
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Repayments of debt
|
(54.0
|
)
|
(0.1
|
)
|
(517.7
|
)
|
—
|
|
(571.8
|
)
|
|||||||||
|
Proceeds from issuance of debt
|
61.8
|
|
3.8
|
|
359.6
|
|
—
|
|
425.2
|
|
|||||||||
|
Purchase of noncontrolling interest
|
—
|
|
—
|
|
(228.1
|
)
|
—
|
|
(228.1
|
)
|
|||||||||
|
Distributions to noncontrolling interest
|
—
|
|
—
|
|
(18.5
|
)
|
—
|
|
(18.5
|
)
|
|||||||||
|
Intercompany financing activities
(1)
|
—
|
|
(592.0
|
)
|
183.2
|
|
408.8
|
|
—
|
|
|||||||||
|
Share repurchases
|
(31.4
|
)
|
—
|
|
—
|
|
—
|
|
(31.4
|
)
|
|||||||||
|
Dividends paid
|
(5.5
|
)
|
—
|
|
—
|
|
—
|
|
(5.5
|
)
|
|||||||||
|
Other financing activities, net
|
4.6
|
|
—
|
|
5.4
|
|
—
|
|
10.0
|
|
|||||||||
|
Net cash provided by (used in) financing activities
|
(24.5
|
)
|
(588.3
|
)
|
(216.1
|
)
|
408.8
|
|
(420.1
|
)
|
|||||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
—
|
|
(0.9
|
)
|
—
|
|
(0.9
|
)
|
|||||||||
|
Net increase (decrease) in cash and cash equivalents
|
(23.3
|
)
|
3.5
|
|
(250.1
|
)
|
—
|
|
(269.9
|
)
|
|||||||||
|
Cash and cash equivalents, beginning of period
|
39.6
|
|
0.4
|
|
638.0
|
|
—
|
|
678.0
|
|
|||||||||
|
Cash and cash equivalents, end of period
|
$
|
16.3
|
|
$
|
3.9
|
|
$
|
387.9
|
|
$
|
—
|
|
$
|
408.1
|
|
||||
|
(1)
|
Intercompany investing and financing activities include cash pooling activity between Terex Corporation and Wholly-Owned Guarantors.
|
F-52
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED
DECEMBER 31, 2012
(in millions)
|
|
Terex
Corporation
|
Wholly-
owned
Guarantors
|
Non-
guarantor
Subsidiaries
|
Intercompany
Eliminations
|
Consolidated
|
||||||||||||||
|
Net cash provided by (used in) operating activities
|
$
|
(15.5
|
)
|
$
|
136.5
|
|
$
|
171.3
|
|
$
|
—
|
|
$
|
292.3
|
|
||||
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Capital expenditures
|
(7.1
|
)
|
(17.1
|
)
|
(58.3
|
)
|
—
|
|
(82.5
|
)
|
|||||||||
|
Other investments
|
(4.5
|
)
|
—
|
|
(19.6
|
)
|
—
|
|
(24.1
|
)
|
|||||||||
|
Proceeds from disposition of discontinued operations
|
—
|
|
—
|
|
3.5
|
|
—
|
|
3.5
|
|
|||||||||
|
Proceeds from sale of assets
|
0.6
|
|
6.1
|
|
27.9
|
|
—
|
|
34.6
|
|
|||||||||
|
Intercompany investing activities
|
(89.6
|
)
|
(127.3
|
)
|
134.0
|
|
82.9
|
|
—
|
|
|||||||||
|
Other investing activities, net
|
—
|
|
—
|
|
(7.8
|
)
|
—
|
|
(7.8
|
)
|
|||||||||
|
Net cash provided by (used in) investing activities
|
(100.6
|
)
|
|
(138.3
|
)
|
|
79.7
|
|
82.9
|
|
(76.3
|
)
|
|||||||
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Repayments of debt
|
(1,260.4
|
)
|
(0.1
|
)
|
(272.5
|
)
|
—
|
|
(1,533.0
|
)
|
|||||||||
|
Proceeds from issuance of debt
|
1,175.0
|
|
—
|
|
59.3
|
|
—
|
|
1,234.3
|
|
|||||||||
|
Purchase of noncontrolling interest
|
—
|
|
—
|
|
(3.5
|
)
|
—
|
|
(3.5
|
)
|
|||||||||
|
Distributions to noncontrolling interest
|
—
|
|
—
|
|
(4.9
|
)
|
—
|
|
(4.9
|
)
|
|||||||||
|
Intercompany financing activities
|
(6.0
|
)
|
—
|
|
88.9
|
|
(82.9
|
)
|
—
|
|
|||||||||
|
Other financing activities, net
|
(16.9
|
)
|
—
|
|
0.7
|
|
—
|
|
(16.2
|
)
|
|||||||||
|
Net cash provided by (used in) financing activities
|
(108.3
|
)
|
(0.1
|
)
|
(132.0
|
)
|
(82.9
|
)
|
(323.3
|
)
|
|||||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
—
|
|
11.2
|
|
—
|
|
11.2
|
|
|||||||||
|
Net increase (decrease) in cash and cash equivalents
|
(224.4
|
)
|
(1.9
|
)
|
130.2
|
|
—
|
|
(96.1
|
)
|
|||||||||
|
