Terex Corporation (NYSE:TEX) today announced income from
continuing operations of $87.8 million, or $0.76 per share, for the
second quarter of 2014. This compared to income from continuing
operations of $20.4 million, or $0.17 per share, for the second
quarter of 2013. Excluding the impact of certain items totaling
$54.4 million, or $0.47 per share, income from continuing
operations as adjusted in the second quarter of 2013 was $74.8
million, or $0.64 per share. The glossary at the end of this press
release contains details regarding the impact of certain items in
the second quarter of 2013.
Net sales were $2,055.1 million in the second quarter of 2014,
10.4% higher than net sales of $1,861.5 million in the second
quarter of 2013. Income from operations was $160.9 million in the
second quarter of 2014, an increase of $77.4 million when compared
to income from operations of $83.5 million in the second quarter of
2013. Excluding the impact of certain items totaling $64.9 million,
income from operations as adjusted in the second quarter of 2013
was $148.4 million.
“Our results for the second quarter and first six months of the
year were mixed both from a business and geographical perspective,”
commented Ron DeFeo, Terex Chairman and Chief Executive Officer.
“Our Aerial Work Platforms (AWP) segment had a strong quarter but
margins were slightly lower than a year ago due to product mix and
planned investments in new product development and manufacturing
footprint. We expect this dynamic to continue through the remainder
of the year, although on increasing sales versus the prior year.
Our Cranes segment is making progress, as bookings were roughly
equal to net sales during the quarter and the order entry run rate
was 12% above the prior year level on a year to date basis. Our
Construction and Material Handling & Port Solutions (MHPS)
segments both delivered quarters roughly in-line with our
expectations, while the Materials Processing (MP) segment had a
more challenging quarter from a sales perspective than originally
anticipated. From a geographical perspective, Western Europe and
North America were the growth drivers with increases of 35% and 15%
respectively, with the rest of world somewhat offsetting these
strengths.”
Outlook: “The Company’s overall
outlook for 2014 remains unchanged,” Mr. DeFeo added. “We expect
continued strength from our AWP segment and improvement from our
Cranes and MHPS segments to drive improved performance for the
second half of 2014 compared with the first six months. While we
see a slightly weaker end-market than we originally anticipated,
from an EPS perspective, the impact on operating earnings is
expected to be somewhat offset by both a lower effective tax rate
and a lower anticipated share count. We reiterate our annual
outlook for earnings per share of between $2.50 and $2.80,
excluding restructuring and other unusual items, although now on
net sales of between $7.3 billion and $7.5 billion.”
Capital Structure: “During the
quarter we completed the divestiture of our truck business for $160
million, reporting a gain on discontinued operations of $51.5
million or $0.45 per share.” commented Kevin Bradley, Terex Senior
Vice President and Chief Financial Officer. “We used the proceeds
from the sale to pay down a portion of our revolving credit line.
We also repurchased $21 million of our shares within the quarter
for a cumulative total of $84 million since the inception of the
program in December 2013."
The Company’s liquidity at June 30, 2014 stands at $779.5
million, an increase of $148 million during the quarter. Liquidity
was comprised of $364.3 million in cash and availability under the
Company’s revolving credit facilities of $415.2 million.
Return on Invested Capital (ROIC) was 10.6% for the trailing
twelve months ended June 30, 2014.
Taxes: The effective tax rate for
the second quarter of 2014 was 31.2% as compared to an effective
tax rate of 59.7% for the second quarter of 2013. The lower
effective tax rate in the second quarter of 2014 was primarily due
to the reduced impact of losses not benefitted compared to the
second quarter of 2013. The Company now expects the effective tax
rate for the full year 2014 to be between 30% and 33%.
Backlog: Backlog for orders
deliverable during the next twelve months was $2,199.2 million at
June 30, 2014, a decrease of 7.0% from March 31, 2014 and an
increase of 2.2% from June 30, 2013. The Glossary contains further
details regarding backlog.
All results are for continuing operations unless directly noted.
All per share amounts are on a fully diluted basis. A comprehensive
review of the quarterly financial performance is contained in the
presentation that will accompany the Company’s earnings conference
call.
