UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

F O R M   10 – Q

(Mark One)

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-10702

Terex Corporation
(Exact name of registrant as specified in its charter)

Delaware
(State of Incorporation)
 
34-1531521
(IRS Employer Identification No.)

200 Nyala Farm Road, Westport, Connecticut 06880
(Address of principal executive offices)

(203) 222-7170
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (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.
YES
x
 
NO
o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES
x
 
NO
o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
 
Accelerated filer o
 
 Non-accelerated filer o
Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES
o
 
NO
x

Number of outstanding shares of common stock: 108.5 million as of October 21, 2015.
The Exhibit Index begins on page 63.





INDEX

TEREX CORPORATION AND SUBSIDIARIES

GENERAL

This Quarterly Report on Form 10-Q filed by Terex Corporation generally speaks as of September 30, 2015 unless specifically noted otherwise, and includes financial information with respect to the subsidiaries of the Company listed below (all of which are 100%-owned) which were guarantors on September 30, 2015 (the “Guarantors”) of the Company’s 6% Senior Notes Due 2021 (the “6% Notes”) and its 6-1/2% Senior Notes Due 2020 (the “6-1/2% Notes”).  See Note Q – “Consolidating Financial Statements” to the Company’s September 30, 2015 Condensed Consolidated Financial Statements included in this Quarterly Report. Unless otherwise indicated, Terex Corporation, together with its consolidated subsidiaries, is hereinafter referred to as “Terex,” the “Registrant,” “us,” “we,” “our” or the “Company.”

Guarantor Information

Guarantor
State or other jurisdiction of
incorporation or organization
I.R.S. employer
identification number
CMI Terex Corporation
Oklahoma
73-0519810
Fantuzzi Noell USA, Inc.
Illinois
36-3865231
Genie Holdings, Inc.
Washington
91-1666966
Genie Industries, Inc.
Washington
91-0815489
Genie International, Inc.
Washington
91-1975116
Powerscreen Holdings USA Inc.
Delaware
61-1265609
Powerscreen International LLC
Delaware
61-1340898
Powerscreen North America Inc.
Delaware
61-1340891
Powerscreen USA, LLC
Kentucky
31-1515625
Terex Advance Mixer, Inc.
Delaware
06-1444818
Terex Aerials, Inc.
Wisconsin
39-1028686
Terex Financial Services, Inc.
Delaware
45-0497096
Terex South Dakota, Inc.
South Dakota
41-1603748
Terex USA, LLC
Delaware
75-3262430
Terex Utilities, Inc.
Oregon
93-0557703
Terex Washington, Inc.
Washington
91-1499412



Forward-Looking Information

Certain information in this Quarterly Report includes forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995) regarding future events or our future financial performance that involve certain contingencies and uncertainties, including those discussed below in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contingencies and Uncertainties.”  In addition, when included in this Quarterly Report or in documents incorporated herein by reference, the words “may,” “expects,” “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:

•
our business is cyclical and weak general economic conditions affect the sales of our products and financial results;
•
the effect of the announcement and pendency of the merger with Konecranes Plc on our customers, employees, suppliers, vendors, distributors, dealers, retailers, operating results and business generally, and the diversion of management’s time and attention;
•
our ability to successfully integrate acquired businesses;
•
our 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 highly competitive and is affected by our cost structure, pricing, product initiatives and other actions taken by competitors;
•
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;
•
the carrying value of our goodwill and other indefinite-lived intangible assets could become impaired;
•
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, commodity price changes, 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, intellectual property claims, class action lawsuits and other liabilities;
•
our ability to comply with an injunction and related obligations imposed by the United States Securities and Exchange Commission (“SEC”);
•
disruption or breach in our information technology systems; and
•
other factors.

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

2


 
 
Page No.
 
 
 
 
 
 
 
TEREX CORPORATION AND SUBSIDIARIES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

3


PART I.
FINANCIAL INFORMATION
ITEM 1.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
(in millions, except per share data)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
Net sales
$
1,641.3

 
$
1,809.8

 
$
4,965.4

 
$
5,519.5

Cost of goods sold
(1,304.7
)
 
(1,452.5
)
 
(3,968.0
)
 
(4,405.0
)
Gross profit
336.6

 
357.3

 
997.4

 
1,114.5

Selling, general and administrative expenses
(224.7
)
 
(240.5
)
 
(693.0
)
 
(761.8
)
Income (loss) from operations
111.9

 
116.8

 
304.4

 
352.7

Other income (expense)
 
 
 

 
 
 
 
Interest income
1.1

 
2.3

 
3.1

 
4.8

Interest expense
(24.7
)
 
(28.8
)
 
(79.9
)
 
(90.9
)
Loss on early extinguishment of debt
—

 
(2.6
)
 
—

 
(2.6
)
Other income (expense) – net 
(11.4
)
 
(1.3
)
 
(21.3
)
 
(6.2
)
Income (loss) from continuing operations before income taxes
76.9

 
86.4

 
206.3

 
257.8

(Provision for) benefit from income taxes
(30.8
)
 
(27.7
)
 
(75.4
)
 
(79.2
)
Income (loss) from continuing operations
46.1

 
58.7

 
130.9

 
178.6

Income (loss) from discontinued operations – net of tax
—

 
—

 
—

 
1.4

Gain (loss) on disposition of discontinued operations – net of tax
(1.2
)
 
5.5

 
1.5

 
58.5

Net income (loss)
44.9

 
64.2

 
132.4

 
238.5

Net loss (income) attributable to noncontrolling interest
(1.3
)
 
—

 
(3.0
)
 
0.5

Net income (loss) attributable to Terex Corporation
$
43.6

 
$
64.2

 
$
129.4

 
$
239.0

Amounts attributable to Terex Corporation common stockholders:
 
 
 

 
 
 
 
Income (loss) from continuing operations
$
44.8

 
$
58.7

 
$
127.9

 
$
179.1

Income (loss) from discontinued operations – net of tax
—

 
—

 
—

 
1.4

Gain (loss) on disposition of discontinued operations – net of tax
(1.2
)
 
5.5

 
1.5

 
58.5

Net income (loss) attributable to Terex Corporation
$
43.6

 
$
64.2

 
$
129.4

 
$
239.0

Basic Earnings (Loss) per Share Attributable to Terex Corporation Common Stockholders:
 
 
 

 
 
 
 
Income (loss) from continuing operations
$
0.41

 
$
0.53

 
$
1.19

 
$
1.62

Income (loss) from discontinued operations – net of tax
—

 
—

 
—

 
0.01

Gain (loss) on disposition of discontinued operations – net of tax
(0.01
)
 
0.05

 
0.02

 
0.53

Net income (loss) attributable to Terex Corporation
$
0.40

 
$
0.58

 
$
1.21

 
$
2.16

Diluted Earnings (Loss) per Share Attributable to Terex Corporation Common Stockholders:
 
 
 

 
 
 
 
Income (loss) from continuing operations
$
0.41

 
$
0.51

 
$
1.17

 
$
1.55

Income (loss) from discontinued operations – net of tax
—

 
—

 
—

 
0.01

Gain (loss) on disposition of discontinued operations – net of tax
(0.01
)
 
0.05

 
0.01

 
0.51

Net income (loss) attributable to Terex Corporation
$
0.40

 
$
0.56

 
$
1.18

 
$
2.07

Weighted average number of shares outstanding in per share calculation
 

 
 

 
 
 
 
Basic
108.5

 
110.2

 
107.0

 
110.4

Diluted
109.2

 
115.4

 
109.7

 
115.7

Comprehensive income (loss)
$
(26.6
)
 
$
(106.6
)
 
$
(58.0
)
 
$
108.8

Comprehensive loss (income) attributable to noncontrolling interest
(1.2
)
 
—

 
(2.9
)
 
0.9

Comprehensive income (loss) attributable to Terex Corporation
$
(27.8
)
 
$
(106.6
)
 
$
(60.9
)
 
$
109.7

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.06

 
$
0.05

 
$
0.18

 
$
0.15


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

4


TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
(in millions, except par value)
 
September 30,
2015
 
December 31,
2014
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
301.1

 
$
478.2

Trade receivables (net of allowance of $27.9 and $30.5 at September 30, 2015 and December 31, 2014, respectively)
1,183.4

 
1,086.4

Inventories
1,545.6

 
1,460.9

Prepaid assets
239.9

 
248.0

Other current assets
79.2

 
82.7

Total current assets
3,349.2

 
3,356.2

Non-current assets
 
 
 

Property, plant and equipment – net
672.8

 
690.3

Goodwill
1,054.4

 
1,131.0

Intangible assets – net
285.9

 
325.4

Other assets
516.6

 
425.1

Total assets
$
5,878.9

 
$
5,928.0

 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
Current liabilities
 

 
 

Notes payable and current portion of long-term debt
$
83.4

 
$
152.5

Trade accounts payable
740.4

 
736.1

Accrued compensation and benefits
207.4

 
204.0

Accrued warranties and product liability
66.9

 
74.2

Customer advances
158.8

 
197.4

Other current liabilities
335.5

 
278.9

Total current liabilities
1,592.4

 
1,643.1

Non-current liabilities
 
 
 

Long-term debt, less current portion
1,814.2

 
1,636.3

Retirement plans
398.8

 
432.5

Other non-current liabilities
147.8

 
177.0

Total liabilities
3,953.2

 
3,888.9

Commitments and contingencies


 


Stockholders’ equity
 

 
 

Common stock, $.01 par value – authorized 300.0 shares; issued 128.8 and 124.6 shares at September 30, 2015 and December 31, 2014, respectively
1.3

 
1.2

Additional paid-in capital
1,266.1

 
1,251.5

Retained earnings
2,094.6

 
1,984.9

Accumulated other comprehensive income (loss)
(620.2
)
 
(429.8
)
Less cost of shares of common stock in treasury – 21.1 and 19.2 shares at September 30, 2015 and December 31, 2014, respectively
(851.9
)
 
(801.9
)
Total Terex Corporation stockholders’ equity
1,889.9

 
2,005.9

Noncontrolling interest
35.8

 
33.2

Total stockholders’ equity
1,925.7

 
2,039.1

Total liabilities and stockholders’ equity
$
5,878.9

 
$
5,928.0


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

5


TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(in millions)
 
Nine Months Ended
September 30,
 
2015
 
2014
Operating Activities
 
 
 
Net income (loss)
$
132.4

 
$
238.5

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 

 
 

Depreciation and amortization
95.7

 
118.2

(Gain) loss on disposition of discontinued operations
(1.5
)
 
(58.5
)
Deferred taxes
(17.4
)
 
(10.7
)
Stock-based compensation expense
31.9

 
36.1

Changes in operating assets and liabilities (net of effects of acquisitions and divestitures):
 

 
 

Trade receivables
(145.1
)
 
(65.9
)
Inventories
(139.8
)
 
(164.7
)
Trade accounts payable
37.2

 
51.4

Customer advances
(35.3
)
 
(2.7
)
Other assets and liabilities
(50.8
)
 
(62.6
)
Other operating activities, net
36.1

 
37.5

Net cash provided by (used in) operating activities
(56.6
)
 
116.6

Investing Activities
 

 
 

Capital expenditures
(73.4
)
 
(58.6
)
Acquisitions of businesses, net of cash acquired
(71.3
)
 
(7.4
)
Proceeds (payments) from disposition of discontinued operations
(0.2
)
 
162.2

Other investing activities, net
0.8

 
3.0

Net cash provided by (used in) investing activities
(144.1
)
 
99.2

Financing Activities
 

 
 

Repayments of debt
(1,029.4
)
 
(1,519.9
)
Proceeds from issuance of debt
1,153.6

 
1,411.7

Purchase of noncontrolling interest
—

 
(73.4
)
Share repurchases
(50.4
)
 
(61.5
)
Dividends paid
(19.3
)
 
(16.5
)
Other financing activities, net
(1.3
)
 
(2.0
)
Net cash provided by (used in) financing activities
53.2

 
(261.6
)
Effect of Exchange Rate Changes on Cash and Cash Equivalents
(29.6
)
 
(17.8
)
Net Increase (Decrease) in Cash and Cash Equivalents
(177.1
)
 
(63.6
)
Cash and Cash Equivalents at Beginning of Period
478.2

 
408.1

Cash and Cash Equivalents at End of Period
$
301.1

 
$
344.5


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

6


TEREX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

NOTE A – BUSINESS COMBINATION AGREEMENT AND PLAN OF MERGER

On August 10, 2015, Terex Corporation ("Terex" or the "Company") entered into a Business Combination Agreement and Plan of Merger (the "BCA") with Konecranes Plc, a Finnish public company limited by shares ("Konecranes"), Konecranes, Inc., a Texas corporation and an indirect wholly owned subsidiary of Konecranes, Konecranes Acquisition Company LLC, a Delaware limited liability company and a newly formed, wholly owned subsidiary of Konecranes, Inc. ("Merger Sub\"). The combined company that would result from the transaction will be called Konecranes Terex Plc. and will be incorporated in Finland.
Pursuant to the BCA, Terex shareholders will receive 0.8 of a Konecranes share for each existing Terex share ("Exchange Ratio"). Equivalent terms will apply to instruments granted prior to the merger date under Terex's long-term incentive plans. Upon completion of the merger, Terex shareholders would own approximately 60% and Konecranes shareholders would own approximately 40% of the combined company. In the proposed transaction, Merger Sub merges with and into Terex, with Terex surviving as an indirect wholly-owned subsidiary of Konecranes (the “Merger”) and Terex shareholders, option holders and other equity right holders receiving Konecranes shares and options in accordance with the exchange ratios set forth above as merger consideration.
The BCA includes undertakings by Terex and Konecranes that are typical in similar transactions and include, for example, undertakings by both companies to conduct their businesses in the ordinary course prior to the completion of the Merger, to cooperate in making the necessary regulatory filings, undertakings not to initiate, solicit, facilitate or encourage any offers or proposals competing with the transaction, and to inform each other and provide each other with an opportunity to negotiate in matters arising from such offers or proposals.
The BCA may be terminated by Terex or Konecranes under certain circumstances prior to the completion of the Merger, including, for example, a material breach by either party of the terms and conditions of the BCA, the Board of Directors of either party not issuing or amending in an adverse manner its recommendation, non-receipt of regulatory approvals, and certain other circumstances. The parties have further agreed on certain termination fees customary in similar transactions and payable to the other party under certain circumstances, including for example, a failure by either party to obtain the requisite shareholder approval, or a change or withdrawal of the recommendation by the Board of Directors of either party. In the event that the BCA is terminated by either party because the requisite shareholder approval was not obtained, the terminating party will be required to reimburse the other party’s reasonable expenses up to a maximum amount of $20 million. In the event that the BCA is terminated by either party because of a change or withdrawal of the recommendation of the Board of Directors, the terminating party will be required to pay a termination fee of $37 million.
The transaction is subject to approval by both Terex and Konecranes shareholders, regulatory approvals, the listing of the Konecranes shares or American Depositary Shares on the New York Stock Exchange or another U.S. national securities exchange reasonably acceptable to Konecranes and Terex, no change in certain legal and tax assumptions, the absence of any material adverse effect occurring with respect to Konecranes or Terex, and other customary conditions. Terex and Konecranes expect to convene meetings of their shareholders to approve the transaction in early 2016. Closing of the transaction is expected to occur during the first half of 2016. Upon closing of the transaction, the combined company will have a Board of Directors comprising nine members, of which five directors will be nominated by Terex and four directors will be nominated by Konecranes. Konecranes' current Chairman of the Board will become Konecranes Terex's Chairman and the Terex Chief Executive Officer (“CEO”) will become Konecranes Terex's CEO.
We have determined that while Konecranes will be the legal acquirer in the transaction, Terex will be the accounting acquirer and will account for the transaction using the acquisition method of accounting.

Business Combination Related Expenses
The Company has incurred transaction costs directly related to the BCA of $8.6 million and $9.5 million for the three and nine months ended September 30, 2015, respectively, which is recorded in Other income (expense) - net in the Condensed Consolidated Statement of Comprehensive Income (Loss).


7


NOTE B – BASIS OF PRESENTATION

Basis of Presentation.  The accompanying unaudited Condensed Consolidated Financial Statements of Terex Corporation and subsidiaries as of September 30, 2015 and for the three and nine months ended September 30, 2015 and 2014 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America to be included in full-year financial statements.  The accompanying Condensed Consolidated Balance Sheet as of December 31, 2014 has been derived from and should be read in conjunction with the audited Consolidated Balance Sheet as of that date.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

The Condensed Consolidated Financial Statements include the accounts of Terex Corporation, its majority-owned subsidiaries and other controlled subsidiaries (“Terex” or the “Company”).  The Company consolidates all majority-owned and controlled subsidiaries, applies the equity method of accounting for investments in which the Company is able to exercise significant influence, and applies the cost method for all other investments.  All material intercompany balances, transactions and profits have been eliminated.

In the opinion of management, all adjustments considered necessary for fair presentation of these interim financial statements have been made.  Except as otherwise disclosed, all such adjustments consist only of those of a normal recurring nature.  Operating results for the three and nine months ended September 30, 2015 are not necessarily indicative of results that may be expected for the year ending December 31, 2015.

Cash and cash equivalents at September 30, 2015 and December 31, 2014 include $18.8 million and $13.5 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.

Recent Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14, Deferral of the Effective Date, which amends ASU 2014-09. As a result, the effective date will be the first quarter of fiscal year 2018 with early adoption permitted in the first quarter of fiscal year 2017. The adoption will use one of two retrospective application methods. The Company has not yet determined the potential effects on its consolidated financial statements.

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. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The total compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The effective date will be the first quarter of fiscal year 2016. The adoption is not expected to have a material effect on the Company’s consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, “Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs,” (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to borrowings be presented in the balance sheet as a direct deduction from the carrying amount of the borrowing, consistent with debt discounts. The ASU does not affect the amount or timing of expenses for debt issuance costs. The effective date will be the first quarter of fiscal year 2016 and will be applied retrospectively. The adoption is not expected to have a material effect on the Company’s consolidated financial statements.

8



In April 2015, the FASB issued ASU 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement,” (“ASU 2015-05”) which amends ASC 350-40, “Intangibles-Goodwill and Other-Internal-Use Software”. ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If an arrangement includes a software license, the accounting for the license will be consistent with licenses of other intangible assets. If the arrangement does not include a license, the arrangement will be accounted for as a service contract. The effective date will be the first quarter of fiscal year 2016 and will be adopted prospectively. The adoption is not expected to have a material effect on the Company’s consolidated financial statements.

In May 2015, the FASB issued ASU 2015-07, “Fair Value Measurement (Topic 820), Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent),” (“ASU 2015-07”). ASU 2015-07 removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share or its equivalent. Further, the amendments remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. The effective date will be the first quarter of fiscal year 2016, with early adoption permitted. The adoption is not expected to have a material effect on the Company’s consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory”. The ASU simplifies the subsequent measurement of inventory by using only the lower of cost or net realizable value. The ASU defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The effective date will be the first quarter of fiscal year 2017 with early adoption permitted. The ASU should be applied prospectively. The Company is evaluating the impact adoption of this guidance will have on determination or reporting of its financial results.

In August 2015, the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements,” which amends ASC 835-30, “Interest - Imputation of Interest”. The ASU clarifies the presentation and subsequent measurement of debt issuance costs associated with lines of credit. These costs may be presented as an asset and amortized ratably over the term of the line of credit arrangement, regardless of whether there are outstanding borrowings on the arrangement. The effective date will be the first quarter of fiscal year 2016 and will be applied retrospectively. The adoption is not expected to have a material effect on the Company’s consolidated financial statements.

In September 2015, the FASB issued ASU 2015-16, “Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments.” This ASU requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The effective date will be the first quarter of fiscal year 2016. The adoption is not expected to have a material effect on the Company’s consolidated financial statements.

Accrued Warranties.  The Company records accruals for potential warranty claims based on its claims 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 Condensed Consolidated Balance Sheet.  The liability is established using historical warranty claim experience for each product sold.  Historical claim experience may be adjusted for known design improvements or for the impact of unusual product quality issues.  Warranty reserves are reviewed quarterly to ensure critical assumptions are updated for known events that may affect the potential warranty liability.


9


The following table summarizes the changes in the consolidated product warranty liability (in millions):
 
Nine Months Ended
 
September 30, 2015
Balance at beginning of period
$
86.5

Accruals for warranties issued during the period
52.2

Changes in estimates
(0.9
)
Settlements during the period
(60.1
)
Foreign exchange effect/other
(3.5
)
Balance at end of period
$
74.2


Fair Value Measurements. Assets and liabilities measured at fair value on a recurring basis under the provisions of Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement and Disclosure” (“ASC 820”) include interest rate swaps 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.

NOTE C – 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) Aerial Work Platforms (“AWP”); (ii) Construction; (iii) Cranes; (iv) Material Handling & Port Solutions (“MHPS”); and (v) Materials Processing (“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.

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 $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.

The Cranes segment designs, manufactures, services, refurbishes and markets mobile telescopic cranes, tower cranes, lattice boom crawler cranes, lattice boom truck cranes, truck-mounted cranes (boom trucks) and utility equipment, as well as their related components and replacement parts. Customers use these products primarily for infrastructure projects, including mining and energy related projects as well as 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. The segment also provides service and support for industrial cranes and aerial products in North America.


10


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, and biomass and forestry machines, as well as their related replacement parts and components. 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.

Business segment information is presented below (in millions):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
Net Sales
 
 
 
 
 
 
 
AWP
$
573.8

 
$
598.7

 
$
1,758.1

 
$
1,901.5

Construction
180.1

 
207.3

 
517.7

 
630.2

Cranes
411.7

 
419.7

 
1,262.4

 
1,316.8

MHPS
366.7

 
468.2

 
1,055.8

 
1,267.8

MP
158.9

 
155.6

 
472.4

 
488.7

Corporate and Other / Eliminations
(49.9
)
 
(39.7
)
 
(101.0
)
 
(85.5
)
Total
$
1,641.3

 
$
1,809.8

 
$
4,965.4

 
$
5,519.5

Income (loss) from Operations
 
 
 

 
 
 
 
AWP
$
79.4

 
$
68.4

 
$
226.6

 
$
264.1

Construction
2.7

 
1.6

 
(1.1
)
 
0.6

Cranes
12.4

 
21.8

 
38.6

 
51.3

MHPS
10.3

 
17.6

 
7.3

 
14.0

MP
13.9

 
8.7

 
46.6

 
42.4

Corporate and Other / Eliminations
(6.8
)
 
(1.3
)
 
(13.6
)
 
(19.7
)
Total
$
111.9

 
$
116.8

 
$
304.4

 
$
352.7


 
September 30,
2015
 
December 31,
2014
Identifiable Assets
 
 
 
AWP (1)
$
1,835.6

 
$
1,143.5

Construction
1,172.3

 
1,246.0

Cranes
1,930.8

 
1,959.7

MHPS
2,558.7

 
2,744.0

MP
899.4

 
813.6

Corporate and Other / Eliminations (1)
(2,517.9
)
 
(1,978.8
)
Total
$
5,878.9

 
$
5,928.0


(1) The change in identifiable assets between December 31, 2014 and September 30, 2015 is primarily
due to the transfer of an intercompany note.


11


NOTE D – INCOME TAXES

During the three months ended September 30, 2015, the Company recognized income tax expense of $30.8 million on income of $76.9 million, an effective tax rate of 40.1% as compared to income tax expense of $27.7 million on income of $86.4 million, an effective tax rate of 32.1%, for three months ended September 30, 2014.  The higher effective tax rate for the three months ended September 30, 2015 was primarily due to an increase in the provision for uncertain tax positions compared to a reduction in the uncertain tax positions provision in the three months ended September 30, 2014.

During the nine months ended September 30, 2015, the Company recognized income tax expense of $75.4 million on income of $206.3 million, an effective tax rate of 36.5% as compared to income tax expense of $79.2 million on income of $257.8 million, an effective tax rate of 30.7% for the nine months ended September 30, 2014.  The higher effective tax rate for the nine months ended September 30, 2015 was primarily due to increased losses not benefited when compared to the nine months ended September 30, 2014.

NOTE E –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 Condensed Consolidated Statement of Cash Flows.

The following amounts related to the discontinued operations were derived from historical financial information and have been segregated from continuing operations and reported as discontinued operations in the Condensed Consolidated Statement of Comprehensive Income (in millions):
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2015
 
2014
 
2015
 
2014
Net sales
$
—

 
$
—

 
$
—

 
$
94.8

Income (loss) from discontinued operations before income taxes
$
—

 
$
—

 
$
—

 
$
1.7

(Provision for) benefit from income taxes
—

 
—

 
—

 
(0.3
)
Income (loss) from discontinued operations – net of tax
$
—

 
$
—

 
$
—

 
$
1.4

 
 
 
 
 
 
 
 
Gain (loss) on disposition of discontinued operations
$
(1.3
)
 
$
(0.8
)
 
$
1.9

 
$
66.7

(Provision for) benefit from income taxes
0.1

 
6.3

 
(0.4
)
 
(8.2
)
Gain (loss) on disposition of discontinued operations – net of tax
$
(1.2
)
 
$
5.5

 
$
1.5

 
$
58.5


During the nine months ended September 30, 2015 and 2014 the Company recorded a gain of $2.8 million and $1.5 million, respectively, 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 three and nine months ended September 30, 2015 the Company recorded a loss of $0.8 million related to the settlement of certain disputes in the asset sale agreement of its truck business. During the three and nine months ended September 30, 2014 the Company recorded a gain of $5.5 million and $57.0 million, respectively, related to the sale of its truck business.


12


NOTE F – EARNINGS PER SHARE
(in millions, except per share data)
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
Income (loss) from continuing operations attributable to Terex Corporation common stockholders
$
44.8

 
$
58.7

 
$
127.9

 
$
179.1

Income (loss) from discontinued operations–net of tax
—

 
—

 
—

 
1.4

Gain (loss) on disposition of discontinued operations–net of tax
(1.2
)
 
5.5

 
1.5

 
58.5

Net income (loss) attributable to Terex Corporation
$
43.6

 
$
64.2

 
$
129.4

 
$
239.0

Basic shares:
 
 
 

 
 
 
 
Weighted average shares outstanding
108.5

 
110.2

 
107.0

 
110.4

Earnings per share – basic:
 

 
 

 
 
 
 
Income (loss) from continuing operations
$
0.41

 
$
0.53

 
$
1.19

 
$
1.62

Income (loss) from discontinued operations–net of tax
—

 
—

 
—

 
0.01

Gain (loss) on disposition of discontinued operations–net of tax
(0.01
)
 
0.05

 
0.02

 
0.53

Net income (loss) attributable to Terex Corporation
$
0.40

 
$
0.58

 
$
1.21

 
$
2.16

Diluted shares:
 

 
 

 
 
 
 
Weighted average shares outstanding - basic
108.5

 
110.2

 
107.0

 
110.4

Effect of dilutive securities:
 

 
 

 
 
 
 
Stock options, restricted stock awards and convertible notes
0.7

 
5.2

 
2.7

 
5.3

Diluted weighted average shares outstanding
109.2

 
115.4

 
109.7

 
115.7

Earnings per share – diluted:
 

 
 

 
 
 
 
Income (loss) from continuing operations
$
0.41

 
$
0.51

 
$
1.17

 
$
1.55

Income (loss) from discontinued operations–net of tax
—

 
—

 
—

 
0.01

Gain (loss) on disposition of discontinued operations–net of tax
(0.01
)
 
0.05

 
0.01

 
0.51

Net income (loss) attributable to Terex Corporation
$
0.40

 
$
0.56

 
$
1.18

 
$
2.07


The following table provides information to reconcile amounts reported on the Condensed Consolidated Statement of Comprehensive Income to amounts used to calculate earnings per share attributable to Terex Corporation common stockholders (in millions):
Reconciliation of Amounts Attributable to Common Stockholders
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
Income (loss) from continuing operations
$
46.1

 
$
58.7

 
$
130.9

 
$
178.6

Noncontrolling interest (income) loss attributed to continuing operations
(1.3
)
 
—

 
(3.0
)
 
0.5

Income (loss) from continuing operations attributable to common stockholders
$
44.8

 
$
58.7

 
$
127.9

 
$
179.1



13


Weighted average options to purchase 0.1 million of the Company’s common stock, par value $0.01 per share (“Common Stock”), were outstanding during the three and nine months ended September 30, 2015 and 2014, but were not included in the computation of diluted shares as the effect would be anti-dilutive.  Weighted average restricted stock awards of 0.8 million were outstanding during the three and nine months ended September 30, 2015, 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. Weighted average restricted stock awards of 0.5 million and 0.4 million were outstanding during the three and nine months ended September 30, 2014, 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.

In connection with settlement of the 4% Convertible Senior Subordinated Notes due 2015 (the “4% Convertible Notes”) the Company issued 3.4 million shares of common stock in June 2015. See Note M – “Long-Term Obligations.” Included in the computation of diluted shares for the nine months ended September 30, 2015 were 1.9 million shares that were contingently issuable prior to conversion. The number of shares that were contingently issuable for the three and nine months ended September 30, 2014 was 4.2 million.

NOTE G – FINANCE RECEIVABLES

TFS leases equipment and provides financing to customers for the purchase and use of Terex equipment. In the normal course of business, TFS assesses credit risk, establishes structure and pricing of financing transactions, documents the finance receivable, records and funds the transactions. TFS bills and collects cash from the end customer.

TFS primarily conducts on-book business in the U.S., with limited business in China, the United Kingdom, and Germany. TFS does business with various types of customers consisting of rental houses, end user customers and Terex equipment dealers.

The Company’s net finance receivable balances include both sales-type leases and commercial loans. Finance receivables that management intends to hold until maturity are stated at their outstanding unpaid principal balances, net of an allowance for loan losses as well as any deferred fees and costs.

TFS bills customers and accrues interest income monthly on the unpaid principal balance. The accrual of interest is generally discontinued when the contractual payment of principal or interest has become 90 days past due or management has significant doubts about further collectibility of the contractual payments, even though the loan may be currently performing. A receivable may remain on accrual status if it is in the process of collection and is either guaranteed or secured. Interest received on non-accrual finance receivables is typically applied against principal. Finance receivables are generally restored to accrual status when the obligation is brought current and the borrower has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectibility of the total contractual principal and interest is no longer in doubt. Finance receivables originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value, in the aggregate. Revenue attributable to finance receivables is recognized on the accrual basis using the effective interest method. The Company has a history of enforcing the terms of these separate financing agreements.

Finance receivables, net consisted of the following (in millions):
 
September 30,
2015
 
December 31,
2014
Commercial loans
$
312.3

 
$
140.1

Sales-type leases
30.9

 
24.0

Total finance receivables, gross
343.2

 
164.1

Allowance for credit losses
(5.6
)
 
(3.0
)
Total finance receivables, net
$
337.6

 
$
161.1



14


Credit losses are charged against the allowance for credit losses when management ceases active collection efforts. Subsequent recoveries, if any, are credited to earnings. The allowance for credit losses is maintained at a level set by management which represents evaluation of known and inherent risks in the portfolio at the consolidated balance sheet date. Management’s periodic evaluation of the adequacy of the allowance is based on the Company’s past loan loss experience, market-based loss experience, specific customer situations, estimated value of any underlying collateral, current economic conditions, and other relevant factors. This evaluation is inherently subjective, since it requires estimates that may be susceptible to significant change. Although specific and general loss allowances are established in accordance with management’s best estimate, actual losses are dependent upon future events and, as such, further additions to or decreases from the level of loss allowances may be necessary.