Cash and cash equivalents, beginning of period
|
264.0
|
|
2.3
|
|
507.8
|
|
—
|
|
774.1
|
|
|||||||||
|
Cash and cash equivalents, end of period
|
$
|
39.6
|
|
$
|
0.4
|
|
$
|
638.0
|
|
$
|
—
|
|
$
|
678.0
|
|
||||
F-53
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Amounts in millions)
|
|
|
Additions
|
|
|
|||||||||||||||
|
|
Balance
Beginning
of Year
|
Charges to
Earnings
|
Other (1)
|
Deductions (2)
|
Balance End
of Year
|
||||||||||||||
|
Year ended December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Deducted from asset accounts:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Allowance for doubtful accounts
|
$
|
47.6
|
|
$
|
1.8
|
|
$
|
(3.8
|
)
|
$
|
(15.1
|
)
|
$
|
30.5
|
|
||||
|
Reserve for inventory
|
132.5
|
|
13.0
|
|
(16.7
|
)
|
(12.5
|
)
|
116.3
|
|
|||||||||
|
Valuation allowances for deferred tax assets
|
181.8
|
|
25.7
|
|
21.6
|
|
—
|
|
229.1
|
|
|||||||||
|
Totals
|
$
|
361.9
|
|
$
|
40.5
|
|
$
|
1.1
|
|
$
|
(27.6
|
)
|
$
|
375.9
|
|
||||
|
Year ended December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Deducted from asset accounts:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Allowance for doubtful accounts
|
$
|
38.5
|
|
$
|
7.1
|
|
$
|
5.6
|
|
$
|
(3.6
|
)
|
$
|
47.6
|
|
||||
|
Reserve for inventory
|
131.9
|
|
37.6
|
|
(0.3
|
)
|
(36.7
|
)
|
132.5
|
|
|||||||||
|
Valuation allowances for deferred tax assets
|
172.2
|
|
5.8
|
|
3.8
|
|
—
|
|
181.8
|
|
|||||||||
|
Totals
|
$
|
342.6
|
|
$
|
50.5
|
|
$
|
9.1
|
|
$
|
(40.3
|
)
|
$
|
361.9
|
|
||||
|
Year ended December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Deducted from asset accounts:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Allowance for doubtful accounts
|
$
|
42.2
|
|
$
|
5.6
|
|
$
|
(6.2
|
)
|
$
|
(3.1
|
)
|
$
|
38.5
|
|
||||
|
Reserve for inventory
|
117.2
|
|
35.6
|
|
13.8
|
|
(34.7
|
)
|
131.9
|
|
|||||||||
|
Valuation allowances for deferred tax assets
|
183.3
|
|
14.2
|
|
(25.3
|
)
|
—
|
|
172.2
|
|
|||||||||
|
Totals
|
$
|
342.7
|
|
$
|
55.4
|
|
$
|
(17.7
|
)
|
$
|
(37.8
|
)
|
$
|
342.6
|
|
||||
|
(1)
|
Primarily represents the impact of foreign currency exchange, purchase accounting adjustments for deferred tax assets, business divestitures and other amounts recorded to accumulated other comprehensive income (loss).
|
|
(2)
|
Primarily represents the utilization of established reserves, net of recoveries.
|
F-54
TABLE OF CONTENTS
Part IprintItem 1. BusinessprintItem 1A. Risk FactorsprintItem 1B. Unresolved Staff CommentsprintItem 2. PropertiesprintItem 3. Legal ProceedingsprintItem 4. Mine Safety DisclosureprintPart IIprintItem 5. Market For The Registrant S Common Equity Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesprintItem 6. Selected Financial DataprintItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsprintItem 7A. Quantitative and Qualitative Disclosures About Market RiskprintItem 8. Financial Statements and Supplementary DataprintItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureprintItem 9A. Controls and ProceduresprintItem 9B. Other InformationprintPart IIIprintItem 10. Directors, Executive Officers and Corporate GovernanceprintItem 11. Executive CompensationprintItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersprintItem 13. Certain Relationships and Related Transactions, and Director IndependenceprintItem 14. Principal Accountant Fees and ServicesprintPart IVprintItem 15. Exhibits and Financial Statement Schedulesprint