In this press release, Terex refers 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 being disclosed by other companies. Terex
believes that this non-GAAP information is useful to understanding
its operating results and the ongoing performance of its underlying
businesses. Certain financial measures are shown in italics the
first time referenced and are described in the text or the Glossary
at the end of this press release.
Conference call
The Company has scheduled a one hour conference call to review
the financial results on Thursday, July 24, 2014 at 8:30 a.m. ET.
Ronald M. DeFeo, Chairman and CEO, will host the call. A
simultaneous webcast of this call will be available on the
Company’s website, www.terex.com. To listen to the call, select
“Investor Relations” in the “About Terex” section on the home page
and then click on the webcast microphone link. Participants are
encouraged to access the call 10 minutes prior to the starting
time. The call will also be archived on the Company’s website under
“Audio Archives” in the “Investor Relations” section of the
website.
Forward-Looking Statements
This press release contains forward-looking information
regarding future events or the Company’s future financial
performance based on the current expectations of Terex Corporation.
In addition, when included in this press release, the words “may,”
“expects,” “intends,” “anticipates,” “plans,” “projects,”
“estimates” and the negatives thereof and analogous or similar
expressions are intended to identify forward-looking statements.
However, the absence of these words does not mean that the
statement is not forward-looking. The Company has based these
forward-looking statements on current expectations and projections
about future events. These statements are not guarantees of future
performance.
Because forward-looking statements involve risks and
uncertainties, actual results could differ materially. Such risks
and uncertainties, many of which are beyond the control of Terex,
include among others: Our business is cyclical and weak general
economic conditions affect the sales of our products and financial
results; our ability to successfully integrate acquired businesses;
the need to comply with restrictive covenants contained in our debt
agreements; our ability to generate sufficient cash flow to service
our debt obligations and operate our business; our ability to
access the capital markets to raise funds and provide liquidity;
our business is sensitive to government spending; our business is
very competitive and is affected by our cost structure, pricing,
product initiatives and other actions taken by competitors; our
ability to timely manufacture and deliver products to customers;
our retention of key management personnel; the financial condition
of suppliers and customers, and their continued access to capital;
our providing financing and credit support for some of our
customers; we may experience losses in excess of recorded reserves;
impairment in the carrying value of goodwill and other
indefinite-lived intangible assets; our ability to obtain parts and
components from suppliers on a timely basis at competitive prices;
our business is global and subject to changes in exchange rates
between currencies, regional economic conditions and trade
restrictions; 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; a material disruption to one of our significant
facilities; possible work stoppages and other labor matters;
compliance with changing laws and regulations, particularly
environmental and tax laws and regulations; litigation, product
liability claims, patent claims, class action lawsuits and other
liabilities; our ability to comply with an injunction and related
obligations resulting from the settlement of an investigation by
the United States Securities and Exchange Commission (“SEC”); our
implementation of a global enterprise resource planning system and
its performance; and other factors, risks and uncertainties that
are more specifically set forth in our public filings with the
SEC.
Actual events or the actual future results of Terex may differ
materially from any forward-looking statement due to these and
other risks, uncertainties and significant factors. The
forward-looking statements speak only as of the date of this
release. Terex expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking
statement included in this release to reflect any changes in
expectations with regard thereto or any changes in events,
conditions, or circumstances on which any such statement is
based.
Terex Corporation is a lifting and material handling solutions
company reporting in five business segments: Aerial Work Platforms,
Construction, Cranes, Material Handling & Port Solutions and
Materials Processing. Terex manufactures a broad range of equipment
for use in various industries, including the construction,
infrastructure, manufacturing, shipping, transportation, refining,
energy, utility, quarrying and mining industries. Terex offers
financial products and services to assist in the acquisition of
Terex equipment through Terex Financial Services. Terex uses its
website (www.terex.com) and its Facebook page
(www.facebook.com/TerexCorporation) to make information available
to its investors and the market.