The following table presents an analysis of the allowance for credit losses:

 
 
Three Months Ended
September 30, 2015
 
Three Months Ended
September 30, 2014
 
 
Commercial Loans
 
Sales-Type Leases
 
Total
 
Commercial Loans
 
Sales-Type Leases
 
Total
Balance, beginning of period
 
$
3.6

 
$
1.3

 
$
4.9

 
$
2.1

 
$
0.7

 
$
2.8

Provision for credit losses
 
0.8

 
(0.1
)
 
0.7

 
—

 
0.2

 
0.2

Charge offs
 
—

 
—

 
—

 
—

 
—

 
—

Recoveries
 
—

 
—

 
—

 
—

 
—

 
—

Balance, end of period
 
$
4.4

 
$
1.2

 
$
5.6

 
$
2.1

 
$
0.9

 
$
3.0


 
 
Nine Months Ended
September 30, 2015
 
Nine Months Ended
September 30, 2014
 
 
Commercial Loans
 
Sales-Type Leases
 
Total
 
Commercial Loans
 
Sales-Type Leases
 
Total
Balance, beginning of period
 
$
1.9

 
1.1

 
$
3.0

 
$
1.9

 
$
0.4

 
$
2.3

Provision for credit losses
 
2.5

 
0.1

 
2.6

 
0.2

 
0.5

 
0.7

Charge offs
 
—

 
—

 
—

 
—

 
—

 
—

Recoveries
 
—

 
—

 
—

 
—

 
—

 
—

Balance, end of period
 
$
4.4

 
$
1.2

 
$
5.6

 
$
2.1

 
$
0.9

 
$
3.0


The Company utilizes a two tier approach to set allowances: (1) identification of impaired finance receivables and establishment of specific loss allowances on such receivables; and (2) establishment of general loss allowances on the remainder of its portfolio. Specific loss allowances are established based on circumstances and factors of specific receivables. The Company regularly reviews the portfolio which allows for early identification of potentially impaired receivables. The process takes into consideration, among other things, delinquency status, type of collateral and other factors specific to the borrower.

General loss allowance levels are determined based upon a combination of factors including, but not limited to, TFS experience, general market loss experience, performance of the portfolio, current economic conditions, and management's judgment. The two primary risk characteristics inherent in the portfolio are (1) the customer's ability to meet contractual payment terms, and (2) the liquidation values of the underlying primary and secondary collaterals. The Company records a general or unallocated loss allowance that is calculated by applying the reserve rate to its portfolio, including the unreserved balance of accounts that have been specifically reserved for. All delinquent accounts are reviewed for potential impairment. A receivable is deemed to be impaired when based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The amount of impairment is measured as the difference between the balance outstanding and the underlying collateral value of the equipment being financed, as well as any other collateral. All finance receivables identified as impaired are evaluated individually. The Company does not aggregate impaired finance receivables for evaluation purposes. Generally, the Company does not change the terms and conditions of existing finance receivables.

15



The following tables present individually impaired finance receivables (in millions):

 
 
September 30, 2015
 
December 31, 2014
 
 
Commercial Loans
 
Sales-Type Leases
 
Total
 
Commercial Loans
 
Sales-Type Leases
 
Total
Recorded investment
 
$
0.5

 
$
2.6

 
$
3.1

 
$
—

 
$
3.3

 
$
3.3

Related allowance
 
0.5

 
0.5

 
1.0

 
—

 
0.8

 
0.8

Average recorded investment
 
0.2

 
1.4

 
1.6

 
—

 
1.7

 
1.7


The average recorded investment for impaired finance receivables was $0.1 million for sales-type leases at September 30, 2014, which was fully reserved. There were no impaired commercial loans at September 30, 2014.

The allowance for credit losses and finance receivables by portfolio, segregated by those amounts that are individually evaluated for impairment and those that are collectively evaluated for impairment, was as follows (in millions):

 
 
September 30, 2015
 
December 31, 2014
Allowance for credit losses, ending balance:
 
Commercial Loans
 
Sales-Type Leases
 
Total
 
Commercial Loans
 
Sales-Type Leases
 
Total
Individually evaluated for impairment
 
$
0.5

 
$
0.5

 
$
1.0

 
$
—

 
$
0.8

 
$
0.8

Collectively evaluated for impairment
 
3.9

 
0.7

 
4.6

 
1.9

 
0.3

 
2.2

Total allowance for credit losses
 
$
4.4

 
$
1.2

 
$
5.6

 
$
1.9

 
$
1.1

 
$
3.0

 
 
 
 
 
 
 
 
 
 
 
 
 
Finance receivables, ending balance:
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
 
$
0.5

 
2.6

 
3.1

 
$
—

 
3.3

 
3.3

Collectively evaluated for impairment
 
$
311.8

 
28.3

 
340.1

 
$
140.1

 
20.7

 
160.8

Total finance receivables
 
$
312.3

 
$
30.9

 
$
343.2

 
$
140.1

 
$
24.0

 
$
164.1


Accounts are considered delinquent when the billed periodic payments of the finance receivables exceed 30 days past the due date.

The following table presents analysis of aging of recorded investment in finance receivables (in millions):

 
September 30, 2015
 
Current
 
31-60 days past due
 
61-90 days past due
 
Greater than 90 days past due
 
Total past due
 
Total Finance Receivables
Commercial loans
$
303.0

 
$
0.9

 
$
0.6

 
$
7.8

 
$
9.3

 
$
312.3

Sales-type leases
28.8

 
—

 
—

 
2.1

 
2.1

 
30.9

Total finance receivables
$
331.8

 
$
0.9

 
$
0.6

 
$
9.9

 
$
11.4

 
$
343.2


 
December 31, 2014
 
Current
 
31-60 days past due
 
61-90 days past due
 
Greater than 90 days past due
 
Total past due
 
Total Finance Receivables
Commercial loans
$
139.5

 
$
0.1

 
$
—

 
$
0.5

 
$
0.6

 
$
140.1

Sales-type leases
20.7

 
—

 
—

 
3.3

 
3.3

 
24.0

Total finance receivables
$
160.2

 
$
0.1

 
$
—

 
$
3.8

 
$
3.9

 
$
164.1




16


At September 30, 2015 and December 31, 2014, $7.8 million and $0.5 million respectively, of commercial loans were 90 days or more past due. Commercial loans in the amount of $9.3 million and $30.2 million were on non-accrual status as of September 30, 2015 and December 31, 2014, respectively.

At September 30, 2015 and December 31, 2014, $2.1 million and $3.3 million, respectively, of sales-type leases receivable were 90 days or more past due. Sales-type leases in the amount of $2.1 million and $3.3 million were on non-accrual status as of September 30, 2015 and December 31, 2014, respectively.

Credit Quality Information

Credit quality is reviewed on a monthly basis based on customers payment status. In addition to the delinquency status, any information received regarding a customer (such as bankruptcy filings, etc.) will also be considered to determine the credit quality of the customer. Collateral asset values are also monitored regularly to determine the potential loss exposures on any given transaction.

The Company uses the following internal credit quality indicators, based on an internal risk rating system, using certain external credit data, listed from the lowest level of risk to highest level of risk. The internal rating system considers factors affecting specific borrowers’ ability to repay.

Finance receivables by risk rating (in millions):

Rating
 
September 30, 2015
 
December 31, 2014
Superior
 
$
10.9

 
$
0.3

Above Average
 
142.1

 
29.2

Average
 
96.8

 
55.0

Below Average
 
53.9

 
54.0

Sub Standard
 
3.8

 
3.1

Unrated *
 
35.7

 
22.5

Total
 
$
343.2


$
164.1


* Customer finance receivables balances less than $1.0 million are not rated.


NOTE H – INVENTORIES

Inventories consist of the following (in millions):
 
September 30,
2015
 
December 31,
2014
Finished equipment
$
506.8

 
$
425.7

Replacement parts
184.0

 
170.5

Work-in-process
471.0

 
454.2

Raw materials and supplies
383.8

 
410.5

Inventories
$
1,545.6

 
$
1,460.9


Reserves for lower of cost or market value, excess and obsolete inventory were $111.6 million and $116.3 million at September 30, 2015 and December 31, 2014, respectively.

17



NOTE I – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment – net consist of the following (in millions):
 
September 30,
2015
 
December 31,
2014
Property
$
97.1

 
$
104.3

Plant
350.5

 
359.5

Equipment
739.0

 
699.5

Property, plant and equipment – gross 
1,186.6

 
1,163.3

Less: Accumulated depreciation
(513.8
)
 
(473.0
)
Property, plant and equipment – net
$
672.8

 
$
690.3


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, 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

Acquisitions
—

 
—

 
—

 
—

 
13.2

 
13.2

Foreign exchange effect and other
(1.1
)
 
—

 
(12.5
)
 
(71.7
)
 
(4.5
)
 
(89.8
)
Balance at September 30, 2015, gross
137.4


132.8

 
205.1

 
571.1

 
206.8

 
1,253.2

Accumulated impairment
(38.6
)
 
(132.8
)
 
(4.2
)
 
—

 
(23.2
)
 
(198.8
)
Balance at September 30, 2015, net
$
98.8

 
$
—

 
$
200.9

 
$
571.1

 
$
183.6

 
$
1,054.4


Intangible assets, net were comprised of the following as of September 30, 2015 and December 31, 2014 (in millions):
 
 
 
September 30, 2015
 
December 31, 2014
 
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
 
$
54.9

 
$
(40.6
)
 
$
14.3

 
$
58.8

 
$
(38.4
)
 
$
20.4

Customer Relationships
16
 
229.6

 
(83.4
)
 
146.2

 
251.9

 
(78.4
)
 
173.5

Land Use Rights
57
 
17.5

 
(2.0
)
 
15.5

 
18.0

 
(1.8
)
 
16.2

Other
8
 
48.7

 
(39.4
)
 
9.3

 
44.6

 
(38.2
)
 
6.4

Total definite-lived intangible assets
 
 
$
350.7

 
$
(165.4
)
 
$
185.3

 
$
373.3

 
$
(156.8
)
 
$
216.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Indefinite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Tradenames
 
 
$
100.6

 
 
 
 
 
$
108.9

 
 
 
 
Total indefinite-lived intangible assets
 
 
$
100.6

 
 
 
 
 
$
108.9

 

 
 

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(in millions)
2015
 
2014
 
2015
 
2014
Aggregate Amortization Expense
$
6.1

 
$
9.3

 
$
18.4

 
28.8



18


Estimated aggregate intangible asset amortization expense (in millions) for each of the five years below is:
2015
$
26.0

2016
$
24.2

2017
$
19.8

2018
$
15.3

2019
$
14.9


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 (“AOCI”) until the underlying hedged transactions are reported in the Company’s Condensed Consolidated Statement of Comprehensive 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”) and Commercial Paper rates. The change in fair value of derivatives designated as cash flow hedges are deferred in AOCI and are recognized in earnings as hedged transactions occur.  The changes in fair value associated with contracts deemed ineffective are recognized in earnings immediately.

In the Condensed Consolidated Statement of Comprehensive Income, the Company records hedging activity related to debt instruments and hedging activity related to foreign currency and interest rate swaps in the accounts for which the hedged items are recorded.  On the Condensed Consolidated Statement of Cash Flows, the Company records cash flows from hedging activities in the same manner as it records the underlying item being hedged.

The Company is party to currency exchange forward contracts that generally mature within one year to manage its exposure to changing currency exchange rates.  At September 30, 2015, the Company had $235.9 million notional amount of currency exchange forward contracts outstanding that were initially designated as hedge contracts, most of which mature on or before September 30, 2016.  The fair market value of these contracts at September 30, 2015 was a net gain of $2.8 million.  At September 30, 2015, $213.5 million notional amount ($2.7 million of fair value gains) of these forward contracts have been designated as, and are effective as, cash flow hedges of forecasted and specifically identified transactions.  During 2015 and 2014, the Company recorded the change in fair value for these cash flow hedges to AOCI and reclassified to earnings a portion of the deferred gain or loss from AOCI as the hedged transactions occurred and were recognized in earnings.

The Company records foreign exchange contracts at fair value on a recurring basis.  The foreign exchange contracts designated as hedging instruments are categorized under Level 2 of the ASC 820 hierarchy and are recorded at September 30, 2015 and December 31, 2014 as a net asset of $2.8 million and net liability of $0.4 million, respectively.  See Note B – “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.


19


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 and balance sheet exposures. Certain of these contracts have not been designated as hedging instruments. The majority of gains and losses recognized from foreign exchange contracts not designated as hedging instruments were offset by changes in the underlying hedged items, resulting in no material net impact on earnings. Changes in the fair value of these derivative financial instruments are recognized as gains or losses in Cost of goods sold or Other income (expense) – net in the Condensed Consolidated Statement of Comprehensive Income.

Concurrent with the sale of a majority stake in A.S.V., Inc. to Manitex International, Inc. (“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 Condensed Consolidated Statement of Comprehensive Income.

The Company enters into certain interest rate swap agreements to offset the variability of cash flows due to changes in the floating rate of borrowings under its Securitization Facility. See Note M – “Long-Term Obligations,” for additional information on the Securitization Facility. The interest rate swaps are designated as cash flow hedges of the changes in the cash flows of interest rate payments on debt associated with changes in floating interest rates. Changes in the fair value of these derivative financial instruments are recognized as gains or losses in Cost of goods sold in the Condensed Consolidated Statement of Comprehensive Income. The Company records these contracts at fair value on a recurring basis.  At September 30, 2015, the Company had $180.9 million notional amount of interest rate swap contracts outstanding that were initially designated as hedge contracts and scheduled to mature in September, 2022. The interest rate swap contracts designated as hedging instruments are categorized under Level 2 of the ASC 820 hierarchy and are recorded at September 30, 2015 as a net liability of $0.9 million. The fair value of these contracts are derived using quoted interest rate swap prices at the reporting date based on their maturities.

The following table provides the location and fair value amounts of derivative instruments designated as hedging instruments that are reported in the Condensed Consolidated Balance Sheet (in millions):
Asset Derivatives
Balance Sheet Account
September 30,
2015
 
December 31,
2014
Foreign exchange contracts
Other current assets
$
4.2

 
$
10.1

Interest rate swap
Other assets
0.2

 
—

Total asset derivatives
 
4.4

 
10.1

Liability Derivatives
 
 

 
 

Foreign exchange contracts
Other current liabilities
(1.4
)
 
(10.5
)
Interest rate swap
Other current liabilities
(1.1
)
 
—

Total liability derivatives
 
(2.5
)
 
(10.5
)
Total Derivatives
 
$
1.9

 
$
(0.4
)

The following table provides the location and fair value amounts of derivative instruments not designated as hedging instruments that are reported in the Condensed Consolidated Balance Sheet (in millions):
Asset Derivatives
Balance Sheet Account
September 30,
2015
 
December 31,
2014
Foreign exchange contracts
Other current assets
$
0.5

 
$
2.2

Debt conversion feature
Other assets
0.9

 
3.0

Total asset derivatives
 
1.4

 
5.2

Liability Derivatives
 
 

 
 

Foreign exchange contracts
Other current liabilities
(2.6
)
 
(1.0
)
Total liability derivatives
 
(2.6
)
 
(1.0
)
Total Derivatives
 
$
(1.2
)
 
$
4.2



20


The following tables provide the effect of derivative instruments that are designated as hedges in the Condensed Consolidated Statement of Comprehensive Income and AOCI (in millions):
Gain (Loss) Recognized in AOCI on Derivatives:
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
Cash Flow Derivatives
 
2015
 
2014
 
2015
 
2014
Foreign exchange contracts
 
$
1.8

 
$
(0.3
)
 
$
3.0

 
$
(2.5
)
Interest rate swap
 
(0.3
)
 
—

 
(0.4
)
 
—

Total
 
$
1.5

 
$
(0.3
)
 
$
2.6

 
$
(2.5
)
Gain (Loss) Reclassified from AOCI into Income (Effective):
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
Account
 
2015
 
2014
 
2015
 
2014
Cost of goods sold
 
$
1.7

 
$
0.1

 
$
8.0

 
$
2.2

Other income (expense) – net
0.5

 
(0.4
)
 
(4.8
)
 
2.1

Total
 
$
2.2

 
$
(0.3
)
 
$
3.2

 
$
4.3

Gain (Loss) Recognized in Income on Derivatives (Ineffective):
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
Account
 
2015
 
2014
 
2015
 
2014
Other income (expense) – net
 
$
(0.2
)
 
$
0.5

 
$
4.7

 
$
(2.3
)

The following table provides the effect of derivative instruments that are not designated as hedges in the Condensed Consolidated Statement of Comprehensive Income (in millions):
Gain (Loss) Recognized in Income on Derivatives not designated as hedges:
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
Account
2015
 
2014
 
2015
 
2014
Other income (expense) – net
$
(2.8
)
 
$
1.6

 
$
(6.0
)
 
$
0.2


Counterparties to the Company’s currency exchange forward contracts and interest rate swap agreements are major financial institutions with credit ratings of investment grade or better and no collateral is required.  There are no significant risk concentrations.  Management continues to monitor counterparty risk and believes the risk of incurring losses on derivative contracts related to credit risk is unlikely and any losses would be immaterial.

Unrealized net gains (losses), net of tax, included in AOCI are as follows (in millions):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
Balance at beginning of period
$
0.4

 
$
0.5

 
$
(0.7
)
 
$
2.7

Additional gains (losses) – net
3.5

 
(0.1
)
 
6.5

 
0.3

Amounts reclassified to earnings
(2.0
)
 
(0.2
)
 
(3.9
)
 
(2.8
)
Balance at end of period
$
1.9

 
$
0.2

 
$
1.9

 
$
0.2


Within the unrealized net gains (losses) included in AOCI as of September 30, 2015, it is estimated that $1.7 million of gains are expected to be reclassified into earnings in the next twelve months.

21



NOTE L – RESTRUCTURING AND OTHER CHARGES

The Company continually evaluates its cost structure to be appropriately positioned to respond to changing market conditions. From time to time the Company may initiate certain restructuring programs to better utilize its workforce and optimize facility utilization to match the demand for its products.

During the third quarter of 2014, the Company established a restructuring program in the MHPS segment to close one of its manufacturing facilities in Germany and relocate production. The expected benefit of this move is concentration of certain production processes in a single location enabling the segment to realize synergies and optimize its expense structure. The program is expected to cost $15.0 million, result in the reduction of 84 team members at that location and be completed in 2015.

During the fourth quarter of 2014, the Company established a restructuring program in the MHPS segment primarily focused on operations in Germany. The program included the consolidation of several material handling sales and service locations, and realignment of the management structure for port solutions. The program is expected to cost $20.4 million, result in the reduction of 115 team members and is expected to be completed in 2016, except for certain payments mandated by governmental agencies.

During the third quarter of 2015, the Company established a restructuring program in the MP segment to close one of its manufacturing facilities in the U.S., consolidate production with other U.S. sites and exit the hand-fed chipper line of products. By consolidating operations, the Company will optimize use of resources, eliminate areas of duplication and operate more efficiently and effectively. The program is expected to cost $0.9 million, result in the reduction of 43 team members and be completed in 2015.

During the third quarter of 2015, the Company established a restructuring program across multiple operating segments to centralize transaction processing and accounting functions into shared service centers. The program is expected to cost $1.5 million, result in the reduction of 69 team members and be completed in 2016. The segment breakdown of this program cost is as follows: Cranes ($0.9 million), MHPS ($0.5 million), and MP ($0.1 million).

The following table provides information for all restructuring activities by segment of the amount of expense incurred during the nine months ended September 30, 2015, the cumulative amount of expenses incurred since inception of the programs through September 30, 2015 and the total amount expected to be incurred (in millions):
 
Amount incurred
during the
nine months ended
September 30, 2015
 
Cumulative amount
incurred through
September 30, 2015
 
Total amount expected to be incurred
Cranes
0.8

 
0.8

 
0.9

MHPS
(0.1
)
 
35.4

 
35.9

MP
1.0

 
1.0

 
1.0

Total
$
1.7

 
$
37.2

 
$
37.8


The following table provides information by type of restructuring activity with respect to the amount of expense incurred during the nine months ended September 30, 2015, 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 nine months ended September 30, 2015
$
0.5

 
$
0.1

 
$
1.1

 
$
1.7

Cumulative amount incurred through September 30, 2015
$
32.3

 
$
0.1

 
$
4.8

 
$
37.2

Total amount expected to be incurred
$
32.9

 
$
0.1

 
$
4.8

 
$
37.8



22


The following table provides a roll forward of the restructuring reserve by type of restructuring activity for the nine months ended September 30, 2015 (in millions):
 
Employee
Termination Costs
 
Facility
Exit Costs
 
Total
Restructuring reserve at December 31, 2014
$
40.1

 
$
—

 
$
40.1

Restructuring charges, net
0.1

 
0.1

 
0.2

Cash expenditures
(3.4
)
 
—

 
(3.4
)
Foreign exchange
(3.1
)
 
—

 
(3.1
)
Restructuring reserve at September 30, 2015
$
33.7

 
$
0.1

 
$
33.8


NOTE M – LONG-TERM OBLIGATIONS

2014 Credit Agreement

On August 13, 2014 the Company entered into a new 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.

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 three and nine months ended September 30, 2014.

On May 29, 2015, the Company entered into an Incremental Assumption Agreement and Amendment No. 1 to the 2014 Credit Agreement which lowered the interest rate on the Company’s €200.0 million Euro denominated term loan from Euro Interbank Offered Rate (“EURIBOR”) plus 3.25% with a 0.75% EURIBOR floor to EURIBOR plus 2.75% with a 0.75% EURIBOR floor.

As of September 30, 2015 and December 31, 2014, the Company had $446.5 million and $467.9 million, respectively, in U.S. dollar and Euro denominated term loans outstanding under the 2014 Credit Agreement. The weighted average interest rate on the term loans at September 30, 2015 and December 31, 2014 was 3.50% and 3.76%, respectively. The Company had $72.3 million in U.S. dollar denominated revolving credit amounts outstanding as of September 30, 2015. The Company had no outstanding U.S. dollar and Euro denominated revolving credit amounts at December 31, 2014. The weighted average interest rate on the revolving credit amounts at September 30, 2015 was 2.68%.


23


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 September 30, 2015 and December 31, 2014, the Company had no letters of credit issued under the 2014 Credit Agreement.  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 that totaled $20.7 million and $30.4 million as of September 30, 2015 and December 31, 2014, 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 $196.8 million and $261.5 million as of September 30, 2015 and December 31, 2014, respectively.

In total, as of September 30, 2015 and December 31, 2014, the Company had letters of credit outstanding of $217.5 million and $291.9 million, respectively. The letters of credit generally serve as collateral for certain liabilities included in the Condensed Consolidated Balance Sheet. Certain letters of credit serve as collateral guaranteeing the Company’s performance under contracts.

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 Q – “Consolidating Financial Statements”).

On September 8, 2015, the Company, after obtaining the requisite consents, amended the indenture governing the 6-1/2% Notes. The principal changes contained in the amendment are that the Merger will not constitute a “Change of Control” under the indenture, and to permit Konecranes to insert one or more holding companies below or above Konecranes without triggering a “Change of Control” if such holding companies do not affect Terex’s ultimate beneficial ownership. Additionally, the reporting covenant under the indenture was amended to permit Konecranes, instead of Terex, following the Merger to make necessary periodic reports. In connection with the receipt and effectiveness of the consents, Terex will owe a total of $3.2 million upon closing of the Merger. (see Note A - “Business Combination Agreement and Plan of Merger”).

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% Senior Subordinated Notes. The 6% Notes are redeemable by the Company beginning in November, 2016 at an initial redemption price of 103.0% of principal amount. The 6% Notes are jointly and severally guaranteed by certain of the Company’s domestic subsidiaries (see Note Q – “Consolidating Financial Statements”).

On September 8, 2015, the Company, after obtaining the requisite consents, amended the indenture governing the 6% Notes. The principal changes contained in the amendment are that the Merger will not constitute a “Change of Control” under the indenture, and to permit Konecranes to insert one or more holding companies below or above Konecranes without triggering a “Change of Control” if such holding companies do not affect Terex’s ultimate beneficial ownership. Additionally, the reporting covenant under the indenture was amended to permit Konecranes, instead of Terex, following the Merger to make necessary periodic reports. In connection with the receipt and effectiveness of the consents, Terex will owe a total of $15.5 million upon closing of the Merger. (see Note A - “Business Combination Agreement and Plan of Merger”).


24


4% Convertible Senior Subordinated Notes

On June 3, 2009, the Company sold and issued $172.5 million aggregate principal amount of 4% Convertible Notes.  At issuance, the Company was required to separately account for the liability and equity components of the 4% Convertible Notes in a manner that reflected the Company’s nonconvertible debt borrowing rate at the date of issuance for interest cost to be 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 represented a discount to the debt and was amortized into interest expense using the effective interest method through settlement.  The Company recorded a related deferred tax liability of $19.4 million on the equity component. During 2012 the Company purchased approximately 25% of the outstanding 4% Convertible Notes. The balance of the 4% Convertible Notes was $128.8 million at settlement on June 1, 2015.  The Company recognized interest expense of $5.7 million on the 4% Convertible Notes for the nine months ended September 30, 2015.  Interest expense on the 4% Convertible Notes throughout its term included 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.

On June 1, 2015 the Company paid cash of $131.1 million (including accrued interest of $2.3 million) and issued 3.4 million shares of its $.01 par value common stock to settle the 4% Convertible Notes.

2015 Securitization Facility

On May 28, 2015, the Company, through certain of its subsidiaries, entered into a Loan and Security Agreement (the “Securitization Facility”) with lenders party thereto. The borrower under the Securitization Facility is a bankruptcy remote subsidiary of the Company (the “Borrower”).

Under the Securitization Facility, the Borrower may, from time to time, request the conduit lender thereunder to make loans to the Borrower. Such loans will be secured by and payable from collateral of the Borrower (primarily equipment loans and leases to Terex customers originated by TFS and transferred to the Borrower). Any such loan may be made by the conduit lender in its sole discretion and if not made by the conduit lender, shall be made by the committed lender under the Securitization Facility. The facility limit for such loans is $350 million. The scheduled termination date for the Securitization Facility is May 28, 2017, but it may be extended by agreement of the parties per the terms of the loan agreement. The Securitization Facility also contains customary representations, warranties and covenants.

On August 10, 2015, the Company entered into an Amendment and Agreement to the Securitization Facility with lenders party thereto. The principal change contained in the amendment is that the Merger will not constitute a change in control for purposes of the Securitization Facility and provided clarity regarding downgrade events after the closing of the Merger.

As of September 30, 2015, the Company had $179.9 million in loans outstanding under the Securitization Facility. The weighted average interest rate on the Securitization Facility at September 30, 2015 was 1.29%. Interest expense on loans outstanding under this facility is recorded to Cost of goods sold in the Condensed Consolidated Statement of Comprehensive Income. The Company is party to certain derivative interest rate swap agreements entered into to hedge its exposure to variable interest rates related to the Securitization Facility. The effective interest rate on the Securitization Facility when combined with the interest rate swap agreements is 2.17%. For further information on the interest rate swap agreements see Note K – “Derivative Financial Instruments.”

Commitment Letter

On August 10, 2015, in connection with the Merger, the Company and Konecranes entered into a Commitment Letter (the "Commitment Letter") with Credit Suisse Securities (USA) LLC ("CS Securities") and Credit Suisse AG ("CS" and, together with CS Securities and their respective affiliates, "Credit Suisse") in which Credit Suisse committed to provide the Company and Konecranes with (A) senior secured credit facilities in an aggregate principal amount of up to $1.65 billion, consisting of (i) a senior secured term loan facility in an aggregate principal amount of $900.0 million (such aggregate principal amount to be allocated between a U.S. dollar-denominated term loan facility to be made to the Company and a Euro-denominated term loan facility in an aggregate principal amount of up to €450.0 million to be made to Konecranes or one of its subsidiaries and (ii) two senior secured revolving credit facilities in an aggregate principal amount of up to $750.0 million and (B) a senior unsecured bridge facility in an aggregate principal amount of up to $1.15 billion. As a result of the receipt of the consents noted above, the Company and Konecranes notified Credit Suisse that it terminated the commitments of the lenders in the amount of $1.15 billion with respect to the bridge facility under the commitment letter from Credit Suisse dated August 10, 2015.


25


Based on indicative price quotations from financial institutions multiplied by the amount recorded on the Company’s Condensed Consolidated Balance Sheet (“Book Value”), the Company estimates the fair values (“FV”) of its debt set forth below as of September 30, 2015, as follows (in millions, except for quotes):
 
Book Value
 
Quote
 
FV
6% Notes
$
850.0

 
$
0.97250

 
$
827

6-1/2% Notes
$
300.0

 
$
1.01000

 
$
303

2014 Credit Agreement Term Loan (net of discount) – USD
$
226.0

 
$
0.99000

 
$
224

2014 Credit Agreement Term Loan (net of discount) – EUR
$
220.5

 
$
0.99500

 
$
219


The fair value of debt reported in the table 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 credit line under the 2014 Credit Agreement and the Securitization Facility, approximate 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.

NOTE N – RETIREMENT PLANS AND OTHER BENEFITS

The Company maintains defined benefit plans in the United States, France, Germany, India, Switzerland and the United Kingdom for some of its subsidiaries, including a nonqualified Supplemental Executive Retirement Plan (“SERP”) in the United States. 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 also has several programs that provide postemployment benefits, including health and life insurance benefits, to certain former salaried and hourly employees. Information regarding the Company’s plans, including the SERP, was as follows (in millions):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
 
U.S. Pension
 
Non-U.S. Pension
 
Other
 
U.S. Pension
 
Non-U.S. Pension
 
Other
 
U.S. Pension
 
Non-U.S. Pension
 
Other
 
U.S. Pension
 
Non-U.S. Pension
 
Other
Components of net periodic cost:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
0.3

 
$
1.6

 
$
—

 
$
0.2

 
$
1.1

 
$
—

 
$
0.9

 
$
4.8

 
$
—

 
$
0.6

 
$
3.6

 
$
—

Interest cost
1.8

 
3.2

 
0.1

 
1.9

 
3.5

 
0.1

 
5.4

 
9.6

 
0.2

 
5.5

 
12.6

 
0.2

Expected return on plan assets
(2.5
)
 
(2.0
)
 
—

 
(2.3
)
 
(1.0
)
 
—

 
(7.4
)
 
(5.9
)
 
—

 
(6.9
)
 
(4.9
)
 
—

Amortization of actuarial loss
1.0

 
1.8

 
—

 
0.7

 
0.5

 
—

 
2.9

 
5.6

 
—

 
2.3

 
2.1

 
—

Net periodic cost 
$
0.6

 
$
4.6

 
$
0.1

 
$
0.5

 
$
4.1

 
$
0.1

 
$
1.8

 
$
14.1

 
$
0.2

 
$
1.5

 
$
13.4

 
$
0.2



26


NOTE O – 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.

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.

•
On August 21, 2015, a purported Terex stockholder, Bernard Stern, filed a class action complaint challenging the Merger in the Delaware Chancery Court, and on August 26, 2015, a purported Terex stockholder, Joseph Weinstock, filed a class action complaint challenging the Merger in the Delaware Chancery Court. The two complaints name as defendants Terex Corporation, Konecranes Plc, Konecranes, Inc., Konecranes Acquisition Company LLC and the members of the Board of Directors of Terex.

The first three 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.


27


The two lawsuits concerning the Merger seek, among other relief, an order enjoining or rescinding the Merger and an award of attorneys’ fees and costs on the grounds that the Company’s Board of Directors breached their fiduciary duty in connection with entering into the business combination agreement and approving the Merger. The complaints further allege that Terex Corporation, Konecranes Plc, Konecranes, Inc. and Konecranes Acquisition Company LLC aided and abetted the alleged breaches of fiduciary duties by the Company’s Board of Directors. It is possible that these complaints will be further amended to make additional claims and/or that additional lawsuits making similar or additional claims relating to the Merger will be brought.