TEREX CORPORATION AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF
INCOME
(unaudited)
(in millions, except per share data)
Three Months Six Months Ended June 30,
Ended June 30, 2014 2013 2014 2013 Net sales $
2,055.1 $ 1,861.5 $ 3,709.7 $ 3,515.2 Cost of goods sold
(1,631.3 ) (1,510.3 ) (2,952.5 ) (2,842.8 )
Gross profit 423.8 351.2 757.2 672.4 Selling, general and
administrative expenses (262.9 ) (267.7 )
(521.3 ) (523.3 ) Income (loss) from operations 160.9 83.5
235.9 149.1 Other income (expense) Interest income 1.2 1.8 2.5 3.5
Interest expense (31.7 ) (31.4 ) (62.1 ) (64.8 ) Loss on early
extinguishment of debt - (5.2 ) - (5.2 ) Other income (expense) –
net (2.0 ) (2.3 ) (4.9 ) (3.9 ) Income
(loss) from continuing operations before income taxes 128.4 46.4
171.4 78.7 (Provision for) benefit from income taxes (40.0 )
(27.7 ) (51.5 ) (42.3 ) Income (loss) from
continuing operations 88.4 18.7 119.9 36.4 Income (loss) from
discontinued operations – net of tax 0.5 0.9 1.4 2.5 Gain (loss) on
disposition of discontinued operations- net of tax 51.5
- 53.0 3.0 Net
income (loss) 140.4 19.6 174.3 41.9 Net loss (income) attributable
to noncontrolling interest (0.6 ) 1.7
0.5 3.3 Net income (loss) attributable to
Terex Corporation $ 139.8 $ 21.3 $ 174.8 $
45.2 Amounts attributable to Terex Corporation common
stockholders: Income (loss) from continuing operations $ 87.8 $
20.4 $ 120.4 $ 39.7 Income (loss) from discontinued operations –
net of tax 0.5 0.9 1.4 2.5 Gain (loss) on disposition of
discontinued operations – net of tax 51.5 -
53.0 3.0 Net income (loss)
attributable to Terex Corporation $ 139.8 $ 21.3 $
174.8 $ 45.2
Basic Earnings (Loss) per Share
Attributable to Terex Corporation Common Stockholders:
Income (loss) from continuing operations $ 0.80 $ 0.18 $ 1.09 $
0.36 Income (loss) from discontinued operations – net of tax - 0.01
0.01 0.02 Gain (loss) on disposition of discontinued operations –
net of tax 0.47 - 0.48
0.03 Net income (loss) attributable to Terex
Corporation $ 1.27 $ 0.19 $ 1.58 $ 0.41
Diluted Earnings (Loss) per Share
Attributable to Terex Corporation Common Stockholders:
Income (loss) from continuing operations $ 0.76 $ 0.17 $ 1.03 $
0.34 Income (loss) from discontinued operations – net of tax - 0.01
0.01 0.02 Gain (loss) on disposition of discontinued operations –
net of tax 0.45 - 0.46
0.03 Net income (loss) attributable to Terex
Corporation $ 1.21 $ 0.18 $ 1.50 $ 0.39
Weighted average number of shares outstanding in per share
calculation Basic 110.3 111.2
110.5 111.0 Diluted 115.8
115.8 116.4 115.8
TEREX CORPORATION AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEET
(unaudited)
(in millions, except par value)
June 30, December 31, 2014 2013 Assets
Current assets Cash and cash equivalents $ 364.3 $ 408.1
Trade receivables (net of allowance of
$43.2 and $47.6 at June 30, 2014 and December 31, 2013,
respectively)
1,368.4 1,176.8 Inventories 1,779.0 1,613.2 Other current assets
300.7 312.0 Current assets – discontinued operations -
129.3 Total current assets 3,812.4 3,639.4 Non-current
assets Property, plant and equipment – net 776.5 789.4 Goodwill
1,267.1 1,245.6 Intangible assets – net 430.5 444.8 Other assets
418.1 401.9 Non-current assets – discontinued operations -
15.6 Total assets $ 6,704.6 $ 6,536.7 Liabilities and
Stockholders’ Equity Current liabilities Notes payable and current
portion of long-term debt $ 190.7 $ 86.8 Trade accounts payable
800.8 689.1 Accrued compensation and benefits 243.4 234.3 Accrued
warranties and product liability 92.6 96.2 Customer advances 334.5
302.1 Other current liabilities 333.3 270.1 Current liabilities –
discontinued operations - 46.1 Total current
liabilities 1,995.3 1,724.7 Non-current liabilities Long-term debt,
less current portion 1,731.8 1,889.9 Retirement plans 383.8 388.2
Other non-current liabilities 231.2 259.5 Non-current liabilities –
discontinued operations - 5.7 Total liabilities
4,342.1 4,268.0 Commitments and contingencies
Redeemable noncontrolling interest - 53.9 Stockholders’ equity
Common stock, $.01 par value – authorized 300.0 shares; issued
124.5 and 123.7 shares at June 30, 2014 and December 31, 2013,
respectively 1.2 1.2 Additional paid-in capital 1,239.7 1,247.5
Retained earnings 1,851.7 1,688.1 Accumulated other comprehensive
income (loss) (75.4) (116.5) Less cost of shares of common stock in
treasury – 15.1 and 13.8 shares at June 30, 2014 and December 31,
2013, respectively (685.6) (630.2) Total Terex
Corporation stockholders’ equity 2,331.6 2,190.1 Noncontrolling
interest 30.9 24.7 Total stockholders’ equity
2,362.5 2,214.8 Total liabilities, redeemable noncontrolling
interest and stockholders’ equity $ 6,704.6 $ 6,536.7
TEREX CORPORATION AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOWS
(unaudited)
(in millions)
Six Months Ended June 30, 2014 2013
Operating Activities Net income $ 174.3 $ 41.9
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 80.0 78.3
Changes in operating assets and
liabilities (net of effects of acquisitions and divestitures):
Trade receivables (183.6) (130.3) Inventories (162.4) (71.8) Trade
accounts payable 108.2 120.9 Customer advances 33.7 25.0 Other, net
(25.7) 65.9 Net cash provided by (used in) operating
activities $ 24.5 $ 129.9 Investing Activities Capital expenditures
(37.3) (41.4) Proceeds from disposition of discontinued operations
162.2 0.7 Other investing activities, net (4.8) 39.3
Net cash (used in) provided by investing activities 120.1
(1.4) Financing Activities Net cash provided by (used in)
financing activities (189.1) (240.2) Effect of
Exchange Rate Changes on Cash and Cash Equivalents 0.7
(18.1) Net Increase (Decrease) in Cash and Cash Equivalents
(43.8) (129.8) Cash and Cash Equivalents at Beginning of Period
408.1 678.0 Cash and Cash Equivalents at End of
Period $ 364.3 $ 548.2
TEREX CORPORATION AND
SUBSIDIARIES
SEGMENT RESULTS DISCLOSURE
(unaudited)
(in millions)
Second Quarter Year-to-Date 2014
2013 2014 2013 % of % of
% of % of Net Sales Net Sales Net Sales Net Sales
Consolidated Net sales $ 2,055.1 $ 1,861.5 $ 3,709.7 $
3,515.2 Gross profit 423.8 20.6% 351.2 18.9% 757.2 20.4% 672.4
19.1% SG&A 262.9 12.8% 267.7 14.4% 521.3
14.1% 523.3 14.9% Income from operations $ 160.9 7.8% $ 83.5
4.5% $ 235.9 6.4% $ 149.1 4.2%
AWP Net sales $ 717.9
$ 606.6 $ 1,302.8 $ 1,115.7 Gross profit 164.2 22.9% 147.0 24.2%
297.3 22.8% 265.5 23.8% SG&A 50.7 7.1% 45.8 7.6%
101.6 7.8% 91.9 8.2% Income from operations $ 113.5
15.8% $ 101.2 16.7% $ 195.7 15.0% $ 173.6 15.6%
Construction Net sales $ 227.2 $ 228.1 $ 422.9 $ 438.5 Gross
profit 26.5 11.7% 25.8 11.3% 45.6 10.8% 40.4 9.2% SG&A
22.5 9.9% 31.0 13.6% 46.6 11.0% 60.1 13.7%
Income (loss) from operations $ 4.0 1.8% $ (5.2) (2.3)% $ (1.0)
(0.2)% $ (19.7) (4.5)%
Cranes Net sales $ 503.5 $
521.2 $ 897.1 $ 992.1 Gross profit 89.9 17.9% 84.8 16.3% 149.9