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, ERISA law and Delaware law with respect to these matters. Accordingly, the Company has filed motions to dismiss the ERISA lawsuit and the securities lawsuit. An agreement in principle has been reached to settle the ERISA lawsuit for $2.5 million which will be funded primarily by insurance. The proceeds of the settlement (after deduction of legal fees) will be distributed to putative class participants. 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. The lawsuits pertaining to the Merger are at the very early stages and the Company has no information other than as set forth in the complaints.

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 September 30, 2015 and December 31, 2014, the Company’s maximum exposure to such credit guarantees was $40.0 million and $42.6 million, respectively, including total guarantees issued by Terex Cranes Germany GmbH, part of the Cranes segment, of $21.0 million and $23.4 million, respectively. The terms of these guarantees coincide with the financing arranged by the customer and generally do not exceed five years. Given the Company’s position as the original equipment manufacturer and its knowledge of end markets, the Company, when called upon to fulfill a guarantee, generally has been able to liquidate the financed equipment at a minimal loss, if any, to the Company.

There can be no assurance that historical credit default experience will be indicative of future results.  The Company’s ability to recover losses experienced from its guarantees may be affected by economic conditions in effect at the time of loss.

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 September 30, 2015 and December 31, 2014, the Company’s maximum exposure pursuant to buyback guarantees was $14.7 million and $24.3 million, respectively, including total guarantees issued by entities in the MHPS segment of $11.2 million and $20.1 million, respectively. 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.

The Company has recorded an aggregate liability within Other current liabilities and Other non-current liabilities in the Condensed Consolidated Balance Sheet of approximately $3 million as of September 30, 2015 and December 31, 2014, 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.


28


NOTE P – STOCKHOLDERS’ EQUITY

Total non-stockholder changes in equity (comprehensive income) include all changes in equity during a period except those resulting from investments by, and distributions to, stockholders.  The specific components include: net income, deferred gains and losses resulting from foreign currency translation, pension liability adjustments, equity security adjustments and deferred gains and losses resulting from derivative hedging transactions.  Total non-stockholder changes in equity were as follows (in millions):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
Net income (loss)
$
44.9

 
$
64.2

 
$
132.4

 
$
238.5

Other comprehensive income (loss), net of tax:
 
 
 

 
 
 
 
Cumulative translation adjustment (CTA), net of (provision for) benefit from taxes of $1.9, $9.2 and $11.1 and $11.0, respectively
(73.9
)
 
(176.3
)
 
(200.1
)
 
(134.6
)
Derivative hedging adjustment, net of (provision for) benefit from taxes of $0.0, $1.7, $0.0 and $2.7, respectively
1.5

 
(0.3
)
 
2.6

 
(2.5
)
Debt and equity securities adjustment, net of (provision for) benefit from taxes of $0.0, $0.0, $0.1 and $0.0, respectively
(2.6
)
 
0.1

 
(8.0
)
 
0.1

Pension liability adjustment:
 
 
 
 
 
 
 
Amortization of actuarial (gain) loss, net of provision for (benefit from) taxes of $(0.4), $(0.4), $(1.2) and $(1.4), respectively
2.4

 
0.8

 
7.3

 
3.0

Foreign exchange and other effects, net of (provision for) benefit from taxes of $0.0, $(1.6), $(1.3) and $(3.0), respectively
1.1

 
4.9

 
7.8

 
4.3

Total pension liability adjustment
3.5


5.7

 
15.1

 
7.3

Other comprehensive income (loss)
(71.5
)
 
(170.8
)
 
(190.4
)
 
(129.7
)
Comprehensive income (loss)
(26.6
)
 
(106.6
)
 
(58.0
)
 
108.8

Comprehensive loss (income) attributable to noncontrolling interest
(1.2
)
 
—

 
(2.9
)
 
0.9

Comprehensive income (loss) attributable to Terex Corporation
$
(27.8
)
 
$
(106.6
)
 
$
(60.9
)
 
$
109.7


Changes in Accumulated Other Comprehensive Income
The table below presents changes in AOCI by component for the three and nine months ended September 30, 2015 and 2014. All amounts are net of tax (in millions).
 
Three months ended September 30, 2015
 
Three months ended September 30, 2014
 
CTA
Deriv. Hedging Adj.
Debt & Equity Securities Adj.
Pension Liability Adj.
Total
 
CTA
Deriv. Hedging Adj.
Debt & Equity Securities Adj.
Pension Liability Adj.
Total
Beginning balance
$
(371.7
)
$
0.4

$
(3.8
)
$
(173.6
)
$
(548.7
)
 
$
33.8

$
0.5

$
—

$
(109.7
)
$
(75.4
)
Other comprehensive income before reclassifications
(73.9
)
3.5

(2.6
)
1.1

(71.9
)
 
(176.3
)
(0.1
)
0.1

4.9

(171.4
)
Amounts reclassified from AOCI
—

(2.0
)
—

2.4

0.4

 
—

(0.2
)
—

0.8

0.6

Net other comprehensive Income (Loss)
(73.9
)
1.5

(2.6
)
3.5

(71.5
)
 
(176.3
)
(0.3
)
0.1

5.7

(170.8
)
Ending balance
$
(445.6
)
$
1.9

$
(6.4
)
$
(170.1
)
$
(620.2
)
 
$
(142.5
)
$
0.2

$
0.1

$
(104.0
)
$
(246.2
)

29


 
Nine months ended September 30, 2015
 
Nine months ended September 30, 2014
 
CTA
Deriv. Hedging Adj.
Debt & Equity Securities Adj.
Pension Liability Adj.
Total
 
CTA
Deriv. Hedging Adj.
Debt & Equity Securities Adj.
Pension Liability Adj.
Total
Beginning balance
$
(245.5
)
$
(0.7
)
$
1.6

$
(185.2
)
$
(429.8
)
 
$
(7.9
)
$
2.7

$
—

$
(111.3
)
$
(116.5
)
Other comprehensive income before reclassifications
(200.1
)
6.5

(8.0
)
7.8

(193.8
)
 
(138.6
)
0.3

0.1

4.3

(133.9
)
Amounts reclassified from AOCI
—

(3.9
)
—

7.3

3.4

 
4.0

(2.8
)
—

3.0

4.2

Net Other Comprehensive Income (Loss)
(200.1
)
2.6

(8.0
)
15.1

(190.4
)
 
(134.6
)
(2.5
)
0.1

7.3

(129.7
)
Ending balance
$
(445.6
)
$
1.9

$
(6.4
)
$
(170.1
)
$
(620.2
)
 
$
(142.5
)
$
0.2

$
0.1

$
(104.0
)
$
(246.2
)
 
Stock-Based Compensation

During the nine months ended September 30, 2015, the Company granted 1.4 million shares of restricted stock to its employees with a weighted average grant date fair value of $26.44 per share.  Approximately 63% of these restricted stock awards vest ratably over a three year period and approximately 37% cliff vest at the end of a three year period.  Approximately 11% of the shares granted are based on performance targets containing a market condition and determined over either a two or three year period. The Company used the Monte Carlo method to determine grant date fair value of $28.10 and $25.60 per share, respectively, for the three and two year awards with a market condition granted on March 5, 2015.  The Monte Carlo method is a statistical simulation technique used to provide the grant date fair value of an award.  The following table presents the weighted-average assumptions used in the valuation:
 
Grant date
Grant date
 
March 5, 2015
March 5, 2015
Dividend yields
0.91
%
0.91
%
Expected volatility
45.48
%
37.00
%
Risk free interest rate
0.98
%
0.58
%
Expected life (in years)
3

2


Share Repurchases and Dividends

In February 2015, the Company announced authorization by its Board of Directors for the repurchase of up to $200 million of the Company’s outstanding shares of common stock. During the nine months ended September 30, 2015 the Company repurchased approximately 1.9 million shares for approximately $50 million under this program. In each of the first three quarters of 2015, the Company’s Board of Directors also declared a dividend of $0.06 per share, which was paid to its shareholders.

Redeemable Noncontrolling Interest
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.


30


NOTE Q – CONSOLIDATING FINANCIAL STATEMENTS

During 2012, the Company 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 Holdings, Inc., Genie Industries, Inc., Genie International, Inc., Powerscreen Holdings USA Inc., Powerscreen International LLC, Powerscreen North America Inc., Powerscreen USA, LLC, 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.


31


TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED SEPTEMBER 30, 2015
(in millions)
 
Terex
Corporation
 
Wholly-owned
Guarantors
 
Non-guarantor
Subsidiaries
 
Intercompany
Eliminations
 
Consolidated
Net sales
$
2.8

 
$
768.0

 
$
1,104.1

 
$
(233.6
)
 
$
1,641.3

Cost of goods sold
(2.4
)
 
(616.2
)
 
(919.7
)
 
233.6

 
(1,304.7
)
Gross profit
0.4

 
151.8

 
184.4

 
—

 
336.6

Selling, general and administrative expenses
3.0

 
(68.0
)
 
(159.7
)
 
—

 
(224.7
)
Income (loss) from operations
3.4

 
83.8

 
24.7

 
—

 
111.9

Interest income
25.5

 
17.3

 
0.6

 
(42.3
)
 
1.1

Interest expense
(36.7
)
 
(1.8
)
 
(28.5
)
 
42.3

 
(24.7
)
Income (loss) from subsidiaries
68.9

 
4.0

 
0.1

 
(73.0
)
 
—

Other income (expense) – net
(25.4
)
 
2.7

 
11.3

 
—

 
(11.4
)
Income (loss) from continuing operations before income taxes
35.7

 
106.0

 
8.2

 
(73.0
)
 
76.9

(Provision for) benefit from income taxes
8.5

 
(32.6
)
 
(6.7
)
 
—

 
(30.8
)
Income (loss) from continuing operations
44.2

 
73.4

 
1.5

 
(73.0
)
 
46.1

Gain (loss) on disposition of discontinued operations – net of tax
(0.6
)
 
—

 
(0.6
)
 
—

 
(1.2
)
Net income (loss)
43.6

 
73.4

 
0.9

 
(73.0
)
 
44.9

Net loss (income) attributable to noncontrolling interest
—

 
—

 
(1.3
)
 
—

 
(1.3
)
Net income (loss) attributable to Terex Corporation
$
43.6

 
$
73.4

 
$
(0.4
)
 
$
(73.0
)
 
$
43.6

 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss), net of tax
$
(27.8
)
 
$
73.1

 
$
(39.0
)
 
$
(32.9
)
 
$
(26.6
)
Comprehensive loss (income) attributable to noncontrolling interest
—

 
—

 
(1.2
)
 
—

 
(1.2
)
Comprehensive income (loss) attributable to Terex Corporation
$
(27.8
)
 
$
73.1

 
$
(40.2
)
 
$
(32.9
)
 
$
(27.8
)

32


TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
NINE MONTHS ENDED SEPTEMBER 30, 2015
(in millions)

 
Terex
Corporation
 
Wholly-owned
Guarantors
 
Non-guarantor
Subsidiaries
 
Intercompany
Eliminations
 
Consolidated
Net sales
$
8.3

 
$
2,412.5

 
$
3,258.8

 
$
(714.2
)
 
$
4,965.4

Cost of goods sold
(6.5
)
 
(1,972.7
)
 
(2,703.0
)
 
714.2

 
(3,968.0
)
Gross profit
1.8

 
439.8

 
555.8

 
—

 
997.4

Selling, general and administrative expenses
16.9

 
(207.8
)
 
(502.1
)
 
—

 
(693.0
)
Income (loss) from operations
18.7

 
232.0

 
53.7

 
—

 
304.4

Interest income
78.2

 
51.5

 
1.7

 
(128.3
)
 
3.1

Interest expense
(115.3
)
 
(4.4
)
 
(88.5
)
 
128.3

 
(79.9
)
Income (loss) from subsidiaries
187.1

 
3.2

 
0.7

 
(191.0
)
 
—

Other income (expense) – net
(63.5
)
 
(1.1
)
 
43.3

 
—

 
(21.3
)
Income (loss) from continuing operations before income taxes
105.2

 
281.2

 
10.9

 
(191.0
)
 
206.3

(Provision for) benefit from income taxes
24.8

 
(80.3
)
 
(19.9
)
 
—

 
(75.4
)
Income (loss) from continuing operations
130.0

 
200.9

 
(9.0
)
 
(191.0
)
 
130.9

Gain (loss) on disposition of discontinued operations – net of tax
(0.6
)
 
—

 
2.1

 
—

 
1.5

Net income (loss)
129.4

 
200.9

 
(6.9
)
 
(191.0
)
 
132.4

Net loss (income) attributable to noncontrolling interest
—

 
—

 
(3.0
)
 
—

 
(3.0
)
Net income (loss) attributable to Terex Corporation
$
129.4

 
$
200.9

 
$
(9.9
)
 
$
(191.0
)
 
$
129.4

 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss), net of tax
$
(60.9
)
 
$
200.7

 
$
(170.0
)
 
$
(27.8
)
 
$
(58.0
)
Comprehensive loss (income) attributable to noncontrolling interest
—

 
—

 
(2.9
)
 
—

 
(2.9
)
Comprehensive income (loss) attributable to Terex Corporation
$
(60.9
)
 
$
200.7

 
$
(172.9
)
 
$
(27.8
)
 
$
(60.9
)

33


TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED SEPTEMBER 30, 2014
(in millions)
 
Terex
Corporation
 
Wholly-owned
Guarantors
 
Non-guarantor
Subsidiaries
 
Intercompany
Eliminations
 
Consolidated
Net sales
$
0.5

 
$
814.0

 
$
1,214.4

 
$
(219.1
)
 
$
1,809.8

Cost of goods sold
(0.4
)
 
(675.1
)
 
(996.1
)
 
219.1

 
(1,452.5
)
Gross profit
0.1

 
138.9

 
218.3

 
—

 
357.3

Selling, general and administrative expenses
0.7

 
(64.0
)
 
(177.2
)
 
—

 
(240.5
)
Income (loss) from operations
0.8

 
74.9

 
41.1

 
—

 
116.8

Interest income
33.4

 
18.5

 
1.6

 
(51.2
)
 
2.3

Interest expense
(41.4
)
 
(4.0
)
 
(34.6
)
 
51.2

 
(28.8
)
Loss on early extinguishment of debt
(1.5
)
 
—

 
(1.1
)
 
—

 
(2.6
)
Income (loss) from subsidiaries
73.3

 
1.4

 
0.1

 
(74.8
)
 
—

Other income (expense) – net
(11.9
)
 
(4.3
)
 
14.9

 
—

 
(1.3
)
Income (loss) from continuing operations before income taxes
52.7

 
86.5

 
22.0

 
(74.8
)
 
86.4

(Provision for) benefit from income taxes
6.7

 
(25.3
)
 
(9.1
)
 
—

 
(27.7
)
Income (loss) from continuing operations
59.4

 
61.2

 
12.9

 
(74.8
)
 
58.7

Income (loss) from discontinued operations – net of tax
—

 
—

 
—

 
—

 
—

Gain (loss) on disposition of discontinued operations – net of tax
4.8

 
—

 
0.7

 
—

 
5.5

Net income (loss)
64.2

 
61.2

 
13.6

 
(74.8
)
 
64.2

Net loss (income) attributable to noncontrolling interest
—

 
—

 
—

 
—

 
—

Net income (loss) attributable to Terex Corporation
$
64.2

 
$
61.2

 
$
13.6

 
$
(74.8
)
 
$
64.2

 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss), net of tax
$
(106.6
)
 
$
60.9

 
$
(110.5
)
 
$
49.6

 
$
(106.6
)
Comprehensive loss (income) attributable to noncontrolling interest
—

 
—

 
—

 
—

 
—

Comprehensive income (loss) attributable to Terex Corporation
$
(106.6
)
 
$
60.9

 
$
(110.5
)
 
$
49.6

 
$
(106.6
)

34


TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
NINE MONTHS ENDED SEPTEMBER 30, 2014
(in millions)

 
Terex
Corporation
 
Wholly-owned
Guarantors
 
Non-guarantor
Subsidiaries
 
Intercompany
Eliminations
 
Consolidated
Net sales
$
40.4

 
$
2,616.4

 
$
3,655.8

 
$
(793.1
)
 
$
5,519.5

Cost of goods sold
(37.4
)
 
(2,134.4
)
 
(3,026.3
)
 
793.1

 
(4,405.0
)
Gross profit
3.0

 
482.0

 
629.5

 
—

 
1,114.5

Selling, general and administrative expenses
(4.2
)
 
(198.0
)
 
(559.6
)
 
—

 
(761.8
)
Income (loss) from operations
(1.2
)
 
284.0

 
69.9

 
—

 
352.7

Interest income
97.2

 
55.1

 
3.3

 
(150.8
)
 
4.8

Interest expense
(124.2
)
 
(12.5
)
 
(105.0
)
 
150.8

 
(90.9
)
Loss on early extinguishment of debt
(1.5
)
 
—

 
(1.1
)
 
—

 
(2.6
)
Income (loss) from subsidiaries
273.0

 
5.5

 
(1.6
)
 
(276.9
)
 
—

Other income (expense) – net
(34.9
)
 
(1.8
)
 
30.5

 
—

 
(6.2
)
Income (loss) from continuing operations before income taxes
208.4

 
330.3

 
(4.0
)
 
(276.9
)
 
257.8

(Provision for) benefit from income taxes
22.7

 
(99.4
)
 
(2.5
)
 
—

 
(79.2
)
Income (loss) from continuing operations
231.1

 
230.9

 
(6.5
)
 
(276.9
)
 
178.6

Income (loss) from discontinued operations – net of tax
0.6

 
—

 
0.8

 
—

 
1.4

Gain (loss) on disposition of discontinued operations – net of tax
7.3

 
—

 
51.2

 
—

 
58.5

Net income (loss)
239.0

 
230.9

 
45.5

 
(276.9
)
 
238.5

Net loss (income) attributable to noncontrolling interest
—

 
—

 
0.5

 
—

 
0.5

Net income (loss) attributable to Terex Corporation
$
239.0

 
$
230.9

 
$
46.0

 
$
(276.9
)
 
$
239.0

 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss), net of tax
$
109.7

 
$
231.3

 
$
(66.2
)
 
$
(166.0
)
 
$
108.8

Comprehensive loss (income) attributable to noncontrolling interest
—

 
—

 
0.9

 
—

 
0.9

Comprehensive income (loss) attributable to Terex Corporation
$
109.7

 
$
231.3

 
$
(65.3
)
 
$
(166.0
)
 
$
109.7



35


TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2015
(in millions)
 
Terex
Corporation
 
Wholly-owned
Guarantors
 
Non-guarantor
Subsidiaries
 
Intercompany
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
8.6

 
$
4.2

 
$
288.3

 
$
—

 
$
301.1

Trade receivables – net
9.4

 
344.2

 
829.8

 
—

 
1,183.4

Intercompany receivables
79.8

 
77.9

 
36.8

 
(194.5
)
 
—

Inventories
—

 
481.2

 
1,064.4

 
—

 
1,545.6

Prepaid assets
36.2

 
44.2

 
159.5

 
—

 
239.9

Other current assets
58.6

 
0.1

 
20.5

 
—

 
79.2

Total current assets
192.6

 
951.8

 
2,399.3

 
(194.5
)
 
3,349.2

Property, plant and equipment – net
60.1

 
135.6

 
477.1

 
—

 
672.8

Goodwill
—

 
180.1

 
874.3

 
—

 
1,054.4

Non-current intercompany receivables
1,413.8

 
2,414.6

 
0.9

 
(3,829.3
)
 
—

Investment in and advances to (from) subsidiaries
3,913.5

 
195.0

 
188.5

 
(4,194.6
)
 
102.4

Other assets
38.9

 
107.9

 
553.3

 
—

 
700.1

Total assets
$
5,618.9

 
$
3,985.0

 
$
4,493.4

 
$
(8,218.4
)
 
$
5,878.9

 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders’ Equity
 

 
 

 
 

 
 

 
 

Current liabilities
 

 
 

 
 

 
 

 
 

Notes payable and current portion of long-term debt
$
—

 
$
1.4

 
$
82.0

 
$
—

 
$
83.4

Trade accounts payable
12.4

 
245.3

 
482.7

 
—

 
740.4

Intercompany payables
3.6

 
33.5

 
157.4

 
(194.5
)
 
—

Accruals and other current liabilities
89.3

 
138.0

 
541.3

 
—

 
768.6

Total current liabilities
105.3

 
418.2

 
1,263.4

 
(194.5
)
 
1,592.4

Long-term debt, less current portion
1,222.3

 
2.1

 
589.8

 
—

 
1,814.2

Non-current intercompany payables
2,345.1

 
22.4

 
1,461.8

 
(3,829.3
)
 
—

Retirement plans and other non-current liabilities
56.3

 
28.8

 
461.5

 
—

 
546.6

Total stockholders’ equity
1,889.9

 
3,513.5

 
716.9

 
(4,194.6
)
 
1,925.7

Total liabilities and stockholders’ equity
$
5,618.9

 
$
3,985.0

 
$
4,493.4

 
$
(8,218.4
)
 
$
5,878.9



36


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

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

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

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
)
 
—

Retirement plans and other non-current liabilities
62.9

 
27.2

 
519.4

 
—

 
609.5

Total stockholders’ equity
2,005.9

 
2,964.6

 
877.8

 
(3,809.2
)
 
2,039.1

Total liabilities and stockholders’ equity
$
5,503.3

 
$
3,491.7

 
$
4,622.9

 
$
(7,689.9
)
 
$
5,928.0



37


TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2015
(in millions)
 
Terex
Corporation
 
Wholly-owned
Guarantors
 
Non-guarantor
Subsidiaries
 
Intercompany
Eliminations
 
Consolidated
Net cash provided by (used in) operating activities
$
(413.2
)
 
$
423.9

 
$
109.3

 
$
(176.6
)
 
$
(56.6
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 

Capital expenditures
(1.6
)
 
(31.1
)
 
(40.7
)
 
—

 
(73.4
)
Proceeds (payments) from disposition of discontinued operations
(3.4
)
 
—

 
3.2

 
—

 
(0.2
)
Acquisition of businesses, net of cash acquired
—

 
(52.1
)
 
(19.2
)
 
—

 
(71.3
)
Intercompany investing activities (1)
454.5

 
—

 
(188.9
)
 
(265.6
)
 
—

Other investing activities, net
(1.0
)
 
0.1

 
19.0

 
(17.3
)
 
0.8

Net cash provided by (used in) investing activities
448.5

 
(83.1
)
 
(226.6
)
 
(282.9
)
 
(144.1
)
Cash flows from financing activities
 

 
 

 
 

 
 
 
 

Repayments of debt
(983.6
)
 
(6.2
)
 
(39.6
)
 
—

 
(1,029.4
)
Proceeds from issuance of debt
927.0

 
—

 
226.6

 
—

 
1,153.6

Share repurchases
(50.4
)
 
—

 
—

 
—

 
(50.4
)
Dividends paid
(19.3
)
 
—

 
—

 
—

 
(19.3
)
Intercompany financing activities (1)
—

 
(332.3
)
 
(127.2
)
 
459.5

 
—

Other financing activities, net
0.6

 
—

 
(1.9
)
 
—

 
(1.3
)
Net cash provided by (used in) financing activities
(125.7
)
 
(338.5
)
 
57.9

 
459.5

 
53.2

Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
(29.6
)
 
—

 
(29.6
)
Net increase (decrease) in cash and cash equivalents
(90.4
)
 
2.3

 
(89.0
)
 
—

 
(177.1
)
Cash and cash equivalents at beginning of period
99.0

 
1.9

 
377.3

 
—

 
478.2

Cash and cash equivalents at end of period
$
8.6

 
$
4.2

 
$
288.3

 
$
—

 
$
301.1


(1)
Intercompany investing and financing activities include cash pooling activity between Terex Corporation and Wholly-Owned Guarantors.


38


TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2014
(in millions)
 
Terex
Corporation
 
Wholly-owned
Guarantors
 
Non-guarantor
Subsidiaries
 
Intercompany
Eliminations
 
Consolidated
Net cash provided by (used in) operating activities
$
(189.3
)
 
$
175.2

 
$
130.7

 
$
—

 
$
116.6

Cash flows from investing activities
 
 
 
 
 
 
 
 
 

Capital expenditures
(4.1
)
 
(21.7
)
 
(32.8
)
 
—

 
(58.6
)
Acquisition of businesses, net of cash acquired
—

 
—

 
(7.4
)
 
—

 
(7.4
)
Proceeds from disposition of discontinued operations
31.3

 
—

 
130.9

 
—

 
162.2

Intercompany investing activities (1)
212.6

 
—

 
—

 
(212.6
)
 
—

Other investing activities, net
—

 
2.2

 
0.8

 
—

 
3.0

Net cash provided by (used in) investing activities
239.8

 
(19.5
)
 
91.5

 
(212.6
)
 
99.2

Cash flows from financing activities
 

 
 

 
 

 
 
 
 

Repayments of debt
(752.0
)
 
(1.1
)
 
(766.8
)
 
—

 
(1,519.9
)
Proceeds from issuance of debt
794.2

 
7.3

 
610.2

 
—

 
1,411.7

Purchase of noncontrolling interest
—

 
—

 
(73.4
)
 
—

 
(73.4
)
Share repurchases
(61.5
)
 
—

 
—

 
—

 
(61.5
)
Dividends paid
(16.5
)
 
—

 
—

 
—

 
(16.5
)
Intercompany financing activities (1)
—

 
(163.6
)
 
(49.0
)
 
212.6

 
—

Other financing activities, net
2.1

 
—

 
(4.1
)
 
—

 
(2.0
)
Net cash provided by (used in) financing activities
(33.7
)
 
(157.4
)
 
(283.1
)
 
212.6

 
(261.6
)
Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
(17.8
)
 
—

 
(17.8
)
Net increase (decrease) in cash and cash equivalents
16.8

 
(1.7
)
 
(78.7
)
 
—

 
(63.6
)
Cash and cash equivalents at beginning of period
16.3

 
3.9

 
387.9

 
—

 
408.1

Cash and cash equivalents at end of period
$
33.1

 
$
2.2

 
$
309.2

 
$
—

 
$
344.5


(1)
Intercompany investing and financing activities include cash pooling activity between Terex Corporation and Wholly-Owned Guarantors.


39


ITEM 2.
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) Aerial Work Platforms (“AWP”); (ii) Construction; (iii) Cranes; (iv) Material Handling & Port Solutions (“MHPS”); and (v) Materials Processing (“MP”). Please refer to Note C – “Business Segment Information” in the accompanying Condensed 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, plus (minus) increases (decreases) in Terex Financial Services (“TFS”) finance receivable assets, plus (minus) decreases (increases) in cash balances held for settlement on securitized assets, less Capital expenditures. The definition reflects our entry into a securitization facility in the second quarter of 2015. We believe that the measure of free cash flow provides management and investors further information on cash generation or use in our primary operations.

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 EPS expectations excluding restructuring and other charges that we do not believe are reflective of our ongoing operations.

Working capital is calculated using the Condensed 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 ended 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.


40


Overview

Despite the challenging marketplace environment, we had several areas show notable year-over-year improvements in the third quarter of 2015. As expected, the margins of our AWP and MP segments improved year-over-year. The Cranes and Construction businesses continue to experience relatively soft market conditions overall, with customers remaining cautious with their equipment purchasing patterns, although bookings were up in AWP, Construction, Cranes and MHPS. Overall our profitability improved despite lower net sales highlighting some of the early successes our internal initiatives are having on our results.
Our AWP segment had a strong third quarter as improved manufacturing efficiencies and lower material costs led to an increase in profitability despite lower net sales. These benefits more than offset the pricing pressure we are continuing to see in the marketplace. We continue to expect strong margins throughout the remainder of the year and are encouraged by AWP’s backlog which is 39% higher than the prior year level. However, from a net sales perspective, current uncertainties in the marketplace, particularly in North America, cause us to be a little more cautious with our expectations for the fourth quarter of 2015.
Our Construction segment had a small operating profit in the third quarter, with pressure on operating results continuing to come from the German and Indian compact construction businesses. Net sales in this segment declined year-over-year due to divestiture of our majority interest in the compact track loader business and the negative impact of foreign exchange rates, partially offset by higher demand for our site dumpers and concrete mixer trucks. Strength in our North American concrete truck business and dumper business is expected to be offset by weakness in our German and Indian compact construction businesses throughout the remainder of 2015.
Our Cranes segment’s net sales and profitability for the third quarter declined year over year as the global crane market remains challenging. However, we are encouraged with the booking activity of our tower cranes business overall and our mobile cranes business in Europe. Our Utilities business remains steady, however, there are signs of some softening.
Our MHPS segment was profitable in the third quarter but below the prior year period. The negative impact of foreign exchange rates and the decrease in port automation sales were the primary drivers of the decline in net sales. We are experiencing a sluggish port equipment market. However, we are encouraged by improved mobile harbor cranes sales and our material handling backlog was steady on a currency neutral basis.
Our MP segment had a good third quarter, with improved operating margins on higher net sales. We have been investing in expanding our environmental equipment and washing systems businesses and believe these will strengthen this segment going forward. The investment in these new product categories has helped offset some of the weakness in the commodity driven markets. We expect this segment to continue to have strong profitability throughout the remainder of the year.
Geographically, while sales in the North American market remain relatively strong, we have been impacted by lower oil and gas related activity. European markets are mixed with sales down slightly on a currency neutral basis. Most of the other markets are experiencing softness, particularly Brazil and Australia, although sales in the Middle East were up.
We generated approximately $62 million in free cash flow in the third quarter and we believe we still have the ability to generate between $200 million and $250 million in free cash flow for the full year 2015. See “Liquidity and Capital Resources” for a detailed description of liquidity and working capital levels, including the primary factors affecting such levels.
Overall, given where we are in the year and the challenging environment we are operating in, we believe we will be at or near the low end of our previously announced 2015 guidance for earnings per share of between $1.90 and $2.10 (excluding restructuring and unusual items) on net sales of between $6.1 billion and $6.4 billion.

Business Combination Agreement and Plan of Merger
On August 10, 2015, we entered into a Business Combination Agreement and Plan of Merger (the "BCA") with Konecranes Plc, a Finnish public company limited by shares ("Konecranes"). The combined company that would result from the transaction will be called Konecranes Terex Plc. and will be incorporated in Finland.
In the proposed transaction, a wholly-owned subsidiary of Konecranes would be merged with and into us and our shareholders would receive 0.8 of a Konecranes share for each existing Terex share (the “Merger”). Upon completion of the Merger, our shareholders would own approximately 60% and Konecranes shareholders would own approximately 40% of the combined company. The BCA includes undertakings by us and Konecranes that are typical in similar transactions, including undertakings by both companies to conduct their businesses in the ordinary course prior to the completion of the Merger.
The BCA may be terminated by us or Konecranes under certain circumstances prior to the completion of the Merger, including, for example, a material breach by either party of the terms and conditions of the BCA. The parties have further agreed on certain termination fees customary in similar transactions and payable to the other party under certain circumstances.

41


The transaction is subject to approval by both Terex and Konecranes shareholders, regulatory approvals, the listing of the Konecranes shares or American Depositary Shares on the New York Stock Exchange or another U.S. national securities exchange. Terex and Konecranes expect to convene meetings of their shareholders to approve the transaction in early 2016. Closing of the transaction is expected to occur during the first half of 2016.
See Note A – “Business Combination Agreement and Plan of Merger” in the notes to the Consolidated Financial Statements for further information regarding the proposed Merger.



42



ROIC

ROIC continues to be a unifying metric we use to measure our performance. ROIC and Non-GAAP Measures assist in showing how effectively we utilize 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 operations by a figure equal to one minus the effective tax rate of the Company. We believe 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) from continuing operations before income taxes for the respective quarter. Debt is calculated using 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’ adjusted 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 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 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 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 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 September 30, 2015 was 9.7%.

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.
 