16.7% 170.7 17.2% SG&A 60.2 12.0% 61.4 11.8%
120.4 13.4% 114.8 11.6% Income from operations $ 29.7
5.9% $ 23.4 4.5% $ 29.5 3.3% $ 55.9 5.6%
MHPS Net
sales $ 431.4 $ 369.8 $ 799.6 $ 709.0 Gross profit 97.2 22.5% 48.6
13.1% 181.8 22.7% 117.3 16.5% SG&A 94.5 21.9%
105.8 28.6% 185.4 23.2% 203.6 28.7% Income (loss)
from operations $ 2.7 0.6% $ (57.2) (15.5)% $ (3.6) (0.5)% $ (86.3)
(12.2)%
MP Net sales $ 183.1 $ 176.3 $ 333.1 $ 330.6
Gross profit 43.7 23.9% 42.0 23.8% 75.9 22.8% 73.7 22.3% SG&A
20.9 11.4% 17.5 9.9% 42.2 12.7% 37.5
11.3% Income from operations $ 22.8 12.5% $ 24.5 13.9% $ 33.7 10.1%
$ 36.2 10.9%
Corp & Eliminations Net sales $
(8.0) $ (40.5) $ (45.8) $ (70.7) Gross profit 2.3 (28.8)% 3.0
(7.4)% 6.7 (14.6)% 4.8 (6.8)% SG&A 14.1 (176.3)%
6.2 (15.3)% 25.1 (54.8)% 15.4 (21.8)% Loss from
operations $ (11.8) 147.5% $ (3.2) 7.9% $ (18.4) 40.2% $ (10.6)
15.0%
GLOSSARY
In an effort to provide investors with additional information
regarding the Company’s results, Terex refers to various GAAP (U.S.
generally accepted accounting principles) and non-GAAP financial
measures which management believes provides useful information to
investors. These non-GAAP measures may not be comparable to
similarly titled measures being disclosed by other companies. In
addition, the Company believes that non-GAAP financial measures
should be considered in addition to, and not in lieu of, GAAP
financial measures. Terex believes that this non-GAAP information
is useful to understanding its operating results and the ongoing
performance of its underlying businesses. Management of Terex uses
both GAAP and non-GAAP financial measures to establish internal
budgets and targets and to evaluate the Company’s financial
performance against such budgets and targets.
As changes in foreign currency exchange rates have a
non-operating impact on the translation of 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.
Backlog is defined as firm orders that are expected to be
filled within one year. The disclosure of backlog aids in the
analysis of the Company’s customers’ demand for product, as well as
the ability of the Company to meet that demand. The backlog of the
various Terex businesses is not necessarily indicative of sales to
be recognized in a specified future period.
Jun 30, Mar
31, % Jun 30, %
2014
2014
change
2013
change Consolidated Backlog $ 2,199.2 $ 2,363.7 (7.0)% $ 2,151.0
2.2 % AWP $ 418.4 $ 522.9 (20.0)% $ 497.3 (15.9)% Construction $
187.8 $ 214.1 (12.3)% $ 151.6 23.9 % Cranes $ 661.4 $ 673.4 (1.8)%
$ 581.2 13.8 % MHPS $ 864.8 $ 878.4 (1.5)% $ 860.3 0.5 % MP $ 66.8
$ 74.9 (10.8)% $ 60.6 10.2 %
EBITDA is defined as earnings, before interest, taxes,
depreciation and amortization. The Company calculates this by
adding the amount of depreciation and amortization expenses that
have been deducted from income from operations back into income
from operations to arrive at EBITDA. Depreciation and amortization
amounts reported in the Consolidated Statement of Cash Flows
include amortization of debt issuance costs that are recorded in
Other income (expense) - net and, therefore, are not included in
EBITDA. Terex believes that disclosure of EBITDA will be helpful to
those reviewing its performance, as EBITDA provides information on
Terex’s ability to meet debt service, capital expenditure and
working capital requirements, and is also an indicator of
profitability.