Sep ‘15
Jun ‘15
Mar ‘15
Dec ’14
Sep ’14
Provision for (benefit from) income taxes
$
30.8

$
33.0

$
11.6

$
(41.5
)
 
Divided by: Income (loss) before income taxes
76.9

119.3

10.1

39.4

 
Effective tax rate
40.1
%
27.7
%
114.9
 %
(105.3
)%
 
Income (loss) from operations as adjusted
$
109.4

$
147.2

$
46.5

$
72.3

 
Multiplied by: 1 minus Effective tax rate
59.9
%
72.3
%
(14.9
)%
205.3
 %
 
Adjusted net operating income (loss) after tax
$
65.5

$
106.4

$
(6.9
)
$
148.4

 
Debt (as defined above)
$
1,897.6

$
1,906.6

$
1,872.9

$
1,788.8

$
1,851.9

Less: Cash and cash equivalents
(301.1
)
(332.7
)
(351.3
)
(478.2
)
(344.5
)
Debt less Cash and cash equivalents
1,596.5

1,573.9

1,521.6

1,310.6

1,507.4

Total Terex Corporation stockholders’ equity as adjusted
1,549.7

1,630.8

1,543.3

1,843.2

2,010.5

Debt less Cash and cash equivalents plus Total Terex Corporation stockholders’ equity as adjusted
$
3,146.2

$
3,204.7

$
3,064.9

$
3,153.8

$
3,517.9


September 30, 2015 ROIC
9.7
%
NOPAT as adjusted (last 4 quarters)
$
313.4

Average Debt less Cash and cash equivalents plus Total Terex Corporation stockholders’ equity as adjusted (5 quarters)
$
3,217.5



43


 
Three months ended 9/30/15
Three months ended 6/30/15
Three months ended 3/31/15
Three months ended 12/31/14
 
Reconciliation of income (loss) from operations:
 

 

 
 
 
Income (loss) from operations as reported
$
111.9

$
148.3

$
44.2

$
70.4

 
(Income) loss from operations for TFS
(2.5
)
(1.1
)
2.3

1.9

 
Income (loss) from operations as adjusted
$
109.4

$
147.2

$
46.5

$
72.3

 
 
 
 
 
 
 
Reconciliation of Terex Corporation stockholders’ equity:
As of 9/30/15
As of 6/30/15
As of 3/31/15
As of 12/31/14
As of 9/30/14
Terex Corporation stockholders’ equity as reported
$
1,889.9

$
1,915.0

$
1,747.8

$
2,005.9

$
2,217.7

TFS Assets
(340.2
)
(284.2
)
(204.5
)
(162.7
)
(207.2
)
Terex Corporation stockholders’ equity as adjusted
$
1,549.7

$
1,630.8

$
1,543.3

$
1,843.2

$
2,010.5


RESULTS OF OPERATIONS

Three Months Ended September 30, 2015 Compared with Three Months Ended September 30, 2014

Consolidated
 
Three Months Ended September 30,
 
 
 
2015
 
2014
 
 
 
 
 
% of
Sales
 
 
 
% of
Sales
 
% Change In
Reported Amounts
 
($ amounts in millions)
 
 
Net sales
$
1,641.3

 
—

 
$
1,809.8

 
—

 
(9.3
)%
Gross profit
$
336.6

 
20.5
%
 
$
357.3

 
19.7
%
 
(5.8
)%
SG&A
$
224.7

 
13.7
%
 
$
240.5

 
13.3
%
 
(6.6
)%
Income from operations
$
111.9

 
6.8
%
 
$
116.8

 
6.5
%
 
(4.2
)%

Net sales for the three months ended September 30, 2015 decreased $168.5 million when compared to the same period in 2014.  The decline in net sales was primarily due to lower net sales in all segments, except for MP. Our MHPS segment experienced the largest decline due to negative changes in foreign exchange rates and a decline in port automation equipment deliveries. Changes in foreign exchange rates negatively impacted consolidated net sales by approximately 9 percent or $155 million. These declines were partially offset by net sales improvements and acquisitions in certain product lines or regions, particularly in our AWP, Construction, MP and Cranes segments.

Gross profit for the three months ended September 30, 2015 decreased $20.7 million when compared to the same period in 2014. The decrease was primarily due to declines in gross profit in our MHPS, Cranes and Construction segments. Changes in foreign exchange rates negatively impacted gross profit in all segments.

SG&A costs for the three months ended September 30, 2015 decreased by $15.8 million when compared to the same period in 2014.  The majority of the decrease in SG&A costs was due to the positive impact of changes in foreign exchange rates, particularly in our MHPS segment, offset by cost increases in our other segments, particularly our MP segment.

Income from operations for the three months ended September 30, 2015 decreased $4.9 million when compared to the same period in 2014.  The decrease was primarily due to lower operating performance in our Cranes and MHPS segments.


44


Aerial Work Platforms
 
Three Months Ended September 30,
 
 
 
2015
 
2014
 
 
 
 
 
% of
Sales
 
 
 
% of
Sales
 
% Change In
Reported Amounts
 
($ amounts in millions)
 
 
Net sales
$
573.8

 
—

 
$
598.7

 
—

 
(4.2
)%
Gross profit
$
128.2

 
22.3
%
 
$
119.3

 
19.9
%
 
7.5
 %
SG&A
$
48.8

 
8.5
%
 
$
50.9

 
8.5
%
 
(4.1
)%
Income from operations
$
79.4

 
13.8
%
 
$
68.4

 
11.4
%
 
16.1
 %

Net sales for the AWP segment for the three months ended September 30, 2015 decreased $24.9 million when compared to the same period in 2014. Net sales decreased approximately $22 million due to the impact of foreign exchange rate changes, $14 million due to continuing softness in Latin America driven by the weak Brazilian economy, $9 million due to weakness in China and Asia Pacific, and $6 million from lower demand for telehandlers and other products in North America. These decreases were partially offset by an increase in net sales of $25 million in Europe from robust replacement demand.

Gross profit for the three months ended September 30, 2015 increased $8.9 million when compared to the same period in 2014. The increase was primarily due to lower material costs (primarily steel) and manufacturing efficiencies of $22 million. Lower pricing of $12 million partially offset the lower costs achieved in the current quarter.

SG&A costs for the three months ended September 30, 2015 decreased $2.1 million when compared to the same period in 2014.  The decrease in SG&A costs was primarily due to the positive impact of foreign exchange rate changes of approximately $2 million as costs and corporate allocations were relatively flat when compared to 2014.

Income from operations for the three months ended September 30, 2015 increased $11.0 million when compared to the same period in 2014.  The increase was due to the items noted above, particularly lower materials costs and manufacturing efficiencies, partially offset by lower pricing.

Construction
 
Three Months Ended September 30,
 
 
 
2015
 
2014
 
 
 
 
 
% of
Sales
 
 
 
% of
Sales
 
% Change In
Reported Amounts
 
($ amounts in millions)
 
 
Net sales
$
180.1

 
—

 
$
207.3

 
—

 
(13.1
)%
Gross profit
$
23.0

 
12.8
%
 
$
24.6

 
11.9
%
 
(6.5
)%
SG&A
$
20.3

 
11.3
%
 
$
23.0

 
11.1
%
 
(11.7
)%
Income from operations
$
2.7

 
1.5
%
 
$
1.6

 
0.8
%
 
68.8
 %

Net sales for the Construction segment for the three months ended September 30, 2015 decreased $27.2 million when compared to the same period in 2014. Net sales decreased by $27 million due to the disposition of our majority interest in the compact track loader business in the fourth quarter of 2014, approximately $18 million from unfavorable foreign currency exchange rates, and $7 million from volume reductions in parts and machine sales. Partially offsetting these decreases was an increase of $16 million primarily due to site dumper sales in the U.K. and an increase of $9 million primarily due to concrete mixer truck sales in the U.S.

Gross profit for the three months ended September 30, 2015 decreased $1.6 million when compared to the same period in 2014, primarily due to the impact of the business disposition noted above and the negative impact of foreign exchange rate changes, partially offset by improved overall manufacturing margins.


45


SG&A costs for the three months ended September 30, 2015 decreased $2.7 million when compared to the same period in 2014 primarily due to the impact of the disposition noted above and the positive impact of foreign exchange rate changes, partially offset by higher engineering costs in Europe.

Income from operations for the three months ended September 30, 2015 increased $1.1 million when compared to the same period in 2014.

Cranes
 
Three Months Ended September 30,
 
 
 
2015
 
2014
 
 
 
 
 
% of
Sales
 
 
 
% of
Sales
 
% Change In
Reported Amounts
 
($ amounts in millions)
 
 
Net sales
$
411.7

 
—

 
$
419.7

 
—

 
(1.9
)%
Gross profit
$
65.5

 
15.9
%
 
$
75.5

 
18.0
%
 
(13.2
)%
SG&A
$
53.1

 
12.9
%
 
$
53.7

 
12.8
%
 
(1.1
)%
Income from operations
$
12.4

 
3.0
%
 
$
21.8

 
5.2
%
 
(43.1
)%

Net sales for the Cranes segment for the three months ended September 30, 2015 decreased by $8.0 million when compared to the same period in 2014.  Negative impacts of foreign exchange rate changes on net sales of approximately $45 million were partially offset by increased crane products volumes of $20 million, mainly in Europe, Latin America and Asia, and a $19 million increase in net sales for utility products in North America, which includes sales from an acquired business.

Gross profit for the three months ended September 30, 2015 decreased by $10.0 million when compared to the same period in 2014 primarily due to negative impacts of foreign exchange rate changes and transactional foreign exchange rate losses of approximately $7 million and lower absorption of manufacturing costs of $5 million. Also contributing to the decrease were higher warranty charges, costs associated with workforce reductions and higher product liability expense.

SG&A costs for the three months ended September 30, 2015 decreased $0.6 million over the same period in 2014 primarily due to the positive impact of foreign exchange rate changes. This decrease was partially offset by increased selling expenses for utility products in North America, including marketing and trade show expenses, additional costs related to an acquired business, and restructuring costs.

Income from operations for the three months ended September 30, 2015 decreased $9.4 million when compared to the same period in 2014, primarily due to the operational items noted above.

Material Handling & Port Solutions
 
Three Months Ended September 30,
 
 
 
2015
 
2014
 
 
 
 
 
% of
Sales
 
 
 
% of
Sales
 
% Change In
Reported Amounts
 
($ amounts in millions)
 
 
Net sales
$
366.7

 
—

 
$
468.2

 
—

 
(21.7
)%
Gross profit
$
80.3

 
21.9
%
 
$
101.9

 
21.8
%
 
(21.2
)%
SG&A
$
70.0

 
19.1
%
 
$
84.3

 
18.0
%
 
(17.0
)%
Income from operations
$
10.3

 
2.8
%
 
$
17.6

 
3.8
%
 
(41.5
)%


46


Net sales for the MHPS segment for the three months ended September 30, 2015 decreased $101.5 million when compared to the same period in 2014. Net sales decreased $65 million due to lower port automation sales, approximately $57 million due to the negative impact of foreign exchange rate changes, and $7 million due to divestitures. These decreases were partially offset by a $26 million increase in net sales related to mobile harbor cranes.

Gross profit for the three months ended September 30, 2015 decreased $21.6 million when compared to the same period in 2014. The decrease was due to unfavorable changes in product mix of $17 million and the negative effect of foreign exchange rate changes of approximately $12 million. The prior year period included $10 million in restructuring charges that did not recur in the current year period.

SG&A costs for the three months ended September 30, 2015 decreased $14.3 million when compared to the same period in 2014. The decrease was due to approximately $12 million of positive impact of foreign exchange rate changes.

Income from operations for the three months ended September 30, 2015 decreased $7.3 million. The decrease was due to items noted above, particularly lower net sales.

Materials Processing
 
Three Months Ended September 30,
 
 
 
2015
 
2014
 
 
 
 
 
% of
Sales
 
 
 
% of
Sales
 
% Change In
Reported Amounts
 
($ amounts in millions)
 
 
Net sales
$
158.9

 
—

 
$
155.6

 
—

 
2.1
%
Gross profit
$
36.6

 
23.0
%
 
$
29.8

 
19.2
%
 
22.8
%
SG&A
$
22.7

 
14.3
%
 
$
21.1

 
13.6
%
 
7.6
%
Income from operations
$
13.9

 
8.7
%
 
$
8.7

 
5.6
%
 
59.8
%

Net sales for the MP segment for the three months ended September 30, 2015 increased by $3.3 million when compared to the same period in 2014. The increase was due to $18 million higher net sales from our environmental equipment business, including $13 million from an acquired business, and increased net sales in India. This increase was partially offset by approximately $13 million of negative impact of foreign exchange rate changes on net sales as well as continued softness in mining-related markets.

Gross profit for the three months ended September 30, 2015 increased by $6.8 million when compared to the same period in 2014. The increase was primarily due to cost reductions, increased margin contributions from our global parts program and the effect of an acquisition. Partially offsetting these improvements was the negative impact of foreign exchange rate changes.

SG&A costs for the three months ended September 30, 2015 increased by $1.6 million when compared to the same period in 2014. The increase was primarily due to increased costs associated with an acquired business, partially offset by the positive effect of foreign exchange rate changes.

Income from operations for the three months ended September 30, 2015 increased $5.2 million. The increase was primarily due to the items noted above, particularly higher net sales from our environmental equipment business.


47


Corporate / Eliminations
 
Three Months Ended September 30,
 
 
 
2015
 
2014
 
 
 
 
 
% of
Sales
 
 
 
% of
Sales
 
% Change In
Reported Amounts
 
($ amounts in millions)
 
 
Net sales
$
(49.9
)
 
—

 
$
(39.7
)
 
—

 
*
Loss from operations
$
(6.8
)
 
*

 
$
(1.3
)
 
*

 
*
*
Not meaningful as a percentage

Net sales amounts include elimination of intercompany sales activity among segments.

Interest Expense, Net of Interest Income

During the three months ended September 30, 2015, our interest expense net of interest income was $23.6 million, or $2.9 million lower than the same period in the prior year. The reduction resulted from the settlement of the 4% Convertible Notes on June 1, 2015 and lower effective interest rates in the current year period.

Other Income (Expense) – Net

Other income (expense) – net for the three months ended September 30, 2015 was expense of $11.4 million, or $10.1 million higher expense when compared to the same period in the prior year. The increase is primarily due to $8.6 million of merger related costs recorded in the current year period.

Income Taxes

During the three months ended September 30, 2015, we recognized income tax expense of $30.8 million on income of $76.9 million, an effective tax rate of 40.1%, as compared to income tax expense of $27.7 million on income of $86.4 million, an effective tax rate of 32.1%, for the three months ended September 30, 2014.  The higher effective tax rate for the three months ended September 30, 2015 was primarily due to an increase in the provision for uncertain tax positions compared to a reduction in the uncertain tax positions provision in the three months ended September 30, 2014.

Gain (Loss) on Disposition of Discontinued Operations

During the three months ended September 30, 2015, we recognized a loss on disposition of discontinued operations of $1.2 million, compared to a gain on disposition of discontinued operations of $5.5 million recognized in the prior year period. The prior year gain was related to the sale of the truck business in May 2014.


48


Nine Months Ended September 30, 2015 Compared with Nine Months Ended September 30, 2014

Consolidated

 
Nine Months Ended September 30,
 
 
 
2015
 
2014
 
 
 
 
 
% of
Sales
 
 
 
% of
Sales
 
% Change In
Reported Amounts
 
($ amounts in millions)
 
 
Net sales
$
4,965.4

 
—

 
$
5,519.5

 
—

 
(10.0
)%
Gross profit
$
997.4

 
20.1
%
 
$
1,114.5

 
20.2
%
 
(10.5
)%
SG&A
$
693.0

 
14.0
%
 
$
761.8

 
13.8
%
 
(9.0
)%
Income from operations
$
304.4

 
6.1
%
 
$
352.7

 
6.4
%
 
(13.7
)%

Net sales for the nine months ended September 30, 2015 decreased $554.1 million when compared to the same period in 2014.  The decline in net sales was driven by lower net sales across all segments, with the largest declines coming from MHPS and AWP. Changes in foreign exchange rates negatively impacted consolidated net sales by approximately 9% or $470 million. The decline was partially offset by improvements in certain product lines or regions, in all of our segments.

Gross profit for the nine months ended September 30, 2015 decreased $117.1 million when compared to the same period in 2014. The decrease was primarily due to declines in gross profit in all segments, except MP. Changes in foreign exchange rates negatively impacted gross profit in all segments. These decreases were partially offset by volume related improvements in our MP segment.

SG&A costs for the nine months ended September 30, 2015 decreased by $68.8 million when compared to the same period in 2014.  The majority of the decrease in SG&A costs was due to the positive impact of changes in foreign exchange rates, particularly in our MHPS segment.

Income from operations for the nine months ended September 30, 2015 decreased $48.3 million when compared to the same period in 2014.  The decrease was primarily due to lower operating performance in our AWP and Cranes segments.

Aerial Work Platforms

 
Nine Months Ended September 30,
 
 
 
2015
 
2014
 
 
 
 
 
% of
Sales
 
 
 
% of
Sales
 
% Change In
Reported Amounts
 
($ amounts in millions)
 
 
Net sales
$
1,758.1

 
—

 
$
1,901.5

 
—

 
(7.5
)%
Gross profit
$
380.2

 
21.6
%
 
$
416.6

 
21.9
%
 
(8.7
)%
SG&A
$
153.6

 
8.7
%
 
$
152.5

 
8.0
%
 
0.7
 %
Income from operations
$
226.6

 
12.9
%
 
$
264.1

 
13.9
%
 
(14.2
)%


Net sales for the AWP segment for the nine months ended September 30, 2015 decreased $143.4 million when compared to the same period in 2014. Net sales decreased approximately $65 million due to the negative impact of foreign exchange rate changes. North American net sales decreased $65 million due to lower pricing and softening demand for telehandlers and other products, which are impacted by the uncertainty surrounding oil and gas markets. Sales in Latin America were lower by $61 million due to the continuing impact of economic uncertainties in Brazil as well as softer pricing. These decreases were partially offset by increased net sales of $51 million in Europe due to robust replacement demand.


49


Gross profit for the nine months ended September 30, 2015 decreased $36.4 million when compared to the same period in 2014. Unfavorable pricing contributed $27 million to the decline. Lower sales volume and mix in the current year period contributed approximately $19 million to the decrease. Also contributing to the decrease in gross profit in the current year period were changes in freight terms, lower used equipment margins, unfavorable changes in foreign currency exchange rates, and a Brazilian import credit received in 2014 but not received in 2015. These decreases were partially offset by $25 million of reduced material costs and $5 million of favorable factory utilization.

SG&A costs for the nine months ended September 30, 2015 increased $1.1 million when compared to the same period in 2014. The increase in SG&A costs was primarily due to increased corporate allocated costs and general and administrative expenses, partially offset by approximately $5 million of positive impact from foreign exchange rate changes.

Income from operations for the nine months ended September 30, 2015 decreased $37.5 million when compared to the same period in 2014.  The decrease was due to items noted above, particularly lower net sales and the negative impact of pricing in the current year period.

Construction

 
Nine Months Ended September 30,
 
 
 
2015
 
2014
 
 
 
 
 
% of
Sales
 
 
 
% of
Sales
 
% Change In
Reported Amounts
 
($ amounts in millions)
 
 
Net sales
$
517.7

 
—

 
$
630.2

 
—

 
(17.9
)%
Gross profit
$
61.7

 
11.9
 %
 
$
70.2

 
11.1
%
 
(12.1
)%
SG&A
$
62.8

 
12.1
 %
 
$
69.6

 
11.0
%
 
(9.8
)%
Income (loss) from operations
$
(1.1
)
 
(0.2
)%
 
$
0.6

 
0.1
%
 
*

*    Not meaningful as a percentage

Net sales for the Construction segment for the nine months ended September 30, 2015 decreased by $112.5 million when compared to the same period in 2014. Net sales decreased by $85 million due to the disposition of our majority interest in the compact track loader business in the fourth quarter of 2014, approximately $58 million from negative foreign currency exchange rate changes, and $22 million from volume reductions in various other parts and machine sales. Partially offsetting these decreases was an increase of $29 million primarily due to site dumper sales in the U.K. and an increase of $24 million primarily due to concrete mixer truck sales in the U.S.

Gross profit for the nine months ended September 30, 2015 decreased $8.5 million when compared to the same period in 2014, primarily due to the impact of the business disposition noted above and the negative impact of foreign exchange rate changes, partially offset by improved overall manufacturing margins.

SG&A costs for the nine months ended September 30, 2015 decreased $6.8 million when compared to the same period in 2014, primarily due to the impact of the business disposition noted above and the positive impact of foreign exchange rate changes, partially offset by higher engineering costs in Europe and the allocation of higher corporate costs.


Loss from operations for the nine months ended September 30, 2015 was $1.1 million, compared to income from operations of $0.6 million for the period in 2014. The decrease in operating performance was due to items noted above, particularly the impacts of the business disposition noted above and foreign exchange rate changes.


50


Cranes
 
Nine Months Ended September 30,
 
 
 
2015
 
2014
 
 
 
 
 
% of
Sales
 
 
 
% of
Sales
 
% Change In
Reported Amounts
 
($ amounts in millions)
 
 
Net sales
$
1,262.4

 
—

 
$
1,316.8

 
—

 
(4.1
)%
Gross profit
$
205.6

 
16.3
%
 
$
225.4

 
17.1
%
 
(8.8
)%
SG&A
$
167.0

 
13.2
%
 
$
174.1

 
13.2
%
 
(4.1
)%
Income from operations
$
38.6

 
3.1
%
 
$
51.3

 
3.9
%
 
(24.8
)%


Net sales for the Cranes segment for the nine months ended September 30, 2015 decreased by $54.4 million when compared to the same period in 2014. The negative impacts of foreign exchange rate changes on net sales and lower net sales for crane products in North America of approximately $138 million were partially offset by higher net sales for utility products in North America, including the contribution from an acquired business of $61 million, and crane products in Asia.

Gross profit for the nine months ended September 30, 2015 decreased by $19.8 million when compared to the same period in 2014. Negative impacts of foreign exchange rate changes and transactional foreign exchange losses of approximately $23 million and higher product liability costs of $3 million were partially offset by margins on higher volumes noted above.

SG&A costs for the nine months ended September 30, 2015 decreased $7.1 million from the same period in 2014 primarily due to the positive impact of foreign exchange rate changes of approximately $16 million. This decrease was partially offset by increased selling expenses for utility products in North America, additional costs related to an acquired business, and higher allocation of corporate costs.

Income from operations for the nine months ended September 30, 2015 decreased $12.7 million when compared to the same period in 2014. The decrease was due to the operational items noted above.

Material Handling & Port Solutions
 
Nine Months Ended September 30,
 
 
 
2015
 
2014
 
 
 
 
 
% of
Sales
 
 
 
% of
Sales
 
% Change In
Reported Amounts
 
($ amounts in millions)
 
 
Net sales
$
1,055.8

 
—

 
$
1,267.8

 
—

 
(16.7
)%
Gross profit
$
231.2

 
21.9
%
 
$
283.7

 
22.4
%
 
(18.5
)%
SG&A
$
223.9

 
21.2
%
 
$
269.7

 
21.3
%
 
(17.0
)%
Income from operations
$
7.3

 
0.7
%
 
$
14.0

 
1.1
%
 
(47.9
)%

Net sales for the MHPS segment for the nine months ended September 30, 2015 decreased $212.0 million when compared to the same period in 2014. The decrease in net sales was primarily due to approximately $173 million negative impact of foreign exchange rate changes on net sales, an $85 million decrease in port automation sales in Western Europe, a $26 million decrease in industrial crane sales mainly in Europe & Latin America and a $20 million decrease in Material Handling net sales related to a business disposed of in 2014.  These decreases were partially offset by $38 million of incremental sales of mobile harbor cranes and stronger sales from our China location of $42 million, which are mainly comprised of ship-to-shore cranes, and stronger sales of port software solutions.


51



Gross profit for the nine months ended September 30, 2015 decreased $52.5 million when compared to the same period in 2014. The decrease was due to the approximately $38 million negative impact of foreign exchange rate changes, unfavorable changes in product mix of $23 million, and reduced sales volumes in Latin America and South Africa. The prior year period included $10 million in restructuring charges that did not recur in the current year period.

SG&A costs for the nine months ended September 30, 2015 decreased $45.8 million when compared to the same period in 2014. The majority of the decrease was due to the approximately $41 million positive impact of foreign exchange rate changes.

Income from operations for the nine months ended September 30, 2015 decreased $6.7 million when compared to the same period in 2014. The decrease was due to the items noted above, particularly from lower net sales.

Materials Processing
 
Nine Months Ended September 30,
 
 
 
2015
 
2014
 
 
 
 
 
% of
Sales
 
 
 
% of
Sales
 
% Change In
Reported Amounts
 
($ amounts in millions)
 
 
Net sales
$
472.4

 
—

 
$
488.7

 
—

 
(3.3
)%
Gross profit
$
112.9

 
23.9
%
 
$
105.7

 
21.6
%
 
6.8
 %
SG&A
$
66.3

 
14.0
%
 
$
63.3

 
13.0
%
 
4.7
 %
Income from operations
$
46.6

 
9.9
%
 
$
42.4

 
8.7
%
 
9.9
 %

Net sales for the MP segment for the nine months ended September 30, 2015 decreased by $16.3 million when compared to the same period in 2014. The decrease was primarily due to the approximately $36 million negative impact of foreign exchange rate changes. Additionally, continued softness in mining-related markets impacted net sales. The decrease was partially offset by an increase of $28 million higher net sales from our environmental equipment business, including $21 million from an acquired business, and increased sales in India.

Gross profit for the nine months ended September 30, 2015 increased by $7.2 million. The increase was primarily due to margin contributions from our global parts program and the effect of an acquisition. Partially offsetting these improvements was the negative impact of foreign exchange rate changes.

SG&A costs for the nine months ended September 30, 2015 increased by $3.0 million. The increase was due to expenses associated with our environmental equipment business, including the effect of an acquisition, and higher allocation of corporate costs, partially offset by the positive impact of foreign exchange rate changes when compared to the same period in 2014.

Income from operations for the nine months ended September 30, 2015 increased $4.2 million. The increase was due to items noted above.


52


Corporate / Eliminations

 
Nine Months Ended September 30,
 
 
 
2015
 
2014
 
 
 
 
 
% of
Sales
 
 
 
% of
Sales
 
% Change In
Reported Amounts
 
($ amounts in millions)
 
 
Net sales
$
(101.0
)
 
—

 
$
(85.5
)
 
—

 
*
Loss from operations
$
(13.6
)
 
*

 
$
(19.7
)
 
*

 
*
*    Not meaningful as a percentage

Net sales amounts include elimination of intercompany sales activity among segments.

Interest Expense, Net of Interest Income

During the nine months ended September 30, 2015, our interest expense net of interest income was $76.8 million, or $9.3 million lower than the same period in the prior year. This reflects the impact of lower interest rates and lower debt balances in the current year period.

Loss on early extinguishment of debt

In connection with the termination of the 2011 Credit Agreement, we 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 nine months ended September 30, 2014.

Other Income (Expense) – Net

Other income (expense) – net for the nine months ended September 30, 2015 was an expense of $21.3 million, or $15.1 million higher expense when compared to the same period in the prior year, primarily due to $9.5 million of merger related costs and higher foreign exchange losses in the current year period.

Income Taxes

During the nine months ended September 30, 2015, we recognized income tax expense of $75.4 million on income of $206.3 million, an effective tax rate of 36.5%, as compared to income tax expense of $79.2 million on income of $257.8 million, an effective tax rate of 30.7%, for the nine months ended September 30, 2014.  The higher effective tax rate for the nine September 30, 2015 was primarily due to increased losses not benefited when compared to the nine months ended September 30, 2014.

Income (Loss) from Discontinued Operations

Income (loss) from discontinued operations for the nine months ended September 30, 2015 decreased by $1.4 million when compared to the same period in the prior year as the truck business was sold in May 2014.

Gain (Loss) on Disposition of Discontinued Operations

The gain on disposition of discontinued operations was $57.0 million lower in the current year period when compared to the prior year period primarily related to the sale of the truck business in May 2014.


53


LIQUIDITY AND CAPITAL RESOURCES

We continue to focus on generating cash and improving margins. Consistent with our expectations, we generated cash in the three months ended September 30, 2015, and as a result, we increased our liquidity (cash and availability under our revolving credit line) by approximately $11 million as compared to June 30, 2015. We had free cash flow of approximately $43 million in the nine months ended September 30, 2015. This was primarily due to net income generated in the current year period. We believe we still have the ability to generate between $200 million and $250 million in free cash flow for the full year 2015.

The following table reconciles Net cash provided by (used in) operating activities to free cash flow (in millions):
 
 
Three Months Ended
9/30/2015
 
Nine Months Ended
9/30/2015
Net cash provided by (used in) operating activities
 
$
28.2

 
$
(56.6
)
Plus: Increase in TFS assets
 
56.0

 
177.5

Less: Increase in cash for securitization settlement
 
2.0

 
(4.8
)
Less: Capital expenditures
 
(24.7
)
 
(73.4
)
Free cash flow
 
$
61.5

 
$
42.7


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 $301.1 million at September 30, 2015.  The majority of the cash held by our foreign subsidiaries is expected 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. 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 internal operating initiatives and meet our operating and debt service requirements. See Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for a detailed description of the risks resulting from our debt and our ability to generate sufficient cash flow to operate our business.

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 primarily 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.

During the first nine months of 2015, cash used in inventory was approximately $140 million as production ramped up for expected future deliveries. Working capital as percent of trailing three month annualized net sales was 27.9% at September 30, 2015.


54


The following tables show the calculation of our working capital and trailing three months annualized sales as of September 30, 2015 (in millions):
 
Three Months Ended
9/30/2015
Net Sales
$
1,641.3

x
4

Trailing Three Month Annualized Net Sales
$
6,565.2


 
As of 9/30/15
Inventories
$
1,545.6

Trade Receivables
1,183.4

Less: Trade Accounts Payable
(740.4
)
Less: Customer Advances
(158.8
)
Total Working Capital
$
1,829.8


Our credit agreement provides us with a revolving line of credit of up to $600 million. See Note M – “Long-Term Obligations,” in our Condensed Consolidated Financial Statements for information concerning our credit agreement. We had $527.7 million available for borrowing under our revolving credit facilities at September 30, 2015. 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 $72.3 million of outstanding borrowings under our revolving credit facilities as well as U.S. dollar and Euro denominated term loans totaling $446.5 million under our credit agreement as of September 30, 2015.

Interest rates charged under the revolving line of credit in 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 2.75%, with a floor of 0.75% on EURIBOR. At September 30, 2015, the weighted average interest rate on these term loans was 3.50%. The weighted average interest rate on our revolving credit amounts at September 30, 2015 was 2.68%.

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 6-1/2% Senior Notes mature April 1, 2020 and our 6% Senior Notes mature May 15, 2021.  Upon completion of the Merger, the debt under our credit facility and both senior notes could potentially accelerate to dates earlier than the above dates. As a result, on August 10, 2015, we and Konecranes entered into a Commitment Letter (the "Commitment Letter") with Credit Suisse Securities (USA) LLC ("CS Securities") and Credit Suisse AG ("CS" and, together with CS Securities and their respective affiliates, "Credit Suisse") in which Credit Suisse committed to provide us and Konecranes with financing for (A) senior secured credit facilities in an aggregate principal amount of up to $1.65 billion, consisting of (i) a senior secured term loan facility in an aggregate principal amount of $900.0 million (such aggregate principal amount to be allocated between a U.S. dollar-denominated term loan facility to be made to the Company and a Euro-denominated term loan facility in an aggregate principal amount of up to €450.0 million to be made to Konecranes or one of its subsidiaries) and (ii) two senior secured revolving credit facilities in an aggregate principal amount of up to $750.0 million and (B) a senior unsecured bridge facility in an aggregate principal amount of up to $1.15 billion. As a result of the receipt of the consents noted in Note M - “Long-Term Obligations,” in our Condensed Consolidated Financial Statements, we and Konecranes notified Credit Suisse that we terminated the commitments of the lenders in the amount of $1.15 billion with respect to the bridge facility under the commitment letter from Credit Suisse dated August 10, 2015.

Our investment in financial services assets was approximately $340 million, net at September 30, 2015. We remain focused on expanding financing solutions in key markets like the U.S. and Europe. We also anticipate using TFS to drive incremental sales by increasing direct customer financing through TFS in certain instances.


55


On May 28, 2015, we entered into a securitization facility with capacity up to $350 million secured by equipment loans and leases to our customers originated by TFS. This is part of our effort to leverage our investment in financial services assets for reductions in borrowing costs. As of September 30, 2015, the Company had $179.9 million in loans outstanding under this facility. See Note M – “Long-Term Obligations,” in our Condensed Consolidated Financial Statements for information concerning this securitization facility.

On June 1, 2015 we paid cash of $131.1 million (including accrued interest of $2.3 million) and issued approximately 3.4 million shares of $.01 par value common stock to settle the 4% Convertible Notes. See Note M – “Long-Term Obligations,” in our Condensed Consolidated Financial Statements for information concerning the 4% Convertible Notes.

In February 2015, we announced authorization by our Board of Directors for the repurchase of up to $200 million of our outstanding shares of common stock. During the nine months ended September 30, 2015 we repurchased approximately 1.9 million shares for approximately $50 million under this program. In each of the first three quarters of 2015, our Board of Directors also declared a dividend of $0.06 per share, which was paid 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 of 2015. However, future declarations of quarterly dividends 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.

Cash Flows

Cash used in operations for the nine months ended September 30, 2015 totaled $56.6 million, compared to cash provided by operations of $116.6 million for the nine months ended September 30, 2014.  The change in cash from operations was primarily driven by lower net income and higher cash used in working capital in the nine months ended September 30, 2015 when compared to the prior year period.

Cash used in investing activities for the nine months ended September 30, 2015 was $144.1 million, compared to $99.2 million cash provided by investing activities for the nine months ended September 30, 2014. The increase of cash used in investing activities was primarily due to proceeds received in the prior year period related to the sale of our truck business, as well as higher cash used for acquisitions and higher capital expenditures in the nine months ended September 30, 2015 when compared to the prior year period.

Cash provided by financing activities was $53.2 million for the nine months ended September 30, 2015, compared to cash used in financing activities for the nine months ended September 30, 2014 of $261.6 million. The change in cash from financing was primarily due to increased net borrowings in the current year period and purchases of noncontrolling interest shares in the prior year period that did not recur in the current year period.

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 our 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 customer default, we are generally able to recover and dispose of the equipment at a minimum loss, if any, to us.

There can be no assurance that 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.


56


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.

See Note O – “Litigation and Contingencies” in the Notes to the Condensed 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 September 30, 2015, we had foreign exchange contracts with a notional value of $235.9 million that were initially designated as hedge contracts.

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 O – “Litigation and Contingencies” in the Notes to the Condensed Consolidated Financial Statements for more information concerning contingencies and uncertainties, including our ERISA, securities, stockholder derivative and Merger 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.


57


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 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.

RECENT ACCOUNTING PRONOUNCEMENTS

Please refer to Note B – “Basis of Presentation” in the accompanying Consolidated Financial Statements for a listing of recent accounting pronouncements.
ITEM 3.
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 Condensed 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 other intercompany transactions. 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.

At September 30, 2015, 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 other currencies by 10% to amounts already incorporated in the financial statements for the nine months ended September 30, 2015 would have had an approximately $6 million impact on the translation effect reported in 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, Commercial Paper 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 September 30, 2015, approximately 29% of our debt was floating rate debt and the weighted average interest rate for all debt was 4.97%.

At September 30, 2015, we performed a sensitivity analysis for our derivatives and other financial instruments that have interest rate risk.  We calculated the pretax earnings impact 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 September 30, 2015 would have increased interest expense by approximately $1 million for the nine months ended September 30, 2015.


58


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 the first nine months of 2015, minor, unfavorable input cost changes in some areas were more than off-set by favorable changes in steel prices and other areas.

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.
ITEM 4.
CONTROLS AND PROCEDURES

(a)
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 Quarterly Report on Form 10-Q, our management carried out an evaluation, under the supervision and with the participation of our management, including the CEO and CFO, as of September 30, 2015, 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 September 30, 2015.

(b)
Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2015 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.

59



PART II.                 OTHER INFORMATION
Item 1.
Legal Proceedings

We are involved in certain claims and litigation arising in the ordinary course of business, which are not considered material to our financial operations or cash flow.  For information concerning litigation and other contingencies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contingencies and Uncertainties.”
Item 1A.
Risk Factors

There have been no material changes in the quarterly period ended September 30, 2015 in our risk factors from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014, other than the addition of the risk factor “Risks related to the Merger” and the updates to the risk factor entitled “We rely on key management” both as set forth below:

Risks related to the Merger

Whether or not the merger is completed, the announcement and pendency of the merger could impact or cause disruptions in the businesses of Terex, which could have an adverse effect on the businesses and operating results of Terex before the merger, and the combined company after the merger. For example:

•
Terex employees may experience uncertainty about their future roles with the combined company, which might adversely affect Terex’s ability to retain and hire key personnel and other employees;
•
the attention of Terex’s management may be directed toward completion of the merger and transaction-related considerations and may be diverted from the day-to-day operations and pursuit of other opportunities that could have been beneficial to the businesses of Terex;
•
customers, distributors, vendors or suppliers may seek to modify or terminate their business relationships with Terex, or delay or defer decisions concerning Terex;
•
we have incurred and will continue to incur significant transaction costs in connection with the Merger regardless of whether the Merger is consummated; and
•
we may be required to pay, in certain circumstances, a termination fee of up to $37 million to Konecranes.

These disruptions could be exacerbated by a delay in the completion of the merger or termination of the business combination agreement.

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. 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.



60


Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

(a)
Not applicable

(b)
Not applicable

(c)
The following table provides information about our purchases during the quarter ended September 30, 2015 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)
July 1, 2015 - July 31, 2015
 
—
 
$—
 
—
 
$150,000
August 1, 2015 - August 31, 2015
 
—
 
$—
 
—
 
$150,000
September 1, 2015 - September 30, 2015
 
—
 
$—
 
—
 
$150,000
Total
 
—
 
$—
 
—
 
$150,000

(1)
In February 2015, we announced authorization by our Board of Directors for the repurchase of up to $200 million of the Company’s outstanding common shares.

Item 3.
Defaults Upon Senior Securities

Not applicable.
Item 4.
Mine Safety Disclosures

Not applicable.
Item 5.
Other Information

Not applicable.
Item 6.
Exhibits

The exhibits set forth on the accompanying Exhibit Index have been filed as part of this Form 10-Q.


61


SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


TEREX CORPORATION
(Registrant)


Date:
October 23, 2015
/s/ Kevin P. Bradley
 
 
Kevin P. Bradley
 
 
Senior Vice President and
 
 
Chief Financial Officer
 
 
(Principal Financial Officer)


Date:
October 23, 2015
/s/ Mark I. Clair
 
 
Mark I. Clair
 
 
Vice President, Controller and
 
 
Chief Accounting Officer
 
 
(Principal Accounting Officer)


62


EXHIBIT INDEX

2.1
Business Combination Agreement and Plan of Merger among Terex Corporation, Konecranes Plc, Konecranes, Inc. and Konecranes Acquisition Company LLC (incorporated by reference to Exhibit 2.1 of the Form 8-K Current Report, Commission File No. 1-10702, dated August 10, 2015 and filed with the Commission on August 13, 2015).
 
 
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 October 15, 2015 and filed with the Commission on October 19, 2015).
 
 
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).
 
 
4.5
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).
 
 
4.7
Supplemental Indenture to the 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 September 8, 2015 and filed with the Commission on September 14, 2015).
 
 
4.8
Supplemental Indenture to the 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 4.2 of the Form 8-K Current Report, Commission File No. 1-10702, dated September 8, 2015 and filed with the Commission on September 14, 2015).

 
 
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). ***

63


 
 
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). ***
 
 
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 (incorporated by reference to Exhibit 10.17 of the Form 10-K for the year ended December 31, 2011 of Terex Corporation, Commission File No. 1-10702). ***
 
 
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 (incorporated by reference to Exhibit 10.18 of the Form 10-K for the year ended December 31, 2011 of Terex Corporation, Commission File No. 1-10702). ***
 
 
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
Incremental Assumption Agreement and Amendment No. 1, dated as of May 29, 2015, to the 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 May 28, 2015 and filed with the Commission June 2, 2015).
 
 
10.18
Loan and Security Agreement, dated as of May 28 2015, among TFS Funding I, LLC, Terex Financial Services, Inc., Institutional Secured Funding (Jersey) Limited, Credit Suisse AG (Cayman Islands Branch) and Credit Suisse AG (New York Branch). ^
 
 
10.19
Commitment Letter dated August 10, 2015, among Terex Corporation, Konecranes Plc, Credit Suisse Securities (USA) LLC and Credit Suisse AG.*

 
 

64


10.20
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). ***
 
 
10.21
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). ***
 
 
10.22
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). ***
 
 
10.23
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). ***
 
 
10.24
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). ***
 
 
10.25
Employment Letter from Terex Corporation signed by John Garrison on October 15, 2015 (incorporated by reference to Exhibit 10.1 of the Form 8-K Current Report, Commission File No. 1-10702, dated October 15, 2015 and filed with the Commission on October 19, 2015).
 
 
12
Calculation of Ratio of Earnings to Fixed Charges. *
 
 
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.
^
Portions of this exhibit have been omitted pursuant to a Confidential Treatment Order dated October 7, 2015 issued by the Commission. The omitted portions have been separately filed with the Commission.



65


EXECUTION VERSION

CREDIT SUISSE SECURITIES (USA) LLC
Eleven Madison Avenue
New York, NY 10010
CREDIT SUISSE AG
Eleven Madison Avenue
New York, NY 10010



CONFIDENTIAL
August 10, 2015
Terex Corporation
200 Nyala Farm Road
Westport, CT 06880
Attention of:
Kevin P. Bradley 
 
Senior Vice President and 
 
Chief Financial Officer
Konecranes Plc
P.O. Box 661 (Koneenkatu 8)
FI-05801 Hyvinkää, Finland
Attention of:
Teo Ottola
 
Chief Financial Officer
Project Alpha
$1,650,000,000 Senior Secured Credit Facilities
$1,150,000,000 Senior Unsecured Bridge Facility
Commitment Letter
Ladies and Gentlemen:
Terex Corporation (“Terex”) and Konecranes Plc (“Konecranes” and, together with Terex, the “Companies” or “you”) have advised Credit Suisse AG (acting through such of its affiliates or branches as it deems appropriate, “CS”) and Credit Suisse Securities (USA) LLC (“CS Securities” and, together with CS and their respective affiliates, “Credit Suisse”, “we” or “us”) that the Companies intend to consummate the Acquisition and the other Transactions (each such term and each other capitalized term used but not defined herein having the meaning assigned to such term in the Transaction Description attached hereto as Exhibit A, the Summary of Principal Terms and Conditions attached hereto as Exhibit B (the “Senior Facilities Term Sheet”), the Summary of Principal Terms and Conditions attached hereto as Exhibit C (the “Bridge Facility Term Sheet” and, together with the Senior Facilities Term Sheet, the “Term Sheets”) or the Summary of Additional Conditions Precedent attached hereto as Exhibit D).
You have further advised us that, in connection therewith, (a) the Borrowers (as defined in Exhibit B) will obtain the senior secured credit facilities

2

described in the Senior Facilities Term Sheet, in an aggregate principal amount of up to $1,650,000,000, consisting of (i) a senior secured term loan facility in an aggregate principal amount of $900,000,000 (the “Term Facility”) (such aggregate principal amount to be allocated between a U.S. dollar-denominated term loan facility to be made to Terex and a Euro-denominated term loan facility in an aggregate principal amount of up to €450,000,000 to be made to Konecranes or to its wholly-owned subsidiary, Konecranes Finance Oy (“Konecranes Finance”)1) and (ii) two senior secured revolving credit facilities in an aggregate principal amount of up to $750,000,000 (collectively, the “Revolving Facilities” and, together with the Term Facility, the “Senior Facilities”) and (b) Terex will, in the event that it does not receive waivers of the CofC Offers and has not consummated the CofC Offers for its Existing Notes, (i) seek to issue an aggregate principal amount of up to $1,150,000,000 in senior unsecured notes (the “Notes”) in a public offering or in a Rule 144A or other private placement and (ii) if applicable, to the extent Terex is unable to issue the full amount of the Notes on or prior to the Closing Date, obtain the senior unsecured bridge facility (the “Bridge Facility” and, together with the Senior Facilities, the “Facilities”) described in the Bridge Facility Term Sheet, in an aggregate principal amount of up to $1,150,000,000 less (i) the aggregate amount of gross cash proceeds provided by Notes issued on or prior to the Closing Date and (ii) the aggregate outstanding principal amount of 6.5% Notes and 6.0% Notes that are not or will not be tendered pursuant to any CofC Offers (as further provided in the Bridge Facility Term Sheet).
1.    Commitments.
In connection with the foregoing, CS is pleased to advise you of its commitment to provide the entire principal amount of the Facilities, in each case upon the terms and subject to the conditions set forth or referred to in this commitment letter (including the Term Sheets and other attachments hereto, this “Commitment Letter”).
Notwithstanding anything to the contrary herein, if CS’ commitment to provide the Bridge Facility terminates in accordance with its terms prior to the Closing Date (as further provided in Bridge Facility Term Sheet), the term “Facilities” as used in this Commitment Letter will be deemed not to include the Bridge Facility from and after the date of such termination.
2.    Titles and Roles.
You hereby appoint (a) CS Securities to act, and CS Securities hereby agrees to act, as lead bookrunner and lead arranger for the Facilities, (b) CS to act, and CS hereby agrees to act, as sole and exclusive administrative agent and sole and exclusive
_________________________________________ 
1 If Konecranes Finance is the borrower under the Euro-denominated Term Facility, Konecranes will provide an unconditional guarantee in respect thereof.

3

collateral agent for the Senior Facilities and (c) CS to act, and CS hereby agrees to act, as sole and exclusive administrative agent for the Bridge Facility, in each case upon the terms and subject to the conditions set forth or referred to in this Commitment Letter. Each of CS and CS Securities, in such capacities, will perform the duties and exercise the authority customarily performed and exercised by it in such roles. You agree that Credit Suisse will have “left” placement in any and all marketing materials or other documentation used in connection with the Facilities. You further agree that no other titles will be awarded and no compensation (other than that expressly contemplated by this Commitment Letter and the Fee Letters referred to below) will be paid in connection with the Facilities unless you and we shall so agree; provided that prior to the date that is 10 business days after the date hereof, you may appoint up to four additional joint bookrunners and/or arrangers and an unlimited number of additional co-managers for the Facilities (each, an “Additional Commitment Party”) and award such Additional Commitment Parties titles in a manner and with economics determined by you in consultation with CS Securities (it being understood that, to the extent you appoint Additional Commitment Parties or confer other titles in respect of the Facilities, each such Additional Commitment Party or affiliates thereof shall commit to providing a percentage of the aggregate principal amount of each Facility on a pro rata basis in accordance with the economics and fees awarded to such Additional Commitment Party (except as otherwise agreed by you and CS Securities), and the commitments of CS in respect of each of the Facilities will be reduced by the amount of the commitments of such Additional Commitment Parties (or their relevant affiliates), upon the execution by such Additional Commitment Party (and any relevant affiliate) of customary joinder documentation; provided further that in no event shall (i) Credit Suisse receive less than 35% of the economics in respect of each of the Facilities or (ii) any Additional Commitment Party (or any relevant affiliate) have economics in respect of any Facility greater than the economics held by Credit Suisse in respect of such Facility.
3.    Syndication.
We intend to syndicate the Facilities (including a portion of our commitments thereunder with respect to the Facilities) to a group of banks, financial institutions and other institutional lenders (together with CS, the “Lenders”) identified by us in consultation with you; provided that, notwithstanding our right to syndicate the Facilities and receive commitments with respect thereto, without your prior written consent (not to be unreasonably withheld, delayed or conditioned), we will not assign all or any portion of our commitments hereunder prior to the date of the initial funding of the Senior Facilities (the “Closing Date”), except to any of our affiliates in accordance with Section 9 of this Commitment Letter or to Additional Commitment Parties in accordance with Section 2 of this Commitment Letter.
Notwithstanding our right to syndicate the Facilities as provided herein and receive commitments with respect thereto, (a) no assignment or novation shall become effective with respect to all or any portion of your commitment in respect of the Facilities until after the funding of the Facilities on the Closing Date (other than with respect to the Additional Commitment Parties as provided for in

4

Section 2) and (b) unless you otherwise agree in writing, we shall retain exclusive control over all rights and obligations with respect to our commitments and other obligations hereunder, including all rights with respect to consents, modifications, supplements, waivers and amendments of this Commitment Letter and of the Fee Letters, until the funding of the Facilities on the Closing Date.
Without limiting your obligations to assist with syndication efforts as set forth below, it is understood that our commitments hereunder are not subject to syndication of the Facilities. We intend to commence syndication efforts promptly upon the execution of this Commitment Letter. Until the earlier of 60 days following the Closing Date and the completion of a Successful Syndication (such earlier date, the “Syndication Date”), you agree actively to assist us in completing a syndication satisfactory to us. Such assistance shall include (a) your using commercially reasonable efforts to ensure that any syndication efforts benefit materially from the existing lending and investment banking relationships of the Companies, (b) direct contact between senior management, representatives and advisors of the Companies and the proposed Lenders, (c) assistance by the Companies in the preparation of a Confidential Information Memorandum for each of the Facilities and other marketing materials to be used in connection with the syndication (collectively, the “Information Materials”), (d) your using commercially reasonable efforts to obtain, prior to the launch of the general syndication, a public corporate rating (but no specific rating) for Konecranes from Standard & Poor’s Financial Services LLC, a part of McGraw Hill Financial (“S&P”) and a public corporate family rating (but no specific rating) for Konecranes from Moody’s Investors Service, Inc. (“Moody’s”) (and public ratings (but no specific rating) for the Facilities (and, upon our reasonable request, any Notes) from each of S&P and Moody’s), (e) the hosting, with us, of one or more meetings of prospective Lenders and (f) your ensuring that from the date hereof until the Syndication Date there shall be no competing issues of debt securities or commercial bank or other credit facilities of Terex, Konecranes or their respective subsidiaries (other than (i) indebtedness incurred pursuant to the commitments in effect on the date hereof under the Existing Credit Agreements, (ii) any commercial paper issued in the ordinary course of business, (iii) capital leases or other debt issued or incurred to finance the acquisition of fixed or capital assets, (iv) ordinary course factoring, trade receivables and similar programs, (v) customary receivables transactions entered into by you and your respective subsidiaries and (vi) any other financing agreed to by us) being offered, placed or arranged if the offering, placement or arrangement thereof could reasonably be expected to materially impair the primary syndication of the Facilities or the placement of any Notes. You agree, at the request of CS Securities, to assist in the preparation of a version of the Information Materials that consists exclusively of information and documentation that is either (i) publicly available or (ii) not material with respect to Terex, Konecranes or their respective subsidiaries or any of their respective securities for purposes of foreign, United States Federal and state securities laws (all such information and documentation being “Public Lender Information”). Any information and documentation that is not Public Lender Information is referred to herein as “Private Lender Information”. Before distribution of any Information Materials, you agree to execute and deliver to CS Securities (i) a customary letter in which you authorize distribution of the

5

Information Materials to Lenders’ employees willing to receive Private Lender Information and (ii) a customary letter in which you authorize distribution of Information Materials consisting solely of Public Lender Information and represent that such Information Materials do not contain any Private Lender Information, which letter shall in each case include a customary representation as to the accuracy of information. You further agree that each document to be disseminated by CS Securities to any Lender in connection with the Facilities will, at the request of CS Securities, be identified by you as either (i) containing Private Lender Information or (ii) containing solely Public Lender Information. You acknowledge that the following documents contain solely Public Lender Information (unless you notify us promptly that any such document contains Private Lender Information): (a) drafts and final definitive documentation with respect to the Facilities, including term sheets; (b) administrative materials prepared by us for prospective Lenders (such as a lender meeting invitation, bank allocation, if any, and funding and closing memoranda); and (c) notification of changes in the terms of the Facilities.
We will manage, in consultation with you, all aspects of the syndication, including decisions as to the selection of institutions to be approached and when they will be approached, when their commitments will be accepted, which institutions will participate, the allocation of the commitments among the Lenders and the amount and distribution of fees among the Lenders. To assist us in our syndication efforts, you agree promptly to prepare and provide to us all reasonable and customary information with respect to the Companies and their respective subsidiaries and the transactions contemplated hereby, including all reasonable and customary financial information and projections (the “Projections”), as we may reasonably request in connection with the arrangement and syndication of the Facilities (it being understood and agreed that the Projections shall include projections of the Companies and their respective subsidiaries for the years 2015 through 2020).
Notwithstanding anything to the contrary contained in this Commitment Letter, the Fee Letters or any other letter agreement or undertaking concerning the financing of the Transactions to the contrary, but without limiting the conditions precedent in Section 6 hereof or Exhibit D hereto, and without limiting your obligations to assist with syndication in this Section 3, compliance with any of the provisions set forth in this Section 3 shall not constitute a condition to the commitments hereunder or the funding of the Facilities on the Closing Date.
4.    Information.
Each of you (as to itself) hereby represents and covenants that (a) all written information other than the Projections, forward-looking information and other information of a general economic or industry-specific nature (the “Information”) that has been or will be made available to us by you or any of your representatives, taken as a whole, is or will be, when furnished, complete and correct in all material respects and does not or will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the

6

circumstances under which such statements are made when taken as a whole (giving effect to supplements thereto from time to time), and (b) the Projections that have been or will be made available to us by you or any of your representatives have been or will be prepared in good faith based upon assumptions believed by you to be reasonable at the time made and at the time the related Projections are made available to Credit Suisse (it being understood that the Projections are subject to significant uncertainties and contingencies, many of which are beyond your control, the Projections, by their nature, are inherently uncertain and no assurances are being given that the results reflected in the Projections will be achieved and actual results may differ from the Projections and such differences may be material). You agree that if any time prior to the later of (i) the Closing Date and (ii) the Syndication Date any of the representations in the preceding sentence would be incorrect if the Information and Projections were being furnished, and such representations were being made, at such time, then you will promptly supplement the Information and the Projections so that such representations will be correct under those circumstances. In arranging and syndicating the Facilities, we will be entitled to use and rely primarily on the Information and the Projections without responsibility for independent verification thereof.
5.    Fees.
As consideration for our commitments hereunder and agreements to perform the services described herein, you agree to pay to us the nonrefundable fees set forth in this Commitment Letter, in the fee letter dated the date hereof and delivered herewith with respect to the Facilities (the “Fee Letter”) and in the administrative agent fee letter dated the date hereof and delivered herewith with respect to the Facilities (the “Administrative Agent Fee Letter” and, together with the Fee Letter, the “Fee Letters”).
6.    Conditions Precedent.
Our commitments hereunder and our agreements to perform the services described herein are subject only to the conditions precedent set forth in this Section 6 and Exhibit D hereto, it being understood and agreed that there are no conditions (implied or otherwise) to the commitments hereunder with respect to the Facilities other than those expressly stated or referred to in this Section 6 and Exhibit D hereto.
Notwithstanding anything in this Commitment Letter, the Fee Letters, the definitive documentation or any other letter agreement or other undertaking concerning the financing of the Acquisition to the contrary, (i) the only representations and warranties the accuracy of which shall be a condition to availability of the Facilities on the Closing Date shall be (A) such of the representations made by Konecranes and its subsidiaries in the Merger Agreement as are material to the interests of the Lenders, but only to the extent that Terex has the right to terminate your obligations (or otherwise decline to consummate the Acquisition) under the Merger Agreement as a result of a breach of such representations in the Merger Agreement (determined without regard to whether any

7

notice is required to be delivered by Terex) (the “Merger Agreement Representations”) and (B) the Specified Representations (as defined below) and (ii) the terms of the definitive documentation for the Facilities shall be in a form such that they do not impair availability of the Facilities on the Closing Date if the conditions set forth in this Section 6 and in Exhibit D hereto are satisfied (it being understood that, to the extent any Collateral (other than the pledge and perfection of the security interests in the capital stock of subsidiaries (pledged under the New York law governed Guarantee and Collateral Agreement) held by the Loan Parties (to the extent required under the Term Sheets) and other assets pursuant to which a lien may be perfected by the filing of a financing statement under the Uniform Commercial Code) is not provided on the Closing Date after your use of commercially reasonable efforts to do so, the delivery of such Collateral shall not constitute a condition precedent to the availability of the Facilities on the Closing Date but shall be required to be delivered after the Closing Date pursuant to arrangements and timing to be mutually agreed). For purposes hereof, “Specified Representations” means the representations and warranties relating to the Loan Parties set forth in the Term Sheets relating to corporate existence, power and authority, due authorization, execution and delivery, in each case as they relate to the entering into and performance of the definitive documentation for the Facilities, the enforceability of such documentation, Federal Reserve margin regulations, the Investment Company Act, OFAC and other laws applicable to sanctioned persons, the PATRIOT Act and other anti-money laundering laws, the FCPA and other anti-bribery laws, no conflicts between the definitive documentation for the Facilities and the organization documents of the Loan Parties, the Merger Agreement or material debt agreements of the Loan Parties or applicable law, status of the Facilities as senior debt, solvency of Konecranes and its subsidiaries on a consolidated basis on the Closing Date after giving effect to the Transactions (with solvency to be defined in a manner consistent with the solvency definition set forth in Annex I to Exhibit D) and, subject to the limitations set forth in the prior sentence, creation, validity, perfection and priority of security interests. This paragraph, and the provisions herein, shall be referred to as the “Limited Conditionality Provisions”.
7.    Indemnification; Expenses.
You agree (a) to indemnify and hold harmless Credit Suisse and its affiliates and their respective directors, officers, employees, agents, trustees, members, partners and advisors (each, an “Indemnified Person”) from and against any and all losses, claims, damages, liabilities and expenses incurred by or asserted against any Indemnified Person arising out of or in any way connected with this Commitment Letter, the Fee Letters, the Transactions, the Facilities or any related transaction or any claim, litigation, investigation or proceeding relating to any of the foregoing, regardless of whether any such Indemnified Person is a party thereto (and regardless of whether such matter is initiated by a third party or by you or any of your affiliates or equityholders), and to reimburse each such Indemnified Person upon demand for any reasonable and documented legal or other out‑of‑pocket expenses (which shall be limited in the case of legal fees and expenses to the reasonable and documented fees, disbursements and other charges of one primary counsel and one local counsel in each applicable jurisdiction (and, if reasonably

8

necessary, one special counsel)) incurred in connection with investigating or defending any of the foregoing, provided that the foregoing indemnity will not, as to any Indemnified Person, apply to losses, claims, damages, liabilities or related expenses to the extent they are found in a final, non-appealable judgment of a court of competent jurisdiction to have resulted from the willful misconduct or gross negligence of such Indemnified Person, (b) to reimburse Credit Suisse from time to time, upon presentation of a summary statement, for all reasonable and documented out-of-pocket expenses (including but not limited to expenses of our due diligence investigation, consultants’ and other professionals’ fees, syndication expenses, travel expenses and fees, disbursements and other charges of one counsel), in each case, incurred in connection with the Facilities and the preparation and negotiation of this Commitment Letter, the Fee Letters, the definitive documentation for the Facilities and any ancillary documents and security arrangements in connection therewith, and (c) to reimburse each Indemnified Person from time to time, upon presentation of a summary statement, for all reasonable and documented out-of-pocket expenses (including but not limited to consultants’ fees, travel expenses and fees, disbursements and other charges of one primary counsel and one local counsel in each applicable jurisdiction (and, if reasonably necessary, one special counsel)), in each case, incurred in connection with the enforcement of this Commitment Letter, the Fee Letters, the definitive documentation for the Facilities and any ancillary documents and security arrangements in connection therewith. You agree that no Indemnified Person shall have any liability (whether direct or indirect, in contract or tort or otherwise) to you or your subsidiaries, affiliates, equity holders or creditors arising out of, in connection with, or as a result of any aspect of the Transactions. Without limiting your indemnification obligations as set forth in this paragraph for any such damages awarded in connection with a third-party claim against an Indemnified Party (subject to any applicable limitations set forth above), notwithstanding any other provision of this Commitment Letter, no party hereto shall be liable for any indirect, special, punitive or consequential damages in connection with the Facilities. You shall not be liable for any settlement of any litigation, investigation or proceeding to which the indemnity in this Section applies (any of the foregoing, a “Proceeding”), effected without your prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned), but if settled with your prior written consent or if there is a final judgment in any such Proceeding, you agree to indemnify and hold harmless each Indemnified Party to the extent and in the manner set forth above. You shall not, without the prior written consent of an Indemnified Party, effect any settlement of any pending or threatened Proceeding against such Indemnified Party in respect of which indemnity could have been sought hereunder by such Indemnified Party unless such settlement (i) includes an unconditional release of such Indemnified Party in form and substance reasonably satisfactory to such Indemnified Party from all liability or claims that are the subject matter of such Proceeding and (ii) does not include any statement as to any admission of fault or culpability by or on behalf of such Indemnified Party.