Three months ended Six
months ended June 30, June 30, 2014 2013 2014 2013
Income (loss) from operations $ 160.9 $ 83.5 $ 235.9 $ 149.1
Depreciation 28.7 26.3 55.8 51.7 Amortization 12.0 13.4 23.8 26.2
Bank fee amortization not included in Income (loss) from operations
(2.1 ) (2.1 ) (4.2 ) (4.3 ) EBITDA
199.5 121.1 311.3 222.7 Operating profit adjustments -
64.9 - 71.0
Adjusted EBITDA $ 199.5 $ 186.0 $ 311.3 $
293.7
MHPS - EBITDA Three months ended Six
months ended June 30, June 30, 2014 2013 2014 2013 Income (loss)
from operations $ 2.7 $ (57.2 ) $ (3.6 ) $ (86.3 ) Depreciation
10.3 9.3 20.5 18.7 Amortization 6.7 7.9
13.3 15.2 EBITDA 19.7 (40.0 ) 30.2
(52.4 ) Operating profit adjustments - 46.5
- 49.2 Adjusted EBITDA $ 19.7
$ 6.5 $ 30.2 $ (3.2 )
Free cash flow is defined as net cash provided by (used
in) operating activities less capital expenditures.
Three months ended Six
months ended June 30, June 30, 2014 2013 2014 2013
Cash from operating activities $ (0.7) $ 71.1 $ 24.5 $ 129.9
Capital expenditures (18.3) (18.9) (37.3)
(41.4) Free Cash Flow $ (19.0) $ 52.2 $ (12.8) $ 88.5
Income (loss) from operations as adjusted / Income (loss)
from continuing operations as adjusted - The Company assesses
the impact of certain items when discussing Income (loss) from
operations and Income (loss) from continuing operations and adjusts
for items it believes are not reflective of operating activities in
the periods. The impact of these adjustments are provided
below.
Second Quarter 2013 Pre-Tax
Tax Rate After-Tax
EPS* Construction Restructuring & Other
(3.4 ) ** (2.5 ) (0.02 ) Cranes Restructuring
& Related (15.0 ) 31 % (10.4 ) (0.09 ) MHPS Restructuring &
Related (46.5 ) ** (38.1
) (0.33 )
Total Impact on Income From
Operations $ (64.9 ) $ (51.0
) $ (0.44 ) Corporate Debt Reduction
(5.2 ) ** (3.5 ) (0.03 ) Construction Restructuring & Other
(4.5 ) ** (3.0 ) (0.03 ) MHPS Redeemable NCI
3.1 ** 3.1 0.03
Total Impact on Income From Continuing Operations
$ (71.5 ) $ (54.4 )
$ (0.47 ) * Based on weighted average
diluted shares of 115.8M ** Based on a jurisdictional blend
Return on Invested Capital (“ROIC”) is determined by
dividing the sum of Net Operating Profit After Tax (“NOPAT”)(as
defined below) 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. Debt is calculated using the Consolidated
Balance Sheet amounts for Notes payable and current portion of
long-term debt plus Long-term debt, less current portion. NOPAT for
each quarter is calculated by multiplying Income (loss) from
operations by a figure equal to one minus the effective tax rate of
the Company. The Company believes that returns on capital deployed
in Terex Financial Services (“TFS”) does not represent its primary
operations and, therefore, TFS finance receivable assets and
results from operations have been excluded from the calculation
below. The effective tax rate is equal to the (Provision for)
benefit from income taxes divided by Income (loss) from continuing
operations before income taxes for the respective quarter. Total
Terex Corporation stockholders’ equity is adjusted to include
redeemable non-controlling interest as this item is deemed to be
temporary equity and therefore should be included in the
denominator of the ROIC ratio. The Company calculates 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, the Company includes 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 and in
connection with certain compensation programs. Terex utilizes ROIC
as a unifying metric because management believes that it measures
how effectively the Company invests its capital and provides a
better measure to compare the Company to peer companies to assist
in assessing how it drives operational improvement. ROIC measures
return on the amount of capital invested in the Company’s primary
businesses, excluding TFS, as opposed to another metric such as
return on Terex Corporation stockholders’ equity that only
incorporates book equity, and is thus a more accurate and
descriptive measure of the Company’s performance. Terex also
believes that adding Debt less Cash and cash equivalents to Total
Terex Corporation stockholders’ equity provides a better comparison
across similar businesses regarding total capitalization, and those
ROIC highlights the level of value creation as a percentage of
capital invested.