9

8.
Sharing Information; Absence of Fiduciary Relationship; Affiliate Activities.
Each of you acknowledges that Credit Suisse may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which you may have conflicting interests regarding the Transactions or otherwise. In particular, Konecranes acknowledges that CS Securities has been retained as a financial advisor to Terex in connection with the Acquisition. Consistent with our policies to hold in confidence the affairs of our customers, we will not furnish confidential information obtained from you by virtue of the Transactions or our other relationships with you to other companies. Each of you also acknowledges that we do not have any obligation to use in connection with the Transactions, or to furnish to you, confidential information obtained by us from other companies.
Each of you further acknowledges and agrees that (a) no fiduciary, advisory or agency relationship between either of you, on the one hand, and any of us, on the other hand, is intended to be or has been created in respect of any of the transactions contemplated by this Commitment Letter, irrespective of whether we have advised or are advising you on other matters, (b) we, on the one hand, and each of you, on the other hand, have an arms-length business relationship that does not directly or indirectly give rise to, nor do you rely on, any fiduciary duty on the part of any of us, (c) each of you is capable of evaluating and understanding, and each of you understands and accepts, the terms, risks and conditions of the transactions contemplated by this Commitment Letter, (d) each of you has been advised that we are engaged in a broad range of transactions that may involve interests that differ from your interests and that we have no obligation to disclose such interests and transactions to you by virtue of any fiduciary, advisory or agency relationship, and (e) each of you waives, to the fullest extent permitted by law, any claims you may have against us arising out of or in connection with the Transactions for breach of fiduciary duty or alleged breach of fiduciary duty and agrees that we shall have no liability (whether direct or indirect) to you in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on behalf of or in right of you, including your equityholders, employees or creditors. Additionally, each of you acknowledges and agrees that Credit Suisse is not advising you as to any legal, tax, investment, accounting or regulatory matters in any jurisdiction (including, without limitation, any consents needed in connection with the transactions contemplated hereby). Each of you shall consult with your own advisors concerning such matters and shall be responsible for making your own independent investigation and appraisal of the transactions contemplated hereby, and Credit Suisse shall have no responsibility or liability to you with respect thereto. Any review by Credit Suisse of you, the Transactions, the other transactions contemplated hereby or other matters relating to such transactions will be performed solely for the benefit of Credit Suisse and shall not be on behalf of you or any of your affiliates.
Each of you further acknowledges that Credit Suisse is a full service securities firm engaged in securities trading and brokerage activities as well as providing investment banking and other financial services. In the ordinary course

10

of business, we may provide investment banking and other financial services to, and/or acquire, hold or sell, for our own account and the accounts of customers, equity, debt and other securities and financial instruments (including bank loans and other obligations) of Terex, Konecranes and other companies with which Terex or Konecranes may have commercial or other relationships. With respect to any securities and/or financial instruments so held by us or any of our customers, all rights in respect of such securities and financial instruments, including any voting rights, will be exercised by the holder of the rights in its sole discretion.
9.    Assignments; Amendments; Governing Law, Etc.
This Commitment Letter shall not be assignable by either of you without our prior written consent (and any attempted assignment without such consent shall be null and void), is intended to be solely for the benefit of the parties hereto (and Indemnified Persons), and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto (and Indemnified Persons). Subject to the provisions of Section 3 above, each of us may assign our respective commitments hereunder to any of our respective affiliates or any Lender. Any such assignment to an affiliate will not relieve the assignor from any of its obligations hereunder unless and until such affiliate shall have funded the portion of the commitment so assigned. Subject to the next preceding sentence, any and all obligations of, and services to be provided by, us hereunder (including our commitments) may be performed and any and all of our rights hereunder may be exercised by or through our respective affiliates or branches. Each of you acknowledges that we may share with any of our respective affiliates, and any such affiliate may share with us, in each case on a confidential basis, any information related to Terex, Konecranes or any of their respective subsidiaries or affiliates and the transactions contemplated hereby. This Commitment Letter may not be amended or any provision hereof waived or modified except by an instrument in writing signed by each of us and each of you. This Commitment Letter may be executed in any number of counterparts, each of which shall be an original and all of which, when taken together, shall constitute one agreement. Delivery of an executed counterpart of a signature page of this Commitment Letter by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. Section headings used herein are for convenience of reference only, are not part of this Commitment Letter and are not to affect the construction of, or to be taken into consideration in interpreting, this Commitment Letter. You acknowledge that information and documents relating to the Facilities may be transmitted through SyndTrak, Intralinks, the internet, e-mail, or similar electronic transmission systems, and that we shall not be liable for any damages arising from the unauthorized use by others of information or documents transmitted in such manner. We may place advertisements in financial and other newspapers and periodicals or on a home page or similar place for dissemination of information, and circulate similar promotional materials, after the closing of the Transactions in the form of a “tombstone” or otherwise describing the names of Terex, Konecranes and their respective affiliates (or any of them), and the amount, type and closing date of such Transactions, all at our expense. This Commitment Letter and the Fee Letters supersede all prior understandings, whether written or oral, between us and you with respect to the Facilities. Your obligations

11

under this Commitment Letter and the Fee Letters are joint and several. THIS COMMITMENT LETTER, AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS COMMITMENT LETTER (INCLUDING, WITHOUT LIMITATION, ANY CLAIMS SOUNDING IN CONTRACT LAW OR TORT LAW ARISING OUT OF THE SUBJECT MATTER HEREOF), SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, PROVIDED, HOWEVER, THAT (A) THE INTERPRETATION OF THE DEFINITION OF “MATERIAL ADVERSE EFFECT” (AND WHETHER OR NOT A “MATERIAL ADVERSE EFFECT” HAS OCCURRED), (B) THE DETERMINATION OF THE ACCURACY OF ANY SPECIFIED MERGER AGREEMENT REPRESENTATIONS AND WHETHER AS A RESULT OF ANY INACCURACY OF ANY SPECIFIED MERGER AGREEMENT REPRESENTATIONS THERE HAS BEEN A FAILURE OF A CONDITION PRECEDENT TO YOUR OBLIGATION TO CONSUMMATE THE MERGER OR SUCH FAILURE GIVES TEREX THE RIGHT TO TERMINATE ITS OBLIGATIONS (OR TO REFUSE TO CONSUMMATE THE MERGER) UNDER THE MERGER AGREEMENT AND (C) THE DETERMINATION OF WHETHER THE MERGER HAS BEEN CONSUMMATED IN ACCORDANCE WITH THE TERMS OF THE MERGER AGREEMENT SHALL, IN EACH CASE, BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAWS PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
10.    Jurisdiction.
Each of the parties hereto hereby irrevocably and unconditionally (a) submits, for itself and its property, to the exclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in the Borough of Manhattan, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Commitment Letter, the Fee Letters or the transactions contemplated hereby, or for recognition or enforcement of any judgment, and agrees that all claims in respect of any such action or proceeding may be heard and determined only in such New York State court or, to the extent permitted by law, in such Federal court, provided that suit for the recognition or enforcement of any judgment obtained in any such New York State or Federal court may be brought in any other court of competent jurisdiction, (b) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Commitment Letter, the Fee Letters or the transactions contemplated hereby in any New York State court or in any such Federal court, (c) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court and (d) agrees that a final and non-appealable

12

judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Service of any process, summons, notice or document by registered mail addressed to you at the address above shall be effective service of process against you for any suit, action or proceeding brought in any such court.
11.    Waiver of Jury Trial.
EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY PARTY RELATED TO OR ARISING OUT OF THIS COMMITMENT LETTER, THE FEE LETTERS OR THE PERFORMANCE OF SERVICES HEREUNDER OR THEREUNDER.
12.    Confidentiality.
This Commitment Letter is delivered to you on the understanding that, without our prior written consent, neither this Commitment Letter nor the Fee Letters nor any of their terms or substance shall be disclosed, directly or indirectly, to any other person except (a) to your respective officers, directors, employees, attorneys, accountants and advisors on a confidential basis, (b) to the ratings agencies (in the case of the Term Sheets only) on a confidential basis or (c) as required by applicable law, rules and regulations, including, without limitation, the rules of the New York Stock Exchange, or compulsory legal process (in which case you agree, to the extent permitted to do so and if practical under the circumstances, to inform us promptly thereof). Notwithstanding any other provision in this Commitment Letter, we hereby confirm that you and your respective officers, directors, employees, attorneys, accountants and advisors shall not be limited from disclosing the U.S. tax treatment or U.S. tax structure of the Facilities.
13.    Surviving Provisions.
The compensation, reimbursement and syndication provisions (in each case subject to Section 16 hereof and Section 4 of the Fee Letter), indemnification, confidentiality, jurisdiction, governing law and waiver of jury trial provisions contained herein and in the Fee Letters, and the provisions of Sections 8 and 17 hereof, shall remain in full force and effect regardless of whether definitive financing documentation shall be executed and delivered and (other than in the case of the syndication provisions) notwithstanding the termination of this Commitment Letter or our commitments hereunder.

13

14.    PATRIOT Act Notification.
CS hereby notifies you that, pursuant to the requirements of the USA PATRIOT Act, Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the “PATRIOT Act”), CS and each Lender is required to obtain, verify and record information that identifies each Loan Party, which information includes the name, address, tax identification number and other information regarding each Loan Party that will allow CS or such Lender to identify each such Loan Party in accordance with the PATRIOT Act. This notice is given in accordance with the requirements of the PATRIOT Act and is effective as to CS and each Lender. You acknowledge that we may share any information obtained from you pursuant to this Section 14 with any prospective Lender on a confidential basis.
15.    Acceptance and Termination.
If the foregoing correctly sets forth our agreement, please indicate your acceptance of the terms of this Commitment Letter and the Fee Letters by returning to us executed counterparts hereof and of the Fee Letters not later than 5:00 p.m., New York City time, on August 11, 2015. Our offer hereunder, and our agreements contained herein, will expire at such time in the event that we have not received such executed counterparts in accordance with the immediately preceding sentence. This Commitment Letter will become a binding commitment of CS only after it has been duly executed and delivered by each of you in accordance with the first sentence of this Section 15. In the event that the Closing Date does not occur on or before 5:00 p.m., New York City time, on August 10, 2016, provided that such date shall be extended (a “Commitment Extension”) to a date not later than November 10, 2016 in the event that the Termination Date (as defined in the Merger Agreement) is extended pursuant to Section 10.2(a) of the Merger Agreement (or such earlier date on which the Merger Agreement terminates), then this Commitment Letter and our respective commitments and undertakings hereunder shall automatically terminate unless we shall, in our discretion, agree to an extension.
16.    Miscellaneous.
Each of the parties hereto agrees that this Commitment Letter and the Fee Letters are binding and enforceable agreements (subject to the effects of bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance, reorganization and other similar laws relating to or affecting creditors’ rights generally and general principles of equity) with respect to the subject matter contained herein, including an agreement to negotiate in good faith the Senior Facilities Documentation and Bridge Loan Documentation by the parties hereto in a manner consistent with this Commitment Letter, it being acknowledged and agreed that the funding of the Facilities is subject to only the applicable conditions precedent set forth in Section 6 of this Commitment Letter and in Exhibit D hereto. Notwithstanding the foregoing, this Commitment Letter, the Fee Letter, the Administrative Fee Letter and the engagement letter dated as of the date hereof (the “Engagement Letter”) may be terminated by Terex as provided in Section 4 of the Fee Letter in which case Terex

14

shall be liable to Credit Suisse only for its fees and expenses to the extent provided therein.
17.    Certain Rights Prior to the Closing Date.
Notwithstanding anything in this Commitment Letter, the Fee Letters, the definitive documentation or any other letter agreement or other undertaking concerning the Acquisition or the financing for the Acquisition to the contrary, prior to the Closing Date, (i) neither Konecranes nor any of its affiliates, equity holders or creditors shall have the right to enforce this Commitment Letter or the commitments or agreements of Credit Suisse hereunder, (ii) as between Terex and Konecranes, Terex shall have the exclusive right to deliver any notices, instructions or consents hereunder and under the Fee Letters, including the exclusive right to terminate this Commitment Letter and the commitments hereunder, (iii) should Credit Suisse receive inconsistent instructions from Terex and Konecranes, Credit Suisse shall be entitled to rely, and act upon, solely the instructions so received from Terex, and (iv) Konecranes agrees that it will not bring or support any action, suit or proceeding of any kind or description, and neither Konecranes nor any of its affiliates, equity holders or creditors will have any rights or claims, in each case whether in law or in equity, whether in contract or in tort or otherwise, against Credit Suisse or any of its officers, directors, employees, agents or advisors, arising out of or relating to this Commitment Letter or the transactions contemplated hereby, and none of Credit Suisse, its officers, directors, employees, agents or advisors shall have any liability or obligation, whether in law or in equity, whether in contract or in tort or otherwise, to Konecranes, its affiliates, equity holders or creditors arising out of or relating to this Commitment Letter or the transactions contemplated hereby.
[Remainder of this page intentionally left blank]





We are pleased to have been given the opportunity to assist you in connection with this important financing.
Very truly yours,

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH


By                    
Name:
Title:
By                    
Name:
Title:


CREDIT SUISSE SECURITIES (USA) LLC

By                    
Name:
Title:


[Signature Page to Commitment Letter]



Accepted and agreed to as of
the date first above written:
TEREX CORPORATION
By                
Name:
Title:

[Signature Page to Commitment Letter]



Accepted and agreed to as of
the date first above written:
KONECRANES PLC
By                
Name:
Title:


By                
Name:
Title:





[Signature Page to Commitment Letter]
[[NYCORP:3544652v25:3130W: 08/10/2015--04:48 PM]]
EXHIBIT A

Project Alpha
Transaction Description
Capitalized terms used but not defined in this Exhibit A shall have the meanings set forth in the other Exhibits to the Commitment Letter to which this Exhibit A is attached or in the Commitment Letter. In the case of any such capitalized term that is subject to multiple and differing definitions, the appropriate meaning thereof in this Exhibit A shall be determined by reference to the context in which it is used.
Pursuant to a Business Combination Agreement and Plan of Merger, dated as of the date hereof (together with all exhibits, annexes, schedules and other disclosure letters thereto, collectively, the “Merger Agreement”), by and among Terex Corporation, a Delaware corporation (“Terex”), Konecranes Plc (“Konecranes”), Konecranes, Inc., a Texas corporation, and Konecranes Acquisition Company LLC, a Delaware limited liability company and a newly formed, indirect wholly-owned subsidiary of Konecranes (“Merger Sub”), Terex will merge with and into Merger Sub, with Terex surviving such merger as an indirect wholly-owned subsidiary of Konecranes, and with the existing stockholders of Terex having their outstanding equity interests in Terex converted into the right to receive approximately 60% of the outstanding equity interests of Konecranes (the “Acquisition”).
Prior to and in preparation for the Acquisition, Konecranes and its subsidiaries intend to undergo a restructuring, pursuant to which, among other transactions, the direct or indirect parent of Merger Sub (“Terex U.S. Holdco”) will issue an intercompany note to a foreign subsidiary of Konecranes (“Finance Sub”) (the restructuring, including the financing, collectively, the “Restructuring”).
In connection with the foregoing, it is intended that:
(a)
Unless it has obtained a waiver of its obligation to do so, Terex will commence an offer (the “6.5% CofC Offer”) to repurchase Terex’s 6.5% senior notes due 2020 (the “6.5% Notes”) as a result of the change of control of Terex occurring upon the consummation of the Acquisition.
(b)
Unless it has obtained a waiver of its obligation to do so, Terex will commence an offer (the “6.0% CofC Offer” and, together with the 6.5% CofC Offer, the “CofC Offers”) to repurchase Terex’s 6.0% senior notes due 2021 (the “6.0% Notes” and, together with the 6.5% Notes, the “Existing Notes”) as a result of the change of control of Terex occurring upon the consummation of the Acquisition.
(c)
The Borrowers (as defined in Exhibit B) will (i) obtain the senior secured credit facilities described in the Senior Facilities Term Sheet, in an aggregate principal amount of up to $1,650,000,000, consisting of (A) a senior secured term loan facility in an aggregate principal amount of $900,000,000 (the “Term Facility”) and (B) two senior secured revolving credit facilities in an aggregate principal amount of up to $750,000,000 (collectively, the

Exh. A-1



“Revolving Facilities” and, together with the Term Facility, the “Senior Facilities”) and (ii) unless Terex has obtained waivers of its obligations to repurchase the Existing Notes pursuant to the CofC Offers or consummated the CofC Offers for the Existing Notes, seek to issue an aggregate principal amount of up to $1,150,000,000 in senior unsecured notes (the “Notes”) in a public offering or in a Rule 144A or other private placement and, to the extent Terex is unable to issue the full amount of the Notes on or prior to the Closing Date, obtain the senior unsecured bridge facility (the “Bridge Facility” and, together with the Senior Facilities, the “Facilities”) described in the Bridge Facility Term Sheet, in an aggregate principal amount of up to $1,150,000,000 less (i) the aggregate amount of gross cash proceeds provided by Notes issued on or prior to the Closing Date and (ii) the aggregate outstanding principal amount of 6.5% Notes and 6.0% Notes that are not or will not be tendered pursuant to any CofC Offers.
(d)
(i) All amounts due or outstanding under the Credit Agreement dated as of August 13, 2014 (as amended, restated, supplemented or otherwise modified, the “Existing Terex Credit Agreement”), among Terex, the subsidiaries of Terex party thereto, the lenders party thereto and Credit Suisse AG, as administrative agent and collateral agent, will be repaid in full, all commitments thereunder will be terminated and all security interests and guarantees in connection therewith will be terminated and/or released, (ii) all amounts due or outstanding under (A) the Revolving Credit Agreement, dated June 4, 2015, among Konecranes Finance Oy, as borrower, Konecranes Oyj, as guarantor, the lenders party thereto, Merchant Banking Skandinaviska Enskilda Banken AB (publ), as Mandated Lead Arranger and Bookrunner, Coordinator and as Agent, (B) the Revolving Credit Agreement, dated 2014, among Konecranes Finance Oy, as borrower, Konecranes Oyj, as guarantor, the lenders party thereto, Commerzbank Aktiengesellchaft, Danske Bank A/S, Merchant Banking, Skandinaviska Enskilda Banken AB (publ), Nordea Bank Finland Plc and Pohjola Bank plc, as Mandated Lead Arrangers and Bookrunners, Danske Bank A/S, as Coordinator, and Danske Bank A/S, as Agent, and (C) the Term Loan Facility Agreement, dated October 13, 2011, among Konecranes Finance Oy, as borrower, Konecranes ABP, as guarantor, and Pohjola Bank Plc, as the bank (each as amended, restated, supplemented or otherwise modified, the “Existing Konecranes Credit Agreements” and, together with the Existing Terex Credit Agreement, the “Existing Credit Agreements”), will be repaid in full, all commitments thereunder will be terminated and all security interests and guarantees in connection therewith will be terminated and/or released (the actions described in clauses (i) and (ii), collectively, the “Credit Agreement Refinancings”), (iii) unless Terex has obtained waivers of its obligations to repurchase the 6.5% Notes and 6.0% Notes, Terex will make the CofC Offers and repurchase any Existing Notes validly tendered pursuant thereto.

Exh. A-2


(e)
The proceeds of the Senior Facilities and cash on hand at Terex and Konecranes and their respective subsidiaries will be applied to (i) effect the Credit Agreement Refinancings, (ii) pay fees and expenses incurred in connection with the Transactions (the “Transaction Costs”) and (iii) for other general corporate purposes, including the repurchase of equity interests in Konecranes following the Closing Date.
(f)
The proceeds of the Bridge Facility (or any Notes issued in lieu thereof) will be applied to (i) finance the 6.5% CofC Offer, (ii) finance the 6.0% CofC Offer and (iii) pay Transaction Costs.
The transactions described above (including the payment of Transaction Costs) are collectively referred to herein as the “Transactions”.

Exh. A-3
EXHIBIT B

Project Alpha
$1,650,000,000 Senior Secured Credit Facilities
Summary of Principal Terms and Conditions
Capitalized terms used but not defined in this Exhibit B shall have the meanings set forth in the other Exhibits to the Commitment Letter to which this Exhibit B is attached (the “Commitment Letter”) or in the Commitment Letter. In the case of any such capitalized term that is subject to multiple and differing definitions, the appropriate meaning thereof in this Exhibit B shall be determined by reference to the context in which it is used.
Borrower:
 
In respect of the Term Facility (as defined below), with respect to the (i) U.S. Term Loans (as defined below), Terex, and (ii) Euro Term Loans (as defined below), Konecranes or Konecranes Finance,2 as applicable (together with Terex the “Term Borrowers”).
In respect of the Revolving Facilities (as defined below), Konecranes, Terex, New Terex Holdings UK Limited, a limited company organized under the laws of England (the “UK Borrower”), Terex International Financial Services Company, a company organized under the laws of Ireland (the “European Borrower”), Terex Australia Pty Ltd, a company organized under the laws of Australia and registered in Queensland, Australia (the “Australian Borrower”) and one or more wholly-owned subsidiaries of Konecranes and/or Terex to be agreed upon (collectively, the “Revolving Borrowers” and together with the Term Borrowers, the “Borrowers”).
Agent:
 
Credit Suisse AG, acting through one or more of its branches or affiliates (“CS”), will act as sole administrative agent and sole collateral agent (in such capacities, the “Agent”) for a syndicate of banks, financial institutions and other institutional lenders acceptable to the Terex (the “Lenders”), and will perform the duties customarily associated with such roles.
Sole Lead Arranger and Bookrunner:
 
Credit Suisse Securities (USA) LLC will act as the sole lead arranger and bookrunner for the Senior Facilities (in such capacities, the “Arranger”), and will perform the duties customarily associated with such roles.
Australian Fronting Lender:
 
Credit Suisse AG, Sydney Branch, will act as fronting Lender in respect of Australian dollar-denominated loans under the Multicurrency Revolving Facility (as defined below) made to the Australian Borrower. Credit Suisse AG, Sydney Branch, is referred to in such capacity as the “Australian Fronting Lender”.
_________________________________________
2If Konecranes Finance is the borrower under the Euro-denominated Term Facility, Konecranes will provide an unconditional guarantee in respect thereof.


Exh. B-1


Facilities:
(A)
Term Facility
A senior secured term loan facility in an aggregate principal amount of $900,000,000 (the “Term Facility”), such aggregate principal amount to be allocated between a U.S. dollar-denominated term loan facility to be made to Terex (the loans thereunder, the “U.S. Term Loans”) and a Euro-denominated term loan facility in an aggregate principal amount of up to €450,000,000 to be made to Konecranes or Konecranes Finance, as applicable (the loans thereunder, the “Euro Term Loans”).
(B)
Revolving Facilities
Two senior secured revolving credit facilities in an aggregate principal amount of up to $750,000,000 (collectively, the “Revolving Facilities” and, together with the Term Facility, the “Senior Facilities”), such aggregate principal amount to be allocated between (a) a U.S. dollar-denominated revolving credit facility in an aggregate amount of up to $375,000,000 to be made available to Terex (the “Domestic Revolving Facility”) and (b) a multicurrency revolving credit facility in an aggregate amount of up to $375,000,000 to be made available to the Revolving Borrowers (the “Multicurrency Revolving Facility”).
 
 
Letters of credit may be issued under the Domestic Revolving Facility or the Multicurrency Revolving Facility, as well as under any Additional L/C Facility (to be defined in a manner consistent with the Existing Terex Credit Agreement), in an outstanding aggregate face amount not in excess of $500,000,000. The Additional L/C Facility sublimit will be $400,000,000. Letters of credit under the Domestic Revolving Facility or the Multicurrency Revolving Facility (but not under the Additional L/C Facility) will reduce borrowing availability under the applicable Revolving Facility on a dollar-for-dollar basis.
In connection with the Domestic Revolving Facility, CS and/or a Lender or Lenders to be determined (before or after closing and with the consent of such Lender or such Lenders) (in such capacity, each, a “Domestic Swingline Lender”) will make available to Terex a swingline facility under which Terex may make short-term borrowings (“Domestic Swingline Loans”) of up to $75,000,000, provided that CS shall not be obligated to make Domestic Swingline Loans in excess of $50,000,000. Domestic Swingline Loans will reduce availability under the Domestic Revolving Facility on a dollar-for-dollar basis. Each Lender under the Domestic Revolving Facility shall, promptly upon request by the Domestic Swingline Lender, fund to the Swingline Lender its pro rata share of any Domestic Swingline Loans. Interest on Domestic Swingline Loans shall be at the same rates as applicable to ABR Revolving Loans.

Exh. B-2


 
 
In connection with the Multicurrency Revolving Facility, a Lender or Lenders to be determined (before or after closing and with the consent of such Lender or such Lenders) (in such capacity, each, a “Multicurrency Swingline Lender”) will make available to the Revolving Borrowers a swingline facility under which the Revolving Borrowers may make short-term borrowings (“Multicurrency Swingline Loans”) in euro and Pounds Sterling of up to the dollar equivalent of $75,000,000. Multicurrency Swingline Loans will reduce availability under the Multicurrency Revolving Facility on a dollar-for-dollar basis. Each Lender under the Multicurrency Revolving Facility shall, promptly upon request by the Multicurrency Swingline Lender, fund to the Multicurrency Swingline Lender its pro rata share of any Multicurrency Swingline Loans. Interest on Multicurrency Swingline Loans shall be at the same rates as applicable to Multicurrency Revolving Loans subject to FBR (as defined in Annex I).
 
 
The Revolving Borrowers will also be permitted to make borrowings (“Contract Loans”) of up to $200,000,000 pursuant to bilateral agreements with Lenders under either Revolving Facility on terms to be agreed by the applicable Revolving Borrower and each such Lender and in the currencies as provided in the Existing Terex Credit Agreement. Contract Loans will reduce availability under the applicable Revolving Facility on a dollar-for-dollar basis (but will not reduce any such Lender’s commitments thereunder nor affect the calculation of any fees (including facility fees) in respect of such Revolving Facility). Any Contract Loans will be deemed to be loans under the Revolving Facilities and secured by the Collateral (as hereinafter defined).

Exh. B-3


Incremental Facilities:
 
The definitive documentation for the Senior Facilities (the “Senior Facilities Documentation”) will permit the Borrowers to obtain one or more incremental term loan facilities (or to obtain additional term loans under an existing term loan facility) under the Senior Facilities Documentation (each, an “Incremental Term Loan Facility”) and/or increase the commitments under either Revolving Facility (any such increase, an “Incremental Revolving Credit Facility”; the Incremental Term Loan Facilities and the Incremental Revolving Credit Facilities are collectively referred to as “Incremental Facilities”) in an unlimited aggregate principal amount; provided, that (a) at the time such Incremental Facilities are incurred and after giving effect thereto and to the use of proceeds thereof (and assuming any Incremental Revolving Credit Facility is fully funded), the Senior Secured Leverage Ratio (to be defined in a manner consistent with the Existing Terex Credit Agreement) does not exceed 2.50 to 1.00, (b) no default or event of default exists or would exist after giving effect thereto, (c) subject to clause (d) below, the terms of any Incremental Term Loan Facilities shall be determined by Terex, Konecranes and the Lenders thereunder and (d) without the prior written consent of Lenders holding at least 51% in interest of the outstanding loans and commitments of any class of loans under the Term Facility, (i) until the date that is 18 months after the Closing Date, if the initial yield on any Incremental Term Loan Facility (as determined by the Agent in a manner consistent with the Existing Terex Credit Agreement) exceeds by more than 50 basis points the yield (as so determined) on the term loans of such class, then the applicable margin for each adversely affected class of term loans shall automatically be increased to eliminate such excess above 50 basis points, (ii) the final maturity date of any Incremental Term Loan Facility shall be no earlier than the final maturity date of any other class of term loans and (iii) the average life to maturity of any Incremental Term Loan Facility shall be no shorter than the average life to maturity of any other class of term loans. Notwithstanding the foregoing, the Senior Facilities Documentation will contain provisions comparable to the Limited Conditionality Provisions in respect of any Incremental Facility incurred to finance a permitted acquisition.
 
 
The Borrowers may seek commitments in respect of the Incremental Facilities from existing Lenders (each of which shall be entitled to agree or decline to participate in its sole discretion) and additional banks, financial institutions and other institutional lenders who will become Lenders in connection therewith.

Exh. B-4


Amend and Extend Provisions:
 
The Senior Facilities Documentation will include customary provisions that will permit the applicable Borrowers to offer to all Lenders under a class of loans or commitments the option to extend the maturity of such Lenders’ loans or commitments on terms and conditions to be set forth in the Senior Facilities Documentation, provided that only the loans and commitments of Lenders that agree to such extension shall be so extended.
Purpose:
(A)
The proceeds of the Term Facility, together with a portion of the Revolving Facilities and cash on hand at Terex and Konecranes and their respective subsidiaries, will be used (a) on the date of the initial borrowing under the Senior Facilities (the “Closing Date”) to (i) effect the Credit Agreement Refinancings, (ii) pay the cash consideration payable pursuant to the Merger Agreement and (iii) pay Transaction Costs and (b) on or after the Closing Date, for other general corporate purposes of the Borrower and its subsidiaries, including the repurchase of equity interests in the Borrower.
 
(B)
The proceeds of loans under the Revolving Facilities will be used by the applicable Revolving Borrower solely (a) on the Closing Date, as set forth in clause (A) above, and (b) from time to time after the Closing Date, for working capital needs and other general corporate purposes (including the making of dividends and other distributions in respect of its equity interests, the repurchase of equity interests in the Borrower, the repayment or other retirement of indebtedness and the financing of permitted acquisitions, in each case to the extent permitted under the Senior Facilities Documentation).
 
(C)
Letters of credit will be used for working capital needs and other general corporate purposes (including to replace, backstop or continue letters of credit outstanding on the Closing Date under the Existing Credit Agreements).
Availability:
(A)
The full amount of the Term Facility must be drawn in a single drawing on the Closing Date. Amounts borrowed under the Term Facility that are repaid or prepaid may not be reborrowed.
 
(B)
Loans under the Revolving Facilities will be available on the Closing Date for the purpose set forth in clause (A) under the heading “Purpose”. Thereafter, loans under the Revolving Facilities will be available at any time prior to the final maturity of the Revolving Facilities, in minimum principal amounts consistent with those set forth in the Existing Terex Credit Agreement. Amounts repaid under the Revolving Facilities may be reborrowed.

Exh. B-5


Multicurrency Advances:
 
The Term Facility will be available in U.S. dollars and Euros and the Domestic Revolving Facility will be available only in U.S. dollars. The Multicurrency Revolving Facility (a) will be available to the Revolving Borrowers (other than the Australian Borrower), up to the maximum amount of the Multicurrency Revolving Facility, in U.S. dollars, euro and Pounds Sterling, and (b) will be available to the Australian Borrower through loans made on behalf of the Lenders by the Australian Fronting Lender in Australian dollars and U.S. dollars in an aggregate principal amount of up to the equivalent of $50,000,000. Loans under the Domestic Revolving Facility will be made by all the Lenders thereunder ratably in accordance with their commitments in respect thereof. Loans under the Multicurrency Revolving Facility (other than loans to the Australian Borrower) will be made by all the Lenders thereunder ratably in accordance with their commitments in respect thereof. Loans made by the Australian Fronting Lender to the Australian Borrower will reduce borrowing availability under the Multicurrency Revolving Facility on a dollar-for-dollar basis. The Lenders under the Multicurrency Revolving Facility will acquire unconditional participations in the loans to the Australian Borrower thereunder in the event of a payment default on such loans, and shall be entitled to receive from the Australian Fronting Lender a participation fee equal to the spread over the applicable LIBOR or base rate on such loans, to the extent the same is received by the Australian Fronting Lender.
Interest Rates and Fees:
 
As set forth on Annex I hereto.
Default Rate:
 
The applicable interest rate plus 2.0% per annum, payable on overdue amounts.
Letters of Credit:
 
Consistent with the Existing Terex Credit Agreement (which includes, among other things, customary provisions relating to Defaulting Lenders), letters of credit under the Revolving Facilities will be issued by one or more Lenders acceptable to the Terex and the Agent who agree to provide such letters of credit (the “Issuing Banks”). Each letter of credit shall expire not later than the earlier of (a) 24 months after its date of issuance and (b) the fifth business day prior to the final maturity of the Revolving Facilities; provided, however, that any letter of credit may provide for renewal thereof for additional periods of up to 24 months (which in no event shall extend beyond the date referred to in clause (b)).
 
 
Drawings under any letter of credit shall be reimbursed by the applicable Revolving Borrower within one business day. To the extent that such Revolving Borrower does not reimburse the applicable Issuing Bank within one business day, the Lenders under the applicable Revolving Facility shall be irrevocably obligated to reimburse such Issuing Bank pro rata based upon their respective commitments under the applicable Revolving Facility.

Exh. B-6


 
 
The issuance of all letters of credit shall be subject to the customary procedures of the applicable Issuing Bank.
Defaulting Lenders:
 
The Senior Facilities Documentation will contain provisions modifying certain rights of defaulting Lenders and the rights and obligations of the Borrowers, the Issuing Banks and the Swingline Lender in the event of defaulting Lenders (including customary reallocation mechanisms and cash collateralization obligations).
Final Maturity and Amortization:
(A)
Term Facility
The Term Facility will mature on the date that is seven years after the Closing Date, and will amortize in equal quarterly installments in an aggregate annual amount equal to 1.0% of the original principal amount of the Term Facility, with the balance payable on the maturity date of the Term Facility.
 
(B)
Revolving Facilities
The Revolving Facilities will mature and the commitments thereunder will terminate on the date that is five years after the Closing Date.
Guarantees:
 
Subject, on the Closing Date, to the Limited Conditionality Provisions, all obligations of the Borrowers under the Senior Facilities and under any interest rate protection or other hedging arrangement entered into with a Lender, the Agent or any affiliate thereof (“Hedging Arrangements”) and performance guarantees will be unconditionally guaranteed (the “Guarantees”) by Terex, Konecranes and each material (to be defined in a manner consistent with the Existing Terex Credit Agreement) direct or indirect wholly-owned subsidiary of Konecranes (each, a “Subsidiary Guarantor” and, together with the Borrowers, the “Loan Parties”), in each case other than any Excluded Subsidiary; provided, however, that with respect to the obligations of any Borrower that is (1) a “United States person” (as defined in section 7701(a)(30) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”)) or (2) a “non-CFC foreign related person” (within the meaning of IRS Notice 2014-52, 2014-42 IRB 712), no Guarantees shall be provided by (a) (i) any person that is a “controlled foreign corporation” as defined in section 957(a) of the Code or (ii) any subsidiary of any such person (each person or subsidiary described in (i) or (ii), a “CFC”) or (b) any subsidiary that is a “United States person” (as defined in section 7701(a)(30) of the Code) and has no material assets other than equity of one or more CFCs (“Foreign Subsidiary Holdco”).

Exh. B-7


 
 
For purposes hereof:
“Excluded Subsidiary” means any direct or indirect subsidiary of the Borrower (x) identified by the Borrowers in the Senior Facilities Documentation, (y) that is individually, and together with any other subsidiaries deemed immaterial subsidiaries, below materiality thresholds to be defined in a manner consistent with the Existing Terex Credit Agreement, as modified to give effect to the Transactions (including the changes to the identity and corporate structure of the Borrowers), or (z) that is not permitted by law, regulation or contract (not entered into for purposes of avoiding such guarantee) to provide such guarantee, or would require governmental (including regulatory) consent, approval, license or authorization to provide such guarantee, unless such consent, approval, license or authorization has been received, or for which the provision of such guarantee would result in a material adverse tax consequence to the Borrower or one of its subsidiaries (as reasonably determined by the Borrower in consultation with the Agent).
 
 
In addition, certain subsidiaries may be excluded from the guarantee requirements under the Senior Facilities Documentation in circumstances where the Agent determines in its reasonable discretion that the cost of providing such a guarantee is excessive in relation to the benefit to the secured parties intended to be afforded thereby.

Exh. B-8


Security:
 
Subject, on the Closing Date, to the Limited Conditionality Provisions, the Senior Facilities (including any Contract Loans), the Guarantees of the Loan Parties, any Hedging Arrangements and performance guarantees up to $500,000,000 will be secured by pledges of, security interests in and/or mortgages on substantially all of the present and after-acquired tangible and intangible assets of the Loan Parties (collectively, the “Collateral”). Notwithstanding the foregoing, (a) the Loan Parties shall not be required to (i) grant a mortgage on any real property owned at closing with a fair market value of $10,000,000 or less or that is under a contract of sale as of the Closing Date, (ii) grant a mortgage on any after-acquired owned real property with a fair market value of $10,000,000 or less, (iii) grant a mortgage on any leased real property or (iv) grant a security interest on any Excluded Assets (as defined below) and (b) with respect to the obligations of any Loan Party that is (1) a “United States person” (as defined in section 7701(a)(30) of the Code) or (2) a “non-CFC foreign related person” (within the meaning of IRS Notice 2014-52, 2014-42 IRB 712), the Collateral shall exclude (i) any voting stock of any CFC or any Foreign Subsidiary Holdco, in each case in excess of 65% of the total combined voting power of such CFC or such Foreign Subsidiary Holdco and (ii) any property of any CFC or any Foreign Subsidiary Holdco (including any stock owned by any CFC or any Foreign Subsidiary Holdco).
For purposes hereof:
“Excluded Assets” means, collectively, (a) motor vehicles and other assets subject to certificates of title or ownership to the extent a security interest therein cannot be perfected by a filing of a financing statement, (b) any asset (including equity interests) if, to the extent and for so long as the grant of a lien thereon is prohibited by applicable law, (c) any Excluded Accounts (as defined below), (d) any contract, instrument, document, lease, license or other agreement to which a Loan Party or any of its property is subject with any person if, to the extent and for so long as the grant of a lien thereon constitutes a breach of or a default under, or creates a right of termination in favor of any party (other than such Loan Party) to, such contract, instrument, document, lease, license or other agreement (but only to the extent any such prohibition on the granting of liens is not rendered ineffective by, or is otherwise unenforceable under, the Uniform Commercial Code or applicable law), (e) any intent‑to‑use trademark application filed in the United States Patent and Trademark Office to the extent that an amendment to allege use or a verified statement of use with respect to such intent‑to‑use application has not been filed with and accepted by the United States Patent and Trademark Office, but only to the extent that the grant of a lien thereon would invalidate or otherwise impair such trademark application, and (f) any assets as to which the Agent shall determine in its reasonable discretion that the costs of obtaining a security interest in the same are excessive in relation to the benefit to the secured parties of the security intended to be afforded thereby.
“Excluded Accounts” means, with respect to any Loan Party, (a) payroll, payroll tax, withholding tax, employee wage and benefit and other tax and employee fiduciary accounts, (b) any zero balance account so long as the opening balance (determined as of the opening of business on the applicable business day of determination) in such account does not exceed the minimum amount required to be deposited by the depositary bank in such account, and (c) any other accounts to the extent the aggregate cash balance in any such account or accounts described in this clause (c) does not exceed, individually or in the aggregate, $2,000,000.

Exh. B-9


 
 
All the above-described pledges, security interests and mortgages shall be created on terms, and pursuant to documentation, consistent with the security documentation under the Existing Terex Credit Agreement and otherwise reasonably satisfactory to the Agent (including, in the case of real property, by customary items such as satisfactory title insurance and surveys), and none of the Collateral shall be subject to any other liens, subject to customary and limited exceptions.
Mandatory Prepayments:
 
Loans under the Term Facility shall be prepaid (without premium or penalty) with:
(a) 50% of Excess Cash Flow (to be defined in a manner consistent with the Existing Terex Credit Agreement) for each 12-month period of Konecranes ending June 30, commencing with the period ending June 30, 2016; provided that the foregoing percentage shall be reduced to 0% when the Senior Secured Leverage Ratio, as of the last day of such 12-month period, is less than 2.75 to 1.00; provided further that voluntary prepayments of loans under the Term Facility made during any 12-month period ending June 30 will reduce the amount of Excess Cash Flow prepayments required for such 12-month period on a dollar-for-dollar basis;
(b) 100% of the net cash proceeds of asset sales or other dispositions of property by Konecranes and its restricted subsidiaries (including proceeds from the sale of stock of any subsidiary of Konecranes and insurance and condemnation proceeds) (subject to certain exceptions, it being understood that no prepayment shall be required for (i) any asset sale or other disposition, the net cash proceeds of which are not greater than $25,000,000 from any single event or series of related events and (ii) asset sales or other dispositions the aggregate net cash proceeds of which are not greater than $75,000,000 in any fiscal year of Konecranes) and reinvestment provisions substantially consistent with the Existing Terex Credit Agreement); and
(c) 100% of the net cash proceeds of issuances, offerings or placements of debt obligations of Konecranes and its restricted subsidiaries (other than net cash proceeds of any debt obligations permitted under the Senior Facilities Documentation, and subject to other exceptions substantially consistent with the Existing Terex Credit Agreement).

Exh. B-10


 
 
The above-described mandatory prepayments shall be applied in direct order of maturity to the remaining amortization payments due during the next twelve months and then pro-rata to the remaining amortization payments of the Term Facility. At Terex’s option, the mandatory prepayment described in clause (c) above may alternatively be applied to prepay loans under the Revolving Facilities (allocated pro rata between the Revolving Facilities), without any reduction of the commitments thereunder.
Notwithstanding the foregoing, no mandatory prepayment under clause (c) above shall be required to the extent that the proceeds of the debt issuance are required to be applied to the prepayment of the Bridge Facility (including in respect of the Extended Term Loans).
Voluntary Prepayments and Reductions in Commitments:
 
Consistent with the Existing Terex Credit Agreement, voluntary reductions of the unutilized portion of the commitments under the Senior Facilities and prepayments of borrowings thereunder will be permitted at any time (without premium or penalty), subject to reimbursement of the Lenders’ redeployment costs in the case of a prepayment of fixed rate borrowings other than on the last day of the relevant interest period.
Notwithstanding the foregoing, in the event that, prior to the six-month anniversary of the Closing Date, (i) the Borrower prepays any loans under the Term Facility in connection with a Repricing Transaction (to be defined in a manner consistent with the Existing Terex Credit Agreement), (ii) the Senior Facilities Documentation is amended to effect a Repricing Transaction or a Lender is required to assign loans under either Term Facility as a result of its failure to consent to an amendment to the Senior Facilities Documentation that effects a Repricing Transaction, then the loans so prepaid, subject to such amendment or so assigned, as the case may be, will be accompanied by a payment of 1.00% of the aggregate principal amount thereof.

Exh. B-11


Senior Facilities Documentation:
 
The Senior Facilities Documentation shall contain representations, warranties, covenants and events of default based on and substantially similar to the Existing Terex Credit Agreement, and shall contain only the representations, warranties, covenants and events of default described herein.
For purposes hereof, including the Commitment Letter and all attachments thereto, the terms “substantially similar to the Existing Terex Credit Agreement,” “consistent with the Existing Terex Credit Agreement,” and words of similar import mean substantially the same as the Existing Terex Credit Agreement with modifications (a) as are necessary to reflect the terms specifically set forth in the Commitment Letter (including the exhibits thereto) and the Fee Letter, (b) to reflect any changes in law or accounting standards since the date of the Existing Terex Credit Agreement, (c) to accommodate the structure of the Acquisition and the Restructuring and the Reorganization (as defined below) and (d) to the extent not inconsistent with the terms of the Commitment Letter (including all exhibits thereto), as agreed by Terex and the Arranger after good faith consideration of comments from the Arranger and the syndicate of Lenders, on one hand, or Terex, on the other. The foregoing are referred to as the “Documentation Principles”.
Representations and Warranties:
 
Subject, on the Closing Date, to the Limited Conditionality Provisions, substantially similar to the Existing Terex Credit Agreement, as modified to give effect to the Transactions (including the changes to the identity and corporate structure of Terex), and limited to: organization, corporate power, authorization and enforceability; governmental approvals; accuracy of financial statements; no material adverse change; title to properties and possession under leases; subsidiaries; absence of material litigation; no violation of agreements or instruments; compliance with laws (including benefits, margin regulations and environmental laws); payment of taxes; inapplicability of the Investment Company Act; solvency; use of proceeds; insurance; labor matters; locations of material owned real property; environmental matters; accuracy of information; treatment as senior indebtedness under subordinated debt; OFAC and sanctioned persons; FCPA and other anti-bribery; PATRIOT Act and other anti-money laundering; and validity, priority and perfection of security interests in the Collateral.
The failure of any representation or warranty (other than the Specified Representations or the Merger Agreement Representations) to be true and correct at any time when made on or prior to the Closing Date will not constitute the failure of a condition precedent to the funding of the Facilities on the Closing Date.

Exh. B-12


Conditions Precedent to Initial Borrowing:
 
The initial borrowing under the Senior Facilities will be subject only to the applicable conditions precedent set forth in Section 6 of, and Exhibit D to, the Commitment Letter.
Conditions Precedent to all Borrowings after the Closing Date:
 
Delivery of notice, accuracy of representations and warranties in all material respects (or, if qualified by materiality, in all respects) and absence of defaults.
Affirmative Covenants:
 
Substantially similar to the Existing Terex Credit Agreement, as modified to give effect to the Transactions (including the changes to the identity and corporate structure of Terex) (to be applicable to Konecranes and its restricted subsidiaries), and limited to: maintenance of corporate existence and rights; performance of obligations; delivery of audited financial statements of Konecranes, unaudited consolidated and consolidating financial statements and other financial information and notices of default, litigation and material adverse effect; maintenance of properties in working order; maintenance of reasonably satisfactory insurance; compliance with laws (including benefits and environmental laws) in all material respects; preparation of environmental reports; use of proceeds; maintenance of records and inspection of books and properties; maintenance of ratings; further assurances; OFAC and sanctioned persons; FCPA and other anti-bribery; PATRIOT Act and other anti-money laundering; and payment of taxes and other obligations.

Exh. B-13


Negative Covenants:
 
Substantially similar to the Existing Terex Credit Agreement, as modified to give effect to the Transactions (including the changes to the identity and corporate structure of Terex) (to be applicable to Konecranes and its restricted subsidiaries), and limited to: limitations on dividends on, and redemptions and repurchases of, capital stock; limitation on restrictions on ability of restricted subsidiaries to pay dividends; limitation on prepayments, redemptions and repurchases of debt (other than loans under the Senior Facilities); limitations on liens and sale‑leaseback transactions; limitations on loans, advances and investments; limitations on debt (to permit performance guarantees); limitations on mergers, consolidations, acquisitions and asset sales; limitations on transactions with affiliates; limitations on changes in business conducted; limitations on changing fiscal year; limitations on amendment of debt; and limitations on designation of unrestricted subsidiaries.
For avoidance of doubt, the limitation on dividends shall permit dividends and share repurchases by Konecranes so long as no default or event of default has occurred and is continuing or would arise as a result thereof (i) in unlimited amounts so long as the Consolidated Leverage Ratio (to be defined in a manner consistent with the Existing Terex Credit Agreement) is less than or equal to 3.75 to 1.00 and (ii) in an amount not in excess of $250,000,000 in any year if the Consolidated Leverage Ratio is greater than 3.75 to 1.00. The baskets in the negative covenants will be increased to reflect the increased size and operational needs of Konecranes and its subsidiaries. In addition, Terex shall be permitted to pay dividends (the “Terex U.S. Holdco Dividends”) to Terex U.S. Holdco which will be a Subsidiary Guarantor in order enable Terex U.S. Holdco pay interest on intercompany debt owed to Finance Sub which will be a Subsidiary Guarantor (the “Intercompany Interest Payments”), which interest payments shall be permitted. In addition, subsidiaries shall be permitted to make customary payments to Konecranes or another consolidated taxpayer pursuant to customary tax sharing arrangements.
The Senior Facilities Documentation will permit so long as no default or event of default would result therefrom, the change in Konecranes’s domicile to a different country so long as the new domicile is a member of the European Union, which change may be effected by a merger in which case the survivor of such merger shall assume the obligations of Konecranes by an instrument in form and substance reasonably satisfactory to the Administrative Agent (the “Reorganization”); provided that (i) Konecranes shall provide the Administrative Agent at least 45 days’ notice of the Reorganization, (ii) the Administrative Agent, in consultation with the applicable Lenders, shall be reasonably satisfied that the applicable Lenders may make and maintain loans and other extensions of credit to Konecranes in the applicable currency or currencies in the jurisdiction of such new domicile in compliance with applicable laws and regulations and without being subject to any unreimbursed or unindemnified tax or other expense and any other adverse tax consequences and (iii) Konecranes shall have delivered to the Administrative Agent such corporate documentation (including all applicable “know your customer” documentation), charter documents, by-laws, resolutions and legal opinions (in each case, consistent with those provided or required to be provided by Terex under the Existing Terex Credit Agreement), modified as appropriate for the jurisdiction of such new domicile or otherwise as may be agreed to by the Administrative Agent.

Exh. B-14


Financial Covenants:
 
Solely the following covenants which will be solely for the benefit of the Lenders under the Revolving Facilities, (a) a maximum Senior Secured Leverage Ratio of 2.75:1.00 and (b) a minimum Interest Coverage Ratio of 2.50:1.00 (collectively, the “Financial Covenants”), in each case (i) tested on a trailing four-quarter basis commencing with the first full fiscal quarter following the Closing Date and (ii) to be applicable solely in the event that on the last day of any fiscal quarter, the aggregate principal amount of loans, unreimbursed disbursements under letters of credit and aggregate face amount of outstanding letters of credit under the Revolving Facilities exceeds 30% of the total commitments in respect of the Revolving Facilities then in effect.

Events of Default:
 
Subject, on the Closing Date, to the Limited Conditionality Provisions, substantially similar to the Existing Terex Credit Agreement, as modified to give effect to the Transactions (including the changes to the identity and corporate structure of Terex), and limited to: nonpayment of principal, interest or other amounts; violation of covenants; incorrectness of representations and warranties in any material respect; cross default and cross acceleration to indebtedness in a principal amount exceeding $75,000,000; bankruptcy; judgments exceeding $75,000,000; ERISA events that could reasonably be expected to result in liability exceeding $75,000,000; actual or asserted invalidity of the guarantees or the security documents; and change in control. For purposes hereof, neither the Reorganization nor the Restructuring shall constitute a Change of Control.

Exh. B-15


Voting:
 
Substantially similar to the Existing Terex Credit Agreement, amendments and waivers of the Senior Facilities Documentation will require the approval of Lenders (the “Required Lenders”) holding at least a majority of the aggregate amount of the loans and commitments under the Senior Facilities (with certain amendments and waivers also requiring class votes), except that (i) (A) the consent of each affected Lender shall be required with respect to, among other things, (a) increases in the commitment of such Lender, (b) reductions or forgiveness of principal, interest, fees or reimbursement obligations payable to such Lender, (c) extensions of final maturity or scheduled amortization of, or dates for payment of interest on, the loans or commitments of such Lender, and (d) subject to the provisions regarding amend and extend transactions and loan buybacks, modifications to certain provisions requiring the pro rata treatment of Lenders and (B) the consent of each Lender shall be required with respect to, among other things, (a) reductions in the percentage contained in the definition of “Required Lenders” and (b) releases of Konecranes or Terex as a guarantor and releases of all or substantially all of the value of other guaranties (other than in connection with permitted asset sales) or all or substantially all of the Collateral and (ii) only the consent of Lenders holding at least a majority of the aggregate amount of the commitments under the Revolving Facilities shall be required with respect to amendments or waivers of (a) the Financial Covenants and (b) definitions related to the Financial Covenants (as such definitions are used for purposes of the Financial Covenants).
Consistent with the Existing Terex Credit Agreement, the Senior Facilities Documentation will permit Terex or Konecranes to replace a Lender or terminate the commitment of a Lender and force the assignment of such Lender’s outstanding loans in full in connection with amendments and waivers requiring the consent of all Lenders or of all Lenders directly affected thereby (so long as the Required Lenders have approved the amendment or waiver), increased costs, taxes, etc. and “defaulting” or insolvent Lenders.
Cost and Yield Protection:
 
Consistent with the Existing Terex Credit Agreement.

Exh. B-16


Assignments and Participations:
 
The Lenders will be permitted to assign (other than to Konecranes or any of its affiliates, except as expressly provided below under the caption “Buybacks”) loans and commitments under the Senior Facilities with the consent of Terex (unless an Event of Default has occurred and be continuing) and the Agent (and (a) the Issuing Banks, in the case of any assignment of a commitment under either of the Revolving Facilities, (b) the Domestic Swingline Lender, in the case of any assignment of a commitment under the Domestic Revolving Facility, and (c) the Multicurrency Swingline Lender, in the case of any assignment of a commitment under the Multicurrency Revolving Facility), in each case, not to be unreasonably withheld, delayed or conditioned (it being understood and agreed that Terex’s withholding of consent to any assignment to a competitor of Konecranes or its restricted subsidiaries shall not be considered to be unreasonably withheld, and that Terex shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within ten business days after having received notice thereof); provided that such consents shall not be required if such assignment is made to another Lender or an affiliate of a Lender or an approved fund (unless the proposed assignment is of a commitment under the Revolving Facilities). Each assignment will be in an integral multiple of $1,000,000. Assignments will be by novation and will not be required to be pro rata between the Senior Facilities.
 
 
The Lenders will be permitted to sell participations in loans and commitments without restriction. Voting rights of participants shall be limited to matters in respect of (i) increases in and extensions of the commitments of such participant, (ii) reductions of principal, interest or fees payable to such participant, (iii) extensions of final maturity, scheduled amortization or interest payment dates of the loans or commitments of such participant and (iv) releases of any Subsidiary Guarantor or all or substantially all of the Collateral.
Buybacks:
 
Subject to customary procedures and limitations, the Term Borrowers will be permitted to purchase loans under the Term Facility, on a non-pro rata basis, pursuant to Dutch auctions to be made available to all Lenders of the applicable class and, subject to a $150,000,000 cap, open market purchases. Any loans so acquired will be immediately canceled.

Exh. B-17


Expenses and Indemnification:
 
Terex and Konecranes will indemnify the Arranger, the Agent, the Lenders, the Issuing Banks, the Domestic Swingline Lender, the Multicurrency Swingline Lender, the Australian Fronting Lender, their respective affiliates, and their respective directors, officers, employees, agents, trustees, members, partners and advisors (each, an “Indemnified Person”) and hold them harmless from and against all costs, expenses (which shall be limited, in the case of legal fees and expenses, to the reasonable and documented fees, disbursements and other charges of one primary counsel and one local counsel in each applicable jurisdiction (and, if reasonably necessary, one special counsel) for each of the Arranger and the Agent, and not more than one outside counsel and one local counsel in each applicable jurisdiction (and, if reasonably necessary, one special counsel) for all of the Lenders and, solely in the case of an actual or reasonably perceived conflict of interest, one additional counsel for each affected Lender) and liabilities of such Indemnified Person arising out of or relating to any claim or any litigation or other proceeding (regardless of whether such Indemnified Person is a party thereto and regardless of whether such matter is initiated by a third party or by a Borrower or any of its affiliates or equityholders) that relates to the Senior Facilities Documentation and the transactions contemplated hereby; provided that no Indemnified Person will be indemnified for any cost, expense or liability to the extent determined in a final, non-appealable judgment of a court of competent jurisdiction to have resulted from (a) the gross negligence or willful misconduct of such Indemnified Person or (b) any disputes solely among Indemnified Persons and not arising out of any act or omission of a Borrower or any of its affiliates (other than any proceeding against any Indemnified Person solely in its capacity or in fulfilling its role as Agent, Issuing Bank, Domestic Swingline Lender, Multicurrency Swingline Lender, Australian Fronting Lender, lead arranger, bookrunner or any other similar role with respect to the Senior Facilities). Terex and Konecranes will also pay (i) all reasonable and documented out-of-pocket expenses incurred by the Agent and its affiliates (which shall be limited, in the case of legal fees and expenses, to the reasonable and documented fees, disbursements and other charges of one primary counsel and one local counsel in each applicable jurisdiction (and, if reasonably necessary, one special counsel) for the Agent and its affiliates) in connection with the syndication and distribution of the Senior Facilities, the preparation and administration of the Senior Facilities Documentation and any amendments or waivers thereto and (ii) all reasonable out-of-pocket expenses (including, without limitation, fees, disbursements and other charges of counsel) of the Arranger, the Agent, the Issuing Banks, the Swingline Lender and the Lenders incurred in connection with the enforcement of the Senior Facilities; provided that, absent an actual or reasonably perceived conflict of interest, the Borrowers will be required to pay the charges of only one counsel and one local counsel in each relevant jurisdiction for the parties set forth in this clause (ii) taken as a whole (and, in the case of an actual or reasonably perceived conflict of interest, one additional counsel and one additional local counsel in each relevant jurisdiction for all such affected parties (so long as such shared representation is consistent with and permitted by professional responsibility rules)).

Exh. B-18


Governing Law:
 
New York.
Counsel to the Agent and Arranger:
 
Cravath, Swaine & Moore LLP.



Exh. B-19
ANNEX I TO
EXHIBIT B


Interest Rates:
The interest rates under the Senior Facilities will be as follows:

Term Facility
At the option of the applicable Term Borrower, Adjusted LIBO Rate plus 3.00% or, in the case of U.S. Term Loans only, ABR plus 2.00%.

Revolving Facilities
The interest rates under the Revolving Facilities shall be based upon the Consolidated Leverage Ratio as set forth below.

Category 1
If the Consolidated Leverage Ratio is greater than or equal to 2.50 to 1.00, at the option of the Borrowers, Adjusted LIBO Rate plus 2.50% or ABR or FBR, as applicable, plus 1.50%.
Category 2
If the Consolidated Leverage Ratio is greater than or equal to 2.00 to 1.00 but less than 2.50 to 1.00, at the option of the Borrowers, Adjusted LIBO Rate plus 2.25% or ABR or FBR, as applicable, plus 1.25%.
Category 3
If the Consolidated Leverage Ratio is less than 2.00 to 1.00, at the option of the Borrowers, Adjusted LIBO Rate plus 2.00% or ABR or FBR, as applicable, plus 1.00%.
 
All Facilities
The Borrowers may elect interest periods of 7 days or 1, 2, 3 or 6 months (or 12 months or, in addition to 7-day interest periods, other interest periods of less than 1 month, if agreed to by all applicable Lenders) for Adjusted LIBO Rate borrowings; provided that the Borrowers shall not be permitted to elect a 7-day interest period more than one time a month.
 
Calculation of interest shall be on the basis of the actual days elapsed in a year of 360 days (or 365 or 366 days, as the case may be, in the case of ABR or FBR loans) and interest shall be payable at the end of each interest period and, in any event, at least every three months.
 
ABR is the Alternate Base Rate, which is the highest of (a) CS’s Prime Rate, (b) the Federal Funds Effective Rate plus ½ of 1.00% and (c) the Adjusted LIBO Rate for a one-month interest period plus 1.00%.

Annex I-1


 
FBR is the Foreign Base Rate, which is the rate of interest (in the absence of the Eurodollar Rate) determined by the Agent to be the average rate charged to borrowers of similar quality as the applicable Borrower, in the currency other than U.S. dollars in which such Borrower seeks to incur loans under the Senior Facilities.
 
The Adjusted LIBO Rate will at all times include statutory reserves and, (a) solely in respect of the Term Facility, shall be deemed to be not less than 0.75%, and (b) in any event shall be deemed to be not less than 0%.
Facility Fees:
A per annum fee of 0.50% will accrue on the aggregate amount of commitments under the Revolving Facilities (whether used or unused), payable by Terex and Konecranes in arrears at the end of each quarter and upon the termination of the applicable Revolving Facility, in each case for the actual number of days elapsed over a 360-day year. Such fees shall be distributed to the Lenders participating in the applicable Revolving Facility pro rata in accordance with the amount of each such Lender’s applicable Revolving Facility commitment.
L/C Participation Fees:
A per annum fee equal to (x) in the case of performance letters of credit, 50% of the spread over Adjusted LIBOR under the Revolving Facilities and (y) in the case of all other letters of credit, 100% of the spread over Adjusted LIBOR under the Revolving Facilities will accrue on the aggregate face amount of outstanding letters of credit under the Revolving Facilities, payable by Terex and Konecranes in arrears at the end of each quarter and upon the termination of the applicable Revolving Facility, in each case for the actual number of days elapsed over a 360-day year. Such fees shall be distributed to the Lenders participating in the applicable Revolving Facility pro rata in accordance with the amount of each such Lender’s applicable Revolving Facility commitment. In addition, by Terex and Konecranes shall pay to each Issuing Bank, for its own account, (a) a fronting fee equal to 0.125% per annum (or such other percentage as may be agreed by Terex and Konecranes and such Issuing Bank) of the aggregate face amount of outstanding letters of credit issued by such Issuing Bank, payable in arrears at the end of each quarter and upon the termination of the applicable Revolving Facility, calculated based upon the actual number of days elapsed over a 360-day year, and (b) customary issuance and administration fees.

Annex I-2


Australian Fronting Fees:
A fee equal to 0.125% per annum (or such other percentage as may be agreed by Terex and Konecranes and the Australian Fronting Lender) will accrue on the aggregate principal amount of Australian Fronted Loans of the Australian Fronting Lender, payable in arrears at the end of each quarter and upon the termination of the applicable Australian Fronting Commitment, for (a) in the case of any Australian Fronted Loan denominated in Australian dollars, the actual number of days elapsed over a 365-day year, and (b) in the case of any Australian Fronted Loan denominated in U.S. dollars, the actual number of days elapsed over a 360-day year.



Annex I-3
EXHIBIT C


Project Alpha
$1,150,000,000 Senior Unsecured Bridge Facility
Summary of Principal Terms and Conditions
Capitalized terms used but not defined in this Exhibit C shall have the meanings set forth in the other Exhibits to the Commitment Letter to which this Exhibit C is attached (the “Commitment Letter”) or in the Commitment Letter. In the case of any such capitalized term that is subject to multiple and differing definitions, the appropriate meaning thereof in this Exhibit C shall be determined by reference to the context in which it is used.
Borrower:
Terex.
Agent:
The Agent under the Senior Facilities will act as sole administrative agent (in such capacity, the “Agent”) for a syndicate of banks, financial institutions and other institutional lenders acceptable to the Borrower (together with CS, the “Lenders”), and will perform the duties customarily associated with such roles.
Sole Lead Arranger and Bookrunner:
The Arranger under the Senior Facilities will act as the sole lead arranger and bookrunner for the Bridge Facility (as defined below), and will perform the duties customarily associated with such roles.
Bridge Loans:
Senior unsecured increasing rate bridge loans providing $1,150,000,000 of gross cash proceeds (the “Bridge Loans”) less (i) the aggregate amount of gross cash proceeds provided by Notes issued on or prior to the Bridge Closing Date (as defined below) (including any Notes issued into escrow) and (ii) the aggregate outstanding principal amount of 6.5% Notes and 6.0% Notes that are not or will not be tendered in the CofC Offers, as provided in “Commitment Reductions” below.
Purpose:
The proceeds of the Bridge Loans will be used on the Bridge Closing Date to (a) unless Terex has obtained a waiver of its obligation to make the 6.5% CofC Offer, finance the 6.5% CofC Offer, (b) unless Terex has obtained a waiver of its obligation to make the 6.0% CofC Offer, finance the 6.0% CofC Offer and (c) pay Transaction Costs.

Exh. C-1


Availability:
If Terex is required to make the CofC Offers in connection with the Transactions, and subject solely to the satisfaction or waiver of the conditions set forth under “Conditions Precedent to Borrowing” set forth below, the Bridge Loans, if any, may be drawn in a single drawing on the Closing Date (the “Bridge Closing Date”) for the sole purpose of enabling Terex to consummate the CofC Offers that are required to be made under (and which shall be made pursuant to the requirements of) the indentures governing the Existing Notes in connection with the Acquisition. Any commitments, if any, in respect of Bridge Loans that are not funded on the Bridge Closing Date in accordance with the foregoing shall automatically terminate.
Commitment Reductions:
The commitments in respect of the Bridge Facility shall be automatically and permanently reduced, on a dollar for dollar basis, by (i) the aggregate outstanding principal amount by which the 6.5% Notes and the 6.0% Notes is reduced (by whatever means) prior to the Bridge Closing Date, and (ii) the then aggregate outstanding principal amount of the 6.5% Notes, if and when Terex obtains a waiver of its obligation to make the 6.5% CofC Offer, and the then aggregate outstanding principal amount of the 6.0% Notes, if and when Terex obtains a waiver of its obligation to make the 6.0% CofC Offer. For the avoidance of doubt, if Terex obtains waivers of its obligations to make both of the CofC Offers, the commitments in respect of the Bridge Facility will immediately and automatically terminate in full.
In addition, Terex shall have the right at any time and from time to time to permanently reduce the commitments in respect of the Bridge Facility on one business day advance notice to the Administrative Agent.
Interest Rates:
The Bridge Loans will bear interest at a rate per annum equal to the three-month Adjusted LIBO Rate, plus a spread of 5.50% (the “Rate”). The Rate will increase by (i) 50 basis points upon the 90‑day anniversary of the Bridge Closing Date, plus (ii) an additional 50 basis points upon each subsequent 90-day anniversary following the initial 90‑day anniversary of the Bridge Closing Date. Interest on the Bridge Loans shall not exceed the Total Cap (as defined in the Fee Letter), in each case, without giving effect to any default interest. Interest will be payable quarterly in arrears, on the Bridge Loan Maturity Date and on the date of any prepayment of the Bridge Loans. For amounts outstanding after the Bridge Loan Maturity Date, interest will be payable on demand at the default rate.
 