See reconciliation of adjusted amounts below on table following
ROIC table. Amounts are as of and for the three months ended for
the periods referenced in the table below.
Jun '14 Mar '14 Dec '13 Sep '13
Jun '13 Provision for (benefit from) income taxes $ 40.0 $ 11.5 $
22.3 $ 22.8 Divided by: Income (loss) before income taxes
128.4 43.0 106.0 106.6
Effective tax rate 31.2 % 26.7 % 21.0 % 21.4 % Income
(loss) from operations as adjusted $ 162.6 $ 76.3 $ 131.5 $ 139.4
Multiplied by: 1 minus Effective tax rate 68.8 % 73.3
% 79.0 % 78.6 % Adjusted net operating income (loss)
after tax $ 111.9 $ 55.9 $ 103.9 $ 109.6
Debt (as defined above) $ 1,922.5 $ 2,055.9 $ 1,976.7
$ 1,905.9 $ 1,870.4 Less: Cash and cash equivalents (364.3 )
(390.5 ) (408.1 ) (370.6 ) (548.2 )
Debt less Cash and cash equivalents 1,558.2 1,665.4 1,568.6 1,535.3
1,322.2 Total Terex Corporation stockholders’ equity as
adjusted 2,138.5 2,012.0 2,092.4
2,002.2 2,042.7 Debt less
Cash and cash equivalents plus Total Terex Corporation
stockholders’ equity as adjusted $ 3,696.7 $ 3,677.4
$ 3,661.0 $ 3,537.5 $ 3,364.9 June 30,
2014 ROIC 10.6 % Adjusted net operating income (loss) after
tax (last 4 quarters) $ 381.3 Average Debt less Cash and
cash equivalents plus Total Terex Corporation stockholders’ equity
as adjusted (5 quarters) $ 3,587.5
Reconciliation of income (loss) from
operations:
Jun '14 Mar '14 Dec '13 Sep '13 Income (loss) from operations as
reported $ 160.9 $ 75.0 $ 131.4 $ 138.6 (Income) loss from
operations for TFS 1.7 1.3 0.1
0.8 Income (loss) from operations as adjusted
$ 162.6 $ 76.3 $ 131.5 $ 139.4
Reconciliation of Terex Corporation stockholders’ equity: Terex
Corporation stockholders’ equity as reported $ 2,331.6 $ 2,183.2 $
2,190.1 $ 2,094.2 $ 1,955.8 TFS assets (193.1 ) (171.2 ) (151.6 )
(149.8 ) (139.7 ) Redeemable noncontrolling interest -
- 53.9 57.8
226.6 Terex Corporation stockholders’ equity as adjusted $
2,138.5 $ 2,012.0 $ 2,092.4 $ 2,002.2 $
2,042.7
Trailing Three Month Annualized Net Sales is calculated
using the net sales for the quarter multiplied by four.
Three months ended June 30, 2014
2013 Net Sales $ 2,055.1 $ 1,861.5 x 4 x 4 Trailing
Three Month Annualized Net Sales $ 8,220.4 $ 7,446.0
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. The
Company views excessive working capital as an inefficient use of
resources, and seeks to minimize the level of investment without
adversely impacting the ongoing operations of the business. For the
periods below, working capital was:
June 30, 2014 2013
Inventories $ 1,779.0 $ 1,591.4 Trade Receivables 1,368.4 1,150.0
Less: Trade Accounts Payable (800.8) (707.0) Less: Customer
Advances (334.5) (331.1) Total Working Capital $
2,012.1 $ 1,703.3
Terex CorporationTom Gelston, 203-222-5943Vice President,
Investor Relationsthomas.gelston@terex.com
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