The Adjusted LIBO Rate will at all times include statutory reserves and shall be deemed to be not less than 1.00%.

Exh. C-2


Default Rate:
The applicable interest rate plus 2.0% per annum, payable on overdue amounts.
Maturity:
One year from the Bridge Closing Date (the “Bridge Loan Maturity Date”).
Guarantees:
All obligations of the Borrower under the Bridge Facility will be unconditionally guaranteed (the “Guarantees”) on a senior unsecured basis by Konecranes and by each subsidiary of Konecranes that guarantees the Senior Facilities of Terex (each, a “Subsidiary Guarantor”).
Security:
None (including in respect of the Extended Term Loans.
Documentation:
The Bridge Facility will be documented under a credit agreement that will be consistent with this Exhibit C and will contain representations and warranties, affirmative covenants, negative covenants and events of default substantially similar to those in the Senior Facilities Documentation with such changes thereto as are necessary or reasonably appropriate to reflect the terms set forth in the Commitment Letter and this Exhibit C and the nature of the transactions contemplated hereby. The foregoing are referred to as the “Documentation Principles”.

Exh. C-3


Rollover:
If the Bridge Loans are not repaid in full on or prior to the Bridge Loan Maturity Date, and provided that no bankruptcy default under the definitive documentation for the Bridge Facility (the “Bridge Loan Documentation”) has occurred and is continuing, the Bridge Loans shall be automatically converted on the Bridge Loan Maturity Date (the “Conversion Date”) into senior unsecured term loans due on the seventh anniversary of the Bridge Loan Maturity Date (the “Extended Term Loans”) in an aggregate principal amount equal to the aggregate principal amount of Bridge Loans so converted. The Extended Term Loans will have the terms set forth in Annex I to this Exhibit C. At any time on or after the Conversion Date, at the option of the applicable Lender and on reasonable prior written notice, the Extended Term Loans may be exchanged by the holders thereof for exchange notes (“Exchange Notes”), which will have the terms set forth in Annex I to this Exhibit C; provided that (i) no Exchange Notes shall be issued until the Borrower shall have received requests to issue at least $100,000,000 in aggregate amount of Exchange Notes (or such lesser principal amount as represent all of the outstanding Extended Term Loans) and (ii) no subsequent Exchange Notes shall be issued until the Borrower shall have received additional requests to issue at least $100,000,000 in aggregate principal amount of additional Exchange Notes (or such lesser principal amount as represent all of the outstanding Extended Term Loans). The Exchange Notes will be issued under an indenture that will have the terms set forth in Annex I to this Exhibit C. In connection with each such exchange, if requested by any Lender that is a Lender as of the Bridge Closing Date (each, an “Initial Bridge Lender”), the Borrower shall (i) deliver to the Lender that is receiving Exchange Notes, and to such other Lenders as such Initial Bridge Lender requests, an offering memorandum of the type customarily utilized in a Rule 144A offering of senior unsecured high-yield securities covering the resale of such Exchange Notes by such Lenders, in such form and substance as reasonably acceptable to the Borrower and such Initial Bridge Lender, and keep such offering memorandum updated in a manner as would be required pursuant to a customary Rule 144A securities purchase agreement; (ii) execute an exchange agreement containing provisions customary in Rule 144A securities purchase agreements (including indemnification provisions) if reasonably requested by such Initial Bridge Lender; (iii) deliver or cause to be delivered such opinions and accountants’ comfort letters addressed to the Initial Bridge Lender and such certificates as the Initial Bridge Lender may reasonably request as would be customary in Rule 144A offerings and otherwise in form and substance reasonably satisfactory to the Initial Bridge Lender; and (iv) take such other actions, and cause its advisors, auditors and counsel to take such actions, as reasonably requested by the Initial Bridge Lender in connection with issuances or resales of Exchange Notes, including providing such information regarding the business and operations of the Borrower and its subsidiaries as is reasonably requested by any prospective holder of Exchange Notes and customarily provided in due diligence investigations in connection with purchases or resales of Rule 144A securities.
The Extended Term Loans will be governed by the provisions of the Bridge Loan Documentation and will have the same terms as the Bridge Loans except as expressly set forth in Annex I to this Exhibit C.

Exh. C-4


Mandatory Prepayments:
The Bridge Loans shall be prepaid (without premium or penalty) with, subject to certain exceptions to be agreed upon, (i) the net proceeds from the issuance, offering or placement of any debt obligations (other than borrowings under the Revolving Facilities) or equity securities by the Borrower or any of its subsidiaries, in each case issued after the Closing Date (with such proceeds being applied to repay the Bridge Loans prior to the repayment of loans outstanding under the Senior Facilities) and (ii) the net proceeds from any asset sales by the Borrower or any of its subsidiaries (including proceeds from the sale of equity securities of any subsidiary of the Borrower) in excess of the amount required to be paid to the lenders under the Senior Facilities.
Voluntary Prepayments:
The Bridge Loans may be repaid, in whole or in part without premium or penalty, at the option of the Borrower at any time upon three business days’ prior written notice, at a price equal to 100% of the principal amount thereof, plus all accrued and unpaid interest and fees to, but not including, the date of repayment.
Scheduled Amortization:
None.
Representations and Warranties:
Subject, on the Closing Date, to the Limited Conditionality Provisions, substantially similar to the Senior Facilities Documentation relating to the Borrower and its restricted subsidiaries, with such changes as are necessary or appropriate in connection with the Bridge Loans.
Change of Control:
Each holder of the Bridge Loans will be entitled to require the Borrower, and the Borrower shall offer, to repay the Bridge Loans held by such holder, at a price of 100% of the principal amount thereof, plus all accrued fees and all accrued and unpaid interest to, but not including, the date of repayment, upon the occurrence of a “change of control” (to be defined in the Bridge Loan Documentation in a manner similar to the definitions contained in indentures governing senior unsecured high-yield debt securities of Terex, as modified to give effect to the Transactions (including the changes to the identity and corporate structure of the Borrower)). The consummation of the Reorganization and/or the Restructuring shall not constitute a Change of Control.

Exh. C-5


Conditions Precedent to Borrowing:
The borrowing under the Bridge Facility will be subject only to the applicable conditions precedent set forth in Section 6 of, and Exhibit D to, the Commitment Letter.
Covenants:
Substantially similar to the Senior Facilities Documentation, relating to the Borrower and its restricted subsidiaries, with such changes and additions as are necessary and appropriate in connection with the Bridge Loans (it being understood that there shall be no financial maintenance covenants under the Bridge Loan Documentation). In particular, the restricted payments, debt incurrence and prepayment of debt covenants will be more restrictive in connection with the Bridge Loans than the equivalent provisions for the Senior Facilities, provided that such restrictions shall permit the share repurchases contemplated by Exhibit A, the Terex U.S. Holdco Dividends and the Intercompany Interest Payments; and provided, further, that any such additional limitations on restricted payments shall not violate any applicable limitations on restrictive agreements under Existing Notes or cause the financial results of any consolidated subsidiaries to be excluded from the calculation of net income, EBITDA and similar financial measures. The Bridge Documentation will not include any financial covenants..
 
The Bridge Loan Documentation will include a customary covenant for the Borrower and its restricted subsidiaries to use their commercially reasonable efforts to issue Notes to refinance the Bridge Loans.
Events of Default:
Subject, on the Closing Date, to the Limited Conditionality Provisions, events of default will be subject to materiality levels, default triggers, grace and cure periods and/or exceptions to be negotiated and reflected in the Bridge Loan Documentation and will be in form and substance customary and usual for senior unsecured high-yield notes of Terex (but in any event no more restrictive than those applicable to the Senior Facilities).

Exh. C-6


Voting:
Substantially similar to the Senior Facilities Documentation, with such changes and additions as are necessary and appropriate in connection with the Bridge Loans. Amendments and waivers of the Bridge Loan Documentation will require the approval of Lenders (the “Required Lenders”) holding at least a majority of the aggregate amount of the Bridge Loans or the Extended Term Loans, as applicable, except that (i) the consent of each affected Lender shall be required with respect to, among other things, (A) increases in the commitment of such Lender, (B) reductions or forgiveness of principal, interest or fees payable to such Lender, (C) extensions of final maturity of, or dates for payment of interest on, the loans or commitments of such Lender, and (D) modifications to certain provisions requiring the pro rata treatment of Lenders and (ii) the consent of each Lender shall be required with respect to, among other things, (A) reductions in the percentage contained in the definition of “Required Lenders” and (B) releases of all or substantially all of the value of the Guarantees (other than in connection with permitted asset sales).
Cost and Yield Protection:
Consistent with the Existing Terex Credit Agreement.

Exh. C-7


Assignments and Participations:
Subject to the provisions of Section 3 of the Commitment Letter, the Bridge Lenders shall have the right to assign their interest in the Bridge Loans in whole or in part without the consent of the Borrower; provided, however, that (i) prior to the date that is one year after the Closing Date and unless a Demand Failure Event (as defined in the Fee Letter) in respect of the Bridge Loans has occurred or a bankruptcy event of default shall have occurred and be continuing, the consent of the Borrower shall be required with respect to any assignment (such consent not to be unreasonably withheld, delayed or conditioned) if, subsequent thereto, the Credit Suisse and the Additional Commitment Parties (together with their respective affiliates) would hold, in the aggregate, less than 50.1% of the outstanding Bridge Loans and (ii) the Borrower shall be notified of such assignment. For any assignments for which the Borrower’s consent is required, such consent shall be deemed to have been given if the Borrower has not responded within ten business days of a request for such consent. Each assignment will be in an integral multiple of $1,000,000. Assignments will be by novation and will be subject to customary restrictions on eligible assignees to be agreed.
The Lenders will be permitted to sell participations in loans without restriction. Voting rights of participants shall be limited to matters in respect of (a) reductions of principal, interest or fees payable to such participant, (b) extensions of final maturity of, or dates for payment of interest on, the loans or commitments of such participant and (c) releases of all or substantially all of the value of the Guarantees.

Exh. C-8


Expenses and Indemnification:
The Borrower will indemnify the Arranger, the Agent, the Lenders, their respective affiliates, and their respective directors, officers, employees, agents, trustees, members, partners and advisors (each, an “Indemnified Person”) and hold them harmless from and against all costs, expenses (which shall be limited, in the case of legal fees and expenses, to the reasonable and documented fees, disbursements and other charges of one primary counsel and one local counsel in each applicable jurisdiction (and, if reasonably necessary, one special counsel) for each of the Arranger and the Agent, and not more than one outside counsel and one local counsel in each applicable jurisdiction (and, if reasonably necessary, one special counsel) for all of the Lenders and, solely in the case of an actual or reasonably perceived conflict of interest, one additional counsel for each affected Lender) and liabilities of such Indemnified Person arising out of or relating to any claim or any litigation or other proceeding (regardless of whether such Indemnified Person is a party thereto and regardless of whether such matter is initiated by a third party or by the Borrower or any of its affiliates or equityholders) that relates to the Bridge Loan Documentation and the transactions contemplated hereby; provided that no Indemnified Person will be indemnified for any cost, expense or liability to the extent determined in a final, non-appealable judgment of a court of competent jurisdiction to have resulted from (a) the gross negligence or willful misconduct of such Indemnified Person or (b) any disputes solely among Indemnified Persons and not arising out of any act or omission of the Borrower or any of its affiliates (other than any proceeding against any Indemnified Person solely in its capacity or in fulfilling its role as Agent, lead arranger, bookrunner or any other similar role with respect to the Bridge Facility). The Borrower will also pay (i) all reasonable and documented out-of-pocket expenses incurred by the Agent and its affiliates (which shall be limited, in the case of legal fees and expenses, to the reasonable and documented fees, disbursements and other charges of one primary counsel and one local counsel in each applicable jurisdiction (and, if reasonably necessary, one special counsel) for the Agent and its affiliates) in connection with the syndication and distribution of the Bridge Facility, the preparation and administration of the Bridge Loan Documentation and any amendments or waivers thereto and (ii) all reasonable out-of-pocket expenses (including, without limitation, fees, disbursements and other charges of counsel) of the Arranger, the Agent and the Lenders incurred in connection with the enforcement of the Bridge Facility; provided that, absent an actual or reasonably perceived conflict of interest, the Borrower will be required to pay the charges of only one counsel and one local counsel in each relevant jurisdiction for the parties set forth in this clause (ii) taken as a whole (and, in the case of an actual or reasonably perceived conflict of interest, one additional counsel and one additional local counsel in each relevant jurisdiction for all such affected parties (so long as such shared representation is consistent with and permitted by professional responsibility rules)).

Exh. C-9


Governing Law:
New York.
Counsel to the Agent and Arranger:
Cravath, Swaine & Moore LLP.


Exh. C-10
ANNEX I TO
EXHIBIT C

SUMMARY OF TERMS OF THE EXTENDED TERM LOANS
AND EXCHANGE NOTES
Extended Term Loans
On the Conversion Date, so long as no bankruptcy default has occurred and is continuing, the outstanding Bridge Loans will be converted automatically into the Extended Term Loans. The Extended Term Loans will be governed by the provisions of the Bridge Loan Documentation and, except as expressly set forth below, will have the same terms as the Bridge Loans.
Maturity:
The Extended Term Loans will mature on the seventh anniversary of the Conversion Date.
Interest Rate:
The Extended Term Loans will bear interest at a rate per annum (the “Interest Rate”) equal to the Total Cap.
Overdue principal and, to the extent permitted by applicable law, overdue interest and all other overdue amounts in respect of the Extended Term Loans at the then-applicable rate plus 2.0% per annum.
Covenants, Defaults and Mandatory Prepayments:
Upon and after the Conversion Date, the covenants, mandatory prepayments (other than with respect to a change of control, with respect to which the provisions of the Bridge Loans will apply) and defaults which would be applicable to the Exchange Notes, if issued, will also be applicable to the Extended Term Loans in lieu of the corresponding provisions of the Bridge Loan Documentation, provided that the optional prepayment provisions applicable to the Bridge Loans shall remain applicable to the Extended Term Loans.


Annex I-1


Exchange Notes
At any time on or after the Conversion Date, upon at least five business days’ prior notice, the Extended Term Loans may, at the option of any Lender (but subject to the minimum amounts provided for in Exhibit C), be exchanged for a principal amount of Exchange Notes equal to 100% of the aggregate principal amount of the Extended Term Loans so exchanged. The Borrower will issue Exchange Notes under an indenture (the “Indenture”) substantially similar to the existing indentures of Terex, as modified to give effect to the Transactions (including the changes to the identity and corporate structure of the Borrower). The Borrower will appoint a trustee acceptable to the Agent and the Initial Bridge Lenders.
Security:
None.
Maturity Date:
The Exchange Notes will mature on the seventh anniversary of the Bridge Loan Maturity Date.
Interest Rate:
Each Exchange Note will bear interest at a rate per annum equal to the Total Cap.
Interest will be payable in arrears on a semi-annual basis. Default interest will be payable on demand.
Overdue principal, and to the extent permitted by applicable law, overdue interest and all other overdue amounts in respect of the Exchange Notes shall bear interest at the then-applicable rate plus 1.0% per annum.
Optional Redemption:
Exchange Notes will be non-callable until the third anniversary of the Bridge Closing Date. Thereafter, each Exchange Note will be callable at par plus accrued and unpaid interest to, but not including, the redemption date plus a premium equal to 75% of the coupon on such Exchange Note, which premium shall decline ratably to par on each subsequent anniversary of the Bridge Closing Date to zero on the date that is 2 years prior to the maturity of the Exchange Notes.
Prior to the third anniversary of the Bridge Closing Date, the Exchange Notes may be redeemed at a make-whole price based on U.S. Treasury notes with a maturity closest to the third anniversary of the Bridge Closing Date plus 50 basis points. In addition, prior to the third anniversary of the Bridge Closing Date, up to 40% of the Exchange Notes may redeemed with proceeds from certain equity sales (to be defined) at a price equal to par plus the coupon of such Exchange Notes.

Annex I-2


Defeasance and Discharge Provisions:
Customary defeasance provisions similar to those contained in indentures governing senior unsecured high-yield debt securities of Terex, as modified to give effect to the Transactions (including the changes to the identity and corporate structure of the Borrower).
Modification:
Customary modification provisions similar to those contained in indentures governing senior unsecured high-yield debt securities of Terex, as modified to give effect to the Transactions (including the changes to the identity and corporate structure of the Borrower).
Change of Control:
The Borrower will be required to repurchase the Exchange Notes following the occurrence of a “change of control” (to be defined similar to the definitions contained in indentures governing senior unsecured high-yield debt securities of Terex, as modified to give effect to the Transactions (including the changes to the identity and corporate structure of the Borrower)) at 101% of the outstanding principal amount thereof, plus accrued and unpaid interest to, but not including, the date of purchase. It is understood and agreed that neither the Reorganization nor the Restructuring shall constitute a “Change of Control”.
Covenants:
The Indenture will include covenants similar to those contained in indentures governing senior unsecured high-yield debt securities of Terex, as modified to give effect to the Transactions (including the changes to the identity and corporate structure of the Borrower) and shall permit the payment by Terex of the U.S. Holdco Dividends and Intercompany Interest Payments.
Events of Default:
The Indenture will provide for events of default similar to those contained in indentures governing senior unsecured high-yield debt securities of Terex, as modified to give effect to the Transactions (including the changes to the identity and corporate structure of the Borrower).
Registration Rights:
Usual and customary for high-yield securities.


Annex I-3
EXHIBIT D

Project Alpha
$1,650,000,000 Senior Secured Credit Facilities
$1,150,000,000 Senior Unsecured Bridge Facility
Summary of Additional Conditions Precedent
Capitalized terms used but not defined in this Exhibit D shall have the meanings set forth in the other Exhibits to the Commitment Letter to which this Exhibit D is attached (the “Commitment Letter”) or in the Commitment Letter. In the case of any such capitalized term that is subject to multiple and differing definitions, the appropriate meaning thereof in this Exhibit D shall be determined by reference to the context in which it is used.
The initial borrowing under each of the Facilities shall be subject to the following additional conditions precedent:
1. The Acquisition and the other Transactions shall be consummated simultaneously with the closing under the Facilities in accordance with applicable law and on the terms described in the Term Sheets and in the Merger Agreement (without any amendment, modification or waiver thereof or any consent thereunder which is materially adverse to the Lenders, the Arranger or the Agent without the prior written consent of the Arranger (not to be unreasonably withheld, delayed or conditioned)). Subject to the Limited Conditionality Provisions, the Merger Agreement Representations and the Specified Representations shall be true and correct in all material respects (except in the case of any Merger Agreement Representation or Specified Representation which expressly relates to a given date or period, such representation and warranty shall be true and correct in all material respects as of the respective date or for the respective period, as the case may be). The Merger Agreement (including all schedule and exhibits thereto) and all other related documentation shall be satisfactory to the Arranger (it being understood that the Merger Agreement (other than the schedules and exhibits thereto) delivered to the Arranger at 4:01 p.m. on August 10, 2015 is satisfactory).
2. Substantially contemporaneously with the receipt of the proceeds of the Loans under the Senior Facilities, the Credit Agreement Refinancings shall have been consummated.
3. Since December 31, 2014, there shall not have been any Material Adverse Effect.
For purposes hereof, “Material Adverse Effect” means, with respect Konecranes, any change, development, event, occurrence, effect or state of facts that, individually or in the aggregate with all such other changes, developments, events, occurrences, effects or states of facts has or is reasonably expected to have a material adverse effect on the business, assets, liabilities, financial condition or results of operations of Konecranes, Konecranes’s Subsidiaries and Joint Ventures (as such terms are defined in the Merger Agreement), taken as a whole; provided that none of the following shall be deemed either alone or in combination to constitute, or be taken into

Exh. D-1


account in determining whether there has been a material adverse effect: any change, development, event, occurrence, effect or state of facts arising out of or resulting from (a) any change in capital market conditions generally or general economic conditions, including with respect to interest rates or currency exchange rates, (b) any change in geopolitical conditions or any outbreak or escalation of hostilities, acts of war or terrorism occurring after the date of the Merger Agreement, (c) any hurricane, tornado, flood, earthquake or other natural or man-made disaster occurring after the date of the Merger Agreement, (d) any change in applicable Law, regulation, GAAP or IFRS (or authoritative interpretation thereof) which is proposed, approved or enacted on or after the date of the Merger Agreement, (e) any change in general conditions in the industries in which Konecranes and its Subsidiaries and Joint Ventures operate, (f) the failure, in and of itself, of Konecranes to meet any internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating metrics before, on or after the date of the Merger Agreement, or changes in the market price, credit rating or trading volume of Konecranes’s securities after the date of the Merger Agreement (it being understood that the underlying facts giving rise or contributing to such failure or change, either alone or in combination, may be deemed to constitute or be taken into account in determining whether there has been a Material Adverse Effect), and (g) the announcement and pendency of the Merger Agreement and the transactions contemplated hereby, including any lawsuit in respect of the Merger Agreement or the transactions contemplated hereby, the taking of any action required or expressly contemplated by the covenants contained herein, and any loss of or change in relationship with any customer, supplier, distributor, or other business partner, or departure of any employee or officer, of Konecranes or any of Konecranes’s Subsidiaries or Joint Ventures, except, in the cases of clauses (a), (b), (d), and (e), to the extent that Konecranes and Konecranes’s Subsidiaries and Joint Ventures, taken as a whole, are materially disproportionately affected thereby as compared with other participants in the industries in which Konecranes and Konecranes’s Subsidiaries and Joint Ventures operate (in which case the incremental disproportionate impact or impacts may be deemed either alone or in combination to constitute, or be taken into account in determining whether there has been, or is reasonably expected to be, a Material Adverse Effect).
4. The Arranger shall have received (a) (i) if the Closing Date shall not have occurred by February 29, 2016, the U.S. GAAP audited consolidated and (to the extent available) consolidating balance sheet and related statements of income, stockholders’ equity and cash flows of Terex for the fiscal year ended December 31, 2015 and (ii) U.S. GAAP unaudited consolidated and (to the extent available) consolidating balance sheets and related statements of income, stockholders’ equity and cash flows of Terex for each fiscal quarter ended after March 31, 2015, and at least 45 days before the Closing Date, (b) (i) if the Closing Date shall not have occurred by March 31, 2016, the IFRS audited consolidated and (to the extent available) consolidating balance sheet and related statements of income,

Exh. D-2


changes in equity and cash flow of Konecranes for the fiscal year ended December 31, 2015 and (ii) IFRS unaudited consolidated and (to the extent available) consolidating balance sheets and related statements of income, changes in equity and cash flow of Konecranes for each fiscal quarter ended after March 31, 2015, at least 45 days before the Closing Date.
5. The Arranger shall have received a pro forma consolidated balance sheet and related pro forma consolidated statements of income and cash flows of Konecranes and Terex as of and for the twelve-month period ending on the last day of the most recently completed four-fiscal quarter period for which financial statements have been delivered pursuant to paragraph 4 above, prepared after giving effect to the Transactions as if the Transactions had occurred as of such date (in the case of such balance sheet) or at the beginning of such period (in the case of such other financial statements).
6. The Arranger shall have received the financial statements required to be delivered pursuant to paragraphs 4 and 5 above, all other information regarding Terex, Konecranes and their respective subsidiaries required to complete a Confidential Information Memorandum for each of the Facilities and such other marketing materials to be used in connection with the syndication reasonably requested by the Arranger (the “Required Information”). The Arranger shall have been afforded a period (the “Marketing Period”) of at least 20 consecutive days following receipt of the Required Information to syndicate the Facilities; provided that (a) the Marketing Period shall not commence prior to September 8, 2015, (b) the Marketing Period shall be tolled to the extent it would include November 26, 2015 through and including November 29, 2015 and (c) if the Marketing Period has not concluded on or prior to December 18, 2015, the Marketing Period shall not commence prior to January 4, 2016.
7. The Arranger shall have received a certificate from the chief financial officer of Konecranes substantially in the form attached as Annex I to this Exhibit D certifying that Konecranes and its subsidiaries, on a consolidated basis after giving effect to the Transactions, are solvent.
8. Subject to the Limited Conditionality Provisions and the applicable Documentation Principles, definitive documentation for the Facilities, in each case consistent with the applicable Documentation Principles, shall be executed and delivered by all parties thereto, and the Arranger shall have received a notice of borrowing, customary legal opinions, corporate documents and officers’ and public officials’ certifications, customary lien search results, organizational documents, customary evidence of authorization and good standing certificates (where the concept is applicable) in jurisdictions of formation/organization, in each case of each Loan Party.
9. Subject to the Limited Conditionality Provisions and the applicable Documentation Principles, with respect to the Senior Facilities, all documents and instruments required to perfect the Agent’s security interests in the Collateral shall have been executed and delivered and, if applicable, be in proper form for filing.

Exh. D-3


10. With respect to the Bridge Facility, (a) one or more investment banks reasonably satisfactory to Credit Suisse (collectively, the “Investment Bank”) shall have been engaged to publicly sell or privately place the Notes and Credit Suisse and the Investment Bank each shall have received, (i) a customary preliminary offering document (an “Offering Document”) suitable for use in a customary “high-yield road show” relating to the Notes, which contains all financial information (including all audited financial statements, all unaudited financial statements (which, in the case of Terex, shall have been reviewed as provided in the procedures specified by the Public Company Accounting Oversight Board in AU 722) and all appropriate pro forma financial statements prepared in accordance with generally accepted accounting principles in the United States and prepared in accordance with Regulation S‑X under the Securities Act of 1933, as amended), and all other data that the Securities and Exchange Commission would require in a registered offering of the Notes or are customarily included in Offering Documents of such type, and (ii) (A) customary comfort letters (which shall also provide “negative assurance” comfort that is customary in the context of a transaction where the most recent financial statements are not more than 135 days old) from the independent accountants for Terex and Konecranes (and any other accountant to the extent financial statements audited or reviewed by such accountants are or would be included in any Offering Document) and (B) a customary “10b-5” disclosure letter from counsel to Konecranes and (b) the Investment Bank shall have been afforded a period of at least 20 consecutive days following receipt of an Offering Document including the information described in clause (a) to seek to place the Notes with qualified purchasers thereof; provided that (i) if such period has not concluded on or prior to August 21, 2015, such period shall not commence prior to September 8, 2015, (ii) such period shall be tolled to the extent it would include November 26, 2015 through and including November 29, 2015 and (iii) if such period has not concluded on or prior to December 18, 2015, such period shall not commence prior to January 4, 2016.
11. The Arranger shall have received, at least five business days prior to the Closing Date, all documentation and other information requested by the Arranger at least 10 business days prior to the Closing Date and required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the PATRIOT Act.
12. All costs, fees, expenses (including without limitation legal fees and expenses) and other compensation contemplated by the Commitment Letter and the Fee Letters payable to the Arranger shall have been paid to the extent due and to the extent due and payable and invoiced prior to the Closing Date.


Exh. D-4
ANNEX I TO
EXHIBIT D

[FORM OF]
SOLVENCY CERTIFICATE


Credit Suisse AG, as Administrative Agent
Eleven Madison Avenue
New York, New York 10010
[DATE]
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of [ ] (as amended, restated, supplemented and/or otherwise modified from time to time, the “Credit Agreement”), among [ ] (the “Company”), the Subsidiaries of the Company from time to time party thereto (together with the Company, the “Borrowers”), the lenders and issuing banks from time to time party thereto and Credit Suisse AG, as administrative agent (the “Administrative Agent”) and as collateral agent. Each capitalized term used herein and not otherwise defined herein shall have the meaning assigned to it in the Credit Agreement.
The undersigned hereby certifies, in his capacity as a [ ] of the Company and not in a personal capacity, as follows:
On the date hereof, immediately after giving effect to the Transactions to occur on the Closing Date, including the making of each Loan to be made on the Closing Date and the application of the proceeds thereof, (a) the fair value of the assets of the Company and its Subsidiaries, at a fair valuation, will exceed their debts and liabilities, subordinated, contingent or otherwise, in each case on a consolidated basis; (b) the present fair saleable value of the property of the Company and its Subsidiaries, in each case on a consolidated basis, will be greater than the amount that will be required to pay the probable liabilities on their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) each of the Company and its Subsidiaries, in each case on a consolidated basis, will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) each of the Company and its Subsidiaries, in each case on a consolidated basis, will not have unreasonably small capital with which to conduct the business in which they are engaged as such business is now conducted and is proposed to be conducted following the Closing Date.
The foregoing certifications are made and delivered pursuant to Section [ ] of the Credit Agreement. In making the foregoing certifications, the undersigned has reviewed the Credit Agreement and such other documents deemed relevant and made such other investigations and inquiries as the undersigned has deemed appropriate,

Annex I-1


to enable the undersigned to execute this Solvency Certificate on behalf of the Company.



Annex I-2


IN WITNESS WHEREOF, the undersigned has caused this Solvency Certificate to be executed as of the date first set forth above.

By:
 
 
Name:
 
Title:





Annex I-3




Exhibit 12
    
TEREX CORPORATION
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(amounts in millions)

 
Three Months Ended
September 30,
Nine Months Ended
September 30,
 
 
2015
 
 
2014
 
2015
 
 
2014
 
Earnings:
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
$
76.9

 
 
$
86.4

 
$
206.3

 
 
$
257.8

 
Adjustments:
 
 
 
 
 
 
 
 
 
 
Undistributed (income) loss of less than 50% owned investments
0.3

 
 
(1.1
)
 
(3.3
)
 
 
(0.9
)
 
Fixed charges
32.2

 
 
39.7

 
102.2

 
 
119.2

 
Earnings
$
109.4

 
 
$
125.0

 
$
305.2

 
 
$
376.1

 
Fixed charges:
 
 
 
 
 
 
 
 
 
 
Interest expense, including debt discount amortization
$
24.7

 
 
$
28.8

 
$
79.9

 
 
$
90.9

 
Amortization/writeoff of debt issuance costs
1.3

 
 
4.4

 
4.1

 
 
8.6

 
Portion of rental expense representative of interest factor (assumed to be 33%)
6.2

 
 
6.5

 
18.2

 
 
19.7

 
Fixed charges
$
32.2

 
 
$
39.7

 
$
102.2

 
 
$
119.2

 
Ratio of earnings to fixed charges
3.4

x
 
3.1

x
3.0

x
 
3.2

x
Amount of earnings deficiency for coverage of fixed charges
$
—

 
 
$
—

 
$
—

 
 
$
—

 














Exhibit 31.1
 
CERTIFICATION
  
I, Ronald M. DeFeo, certify that:
 
1.
I have reviewed this quarterly report on Form 10-Q of Terex Corporation;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of  the end of the period covered by this report based on such evaluation; and

d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 

Date:  October 23, 2015


/s/ Ronald M. DeFeo
Ronald M. DeFeo
Chairman and
Chief Executive Officer







Exhibit 31.2
 
CERTIFICATION
 
I, Kevin P. Bradley, certify that:
 
1.
I have reviewed this quarterly report on Form 10-Q of Terex Corporation;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of  the end of the period covered by this report based on such evaluation; and

d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 

Date:  October 23, 2015
 

/s/ Kevin P. Bradley
Kevin P. Bradley
Senior Vice President and
Chief Financial Officer






Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the quarterly report of Terex Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Ronald M. DeFeo, Chairman and Chief Executive Officer of the Company, and Kevin P. Bradley, Senior Vice President and Chief Financial Officer of the Company, certify, to the best of our knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


 
/s/ Ronald M. DeFeo
 
Ronald M. DeFeo
 
Chairman and
 
Chief Executive Officer
 
 
 
October 23, 2015

 
/s/ Kevin P. Bradley
 
Kevin P. Bradley
 
Senior Vice President and
 
Chief Financial Officer
 
 
 
October 23, 2015


A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Terex Corporation and will be retained by Terex Corporation and furnished to the Securities and Exchange Commission or its staff upon request.



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